ROYAL GOLD INC (RGLD) FY 2022 MD&A

Results of Operations

Year Ended December 31, 2022, Compared with Year Ended December 31, 2021 (In thousands, except share data)

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For the year ended December 31, 2022, we recorded net income attributable to Royal Gold stockholders of $239.0 million, or $3.64 per basic share and $3.63 per diluted share, as compared to net income attributable to Royal Gold stockholders of $274.0 million, or $4.17 per basic and diluted share, for the year ended December 31, 2021. The decrease in net income was primarily due to lower revenue and higher interest expense as a result of higher amounts outstanding under our  revolving credit facility compared to the prior period. This decrease was partially offset by a decrease in income tax expense as discussed in further detail below.

For the year ended December 31, 2022, we recognized total revenue of $603.2 million, which is comprised of stream revenue of $417.8 million and royalty revenue of $185.4 million, at an average gold price of $1,800 per ounce, an average silver price of $21.73 per ounce and an average copper price of $3.99 per pound, compared to total revenue of $653.6 million, which is comprised of stream revenue of $436.3 million and royalty revenue of $217.3 million, at an average gold price of $1,799 per ounce, an average silver price of $25.14 per ounce and an average copper price of $4.23 per pound, for the year ended December 31, 2021.

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Revenue and the corresponding production attributable to our stream and royalty interests, for the year ended December 31, 2022 compared to the year ended December 31, 2021 is as follows:

Revenue and Reported Production Subject to our Stream and Royalty Interests

Year Ended December 31, 2022 and 2021

(In thousands, except reported production in oz. and lbs.)

The decrease in our total revenue for the year ended December 31, 2022, compared with year ended December 31, 2021, resulted primarily from lower gold sales at Andacollo, lower gold and silver sales at Pueblo Viejo and lower gold production at Cortez and Peñasquito. These decreases were partially offset by an increase in gold sales at Mount Milligan and Xavantina, higher silver sales at Khoemacau and $5.2 million of revenue from the newly acquired royalties at Cortez compared to the prior period.

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Gold and silver ounces and copper pounds purchased and sold during the year ended December 31, 2022 and 2021, as well as gold, silver and copper in inventory as of December 31, 2022 and 2021, for our stream interests were as follows:

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Cost of sales decreased to $94.6 million for the year ended December 31, 2022, from $98.5 million for the year ended December 31, 2021. The decrease was primarily due to a decrease in gold sales at Andacollo and a decrease in gold and silver sales at Pueblo Viejo when compared to the prior period. This decrease was partially offset by an increase in gold sales at Mount Milligan when compared to the prior period. Cost of sales, which excludes depreciation, depletion and amortization, is specific to our stream agreements and is the result of our 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.

General and administrative costs increased to $34.6 million for year ended December 31, 2022, from $29.3 million for the year ended December 31, 2021. The increase was primarily due to higher employee related costs and non-cash stock compensation expense.

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Depreciation, depletion and amortization decreased to $178.9 million for the year ended December 31, 2022, from $189.0 million for the year ended December 31, 2021. The decrease was primarily due to lower depletion rates at Mount Milligan compared to the prior period. Refer to Note 4 of our notes to consolidated financial statements for further discussion on the decrease in depletion rates at Mount Milligan. This decrease was partially offset by additional depletion from Khoemacau which produced first deliveries in the September 30, 2021 quarter.

During the year ended December 31, 2022, we recognized an impairment loss of $4.3 million on the carrying value of a non-principal exploration stage royalty due to new legal information received. Refer to Note 4 of our notes to consolidated financial statements for further discussion on the impairment.

We recognized a loss in fair value changes in equity securities of $1.5 million for the year ended December 31, 2022, compared to a gain in fair value changes in equity securities of $2.5 million for the year ended December 31, 2021. The change was primarily due to a decrease in the fair value of marketable equity securities as discussed further in Note 5 of our notes to consolidated financial statements.

Interest and other expense increased to $17.2 million for the year ended December 31, 2022, from $5.8 million for the year ended December 31, 2021. The increase in the current period was primarily attributable to higher interest expense as a

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result of higher average amounts outstanding under our revolving credit facility and higher interest rates when compared to the prior period. Refer to Note 6 of our notes to consolidated financial statements for further discussion on our debt.

Income tax expense was $32.9 million for the year ended December 31, 2022, as compared to $53.2 million for the year ended December 31, 2021, which resulted in an effective tax rate of 12.1% in the current period and 16.2% in the prior period. The effective tax rate for the year ended December 31, 2022, was primarily impacted by the release of a valuation allowance on certain foreign deferred tax assets. The effective tax rate for the year ended December 31, 2021, was impacted by the release of uncertain tax positions resulting from a settlement agreement with a foreign tax authority and a change in estimates, partially offset by a foreign tax rate adjustment resulting in a revaluation of certain deferred tax assets.

