Royal Gold
Annual Report 2013

Plain-text annual report

R R O O Y Y A A L L G G O O L L D D , , 2013 ANNUAL REPORT I I N N C C . . G R O W T H E M B E D D E D G R O W T H 2 0 1 3 A n n u a l R e p o r t World Class Royalty Company 9/25/13 2:56 PM Table of Contents Corporate Profile/Business Strategy Financial Data Financial Highlights Letter to Shareholders Portfolio Map Property Portfolio Cornerstone Properties Principal Properties Property Tables Property Table Footnotes The Gold Market Corporate Responsibility Non-GAAP Financial Measures Glossary Five-Year Return to Shareholders Form 10-K 1 2 3 4 8 10 16 18 22 24 25 26 27 28 29 Corporate Information IMMEDIATELY FOLLOWING LAST PAGE OF 10-K Board of Directors INSIDE BACK COVER Management INSIDE BACK COVER NOTES: 1. Certain Information, including the Company’s audited financial statements, required to be included in this Annual Report, is contained in the Form 10-K beginning on page 29. 2 We do not own or operate the properties on which we hold royalty and metal stream agreements and therefore much of the information in this Annual Report regarding the properties is provided to us by the operators, including reserves, production estimates and status of the development at the properties. 33599cov.indd 4-6 Royal Gold, Inc. CORPORATE PROFILE Royal Gold, Inc. acquires and manages precious metal royalties and streams, with a primary focus on gold. The Company’s portfolio provides investors with a unique opportunity to capture value in the precious metals sector without incurring many of the costs and risks associated with mine operations. To acquire a royalty, Royal Gold buys a percentage of the metal produced from a mineral property in exchange for an initial payment without assuming any responsibility for the actual mining operation. Existing royalties are acquired outright from either a mineral resource company or a private party; new royalties are created by providing capital to an operator or explorer in exchange for a royalty. Precious metal streams are obtained by providing financing to base metal operators, allowing them to monetize their precious metal by-product production. A metal stream is similar to a royalty but typically has a smaller front end payment, and requires that payments be made as metal is delivered over the life of the mine. In either case, Royal Gold does not have to contribute to the exploration, operating, or capital costs at the mine after our investment is made. Royal Gold owns a large portfolio of producing, development, evaluation and exploration stage royalties and streams located in some of the world’s most prolific gold regions. With this high quality portfolio, Royal Gold maintains upside potential through any exploration successes by the operators and benefits when new reserves are discovered and produced. This successful business model generates strong cash flow and high margins with a lower cost structure, providing shareholders with a premium precious metals investment. Royal Gold is a Denver-based Company, traded on the Nasdaq Global Select Market, under the symbol “RGLD,” and on the Toronto Stock Exchange, under the symbol “RGL.” BUSINESS STRATEGY BUSINESS STRATEGY KEY ELEMENTS OF OUR BUSINESS STRATEGY INCLUDE: KEY ELEMENTS OF OUR BUSINESS STRATEGY INCLUDE: • Focus on Gold. Royal Gold is a precious metals investment vehicle focused on gold. • Business Model. Royal Gold’s lower risk business model is based on acquiring royalty interests in precious metal properties or entering into precious metals stream transactions, rather than engaging in costly and more complex mining operations. • Growth and Diversification. Royal Gold is determined to add to its broad-based and geopolitically favorable portfolio of precious metal interests through accretive transactions. • Margin Enhancement. Royal Gold’s unique business model allows it to efficiently grow revenue without adding significant overhead costs. • Financial Flexibility. Royal Gold’s liquidity allows the Company to compete for royalty acquisitions or metal streams by means of a purchase, a corporate transaction, providing financing, or entering into a strategic exploration alliance. 33599nar.indd 1 1 9/26/13 10:46 AM Royal Gold, Inc. Royal Gold, Inc. SELECTEd FINANCIAL d SELECTE d FINANCIAL dATAATA SELECTED STATEMENTS OF OPERATIONS DATA Fiscal Years Ended June 30, (Amounts in thousands, except per share data) 2013 2013 2012 2012 2011 2011 2010 2010 20092009 Royalty revenue Adjusted EBITDA 6 Operating income Net income 1 Net income available to Royal Gold common stockholders 2, 3, 4, 5 Net income per share available to Royal Gold common stockholders: Basic Diluted Dividends declared per common share 7 $ $ $ $ $ $ $ 289,224 $ 263,054 $ 216,469 $ 136,565 $ 73,771 $ 260,805 171,504 73,409 $ $ $ 237,616 156,888 98,309 $ $ $ 190,172 $ 100,068 118,925 77,299 $ $ 41,035 29,422 $ $ $ 61,706 27,292 41,357 69,153 $ 92,476 $ 71,395 $ 21,492 $ 38,348 1.09 1.09 0.75 $ $ $ 1.61 1.61 0.56 $ $ $ 1.29 1.29 0.42 $ $ $ 0.49 0.49 0.34 $ $ $ 1.09 1.07 0.30 SELECTED BALANCE SHEET DATA As of June 30, (Amounts in thousands) 2013 2013 2012 2012 2011 2011 2010 2010 20092009 Royalty interests in mineral properties, net $ 2,120,268 $ 1,890,988 $ 1,690,439 $ 1,476,799 $ 455,966 Total assets Debt Total liabilities $ 2,905,341 $ 2,376,366 $ 1,902,702 $ 1,865,333 $ 809,924 $ $ 302,263 $ 293,248 $ 226,100 $ 248,500 534,705 $ 512,937 $ 415,007 $ 431,785 $ $ 19,250 49,513 Total Royal Gold stockholders’ equity $ 2,348,887 $ 1,838,459 $ 1,460,162 $ 1,403,716 $ 749,441 For footnote information, see page 3 For footnote information, see page 3 2 33599nar.indd 2 9/24/13 2:10 PM FINANCIAL HIGHLIGHTS REVENUE $ MILLIONS NET INCOME 1 $ MILLIONS For the Fiscal Years Ended June 30, For the Fiscal Years Ended June 30, 289.2 263.1 216.5 92.5 4 71.4 69.2 5 136.6 73.8 38.3 2 21.5 3 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 ADJUSTED EBITDA 6 $ MILLIONS For the Fiscal Years Ended June 30, DIVIDENDS 7 $ PER SHARE Calendar Years 260.8 237.6 190.2 0.80 0.60 0.32 0.36 0.44 100.1 61.7 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 1. The term “net income” represents net income available to Royal Gold shareholders as shown on the Company’s Consolidated Statement of Operations and Comprehensive Income in the Company’s Annual Report on Form 10-K. 2. Net income for FY2009 was impacted by two one-time gains related to the Barrick royalty portfolio acquisition and the Benso royalty buy-back by Golden Star. The effect of these gains was $0.62 per basic share after taxes. 3. Net income for FY2010 was impacted by pre-tax effects of severance and acquisition cost of $19.4 million, or $0.33 per share, related to the International Royalty Corporation transaction. 4. Net income for FY2012 was impacted by a royalty restructuring charge at Relief Canyon resulting in a $0.02 loss per basic share after taxes. 5. Net income for FY2013 was impacted by an impairment loss recognized on available-for-sale securities of $12.1 million, or $0.23 per basic share after taxes, in addition to increased depletion and interest expense. 6. The term “Adjusted EBITDA” is a non-GAAP financial measure. Adjusted EBITDA is defined by the Company as net income plus depreciation, depletion and amortization, non-cash charges, income tax expense, interest and other expense, and any impairment of mining assets, less non-controlling interests in operating income of consolidated subsidiaries, interest and other income, and any royalty portfolio restructuring gains or losses. See page 26 for a GAAP reconciliation. 7. Dividends are paid on a calendar year basis and do not correspond with the fiscal year dividend amounts shown in the Selected Financial Data. Fiscal 2013 dividends totaled $0.75 per share; calendar 2013 total includes estimated fourth quarter dividend. 33599nar.indd 3 3 9/24/13 2:10 PM Royal Gold, Inc. LETTER TO SHAREHOLDERS Dear Fellow Shareholder, Fiscal 2013 was the first year in more than a decade million in working capital and an undrawn credit facility of that the gold price declined. Specifically, gold ended $350 million. the year 25% lower largely due to a renewed faith in the United States economy and dollar. This has spawned an avalanche of modified business plans throughout the sector to cope with the new realities of a “lower gold price” environment and to refocus on margins, cost control, returns to shareholders and disciplined capital allocation. Fiscal 2013 has been a deal rich environment and we expect next year to be so as well. However we have been very careful with our shareholders’ money and have not chased acquisitions that don’t provide a reasonable return in the current gold price environment. We look forward to unique business opportunities in the coming year and will continue to be very selective as we consider Royal Gold never lost that focus. Our royalty business new investments. model allows us to keep a tight control on costs and our EBITDA* margins are consistently around 90%. Our compounded annual growth rate over the past decade in revenue per share, EBITDA per share, and normalized earnings per share was 19%, 22%, and 11%, respectively. With regard to disciplined capital allocation, the carrying cost of our assets is only $340 per gold equivalent ounce attributable to the Company, representing a nearly 4x margin compared to the current price of gold. During the year, we increased our interest at Mt. Milligan by 12.25% of the payable gold in exchange for an upfront payment of $200 million and payments of $435 per ounce of gold delivered. We now have the right to purchase up to 52.25% of the payable gold from the property. We have been watching the construction progress with keen interest and are very excited to see that production is close at hand. It has been slightly over three years since we first invested in Mt. Milligan We recognize that financial stress for others can and the flow of funds is now ready to turn in our favor. bring opportunities to Royal Gold. As such, in the We anticipate that Mt. Milligan will be our largest future second half of fiscal 2012 and the first half of fiscal source of revenue, potentially representing a 50% 2013, we methodically enhanced our liquidity prior to increase in net gold equivalent ounces at current gold the gold price downturn and are in excellent financial prices and full production. This growth is already largely condition. In October 2012, we completed an equity paid for, as we only have $12.9 million remaining of our offering on attractive terms to position the company $781.5 million investment commitment. Thompson Creek for new acquisitions. We perceived that the industry Metals, the owner of Mt. Milligan, expects to start plant would become capital constrained, with debt and equity commissioning in August 2013 and anticipates reaching financing limited or unavailable for many, and believed commercial production by calendar 2013 year end. Based that having a strong balance sheet would result in on that schedule, we should see meaningful revenue opportunities. We ended the fiscal year with over $700 contributions commencing at or near the beginning of calendar 2014. 4 33599nar.indd 4 9/24/13 6:58 PM Our other major development asset is Barrick Gold’s average annual production profile of approximately Pascua-Lama project on the border of Chile and 800,000 ounces per year at an all-in sustaining cash cost Argentina. Although construction of the process estimated to be in the lowest quartile in the industry. facilities notably advanced in Argentina, the development We continue to look for opportunities to invest in similar schedule for the project suffered a setback during world class assets. the fiscal year. Construction activities on the Chilean side of the project are currently suspended while environmental and other regulatory requirements are being addressed. Barrick has reinforced its commitment to the project, rescheduled construction to coincide with this environmental and regulatory work, and now expects production to commence in mid-2016. This delay impacts our near term project value, but we continue to focus on the characteristics that attracted us to the project in the first place. This is a world class asset with total gold reserves of about 18.0 million ounces with an expected Mt. Milligan and Pascua-Lama represent two of our five cornerstone assets. The Andacollo mine in Chile operated by Teck, the Voisey’s Bay mine in Canada operated by Vale, and the Peñasquito mine in Mexico operated by Goldcorp represent our other three cornerstone assets. We expect all of these properties to have mine lives over two decades, which will provide a stable foundation for Royal Gold for many years to come. These assets are supplemented by more than 30 additional properties that are presently providing Our royalty business model allows us to keep a tight control on costs and our EBITDA margins are consistently around 90%. Our compounded annual growth rate over the past decade in revenue per share, EBITDA per share, and normalized earnings per share was 19%, 22%, and 11%, respectively. 