UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~December 31, 2018~~September 30, 2019


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-13357

Royal Gold, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		84-0835164
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation)		Identification No.)

1660 Wynkoop Street, Suite 1000
Denver, Colorado		80202
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code ~~(303)~~ (303) 573-1660

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of the Exchange on which Registered
Common Stock, $0.01 par value	RGLD	Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were ~~65,516,940~~65,591,907 shares of the Company’s common stock, par value $0.01 per share, outstanding as of ~~January~~October 31, 2019.

Table of Contents

INDEX

~~INDEX~~

		PAGE

PART I	FINANCIAL INFORMATION

~~PART I~~Item 1.	~~FINANCIAL INFORMATION~~Financial Statements (Unaudited)

~~Item 1.~~	~~Financial Statements (Unaudited)~~Consolidated Balance Sheets	3

	~~Consolidated Balance Sheets~~	3
	Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~	4
	Consolidated Statements of Changes in Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	5 6
	Notes to Consolidated Financial Statements	6 7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17 19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30

Item 4.	Controls and Procedures	31 30

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32 31

Item 3.	Defaults Upon Senior Securities	32 31

Item 4.	Mine Safety Disclosure	32 31

Item 5.	Other Information	32 31

Item 6.	Exhibits	32

SIGNATURES		33

Table of Contents

ITEM 1. FINANCIAL STATEMENTS

ROYAL GOLD, INC.

Consolidated Balance Sheets

(Unaudited, in thousands except share data)

December 31, 2018

June 30, 2018
ASSETS

Cash and equivalents

$
156,536

$
88,750
Royalty receivables

25,659

26,356
Income tax receivable

12,793

40
Stream inventory

7,954

9,311
Prepaid expenses and other

793

1,350
Total current assets

203,735

125,807
Stream and royalty interests, net (Note 2)

2,419,908

2,501,117
Other assets

51,463

55,092
Total assets

$
2,675,106

$
2,682,016
LIABILITIES

Accounts payable

$
2,291

$
9,090
Dividends payable

17,359

16,375
Income tax payable

10,739

18,253
Withholding taxes payable

2,348

3,254
Other current liabilities

4,439

4,411
Total current liabilities

37,176

51,383
Debt (Note 3)

358,897

351,027
Deferred tax liabilities

90,700

91,147
Uncertain tax positions

35,590

33,394
Other long-term liabilities

5,773

13,796
Total liabilities

528,136

540,747
Commitments and contingencies (Note 10)

EQUITY

Preferred stock, $.01 par value, 10,000,000 shares authorized; and 0 shares issued

—

—
Common stock, $.01 par value, 200,000,000 shares authorized; and 65,396,339 and 65,360,041 shares outstanding, respectively

654

654
Additional paid-in capital

2,197,254

2,192,612
Accumulated other comprehensive loss

-

(1,201)
Accumulated losses

(86,238)

(89,898)
Total Royal Gold stockholders’ equity

2,111,670

2,102,167
Non-controlling interests

35,300

39,102
Total equity

2,146,970

2,141,269
Total liabilities and equity

$
2,675,106

$
2,682,016


	September 30,		June 30,
	2019		2019
ASSETS
Cash and equivalents	$	121,970	$	119,475
Royalty receivables		26,635		20,733
Income tax receivable		3,698		2,702
Stream inventory		10,772		11,380
Prepaid expenses and other		1,135		389
Total current assets		164,210		154,679
Stream and royalty interests, net (Note 3)		2,305,018		2,339,316
Other assets		78,683		50,156
Total assets	$	2,547,911	$	2,544,151
LIABILITIES
Accounts payable	$	3,496	$	2,890
Dividends payable		17,380		17,372
Income tax payable		5,548		6,974
Other current liabilities		5,949		6,374
Total current liabilities		32,373		33,610
Debt (Note 5)		164,595		214,554
Deferred tax liabilities		88,184		88,961
Uncertain tax positions		38,322		36,573
Other long-term liabilities		2,109		-
Total liabilities		325,583		373,698
Commitments and contingencies (Note 12)
EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; and 0 shares issued		—		—
Common stock, $.01 par value, 200,000,000 shares authorized; and 65,495,787 and 65,440,492 shares outstanding, respectively		655		655
Additional paid-in capital		2,202,350		2,201,773
Accumulated losses		(12,676)		(65,747)
Total Royal Gold stockholders’ equity		2,190,329		2,136,681
Non-controlling interests		31,999		33,772
Total equity		2,222,328		2,170,453
Total liabilities and equity	$	2,547,911	$	2,544,151

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

ROYAL GOLD, INC.

Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~

(Unaudited, in thousands except share data)

For The Three Months Ended

For The Six Months Ended

December 31,

December 31,

December 31,

December 31,


2018

2017

2018

2017

Revenue

$
97,592

$
114,348

$
197,585

$
226,824

Costs and expenses

Cost of sales

18,162

19,863

34,689

40,282

General and administrative

7,423

9,555

17,349

16,455

Production taxes

909

602

2,201

1,145

Exploration costs

842

1,358

5,204

4,561

Depreciation, depletion and amortization

38,807

42,008

81,358

81,701

Total costs and expenses

66,143

73,386

140,801

144,144

Operating income

31,449

40,962

56,784

82,680

Fair value changes in equity securities

(3,631)

—

(5,099)

—

Interest and other income

487

645

590

1,634

Interest and other expense

(7,410)

(9,034)

(15,287)

(17,651)

Income before income taxes

20,895

32,573

36,988

66,663

Income tax benefit (expense)

2,148

(48,360)

(1,967)

(55,904)

Net income (loss)

23,043

(15,787)

35,021

10,759

Net loss attributable to non-controlling interests

543

1,022

3,575

3,105

Net income (loss) attributable to Royal Gold common stockholders

$
23,586

$
(14,765)

$
38,596

$
13,864

Net income (loss)

$
23,043

$
(15,787)

$
35,021

$
10,759

Adjustments to comprehensive income (loss), net of tax

Unrealized change in market value of available-for-sale securities

—

(390)

—

(193)

Comprehensive income (loss)

23,043

(16,177)

35,021

10,566

Comprehensive loss attributable to non-controlling interests

543

1,022

3,575

3,105

Comprehensive income (loss) attributable to Royal Gold stockholders

$
23,586

$
(15,155)

$
38,596

$
13,671

Net income (loss) per share available to Royal Gold common stockholders:

Basic earnings (loss) per share

$
0.36

$
(0.23)

$
0.59

$
0.21

Basic weighted average shares outstanding

65,395,457

65,306,766

65,385,161

65,271,131

Diluted earnings (loss) per share

$
0.36

$
(0.23)

$
0.59

$
0.21

Diluted weighted average shares outstanding

65,473,400

65,306,766

65,485,423

65,460,430

Cash dividends declared per common share

$
0.265

$
0.25

$
0.515

$
0.49


	For The Three Months Ended
	September 30,		September 30,
	2019		2018
Revenue (Note 6)	$	118,774	$	99,992

Costs and expenses
Cost of sales (excludes depreciation, depletion and amortization)		20,111		16,527
General and administrative		7,443		9,927
Production taxes		1,099		1,292
Exploration costs		2,626		4,362
Depreciation, depletion and amortization		38,714		42,551
Total costs and expenses		69,993		74,659

Operating income		48,781		25,333

Fair value changes in equity securities		(1,375)		(1,468)
Interest and other income		775		103
Interest and other expense		(2,834)		(7,877)
Income before income taxes		45,347		16,091

Income tax benefit (expense)		23,525		(4,115)
Net income		68,872		11,976
Net loss attributable to non-controlling interests		1,581		3,032
Net income attributable to Royal Gold common stockholders	$	70,453	$	15,008

Net income	$	68,872	$	11,976
Comprehensive income		68,872		11,976
Comprehensive loss attributable to non-controlling interests		1,581		3,032
Comprehensive income attributable to Royal Gold stockholders	$	70,453	$	15,008

Net income per share available to Royal Gold common stockholders:
Basic earnings per share	$	1.07	$	0.23
Basic weighted average shares outstanding		65,465,611		65,374,866
Diluted earnings per share	$	1.07	$	0.23
Diluted weighted average shares outstanding		65,615,926		65,497,159
Cash dividends declared per common share	$	0.265	$	0.25

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

ROYAL GOLD, INC.

Consolidated Statements of ~~Cash Flows~~Changes in Stockholders’ Equity

(~~Unaudited,~~unaudited, in ~~thousands)~~thousands except share data)

For The Six Months Ended

December 31,

December 31,


2018

2017
Cash flows from operating activities:

Net income

$
35,021

$
10,759
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization

81,358

81,701
Amortization of debt discount and issuance costs

7,864

7,413
Non-cash employee stock compensation expense

4,070

4,395
Fair value changes in equity securities

5,099

—
Deferred tax (benefit) expense

(307)

28,958
Other

—

(158)
Changes in assets and liabilities:

Royalty receivables

697

(2,399)
Stream inventory

1,356

524
Income tax receivable

(12,753)

(5,197)
Prepaid expenses and other assets

2,305

(328)
Accounts payable

(7,026)

(1,658)
Income tax payable

(7,514)

9,445
Withholding taxes payable

(906)

26
Uncertain tax positions

2,197

4,560
Other liabilities

(7,993)

9,193
Net cash provided by operating activities

$
103,468

$
147,234

Cash flows from investing activities:

Acquisition of stream and royalty interests

(55)

—
Purchase of equity securities

(3,569)

—
Other

(87)

(94)
Net cash used in investing activities

$
(3,711)

$
(94)

Cash flows from financing activities:

Repayment of revolving credit facility

—

(100,000)
Net payments from issuance of common stock

(2,217)

(3,541)
Common stock dividends

(32,754)

(31,391)
Contributions from non-controlling interest

2,790

—
Other

210

77
Net cash used in financing activities

$
(31,971)

$
(134,855)
Net increase in cash and equivalents

67,786

12,285
Cash and equivalents at beginning of period

88,750

85,847
Cash and equivalents at end of period

$
156,536

$
98,132


	Royal Gold Stockholders
						Accumulated
				Additional		Other
	Common Shares			Paid-In		Comprehensive		Accumulated		Non-controlling		Total
	Shares	Amount		Capital		Income (Loss)		(Losses) Earnings		Interests		Equity
Balance at June 30, 2019	65,440,492	$	655	$	2,201,773	$	—	$	(65,747)	$	33,772	$	2,170,453
Stock-based compensation and related share issuances	55,295		—		(323)		—		—		—		(323)
Distributions from (to) non-controlling interests	—		—		900		—		—		(192)		708
Net income	—		—		—		—		70,453		(1,581)		68,872
Dividends declared	—		—		—		—		(17,382)		—		(17,382)
Balance at September 30, 2019	65,495,787	$	655	$	2,202,350	$	—	$	(12,676)	$	31,999	$	2,222,328

	Royal Gold Stockholders
						Accumulated
				Additional		Other
	Common Shares			Paid-In		Comprehensive		Accumulated		Non-controlling		Total
	Shares	Amount		Capital		Income (Loss)		(Losses) Earnings		Interests		Equity
Balance at June 30, 2018	65,360,041	$	654	$	2,192,612	$	(1,201)	$	(89,898)	$	39,102	$	2,141,269
Stock-based compensation and related share issuances	34,857		—		472		—		—		—		472
Distributions from (to) non-controlling interests	—		—		1,950		—		—		(25)		1,925
Net income	—		—		—		—		15,008		(3,032)		11,976
Other comprehensive loss	—		—		—		1,201		(1,201)		—		—
Dividends declared	—		—		—		—		(16,376)		—		(16,376)
Balance at September 30, 2018	65,394,898	$	654	$	2,195,034	$	—	$	(92,467)	$	36,045	$	2,139,266

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

ROYAL GOLD, INC.

Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	Three Months Ended
	September 30,		September 30,
	2019		2018
Cash flows from operating activities:
Net income	$	68,872	$	11,976
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization		38,714		42,551
Amortization of debt discount and issuance costs		281		3,903
Non-cash employee stock compensation expense		2,101		2,444
Fair value changes in equity securities		1,375		1,468
Deferred tax benefit		(33,139)		(1,681)
Changes in assets and liabilities:
Royalty receivables		(5,902)		1,250
Stream inventory		608		(701)
Income tax receivable		(995)		(6,341)
Prepaid expenses and other assets		(3,197)		1,061
Accounts payable		517		(4,060)
Income tax payable		(1,426)		(10,241)
Uncertain tax positions		1,748		3,266
Other liabilities		1,682		(258)
Net cash provided by operating activities	$	71,239	$	44,637

Cash flows from investing activities:
Acquisition of royalty interests		(4,362)		(3)
Other		4,858		(121)
Net cash provided by (used in) investing activities	$	496	$	(124)

Cash flows from financing activities:
Repayment of debt		(50,000)		—
Net payments from issuance of common stock		(2,423)		(1,972)
Common stock dividends		(17,373)		(16,376)
Other		556		2,163
Net cash used in financing activities	$	(69,240)	$	(16,185)
Net increase in cash and equivalents		2,495		28,328
Cash and equivalents at beginning of period		119,475		88,750
Cash and equivalents at end of period	$	121,970	$	117,078

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ~~AND RECENTLY ISSUED~~ ACCOUNTING STANDARDS

Royal Gold, Inc. (“Royal Gold”, the “Company”, “we”, “us”, or “our”), together with its subsidiaries, is engaged in the business of acquiring and managing metal streams, royalties and similar interests. We seek to acquire existing stream and royalty interests or to finance mining projects that are in production or in the development stage in exchange for stream or royalty interests. A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of ~~one~~1 or more metals produced from a mine at a price determined for the life of the transaction by the purchase agreement. A royalty is a non-operating interest in a mining project that provides the right to revenue or metals produced from the project after deducting contractually specified costs, if any.

Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for a fair presentation of our interim financial statements have been included in this Form 10-Q. Operating results for the three ~~and six~~ months ended ~~December 31, 2018~~September 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, ~~2019.~~2020. These interim unaudited financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2018~~2019 filed with the Securities and Exchange Commission on August ~~9, 2018~~8, 2019 (“Fiscal ~~2018~~2019 10-K”).

Certain amounts in the prior period consolidated balance sheet have been reclassified for comparative purposes to conform with the presentation in the current period balance sheet. Reclassified amounts were not material.

Recently Adopted Accounting Standards

~~Revenue Recognition~~Leases

~~On July 1, 2018, we adopted Accounting Standards Codification 606 -~~ ~~Revenue from Contracts with Customers~~ (“ASC 606”) using the modified retrospective method of transition. Under this transition approach, we applied ASC 606 to all existing contracts for which all (or substantially all) of the revenue attributable to a contract had not been recognized under legacy revenue guidance. The guidance of ASC 606 will also be applied to any new contracts entered into on or after July 1, 2018.

ASC 606 supersedes nearly all of the existing revenue recognition guidance under U.S. GAAP and sets out a five-step revenue recognition framework to recognize revenue upon the transfer of control of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services.

For the three and six months ended December 31, 2018, there was no impact to our reported revenue, operating costs and expenses or net income attributable to Royal Gold common stockholders as a result of adopting ASC 606, as compared to legacy revenue guidance under U.S. GAAP. In addition, no cumulative catch-up adjustment to accumulated losses was required on July 1, 2018 as a result of adopting ASC 606. Please refer to Note 4 for additional discussion.

~~Recognition and Measurement of Financial Instruments~~

~~On July 1, 2018, we adopted Accounting Standards Update (“ASU”) 2016-01 –~~ ~~Financial Instrument~~, which is guidance on the recognition and measurement of financial instruments. The amended guidance requires, among other things, that equity securities previously classified as available-for-sale be measured at fair value with changes in fair value recognized in net income rather than other comprehensive income (loss) as required under previous guidance. Upon adoption, the Company recorded a cumulative-effect adjustment in ~~Accumulated losses~~ of $1.2 million. The decrease in fair value of our equity securities was approximately $3.6 million and $5.1 million for the three and six months ended December 31, 2018, respectively, and is included in ~~Fair value change of marketable equity securities~~ on our consolidated statements of operations and comprehensive income (loss). The carrying value of the Company’s equity securities as of December 31, 2018 and June 30, 2018 was $17.7 million and $19.2 million, respectively, and is included in ~~Other assets~~ ~~on the~~

~~Table of Contents~~

~~ROYAL GOLD, INC.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~Company’s consolidated balance sheets. As of December 31, 2018, the Company owns 809,744 common shares of Contango Ore, Inc. (“CORE”) and 3,597,823 common shares of Rubicon Minerals Corporation.~~

~~Recently Issued Accounting Standards~~

~~Leases~~

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) 2016-02, Leases (Topic ~~842)~~842), which requires recognition of right-of-use assets and lease payment liabilities on the balance sheet by lessees for ~~virtually~~ all leases ~~currently classified as operating leases~~. ~~Under ASU 2016-02, companies are permitted to make a policy election to not recognize lease assets or liabilities when the term of the lease is less~~with terms greater than twelve months. ~~The new guidance~~ Classification of leases as either a finance or operating lease will determine the recognition, measurement and presentation of expenses. ASU 2016-02 also requires certain quantitative and qualitative disclosures about material leasing arrangements.

