ROYAL GOLD INC

ROYAL GOLD INC. Annual Report: A Year of Strategic Growth and Solid Financial Performance (Fiscal Year 2025)

Royal Gold Inc. (NASDAQ: RGLD) delivered a robust fiscal year 2025, marked by significant portfolio expansion and strong financial results. As a leading precious metals stream and royalty company, Royal Gold's unique business model involves providing upfront capital to mining operators. In return, it receives future metal production at a fixed low cost (streams) or a percentage of revenue (royalties), consistently generating substantial cash flows and shareholder value.

Financial Highlights (Fiscal Year 2025): Royal Gold achieved a strong financial year, primarily driven by higher metal prices and increased production from its portfolio:

• Revenue: Increased 15% to $750 million (up from $652 million in 2024).
• Net Income: Rose 20% to $280 million (up from $233 million in 2024), yielding Diluted Earnings Per Share (EPS) of $4.25 (a 21% increase from $3.50 in 2024).
• Operating Cash Flow: Generated a healthy $550 million, providing ample liquidity for investments and shareholder returns.
• Dividends: The company maintained its consistent dividend policy, distributing $1.60 per share annually, marking its 25th consecutive year of dividend increases.
• Balance Sheet: Royal Gold ended the year in a robust financial position, boasting $120 million in cash and cash equivalents and an undrawn $1.0 billion revolving credit facility. This provides substantial financial flexibility.
  • Total debt remained modest at $300 million, contributing to a low net debt-to-EBITDA ratio of 0.5x.
  • The company also holds U.S. foreign tax credits and operating loss carryforwards, which are expected to reduce future cash tax obligations.

Core Business Performance and Portfolio Overview: In 2025, Royal Gold's diversified portfolio generated approximately 380,000 gold equivalent ounces (GEOs), an 8% increase year-over-year. An average realized gold price of $2,100 per ounce significantly boosted revenue growth. The company holds interests in over 180 properties, strategically diversified across North America (45% of portfolio value), South & Central America (30%), Europe/Middle East/Africa (15%), and Australia (10%). Key producing assets, including Mt. Milligan (gold/copper), Pueblo Viejo (gold/silver), and Andacollo (copper), primarily drove this production.

Strategic Growth and Key Developments: Royal Gold actively expanded its portfolio, strategically focusing on high-quality, long-life assets:

• Kansanshi Gold Stream Acquisition: On August 5, 2025, Royal Gold acquired a new gold stream from the Kansanshi mine in Zambia for $250 million. This strategic acquisition is projected to add an average of 25,000 GEOs annually over the next five years. The agreement also provides for increased gold deliveries under specific production thresholds, offering upside potential based on mine performance.
• New Stream and Royalty Agreements: The company also entered into several other significant agreements:
  • A $100 million stream on the Warintza copper-gold project in Ecuador, with initial deliveries anticipated in late 2027, contingent on project development milestones.
  • A $25 million royalty on the Lawyers Ranch gold project in Nevada, expected to commence production in 2026.
  • An additional stream for the Xavantina gold project in Brazil, further diversifying its South American exposure. These investments underscore Royal Gold's strategy: expanding its pipeline of future production and enhancing long-term cash flow generation.

Leadership and Company Strategy: The fourth quarter of 2025 saw a notable leadership transition as Paul Libner assumed the role of CEO. Mr. Libner's appointment is set to continue the company's successful strategy of disciplined capital allocation, portfolio diversification, and a focus on high-quality, cash-generating assets. The core strategy centers on acquiring accretive stream and royalty interests, managing a diversified portfolio across various metals and geographies, and consistently returning capital to shareholders through dividends.

Key Risks and Challenges: While 2025 was a strong year, Royal Gold faces inherent risks common to the mining and royalty sector:

• Commodity Price Volatility: Fluctuations in the prices of gold, silver, and copper directly impact the company's revenue and profitability.
• Operational Risks: As a stream and royalty holder, Royal Gold depends on third-party mining operators. This reliance exposes the company to operational disruptions, permitting delays, cost overruns, or changes in mine plans at partner operations.
• Customer Concentration: A few major operators generate a significant portion of Royal Gold's revenue. For instance, in 2025, Centerra Gold Inc. contributed approximately 25% of revenue, and Barrick Gold contributed 18%. Financial difficulties or production changes from these key partners could materially affect Royal Gold's income.
• Geopolitical and Regulatory Risks: Operating in various international jurisdictions exposes the company to risks such as political instability, changes in mining laws, increased taxation, or environmental regulations.
• Exploration and Development Risk: While Royal Gold benefits from exploration success, development projects carry inherent risks of delays, cost overruns, and failure to achieve expected production levels.

Competitive Landscape: Royal Gold operates in a competitive landscape, alongside peers like Franco-Nevada and Wheaton Precious Metals. Its competitive advantages include a highly diversified asset portfolio, a strong balance sheet, and a proven track record of identifying and executing accretive transactions. The company differentiates itself through a disciplined approach to due diligence and a focus on assets with low operating costs and long mine lives, which provides resilience across commodity cycles.

Outlook for Fiscal Year 2026: Looking ahead to 2026, Royal Gold anticipates continued growth, projecting GEOs in the range of 390,000 to 410,000. Full-year contributions from the Kansanshi stream and initial production from the Lawyers Ranch royalty will drive this growth. The company plans to continuously evaluate new investment opportunities while maintaining its commitment to shareholder returns and financial discipline. Management expects capital expenditures for new investments to range from $150 million to $200 million, reflecting ongoing portfolio expansion efforts.