33599nar.indd 5 5 9/24/13 2:10 PM Royal Gold, Inc. revenue to Royal Gold. This level of asset diversification lower due mainly to a non-cash impairment on the value is a strength of the Company and provides for more of third-party securities we own. Other contributing consistent financial results. factors to lower earnings were interest expense Andacollo reached steady state production during the fiscal year, following the post construction ramp-up associated with our 2019 Notes and higher depletion expense due to higher production volumes. period, and is now operating near the design capacity. Although these are robust financial results given the Andacollo increased gold production by 33% during the current market conditions, broader market concerns and year and was our largest revenue source, representing the Pascua-Lama challenges have weighed on our share 28% of our total revenue. price. In addition, valuation metrics for gold equities, Vale reached an agreement with the Newfoundland and Labrador provincial government to amend their Voisey’s Bay Development Agreement which provides the operation with additional mineral processing flexibility and they also committed to pursue underground mining to extend the mine life. Voisey’s Bay contributed 11% of Royal Gold’s total revenue. including Royal Gold, have been compressed to a level unseen in decades. This has been driven by an investment rotation out of gold equities and into the broader market for a variety of reasons. Investors have a regained confidence in the United States economy and some are rotating out of gold, resulting in a 25% reduction in gold price during the fiscal year, most of that coming in the fourth fiscal quarter. At the same time, Royal Gold share Peñasquito suffered production limitations during the price has declined disproportionately by 46%. This share fiscal year due to water restrictions. Current guidance price decline, coupled with our 33% dividend increase from Goldcorp for calendar 2013 forecasts production at during the year, resulted in a dividend yield of nearly 2% about 80% of installed capacity, indicating the magnitude at fiscal year end. of growth possible once sufficient water is available to operate at full capacity. Goldcorp has identified additional resources and expects to have sufficient water available for the plant in the second half of calendar 2014. Peñasquito represented 10% of our total revenue during the fiscal year. I believe the fundamentals of Royal Gold and its growth profile compare favorably to any business – inside or outside the gold industry. We have growth already bought and paid for at Mt. Milligan in the short term and Pascua-Lama in the long term, a strong financial position, a free option on gold price upside, an attractive dividend, On an aggregate basis, increased metal production a balanced portfolio, and a great team of dedicated offset lower average gold prices, resulting in 10% higher professionals. I am highly encouraged about the future of revenue. Similarly, cash flow from operations was 6% Royal Gold and am delighted that we are positioned with higher for the fiscal year. However, earnings were 25% strength during this period of opportunity. 6 33599nar.indd 6 9/24/13 2:10 PM I remain honored to be associated with a motivated and extremely capable team. At the end of the fiscal year, we bid farewell to Karen Gross, Vice President and Corporate Secretary. Karen dedicated 26 years to the company and we wish her the very best in her retirement. We are excited to welcome two new members to our team. Karli Anderson has quickly and capably taken on investor relation responsibilities and now serves as our Vice President of Investor Relations. Jason Hynes also recently joined Royal Gold and we look forward to his management of our foreign subsidiary in Switzerland, and his strong contribution in business development activities as our Director, Business Development and Global Sales. We also strengthened our board by adding Ron Vance as a director of the Company during the fiscal year. Ron’s 30 years of experience in the mining industry as a senior executive in the areas of corporate development, marketing, project development, and finance – while working with some of the world’s largest mining companies – will be of great benefit to Royal Gold. In closing, let me express my appreciation to all of our shareholders for your support of our efforts. It is a privilege to represent Royal Gold and on behalf of all of our employees, we thank you for that opportunity. Sincerely, Tony A. Jensen Tony Jensen, President and CEO 33599nar.indd 7 * Adjusted EBITDA is a non-GAAP measure. See page 26 for more information. 7 9/24/13 2:10 PM Royal Gold, Inc. Royal Gold, Inc. PORTFOLIO m mAPAP PORTFOLIO 8 33599nar.indd 8 9/24/13 2:10 PM PASCUA-LAMAANDACOLLOCORNERSTONEPEÑASQUITOMULATOSROBINSONLAS CRUCESWOLVERINEHOLTCANADIAN MALARTICCORTEZVOISEY’S BAYMT. MILLIGANPRINCIPALPRODUCINGDEVELOPMENTEVALUATIONEXPLORATION61 PROPERTIES6993710020020202154 PROPERTIES162112510 PROPERTIES40332 PROPERTIES12 PROPERTIES34233621509757 PROPERTIES4621265 PROPERTIES3 PROPERTIES}204 PROPERTIES33599nar.indd 9 9 9/24/13 2:10 PM PASCUA-LAMAANDACOLLOCORNERSTONEPEÑASQUITOMULATOSROBINSONLAS CRUCESWOLVERINEHOLTCANADIAN MALARTICCORTEZVOISEY’S BAYMT. MILLIGANPRINCIPALPRODUCINGDEVELOPMENTEVALUATIONEXPLORATION61 PROPERTIES6993710020020202154 PROPERTIES162112510 PROPERTIES40332 PROPERTIES12 PROPERTIES34233621509757 PROPERTIES4621265 PROPERTIES3 PROPERTIES}204 PROPERTIESRoyal Gold, Inc. CORNERSTONE PROPERTIES NOTE: Reserves, estimated production and mine start-up information for all of the following properties were provided by the operators and have not been verified by Royal Gold. Metal prices for the reserve figures can be found on page 22, footnote number 2. The solid performance of our three operating cornerstone The solid performance of our three operating cornerstone interests, coupled with the near term growth from Mt. Milligan interests, coupled with the near term growth from Mt. Milligan and the long term growth from Pascua-Lama, will provide a and the long term growth from Pascua-Lama, will provide a robust, stable and long lived foundation for years to come. robust, stable and long lived foundation for years to come. 10 33599nar.indd 10 9/24/13 2:10 PM ACOLLO AANdNdACOLLO Year-over-year production increased by about one-third. Royal Gold owns a net smelter return (“NSR”) royalty equal to 75% of all gold produced from the sulfide portion of the deposit until 910,000 payable ounces have been sold, and 50% of the payable gold thereafter. 1 The Andacollo operation is a surface copper mine operated by a subsidiary of Teck Resources Limited (“Teck”). Gold is produced as a by-product of copper production. The mine is located in Chile’s Region IV, approximately 35 miles southeast of La Sarena and 220 miles north of Santiago. Production status: Year-over-year production increased by about one-third largely due to higher mill throughput and higher grades of ore. Mill throughput averaged approximately 47,000 tonnes per day during the fourth quarter of fiscal 2013. Teck’s full-year calendar 2013 guidance is 63,000 ounces due to mining of lower grade material in the second half of the year. 1 There have been approximately 167,000 cumulative payable ounces produced as of June 30, 2013. 2 Reported production for FY2013 relates to the amount of metal sales subject to our royalty interests as reported to us by the operator of the mine. 3 Reserves as of December 31, 2012. Venue rereVenue fy 2013 fy 2013 $82.3m METAL METAL GOLD PRODUCTION 22 PRODUCTION RESERVES 33 RESERVES 68,600 oZ Z 68,600 o 1.8m oZZ 1.8m o egion iV, chile rregion iV, chile 20+ yrs estimated mine life 20+ yrs 33599nar.indd 11 11 9/24/13 2:10 PM Royal Gold, Inc. Royal Gold, Inc. VVOISEOISEy’y’SS BBAyAy Voisey’s Bay operated at steady state production during fiscal 2013 Royal Gold holds a 2.7% NSR royalty on all metals from the Voisey’s Bay mine operated by Vale Inco (“Vale”). Voisey’s Bay is a surface nickel-copper-cobalt mine located in northern Labrador, about 20 miles southwest of the town of Nain and 50 miles northwest of Natuashish. Production status: In late March 2013, the Government of Newfoundland and Labrador announced amendments to their Voisey’s Bay Development Agreement including a commitment from Vale to pursue underground mining to extend the mine life. The agreement also allows Vale to continue processing concentrate outside of the province while construction is being finalized at the Long Harbour hydromet processing facility. 1. Revenues consist of provisional payments for concentrates produced during the current period and final settlements for prior production periods. 2. Reported production for FY2013 relates to the amount of metal sales subject to our royalty interests as reported to us by the operator of the mine. 3. Reserves as of December 31, 2012. Venue 11 rereVenue fy 2013 fy 2013 $32.5m METAL METAL NICKEL COPPER COBALT PRODUCTION 2 2 PRODUCTION RESERVES 33 RESERVES 143.9m lbs 143.9m lbs 1.046b lbs 1.046b lbs 101.9m lbs 101.9m lbs 586.694m lbs 586.694m lbs 0.7m lbs 0.7m lbs 48.832m lbs 48.832m lbs 20+ yrs estimated mine life 20+ yrs 12 33599nar.indd 12 llabrador, c anada abrador, canada 9/24/13 2:10 PM PPEñEñASASququITOITO Goldcorp reported a 26% increase in gold production over the prior fiscal year improvements and the addition of new fresh water wells. Goldcorp also announced that it plans to begin construction to develop a newly identified water source during the first quarter of fiscal 2014 with completion expected during the second half of calendar year 2014. Once sufficient water is available they will be able to move toward full design processing capability of 130,000 tonnes per day. Royal Gold owns a 2.0% NSR royalty on all metals at the Peñasquito mine. The surface mine, composed of two main deposits, Peñasco and Chile Colorado, hosts one of the world’s largest gold, silver, and zinc reserves, while also containing large lead reserves. The project is operated by a subsidiary of Goldcorp Inc. (“Goldcorp”) and is located in the state of Zacatecas, approximately 125 miles northeast of the city of Zacatecas and 15 miles south of Concepción del Oro. Production status: Goldcorp reported a 26% increase in gold production over the prior fiscal year, while production of silver, zinc and lead decreased by modest amounts. Goldcorp’s annual CY2013 production guidance anticipates increased production for the first half of fiscal 2014 as the mine moves from lower grade to higher grade ore. In the fourth quarter the sulfide plant achieved throughput of 105,000 tonnes per day following the completion of crusher maintenance, blasting 1. Reported production for fiscal 2013 relates to the amount of metal sales subject to our royalty interests as reported to us by the operator of the mine. 2. Reserves as of December 31, 2012. Zacatecas, mexico Zacatecas, mexico Venue rereVenue fy 2013 fy 2013 $28.0m METAL METAL GOLD SILVER ZINC LEAD PRODUCTION 1 1 PRODUCTION RESERVES 22 RESERVES 371,000 oZ Z 371,000 o 15.69m oZZ 15.69m o 21.1m oZZ 21.1m o 911.8m oZZ 911.8m o 282.3m lbs 282.3m lbs 13.961b lbs 13.961b lbs 126.3m lbs 126.3m lbs 5.814b lbs 5.814b lbs 22 yrs estimated mine life 22 yrs 33599nar.indd 13 13 9/24/13 2:10 PM Thompson Creek expects to reach commercial production at Mt. Milligan in the fourth quarter of this calendar year. the start-up period. Thompson Creek expects to reach commercial production at Mt. Milligan in the fourth quarter of this calendar year and estimates that annual gold production will average 262,000 ounces over the first six years. Royal Gold, Inc. Royal Gold, Inc. MT. MILLIGAN MT. MILLIGAN Royal Gold owns the right to 52.25% of the payable gold from the Mt. Milligan project which is owned by a subsidiary of Thompson Creek Metals Company (“Thompson Creek”). In addition to Royal Gold’s upfront payments to acquire this metal stream, the Company will make cash payments to Thompson Creek at a fixed price of $435 for each ounce of gold delivered to Royal Gold.1 Mt. Milligan is a surface copper-gold mine located in central British Columbia, Canada, approximately 95 miles northwest of Prince George. CONSTRUCTION STATUS: In mid-August, Thompson Creek reported that the phased start-up had begun with the first feed to the concentrator. In late September, they announced the commencement of copper-gold concentrate production. Routine testing and commissioning of the equipment and process circuits will continue through 1. This is a metal stream whereby the purchase price for each gold ounce delivered is $435 or the prevailing market price of gold, if lower; no inflation adjustment. 2. Reserves as of October 2009. GOLD RESERVES 22 GOLD RESERVES 6.02M OZ CY2013 - Q3 CY2013 - Q3 START-UP - Q4Q4 - ESTIMATED COMMERCIAL PRODUCTION 22 YRS ESTIMATED MINE LIFE 22 YRS British Columbia, Canada British Columbia, Canada 14 33599nar.indd 14 9/26/13 10:46 AM PASCPASCuuAA-L-LAAmmAA Pascu-Lama is a world class asset with a long estimated mine life and low estimated cash costs. Royal Gold owns a 0.78% - 5.23% sliding-scale NSR royalty 1 on the Pascua-Lama project which is operated by a subsidiary of Barrick Gold Corporation (“Barrick”). This royalty is applicable to all gold production from an area of interest in Chile. Royal Gold also holds a 1.05% NSR copper royalty which applies to all of the copper reserves in Chile within the area of interest, and takes effect after January 1, 2017. The Pascua-Lama project is being developed as a surface mine and is located on both sides of the border between Argentina and Chile, approximately 95 miles southeast of Vallenar, Chile and approximately 185 miles northeast of San Juan, Argentina. pre-stripping. They also intend to re-sequence construction status: In July 2013, Barrick construction of the process plant and other facilities in Argentina in order to target first production by mid reported that construction activities have been deferred until the project’s water management system has been calendar 2016. completed to the satisfaction of Chile’s Environmental Barrick estimates that capital costs will be in the range of Superintendent. Barrick estimates that the system approximately $8.0 to $8.5 billion. As of June 30, 2013, will be in compliance with permit conditions by the end approximately $5.4 billion has been spent on the project. of calendar 2014. After this, they expect to complete Barrick’s annual production guidance for the first five the remaining construction works in Chile, including years is 800,000 to 850,000 ounces of gold. 1. See footnotes 24 to 26 on page 23 of this report. 