Subsequently, in July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”). ASU 2018-11 provides an additional modified retrospective transition method for adopting ASU 2016-02, which eliminates the need for adjusting prior period comparable financial statements prepared under legacy lease accounting guidance.

ASU 2016-02, together with ASU 2018-11, is effective for the ~~Company’s fiscal year beginning~~Company July 1, ~~2019, and early adoption is permitted. We are currently evaluating~~2019. The Company adopted the new guidance using the modified retrospective approach set forth in ASU 2018-11, with the date of initial application on July 1, 2019. Comparative reporting periods were not adjusted upon adoption.

As permitted under the transition ~~effort~~guidance, the Company has elected to use the following practical expedients at transition:

●

To not reassess whether any expired or existing contracts were or contained leases; and

●

To not reassess the lease classification for any expired or existing leases.

Table of Contents

ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

In addition, the Company has elected to use the following practical expedients at and subsequent to adoption in accordance with ASU 2016-02:

●

Not to separate non-lease from lease components, and instead account for each lease component and any associated non-lease components as a single lease component; and

●

Not to recognize right-of-use assets and associated liabilities for short-term contracts with lease terms of 12 months or less.

The Company’s significant lease arrangements relate to its office spaces. These arrangements are for leases of assets such as corporate office space and office equipment. Through the implementation process, the Company evaluated its lease arrangements, which included an analysis of contracts, and updated its internal controls and processes that are necessary to track and calculate the additional accounting and disclosure requirements as required upon adoption of ASU 2016-02.

Upon adoption, the new standard had an insignificant impact ~~if any, this guidance will have~~on the Company’s consolidated balance sheets as of September 30, 2019. Adoption of the new standard resulted in the recognition of $2.4 million of right-of-use assets on our consolidated balance sheets with an offsetting $2.4 million of lease liabilities for operating leases. The current portion of our right of use assets are included in Prepaid expenses and other, while the long-term portion is included in Other assets on our consolidated balance sheets. The current portion of the offsetting lease liabilities are included in Other current liabilities, while the long-term portion is included in Other long-term liabilities on our consolidated balance sheets. The Company did not have any finance leases as of September 30, 2019. The adoption of ASU 2016-02 did not impact accumulated losses, our consolidated statements of operations and comprehensive income, and our consolidated statements of cash flows.

2. ACQUISITION

Castelo de Sonhos royalty acquisition

In August 2019, a subsidiary of the Company entered into an agreement with TriStar Gold Inc. and its subsidiaries (together “TriStar”) to acquire (i) up to a 1.5% net smelter return (“NSR”) royalty on the Castelo de Sonhos gold project (“CDS”), located in Brazil, and (ii) warrants to purchase up to 19,640,000 common shares of TriStar. Total consideration is $7.5 million and is payable over 3 payments, of which $4.5 million was paid in August 2019. The second and third payments of $1.5 million each are subject to satisfaction of certain conditions and are payable by November 30, 2019 and March 31, 2020. The NSR royalty is incrementally earned pro-rata with the funding schedule while the warrants to purchase TriStar common shares will be issued pro-rata with the funding schedule.

The CDS royalty acquisition has been accounted for as an asset acquisition. The $4.4 million paid as part of the aggregate funding schedule, plus direct acquisition costs, have been recorded as an exploration stage royalty interest within Stream and royalty interests, net on our consolidated balance sheets. Any future funding of the second and third payments, plus any direct acquisition costs, will also be recorded as an exploration stage royalty interest.

The warrants have been recorded within Other assets on our consolidated balance sheets and have a carrying value of approximately $0.8 million as of September 30, 2019. The warrants have been classified as a financial asset instrument and are recorded at fair value at each reporting date using the Black-Scholes model. Any change in fair value of the warrants at subsequent reporting periods will be recorded within Interest and other income on our consolidated statements of operations and ~~footnote disclosures.~~comprehensive income. As of September 30, 2019, the Company holds 11,784,000 warrants at an exercise price of C$0.25 per common share with a term of five years.

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2.ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

3. STREAM AND ROYALTY INTERESTS, NET

The following tables summarize the Company’s stream and royalty interests, net as of ~~December 31, 2018~~September 30, 2019 and June 30, ~~2018.~~2019.


As of December 31, 2018 (Amounts in thousands):	Cost		Accumulated Depletion		Net

As of September 30, 2019 (Amounts in thousands):							Cost		Accumulated Depletion		Net
Production stage stream interests:
Mount Milligan	$	790,635	$	(164,639)	$	625,996	$	790,635	$	(192,726)	$	597,909
Pueblo Viejo		610,404		(135,152)		475,252		610,404		(168,961)		441,443
Andacollo		388,182		(73,736)		314,446		388,182		(93,774)		294,408
Rainy River		175,727		(8,940)		166,787		175,727		(17,462)		158,265
Wassa and Prestea		146,475		(51,523)		94,952		146,475		(59,565)		86,910
Total production stage stream interests		2,111,423		(433,990)		1,677,433		2,111,423		(532,488)		1,578,935
Production stage royalty interests:
Voisey's Bay		205,724		(92,244)		113,480		205,724		(97,136)		108,588
Peñasquito		99,172		(39,827)		59,345		99,172		(41,414)		57,758
Holt		34,612		(21,946)		12,666		34,612		(22,936)		11,676
Cortez		20,878		(11,428)		9,450		80,681		(12,777)		67,904
Other		487,224		(377,655)		109,569		487,224		(390,591)		96,633
Total production stage royalty interests		847,610		(543,100)		304,510		907,413		(564,854)		342,559
Total production stage stream and royalty interests		2,959,033		(977,090)		1,981,943		3,018,836		(1,097,342)		1,921,494


Development stage stream interests:
Other		12,038		—		12,038		12,038		—		12,038

Development stage royalty interests:
Cortez		59,803		—		59,803
Other		70,952		—		70,952		70,952		—		70,952
Total development stage royalty interests		130,755		—		130,755
Total development stage stream and royalty interests		142,793		—		142,793		82,990		—		82,990


Exploration stage royalty interests:
Pascua-Lama		177,690		—		177,690		177,690		—		177,690
Other		117,482		—		117,482		122,844		—		122,844
Total exploration stage royalty interests		295,172		—		295,172		300,534		—		300,534
Total stream and royalty interests, net	$	3,396,998	$	(977,090)	$	2,419,908	$	3,402,360	$	(1,097,342)	$	2,305,018

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

As of June 30, 2018 (Amounts in thousands):

Cost

Accumulated Depletion

Impairments

Net
Production stage stream interests:

Mount Milligan

$
790,635

$
(152,833)

$
—

$
637,802
Pueblo Viejo

610,404

(114,944)

—

495,460
Andacollo

388,182

(59,851)

—

328,331
Wassa and Prestea

146,475

(41,601)

—

104,874
Rainy River

175,727

(4,028)

—

171,699
Total production stage stream interests

2,111,423

(373,257)

—

1,738,166
Total production stage stream and royalty interests

Production stage royalty interests:

Voisey's Bay

205,724

(86,933)

—

118,791
Peñasquito

99,172

(38,426)

—

60,746
Holt

34,612

(21,173)

—

13,439
Cortez

20,878

(11,241)

—

9,637
Other

483,795

(364,795)

—

119,000
Total production stage royalty interests

844,181

(522,568)

—

321,613
Total production stage stream and royalty interests

2,955,604

(895,825)

—

2,059,779
Development stage stream interests:

Other

12,038

—

—

12,038

Development stage royalty interests:

Cortez

59,803

—

—

59,803
Other

74,610

—

(284)

74,326
Total development stage royalty interests

134,413

—

(284)

134,129
Total development stage stream and royalty interests

146,451

—

(284)

146,167

Exploration stage royalty interests:

Pascua-Lama

416,770

—

(239,080)

177,690
Other

117,481

—

—

117,481
Total exploration stage royalty interests

534,251

—

(239,080)

295,171
Total stream and royalty interests, net

$
3,636,306

$
(895,825)

$
(239,364)

$
2,501,117


As of June 30, 2019 (Amounts in thousands):	Cost		Accumulated Depletion		Net
Production stage stream interests:
Mount Milligan	$	790,635	$	(184,091)	$	606,544
Pueblo Viejo		610,404		(158,819)		451,585
Andacollo		388,182		(86,675)		301,507
Rainy River		175,727		(14,522)		161,205
Wassa and Prestea		146,475		(56,919)		89,556
Total production stage stream interests		2,111,423		(501,026)		1,610,397
Total production stage stream and royalty interests
Production stage royalty interests:
Voisey's Bay		205,724		(95,564)		110,160
Peñasquito		99,172		(40,659)		58,513
Holt		34,612		(22,570)		12,042
Cortez		20,878		(12,362)		8,516
Other		487,224		(386,501)		100,723
Total production stage royalty interests		847,610		(557,656)		289,954
Total production stage stream and royalty interests		2,959,033		(1,058,682)		1,900,351
Development stage stream interests:
Other		12,038		—		12,038

Development stage royalty interests:
Cortez		59,803		—		59,803
Other		70,952		—		70,952
Total development stage royalty interests		130,755		—		130,755
Total development stage stream and royalty interests		142,793		—		142,793

Exploration stage royalty interests:
Pascua-Lama		177,690		—		177,690
Other		118,482		—		118,482
Total exploration stage royalty interests		296,172		—		296,172
Total stream and royalty interests, net	$	3,397,998	$	(1,058,682)	$	2,339,316

~~Voisey’s Bay~~Mount Milligan

The royalty on production of nickel, copper, cobalt and other minerals from the Voisey’s Bay mine in Newfoundland and Labrador, Canada is directly owned by the Labrador Nickel Royalty Limited Partnership (“LNRLP”), in which the Company’s wholly-owned ~~indirect~~ subsidiary, ~~is the general partner and 90% owner. The remaining 10% interest in LNRLP is owned by a subsidiary of Altius Minerals Corporation~~RGLD Gold AG (“~~Altius”~~RGLD Gold”), ~~a non-controlling interest.~~

~~On September 13, 2018, LNRLP entered into an agreement with Vale Canada Limited and certain of its subsidiaries (collectively,~~owns the ~~“Parties”)~~right to ~~comprehensively settle their long-standing litigation related to calculation~~purchase 35% of the ~~royalty on~~payable gold and 18.75% of the ~~sale of all concentrates~~payable copper produced from the ~~Voisey’s Bay mine. Refer~~Mount Milligan copper-gold mine in British Columbia, Canada, which is operated by an indirect subsidiary of Centerra Gold Inc. (“Centerra”). The Company’s carrying value for its stream interest at Mount Milligan is $597.9 million as of September 30, 2019.

On October 30, 2019, Centerra reported that issues identified with decreasing long-term gold recoveries and increased costs in the short-to medium-term led them to ~~Note 14~~record an impairment charge against their carrying value of ~~our Fiscal 2018 10-K for further discussion on~~ the ~~claims previously asserted by LNRLP.~~

~~The Parties agreed~~Mount Milligan mine under applicable accounting standards, and that it has begun a comprehensive technical review of the operation with the objective of publishing an updated 43-101 technical report in the coming months. According to ~~a new method for calculating~~Centerra, the ~~royalty~~updated 43-101 report will include studies to optimize the economics of the mine as well as incorporate results of exploration drilling through calendar 2019. While Centerra acknowledged that the extent of any changes in ~~respect of concentrates processed~~reserves and mineralized material cannot be precisely determined until all relevant studies and modeling have been completed, it expects that the mineral reserves and mineralized material at ~~Vale’s Long Harbour Processing Plant, which~~Mount Milligan will be ~~effective~~materially reduced.

A significant reduction in reserves and mineralized material could be an indicator of potential impairment for ~~all Voisey’s Bay~~Royal Gold. The financial impairment taken by Centerra does not impact the mine ~~production after April 1, 2018. Under~~operating performance, and, further, a significant reduction in reserves and mineralized material at Mount Milligan may not result in an impairment given current high gold prices and our low depletion rates for the ~~terms of the settlement, Royal Gold expects the 3% royalty rate will apply to approximately 50% of the gross metal value in the concentrates~~Mount Milligan stream interest. It is unclear at the nickel, copper and cobalt prices prevailing at the time of settlement. As those metal prices rise or fall, the percentage of gross metal value in the concentrates applicable to the royalty would correspondingly increase or decrease.

this point what impact, if any,

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

the results of Centerra’s technical report work will have on the carrying value of our stream interest at Mount Milligan. The Company will continue to monitor these developments at Mount Milligan in subsequent quarterly reporting periods.

Other

During the ~~three and six months~~quarter ended ~~December 31, 2018,~~June 30, 2019, the Company ~~recognized approximately $2.5 million~~was made aware of insolvency proceedings at one of our non-principal producing properties (El Toqui), and $7.5 million (each period includes 10% non-controlling interest), respectively, in royalty revenue attributable to the Voisey’s Bay royalty. Royalty revenue recognized on the Voisey’s Bay royalty forduring the quarter ended September 30, 2019, the Company was made aware of insolvency proceedings at one of our evaluation stage properties. The outcome of these insolvency proceedings may impact our royalty interests and the associated carrying values, which are approximately $1.4 million (El Toqui) and $2.7 million (evaluation stage interest) as of September 30, 2019. The Company continues to monitor these insolvency proceedings as part of our regular asset impairment analysis. Based on the results of these insolvency proceedings, the Company could determine that a future write-down of either interest to an amount less than the current carrying value or to zero is necessary.

4. MARKETABLE EQUITY SECURITIES

As of September 30, 2019, the Company’s marketable equity securities include 809,744 common shares of Contango Ore, Inc. (“CORE”), 3,949,575 common shares of Rubicon Minerals Corporation, and warrants to purchase up to 11,784,000 common shares of TriStar. Our marketable equity securities are measured at fair value (Note 11) each reporting period with any changes in fair value recognized in net income.

The decrease in fair value of our marketable equity securities was approximately $1.4 million and $1.5 million for the three months ended September 30, 2019 and 2018, ~~was attributable to metal production from~~respectively, and is included in Fair value changes in equity securities on our consolidated statements of operations and comprehensive income. The carrying value of the Company’s marketable equity securities as of September 30, 2019 and June 30, 2019 was $15.0 million and ~~September 30, 2018 quarters. Royalty payments for each quarter are due 45 days after quarter-end. Refer to Note 4 for further discussion~~$16.0 million, respectively, and is included in Other assets on ~~our revenue recognition.~~the Company’s consolidated balance sheets.

5. DEBT

~~3. DEBT~~

The Company’s ~~non-current~~ debt as of ~~December 31, 2018~~September 30, 2019 and June 30, ~~2018~~2019 consists of the following:


	As of December 31, 2018								As of June 30, 2018
	Principal		Unamortized Discount		Debt Issuance Costs		Total		Principal		Unamortized Discount		Debt Issuance Costs		Total
		(Amounts in thousands)								(Amounts in thousands)
Convertible notes due 2019	$	370,000	$	(6,205)	$	(635)	$	363,160	$	370,000	$	(12,764)	$	(1,316)	$	355,920

																	As of September 30, 2019						As of June 30, 2019
																	Principal		Debt Issuance Costs		Total		Principal		Debt Issuance Costs		Total
																		(Amounts in thousands)						(Amounts in thousands)
Revolving credit facility		—		—		(4,263)		(4,263)		—		—		(4,893)		(4,893)	$	170,000	$	(5,405)	$	164,595	$	220,000	$	(5,446)	$	214,554
Total debt	$	370,000	$	(6,205)	$	(4,898)	$	358,897	$	370,000	$	(12,764)	$	(6,209)	$	351,027	$	170,000	$	(5,405)	$	164,595	$	220,000	$	(5,446)	$	214,554

~~Convertible Senior Notes Due~~Revolving credit facility

On September 20, 2019,

~~In June 2012,~~ the Company completed an offering of $370 million aggregate principal amount of 2.875% convertible senior notes due 2019 (“2019 Notes”). The 2019 Notes bear interest at the rate of 2.875% per annum, and the Company is requiredentered into a third amendment to make semi-annual interest payments on the outstanding principal balance of the 2019 Notes on June 15 and December 15 of each year, beginning December 15, 2012. The 2019 Notes mature on June 15, 2019. Generally, we classify debt that is maturing within one year as a current liability. However, the Company has the intent and ability to settle the principal amount of the 2019 Notes in cash primarily from its availableour revolving credit facility ~~a non-current liability,~~dated as of ~~December 31~~June 2, 2017. Under the amendment, the Company’s Swiss subsidiary, RGLD Gold AG, was added as a co-borrower and ~~June 30, 2018.~~

~~Interest expense recognized on the 2019 Notes for the three~~joint and six months ended December 31, 2018 was $6.3 million and $12.6 million, respectively, compared to $6.1 million and $12.1 million, respectively, for the three and six months ended December 31, 2017, and included the contractual coupon interest, the accretionseveral obligor, certain of the ~~debt discount~~Company’s Canadian subsidiaries were added as guarantors, and ~~amortization~~certain equity pledges that previously had been granted in favor of the ~~debt issuance costs.~~lenders to support the facility were released, with the result that the facility is now unsecured.