Liquidity and Capital Resources

We use our liquidity and capital resources to fund dividends and for the acquisition of stream and royalty interests, including any conditional funding schedules. Our short-term and long-term capital requirements are primarily affected by our ongoing acquisition activities. We currently, and generally at any time, have acquisition opportunities in various stages of active review. In the event of one or more substantial stream or royalty interest or other acquisitions, we may seek additional debt or equity financing as necessary. We occasionally borrow and repay amounts under our revolving credit facility and may do so in the future. We believe that our current liquidity and capital resources will be adequate to cover our operating needs for the foreseeable future.

At December 31, 2022, we had working capital of $122.2 million, including $118.6 million of cash and equivalents. This compares to working capital of $154.6 million, including $143.6 million of cash and equivalents at December 31, 2021. The decrease in our working capital was primarily attributable to the acquisition of royalty and stream interests during the year ended December 31, 2022, which is discussed further below under “Summary of Cash Flows.”

During the year ended December 31, 2022, liquidity needs were met from $417.3 million in net cash provided by operating activities and our available cash resources. Working capital, combined with the $425 million of available capacity under our revolving credit facility, resulted in approximately $547.2 million of total liquidity at December 31, 2022. Refer to Note 6 of our notes to consolidated financial statements and below (“Recent Liquidity and Capital Resource Developments”) for further discussion on our debt.

At year ended December 31, 2022, our contractual cash obligations are solely comprised of operating leases. We believe we will be able to fund all current cash obligations from net cash provided by operating activities. For additional information on our operating leases, see Note 7 of our notes to consolidated financial statements.

Please refer to our risk factors included in Part I, Item 1A of this report for a discussion of certain risks that may impact our liquidity and capital resources.

Recent Liquidity and Capital Resource Developments

Revolving Credit Facility Drawdown

On July 2, 2022, we borrowed $500 million under our revolving credit facility for the acquisition of the Rio Tinto Royalty, and on September 6, 2022, we repaid $50 million of the outstanding borrowings. Refer to Note 3 of our notes to consolidated financial statements for further discussion on the Rio Tinto Royalty acquisition.

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On December 6, 2022, we repaid $75 million of outstanding borrowings on our revolving credit facility, and on December 28, 2022 we borrowed $200 million for the acquisition of the Idaho Royalty. Refer to Note 3 of our notes to consolidated financial statements for further discussion on the acquisition of the Idaho Royalty. As of December 31, 2022, we had $575 million outstanding under our revolving credit facility.

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Dividend Increase

On November 15, 2022, we announced an increase in our annual dividend for calendar year 2023 from $1.40 to $1.50 per share, payable on a quarterly basis of $0.375 per share. The newly declared dividend is 7% higher than the dividend paid during calendar year 2022. We have steadily increased our annual dividend for 22 years, or since calendar year 2001. We expect to pay our annual dividend using cash on hand.

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Summary of Cash Flows (In thousands)

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Operating Activities

Net cash provided by operating activities totaled $417.3 million for the year ended December 31, 2022, compared to $461.9 million for the year ended December 31, 2021. The change was primarily due to a $35.9 million decrease in cash proceeds received from our stream and royalty interests, net of cost of sales, compared to the prior period.

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Investing Activities

Net cash used in investing activities totaled $922.9 million for the year ended December 31, 2022, compared to net cash used in investing activities of $417.0 million for the year ended December 31, 2021. The increase over the prior period was primarily due to the GBR, Rio Tinto Royalty and Idaho Royalty acquisitions.

Financing Activities

Net cash provided by financing activities totaled $480.6 million for the year ended December 31, 2022, compared to net cash used in financing activities of $283.2 million for the year ended December 31, 2021. The change was primarily due to an increase in the debt outstanding for the year ended December 31, 2022 that was used to fund acquisitions of our new royalty interests at Cortez and the Great Bear Project compared to the prior period.

Critical Accounting Estimates

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Use of Estimates

The preparation of our financial statements, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), requires management to make estimates and assumptions. These estimates and assumptions have a significant effect on reported amounts of assets and liabilities, revenue and expenses because they result primarily from the need to make estimates and assumptions on matters that are inherently uncertain.

We rely on mineral reserve and mineral resource estimates reported by the operators of the properties on which we hold stream and royalty interests. These estimates and the underlying assumptions affect the potential impairments of long-lived assets and the ability to realize income tax benefits associated with deferred tax assets. These estimates and assumptions also affect the rate at which we recognize revenue or charge depreciation, depletion and amortization to earnings. On an ongoing basis, management evaluates these estimates and assumptions; however, actual amounts could differ from these estimates and assumptions. Differences between estimates and actual amounts are adjusted and recorded in the period that the actual amounts are known.

Stream and Royalty Interests in Mineral Properties and Related Depletion

Stream and royalty interests include acquired stream and royalty interests in production, development and exploration stage properties. The costs of acquired stream and royalty interests are capitalized as tangible assets as such interests do not meet the definition of a financial asset.

Production stage stream and royalty interests are depleted using the units of production method over the life of the mineral property (as stream sales occur or royalty payments are recognized), which are estimated using proven and probable mineral reserves as provided by the operator. Development stage mineral properties, which are not yet in production, are not depleted until the property begins production. Exploration stage mineral properties, where there are no proven and probable mineral reserves, are not depleted. When the associated exploration stage mineral interests are converted to proven and probable mineral reserves, the mineral property becomes a development stage mineral property.