2. Royalty applies to all gold production from an area of interest in Chile. Only that portion of the reserves pertaining to our royalty interest in Chile are reflected here. 3. Reserves as of December 31, 2011. gold reserVes Ves 2, 32, 3 gold reser 14.68m oZ egion iii, chile rregion iii, chile cy2016 cy2016 ESTIMATED PRODUCTION START-UP Pascua-lama r Pascua-l ama royalty s chedule oyalty schedule 25+ yrs estimated mine life 25+ yrs Price of gold (Per oZ) <$325 $400 $500 $600 $700 >$800 0.78% 1.57% 2.72% 3.56% 4.39% 5.23% Royalty is interpolated between lower and upper endpoints 33599nar.indd 15 15 9/24/13 2:10 PM Royal Gold, Inc. Royal Gold, Inc. PRINCIPAL PROPERTIES PRINCIPAL PROPERTIES Note: The following principal properties, as of June 30, 2013, were determined by historical and future potential revenues, upon consideration of reserves, production estimates, feasibility studies, metal price assumptions, and mine lives. Holt OPERATOR: St Andrew Goldfields ROYALTY: 0.00013 x average FY2013 REVENUE: $19.0M monthly gold price - NSR (sliding-scale) FY2013 PRODUCTION: 1 56,400 oz. gold LOCATION: Ontario, Canada RESERVES (12/31/12): 0.5M oz. gold Mulatos OPERATOR: Alamos ROYALTY: 1.0% to 5.0% NSR (sliding-scale) LOCATION: Sonora, Mexico FY2013 REVENUE: $17.4M FY2013 PRODUCTION: 1, 2 218,000 oz. gold RESERVES (12/31/12): 1.4M oz. gold Robinson OPERATOR: KGHM ROYALTY: 3.0% NSR FY2013 REVENUE: $15.7M LOCATION: Nevada, United States FY2013 PRODUCTION: 1 49,100 oz. gold; 146.2M lbs. copper RESERVES (12/31/11): 0.8M oz. gold; 1.3B lbs. copper Cortez OPERATOR: Barrick FY2013 REVENUE: $9.0M ROYALTY: 0.40% to 5.0% GSR1 and GSR2 (sliding-scale); 0.71% GSR3; and 0.39% NVR1 FY2013 PRODUCTION: 1 82,100 oz. gold LOCATION: Nevada, United States RESERVES (12/31/12): 5.6M oz. gold 16 33599nar.indd 16 9/24/13 6:58 PM  Canadian Malartic oPerator: Osisko royalty: 1.0% to 1.5% NSR (sliding-scale) location: Quebec, Canada fy2013 reVenue: $8.0m fy2013 Production: 1 347,000 oz. gold reserVes (12/31/2012) : 4.3m oz. gold Las Cruces oPerator: First Quantum Minerals royalty: 3 1.5% NSR location: Andalucia, Spain fy2013 reVenue: $8.0m fy2013 Production: 1 153.4m lbs. copper reserVes (12/31/12): 1.7b lbs. copper Wolverine oPerator: Yukon Zinc royalty: 0.0% to 9.445% NSR (sliding-scale) location: Yukon Territory, Canada fy2013 reVenue: $6.4m fy2013 Production: 1 11,300 oz. gold; 2.8m oz. silver reserVes (12/31/11): 0.2m oz. gold; 39.5m oz. silver 1. Reported production relates to the amount of metal sales that are subject to our royalty interests for the fiscal year ended June 30, 2013, as reported to us by the operators of the mines. The royalty is capped at 2.0 million ounces of production. There have been approximately 1.1 million ounces of cumulative production as of June 30, 2013. 2. 3. Royalty is payable only when LME cash settlement price for Grade A copper is equivalent or greater than $0.80 per pound of copper. 33599nar.indd 17 17 9/24/13 2:10 PM Royal Gold, Inc. PRODUCING PROPERTIES PROPERTY LOCATION OPERATOR ROYALTY (gold unless otherwise stated) RESERVES 1,2,3,4,5 (contained oz or lbs) M 6 REVENUE FY2013 ($M) REVENUE FY2012 ($M) ANDACOLLO Chile, Region IV Teck VOISEY’S BAY Canada, Labrador Vale PEÑASQUITO Mexico, Zacatecas Goldcorp 75% gold until 910,000 payable ounces; 50% thereafter (NSR) 7 2.7% NSR (copper, nickel and cobalt) 2.0% NSR (gold, silver, lead and zinc) 1.802 Au 82.3 64.1 586.694 Cu 1046.270 Ni 48.832 Co 15.690 Au 8 911.800 Ag 8 5,814.000 Pb 13,960.540 Zn 32.5 36.0 28.0 28.5 HOLT MULATOS ROBINSON Canada, Ontario St Andrew Goldfields 0.00013 x Au price (NSR) 0.491 Au Mexico, Sonora United States, Nevada Alamos KGHM 1.0% to 5.0% NSR 9 1.422 Au 10 3.0% NSR (gold and copper) 0.812 Au; 1,329.473 Cu CORTEZ (PIPELINE MINING COMPLEX) United States, Nevada Barrick GSR1 and GSR2: 0.40% to 5.0% GSR 11 GSR3: 0.71% GSR NVR1: 0.39% NVR CANADIAN MALARTIC Canada, Quebec Osisko 1.0% to 1.5% NSR 13 1.617 Au 12 3.986 Au 12 2.265 Au 12 1.536 Au 12 4.275 Au LAS CRUCES Spain, Andalucia First Quantum Minerals 1.5% NSR (copper) 14 1,693.150 Cu GOLDSTRIKE (SJ CLAIMS) LEEVILLE United States, Nevada Barrick 0.9% NSR United States, Nevada Newmont 1.8% NSR 4.924 Au 1.552 Au WOLVERINE Canada, Yukon Territory Yukon Zinc 0.0% to 9.445% NSR(royalty on gold and silver only) 15 0.193 Au; 39.475 Ag INATA DOLORES Burkina Faso, Soum Avocet 2.5% GSR 0.915 Au Mexico, Chihuahua Pan American Silver 3.25% NSR (gold) 2.0% NSR (silver) 1.617 Au; 76.100 Ag GWALIA DEEPS Australia, W. Australia St Barbara 1.5% NSR TAPARKO MARIGOLD Burkina Faso, Namantenga Nord Gold 2.0% GSR; 0.75% GSR (milling royalty) 16 United States, Nevada Goldcorp/Barrick 2.0% NSR SOUTH LAVERTON Australia, W. Australia Saracen 1.5% NSR; $6.00/oz 17 2.254 Au 0.703 Au 4.131 Au 0.891 Au DON MARIO Bolivia, Chiquitos EL LIMON EL TOQUI Nicaragua, El Limon Chile, Region XI BALD MOUNTAIN United States, Nevada United States, Nevada Orvana B2Gold Nyrstar Barrick Barrick United States, South Dakota Goldcorp 0.0% to 2.0% NSR 20 Canada, Ontario Barrick KING OF THE HILLS Australia, W. Australia St Barbara 1.75% to 2.5% NSR 19 3.0% NSR 0.97% NSR 1.5% NSR 3.0% NSR (gold, silver and copper) 0.177 Au; 5.514 Ag 120.992 Cu 3.0% NSR 0.249 Au 0.0% to 3.0% NSR (gold, silver, lead and zinc) 18 0.254 Au; 1.338 Ag 27.414 Pb; 562.681 Zn United States, Utah Bowie Resources 1.41% GV (coal) United States, Montana Revett 3.0% GSR (silver and copper) 11.163 Ag; 87.246 Cu Canada, Saskatchewan Potash Corporation of Saskatchewan $0.36 to $1.44 and $0.25 per ton (potash) 21 312M tons (potash) Australia, W. Australia Reed Resources 0.45% NSR 22 RUBY HILL WHARF WILLIAMS SKYLINE TROY ALLAN MEEKATHARRA - YALOGINDA 1.831 Au 0.326 Au 0.457 Au 0.833 Au 0.153 Au N.A. 0.165 Au 0.129 Au TWIN CREEKS United States, Nevada Newmont 2.0% GPR GOLD HILL United States, Nevada Barrick/Kinross 1.0% to 2.0% NSR 24, 25 0.6% to 0.9% NSR (M-ACE) (gold and silver) 24, 25, 26 0.371 Au; 5.203 Ag JOHNSON CAMP United States, Arizona Nord Resources 2.5% NSR (copper) 656.000 Cu 19.0 17.4 15.7 9.0 8.0 8.0 7.1 6.9 6.4 4.9 4.8 4.3 3.8 3.8 3.1 2.8 2.5 2.4 2.2 2.0 1.9 1.4 1.4 0.9 0.8 0.7 0.1 0.1 0.01 – 28 15.0 13.8 11.7 13.2 7.1 6.4 5.5 9.2 2.2 6.4 5.3 4.9 4.1 0.8 2.5 0.2 2.1 2.1 0.9 0.4 2.4 1.7 1.2 1.4 2.3 0.7 – 23 0.1 – 27 – 28 18 33599nar.indd 18 * Three oil and gas royalties are not included in this table. 9/26/13 10:46 AM DEVELOPMENT PROPERTIES PROPERTY LOCATION OPERATOR ROYALTY (gold unless otherwise stated) RESERVES 1,2,3,4,5 (contained oz or lbs) M 6 DON NICOLAS Argentina, Santa Cruz Minera IRL 2.0% NSR (gold, silver) KUNDIP Australia, W. Australia Silver Lake Resources 1.0% to 1.5% NSR 7 MEEKATHARRA - NANNINE MEEKATHARRA - PADDY’S FLAT MEEKATHARRA - REEDYS Australia, W. Australia Reed Resources 1.5% NSR 8 Australia, W. Australia Reed Resources 1.5% NSR; AU$10 per ounce produced 8, 9 0.451 Au Australia, W. Australia Reed Resources 1.5% to 2.5% NSR 8, 10 1.0% NSR 8, 11 1.5% NSR 8 BALCOOMA Australia, Queensland Snow Peak Mining 1.5% NSR SOUTHERN CROSS Australia, W. Australia China Hanking Holdings 1.5% NSR 13 MARA ROSA Brazil, Goiás Amarillo Gold 1.0% NSR 0.196 Au 0.401 Ag 0.305 Au 0.021Au 0.114 Au 0.001 Au 12 0.380 Ag 12 32.466 Cu 12 7.879 Pb 12 29.274 Zn 12 0.119 Au 0.946 Au BELCOURT Canada, British Columbia Walter Energy 0.103% GV (coal) 95.2 tonnes (coal) BOUSQUET-CADILLAC- JOANNES Canada, British Columbia Agnico-Eagle 2.0% NSR CABER Canada, Quebec Nyrstar 1.0% NSR (copper and zinc) KUTCHO CREEK Canada, British Columbia Capstone Mining 1.6% NSR (gold, silver, copper and zinc) 0.178 Au 11.355 Cu 116.036 Zn 0.124 Au 11.618 Ag 462.678 Cu 734.300 Zn MT. MILLIGAN Canada, British Columbia Thompson Creek 52.25% of payable gold 14, 15 6.020 Au PINE COVE Canada, Newfoundland Anaconda Mining 7.5% NPI 16 0.175 Au RAMBLER NORTH Canada, Newfoundland Rambler Metals and Mining SCHAFT CREEK Canada, British Columbia Copper Fox/Teck Resources TULSEQUAH CHIEF Canada, British Columbia Chieftain Metals 1.0% NSR (gold, silver, copper and zinc) 17 N.A. 3.5% NPI (gold, silver, copper and molybdenum) 5.775 Au 51.895 Ag 5,630.715 Cu 373.340 Mo 12.5% of payable gold; 18, 19 22.5% of payable silver 20, 21 0.477 Au 16.876 Ag EL MORRO Chile, Region III Goldcorp/New Gold 1.4% NSR (gold, copper) 2.884 Au 22, 23 2,094 Cu 22, 23 PASCUA-LAMA Chile, Region III Barrick 0.78% to 5.23% NSR (gold) 24, 25 1.05% NSR (copper) 26 14.680 Au 548.177 Cu PINSON United States, Nevada Atna 3.0% NSR Cordilleran 27, 28, 29 2.94% NSR – Rayrock 27, 29, 30 SOLEDAD MOUNTAIN United States, California Golden Queen 3.0% NSR (gold and silver) 31 0.645 Au 1.233 Au 22.396 Ag 33599nar.indd 19 19 9/26/13 10:46 AM LOCATION OWNERSHIP ROYALTY RATE Royal Gold, Inc. EVALUATION PROPERTIES 1 PROPERTY CHISPAS MARTHA AVEBURY BELL CREEK BELLEVUE BUNDARRA (Black Cat) BURNAKURA Argentina Argentina Australia Australia Australia Australia Australia Minera IRL Coeur Mining MMG Limited Metallica Minerals Glencore Xstrata Terrain Minerals/St Barbara KGL Resources CELTIC/WONDER NORTH Australia SR Mining CHERITONS FIND EDNA MAY Australia Australia Riedel Resources Evolution Mining MEEKATHARRA- SABBATH Australia Dourado Resources MT. FISHER MT. GOODE (COSMOS) Australia Australia Rox Resources Glencore Xstrata NORTH WELL CHILKOOT Australia Norilsk PADDINGTON PHILLIPS FIND QUINNS AUSTIN RED DAM TEMORA Australia Australia Australia Australia Australia Norton Gold Fields Barra Resources Caravel Minerals Phoenix Gold Straits Resources VAN UDEN GOLD DEPOSIT Australia Convergent Minerals/St Barbara Australia Australia Australia Laramide Resources Nex Metals Burkina Faso Amara Mining Canada Canada Canada Canada Canada Canada Canada Canada Canada Ghana Guatemala Mexico Nicaragua Russia Russia Sabina Gold & Silver Agnico-Eagle Thompson Creek Goldcorp/ Premier Gold Lake Shore Gold MMG Limited Anglo American NorthIsle Copper and Gold Elgin Mining PMI Gold Kappes, Cassiday & Associates Quaterra Resources/Blackberry Condor Gold Barrick Polymetal United States Terraco Gold Corp. WEMBLEY DURACK WESTMORELAND YUNDAMINDERA SEGA BACK RIVER BARRAUTE (Swanson) BERG FOLLANSBEE GOLD RIVER HIGH LAKE HORIZON COAL HUSHAMU ULU KUBI VILLAGE TAMBOR NIEVES LA INDIA FEDOROVA SVETLOYE ALMADEN LA JARA MESA LONG VALLEY 2.0% NSR 2.0% NSR 2.0% NSR AUD$1 to AUD$2/tonne 2.0% NSR 1.5% NSR 1.5% to 2.5% NSR 2 1.5% NSR 1.5% NSR 0.5% GSR AUD$1.00/tonne 3 AUD$5.00/oz 4 1.5% NSR (nickel) 2.5% to 4.0% NSR 5 1.75% NSR AUD$10.00/oz 6 1.5% NSR 2.5% GSR 12.5% NPI 1.5% NSR 1.0% NSR 1.5% NSR 3.0% NSR 7 1.95% NSR 8,9; 2.35% NSR 8,9 2.0% NSR 1.0% NSR 2.0% NSR 1.5% NSR 1.5% NSR 0.50% GV (coal) 10.0% NPI 5.0% NSR 10 3.0% NPI 4.0% NSR 2.0% NSR 3.0% NSR 0.75% or 1.0% NSR; 0.5% NSR; 1.25% or 1.5% NSR 11 1.0% NSR 1.0% to 2.0% NSR 12 1.5% NSR 2.0% NSR Montezuma Mining/Horseshoe Gold Mine 1.0% NSR HASBROUCK MOUNTAIN United States Allied Nevada ISLAND MOUNTAIN United States Victoria Gold United States Laramide Resources $0.25/lb 13 (uranium) MCDONALD (Keep Cool) United States United States Vista Gold Newmont 1.0% NSR 3.0% NSR NIBLACK United States Heatherdale Resources 1.0% to 3.0% NSR 14 RELIEF CANYON United States Pershing Gold ROCK CREEK United States SAN JUAN SILVER (Bulldog) United States Revett Hecla WILDCAT United States Allied Nevada 2.0% NSR 1.0% NSR 3.0% NSR 15; 1.0% NSR 15 1.0% NSR 16; 1.0% to 2.0% NSR 17 20 33599nar.indd 20 9/26/13 10:46 AM EXPLORATION PROPERTIES PROPERTY OWNERSHIP ROYALTY PROPERTY OWNERSHIP ROYALTY ARGENTINA Michelle Mina Cancha AUSTRALIA Abbotts Blue Haze Gold Blue Haze Nickel Bourkes Bundarra Buttercup Bore Chesterfield Copperhead Croesus Forrestania Forrestania Nickel Jaguar Nickel Kalgoorlie East Lake Ballard Lounge Lizard Maori Lass Melba Flats Merlin Orbit Mt. Goode Bellevue Mt Newman-Victory Red Hill West Southern Cross Nickel (Kagara) Southern Cross Nickel Western Areas (Western Areas) Stakewell West Wyalong Minera IRL Yamana Gold 2.0% NSR 2.5% NSR Caravel Minerals St Barbara Hannans Reward/Kagara Caravel Minerals Terrain Minerals Panoramic Resources General Mining St Barbara Norton Gold Fields Western Areas Hannans Reward/ Cullen Resources Independence Group Malanti Pty Ltd Swan Gold Mining Western Areas St Barbara MMG Limited Merlin Diamonds Glencore Xstrata St Barbara Cullen Resources Kagara Nickel Munarra Metals Argent Minerals/ Golden Cross Resources Caravel Minerals Shear Diamonds Augusta Resource Stornoway Diamond Bluestone Resources/ Hunter Exploration SnipGold Bluestone Resources Talisman Energy/ Capstone Mining Shear Diamonds/ Stornoway Diamond Shear Diamonds/ Stornoway Diamond Teck Resources/ Bluestone Resources/ Hunter Exploration Hecla Mining Nuinsco Resources/ Ocean Partner Holdings Osisko Mining Moneta Porcupine Mines Americas Bullion Royalty Goldcorp Krinor Resources Shear Diamonds Stornoway Diamond Nuinsco Resources/ Ocean Partner Holdings Stornoway Diamond Kiska Metals Corporation 1.5% NSR 1.5% NSR 1.5% NSR 1.5% NSR 1.5% NSR 2.0% GPR 1.5% NSR 1.5% NSR AUD $1.25/tonne 1 1.5% NSR 2 1.5% NSR 1.5% NSR 1.125% NSR 0.60% NSR 1.5% NSR 3 1.5% NSR 2.0% NSR 1.0% GV 2.0% NSR 4; 1.5% NSR 4 1.5% NSR 2.5% NSR 1.5% NSR 2 1.5% NSR 2 1.5% NSR 2.5% NSR 