~~Revolving credit facility~~

~~The Company maintains a $1 billion revolving credit facility.~~ As of ~~December 31, 2018,~~September 30, 2019, the Company had ~~no amounts~~$170 million outstanding and ~~$1 billion~~$830 million available under the revolving credit facility. Interest expense recognized on the revolving credit facility for the three and six months ended December 31, 2018 was $0.3 million and $0.6 million (amortization of debt issuance costs only), respectively, and $1.8 million and $3.6 million, respectively, for the three and six months ended December 31, 2017, which included interest on the outstanding borrowings and the amortization of the debt issuance costs. Royal Gold may repay any borrowings under the revolving credit facility at any time without premium or penalty.

As of September 30, 2019, the interest rate on borrowings under the revolving credit facility was LIBOR plus 1.10% for an all-in rate of 3.24%. For the three months ended September 30, 2019 and 2018, interest expense, which includes interest on the outstanding borrowings and the amortization of the debt issuance costs, was $2.2 million and $0.3 million

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

respectively. As discussed in Note 5 to the ~~notes to~~ consolidated financial statements in the Company’s Fiscal ~~2018~~2019 10-K, the Company has financial covenants associated with its revolving credit facility. As of ~~December 31, 2018,~~September 30, 2019, the Company was in compliance with each financial covenant.

4.6. REVENUE

Revenue Recognition

Under current ASC 606 – Revenue from Contracts with Customers (“ASC 606”) guidance, a performance obligation is a promise in a contract to transfer control of a distinct good or service (or integrated package of goods and/or services) to a customer. A contract’s transaction price is allocated to

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~~ROYAL GOLD, INC.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

each distinct performance obligation and recognized as revenue when, or as, a performance obligation is satisfied. In accordance with this guidance, revenue attributable to our stream interests and royalty interests is generally recognized at the point in time that control of the related metal production transfers to our customers. The amount of revenue we recognize further reflects the consideration to which we are entitled under the respective stream or royalty agreement. A more detailed summary of our revenue recognition policies for our stream and royalty interests is discussed below.

Stream Interests

A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more of the metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. Gold, silver and copper received under our metal streaming agreements are taken into inventory, and then sold primarily using average spot rate gold, silver and copper forward contracts. The sales price for these average spot rate forward contracts is determined by the average daily gold, silver or copper spot prices during the term of the contract, typically a consecutive number of trading days between ten days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policy in effect at the time) commencing shortly after receipt and purchase of the metal. We settle our forward sales contracts via physical delivery of the metal to the purchaser (our customer) on the settlement date specified in the contract. Under our forward sales contracts, there is a single performance obligation to sell a contractually specified volume of metal to the purchaser, and we satisfy this obligation at the point in time of physical delivery. Accordingly, revenue from our metal sales is recognized on the date of settlement, which is the date that control, custody and title to the metal transfer to the purchaser.

Royalty Interests

Royalties are non-operating interests in mining projects that provide the right to a percentage of revenue or metals produced from the project after deducting specified costs, if any. We are entitled to payment for our royalty interest in a mining project based on a contractually specified commodity price (for example, a monthly or quarterly average spot price) for the period in which metal production ~~occurred.~~occurs. As a royalty holder, we act as a passive entity in the production and operations of the mining project, and the third-party operator of the mining project is responsible for all mining activities, including subsequent marketing and delivery of all metal production to their ultimate customer. In all of our material royalty interest arrangements, we have concluded that we transfer control of our interest in the metal production to the operator at the point at which production occurs, and thus, the operator is our customer. We have further determined that the transfer of each unit of metal production comprising our royalty interest to the operator represents a separate performance obligation under the contract, and each performance obligation is satisfied at the point in time of metal production by the operator. Accordingly, we recognize revenue attributable to our royalty interests in the period in which metal production occurs at the specified commodity price per the agreement, net of any contractually allowable offsite treatment, refining, transportation and, if applicable, mining costs.

Royalty Revenue Estimates

For a small number of our royalty interests, we may not receive, or be entitled to receive, payment information, including production information from the operator, for the period in which metal production occurred prior to issuance of our financial statements. As a result, we may estimate revenue for these royalties based on available information, including

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

public information, from the operator. If adequate information is not available from the operator or from other public sources before we issue our financial statements, the Company will recognize royalty revenue during the period in which the necessary payment information is received. Differences between estimates and actual amounts could differ significantly and are recorded in the period that the actual amounts are known. Please also refer to our “Use of Estimates” accounting policy discussed in our Fiscal ~~2018~~2019 10-K. For the quarter ended ~~December 31, 2018,~~September 30, 2019, royalty revenue that was estimated or was attributable to metal production for a period prior to ~~December 31, 2018,~~September 30, 2019, was not material.

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~~ROYAL GOLD, INC.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

Disaggregation of Revenue

We have identified ~~two~~2 material revenue sources in our business: stream interests and royalty interests. These identified revenue sources are consistent with our reportable segments as discussed in Note 8.10.

Revenue by metal type attributable to each of our revenue sources is disaggregated as follows:


	Three Months Ended		Six Months Ended
	December 31, 2018		December 31, 2018

					Three Months Ended
					September 30,		September 30,
					2019		2018
Stream revenue:
Gold	$	53,179	$	112,293	$	72,224	$	59,114
Silver		7,884		16,604		8,436		8,720
Copper		6,616		8,819		6,321		2,203
Total stream revenue	$	67,679	$	137,716	$	86,981	$	70,037
Royalty revenue:
Gold	$	19,656	$	38,210	$	21,757	$	18,554
Silver		1,567		2,919		1,829		1,352
Copper		4,359		7,974		2,980		3,615
Other		4,331		10,766		5,227		6,434
Total royalty revenue	$	29,913	$	59,869	$	31,793	$	29,955
Total revenue	$	97,592	$	197,585	$	118,774	$	99,992

Revenue attributable to our principal stream and royalty interests is disaggregated as follows:


		Three Months Ended		Six Months Ended
	Metal(s)	December 31, 2018		December 31, 2018

							Three Months Ended
							September 30,		September 30,
						Metal(s)	2019		2018
Stream revenue:
Mount Milligan	Gold & Copper	$	28,169	$	37,015	Gold & Copper	$	30,497	$	8,847
Pueblo Viejo	Gold & Silver		18,230		37,717	Gold & Silver		21,618		19,486
Wassa and Prestea	Gold		9,550		17,611
Andacollo	Gold		7,635		35,378	Gold		20,604		27,743
Wassa						Gold		5,319		5,325
Rainy River						Gold & Silver		7,166		5,900
Other	Gold & Silver		4,095		9,995	Gold & Silver		1,777		2,736
Total stream revenue		$	67,679	$	137,716		$	86,981	$	70,037
Royalty revenue:
Peñasquito	Gold, Silver, Lead & Zinc	$	4,660	$	8,297	Gold, Silver, Lead & Zinc	$	4,420	$	3,637
Cortez	Gold		2,335		2,939	Gold		4,417		603
Other	Various		22,918		48,633	Various		22,956		25,715
Total royalty revenue		$	29,913	$	59,869		$	31,793	$	29,955
Total revenue		$	97,592	$	197,585		$	118,774	$	99,992

Please refer to Note 810 for the geographical distribution of our revenue by reportable segment.

Contract Receivables

Under our forward sales contracts related to our metal streaming arrangements, payment is due from the purchaser on the day of settlement. Accordingly, our metal stream sales contracts do not give rise to a receivable under ASC 606.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Under our royalty arrangements, payment is typically due by the royalty payor either (i) monthly, typically thirty days after month-end or (ii) quarterly, typically thirty to sixty days after the respective quarter-end. Revenue related to production that has occurred as of the reporting date but for which payment has not been received represents a receivable (rather than a contract asset) under ASC 606 as payment by the operator is unconditional upon the production of metal. As of ~~December 31, 2018,~~September 30, 2019, and June 30, ~~2018,~~2019, our royalty receivables were ~~$25.7~~$26.6 million and ~~$26.4~~$20.7 million, respectively.

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~~ROYAL GOLD, INC.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

Practical Expedients Utilized

Our forward sales contracts related to our metal streaming arrangements are short-term in nature with a term of one year or less. For these contracts, we have utilized the practical expedient allowed in ASC 606 that exempts us from presenting the transaction price allocated to remaining performance obligations (i.e. forecasts of unearned revenue) for contracts with an original expected term of one year or less.

Our royalty arrangements generally cover metal production over the life of a mine and, thus, have a contract term that is greater than one year. Under these contracts, variability related to future production volumes and market pricing is allocated entirely to those future production volumes from the mining operation. Consequently, we have utilized an alternative practical expedient allowed in ASC 606 that exempts us from presenting the transaction price allocated to remaining performance obligations (i.e. forecasts of unearned revenue) if the variable consideration in a contract is allocated entirely to a wholly unsatisfied performance obligation.

5.7. STOCK-BASED COMPENSATION

The Company recognized stock-based compensation expense as follows:


	Three Months Ended				Six Months Ended
	December 31,		December 31,		December 31,		December 31,
	2018		2017		2018		2017
		(Amounts in thousands)				(Amounts in thousands)

									Three Months Ended
									September 30,		September 30,
									2019		2018
										(Amounts in thousands)
Stock options	$	33	$	79	$	154	$	170	$	31	$	120
Stock appreciation rights		408		486		1,175		974		442		766
Restricted stock		677		888		1,956		2,314		1,243		1,280
Performance stock		507		568		785		937		385		278
Total stock-based compensation expense	$	1,625	$	2,021	$	4,070	$	4,395	$	2,101	$	2,444

Stock-based compensation expense is included within General and administrative expense in the consolidated statements of operations and comprehensive income.

During the three ~~and six~~ months ended ~~December 31,~~September 30, 2019 and 2018, the Company granted the following stock-based compensation awards:


	Three Months Ended		Six Months Ended
	December 31,	December 31,	December 31,	December 31,
	2018	2017	2018	2017
	(Number of shares)		(Number of shares)

					Three Months Ended
					September 30,	September 30,
					2019	2018
					(Number of shares)
Stock options	—	—	6,430	6,858	1,604	6,430
Stock appreciation rights	—	—	69,360	71,262	46,726	69,360
Restricted stock	—	—	42,260	50,380	23,976	42,260
Performance stock (at maximum 200% attainment)	—	—	57,420	68,020	28,560	57,420
Total equity awards granted	—	—	175,470	196,520	100,866	175,470

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

As of ~~December 31, 2018,~~September 30, 2019, unrecognized compensation expense (expressed in thousands below) and weighted-average vesting period for each of our stock-based compensation awards were as follows:


	Unrecognized		Weighted-
	compensation		average vesting
	expense		period (years)

					Unrecognized		Weighted-
					compensation		average vesting
					expense		period (years)
Stock options	$	197		2.0	$	160		1.9
Stock appreciation rights		2,581		2.0		3,012		2.2
Restricted stock		5,744		3.2		6,140		3.3
Performance stock		1,307		1.7		2,522		2.1

6.8. EARNINGS PER SHARE (“EPS”)

Basic earnings ~~(loss)~~ per common share were computed using the weighted average number of shares of common stock outstanding during the period, considering the effect of participating securities. Unvested stock-based compensation awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of earnings per share pursuant to the two-class method. The Company’s unvested restricted stock awards contain non-forfeitable dividend rights and participate equally with common stock with respect to dividends issued or declared. The Company’s unexercised stock options, unexercised SSARs and unvested performance stock do not contain rights to dividends. Under the two-class method, the earnings used to determine basic earnings ~~(loss)~~ per common share are reduced by an amount allocated to participating securities. Use of the two-class method has an immaterial impact on the calculation of basic and diluted earnings ~~(loss)~~ per common share.

The following tables summarize the effects of dilutive securities on diluted EPS for the period:


	Three Months Ended				Six Months Ended
	December 31,		December 31,		December 31,		December 31,
	2018		2017		2018		2017
		(in thousands, except per share data)				(in thousands, except per share data)
Net income (loss) available to Royal Gold common stockholders	$	23,586	$	(14,765)	$	38,596	$	13,864

									Three Months Ended
									September 30,		September 30,
									2019		2018
										(in thousands, except per share data)
Net income available to Royal Gold common stockholders									$	70,453	$	15,008
Weighted-average shares for basic EPS		65,395,457		65,306,766		65,385,161		65,271,131		65,465,611		65,374,866
Effect of other dilutive securities		77,943		—		100,262		189,299		150,315		122,293
Weighted-average shares for diluted EPS		65,473,400		65,306,766		65,485,423		65,460,430		65,615,926		65,497,159
Basic earnings (loss) per share	$	0.36	$	(0.23)	$	0.59	$	0.21
Diluted earnings (loss) per share	$	0.36	$	(0.23)	$	0.59	$	0.21
Basic earnings per share									$	1.07	$	0.23
Diluted earnings per share									$	1.07	$	0.23

The calculation of weighted average shares includes all of our outstanding common stock. The Company intends to settle the principal amount of the 2019 Notes in cash from amounts available under our revolving credit facility. As a result, there will be no impact to diluted earnings per share unless the share price of the Company’s common stock exceeds the conversion price of $102.29.

7.9. INCOME TAXES


	Three Months Ended				Six Months Ended
	December 31,		December 31,		December 31,		December 31,
	2018		2017		2018		2017
	(Amounts in thousands, except rate)				(Amounts in thousands, except rate)
Income tax benefit (expense)	$	2,148	$	(48,360)	$	(1,967)	$	(55,904)

									Three Months Ended
									September 30,		September 30,
									2019		2018
									(Amounts in thousands, except rate)
Income tax (benefit) expense									$	(23,525)	$	4,115
Effective tax rate		(10.3%)		148.5%		5.3%		83.9%		(51.9%)		25.6%

~~Table of Contents~~

~~ROYAL GOLD, INC.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

The decrease in the effective tax rate for the three ~~and six~~ months ended ~~December 31,~~September 30, 2019, as compared to the three months ended September 30, 2018, was attributable to discrete tax benefits ($32.3 million) primarily related to the ~~Company’s refined analysis~~remeasurement of certain deferred tax assets and a net step-up in the basis of tax assets due to the enactment of the ~~transition tax as part~~Federal Act on Tax Reform and AHV Financing in Zug, Switzerland on September 3, 2019.

Table of ~~H.R. 1, originally known as the Tax Cuts and Jobs Act (the “Act”), and our ability~~Contents

ROYAL GOLD, INC.

Notes to utilize additional foreign tax credits. As of December 31, 2018, the Company completed its analysis of the Act within the measurement period provided by Staff Accounting Bulletin No. 118 and the amounts are no longer considered provisional. Despite the completion of our analysis, many aspects of the law remain unclear and future guidance could impact the Company. A material impact due to evolving guidance is not anticipated, however, the Company will continue to monitor any new developments.Consolidated Financial Statements (Continued)

(Unaudited)

10. SEGMENT INFORMATION

The Company manages its business under ~~two~~2 reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Royal Gold’s long-lived assets (stream and royalty interests, net) are geographically distributed as shown in the following table:


	As of December 31, 2018						As of June 30, 2018
					Total stream								Total stream
	Stream		Royalty		and royalty		Stream		Royalty				and royalty
	interest		interest		interests, net		interest		interest		Impairments		interests, net

															As of September 30, 2019						As of June 30, 2019
																			Total stream						Total stream
															Stream		Royalty		and royalty		Stream		Royalty		and royalty
															interest		interest		interests, net		interest		interest		interests, net
Canada	$	792,783	$	206,039	$	998,822	$	809,500	$	214,562	$	(284)	$	1,023,778	$	756,174	$	197,409	$	953,583	$	767,749	$	200,251	$	968,000
Dominican Republic		475,252		—		475,252		495,460		—		—		495,460		441,443		—		441,443		451,585		—		451,585
Chile		314,446		214,226		528,672		328,331		453,306		(239,080)		542,557		294,408		214,225		508,633		301,507		214,226		515,733
Africa		94,952		321		95,273		104,874		502		—		105,376		86,910		321		87,231		89,555		321		89,876
Mexico		—		87,211		87,211		—		93,277		—		93,277		—		81,920		81,920		—		83,748		83,748
United States		—		164,277		164,277		—		165,543		—		165,543		—		162,412		162,412		—		163,398		163,398
Australia		—		33,061		33,061		—		34,254		—		34,254		—		31,187		31,187		—		31,944		31,944
Other		12,039		25,301		37,340		12,039		28,833		—		40,872
Rest of world																12,039		26,570		38,609		12,039		22,993		35,032
Total	$	1,689,472	$	730,436	$	2,419,908	$	1,750,204	$	990,277	$	(239,364)	$	2,501,117	$	1,590,974	$	714,044	$	2,305,018	$	1,622,435	$	716,881		2,339,316

The Company’s ~~revenue, cost~~reportable segments for purposes of ~~sales and net~~assessing performance are shown below (amounts in thousands):


	Three Months Ended September 30, 2019
	Revenue		Cost of sales⁽¹⁾		Production taxes		Depletion ⁽²⁾		Segment gross profit
Stream interests	$	86,981	$	20,111	$	—	$	31,462	$	35,408
Royalty interests		31,793		—		1,099		7,199		23,495
Total	$	118,774	$	20,111	$	1,099	$	38,661	$	58,903