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Asset Impairment

We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts of an asset or group of assets may not be recoverable. The recoverability of the carrying value of stream and royalty interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each stream and royalty interest using estimates of proven and probable mineral reserves, mineral resources and other relevant information received from the operators. We evaluate the recoverability of the carrying value of royalty interests in exploration stage mineral properties in the event of significant decreases in the price of gold, silver, copper and other metals, and whenever new information regarding the mineral properties is obtained from the operator indicating that production will not likely occur or may be reduced in the future, thus potentially affecting the future recoverability of our stream or royalty interests. Impairments in the carrying value of each property are measured and recorded to the extent that the carrying value in each property exceeds its estimated fair value, which is generally calculated using estimated future discounted cash flows.

Estimates of gold, silver, copper, and other metal prices, and operators’ estimates of proven and probable mineral reserves or mineral resources related to our stream or royalty properties are subject to certain risks and uncertainties which may affect the recoverability of our investment in these stream and royalty interests in mineral properties. It is possible that changes could occur to these estimates, which could adversely affect the net cash flows expected to be generated from these stream and royalty interests. Refer to Note 4 of our notes to consolidated financial statements for a discussion of the impairment assessment results for the year ended December 31, 2022.

Revenue

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 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 and royalty interests is generally recognized at the point in time that control of the related metal production transfers to our customers, as described below. 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.

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Stream Interests

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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 stream 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 stream 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.

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Royalty Interests

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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. 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

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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, other contractually permitted costs.

Income Taxes

Our annual tax rate is based on income, statutory tax rates in effect and tax planning opportunities available to us in the various jurisdictions in which the Company operates. Significant judgment is required in determining the annual tax expense, current tax assets and liabilities, deferred tax assets and liabilities, and our future taxable income, both as a whole and in various tax jurisdictions, for purposes of assessing our ability to realize future benefit from our deferred tax assets. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which we operate or unpredicted results from the final determination of each year’s liability by taxing authorities.

We treat global intangible low-taxed income (“GILTI”) as a period cost and therefore do not record deferred tax impacts of GILTI in our consolidated financial statements. Our deferred income taxes reflect the impact of temporary differences between the reported amounts of assets and liabilities for financial reporting purposes and such amounts measured by tax laws and regulations. In evaluating the realizability of the deferred tax assets, management considers both positive and negative evidence that may exist, such as earnings history, reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies in each tax jurisdiction. A valuation allowance may be established to reduce our deferred tax assets to the amount that is considered more likely than not to be realized through the generation of future taxable income and other tax planning strategies.

Our operations may involve dealing with uncertainties and judgments in the application of complex tax regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. We adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit; however, due to the complexity of some of these uncertainties, the ultimate resolution could result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period which they are determined. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

Forward-Looking Statements

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This report and our other public communications include “forward-looking statements” within the meaning of U.S. federal securities laws. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from these statements.

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Forward-looking statements are often identified by words like “will,” “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,” “anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project,” or negatives of these words or similar expressions. Forward-looking statements include, among others, the following: statements about our expected financial performance and outlook, including sale volume, revenue, expenses, tax rates, earnings or cash flow; operators’ expected operating and financial performance, including production, deliveries, mine plans, estimates of mineral resources and mineral reserves, development, cash flows and liquidity, capital requirements and capital expenditures; influence on our operators’ operations; benefits from acquisitions; receipt of metal deliveries; liquidity, capital resources, financing and stockholder returns; borrowings and repayments under our revolving credit facility; growing our portfolio of assets; the materiality of properties within our portfolio; impact of inadequately assessing new acquisitions; macroeconomic and market conditions; impacts of climate-change; diversity and inclusion efforts; returns on investments; sufficiency of contractual protections; adoption of new accounting standards; valuation allowances;

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assumptions related to fair value of equity awards; prices for gold, silver, copper, nickel and other metals; potential impairments; and tax changes.

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Factors that could cause actual results to differ materially from these forward-looking statements include, among others, the following: a lower-price environment for gold, silver, copper, nickel or other metals; operating activities or financial performance of properties on which we hold stream or royalty interests, including variations between actual and forecasted performance, operators’ ability to complete projects on schedule and as planned, operators’ changes to mine plans and mineral reserves and mineral resources (including updated mineral reserve and mineral resource information), liquidity needs, mining and environmental hazards, labor disputes, distribution and supply chain disruptions, permitting and licensing issues, contractual issues involving our stream or royalty agreements, or operational disruptions; risks associated with doing business in foreign countries; increased competition for stream and royalty interests; environmental risks, included those caused by climate change; potential cyber-attacks, including ransomware; our ability to identify, finance, value and complete acquisitions; adverse economic and market conditions; impact of health epidemics and pandemics; changes in laws or regulations governing us, operators or operating properties; changes in management and key employees; and other factors described elsewhere in this report, including in Item 1A – Risk Factors. Most of these factors are beyond our ability to predict or control.

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Forward-looking statements speak only as of the date on which they are made. We disclaim any obligation to update any

forward-looking statements, except as required by law. Readers are cautioned not to put undue reliance on forward-looking statements.

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