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STREAM AND ROYALTY INTERESTS, NET

12 Months Ended

Jun. 30, 2020

4. STREAM AND ROYALTY INTERESTS, NET

The following summarizes our stream and royalty interests as of June 30, 2020 and 2019:


As of June 30, 2020 (Amounts in thousands):	Cost		Accumulated Depletion		Impairments		Net
Production stage stream interests:
Mount Milligan	$	790,635	$	(236,352)	$	—	$	554,283
Pueblo Viejo		610,404		(203,935)		—		406,469
Andacollo		388,182		(110,521)		—		277,661
Rainy River		175,727		(27,278)		—		148,449
Wassa		146,475		(67,619)		—		78,856
Total production stage stream interests		2,111,423		(645,705)		—		1,465,718
Production stage royalty interests:
Voisey's Bay		205,724		(101,381)		—		104,343
Peñasquito		99,172		(44,614)		—		54,558
Holt		34,612		(23,851)		—		10,761
Cortez		80,681		(15,065)		—		65,616
Other		487,225		(403,080)		(1,341)		82,804
Total production stage royalty interests		907,414		(587,991)		(1,341)		318,082
Total production stage stream and royalty interests		3,018,837		(1,233,696)		(1,341)		1,783,800

Development stage stream interests:
Khoemacau		136,608		—		—		136,608
Other		12,037		—		—		12,037
Development stage royalty interests:
Other		70,952		—		—		70,952
Total development stage stream and royalty interests		219,597		—		—		219,597

Exploration stage royalty interests:
Pascua-Lama		177,690		—		—		177,690
Other		137,826		—		—		137,826
Total exploration stage royalty interests		315,516		—		—		315,516
Total stream and royalty interests, net	$	3,553,950	$	(1,233,696)	$	(1,341)	$	2,318,913


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		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

Mount Milligan

RGLD Gold owns the right to purchase 35% of the payable gold and 18.75% of the payable copper produced from the 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 $554.3 million as of June 30, 2020.

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 record an impairment charge against their carrying value of the Mount Milligan mine under applicable accounting standards, and that it had begun a comprehensive technical review of the operation with the objective of publishing an updated National Instrument 43-101 (“NI 43-101”) technical report.

On March 26, 2020, Centerra published an updated NI 43-101 technical report for Mount Milligan which provided, among other things, a detailed update to the life of mine plan and reductions to the proven and probable reserves due to increased costs, lower expected productivities and lower process plant throughput.

Significant reductions in proven and probable reserves or mineralized material are indicators of potential impairment for Royal Gold’s stream and royalty interests. As part of our regular asset impairment analysis during the quarter ended March

31, 2020, we determined that an impairment of our stream interest at Mount Milligan was not necessary as (i) the financial impairment taken by Centerra does not impact the mine operating performance, and (ii) the reduction in reserves and mineralized material at Mount Milligan resulted in updated gold and copper depletion rates that remain well below current and long-term consensus gold and copper prices. As of June 30, 2020, the gold and copper depletion rates at our Mount Milligan stream interest are $764 per ounce of gold and $1.48 per pound of copper. Depletion rates well below current and long-term consensus metal prices are a strong indicator the carrying value of our stream or royalty interests are recoverable.

Rainy River

RGLD Gold owns the right to purchase 6.50% of the gold produced from the Rainy River mine, which is located in northwestern Ontario, Canada and is operated by New Gold, Inc. (“New Gold”), until 230,000 gold ounces have been delivered, and 3.25% thereafter; and 60% of the silver produced from the Rainy River mine until 3.1 million silver ounces have been delivered, and 30% thereafter. As of June 30, 2020, approximately 38,700 ounces of gold and approximately 410,500 ounces of silver have been delivered to RGLD Gold. The Company’s carrying value for its stream interest at Rainy River is $148.5 million as of June 30, 2020.

During the quarter ended December 31, 2019, New Gold reported that it continued to advance a comprehensive mine optimization study that would include a review of alternative open pit and underground mining scenarios at Rainy River On February 13, 2020, New Gold reported the results of the comprehensive optimization study that included an updated mine plan, which resulted in, among other things, a reduction in gold and silver reserves and the potential to extend the underground mine life beyond calendar 2028. New Gold published an updated NI 43-101 technical report for Rainy River on March 27, 2020, reflecting the updated mine plan and reserves.

Significant reductions in proven and probable reserves or mineralized material are indicators of potential impairment for the Company’s stream and royalty interests. As a result of the new information from New Gold, and as part of the Company’s regular asset impairment analysis, the Company determined that an impairment on its Rainy River stream interest was not necessary as of March 31, 2020 as the reduction in gold and silver reserves resulted in updated depletion rates that remain well below current and long-term consensus gold and silver prices. As of June 30, 2020, the gold and silver depletion rates at our Rainy River stream interest are $848 per ounce of gold and $11.27 per ounce of silver. Depletion rates well below current and long-term metal prices are a strong indicator the carrying value of our stream or royalty interests are recoverable.