	Three Months Ended September 30, 2018
	Revenue		Cost of sales⁽¹⁾		Production taxes		Depletion ⁽²⁾		Segment gross profit
Stream interests	$	70,037	$	16,527	$	—	$	32,097	$	21,413
Royalty interests		29,955		—		1,292		10,408		18,255
Total	$	99,992	$	16,527	$	1,292	$	42,505	$	39,668

(1)	Excludes depreciation, depletion and amortization

(2)	Depletion amounts are included within Depreciation, depletion and amortization on our consolidated statements of operations and comprehensive income.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

A reconciliation of total segment gross profit to the consolidated Income before income taxes is shown below (amounts in thousands):


	Three Months Ended
	September 30,		September 30,
		2019		2018
Total segment gross profit	$	58,903	$	39,668

Costs and expenses
General and administrative expenses		7,443		9,927
Exploration costs		2,626		4,362
Depreciation		53		46
Operating income		48,781		25,333
Fair value changes in equity securities		(1,375)		(1,468)
Interest and other income		775		103
Interest and other expense		(2,834)		(7,877)
Income before income taxes	$	45,347	$	16,091

The Company’s revenue by reportable segment for the three ~~and six~~ months ended ~~December 31,~~September 30, 2019 and 2018 ~~and 2017~~ is geographically distributed as shown in the following ~~table:~~table (amounts in thousands):


	Three Months Ended December 31, 2018						Three Months Ended December 31, 2017
	Revenue		Cost of sales		Net revenue		Revenue		Cost of sales		Net revenue
Streams:

													Three Months Ended
													September 30,		September 30,
													2019		2018
Stream interests:
Canada	$	32,264	$	9,729	$	22,535	$	22,702	$	6,624	$	16,078	$	37,663	$	14,747
Dominican Republic		18,230		5,409		12,821		26,355		8,198		18,157		21,618		19,486
Chile		7,635		1,124		6,511		21,601		3,297		18,304		20,604		27,742
Africa		9,550		1,900		7,650		8,629		1,744		6,885		7,096		8,062
Total streams	$	67,679	$	18,162	$	49,517	$	79,287	$	19,863	$	59,424

Royalties:
Mexico	$	7,837	$	—	$	7,837	$	10,854	$	—	$	10,854
Total stream interests													$	86,981	$	70,037

Royalty interests:
United States		8,284		—		8,284		12,298		—		12,298	$	10,602	$	6,056
Canada		7,536		—		7,536		5,396		—		5,396		8,921		10,181
Mexico														6,387		7,996
Australia		3,157		—		3,157		3,227		—		3,227		3,802		3,060
Africa		532		—		532		585		—		585		470		492
Other		2,567		—		2,567		2,701		—		2,701
Total royalties	$	29,913	$	—	$	29,913	$	35,061	$	—	$	35,061
Total streams and royalties	$	97,592	$	18,162	$	79,430	$	114,348	$	19,863	$	94,485
Rest of world														1,611		2,170
Total royalty interests													$	31,793	$	29,955
Total revenue													$	118,774	$	99,992

~~Table of Contents~~

~~ROYAL GOLD, INC.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

Six Months Ended December 31, 2018

Six Months Ended December 31, 2017


Revenue

Cost of sales

Net revenue

Revenue

Cost of sales

Net revenue
Streams:

Canada

$
47,010

$
13,994

$
33,016

$
54,654

$
15,847

$
38,807
Dominican Republic

37,717

11,733

25,984

51,758

15,785

35,973
Chile

35,378

5,402

29,976

33,938

5,109

28,829
Africa

17,611

3,560

14,051

17,699

3,541

14,158
Total streams

$
137,716

$
34,689

$
103,027

$
158,049

$
40,282

$
117,767

Royalties:

Mexico

$
15,833

$
—

$
15,833

$
21,751

$
—

$
21,751
United States

14,340

—

14,340

22,727

—

22,727
Canada

17,717

—

17,717

11,488

—

11,488
Australia

6,217

—

6,217

6,548

—

6,548
Africa

1,024

—

1,024

1,047

—

1,047
Other

4,738

—

4,738

5,214

—

5,214
Total royalties

$
59,869

$
—

$
59,869

$
68,775

$
—

$
68,775
Total streams and royalties

$
197,585

$
34,689

$
162,896

$
226,824

$
40,282

$
186,542

9.11. FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1: Quoted prices for identical instruments in active markets;

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Level 3: Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The following table sets forth the Company’s financial assets measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy.


	As of September 30, 2019
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
Assets (In thousands):
Marketable equity securities⁽¹⁾	$	14,970	$	14,970	$	14,200	$	770	$	—

As of December 31, 2018

Carrying

Fair Value


Amount

Total

Level 1

Level 2

Level 3
Assets (In thousands):

Marketable equity securities(1)

$
17,681

$
17,681

$
17,681

$
—

$
—
Total assets

$
17,681

$
17,681

$
17,681

$
—

$
—

Liabilities (In thousands):

Debt(2)

$
440,795

$
371,388

$
371,388

$
—

$
—
Total liabilities

$
440,795

$
371,388

$
371,388

$
—

$
—

⁽¹⁾

~~Included in~~ ~~Other assets~~ ~~on the Company’s consolidated balance sheets.~~

⁽²⁾

~~Included in the carrying amount is the equity component of our 2019 Notes in the amount of $77 million, which is included within~~ ~~Additional paid-in capital~~ ~~on the Company’s consolidated balance sheets.~~

(1) Included in Other assets on the Company’s consolidated balance sheets.

~~Table of Contents~~

~~ROYAL GOLD, INC.~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

The Company’s marketable equity securities classified within Level 1 of the fair value hierarchy are valued using quoted market prices in active ~~markets. The fair value of the Level 1 marketable equity securities is calculated as the quoted market price of the marketable equity security~~markets multiplied by the quantity of shares held by the Company. The ~~Company’s debt~~warrants classified within Level 12 of the fair value hierarchy isare valued each period using ~~quoted prices~~the Black-Scholes model. The warrants are part of the TriStar transaction discussed further in ~~an active market.~~ Note 2 and have been classified as a financial asset instrument. The carrying value of the Company’s revolving credit facility (Note 5) approximates fair value as of September 30, 2019.

As of ~~December 31, 2018,~~September 30, 2019, the Company also had assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis like those associated with stream and royalty interests, intangible assets and other long-lived assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if any of these assets are determined to be impaired. If recognition of these assets at their fair value becomes necessary, such measurements will be determined utilizing Level 3 inputs.

~~10.~~12. COMMITMENTS AND CONTINGENCIES

Khoemacau Silver Stream Acquisition

As of September 30, 2019, the Company’s conditional funding schedule for $212 million pursuant to its Khoemacau silver stream acquisition made in February 2019 remains subject to certain conditions. On November 5, 2019, the Company’s wholly-owned subsidiary, RGLD Gold AG, made its first advance payment ($65.8 million) pursuant to the Khoemacau silver stream. Refer to our Fiscal 2019 10-K for further details on the Khoemacau silver stream acquisition.

Ilovica Gold Stream Acquisition

As of ~~December 31, 2018,~~September 30, 2019, the Company’s conditional funding schedule for $163.75 million related to its Ilovica gold stream acquisition made in October 2014 remains subject to certain conditions.

1618

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist you in better understanding and evaluating our financial condition and results of operations. Royal Gold, Inc. (“Royal Gold”, the “Company”, “we”, “us”, or “our”) recommends that you read this MD&A in conjunction with our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2018~~2019 filed with the Securities and Exchange Commission (the “SEC”) on August ~~9, 2018.~~8, 2019 (Fiscal 2019 10-K).

This MD&A contains forward-looking information. You should review our important note about forward-looking statements following this MD&A.

We refer to “GSR,” “NSR,” “NVR,” “metal stream (or “stream”)” and other types of royalty or similar interests throughout this MD&A. These terms are defined in our Fiscal ~~2018~~2019 10-K.

Statement Regarding Third Party Information

Royal Gold does not own, develop, or mine the properties on which it holds stream or royalty interests, except for our interest in the Peak Gold, LLC joint venture (“Peak Gold JV”) as described further in ~~this report.~~our Fiscal 2019 10-K. Certain information provided in this report, including the Operator’s Production Estimates by Stream and Royalty Interest for Calendar ~~2018 (or Calendar 2019)~~2019 and Property Developments, has been provided to us by the operators of properties where we own interests or is publicly available information filed by these operators with applicable securities regulatory bodies, including the SEC. Royal Gold has not verified, and is not in a position to verify, and expressly disclaims any responsibility for, the accuracy, completeness or fairness of such third-party information and refers the reader to the public reports filed by the operators for information regarding those properties.

Overview

Royal Gold, together with its subsidiaries, is engaged in the business of acquiring and managing metal streams, royalties, and similar interests. We seek to acquire existing stream and royalty interests or to finance projects that are in production or in the development stage in exchange for stream or royalty interests.

We manage our business under two segments:

Acquisition and Management of Stream Interests — A metal stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. As of ~~December 31, 2018,~~September 30, 2019, we owned seven stream interests, which are on ~~five~~six producing properties and ~~one~~two development stage ~~property.~~properties. Stream interests accounted for approximately ~~69% of~~73% and 70% our total revenue for the three ~~and six~~ months ended ~~December 31,~~September 30, 2019 and 2018, ~~and 2017.~~respectively. We expect stream interests to continue representing a significant proportion of our total revenue.

Acquisition and Management of Royalty Interests — Royalties are non-operating interests in mining projects that provide the right to revenue or metals produced from the project after deducting specified costs, if any. As of ~~December 31, 2018,~~September 30, 2019, we owned royalty interests on 3635 producing properties, 1614 development stage properties and ~~133~~130 exploration stage properties, of which we consider 5648 to be evaluation stage projects. We use “evaluation stage” to describe exploration stage properties that contain mineralized material and on which operators are engaged in the search for reserves. Royalties accounted for approximately ~~31%~~27% and 30% of our total revenue for the three ~~and six~~ months ended ~~December 31,~~September 30, 2019 and 2018, ~~and 2017.~~ respectively.

We do not conduct mining operations on the properties in which we hold stream and royalty interests, and except for our interest in the Peak Gold JV, we generally are not required to contribute to capital costs, exploration costs, environmental costs or other operating costs on those properties.

Table of Contents

In the ordinary course of business, we engage in a continual review of opportunities to acquire existing stream and royalty interests, to establish new streams and royalties on operating mines, to create new stream and royalty interests through the financing of

~~Table of Contents~~

mine development or exploration, or to acquire companies that hold stream and royalty interests. We currently, and generally at any time, have acquisition opportunities in various stages of active review, including, for example, our engagement of consultants and advisors to analyze particular opportunities, our analysis of technical, financial, legal and other confidential information of particular opportunities, submission of indications of interest and term sheets, participation in preliminary discussions and negotiations and involvement as a bidder in competitive processes.

Our financial results are primarily tied to the price of gold and, to a lesser extent, the price of silver and copper, together with the amounts of production from our producing stage stream and royalty interests. The price of gold, silver, copper and other metals has fluctuated widely in recent years. The marketability and the price of metals are influenced by numerous factors beyond the control of the Company and significant declines in the price of gold, silver or copper could have a material and adverse effect on the Company’s results of operations and financial condition.

For the three ~~and six~~ months ended ~~December 31,~~September 30, 2019 and 2018, ~~and 2017,~~ gold, silver and copper price averages and percentage of revenue by metal were as follows:


	Three Months Ended						Six Months Ended
	December 31, 2018			December 31, 2017			December 31, 2018			December 31, 2017

													Three Months Ended
													September 30, 2019			September 30, 2018
Metal	Average Price		Percentage of Revenue	Average Price		Percentage of Revenue	Average Price		Percentage of Revenue	Average Price		Percentage of Revenue	Average Price		Percentage of Revenue	Average Price		Percentage of Revenue
Gold ($/ounce)	$	1,226	75%	$	1,275	79%	$	1,220	76%	$	1,277	78%	$	1,472	79%	$	1,213	78%
Silver ($/ounce)	$	14.54	10%	$	16.73	9%	$	14.78	10%	$	16.78	9%	$	16.98	9%	$	15.02	10%
Copper ($/pound)	$	2.80	11%	$	3.09	9%	$	2.78	8%	$	2.98	9%	$	2.63	8%	$	2.77	6%
Other		N/A	4%		N/A	3%		N/A	6%		N/A	4%		N/A	4%		N/A	6%

Recent Business Developments

~~Voisey’s Bay~~Castelo de Sonhos royalty acquisition

The royalty on production of nickel, copper, cobalt and other minerals from the Voisey’s Bay mine in Newfoundland and Labrador, Canada is directly owned by the Labrador Nickel Royalty Limited Partnership (“LNRLP”), in which the Company’s wholly-owned indirect subsidiary is the general partner and 90% owner. The remaining 10% interest in LNRLP is owned byIn August 2019, a subsidiary of ~~Altius Minerals Corporation (“Altius”).~~

~~On September 13, 2018, LNRLP~~the Company entered into an agreement with ~~Vale Canada Limited~~TriStar Gold Inc. and ~~certain of~~ its subsidiaries ~~(collectively, the “Parties”~~(together “TriStar”) to ~~comprehensively settle their long-standing litigation related~~acquire (i) up to ~~calculation of the~~a 1.5% net smelter return (“NSR”) royalty on the ~~sale~~Castelo de Sonhos gold project (“CDS”), located in Brazil, and (ii) warrants to purchase up to 19,640,000 common shares of ~~all concentrates produced from~~TriStar. Total consideration is $7.5 million and is payable over three payments, of which $4.5 million was paid in August 2019. The second and third payments of $1.5 million each are subject to satisfaction of certain conditions and are payable by November 30, 2019 and March 31, 2020. The NSR royalty is incrementally earned pro-rata with the ~~Voisey’s Bay mine.~~

~~The Parties agreed~~funding schedule while the warrants to ~~a new method for calculating the royalty in respect of concentrates processed at Vale’s Long Harbour Processing Plant (“LHPP”), which~~purchase TriStar common shares will be ~~effective for all Voisey’s Bay mine production after April 1, 2018. Under~~issued pro-rata with the ~~terms of~~funding schedule.

Aggregate funds invested by the ~~settlement, Royal Gold expects the 3% royalty rate~~Company will ~~apply~~be used by TriStar primarily to approximately 50% of the gross metal value in the concentrates at the nickel, copper and cobalt prices prevailing at the time of settlement. As those metal prices rise or fall, the percentage of gross metal value in the concentrates applicableadvance CDS to the ~~royalty would correspondingly increase or decrease.~~

~~The LHPP is designed to produce 50,000 tonnes~~feasibility stage, including advancing permitting activities. A Preliminary Economic Assessment for CDS was prepared by TriStar in calendar 2018 and was based on a total of ~~finished nickel annually. The plant is currently ramping up and has produced~~2.0 million ounces of mineralized material at an average ~~quarterly rate~~grade of approximately 8,600 tonnes of finished nickel during the June and September 2018 quarters, which is approximately 70% of LHPP’s design capacity. In the next few years, Voisey’s Bay concentrate will provide 100% of the feed to LHPP but, over time, other sources of concentrate will be added to LHPP.

Vale announced it will recommence the $1.7 billion development of an underground mine and associated facilities, which is expected to extend the Voisey’s Bay mine life until 2034. Vale expects the underground mine to begin production in 2021 and to ramp up over four years, while the current open pit mining in the Ovoid deposit is expected to continue until 2022. Vale estimates Voisey's Bay mineral reserves at 32.4 million tonnes with a nickel grade of 2.13%, a copper grade of 0.96%, and a cobalt grade of 0.13% as of December 31, 2017.

~~Table of Contents~~

During the three and six months ended December 31, 2018, the Company recognized approximately $2.5 million and $7.5 million (each period includes the 10% non-controlling interest), respectively, in royalty revenue attributable to the Voisey’s Bay royalty. Royalty revenue recognized on the Voisey’s Bay royalty for the quarter ended September 30, 2018 was attributable to metal production from the June 30 and September 30, 2018 quarters. Royalty payments for each quarter are due 45 days after quarter-end. The Company anticipates recognizing revenue for the Voisey’s Bay royalty in the period in which metal production occurs, based on information provided by the operator. If information is not received timely from the operator, the Company may estimate Voisey’s Bay royalty revenue based on available or historical information.1.0 gram per tonne. Refer to Note 42 of our notes to consolidated financial statements for further ~~discussion on our revenue recognition.~~discussion.

~~Peak Gold JV~~

On September 24, 2018, the Company announced that the Peak Gold JV, of which our Royal Alaska, LLC subsidiary owns a 40% interest, completed a Preliminary Economic Assessment (“PEA”) on the Peak Gold Project located near Tok, Alaska. The PEA contemplates on a preliminary basis an open pit mining operation with positive economics at base case gold and silver prices. The Company has engaged an external advisor to assist in identifying options with respect to our interests in the Peak Gold Project.