1.5% NSR 1.5% NSR 1.5% NSR 1.0% GV 1.0% GV 1.0% NSR 1.0% GV 5.0% NSR 1.0% GV 1.0% GV 1.0% GV 2.0% NSR 5 2.0% NSR 6; 3.0% NSR 6 3.0% NSR 2.0% NSR 2.0% NSR 2.0% NSR 1.0% NSR 1.0% GV 1.0% GV 0.0% to 2.0% NSR 7 2.0% NSR 7 1.0% GV 1.0% NSR 8 Yagahong CANADA Afridi Lake Ashmore Aviat One Barrow Lake and North Kellet River Bronson Slope Boothia Peninsula Carswell Lake Churchill Churchill West Darby (Hayes River) Duverny Franquet Gauthier Godfrey II Gold Dome Golden Bear Hickey’s Pond Hood River Jewel Joe Mann Jubilee Kizmet 33599nar.indd 21 CANADA (Continued) Lazy Edward Bay McKenzie Red Lake Mike Lake Monument Denison Mines Goldcorp Pitchblack Resources New Nadina Explorations/ Archon Minerals Motherlode Greyhound Veris Gold Nighthawk Lake Imperial Metals/ Rainy Mountain Royalty/ Trillium North Minerals Nuinsco Resources/ Ocean Partner Holdings Commander Resources Noyon Qimmiq Railroad Rambler South Shasta TAK Voisey’s Bay Diamonds Vale Wilanour Yellowknife Lithium Eastmain Resources Krinor Resources Sable Resources Independence Gold Goldcorp Erex International 2.5% NSR 9 1.0% NSR 2.0% NSR 1.0% GV 2.0% NSR 2.5% NSR 10 3.0% NSR 1.0% to 3.0% NSR; 11 2.0% NSR 11; 1.0% GV 11 3.0% NSR 12 1.0% NSR 0.5% NSR 5.0% NSR 13 3.0% GV 5.0% NPI 2.0% NPI DOMINICAN REPUBLIC Minera Hispanola Energold Drilling 0.40% NSR 14 FINLAND Kettukuusikko Naakenavaara HONDURAS Vueltas de Rio MEXICO San Jeronimo PERU Alto Dorado TUNISIA Trozza Taranis Resources Taranis Resources 2.0% NSR 2.0% NSR Lundin 2.0% NSR Goldcorp 2.0% NSR Candente Gold 2.5% NSR China Minmetals 2.5% NSR UNITED STATES Uranium Resources Ambrosia Lake Teck/ Pennaroya Utah Apex McEwen Mining BSC Buckhorn South Barrick Cooks Creek Ferris Creek Barrick Doby George Dottie Fletcher Junction Horse Mountain Hot Pot ICBM Keystone Mule Canyon Oro Blanco Pinson – Other Reese River Rye San Rafael Silver Cloud Simon Creek Trenton Canyon Uncle Sam Windfall Wood Gulch Woodruff Creek Western Exploration Pan American Silver Nevada Exploration Barrick Nevada Exploration Timberline Resources Energy Fuels Newmont Pan American Silver Barrick Valor Gold Barrick Rio Grande Resources Rimrock Gold Barrick Newmont Coventry Resources Timberline Resources Western Exploration McEwen Mining 2.0% NVR 3.0% NSR 15 2.5% NSR 15.0% NPI 16; 14.0% NPI 16 1.5% NVR 2.0% NSR 17 3.0% NSR 1.25% NSR 0.25% NVR 1.25% NSR 0.75% NSR 2.0% NSR 5.0% NSR 3.0% NSR 0.489% to 5.979% NSR 18 2.0% NSR 0.5% NSR 2.0% NVR 2.0% NSR 1.0% NSR 3.0% GSR 19; 10.0% NPI 19 2.0% NSR 3.2% NSR 5.0% NSR 1.0% NSR 21 9/26/13 10:46 AM Royal Gold, Inc. FOOTNOTES Producing Properties 1 Reserves have been reported by the operators of record as of December 31, 2012, with the exception of the following properties: Don Mario – October 2012; Soledad – September 2012; Gwalia Deeps, King of the Hills, South Laverton and Southern Cross – June 2012; Meekatharra (Nannine, Paddy’s Flat, Reedys and Yaloginda) and Tulsequah Chief – March 2012; Taparko – January 2012; Pascua-Lama (Au), Don Nicolas, Gold Hill, Johnson Camp, Robinson and Wolverine – December 2011; Mara Rosa – October 2011; Balcooma – June 2011; Kutcho Creek – February 2011; Kundip and Pascua-Lama (Cu) – December 2010; Pine Cove – June 2010; Mt. Milligan – October 2009; Caber – July 2007. 2 Gold reserves were calculated by the operators at the following per ounce prices: A$1,600 – Paddington; $1,500 – Bald Mountain, Cortez, Gold Strike, Ruby Hill and Williams; A$1,500 – South Laverton; $1,490 – Bousquet/Cadillac/Joannes; $1,475 – Canadian Malartic; $1,400 – Don Mario, Holt, Leeville, Mulatos, and Twin Creeks; A$1,400 – Southern Cross; $1,366 – Schaft Creek; $1,350 – Dolores, Peñasquito, Tulsequah Chief, and Wharf; $1,310 – Soledad; $1,300 – Pinson; A$1,300 – Meekatharra: Nannine, Paddy’s Flat; Reedys and Yaloginda; $1,250 – El Limon, Gwalia Deeps, King of the Hills, and Taparko; $1,200 – Gold Hill, Inata, and Pascua Lama; $1,100 – Don Nicolas and Mara Rosa; $1,010 – Andacollo; $1,000 – Robinson; $983 – Pine Cove; $690 – Mt. Milligan. No gold price was reported for Balcooma, El Toqui, Kundip, Kutcho Creek, Marigold, and Wolverine. Silver reserves were calculated by the operators at the following prices per ounce: $30.00 – Gold Hill; $28.83 – Troy; $25.96 – Schaft Creek; $25.00 – Don Nicolas, Dolores, and Don Mario; $24.05 – Soledad; $24.00 – Peñasquito and $22.00 – Tulsequah Chief. No silver price was reported for Balcooma, El Toqui, Kutcho Creek and Wolverine. Copper reserves were calculated by the operators at the following prices per pound: $3.67 – Voisey’s Bay and Troy; $3.52 – Schaft Creek; $3.10 – Tulsequah Chief; $3.00 – Don Mario; $2.75 – Robinson and Las Cruces; $2.50 – Johnson Camp; and $2.00 – Pascua- Lama. No copper reserve price was reported for Balcooma, Caber or Kutcho Creek. Lead reserve price was calculated by the operators at the following prices per pound: $0.80 – Peñasquito. No lead reserve price was reported for Balcooma or El Toqui. Zinc reserve price was calculated by the operators at the following prices per pound: $0.85 – Peñasquito. No zinc reserve price was reported for Balcooma, Caber, El Toqui or Kutcho Creek. Nickel reserve price was calculated by the operator at Voisey’s Bay at $9.41 per pound. Cobalt reserve price was calculated by the operator at Voisey’s Bay at $15.66 per pound. Molybdenum reserve price was calculated by the operator at Schaft Creek at $15.30 per pound. 3 Royalty and metal stream definitions are included in the glossary on page 27 of this annual report. 4 Set forth below are the definitions of proven and probable reserves used by the U.S. Securities and Exchange Commission. “Reserve” is that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. “Proven (Measured) Reserves” are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, and the grade is computed from the results of detailed sampling, and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that the size, shape, depth and mineral content of the reserves are well established. “Probable (Indicated) Reserves” are reserves for which the quantity and grade are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance of probable (indicated) reserves, although lower than that for proven (measured) reserves, is high enough to assume geological continuity between points of observation. 5 Royal Gold has disclosed a number of reserve estimates that are provided by royalty operators that are foreign issuers and are not based on the U.S. Securities and Exchange Commission’s definitions for proven and probable reserves. For Canadian issuers, definitions of “mineral reserve,” “proven mineral reserve,” and “probable mineral reserve” conform to the Canadian Institute of Mining, Metallurgy and Petroleum definitions of these terms as of the effective date of estimation as required by National Instrument 43-101 of the Canadian Securities Administrators. For Australian issuers, definitions of “mineral reserve,” “proven mineral reserve,” and “probable mineral reserve” conform with the Australasian Code for Reporting of Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia, as amended (“JORC Code”). Royal Gold does not reconcile the reserve estimates provided by the operators with definitions of reserves used by the U.S. Securities and Exchange Commission. 6 “Contained ounces” or “contained pounds” do not take into account recovery losses in mining and processing the ore. 7 The royalty rate is 75% until 910,000 payable ounces of gold have been produced – 50% thereafter. There have been approximately 171,000 cumulative payable ounces produced as of June 30, 2013. Gold is produced as a by-product of copper. 8 Operator reports reserves by material type. Reserves represent combined oxide and sulfide ores. The sulfide material will be processed by milling. The oxide material will be processed by heap leaching. 9 The Company’s royalty is subject to a 2.0 million ounce cap on gold production. There have been approximately 1.1 million ounces of cumulative production as of June 30, 2013. NSR sliding-scale schedule (price of gold per ounce – royalty rate): $0.00 to $299.99 – 1.0%; $300 to $324.99 – 1.50%; $325 to $349.99 – 2.0%; $350 to $374.99 – 3.0%; $375 to $399.99 – 4.0%; $400 or higher – 5.0%. 10 Reserve shown is “capped” assuming 7.0% recovery. 11 GSR sliding-scale schedule (price of gold per ounce – royalty rate): Below $210 – 0.40%; $210 to $229.99 – 0.50%; $230 to $249.99 – 0.75%; $250 to $269.99 – 1.30%; $270 to $309.99 – 2.25%; $310 to $329.99 – 2.60%; $330 to $349.00 – 3.00%; $350 to $369.99 – 3.4%; $370 to 389.99 – 3.75%; $390 to $409.99 – 4.0%; $410 to $429.99 – 4.25%; $430 to $449.99 – 4.50%; $450 to $469.99 – 4.75%; $470 and higher – 5.0%. 12 NVR1 and GSR3 reserves and additional mineralized material are subsets of the reserves and additional mineralized material covered by GSR1 and GSR2. 13 NSR sliding-scale schedule (price of gold per ounce – royalty rate): $0.00 to $350 – 1.0%; above $350 – 1.5%. 14 Royalty is payable only when LME cash settlement price for Grade A copper is equivalent or greater than $0.80 per pound of copper. 15 Gold royalty rate is based on the price of silver per ounce. NSR sliding-scale schedule (price of silver per ounce – royalty rate): Below $5.00 – 0.0%; $5.00 to $7.50 – 3.778%; >$7.50 – 9.445%. 16 The 2.0% GSR applies to gold production from defined portions of the Taparko-Bouroum project area. The 0.75% GSR milling royalty applies to ore mined outside of the defined area of the Taparko-Bouroum project that is processed through the Taparko facility up to a maximum of 1.1 million tons per year. 17 The $6/ounce royalty applies to Monty’s Dam and Elliot Lode properties only and it becomes payable once 265,745 ounces of gold have been produced. This royalty is payable on gold only. 18 All metals are paid based on zinc prices. NSR sliding-scale schedule (price of zinc per pound – royalty rate): Below $0.50 – 0.0%; $0.50 to below $0.55 – 1.0%; $0.55 to below $0.60 – 2.0%; $0.60 or higher – 3.0%. 19 NSR sliding-scale schedule (price of gold per ounce – royalty rate): Below $375 – 1.75%; >$375 to $400 – 2.0%; >$400 to $425 – 2.25%; >$425 and higher – 2.5%. All price points are stated in 1986 dollars and are subject to adjustment in accordance with a blended index comprised of labor, diesel fuel, industrial commodities and mining machinery. 20 NSR sliding-scale schedule (price of gold per ounce – royalty rate): $0.00 to under $350 – 0.0%; $350 to under $400 – 0.5%; $400 to under $500 – 1.0%; $500 or higher – 2.0%. 21 The royalty applies to 40% of production. The royalty rate is $1.44 per ton for the first 600,000 tons on which the royalty is paid, reducing to $0.72 per ton on 600,000 to 800,000 tons and to $0.36 per ton above 800,000 tons, at a price above $23.00 per ton. A sliding-scale is applicable when the price of potash drops below $23.00 per ton. Given the current North American market price for potash, the complete sliding-scale schedule is not presented here. In addition, there is a $0.25 per ton royalty payable on certain production up to 600,000 tons. 22 Operation is in administration. The operator has not indicated when mining will resume. 23 Royalty production did not commence until calendar 2013. 24 Round Mountain, a joint venture between Kinross and Barrick, has the right, at any time, to purchase the royalty interest for $10.0 million less any royalty payments paid prior to the purchase option being exercised. The royalty is subject to a minimum royalty payment of $100,000 per year, which is capped at $1.0 million. As of June 30, 2013, minimum royalty payments totaling $975,000 have been received. Once all royalty payments and the minimum royalty payment equals $10.0 million, the royalty terminates. 25 The 1.0% to 2.0% sliding-scale NSR royalty will pay 2.0% when the price of gold is above $350 per ounce and 1.0% when the price of gold falls to $350 per ounce or below. The 0.6% to 0.9% NSR sliding-scale schedule (price of gold per ounce – royalty rate): Below $300 – 0.6%; $300 to $350 – 0.7%; > $350 to $400 – 0.8%; > $400 – 0.9%. The silver royalty rate is based on the price of gold. 26 The 0.6% to 0.9% sliding-scale NSR applies to the M-ACE claims. The operator did not break out reserves or resources subject to the M-ACE claims royalty. 27 Production subject to the 1.0% to 2.0% NSR sliding-scale royalty commenced in the first quarter of calendar 2013. 28 The Company has not recognized revenue from this property since the acquisition of IRC in February 2010. Development Properties Note: For footnotes 1 through 6, see corresponding footnotes under Producing Properties Footnotes. 7 The royalty rate is 1.0% until 250,000 ounces of gold has been produced; 1.5% thereafter. 8 Operation is in administration. 9 The A$10 per ounce royalty applies on production above 50,000 ounces. Royalty payable on gold only. 22 33599nar.indd 22 9/24/13 2:10 PM 10 The 1.5% to 2.5% NSR sliding-scale royalty applies to cumulative production above 300,000 ounces at both the Burnakura and Meekatharra-Reedys properties. Once 300,000 ounces have been produced, the royalty begins paying at a per year rate of 1.5% for the next 75,000 ounces per year produced and at a rate of 2.5% on production above 75,000 ounces per year. Cumulative production is estimated at 271,000 ounces as of June 30, 2013. 11 The 1.0% NSR applies to the Rand area only. Royalty payable on gold only. 12 Figures reflect reserves associated with the entire property. The operator did not provide a detailed breakdown of the reserves subject to Royal Gold’s royalty interest. Therefore, a portion of the reserves is not subject to Royal Gold’s royalty interest. 