COVID-19 and current economic environment

Several of our operating counterparties announced temporary operational curtailments or the withdrawal or review of previously disclosed guidance due to the ongoing COVID-19 pandemic. The economic and societal impacts associated with COVID-19 are fluid and changing rapidly, and we are currently unable to predict the nature or extent of any impact on our results of operations and financial condition. We will continue to monitor any further developments that the COVID-19 pandemic may have on stream or royalty interests as part of our regular asset impairment analysis.

Impairment of royalty interests

In accordance with our impairment accounting policy discussed in Note 1, impairments in the carrying value of each royalty interests are measured and recorded to the extent that the carrying value in each royalty interest exceeds its estimated fair value, which is generally calculated using estimated future discounted cash-flows. For our regular asset impairment analysis, we did not identify the presence of any impairment indicators and did not record any impairment

charges for the fiscal year ended of June 30, 2019. We identified impairment indicators and recorded impairment charges for the fiscal year ended June 30, 2020, and 2018 as summarized in the following table and discussed in detail below:


	Fiscal Year Ended June 30,
	2020		2019		2018

		(Amounts in thousands)
Royalty:
Pascua-Lama		—		—		239,080
Other		1,341		—		284
Total impairment of royalty interests	$	1,341	$	—	$	239,364

Other

During the quarter ended June 30, 2019, we were made aware of insolvency proceedings at one of our non-principal producing properties (El Toqui). During the quarter ended June 30, 2020, we obtained new information regarding the insolvency proceedings and determined our carrying value for El Toqui was not recoverable and an impairment of $1.3 million was necessary. Our carrying value for El Toqui is zero as of June 30, 2020.

Pascua-Lama

We own a 0.78% to 5.45% sliding-scale NSR royalty on gold and silver production from the Chilean portion of the Pascua-Lama project, which straddles the border between Argentina and Chile, and is owned by Barrick. We own an additional royalty equivalent to 1.09% of proceeds from copper produced from the Chilean portion of the project, net of allowable deductions, sold on or after January 1, 2017.

On January 18, 2018, Barrick reported that it is analyzing a revised sanction related to the Pascua-Lama project issued by Chile’s Superintendencia del Medio Ambiente (“SMA”) on January 17, 2018. The sanction is part of a re-evaluation process ordered by Chile’s Environmental Court in 2014 and relates to historical compliance matters at the Pascua-Lama project. According to Barrick, the SMA has not revoked Pascua-Lama’s environmental permit, but has ordered the closure of existing facilities on the Chilean side of the project, in addition to certain monitoring activities.

On February 6, 2018, in light of the SMA order to close surface facilities in Chile, and earlier plans to evaluate an underground mine, Barrick announced it reclassified Pascua-Lama’s proven and probable reserves, which are based on an open pit mine plan, as mineralized material. Barrick reported further details in its year-end results on February 14, 2018 and an update on the Pascua-Lama project at its February 22, 2018 Investor Day. A significant reduction in reserves or mineralized material are indicators of impairment.

On April 23, 2018, Barrick announced that work performed to-date on the prefeasibility study for a potential underground project has been suspended, and they will focus on adjusting the project closure plan for surface infrastructure on the Chilean side of the project. Barrick will continue to evaluate opportunities to de-risk the project while maintaining Pascua-Lama as an option for development in the future if economics improve and related risks can be mitigated.

As part of the impairment determination, the fair value for Pascua-Lama was estimated by calculating the net present value of the estimated future cash-flows, subject to our royalty interest, expected to be generated by the mining of the Pascua-Lama deposits. We applied a probability factor to our fair value calculation that Barrick will either proceed with an open-pit mine or an underground mine at Pascua. The estimates of future cash flows were derived from open-pit and underground mine models we developed using various information reported by Barrick. The metal price assumptions we used in the model were supported by consensus price estimates obtained by a number of industry analysts. The future cash flows were discounted using a discount rate which reflects specific market risk factors we associate with the Pascua-Lama royalty

interest. Following the impairment charge ($239.1 million) during the three months ended March 31, 2018, the Pascua-Lama royalty interest has a remaining carrying value of $177.7 million as of June 30, 2020. As a result of Barrick’s reclassification of Pascua-Lama’s reserves to mineralized material, our Pascua-Lama royalty interest was reclassified to exploration stage from development stage during our fiscal year ended June 30, 2018.