~~Royal Gold also owns two net smelter return royalties on the Peak Gold Project.~~

~~Acquisition of Contango Ore, Inc. Common Stock~~

On October 3, 2018, the Company purchased the second and final tranche of Contango Ore, Inc. (“CORE”) common stock (127,188 shares) for $26 per share. As previously reported in our Fiscal 2018 10-K, the Company purchased 682,556 shares of CORE common stock at $26 per share in June 2018. As of December 31, 2018, the Company owns 809,744 shares of CORE common stock.

Principal Stream and Royalty Interests

The Company considers both historical and future potential revenues in determining which stream and royalty interests in our portfolio are principal to our business. Estimated future potential revenues from both producing and development properties are based on a number of factors, including reserves subject to our stream and royalty interests, production estimates, feasibility studies, metal price assumptions, mine life, legal status and other factors and assumptions, any of which could change and could cause the Company to conclude that one or more of such stream and royalty interests are no longer principal to our business. Currently, our principal producing stream and royalty interests are listed alphabetically in the following table.

Please refer to our Fiscal ~~2018~~2019 10-K for further discussion of our principal producing stream and royalty interests.

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Principal Producing Properties


			Stream or royalty interests
Mine	Location	Operator	(Gold unless otherwise stated)
Andacollo	Region IV, Chile	Compañía Minera Teck Carmen de Andacollo (“Teck”)	Gold stream - 100% of gold produced (until 900,000 ounces delivered; 50% thereafter)
Cortez	Nevada, USA	Nevada Gold Mines LLC ("NGM"), a joint venture between Barrick Gold Corporation ("Barrick") and Newmont Goldcorp Corporation ("Newmont Goldcorp")	GSR1: 0.40% to 5.0% sliding-scale GSR
			GSR2: 0.40% to 5.0% sliding-scale GSR
			GSR3: 0.71% GSR
			NVR1: 4.91% NVR; 4.52% NVR (Crossroads)
Mount Milligan	British Columbia, Canada	Centerra Gold Inc. ("Centerra")	Gold stream - 35.00% of payable gold
			Copper stream - 18.75% of payable copper
Peñasquito	Zacatecas, Mexico	Newmont Goldcorp ~~Inc. (“Goldcorp”)~~	2.0% NSR (gold, silver, lead, zinc)
Pueblo Viejo	Sanchez Ramirez, Dominican Republic	Barrick (60%)	Gold stream - 7.5% of gold produced (until 990,000 ounces delivered; 3.75% thereafter)
			Silver stream - 75% of silver produced (until 50.0 million ounces delivered; 37.5% thereafter)
~~Wassa and Prestea(1)~~Rainy River	Ontario, Canada	New Gold, Inc. (“New Gold”)	Gold stream - 6.5% of gold produced (until 230,000 ounces delivered; 3.25% thereafter)
			Silver stream - 60% of silver produced (until 3.1 million ounces delivered; 30% thereafter)
Wassa	Western Region of Ghana	Golden Star Resources Ltd. (“Golden Star”)	Gold stream - 10.5% of gold produced (until 220,000 ounces delivered; 5.5% thereafter)

⁽¹⁾

~~Gold stream percentage increased to 10.5% from 9.25% effective January 1, 2018.~~

Operators’ Production Estimates by Stream and Royalty Interest for Calendar ~~2018~~2019

We generally receive annual production estimates from many of the operators of our producing mines during the first quarter of each calendar year. In some instances, an operator may revise their original calendar year ~~guidance.~~guidance throughout the year. The following table shows current production estimates for our principal producing properties for calendar ~~2018~~2019 as well as the actual production reported to us by the various operators through ~~December 31, 2018.~~September 30, 2019. The estimates and production reports are prepared by the operators of the mining properties. We do not participate in the preparation or calculation of the operators’ estimates or production reports and have not independently assessed or verified, and disclaim all responsibility for, the accuracy of such information. Please refer to “Property Developments” below within this MD&A for further discussion on our principal producing and development stage properties.

Table of Contents

Operators’ Estimated and Actual Production by Stream and Royalty Interest for Calendar ~~2018~~2019

Principal Producing Properties

Calendar 2019 Operator’s Production

Estimate⁽¹⁾

Actual⁽²⁾

Gold

Silver

Base Metals

Gold

Silver

Base Metals

Stream/Royalty

(oz.)

(lbs.)

(oz.)

(lbs.)

Stream:

Andacollo⁽³⁾

62,000

40,400

Mount Milligan⁽⁴⁾

155,000 - 175,000

137,100

Copper

65 - 75 million

53.1 million

Pueblo Viejo⁽⁵⁾

550,000 - 600,000

N/A

411,000

N/A

Rainy River⁽⁶⁾

245,000 - 270,000

202,700

214,200

Wassa⁽⁷⁾

150,000 - 160,000

114,800

Royalty:

Cortez GSR1

115,500

86,800

Cortez GSR2

70,200

17,900

Cortez GSR3

183,700

104,100

Cortez NVR1

156,900

90,900

Cortez NVR1C

2,000

600

Peñasquito⁽⁸⁾

165,000

25 million

71,000

9.2 million

Lead

180 million

63 million

Zinc

245 million

108 million

Calendar 2018 Operator’s Production Estimate

Calendar 2018 Operator’s Production

Estimate(1)

Actual(2)

Gold

Silver

Base Metals

Gold

Silver

Base Metals
Stream/Royalty

(oz.)

(oz.)

(lbs.)

(oz.)

(oz.)

(lbs.)
Stream:

Andacollo(3)

66,700





59,600




Mount Milligan(4)

175,000 - 195,000

195,000

Copper

40 - 47 million

47.1 million
Pueblo Viejo(5)

575,000 - 590,000

Not provided

581,000

Not provided

Wassa and Prestea(6)

225,000 - 235,000

224,900

Royalty:

Cortez GSR1

48,300

44,600

Cortez GSR2

2,200

5,200

Cortez GSR3

50,500

49,800

Cortez NVR1

31,600

36,600

Peñasquito(7)

310,000

Not provided

220,000

14.1 million

Lead





160 million

82.5 million
Zinc





300 million

225.9 million

~~Table of Contents~~

(1)

⁽¹⁾

Production estimates received from our operators are for calendar ~~2018.~~2019. Please refer to our cautionary statement regarding third party information at the beginning of this MD&A. There can be no assurance that production estimates received from our operators will be achieved. Please also refer to our cautionary language regarding forward-looking statements following this MD&A, as well as the Risk Factors identified in Part I, Item 1A, of our Fiscal ~~2018~~2019 10-K for information regarding factors that could affect actual results.

(2)

⁽²⁾

Actual production figures shown are from our operators and cover the period January 1, ~~2018~~2019 through ~~December 31, 2018,~~September 30, 2019, unless otherwise noted in footnotes to this table.

(3)

⁽³⁾

The estimated and actual production figures shown for Andacollo are contained gold in concentrate.

(4)

⁽⁴⁾

The estimated and actual production figures shown for Mount Milligan are payable gold and copper in concentrate.

(5)

⁽⁵⁾

The estimated and actual production figures shown for Pueblo Viejo are payable gold in doré and represent Barrick’s 60% interest in Pueblo Viejo. The operator did not provide estimated or actual silver production.

(6)	⁽⁶⁾The estimated and actual production figures shown for Rainy River are produced gold and silver in doré.

(7)

The estimated and actual production figures shown for Wassa ~~and Prestea~~ are payable gold in doré.

(8)

⁽⁷⁾

The estimated and actual gold and silver production figures shown for Peñasquito are payable gold and silver in concentrate and doré. The estimated ~~and actual~~ lead and zinc production figures shown are payable lead and zinc in concentrate. The ~~operator did not provide~~ estimated ~~annual silver~~ production ~~and the actual silver production figure~~figures shown ~~is payable silver in concentrate and doré. Actual production shown is~~are for the ~~nine months ended~~period April 18, 2019 through December 31, 2019, while actual production figures shown are for the period April 18, 2019 through September 30, ~~2018. Full calendar year 2018 actual information was not available from~~2019, per the ~~operator as of the date of this report.~~

operator.

Property Developments

The following property development information is provided by the operators of the property, either to Royal Gold or in various documents made publicly available.

Stream Interests

Andacollo

Gold stream deliveries from Andacollo were approximately ~~10,700~~9,700 ounces of gold for the three months ended ~~December 31, 2018,~~September 30, 2019, compared to approximately ~~13,500~~15,300 ounces of gold for the three months ended ~~December 31, 2017. Deliveries during the current quarter were lower as a result of timing of shipments.~~

Consistent with the mine plan, Teck expects copper grades to decline toward reserve grade in calendar 2018 and future years. Teck reports that it continues to study and pilot projects that would help partially offset the decline in grades. The current life of mine for Andacollo is expected to continue until 2035. Additional permitting or amendments to existing permits will be required to execute the life of mine plan.

~~Mount Milligan~~

Gold stream deliveries from Mount Milligan were approximately 10,300 ounces of gold for the three months ended December 31, 2018, compared to approximately 17,700 ounces of gold for the three months ended December 31, 2017.

Copper stream deliveries from Mount Milligan were approximately 2.5 million pounds during the three months ended December 31, 2018, compared to approximately 2.7 million pounds during the three months ended December 31, 2017.September 30, 2018. Decreased deliveries resulted from differences in the timing of shipments and settlements during the periods.

~~During calendar~~On October 13, 2019, ~~Centerra expects Mount Milligan~~Teck reported the Teck Carmen de Andacollo Workers Union gave notice that a strike would commence on October 14, 2019. On October 23, 2019, Teck confirmed that operations were suspended on October 14,

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2019, with the exception of essential activities required to ~~produce between 155,000~~maintain safety and 175,000 ounces of gold (compared to 195,000 actual ounces of gold in calendar 2018) and between 65 million and 75 million pounds of copper (compared to 47 million actual pounds of copper in calendar 2018). Centerra anticipates that mill throughput will be reduced during the ~~remainder~~environment. Negotiations with the union are ongoing. We anticipate the impact of the ~~winter season~~strike to ~~properly manage~~be reflected beginning with our March 2020 quarterly results as we generally receive gold deliveries from Andacollo within five months of concentrate shipment.

Khoemacau Copper Silver Project

According to Khoemacau Copper Mining (Pty.) Limited (“KCM”), they continued to make good progress at the ~~water balance until~~Khoemacau Project (“Khoemacau”) in Botswana. According to KCM, the ~~water flow increases in the spring. Once the spring melt has commenced, which typically occurs in April, mill throughput levels are expected to return to full capacity. In the second half~~project reached approximately 11% of ~~calendar 2019, Centerra expects to achieve an average throughput of approximately 55,000 tonnes per calendar day.~~

Permit applications are in process to allow the mine to draw additional flow during the spring melt period for the next three years from each of Philip Lake, Rainbow Creek and Meadows Creek. This additional water would be stored in the tailings storage facility for use during the remainder of the year, which is expected to allow operations to continueconstruction completion at ~~a rate~~

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of 55,000 tonnes per calendar day. Centerra is also completing an inventory of regional water sources to identify other potential long-term water sources that could provide additional water through to the end of the ~~mine life.~~first quarter with 67% of the capital committed. Also according to KCM, work at site primarily has been focused on excavation of the South, Central and North boxcuts to provide access to the Zone 5 orebody, with handover of the first boxcut to the underground mining contractor targeted for the end of calendar 2019. KCM reported that additional construction is underway on surface infrastructure at Zone 5 and the access and infrastructure corridor between Zone 5 and the Boseto mill, while work on refurbishment of the Boseto plant is scheduled to commence shortly.

~~Pueblo Viejo~~On November 5, 2019, Royal Gold made the first advance payment of $65.8 million under the Khoemacau stream agreement. Royal Gold’s remaining commitment ranges from $146.2 million for the base stream of 80% of payable silver up to $199.2 million should KCM elect to increase the stream from 80% to 100% of payable silver. Further payments are subject to certain conditions and are scheduled to be made on a quarterly basis using an agreed formula and certification process as project spending progresses. The project cost remains on budget according to KCM’s forecast and KCM expects the first shipment of concentrate by mid-2021.

Mount Milligan

Gold stream deliveries from ~~Pueblo Viejo~~Mount Milligan were approximately ~~10,400~~14,000 ounces of gold for the three months ended ~~December 31, 2018,~~September 30, 2019, compared to approximately 12,600 ounces of gold for the three months ended ~~December 31, 2017. Production~~September 30, 2018. Copper stream deliveries from Mount Milligan were approximately 2.4 million pounds during the three months ended September 30, 2019, compared to approximately 1.6 million pounds during the three months ended September 30, 2018.

Centerra reported that favorable rainfall combined with access to surface water during the year from Philip Lake 1 and Rainbow Creek resulted in more than twice the amount of stored water volume than last year at ~~Pueblo Viejo~~this time. In addition, Centerra reported success in its groundwater exploration program, and subject to the receipt of permits, expects to bring new groundwater sources on line in December. With these improvements and prudent water management, Centerra currently expects that Mount Milligan should not need to slow production in the first calendar quarter of 2020 to conserve water, as was ~~impacted by a higher portion of carbonaceous ore, resulting~~required in ~~lower~~the two prior years.

Centerra also reported that it continues to work on life-of-mine water sources with relevant stakeholders, and formal applications and government review are expected to commence later in calendar 2019.

On October 30, 2019, Centerra reported that issues identified with decreasing long-term gold recoveries and increased costs in the short to medium-term led it to record an ~~expected decline~~impairment charge against the carrying value of the Mount Milligan mine using a financial analysis under applicable accounting standards, and that it has begun a comprehensive technical review of the operation with the objective of publishing an updated 43-101 technical report in ~~ore grades~~the coming months. According to Centerra, the updated 43-101 report will include studies to optimize the economics of the mine as well as incorporate results of exploration drilling through 2019. While Centerra acknowledged that the extent of any changes in reserves and mineralized material cannot be precisely determined until all relevant studies and modeling have been completed, it expects that the mineral reserves and mineralized material at Mount Milligan will be materially reduced. It is unclear at this point what impact, if any, the results of this work will have on the carrying value of our stream interest at Mount Milligan.

Pueblo Viejo

Gold stream deliveries from Pueblo Viejo were approximately 10,500 ounces of gold for the ~~period.~~three months ended September 30, 2019, compared to approximately 8,900 ounces of gold for the three months ended September 30, 2018. Silver stream deliveries were approximately ~~469,000~~462,500 ounces of silver for the three months ended ~~December 31, 2018,~~September 30, 2019, compared to approximately ~~260,200~~509,500 ounces of silver for the three months ended ~~December 31, 2017. Prior period silver deliveries were adversely impacted by timing~~September 30, 2018.

Table of ~~payments from Barrick’s third-party refiners.~~Contents

Barrick ~~stated that it is advancing a prefeasibility-level study for a~~expects Pueblo Viejo’s plant expansion ~~at Pueblo Viejo, which~~prefeasibility study to be completed by the end of calendar 2019. Barrick expects the plant expansion project could significantly increase throughput, ~~by roughly 50% to 12 million tonnes per year, thereby~~ allowing the mine to maintain average annual gold production of approximately 800,000 ounces after calendar ~~2022. The prefeasibility study will evaluate options including the addition of~~2022 (on a pre-oxidation heap leach pad with a capacity of eight million tonnes per year, a new mill and flotation concentrator with a capacity of four million tonnes per year, and additional tailings capacity. According to Barrick, the project has potential to convert roughly seven million ounces of mineralized material to proven and probable reserves. Barrick reports that the pilot pre-oxidation heap leach pad is now in operation, and construction of the pilot flotation circuit is well advanced, including the holding tank and thickener. 100% basis).

Rainy River

Gold stream deliveries from Rainy River were approximately ~~4,500~~4,400 ounces of gold for the three months ended ~~December 31, 2018,~~September 30, 2019, compared to approximately ~~1,000~~3,600 ounces of gold for the three months ended ~~December 31, 2017.~~September 30, 2018. Silver stream deliveries were approximately ~~41,700~~49,400 ounces of silver for the three months ended ~~December 31, 2018,~~September 30, 2019, compared to approximately ~~11,900~~35,200 ounces of silver for the three months ended ~~December 31, 2017. Milling operations were initiated during~~September 30, 2018. The increase resulted from the ~~December 2017 quarter and have been ramping up production through calendar 2018.~~continued improved operating performance at Rainy River.

New Gold ~~Inc. (“New Gold”)~~ reported ~~that~~mill throughput for the first quarter averaged 24,500 tonnes per day, which is the first full quarter the mill has operated at the target range of 24,000 tonnes per day. Ore production during the first quarter included planned lower grade ore from Phase 2 as well as remaining higher-grade ore from Phase 1, as mining operations continued the transition from Phase 1 to Phase 2 of the mine plan. New Gold expects grades in the December ~~2018~~2019 quarter ~~Rainy River continued~~ to ~~improve its overall operational performance with quarterly gold production of approximately 77,200 ounces~~decline and ~~calendar 2018 gold production of approximately 227,300 ounces, achieving their revised annual guidance of~~average between ~~210,000~~0.8 and ~~250,000 gold ounces.~~1.0 grams per tonne as ore from Phase 1 is now mined out. New Gold also reported that ~~during the December 2018 quarter, mill throughput averaged approximately 20,700 tonnes per day, while achieving an average~~ gold recovery averaged 91% for the first quarter in-line with the mine plan, and efforts continue to focus on achieving additional circuit optimizations as well as the commissioning of ~~89%,~~ the ~~best quarterly performance to-date.~~gravity circuit, which could further improve recoveries.