13 Operation placed on care and maintenance in December 2012. The operator has not indicated when mining will continue. 14 This is a metal stream whereby the purchase price for gold ounces delivered is $435 per ounce, or the prevailing market price of gold, if lower; no inflation adjustment. 15 Commissioning began in August 2013. Thompson Creek estimates that commercial production will begin in the fourth quarter of calendar 2013. 16 Operation is currently in production; estimated pay-back of capital, a requisite to royalty payments, to occur by 2016. 17 Operation is currently in production but not on Royal Gold’s royalty ground. 18 This is a metal stream whereby Royal Gold is entitled to 12.5% of payable gold until 48,000 ounces of payable gold have been delivered; 7.5% thereafter. 19 This is a metal stream whereby the purchase price for gold ounces delivered is $450 per ounce on the first 48,000 ounces of gold; $500 per ounce thereafter, or the prevailing market price, if lower. 20 This is a metal stream whereby Royal Gold is entitled to 22.5% of payable silver until 2.78 million ounces of payable silver have been delivered; 9.75% thereafter. 21 This is a metal stream whereby the purchase price for silver ounces delivered is $5.00 per ounce on the first 2.78 million ounces of silver; $7.50 per ounce thereafter, or the prevailing market price of the metal, if lower. 22 Reserve figures represent the estimated gold and copper reserves that are associated with Royal Gold’s royalty interests rather than total reserves for the project. Total reserves at the project are estimated to be 9.5 million ounces of gold and 7.0 billion pounds of copper. 23 Goldcorp presently reports reserves attributable to its 70% interest in the El Morro project which currently consists of the La Fortuna deposit. La Fortuna is the only deposit at the project with reported reserves. Royal Gold estimates that its royalty covers approximately 30% of this deposit. 24 Royalty applies to all gold production from an area of interest in Chile. Only that portion of the reserves pertaining to our royalty interest in Chile is reflected here. Approximately 20% of the royalty is limited to the first 14.0 million ounces of gold produced from the project. Also, 24% of the royalty can be extended beyond 14.0 million ounces produced for $4.4 million. In addition, a one-time payment totaling $8.4 million will be made if gold prices exceed $600 per ounce for any six-month period within the first 36 months of commercial production. Barrick has announced that development at Pascua-Lama has been suspended pending the outcome of regulatory and litigation challenges. 25 NSR sliding-scale schedule (price of gold per ounce - royalty rate): less than or equal to $325 – 0.78%; $400 – 1.57%; $500 – $2.72%; $600 – 3.56%; $700 – 4.39%; greater than or equal to $800 – 5.23%. Royalty is interpolated between the lower and upper endpoints. 26 Royalty applies to all copper production from an area of interest in Chile. Only that portion of the reserves pertaining to our royalty interest in Chile is reflected here. This royalty will take effect after January 1, 2017. 1.5% for the next 75,000 ounces per year produced and at a rate of 2.5% on production above 75,000 ounces per year. Cumulative production is estimated at 271,000 ounces as of June 30, 2013. 3 Royalty applies on production above 10,000 ounces. 4 Royalty is capped at 500,000 ounces. 5 Royalty rate is 4.0% for grades at 1.5 g/t or less and 2.5% at grades above 1.5 g/t. 6 Royalty applies to production above 40,000 ounces and is capped at $1 million. 7 Operator has the right to buy back up to 2.0% of the royalty for US$2.0 million. 8 Royalty rate is 1.95% on Goose Lake and 2.35% on George Lake. 9 Royalty on George Lake applies to production above 800,000 ounces. Royalty on Goose Lake applies to production above 400,000 ounces. 10 Royalty applies to production above 675,000 ounces. 11 The 0.75% NSR royalty applies to gold and silver and the 1.0% NSR royalty applies to platinum group elements, copper and nickel. The 0.5% NSR royalty applies to gold, silver, platinum group elements, copper and nickel. The 1.25% NSR royalty applies to gold and silver and the 1.5% NSR royalty applies to platinum group elements, copper and nickel. These royalties become payable on commercial production once capital repayment has been made at the project. 12 A $325,000 payment is due upon production of the first 100,000 ounces. Once production reaches 200,000 ounces, the royalty begins paying at the following rate schedule (price of gold per ounce – royalty rate): $0.00 to $425 – 1.0%; $425 and above – 2.0%. 13 Royalty is payable on per pound of uranium produced above eight million pounds. 14 Royalty rate is 1.0% for each ton of ore having a value of less than $115 per ton; 2.0% for each ton of ore having a value between $115 and $135 per ton; and 3.0% for each ton of ore having a value greater than $135 per ton. 15 Royalty rate is 3.0% on Homestake and Emerald unpatented claims; 1.0% on Emerald patented claims. 16 The 1.0% royalty rate applies to the SS lode claims only. 17 An additional 1.0% NSR applies to gold production between 500,000 ounces and 1.0 million ounces. The royalty increases to a 2.0% NSR on production in excess of 1.0 million ounces. This royalty applies to various claims on the mining property. Exploration Properties 1 Royalty paid on dollars per tonne of ore above 50,000 tonnes up to 500,000 tonnes. 2 Royalty payable on all minerals, except nickel or any by-products in whatever form or state. 3 Royalty payable on gold only. 4 Royalty rate is 2.0% for gold and 1.5% for all other metals. 5 Royalty rate is equal to 15% of the proceeds of production until $1,760,000 has been paid. A 2.0% NSR royalty applies to production thereafter. 6 The 2.0% NSR royalty applies to production from an area of the property referred to as the “GeoNova Properties,” and the 3.0% NSR royalty applies to production from an area of the property referred to as the “Homestake Properties.” 7 Sliding-scale royalty applies to gold only. NSR sliding-scale schedule (price per gold ounce – royalty rate): Below $325 – 0.0%; $325 – 1.5%; $375 – 2.0%. Once $500,000 has been received in gold royalty payments, the rate will reduce to 1.0% and will only be in effect at a gold price of $350 per ounce or higher. The 2.0% NSR royalty applies to silver and copper. 8 Operator has the option to purchase the entire 1.0% NSR for $1 million prior to the 27 Royalty only applies to Section 29 which currently holds about 95% of the reserves development of a mine on the property. reported for the property. 28 An additional Cordilleran royalty applies to a portion of Section 28. 29 Operation has been placed on care and maintenance as of June 2013. The operator has not indicated when mining will resume. 30 Additional Rayrock royalties apply to Sections 28, 32 and 33; these royalty rates vary depending on pre-existing royalties. The Rayrock royalties take effect once 200,000 ounces of gold have been produced from open pits on the property. As of June 30, 2013, approximately 103,000 ounces have been produced from the existing open pits. 31 Royalty is capped at $300,000 plus simple interest. Evaluation Properties 1 Royal Gold considers and categorizes an exploration stage property to be an “evaluation stage” property if mineralized material has been identified on the property but reserves have yet to be identified. The U.S. Securities and Exchange Commission does not recognize the term “mineralized material.” Investors are cautioned not to assume that any part or all of the mineralized material identified on these properties will ever be converted into reserves. 2 The 1.5% to 2.5% NSR sliding-scale royalty applies to cumulative production above 300,000 ounces at both the Burnakura and Meekatharra-Reedys properties. Once 300,000 ounces have been produced, the royalty begins paying at a per year rate of 9 Operator has the option to purchase 1.25% of the 2.5% NSR for $1 million at any time prior to a production decision or within 30 days thereafter. 10 Operator may purchase 1.5% of the 2.5% NSR at any time for CDN$1.5 million. 11 The 1.0 to 3.0% NSR sliding-scale royalty only applies to gold production. The 2.0% NSR royalty applies to commercial production of all minerals excluding diamonds and industrial minerals. The 1.0% GV royalty applies to commercial production of all diamonds and industrial minerals. 12 Owner has the option to purchase 1.0% of the 3.0% NSR for $1 million at any time. 13 Operator has the right to purchase 2.5% of the 5.0% NSR at any time for $1million. 14 Royalty on three property packages is capped at an aggregate of $2 million. 15 Royalty is capped at $1 million. 16 The 15.0% NPI and the 14.0% NPI apply to different claims on the property. 17 The 2.0% NSR becomes payable once 400,000 ounces have been produced. 18 Royalty rate varies depending on pre-existing royalties (max of 6.0%). 19 The 3.0% GSR applies to production from the properties from which greater than 60% of the revenues are projected to be derived from gold and silver. The 10% NPI applies to production from the properties from which less than 60% of the revenues are projected to be derived from gold and silver. 33599nar.indd 23 23 9/26/13 10:46 AM Royal Gold, Inc. ARKET 11 THE GOLd mARKET Gold Price and Demand Overview The price of gold rose 6% in calendar 2012, marking the 11th consecutive year of price increases for the precious metal. However, it was the smallest percentage increase in the annual average price since the beginning of the gold bull market in 2002. Demand for gold was influenced by brisk Central bank buying and resilient institutional investor demand, which were partially offset by flat jewelry demand and slightly lower bar and coin demand relative to the prior year. Over the same 12-month timeframe, the gold price averaged $1,670 compared with an average of $1,572 in calendar 2011. Calendar Year 2012 Central banks were once again net purchasers of gold, adding 17.5 million ounces to their reserves, an increase of nearly 20% over the heavy demand seen in the previous year. According to historical records from the World Gold Council, this was the greatest level of demand in central bank buying in 50 years. Several countries more than doubled their current reserves including Brazil, Paraguay, and Iraq. Other notable accumulations occurred in Turkey (5.3 million ounces), followed by Russia (2.4 million ounces), and Brazil, the Philippines, and Kazakhstan (just over 1 million ounces each). The largest seller of gold was the central bank of Germany, shedding approximately 177,000 ounces for the purpose of minting commemorative gold coins. The gold price also reflected strong investment demand for exchange traded funds (“ETFs”). According to the CPM Group 2, gold ETF holdings reached an all-time high of 86.5 million ounces on December 30, 2012, with net additions totaling 8.4 million ounces for the year. In contrast, the demand for gold jewelry and physical gold bars and coins dropped by 4% and 17%, respectively. These demand categories tend to be consumer-driven, and were impacted by a temporary increase in import duties in India, price sensitivity in Thailand, South Korea and Vietnam, and a relative slowdown of the Chinese economy in 2012. In calendar 2012, total gold supply decreased by 2%, as lower recycling activity offset a modest increase in mine production. A return to net producer de-hedging also contributed to the slightly lower total supply figure. Annual gold mine output was 86.6 million ounces in 2012, compared with 91 million ounces in 2011. This modest decrease was largely due to lower production from Argentina, Australia, Papua New Guinea, and South Africa, partially offset by increased production in Canada, China, Ghana, Mali, Mexico, Russia and Tanzania. China was again the world’s biggest gold producer in 2012, with nearly 13 million ounces of production, followed by Australia with an output of 8.7 million ounces of gold. The United States was the third largest producer mining 8 million ounces, followed by Russia with 6.6 million ounces. South Africa, once a top producer, held fifth place with 5 million ounces of production. Six Months to June 30, 2013 In the first six months of 2013, the average gold price decreased 8% from $1,651 to an average of $1,522 over the same period in calendar 2012. Investment demand fell 12% from the prior year period as investors interpreted signs of strength in the US economy as indication that quantitative easing may come to an end. The lower investment demand was partially offset by jewelry demand, which was up 21% from the prior year period, largely due to lower prices and pent up demand. Total supply of gold for the first half 2013 was down 4% ending the period at 66.1 million ounces, largely due to a lower supply of recycled gold. Central bank purchases also dropped significantly in the first half of fiscal 2013, declining by 35% from 9 million ounces to 5.8 million ounces as of June 30, 2013. 