New Gold reported that it ~~deferred the underground mine development plan~~continued to ~~calendar 2020. During calendar 2019, New Gold will launch~~advance a comprehensive ~~review~~mine optimization study that includes a review of alternative open pit and underground mining scenarios, ~~with~~and it expects to release the ~~overall objective~~results of ~~reducing capital and improving the return on investment for the underground portion of the life of mine.~~this study by no later than mid-February 2020.

Wassa ~~and Prestea~~

Gold stream deliveries from Wassa ~~and Prestea~~ were approximately ~~4,700~~2,900 ounces of gold for the three months ended ~~December 31, 2018,~~September 30, 2019, compared to approximately ~~6,000~~4,200 ounces of gold for the three months ended ~~December 31, 2017. Decreased deliveries resulted from lower~~September 30, 2018. Golden Star reported the decrease in production at ~~Prestea due~~Wassa was primarily a result of lower grades and recoveries compared to ~~slower than planned ramp-up of the underground and the completion of open pit mining at Prestea earlier in calendar 2018, which contributed to production in~~ the prior year ~~quarter.~~quarter, which was partially offset by an increase in the mining rate at Wassa underground.

InGolden Star announced they completed their calendar 2019 drilling program at Wassa and the geological interpretations have commenced. Golden Star ~~expects Wassa~~plans to ~~produce at an average rate of approximately 3,500 tonnes per day moving towards a target of 4,000 tonnes per day in calendar 2020.~~use the new geological interpretations for mineral resource estimations that will be updated for Golden Star reported that deep drilling continues to show positive results and studies are ongoing to decide on the optimal long-term development of Wassa, including the appropriate mining method. A PEA is expected in the second half of calendar 2019.

Golden Star reported that during the December 2018 quarter, the Prestea plant was converted to a low tonnage, high grade configuration, allowing it to efficiently treat underground production and that significant improvements were being recorded in Prestea’s lead production indicators at the end of calendar 2018. Golden Star expects improvements in raise

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~~development, long hole drilling and blasting productivities to continue to bring the production rate up to the 650 tonnes per day target in calendar 2019.~~

~~Golden Star expects consolidated~~Star’s calendar 2019 ~~gold production to range between 220,000~~year-end resource and ~~240,000 ounces.~~ reserve statements.

Royalty Interests

Cortez

Production attributable to our royalty interest at Cortez ~~decreased approximately 20% over~~was 35,100 ounces of gold for the ~~prior year quarter,~~three months ended September 30, 2019 compared to 7,000 ounces of gold for the three months ended September 30, 2018, as a result of ~~lower~~ production ~~subject to our royalty interests during~~ramping-up at the ~~current quarter. Waste stripping at~~ Crossroads deposit, which is subject to our NVR1C, GSR2 and portions of our NVR1 ~~(Crossroads)~~ and ~~GSR2~~GSR3 royalty ~~interests, is currently ongoing.~~interests. Initial ore production at Crossroads was realized during calendar ~~2018, which included 5.5 million tonnes of predominately heap leach ore containing approximately 62,000 ounces of gold. Ore~~2018. Barrick reported that Crossroads transitioned from pre-production in the June 2019 quarter to production ~~at Crossroads is expected to continue ramping up into calendar 2020.~~ status in the September 2019 quarter.

Peñasquito

Gold ~~and zinc~~ production attributable to our royalty interest at Peñasquito decreased approximately ~~25%~~30%, silver and ~~12%, respectively, lead~~zinc production attributable to our royalty interest increased approximately 8%10% and 67%, ~~and silver~~respectively, when compared to the prior year quarter, while lead production was in line with the prior year quarter.

Newmont Goldcorp ~~forecasted lower than historic gold recovery~~reported that production at Peñasquito was impacted during the ~~December 2018~~first quarter due to the ~~carbonaceous content~~suspension of operations on September 14 resulting from an illegal blockade of the ~~sediment ore forecasted~~mine by a trucking contractor and some members of the Cedros community and was related to the same dispute that resulted in a suspension of operations from April 29, 2019 through June 17, 2019. Newmont Goldcorp stated the ~~Chile Colorado pit.~~

~~On November 29, 2018, Goldcorp announced that~~this most recent blockade impacted Peñasquito’s production during the first quarter by approximately 11,000 gold ~~from the Peñasquito Pyrite Leach Project (“PLP”) was achieved,~~ounces, 1.7 million silver ounces, 13.7 million pounds of lead and ~~on January 14, 2019, announced that PLP achieved commercial production in December 2018, both under budget and ahead~~22.8 million pounds of ~~schedule. Peñasquito’s PLP is expected to recover approximately 35% of the gold and 42% of the silver currently reporting to the tailings~~zinc, and is expected to ~~add production~~impact Newmont Goldcorp’s full-year results for the operation.

Table of ~~over one million ounces of gold~~Contents

Newmont Goldcorp reported that the blockade was lifted on October 8, 2019 and ~~45 million ounces of silver over~~concentrate shipments resumed immediately thereafter. Newmont Goldcorp further stated the ~~current life of the mine. For calendar 2019, Goldcorp expects grades and recoveries~~site has now returned to ~~climb at Peñasquito as the mine benefits from completion of the multi-year waste stripping campaign in the main Peñasco pit and~~full operation after a ~~full year of operation at the PLP.~~10-day restart process, which commenced on October 22, 2019.

Results of Operations

Quarter Ended ~~December 31, 2018,~~September 30, 2019, Compared to Quarter Ended ~~December 31, 2017~~September 30, 2018

For the quarter ended ~~December 31, 2018,~~September 30, 2019, we recorded net income attributable to Royal Gold stockholders of ~~$23.6~~$70.5 million, or ~~$0.36~~$1.07 per basic and diluted share, as compared to net ~~loss~~income attributable to Royal Gold stockholders of ~~$14.8~~$15.0 million, or ~~($0.23)~~$0.23 per basic and diluted share, for the quarter ended ~~December 31, 2017.~~September 30, 2018. The increase in our earnings per share was primarily attributable to ~~a decrease~~(i) an increase in ~~income tax expense, as discussed further below. The decrease in our income tax expense during the current period was partially offset by~~revenue, (ii) a decrease in our ~~revenue~~interest expense, and ~~fair value decreases on our equity securities,~~(iii) discrete income tax benefits recognized, primarily attributable to recent Swiss tax reform, each discussed further below. Income tax expense was higher in the prior period due to the effects of the Tax Cuts and Jobs Act (the “Act”) and a non-cash functional currency election for income tax purposes. The impacts of the Act and the non-cash functional currency election on our prior period income tax expense was approximately $26.4 million and $15.9 million, respectively, or $0.40 and $0.24 per basic share, respectively. Refer to Note 7 of our notes to consolidated financial statements for further discussion on the Act.

For the quarter ended ~~December 31, 2018,~~September 30, 2019, we recognized total revenue of ~~$97.6~~$118.8 million, which is comprised of stream revenue of ~~$67.7~~$87.0 million and royalty revenue of ~~$29.9~~$31.8 million at an average gold price of ~~$1,226~~$1,472 per ounce, an average silver price of ~~$14.54~~$16.98 per ounce and an average copper price of ~~$2.80~~$2.63 per pound. This is compared to total revenue of ~~$114.4~~$100.0 million for the three months ended ~~December 31, 2017,~~September 30, 2018, which was comprised of stream revenue of ~~$79.3~~$70.0 million and royalty revenue of ~~$35.1~~$30.0 million, at an average gold price of ~~$1,275~~$1,213 per ounce, an average silver price of ~~$16.73~~$15.02 per ounce and an average copper price of ~~$3.09~~$2.77 per ~~pound for the quarter ended December 31, 2017.~~pound. Revenue and the corresponding production attributable to our stream and royalty interests for the quarter ended ~~December 31, 2018~~September 30, 2019 compared to the quarter ended ~~December 31, 2017~~September 30, 2018 are as follows:

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Revenue and Reported Production Subject to Our Stream and Royalty Interests

Quarter Ended ~~December 31,~~September 30, 2019 and 2018 ~~and 2017~~

(In thousands, except reported production ozs. and lbs.)


		Three Months Ended				Three Months Ended
		September 30, 2019				September 30, 2018
				Reported				Reported
Stream/Royalty	Metal(s)	Revenue		Production⁽¹⁾		Revenue		Production⁽¹⁾
Stream⁽²⁾:
Mount Milligan		$	30,497			$	8,847
	Gold			16,600	oz.			5,500	oz.
	Copper			2.4	Mlbs.			837,100	lbs.
Pueblo Viejo		$	21,618			$	19,486
	Gold			9,500	oz.			9,200	oz.
	Silver			475,600	oz.			540,200	oz.
Andacollo	Gold	$	20,604	14,000	oz.	$	27,743	22,700	oz.
Rainy River		$	7,166			$	5,900
	Gold			4,600	oz.			4,500	oz.
	Silver			34,500	oz.			31,500	oz.
Wassa	Gold	$	5,319	3,600	oz.	$	5,325	4,300	oz.
Other⁽³⁾	Gold	$	1,777	1,200	oz.	$	2,736	2,200	oz.
Total stream revenue		$	86,981			$	70,037

Royalty⁽²⁾:
Peñasquito		$	4,420			$	3,637
	Gold			35,500	oz.			50,300	oz.
	Silver			4.6	Moz.			4.2	Moz.
	Lead			29.7	Mlbs.			29.9	Mlbs.
	Zinc			107.1	Mlbs.			64.2	Mlbs.
Cortez	Gold	$	4,417	35,100	oz.	$	603	7,000	oz.
Other⁽³⁾	Various	$	22,956	N/A		$	25,715	N/A
Total royalty revenue		$	31,793			$	29,955
Total Revenue		$	118,774			$	99,992

Three Months Ended

Three Months Ended

December 31, 2018

December 31, 2017

Reported

Reported
Stream/Royalty

Metal(s)

Revenue

Production(1)

Revenue

Production(1)
Stream(2):

Mount Milligan

$
28,169

$
21,632

Gold

17,700
oz.

12,600
oz.

Copper

2.4
Mlbs.

1.8
Mlbs.
Pueblo Viejo

$
18,230

$
26,355

Gold

8,900
oz.

14,500
oz.

Silver

509,500
oz.

469,600
oz.
Wassa and Prestea

Gold

$
9,550

7,800
oz.

$
8,629

6,800
oz.
Andacollo

Gold

$
7,635

6,200
oz.

$
21,601

17,000
oz.
Other(3)

$
4,095

$
1,070

Gold

2,900
oz.

800
oz.

Silver

36,000
oz.

N/A

Total stream revenue

$
67,679

$
79,287

Royalty(2):

Peñasquito

$
4,660

$
6,190

Gold

53,400
oz.

71,100
oz.

Silver

5.0
Moz.

5.1
Moz.

Lead

36.1
Mlbs.

33.4
Mlbs.

Zinc

83.1
Mlbs.

94.4
Mlbs.
Cortez

Gold

$
2,335

19,900
oz.

$
2,934

25,000
oz.
Other(3)

Various

$
22,918

N/A

$
25,937

N/A

Total royalty revenue

$
29,913

$
35,061

Total Revenue

$
97,592

$
114,348

(1)

⁽¹⁾

Reported production relates to the amount of metal sales subject to our stream and royalty interests for the three months ended ~~December 31,~~September 30, 2019 and 2018, ~~and 2017,~~ and may differ from the operators’ public reporting.

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(2)

⁽²⁾

Refer to “Property Developments” above for further discussion on our principal stream and royalty interests.

(3)

⁽³⁾

Individually, no stream or royalty included within the “Other” category for royalties contributed greater than 5% of our total revenue for either period. ~~The “Other” category for streams is only our Rainy River gold and silver stream.~~

The ~~decrease~~increase in our total revenue for the three months ended ~~December 31, 2018,~~September 30, 2019, compared with the three months ended ~~December 31, 2017,~~September 30, 2018, resulted primarily from ~~a decrease~~an increase in our stream revenue and ~~a decrease~~an increase in the average gold ~~silver~~ and ~~copper~~silver prices. The ~~decrease~~increase in our stream revenue was primarily attributable to ~~a decrease~~an increase in ~~gold sales at Andacollo and Pueblo Viejo due to the timing of deliveries. This decrease was partially offset by higher~~ gold and copper sales at Mount Milligan.

~~Table of Contents~~

~~Gold and silver ounces and copper pounds purchased and sold during the three months ended December 31, 2018 and 2017, and~~This increase was partially offset by lower gold ~~and silver ounces and copper pounds in inventory as of December 31, 2018, and June 30, 2018, for our streaming interests were as follows:~~

Three Months Ended

Three Months Ended

As of

As of

December 31, 2018

December 31, 2017

December 31, 2018

June 30, 2018
Gold Stream

Purchases (oz.)

Sales (oz.)

Purchases (oz.)

Sales (oz.)

Inventory (oz.)

Inventory (oz.)
Andacollo

10,700

6,200

13,500

17,000

4,500

7,400
Pueblo Viejo

10,400

8,900

12,600

14,500

10,400

9,200
Mount Milligan

10,300

17,700

17,700

12,700

—

300
Wassa and Prestea

4,700

7,900

6,000

6,800

700

3,900
Rainy River

4,500

2,900

1,000

800

1,600

800
Total

40,600

43,600

50,800

51,800

17,200

21,600

Three Months Ended

Three Months Ended

As of

As of

December 31, 2018

December 31, 2017

December 31, 2018

June 30, 2018
Silver Stream

Purchases (oz.)

Sales (oz.)

Purchases (oz.)

Sales (oz.)

Inventory (oz.)

Inventory (oz.)
Pueblo Viejo

469,000

509,500

260,200

469,600

469,000

540,200
Rainy River

41,700

36,000

11,900

—

41,700

32,300
Total

510,700

545,500

272,100

469,600

510,700

572,500

Three Months Ended

Three Months Ended

As of

As of

December 31, 2018

December 31, 2017

December 31, 2018

June 30, 2018
Copper Stream

Purchases (Mlbs.)

Sales (Mlbs.)

Purchases (Mlbs.)

Sales (Mlbs.)

Inventory (Mlbs.)

Inventory (Mlbs.)
Mount Milligan

2.5

2.4

2.7

1.8

0.9

—

~~Our royalty revenue decreased during the quarter ended December 31, 2018, compared with the quarter ended December 31, 2017, primarily~~sales at Andacollo due to ~~decreased production at~~ ~~Peñasquito~~ ~~and Cortez and a decrease in the average gold, silver and copper prices.~~timing of deliveries. Please refer to “Property Developments” earlier within this MD&A for further discussion on recent developments regarding properties covered by certain of our stream and royalty interests.

Gold and silver ounces and copper pounds purchased and sold during the three months ended September 30, 2019 and 2018, and gold and silver ounces and copper pounds in inventory as of September 30, 2019, and June 30, 2019, for our streaming interests were as follows:


	Three Months Ended		Three Months Ended		As of	As of
	September 30, 2019		September 30, 2018		September 30, 2019	June 30, 2019
Gold Stream	Purchases (oz.)	Sales (oz.)	Purchases (oz.)	Sales (oz.)	Inventory (oz.)	Inventory (oz.)
Mount Milligan	14,000	16,600	12,600	5,500	4,500	7,100
Pueblo Viejo	10,500	9,500	8,900	9,200	10,500	9,500
Andacollo	9,700	14,000	15,300	22,700	100	4,300
Wassa	2,900	3,600	4,200	4,300	700	1,500
Rainy River	4,400	4,600	3,600	4,500	1,600	1,800
Other	1,400	1,200	2,300	2,200	600	400
Total	42,900	49,500	46,900	48,400	18,000	24,600

	Three Months Ended		Three Months Ended		As of	As of
	September 30, 2019		September 30, 2018		September 30, 2019	June 30, 2019
Silver Stream	Purchases (oz.)	Sales (oz.)	Purchases (oz.)	Sales (oz.)	Inventory (oz.)	Inventory (oz.)
Pueblo Viejo	462,500	475,600	509,500	540,200	462,500	475,600
Rainy River	49,400	34,500	35,200	31,500	51,400	36,500
Total	511,900	510,100	544,700	571,700	513,900	512,100

	Three Months Ended		Three Months Ended		As of	As of
	September 30, 2019		September 30, 2018		September 30, 2019	June 30, 2019
Copper Stream	Purchases (Mlbs.)	Sales (Mlbs.)	Purchases (Mlbs.)	Sales (Mlbs.)	Inventory (Mlbs.)	Inventory (Mlbs.)
Mount Milligan	2.4	2.4	1.6	0.8	0.8	0.8

Cost of sales, ~~decreased~~which excludes depreciation, depletion and amortization, increased to ~~$18.2~~$20.1 million for the three months ended ~~December 31, 2018~~September 30, 2019 from ~~$19.9~~$16.5 million for the three months ended ~~December 31, 2017.~~September 30, 2018. The ~~decrease~~increase was primarily due to ~~decreased~~increased gold and copper sales from ~~Andacollo.~~Mount Milligan. Cost of sales is specific to our stream agreements and is the result of RGLD Gold AG’s ~~(“RGLD Gold”)~~ purchase of gold, silver and copper for a cash payment. The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold, silver or copper spot price near the date of metal delivery.

General and administrative expenses decreased to $7.4 million for the three months ended ~~December 31, 2018~~September 30, 2019 from ~~$9.6~~$9.9 million for the three months ended ~~December 31, 2017.~~September 30, 2018. The decrease during the current quarter was primarily due to a decrease in legal costs primarily attributable to the Voisey’s Bay royalty calculation dispute and settlement, ~~as discussed further above under “Recent Business Developments.”~~which was settled during the three months ended September 30, 2018.

Depreciation, depletion and amortization decreased to ~~$38.8~~$38.7 million for the three months ended ~~December 31, 2018~~September 30, 2019 from ~~$42.0~~$42.6 million for the three months ended ~~December 31, 2017.~~September 30, 2018. The decrease was primarily attributable to decrease in gold sales at Andacollo and Pueblo Viejo, which resulted in a decrease in depletion of approximately $8.1 million. This decrease was partially offset by an increase in metal sales at Mount Milligan and Rainy River, which resulted in an increase in depletion of approximately $4.1 million

On July 1, 2018, the Company adopted new Accounting Standards Update (“ASU”) guidance which impacts how we recognize changes in fair value on our equity securities at each reporting period. As a result of the new ASU guidance, the Company recognized a loss on changes in fair value of equity securities of $3.6 million for the three months ended December 31, 2018. Refer to Note 1 of our notes to consolidated financial statements for further detail. The new guidance could increase our earnings volatility.

During the three months ended December 31, 2018, we recognized an income tax benefit totaling $2.1 million compared with income tax expense of $48.4 million during the three months ended December 31, 2017. This resulted in an effective tax rate of (10.3%) in the current period, compared with 148.5% in the quarter ended December 31, 2017. The decrease in the effective tax rate for the three months ended December 31, 2018 was primarily related to the Company’s updated

~~Table of Contents~~

analysis of the tax impacts of the Act, considering all recently released U.S. Treasury regulations and IRS guidance. Refer to Note 7 of our notes to consolidated financial statements for further discussion on the Act.

~~Six Months Ended December 31, 2018, Compared to Six Months Ended December 31, 2017~~

For the six months ended December 31, 2018, we recorded net income attributable to Royal Gold stockholders of $38.6 million, or $0.59 per basic and diluted share, as compared to net income attributable to Royal Gold stockholders of $13.9 million, or $0.21 per basic and diluted share, for the six months ended December 31, 2017. The increase in our earnings per share was primarily attributable to a decrease in income tax expense. The decrease in our income tax expense during the current period was partially offset by a decrease in our revenue and fair value decreases on our equity securities, each discussed below. Income tax expense was higher in the prior period due to the effects of the Act and a non-cash functional currency election for income tax purposes. The impacts of the Act and the non-cash functional currency election on our prior period income tax expense was approximately $26.4 million and $15.9 million, respectively, or $0.40 and $0.24 per basic share, respectively. Refer to Note 7 of our notes to consolidated financial statements for further discussion on the Act.

For the six months ended December 31, 2018, we recognized total revenue of $197.6 million, which is comprised of stream revenue of $137.7 million and royalty revenue of $59.9 million at an average gold price of $1,220 per ounce, an average silver price of $14.78 per ounce and an average copper price of $2.78 per pound. This is compared to total revenue of $226.8 million for the six months ended December 31, 2017, which was comprised of stream revenue of $158.0 million and royalty revenue of $68.8 million, at an average gold price of $1,277 per ounce, an average silver price of $16.78 per ounce and an average copper price of $2.98 per pound. Revenue and the corresponding production attributable to our stream and royalty interests for the six months ended December 31, 2018 compared to the quarter ended December 31, 2017 are as follows:

~~Revenue and Reported Production Subject to Our Stream and Royalty Interests~~

~~Six Months Ended December 31, 2018 and 2017~~

~~(In thousands, except reported production ozs. and lbs.)~~

Six Months Ended

Six Months Ended

December 31, 2018

December 31, 2017

Reported

Reported
Stream/Royalty

Metal(s)

Revenue

Production(1)

Revenue

Production(1)
Stream(2):

Pueblo Viejo

$
37,717

$
51,758

Gold

18,100
oz.

27,400
oz.

Silver

1.0
Moz.

1.0
Moz.
Mount Milligan

$
37,015

$
53,584

Gold

23,300
oz.

31,300
oz.

Copper

3.2
Mlbs.

4.4
Mlbs.
Andacollo

Gold

$
35,378

28,900
oz.

$
33,938

26,700
oz.
Wassa and Prestea

Gold

$
17,611

14,400
oz.

$
17,699

13,900
oz.
Other(3)

$
9,995

$
1,070

Gold

7,400
oz.

800
oz.

Silver

67,500
oz.

N/A

Total stream revenue

$
137,716

$
158,049

Royalty(2):

Peñasquito

$
8,297

$
13,986

Gold

103,700
oz.

205,100
oz.

Silver

9.2
Moz.

11.0
Moz.

Lead

65.9
Mlbs.

69.6
Mlbs.

Zinc

147.3
Mlbs.

186.8
Mlbs.
Cortez

Gold

$
2,939

26,900
oz.

$
5,922

54,900
oz.
Other(3)

Various

$
48,633

N/A

$
48,867

N/A

Total royalty revenue

$
59,869

$
68,775

Total revenue

$
197,585

$
226,824

⁽¹⁾

Reported production relates to the amount of metal sales subject to our stream and royalty interests for the six months ended December 31, 2018 and 2017, and may differ from the operators’ public reporting.

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⁽²⁾

~~Refer to “Property Developments” above for further discussion on our principal stream and royalty interests.~~

⁽³⁾

Individually, no stream (except Rainy River) or royalty included within the “Other” category contributed greater than 5% of our total revenue for either period. The “Other” category for streams is only our Rainy River gold and silver stream.

The decrease in our total revenue for the six months ended December 31, 2018, compared with the six months ended December 31, 2017, resulted primarily from a decrease in our stream revenue and a decrease in the average gold, silver and copper prices. The decrease in our stream revenue was primarily attributable to a decrease in gold ~~and copper sales at Mount Milligan and a decrease in gold sales at Pueblo Viejo. These decreases were partially offset by higher metal~~ sales at Andacollo, ~~and Rainy River. The decrease in metal sales at Mount Milligan was anticipated based on previously announced news from Centerra and as reported earlier by~~when compared to the ~~Company.~~prior year quarter.

Gold and silver ounces and copper pounds purchased and sold during the six months ended December 31, 2018 and 2017, and gold and silver ounces and copper pounds in inventory as of December 31, 2018, and June 30, 2018, for our streaming interests were as follows:

Six Months Ended

Six Months Ended

As of

As of

December 31, 2018

December 31, 2017

December 31, 2018

June 30, 2018
Gold Stream

Purchases (oz.)

Sales (oz.)

Purchases (oz.)

Sales (oz.)

Inventory (oz.)

Inventory (oz.)
Andacollo

26,000

28,900

26,500

26,700

4,500

7,400
Mount Milligan

23,000

23,300

36,400

31,300

—

300
Pueblo Viejo

19,300

18,100

23,100

27,400

10,400

9,200
Wassa and Prestea

11,200

14,300

13,400

13,900

700

3,900
Rainy River

8,100

7,400

1,000

800

1,600

800
Total

87,600

92,000

100,400

100,100

17,200

21,600

Six Months Ended

Six Months Ended

As of

As of

December 31, 2018

December 31, 2017

December 31, 2018

June 30, 2018
Silver Stream

Purchases (oz.)

Sales (oz.)

Purchases (oz.)

Sales (oz.)

Inventory (oz.)

Inventory (oz.)
Pueblo Viejo

978,400

1,049,700

730,200

1,006,200

469,000

540,200
Rainy River

76,900

67,400

11,900

—

41,700

32,300
Total

1,055,300

1,117,100

742,100

1,006,200

510,700

572,500

Six Months Ended

Six Months Ended

As of

As of

December 31, 2018

December 31, 2017

December 31, 2018

June 30, 2018
Copper Stream

Purchases (Mlbs.)

Sales (Mlbs.)

Purchases (Mlbs.)

Sales (Mlbs.)

Inventory (Mlbs.)

Inventory (Mlbs.)
Mount Milligan

4.2

3.2

5.3

4.4

0.9

—

Cost of sales decreased to $34.7 million for the six months ended December 31, 2018 from $40.3 million for the six months ended December 31, 2017. The decrease was primarily due to decreased gold sales from Mount Milligan and Pueblo Viejo, partially offset by an increase in gold sales at Rainy River. Cost of sales is specific to our stream agreements and is the result of RGLD Gold’s purchase of gold, silver and copper for a cash payment. The cash payment for gold from Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold, silver or copper (Mount Milligan) spot price near the date of metal delivery.

On July 1, 2018, the Company adopted new ASU guidance which impacts how we recognize changes in fair value on our equity securities at each reporting period. As a result of the new ASU guidance, the Company recognized a loss on changes in fair value of equity securities of $5.1 million for the six months ended December 31, 2018. Refer to Note 1 of our notes to consolidated financial statements for further detail. The new guidance could increase our earnings volatility.

Interest and other expense decreased to ~~$15.3~~$2.8 million for the ~~six~~three months ended ~~December 31, 2018,~~September 30, 2019, from ~~$17.7~~$7.9 million for the ~~six~~three months ended ~~December 31, 2017.~~September 30, 2018. The decrease was primarily attributable to lower interest expense as a result of a decrease in average debt amounts outstanding ~~under our revolving credit facility. The Company repaid the remaining amounts outstanding on the revolving credit facility during fiscal year 2018.~~

~~During the six months ended December 31, 2018, we recognized income tax expense totaling $2.0 million~~when compared with income tax expense of $55.9 million during the six months ended December 31, 2017. This resulted in an effective tax rate of 5.3% in the current period, compared with 83.9% during the six months ended December 31, 2017. The decrease in the effective tax rate for the six months ended December 31, 2018 was primarily related to the ~~Company’s updated~~

prior period. As discussed in our Fiscal 2019 10-K, the Company settled the $370 million aggregate principal amount due under its convertible senior notes that

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~~analysis of the tax impacts of the Act, considering all recently released U.S. Treasury regulations and IRS guidance.~~matured in June 2019. Refer to Note 75 of our notes to consolidated financial statements for further discussion on our outstanding debt.

During the ~~Act.~~three months ended September 30, 2019, we recognized an income tax benefit totaling $23.5 million compared with income tax expense of $4.1 million during the three months ended September 30, 2018. The income tax benefit resulted in an effective tax rate of (51.9%) in the current period, compared with 25.6% in the quarter ended September 30, 2018. The decrease in the effective tax rate for the three months ended September 30, 2019 was attributable to discrete tax benefits ($32.3 million) primarily related to the remeasurement of certain deferred tax assets held by our Swiss subsidiary, RGLD Gold AG, and a net step-up in the basis of tax assets, resulting from the enactment of the Federal Act on Tax Reform and AHV Financing in Zug, Switzerland during the current quarter. In October of 2019, RGLD Gold AG decided to relocate its corporate office from the Canton of Zug to the Canton of Lucerne. As a result of the corporate relocation, we anticipate an additional step-up in the basis of tax assets during the three months ending December 31, 2019, which may result in additional tax benefits.

Liquidity and Capital Resources

Overview

At ~~December 31, 2018,~~September 30, 2019, we had current assets of ~~$203.7~~$164.2 million compared to current liabilities of ~~$37.2~~$32.4 million resulting in working capital of ~~$166.5~~$131.8 million and a current ratio of 5 to 1. This compares to current assets of ~~$125.8~~$154.7 million and current liabilities of ~~$51.4~~$33.6 million at June 30, ~~2018,~~2019, resulting in working capital of ~~$74.4~~$121.1 million and a current ratio of approximately 25 to 1. ~~The increase in our current ratio was primarily attributable to an increase in our cash and equivalents, which is discussed further below under “Summary of Cash Flows.”~~

During the ~~quarter~~three months ended ~~December 31, 2018,~~September 30, 2019, liquidity needs were met from ~~$79.4~~$71.2 million in net ~~revenue~~cash provided by operating activities and our available cash resources. During the three months ended September 30, 2019, the Company repaid $50 million of the outstanding borrowings under the revolving credit facility. As of ~~December 31, 2018,~~September 30, 2019, the Company had ~~no amounts~~$170 million outstanding and ~~$1 billion~~$830 million available under its revolving credit facility. Working capital, combined with the Company’s undrawn revolving credit facility, resulted in approximately ~~$1.2~~$1.0 billion of total liquidity at ~~December 31, 2018.~~September 30, 2019. The Company was in compliance with each financial covenant under the revolving credit facility as of ~~December 31, 2018.~~September 30, 2019. Refer to Note 35 of our notes to consolidated financial statements for further discussion on our debt.

We believe that our current financial resources and funds generated from operations will be adequate to cover anticipated expenditures for debt service, general and administrative expense costs and capital expenditures for the foreseeable future. Our current financial resources are also available to fund dividends and for acquisitions of stream and royalty ~~interests.~~interests, including the conditional funding schedule in connection with the Khoemacau silver stream acquisition. Our long-term capital requirements are primarily affected by our ongoing acquisition activities. The Company currently, and generally at any time, has acquisition opportunities in various stages of active review. In the event of one or more substantial stream ~~and~~or royalty interest or other acquisitions, we may seek additional debt or equity financing as necessary.

Please refer to our risk factors included in Part 1, Item 1A of our Fiscal ~~2018~~2019 10-K and in Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of certain risks that may impact the Company’s liquidity and capital resources.

Summary of Cash Flows

Operating Activities

Net cash provided by operating activities totaled ~~$103.5~~$71.2 million for the ~~six~~three months ended ~~December 31, 2018,~~September 30, 2019, compared to ~~$147.2~~$44.6 million for the ~~six~~three months ended ~~December 31, 2017.~~September 30, 2018. The ~~decrease~~increase is primarily due to ~~higher income taxes paid of $20.6 million over the prior quarter and a decrease~~an increase in proceeds received from our stream ~~and royalty~~ interests, net of ~~production taxes and~~ cost of sales, of approximately ~~$20.5 million. The increase in cash~~$14.7 million and lower income taxes paid ~~during~~of $10.6 million over the ~~current period is primarily attributable to an increase in required estimated tax payments made to various taxing authorities and an increase in~~ prior ~~fiscal year earnings at certain foreign subsidiaries, which corresponding tax payments were made within the current~~ period.

Investing Activities

Net cash provided by investing activities totaled $0.5 million for the three months ended September 30, 2019, compared to net cash used in investing activities ~~totaled $3.7 million for the six months ended December 31, 2018, compared~~of $0.1 million for the ~~six~~three months ended ~~December 31, 2017. The increase in cash used investing activities is primarily due to additional CORE common stock purchased during the current period.~~September 30, 2018.

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Financing Activities

Net cash used in financing activities totaled ~~$32.0~~$69.2 million for the ~~six~~three months ended ~~December 31, 2018,~~September 30, 2019, compared to ~~$134.9~~$16.2 million for the ~~six~~three months ended ~~December 31, 2017.~~September 30, 2018. The ~~decrease~~increase in cash used in financing activities is primarily due to ~~a decrease~~an increase in repayments on our revolving credit facility. The Company repaid ~~the remaining amounts outstanding~~$50.0 million on ~~the~~our revolving credit facility during ~~fiscal year 2018.~~the three months ended September 30, 2019.

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Recently ~~Issued or~~ Adopted Accounting Standards and Critical Accounting Policies

Refer to Note 1 of our notes to consolidated financial statements for further discussion on any recently ~~issued or~~ adopted accounting standards. Refer to our Fiscal ~~2018~~2019 10-K for discussion on our critical accounting policies.

Forward-Looking Statements

Cautionary “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical matters, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. Such forward-looking statements include, without limitation, statements regarding ~~projected~~the impact of recently adopted or issued accounting standards; the expected schedule for making additional payments to complete acquisition of the CDS NSR and warrants to purchase common shares of TriStar; adverse financial conditions experienced by operators of certain producing stream and royalty properties; available water sources, success in groundwater exploration, expectations for production ~~estimates~~during the first calendar quarter of 2020, and progress of work on life-of-mine water sources, decreasing long-term recoveries and increasing short to medium-term costs, expected results of updated 43-101 technical report and impact of updated 43-101 technical report on the Company’s interests at Mount Milligan; insolvency proceedings and potential for write-down of Company’s carrying value for certain non-principal producing and evaluation properties; expected schedule for making advance payments pursuant to the Khoemacau copper-silver project stream agreement and the funding of such payments; remaining conditions for funding under the Ilovica stream agreement; expectations concerning the proportion of total revenue to come from stream and royalty interests; estimates pertaining to timing, commencement and ~~commencement~~volume of production from the operators of properties where we hold stream and royalty ~~interests;~~interests and comparisons of estimates to actual production; statements related to ongoing developments and expected developments at properties where we hold stream and royalty interests; ~~the~~strike, suspension of operations and ongoing negotiations at Andacollo and anticipated impact of ~~recently issued or adopted accounting standards;~~suspension to the Company; progress of construction, capital committed, forecasted budget and estimated timeframe for first shipment of concentrate at Khoemacau, and size of and conditions to the Company’s remaining commitment under the Khoemacau stream agreement; mill availability and throughput, ore production, declining grade, recoveries, circuit optimization, commissioning of gravity circuit and mine optimization at Rainy River; decrease in production, lower grades and recoveries, increased mining rate, 2019 drilling program and geological interpretations and updated mineral resource estimations at Wassa; expected transition from pre-stripping to production phase stripping at Cortez; dispute, blockade, suspension and resumption of concentrate sales and operations at, and impact to full-year results for, Peñasquito; expected completion of plant expansion prefeasibility study and feasibility study, and expected increase in throughput and production, at Pueblo Viejo; possible tax benefits from relocation of the RGLD Gold AG office; fluctuations in the prices for gold, silver, copper, nickel and other metals; stream and royalty revenue estimates and comparisons of estimates to actual revenue; effective tax rate estimates, including the effect of recently enacted tax reform; application of the royalty on production from Voisey’s Bay to a percentage of gross metal value in concentrates; royalty revenue estimates compared to actual royalty payments; the results of the PEAs for the Peak Gold Project and the Wassa underground mine, and the results of the pre-feasibility study for the Pueblo Viejo plant expansion;reforms; the adequacy of financial resources and funds to cover anticipated expenditures for debt service, general and administrative expenses and dividends, as well as costs associated with exploration and business development and capital expenditures; expected delivery dates of gold, silver, copper and other metals; and our expectation that substantially all our revenues will be derived from stream and royalty interests. Words such as “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,” “anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project,” and variations of these words, comparable words and similar expressions generally indicate forward-looking statements, which speak only as of the date the statement is made. Do not unduly rely on forward-looking statements. Actual results may differ materially from past results as well as those expressed or implied by these forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include, among others:

●

a low price environment for gold and other metal prices on which our stream and royalty interests are paid or a low price environment for the primary metals mined at properties where we hold stream and royalty interests;

●

the production at or performance of properties where we hold stream and royalty interests, and variation of actual performance from the production estimates and forecasts made by the operators of these properties;

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●

the ability of operators to bring projects into production on schedule or operate in accordance with feasibility studies, including development stage mining properties, mine and mill expansion projects and other development and construction projects;

●

acquisition and maintenance of permits and authorizations, completion of construction and commencement and continuation of production at the properties where we hold stream and royalty interests;

●

challenges to mining, processing and related permits and licenses, or to applications for permits and licenses, by or on behalf of indigenous populations, non-governmental organizations, local communities, or other third parties;

●

liquidity or other problems our operators may encounter, including shortfalls in the financing required to complete construction and bring a mine into production;

●

decisions and activities of the operators of properties where we hold stream and royalty interests;

●

hazards and risks at the properties where we hold stream and royalty interests that are normally associated with developing and mining properties, including unanticipated grade, continuity and geological, metallurgical, processing or other problems, mine operating and ore processing facility problems, pit wall or tailings dam failures, industrial accidents, environmental hazards and natural catastrophes such as drought, floods, hurricanes or earthquakes and access to sufficient raw materials, water and power;

●

changes in operators’ mining, processing and treatment techniques and changes to operators’ cost structure, which may change the production of minerals subject to our stream and royalty interests;

●

changes in the methodology employed by our operators to calculate our stream and royalty interests, or failure to make such calculations in accordance with the agreements that govern them;

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●

changes in project parameters as plans of the operators of properties where we hold stream and royalty interests are refined;

●

accuracy of and decreases in estimates of reserves and mineralization by the operators of properties where we hold stream and royalty interests;

●

contests to our stream and royalty interests and title and other defects in the properties where we hold stream and royalty interests;

●

adverse effects on market demand for commodities, the availability of financing, and other effects from adverse economic and market conditions;

●

future financial needs of the Company and the operators of properties where we hold stream or royalty interests;

●

federal, state and foreign legislation governing us or the operators of properties where we hold stream and royalty interests;

●

the availability of stream and royalty interests for acquisition or other acquisition opportunities and the availability of debt or equity financing necessary to complete such acquisitions;

●

our ability to make accurate assumptions regarding the valuation, timing and amount of revenue to be derived from our stream and royalty interests when evaluating acquisitions;

●

risks associated with conducting business in foreign countries, including application of foreign laws to contract and other disputes, validity of security interests, governmental consents for granting interests in exploration and exploitation licenses, application and enforcement of real estate, mineral tenure, contract, safety, environmental and permitting laws, currency fluctuations, expropriation of property, repatriation of earnings, taxation, price controls, inflation, import and export regulations, community unrest and labor disputes, endemic health issues, corruption, enforcement and uncertain political and economic environments;

●

changes in laws governing us, the properties where we hold stream and royalty interests or the operators of such properties;

●

risks associated with issuances of additional common stock or incurrence of indebtedness in connection with acquisitions or otherwise including risks associated with the issuance and conversion of convertible notes;

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●

changes in management and key employees; and

●

failure to complete future acquisitions;

as well as other factors described elsewhere in this report and our other reports filed with the SEC, including our Fiscal ~~2018~~2019 10-K. Most of these factors are beyond our ability to predict or control. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any forward-looking statements made herein, except as required by law. Readers are cautioned not to put undue reliance on forward-looking statements.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our earnings and cash flows are significantly impacted by changes in the market price of gold and other metals. Gold, silver, copper and other metal prices can fluctuate significantly and are affected by numerous factors, such as demand, production levels, economic policies of central banks, producer hedging, world political and economic events and the strength of the U.S. dollar relative to other currencies. Please see “Volatility in gold, silver, copper, nickel and other metal prices may have an adverse impact on the value of our stream and royalty interests and may reduce our revenues. Certain contracts governing our stream and royalty interests have features that may amplify the negative effects of a ~~drop~~decrease in metals prices,” under Part I, Item 1A of our Fiscal ~~2018~~2019 10-K, for more information that can affect gold, silver, copper and other metal prices as well as historical gold, silver, copper and nickel prices.

During the ~~six~~three months ended ~~December 31, 2018,~~September 30, 2019, we reported revenue of ~~$197.6~~$118.8 million, with an average gold price for the period of ~~$1,220~~$1,472 per ounce, an average silver price of ~~$14.78~~$16.98 per ounce and an average copper price of ~~$2.78~~$2.63 per pound. Approximately ~~76%~~79% of our total reported revenues for the ~~six~~three months ended ~~December 31, 2018~~September 30, 2019 were attributable

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to gold sales from our gold producing stream and royalty interests, as shown within the MD&A. For the ~~six~~three months ended ~~December 31, 2018,~~September 30, 2019, if the price of gold had averaged 10% higher or lower per ounce, we would have recorded an increase or decrease in revenue of approximately ~~$15.6~~$9.9 million.

Approximately ~~10%~~9% of our total reported revenues for the ~~six~~three months ended ~~December 31, 2018~~September 30, 2019 were attributable to silver sales from our silver producing stream and royalty interests. For the ~~six~~three months ended ~~December 31, 2018,~~September 30, 2019, if the price of silver had averaged 10% higher or lower per ounce, we would have recorded an increase or decrease in revenue of approximately ~~$2.0~~$1.1 million.

Approximately 8% of our total reported revenues for the ~~six~~three months ended ~~December 31, 2018~~September 30, 2019 were attributable to copper sales from our copper producing stream and royalty interests. For the ~~six~~three months ended ~~December 31, 2018,~~September 30, 2019, if the price of copper had averaged 10% higher or lower per pound, we would have recorded an increase or decrease in revenue of approximately ~~$2.0~~$1.0 million.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of ~~December 31, 2018,~~September 30, 2019, the Company’s management, with the participation of the President and Chief Executive Officer (the principal executive officer) and Chief Financial Officer and Vice President Strategy (the principal financial and accounting officer) of the Company, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on such evaluation, the Company’s President and Chief Executive Officer and its Chief Financial Officer and Vice President Strategy have concluded that, as of ~~December 31, 2018,~~September 30, 2019, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the required time periods and that such information is accumulated and communicated to the Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer and Vice President Strategy, as appropriate to allow timely decisions regarding required disclosure.

Disclosure controls and procedures involve human diligence and compliance and are subject to lapses in judgment and breakdowns resulting from human failures. As a result, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of

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a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Controls

There has been no change in the Company’s internal control over financial reporting during the three months ended ~~December 31, 2018~~September 30, 2019 that has materially affected, or that is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

Not applicable.

~~Voisey’s Bay~~

~~Refer to Note 2 of our notes to consolidated financial statements for a discussion of the settlement associated with our Voisey’s Bay royalty.~~

ITEM 1A. RISK FACTORS

Information regarding risk factors appears in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward-Looking Statements,” and various risks faced by us are also discussed

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elsewhere in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. In addition, risk factors are included in Part I, Item 1A of our Fiscal ~~2018~~2019 10-K.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5.OTHER INFORMATION

Not applicable.

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ITEM 6.EXHIBITS

~~EXHIBITS~~

Exhibit Number		Description
4.2*		Description of Capital Stock of Royal Gold, Inc.

10.1*		Amendment No. 3 to Revolving Facility Credit Agreement dated as of September 20, 2019 and entered into by and among Royal Gold, Inc., RGLD Gold AG, RG Royalties, LLC, Royal Gold International Holdings, Inc., the banks and financial institutions identified therein as a “Lender”, and The Bank of Nova Scotia as Administrative Agent for the Lenders

31.1*		Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1‡		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2‡		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		Inline XBRL Instance Document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document.

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.

‡	Furnished herewith.

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SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ROYAL GOLD, INC.

Date: ~~February~~November 7, 2019
	By:	/s/ Tony Jensen
		Tony Jensen
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: ~~February~~November 7, 2019	By:	/s/ William Heissenbuttel
		William Heissenbuttel
		Chief Financial Officer and Vice President Strategy
		(Principal Financial and Accounting Officer)


	December 31, 2018		June 30, 2018
ASSETS
Cash and equivalents	$	156,536	$	88,750
Royalty receivables		25,659		26,356
Income tax receivable		12,793		40
Stream inventory		7,954		9,311
Prepaid expenses and other		793		1,350
Total current assets		203,735		125,807
Stream and royalty interests, net (Note 2)		2,419,908		2,501,117
Other assets		51,463		55,092
Total assets	$	2,675,106	$	2,682,016
LIABILITIES
Accounts payable	$	2,291	$	9,090
Dividends payable		17,359		16,375
Income tax payable		10,739		18,253
Withholding taxes payable		2,348		3,254
Other current liabilities		4,439		4,411
Total current liabilities		37,176		51,383
Debt (Note 3)		358,897		351,027
Deferred tax liabilities		90,700		91,147
Uncertain tax positions		35,590		33,394
Other long-term liabilities		5,773		13,796
Total liabilities		528,136		540,747
Commitments and contingencies (Note 10)
EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; and 0 shares issued		—		—
Common stock, $.01 par value, 200,000,000 shares authorized; and 65,396,339 and 65,360,041 shares outstanding, respectively		654		654
Additional paid-in capital		2,197,254		2,192,612
Accumulated other comprehensive loss		-		(1,201)
Accumulated losses		(86,238)		(89,898)
Total Royal Gold stockholders’ equity		2,111,670		2,102,167
Non-controlling interests		35,300		39,102
Total equity		2,146,970		2,141,269
Total liabilities and equity	$	2,675,106	$	2,682,016


	For The Three Months Ended				For The Six Months Ended
	December 31,		December 31,		December 31,		December 31,
	2018		2017		2018		2017
Revenue	$	97,592	$	114,348	$	197,585	$	226,824

Costs and expenses
Cost of sales		18,162		19,863		34,689		40,282
General and administrative		7,423		9,555		17,349		16,455
Production taxes		909		602		2,201		1,145
Exploration costs		842		1,358		5,204		4,561
Depreciation, depletion and amortization		38,807		42,008		81,358		81,701
Total costs and expenses		66,143		73,386		140,801		144,144

Operating income		31,449		40,962		56,784		82,680

Fair value changes in equity securities		(3,631)		—		(5,099)		—
Interest and other income		487		645		590		1,634
Interest and other expense		(7,410)		(9,034)		(15,287)		(17,651)
Income before income taxes		20,895		32,573		36,988		66,663

Income tax benefit (expense)		2,148		(48,360)		(1,967)		(55,904)
Net income (loss)		23,043		(15,787)		35,021		10,759
Net loss attributable to non-controlling interests		543		1,022		3,575		3,105
Net income (loss) attributable to Royal Gold common stockholders	$	23,586	$	(14,765)	$	38,596	$	13,864

Net income (loss)	$	23,043	$	(15,787)	$	35,021	$	10,759
Adjustments to comprehensive income (loss), net of tax
Unrealized change in market value of available-for-sale securities		—		(390)		—		(193)
Comprehensive income (loss)		23,043		(16,177)		35,021		10,566
Comprehensive loss attributable to non-controlling interests		543		1,022		3,575		3,105
Comprehensive income (loss) attributable to Royal Gold stockholders	$	23,586	$	(15,155)	$	38,596	$	13,671

Net income (loss) per share available to Royal Gold common stockholders:
Basic earnings (loss) per share	$	0.36	$	(0.23)	$	0.59	$	0.21
Basic weighted average shares outstanding		65,395,457		65,306,766		65,385,161		65,271,131
Diluted earnings (loss) per share	$	0.36	$	(0.23)	$	0.59	$	0.21
Diluted weighted average shares outstanding		65,473,400		65,306,766		65,485,423		65,460,430
Cash dividends declared per common share	$	0.265	$	0.25	$	0.515	$	0.49


	Six Months Ended December 31, 2018						Six Months Ended December 31, 2017
	Revenue		Cost of sales		Net revenue		Revenue		Cost of sales		Net revenue
Streams:
Canada	$	47,010	$	13,994	$	33,016	$	54,654	$	15,847	$	38,807
Dominican Republic		37,717		11,733		25,984		51,758		15,785		35,973
Chile		35,378		5,402		29,976		33,938		5,109		28,829
Africa		17,611		3,560		14,051		17,699		3,541		14,158
Total streams	$	137,716	$	34,689	$	103,027	$	158,049	$	40,282	$	117,767

Royalties:
Mexico	$	15,833	$	—	$	15,833	$	21,751	$	—	$	21,751
United States		14,340		—		14,340		22,727		—		22,727
Canada		17,717		—		17,717		11,488		—		11,488
Australia		6,217		—		6,217		6,548		—		6,548
Africa		1,024		—		1,024		1,047		—		1,047
Other		4,738		—		4,738		5,214		—		5,214
Total royalties	$	59,869	$	—	$	59,869	$	68,775	$	—	$	68,775
Total streams and royalties	$	197,585	$	34,689	$	162,896	$	226,824	$	40,282	$	186,542


	As of December 31, 2018
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
Assets (In thousands):
Marketable equity securities(1)	$	17,681	$	17,681	$	17,681	$	—	$	—
Total assets	$	17,681	$	17,681	$	17,681	$	—	$	—

Liabilities (In thousands):
Debt(2)	$	440,795	$	371,388	$	371,388	$	—	$	—
Total liabilities	$	440,795	$	371,388	$	371,388	$	—	$	—


	Three Months Ended		Three Months Ended		As of	As of
	December 31, 2018		December 31, 2017		December 31, 2018	June 30, 2018
Gold Stream	Purchases (oz.)	Sales (oz.)	Purchases (oz.)	Sales (oz.)	Inventory (oz.)	Inventory (oz.)
Andacollo	10,700	6,200	13,500	17,000	4,500	7,400
Pueblo Viejo	10,400	8,900	12,600	14,500	10,400	9,200
Mount Milligan	10,300	17,700	17,700	12,700	—	300
Wassa and Prestea	4,700	7,900	6,000	6,800	700	3,900
Rainy River	4,500	2,900	1,000	800	1,600	800
Total	40,600	43,600	50,800	51,800	17,200	21,600

	Three Months Ended		Three Months Ended		As of	As of
	December 31, 2018		December 31, 2017		December 31, 2018	June 30, 2018
Silver Stream	Purchases (oz.)	Sales (oz.)	Purchases (oz.)	Sales (oz.)	Inventory (oz.)	Inventory (oz.)
Pueblo Viejo	469,000	509,500	260,200	469,600	469,000	540,200
Rainy River	41,700	36,000	11,900	—	41,700	32,300
Total	510,700	545,500	272,100	469,600	510,700	572,500

	Three Months Ended		Three Months Ended		As of	As of
	December 31, 2018		December 31, 2017		December 31, 2018	June 30, 2018
Copper Stream	Purchases (Mlbs.)	Sales (Mlbs.)	Purchases (Mlbs.)	Sales (Mlbs.)	Inventory (Mlbs.)	Inventory (Mlbs.)
Mount Milligan	2.5	2.4	2.7	1.8	0.9	—