24 33599nar.indd 24 9/24/13 2:10 PM According to the World Gold Council’s Gold Demand Trends — Second Quarter 2013, the lower rate of purchasing was likely the result of volatile price moves during the period, weakness in emerging market currencies, and the declining rate of growth in foreign exchange reserves among the banks. The buying was concentrated among central banks in the Commonwealth of Independent States region, the largest of which was Russia, purchasing 482,000 ounces during the quarter ended March 30, 2013. Again, many of the developing countries’ purchases reflected a need for reserve diversification as they remain largely underweight in their allocation of gold compared with larger, more developed countries. Northwest Mining Association and the Denver Gold Group; and by its Vice President, Investor Relations who serves as Chairman of the Board of Directors of the Denver Gold Group. For more information on gold, you can visit the following web sites: Colorado Mining Association – www.coloradomining.org Denver Gold Group – www.denvergold.org Minerals Education Coalition – www.MineralsEducationCoalition.org National Mining Association - www.nma.org Nevada Mining Association - www.nevadamining.org Organizational Involvement Northwest Mining Association – www.nwma.org Royal Gold is an active participant in organizations involved in promoting the mining industry and the use of gold. The Company is a member of the World Gold Council, and is represented by its President and Chief Executive Officer on the board of the National Mining Association; by its Vice President of Operations on the boards of the Nevada and Colorado Mining Associations; by its Chief Financial Officer and Treasurer on the boards of the World Gold Council - www.gold.org 1 This information is derived from the World Gold Council, Thomson Reuters- GFMS, and the CPM Group and represents the data and opinions of those sources. Royal Gold has not verified this data and presents this information as a representative overview of views on the gold business from gold industry sources. No assurance can be given that this data or these opinions will prove accurate. Investors are urged to reach their own conclusions regarding the gold market. 2 From the CPM Gold Yearbook 2013, March 2013, Volume 27, Number 1. CORPORATE RESPONSIBILITY CORPORATE RESPONSIBILITY Royal Gold is committed to preserving and protecting the environment, promoting the health and safety of its employees, respecting local cultures and values, and being an exemplary international corporate citizen. Although Royal Gold does not control or operate any of the properties where we hold royalty interests, we do expect and encourage the operators of such properties to conduct their activities in a responsible manner. As demonstrated by our membership in the World Gold Council, which is an associate member of the International Council on Mining and Metals (ICMM), Royal Gold supports the ten ICMM principles that seek continual improvement in sustainable development performance. In fiscal 2013, 28% of our revenue from primary gold producing companies was derived from World Gold Council member companies that also support the ICMM principles. Approximately 61% of our total revenue for fiscal 2013 was derived from ICMM member companies. 33599nar.indd 25 25 9/26/13 10:46 AM Royal Gold, Inc. NON-GAAP FINANCIAL MEASURES The Company computes and discloses Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined by the Company as net income plus depreciation, depletion and amortization, non-cash charges, income tax expense, interest and other expense, and any impairment of mining assets, less non- controlling interests in operating income of consolidated subsidiaries, interest and other income, and any royalty portfolio restructuring gains or losses. Other companies may define and calculate this measure differently. Management believes that Adjusted EBITDA is a useful measure of the performance of our royalty portfolio. Adjusted EBITDA identifies the cash generated in a given period that will be available to fund the Company’s future operations, growth opportunities, shareholder dividends and to service the Company’s debt obligations. This information differs from measures of performance determined in accordance with U.S. generally accepted accounting principles (“GAAP”) and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. Below is a reconciliation of net income to Adjusted EBITDA: Adjusted EBITDA Reconciliation For the Years Ended June 30, (Unaudited in thousands) Net income Depreciation, depletion and amortization Non-cash employee stock compensation Restructuring on royalty interests in mineral properties Loss on available-for-sale securities Royalty portfolio restructuring gain Interest and other income Interest and other expense Income tax expense Non-controlling interests in operating income 2013 $ 73,409 85,020 5,701 2012 $ 98,309 75,001 6,507 2011 $ 77,299 67,399 6,494 2010 $ 29,422 53,793 7,279 - 12,121 - (2,902) 25,117 63,759 1,328 - - (3,836) 7,705 54,710 - - - (5,088) 7,740 38,974 - - - (6,360) 3,809 14,164 2009 $ 41,357 32,578 2,921 - - (33,714) (3,192) 984 21,857 of consolidated subsidiaries (1,402) (2,108) (2,646) (2,039) (1,085) Adjusted EBITDA $ 260,805 $ 237,616 $ 190,172 $ 100,068 $ 61,706 26 33599nar.indd 26 9/27/13 8:16 AM GLOSSARY Concentrate: The clean product recovered in froth flotation. Fixed-rate royalty: A royalty rate that stays constant. Grade: The metal content of ore. With precious metals, grade is expressed as troy ounces per ton of ore or as grams per tonne of ore. A “troy” ounce is one-twelfth of a pound. Gross proceeds royalty (GPR): A royalty in which payments are made on contained ounces rather than recovered ounces. Gross smelter return (GSR) royalty: A defined percentage of the gross revenue from a resource extraction operation, less, if applicable, certain contract-defined costs paid by or charged to the operator. Gross value (GV) royalty: A defined percentage of the gross value, revenue or proceeds from a resource extraction operation, without deductions of any kind. Metal streaming: A metal 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. Milling royalty: A royalty on ore throughput at a mill. Mineralized material: That part of a mineral system that has potential economic significance but is not included in the proven and probable ore reserve estimates until further drilling and metallurgical work is completed, and until other economic and technical feasibility factors based upon such work have been resolved. Net profits interest (NPI) royalty: A defined percentage of the gross revenue from a resource extraction operation, after recovery of certain contract-defined pre-production costs, and after a deduction of certain contract-defined mining, milling, processing, transportation, administrative, marketing and other costs. Net smelter return (NSR) royalty: A defined percentage of the gross revenue from a resource extraction operation, less a proportionate share of incidental transportation, insurance, refining and smelting costs. Net value royalty (NVR): A defined percentage of the gross revenue from a resource extraction operation, less certain contract-defined costs. Probable reserve: Ore reserves for which quantity and grade are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume geological continuity between points of observation. Proven reserve: Ore reserves for which: (a) the quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, and grade is computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established. Reserve: That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Reserves are categorized as proven or probable reserves (see separate definitions). Royalty: The right to receive a percentage or other denomination of mineral production from a mining operation. Sliding-scale royalty: A royalty rate that fluctuates based on contract-specified variables such as metal price or production volume. Ton: A unit of weight equal to 2,000 pounds or 907.2 kilograms. Tonne: A unit of weight equal to 2,204.6 pounds or 1,000 kilograms. 33599nar.indd 27 27 9/24/13 8:04 PM Royal Gold, Inc. Royal Gold, Inc. TO SHAREHOLDERS FIVE-YEAR RETURN TO SHAREHOLDERS FIVE-YEAR RETURN Return to Shareholders 1 PHLX Gold/Silver Sector Index SM (XAU SM) 2008 2009 2010 2011 2012 2013 Gold Resource Corporation Gold Fields Limited $300 $200 $100 $0 ROYAL GOLD S&P 500 INDEX PHLX GOLD/SILVER SECTOR Annual Return Percentage Company Name / Index Royal Gold, Inc. S&P 500 Index PHLX Gold/Silver Sector Indexed Returns 1 Base Period Company Name / Index Royal Gold, Inc. S&P 500 Index PHLX Gold/Silver Sector 2008 100 100 100 1. Includes dividend reinvestment Forward Looking Statements Agnico Eagle Mines Limited IAMGold Corporation Allied Nevada Gold Corp. Kinross Gold Corporation Anglogold Ashanti Limited McEwen Mining Inc. AuRico Gold Inc. Banro Corporation Barrick Gold Corporation Coeur d’Alene Mining, Inc. New Gold Inc. Newmont Mining Corporation NovaGold Resources Inc. Pan American Silver Corporation Compania De Minas Buenaventura Randgold Resources Limited Eldorado Gold Corporation Royal Gold, Inc. First Majestic Silver Corporation Seabridge Gold Inc. Freeport-McMoran Copper & Gold Silver Standard Resources Inc. Goldcorp Inc. Harmony Gold Mining Limited Hecla Mining Company Silver Wheaton Corporation Tanzanian Royalty Exploration Corporation Yamana Gold, Inc. Years Ended June 30, 2009 34.29 -26.22 -28.02 2010 16.00 14.43 32.27 2011 23.02 30.69 14.01 2012 34.68 5.45 -19.98 2013 -45.79 20.60 -40.06 Years Ended June 30, 2009 134.29 73.78 71.98 2010 155.78 84.43 95.20 2011 191.64 110.35 108.54 2012 258.09 116.36 86.86 2013 139.91 140.32 52.07 Cautionary “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical matters, the matters discussed in this report 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 statements that Royal Gold’s portfolio provides investors an opportunity to capture value in the precious metals sector; that the Company will maintain upside potential through production expansion and reserve increases through exploration; that the Company’s business model will generate strong cash flow and high margins with a lower cost structure; that Royal Gold’s business model allows revenue growth without adding significant overhead costs; the expectation that Mt. Milligan will be our largest future source of revenue, potentially representing a 50% increase in net gold equivalents at current prices and full production; that we should see meaningful revenue contributions commencing at or near the beginning of calendar 2014 from Mt. Milligan; the expection that Pascua- Lama will commence production in calendar 2016 and contribute towards the Company’s long-term growth; the expectation that Royal Gold’s cornerstone properties will have mine lives over two decades and will provide a stable foundation over many years; that our asset diversification will provide more consistent financial results; the magnitude of production growth at Peñasquito once sufficient water is available; and estimated proven and probable reserves, production estimates, time frames for construction and mine start-up, and mill throughput reported by the operators of our various properties. Factors that could cause actual results to differ materially from these forward-looking statements include, among others, changes in gold and other metals prices; the performance of our producing royalty properties; unanticipated grade, geological, metallurgical, processing or other problems at the royalty properties; economic and market conditions, as well as other factors described elsewhere in this report and our report on Form 10-K (See Part I, Item 1A, Risk Factors.) The reader is urged to read the Risk Factors in connection with the risks inherent in our forward- looking statements. We disclaim any obligation to update any forward looking-statements. Readers are cautioned not to put undue reliance on forward-looking statements. 28 33599nar.indd 28 9/26/13 10:46 AM UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) (cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30, 2013 or (cid:3) 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 (State or Other Jurisdiction of Incorporation or Organization) 1660 Wynkoop Street, Suite 1000 Denver, Colorado (Address of Principal Executive Offices) 84-0835164 (I.R.S. Employer Identification No.) 80202 (Zip Code) Registrant’s telephone number, including area code: (303) 573-1660 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common stock, $0.01 par value NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:2) No (cid:3) Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes (cid:3) No (cid:2) 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 (cid:2) No (cid:3) Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes (cid:2) No (cid:3) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:3) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of ‘‘accelerated filer’’, ‘‘large accelerated filer’’ and ‘‘smaller reporting company’’ in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer (cid:2) Accelerated filer (cid:3) Smaller reporting company (cid:3) Non-accelerated filer (cid:3) (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:3) No (cid:2) Aggregate market value of the voting common stock held by non-affiliates of the registrant, based upon the closing sale price of Royal Gold common stock on December 30, 2012, as reported on the NASDAQ Global Select Market was $5,009,069,966. There were 64,378,015 shares of the Company’s common stock, par value $0.01 per share, outstanding as of July 29, 2013. In addition, as of such date, there were 667,229 exchangeable shares of RG Exchangeco Inc., a subsidiary of registrant, outstanding which are exchangeable at any time into shares of the Company’s common stock on a one-for-one basis and entitle their holders to dividend and other rights economically equivalent to those of the Company’s common stock. Portions of the Proxy Statement for the 2013 Annual Meeting of Stockholders scheduled to be held on November 20, 2013, and to be filed within 120 days after June 30, 2013, are incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10-K. DOCUMENTS INCORPORATED BY REFERENCE INDEX PART I. ITEM 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 4. Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART II. ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . ITEM 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART III. ITEM 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . ITEM 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 13. Certain Relationships and Related Transactions, and Director Independence . . . . . ITEM 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART IV. ITEM 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 1 6 21 21 33 33 34 35 35 50 51 85 85 87 87 87 87 87 88 88 89 91 (This page has been left blank intentionally.) This document (including information incorporated herein by reference) contains ‘‘forward-looking statements’’ within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which involve a degree of risk and uncertainty due to various factors affecting Royal Gold, Inc. and its subsidiaries. For a discussion of some of these factors, see the discussion in Item 1A, Risk Factors, of this report. In addition, please see our note about forward-looking statements included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations (‘‘MD&A’’), of this report. ITEM 1. BUSINESS Overview PART I Royal Gold, Inc. (‘‘Royal Gold’’, the ‘‘Company’’, ‘‘we’’, ‘‘us’’, or ‘‘our’’), together with its subsidiaries, is engaged in the business of acquiring and managing precious metals royalties, precious metals streams and similar 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. We use the term ‘‘royalty interest’’ in this Annual Report on Form 10-K to refer to royalties, gold, silver or other metal stream interests, and other similar interests. We seek to acquire existing royalty interests or to finance projects that are in production or in development stage in exchange for royalty interests. In the ordinary course of business, we engage in a continual review of opportunities to acquire existing royalty interests, to create new royalty interests through the financing of mine development or exploration, or to acquire companies that hold 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, analysis of technical, financial and other confidential information, submission of indications of interest, participation in preliminary discussions and negotiations and involvement as a bidder in competitive processes. As of June 30, 2013, the Company owned royalty interests on 36 producing properties, 21 development stage properties and 147 exploration stage properties, of which the Company considers 50 to be evaluation stage projects. The Company uses ‘‘evaluation stage’’ to describe exploration stage properties that contain mineralized material and on which operators are engaged in the development of reserves. We do not conduct mining operations nor are we required to contribute to capital costs, exploration costs, environmental costs or mining, processing or other operating costs on the properties in which we hold royalty interests. During the fiscal year ended June 30, 2013, we focused on the management of our existing royalty interests and the acquisition of royalty interests. As discussed in further detail throughout this report, some significant developments to our business during fiscal year 2013 were as follows: (1) Our royalty revenues increased 10% to $289.2 million, compared with $263.1 million during fiscal year 2012; (2) We acquired the right to purchase an additional 12.25% of the payable gold produced from the Mt. Milligan copper-gold project located in British Columbia, Canada; (3) We sold 5,250,000 shares of our common stock, at a price of $90.00 per share, resulting in proceeds of approximately $472.5 million; (4) We obtained the right to increase the net smelter return (‘‘NSR’’) royalty we may acquire on all the gold and silver production from Seabridge Gold, Inc.’s (‘‘Seabridge’’) Kerr-Sulphurets- Mitchell project (‘‘KSM Project’’) in British Columbia, Canada by 0.75%; and 1 (5) We increased our calendar year dividend to $0.80 per basic share, which is paid in quarterly installments throughout calendar year 2013. This represents a 33% increase compared with the dividend paid during calendar year 2012. Certain Definitions Additional Mineralized Material: Additional mineralized material is that part of a mineral system that has potential economic significance but cannot be included in the proven and probable ore reserve estimates until further drilling and metallurgical work is completed, and until other economic and technical feasibility factors based upon such work have been resolved. The Securities and Exchange Commission (the ‘‘SEC’’) does not recognize this term. Investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. Gross Proceeds Royalty (GPR): A royalty in which payments are made on contained ounces rather than recovered ounces. Gross Smelter Return (GSR) Royalty: A defined percentage of the gross revenue from a resource extraction operation, in certain cases reduced by certain contract-defined costs paid by or charged to the operator. g/t: A unit representing grams per tonne. Gold or Silver Stream: A gold or silver purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of gold or silver, as applicable, produced from a mine, at a price determined for the life of the transaction by the purchase agreement. Net Profits Interest (NPI): A defined percentage of the gross revenue from a resource extraction operation, after recovery of certain contract-defined pre-production costs, and after deduction of certain contract-defined mining, milling, processing, transportation, administrative, marketing and other costs. Net Smelter Return (NSR) Royalty: A defined percentage of the gross revenue from a resource extraction operation, less a proportionate share of incidental transportation, insurance, refining and smelting costs. Net Value Royalty (NVR): A defined percentage of the gross revenue from a resource extraction operation, less certain contract-defined transportation costs, milling costs and taxes. Proven (Measured) Reserves: Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, and the grade and/or quality are computed from the results of detailed sampling, and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that the size, shape, depth and mineral content of the reserves are well established. Probable (Indicated) Reserves: Reserves for which the quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance of probable (indicated) reserves, although lower than that for proven (measured) reserves, is high enough to assume geological continuity between points of observation. Payable Metal: Ounces or pounds of metal in concentrate payable to the operator after deduction of a percentage of metal in concentrate that is paid to a third-party smelter pursuant to smelting contracts. Reserve: That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. 2 Royalty: The right to receive a percentage or other denomination of mineral production from a resource extraction operation. Ton: A unit of weight equal to 2,000 pounds or 907.2 kilograms. Tonne: A unit of weight equal to 2,204.6 pounds or 1,000 kilograms. Recent Business Development Proposed Acquisition of the El Morro Royalty In August 2013, Royal Gold, through its wholly-owned Chilean subsidiary, acquired a 70% interest in a 2.0% NSR royalty on certain portions of the El Morro copper gold project in Chile (‘‘El Morro’’), from Xstrata Copper Chile S.A., for $35 million. Goldcorp Inc. (‘‘Goldcorp’’) holds 70% ownership of the El Morro project and is the operator, with the remaining 30% held by New Gold Inc. (‘‘New Gold’’). Goldcorp and New Gold reported that as of December 31, 2012, proven and probable reserves totaled 9.5 million ounces of gold and 7 billion pounds of copper on a 100% basis. This royalty encompasses some legacy BHP concessions that are currently estimated by Royal Gold to cover approximately one-third of the total reserve. Goldcorp has indicated that all El Morro project field construction activities have been suspended since April 27, 2012, pending the definition and implementation by the Chilean environmental permitting authority (the Servicio de Evaluaci´on Ambiental or SEA) of a community consultation process which corrects certain deficiencies in that process as specifically identified by the Antofogasta Court of Appeals. The Chilean authorities and local communities continue to refine and advance this new consultation process with Goldcorp’s support. Overall project activities are restricted to gathering information and engineering to support permit applications for submission following the completion of the administrative process and optimization of the project including securing a long-term power supply. Fiscal 2013 Business Developments Please refer to Item 7, MD&A, for discussion on recent liquidity and capital resource developments. Acquisition of an Additional Royalty Option on the Kerr-Sulphurets-Mitchell Project On December 13, 2012, Royal Gold purchased 1,004,491 common shares (the ‘‘Additional Seabridge Shares’’) of Seabridge at a 15% premium to the volume weighted-average trading price of Seabridge common shares on the Toronto Stock Exchange (‘‘TSX’’) for a five day trading period that ended December 11, 2012, for $18.3 million (C$18.0 million). Effective December 13, 2012, Royal Gold entered into an amendment (the ‘‘Seabridge Amendment’’) to its option agreement with Seabridge (the ‘‘Seabridge Option Agreement’’) to, among other things, remove the 270 day minimum holding period applicable to the Additional Seabridge Shares. Upon Royal Gold’s purchase of the Additional Seabridge Shares, Royal Gold obtained the right, under the Seabridge Option Agreement, as amended by the Seabridge Amendment, to increase the NSR royalty it may acquire on all of the gold and silver production from Seabridge’s KSM project in British Columbia, Canada, by 0.75%. Royal Gold now holds the right to purchase either a 1.25% NSR royalty on such production for C$100 million, or a 2.0% NSR royalty for C$160 million. If Royal Gold exercises its purchase right, the purchase price will be payable in three equal installments over the 540-day period following exercise. Royal Gold sold the Additional Seabridge Shares in a private transaction to an unrelated party for $14.6 million (C$14.4 million) on December 13, 2012. 3 Mt. Milligan III Gold Stream Acquisition On August 8, 2012, Royal Gold entered into an amendment to its purchase and sale agreement with Thompson Creek Metals Company Inc. (‘‘Thompson Creek’’) whereby Royal Gold, among other things, agreed to purchase an additional 12.25% of the payable gold from the Mt. Milligan copper-gold project in exchange for a total of $200 million, of which $75 million was paid shortly after closing, and, when production is reached, cash payments for each payable ounce of gold delivered to Royal Gold, as discussed further below (the ‘‘Milligan III Acquisition’’). Thompson Creek intends to use the proceeds from the Milligan III Acquisition to finance a portion of the construction of the Mt. Milligan project and related costs. Under the Milligan III Acquisition, Royal Gold increased its aggregate pre-production commitment in the Mt. Milligan project from $581.5 million to $781.5 million and agreed to purchase a total of 52.25% of the payable ounces of gold produced from the Mt. Milligan project at a cash purchase price equal to the lesser of $435, with no inflation adjustment, or the prevailing market price for each payable ounce of gold (regardless of the number of payable ounces delivered to Royal Gold). As of June 30, 2013, the Company has paid $768.6 million of the aggregate pre-production commitment of $781.5 million. The final remaining scheduled quarterly payment of $12.9 million is due September 1, 2013. Royal Gold’s obligation to make this quarterly payment is subject to the satisfaction of certain conditions included in the agreement governing the Milligan III Acquisition (including that the aggregate amount of historical payments made by Royal Gold plus the final quarterly payment is less than the aggregate costs of developing the Mt. Milligan project incurred or accrued by Thompson Creek as of the date of the quarterly payment). Mt. Milligan is an open pit copper-gold project that Thompson Creek reports is in the advanced stages of construction and Thompson Creek estimates that commercial production will commence in the fourth quarter of calendar 2013. According to a National Instrument 43-101 technical report regarding the Mt. Milligan project filed on the System for Electronic Document Analysis and Retrieval (SEDAR) under Thompson Creek’s profile on October 13, 2011, proven and probable reserves total 482 million tonnes (0.20% copper; 0.39 g/t gold), containing 2.1 billion pounds of copper and 6.0 million ounces of gold, which reserves are estimated to support a mine life of approximately 22 years, with the project estimated to produce on average approximately 194,000 ounces of gold annually over the life of the mine, including estimated average production of 262,000 ounces of gold annually during the first six years of operation. Our Operational Information Operating Segments, Geographical and Financial Information The Company manages its business under a single operating segment, consisting of the acquisition and management of royalty interests. Royal Gold’s royalty revenue and long-lived assets (royalty interests in mineral properties, net) are geographically distributed as shown in the following table. Chile . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . Mexico . . . . . . . . . . . . . . . . . . . . . . . United States . . . . . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . . . . . . . . . Africa . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . Royalty Revenue Fiscal Year Ended June 30, Royalty Interests in Mineral Property, net Fiscal Year Ended June 30, 2013 2012 2011 2013 2012 2011 29% 25% 21% 30% 35% 40% 24% 24% 19% 52% 43% 36% 9% 11% 19% 20% 18% 3% 5% 17% 18% 24% 5% 3% 5% 5% 4% 2% 1% 9% 4% 3% 3% 4% 4% 4% 4% 7% 4% 3% 1% 3% 4 Please see ‘‘Operations in foreign jurisdictions are subject to many risks, which could decrease our revenues,’’ under Part I, Item 1A, Risk Factors, of this report for a description of the risks attendant to foreign operations. Our financial results are primarily tied to the price of gold and, to a lesser extent, the price of silver, copper and nickel, together with the amounts of production from our producing stage royalty interests. The prices of gold, silver, copper, nickel and other metals have fluctuated widely in recent years. The marketability and the price of metals are influenced by numerous factors beyond the control of the Company and declines in the price of gold, silver, copper or nickel could have a material and adverse effect on the Company’s results of operations and financial condition. During the fiscal year ended June 30, 2013, we derived approximately 77% of our royalty revenue from precious metals (including 70% from gold and 7% from silver), 11% from copper and 8% from nickel. Competition The mining industry in general and the royalty segment in particular are competitive. We compete with other royalty companies, mine operators, and financial buyers in efforts to acquire existing royalty interests and with the lenders, investors, and royalty and streaming companies providing financing to operators of mineral properties in our efforts to create new royalty interests. Many of our competitors in the lending and mining business are larger than we are and have greater resources and access to capital than we have. Key competitive factors in the royalty acquisition and financing business include the ability to identify and evaluate potential opportunities, transaction structure and consideration, and access to capital. Regulation Like all mining operations, the operators of the mines that are subject to our royalties must comply with environmental laws and regulations promulgated by federal, state and local governments including, but not limited to, the National Environmental Policy Act; the Comprehensive Environmental Response, Compensation and Liability Act; the Clean Air Act; the Clean Water Act; the Hazardous Materials Transportation Act; and the Toxic Substances Control Act. Mines located on public lands in the United States are subject to the General Mining Law of 1872 (the ‘‘General Mining Law’’) and are subject to comprehensive regulation by either the United States Bureau of Land Management (an agency of the United States Department of the Interior) or the United States Forest Service (an agency of the United States Department of Agriculture). The mines also are subject to regulations of the United States Environmental Protection Agency (‘‘EPA’’), the United States Mine Safety and Health Administration and similar state and local agencies. Operators of mines that are subject to our royalty interests in other countries are obligated to comply with similar laws and regulations in those jurisdictions. Although we are not responsible as a royalty interest owner for ensuring compliance with these laws and regulations, failure by the operators of the mines on which we have royalty interests to comply with applicable laws, regulations and permits can result in injunctive action, damages and civil and criminal penalties on the operators which could reduce or eliminate production from the mines and thereby reduce or eliminate the royalties we receive and negatively affect our financial condition. Corporate Information We were incorporated under the laws of the State of Delaware on January 5, 1981. Our executive offices are located at 1660 Wynkoop Street, Suite 1000, Denver, Colorado 80202; our telephone number is (303) 573-1660. 5 Available Information Royal Gold maintains an internet website at www.royalgold.com. Royal Gold makes available, free of charge, through the Investor Relations section of its website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our SEC filings are available from the SEC’s internet website at www.sec.gov which contains reports, proxy and information statements and other information regarding issuers that file electronically. These reports, proxy statements and other information may also be inspected and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The charters of Royal Gold’s key committees of the Board of Directors and Royal Gold’s Code of Business Conduct and Ethics are also available on the Company’s website. Any of the foregoing information is available in print to any stockholder who requests it by contacting Royal Gold’s Investor Relations Department at (303) 573-1660. The information on the Company’s website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC. Company Personnel We currently have 21 employees, all of whom are located in Denver, Colorado. Our employees are not subject to a labor contract or a collective bargaining agreement. We consider our employee relations to be good. We also retain independent contractors to provide consulting services, relating primarily to geologic and geophysical interpretations and also relating to such metallurgical, engineering, environmental, and other technical matters as may be deemed useful in the operation of our business. ITEM 1A. RISK FACTORS You should carefully consider the risks described below before making an investment decision. Our business, financial condition, results of operations, and cash flows could be materially adversely affected by any of these risks. The market or trading price of our securities could decline due to any of these risks. In addition, please see our note about forward-looking statements included in Part II, Item 7, MD&A of this Annual Report on Form 10-K. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations. Risks Related to Our Business Volatility in gold, silver, copper, nickel and other metal prices may have an adverse impact on the value of our royalty interests and may reduce our revenues. Certain contracts governing our royalty interests have features that may amplify the negative effects of a drop in metals prices. The profitability of our royalty interests is directly related to the market price of gold, silver, copper, nickel and other metals. Our revenue is particularly sensitive to changes in the price of gold, as gold royalty interests represent the majority of our royalty revenue. Market prices may fluctuate widely and are affected by numerous factors beyond the control of Royal Gold or any mining company, including metal supply, industrial and jewelry fabrication, investment demand, central banking economic policy, expectations with respect to the rate of inflation, the relative strength of the dollar and other currencies, interest rates, gold purchases, sales and loans by central banks, forward sales by metal producers, global or regional political, economic or banking conditions, and a number of other factors. Declines in market prices for gold, silver, copper, nickel and certain other metals such as those experienced during the first half of calendar 2013, decrease our revenues. Severe declines in market 6 prices could cause an operator to reduce, suspend or terminate production from an operating project or construction work at a development project, which may result in a temporary or permanent reduction or cessation of revenue from those projects, and we might not be able to recover the initial investment in our royalty interests. Our sliding-scale royalties, such as Cortez, Holt, Mulatos, Wolverine and other properties, amplify this effect, because when metal prices fall below certain thresholds in a sliding-scale royalty, a lower royalty rate is applied to production. Any such price decline may result in a material and adverse effect on our profitability, results of operations and financial condition. In addition, the selection of a property for exploration or development, the determination to construct a mine and place it into production, and the dedication of funds necessary to achieve such purposes are decisions that must be made long before the first revenues from production will be received. Price fluctuations between the time that decisions about exploration, development and construction are made and the commencement of production can have a material adverse effect on the economics of a mine and can eliminate or have a material adverse impact on the value of royalty interests. Moreover, certain agreements governing our royalty interests, such as those relating to our royalty interests in the Andacollo, Robinson, Pe˜nasquito and Voisey’s Bay properties, are based on the operator’s concentrate sales to smelters, which include price adjustments between the operator and the smelter based on metals prices at a later date, typically three to five months after shipment to the smelter. In such cases, our payments from the operator include a component of these later price adjustments, which can result in decreased revenue in later periods if metals prices have fallen. Volatility in gold, silver, copper and nickel prices is demonstrated by the annual high and low prices for those metals from selected calendar years during the past decade. (cid:129) High and low gold prices per ounce, based on the London Bullion Market Association P.M. fix, have ranged from $416 to $320 in 2003, from $537 to $411 in 2005, from $1,212 to $810 in 2009, from $1,895 to $1,319 in 2011, from $1,792 to $1,540 in 2012, and from $1,694 to $1,192 year to date 2013. (cid:129) High and low silver prices per ounce, based on the London Bullion Market Association fix, have ranged from $5.97 to $4.37 in 2003, from $9.23 to $6.39 in 2005, from $19.18 to $10.51 in 2009, from $48.70 to $26.68 in 2011, from $37.23 to $26.67 in 2012, and from $32.23 to $18.61 year to date 2013. (cid:129) High and low copper prices per pound, based on the London Metal Exchange cash settlement price for Grade A copper, have ranged from $1.00 to $0.72 in 2003, from $2.08 to $1.44 in 2005, from $3.33 to $1.38 in 2009, from $4.60 to $3.08 in 2011, from $3.93 to $3.29 in 2012, and from $3.75 to $3.01 year to date 2013. (cid:129) High and low nickel prices per pound, based on the London Metal Exchange cash settlement price for nickel, have ranged from $7.53 to $3.36 in 2003, from $8.12 to $5.22 in 2005, from $9.31 to $4.25 in 2009, from $13.17 to $7.68 in 2011, from $9.90 to $6.89 in 2012, and from $8.46 to $6.00 year to date 2013. We own passive interests in mining properties, and it is difficult or impossible for us to ensure properties are developed or operated in our best interest. All of our current revenue is derived from royalty interests on properties operated by third parties. The holder of a royalty interest typically has no authority regarding the development or operation of a mineral property. Therefore, we are not in control of decisions regarding development or operation of any of the properties on which we hold a royalty interest, and we have limited legal rights to influence those decisions. 7 Our strategy of having others operate properties on which we retain a royalty interest puts us generally at risk to the decisions of others regarding all operating matters, including permitting, feasibility analysis, mine design and operation, processing, plant and equipment matters and temporary or permanent suspension of operations, among others. These decisions are likely to be motivated by the best interests of the operator rather than to maximize payments to us. Although we attempt to secure contractual rights when we create new royalty interests, such as audit or access rights, that will permit us to protect our interests to a degree, there can be no assurance that such rights will always be available or sufficient, or that our efforts will be successful in achieving timely or favorable results or in affecting the operation of the properties in which we have a royalty interest in ways that would be beneficial to our stockholders. Our revenues are subject to operational and other risks faced by operators of our mining properties. Although we are not required to pay capital costs (except for transactions where we finance mine development) or operating costs, our financial results are indirectly subject to hazards and risks normally associated with developing and operating mining properties where we hold royalty interests. Some of these risks include: (cid:129) insufficient ore reserves; (cid:129) increases in production or capital costs incurred by operators or third parties that may impact the amount of reserves available to be mined, cause an operator to delay or curtail mining development and operations or render mining of ore uneconomical and cause an operator to close operations; (cid:129) declines in the price of gold, silver, copper, nickel and other metals; (cid:129) mine operating and ore processing facility problems; (cid:129) economic downturns and operators’ insufficient financing; (cid:129) insolvency or bankruptcy of the operator; (cid:129) significant permitting, environmental and other regulatory requirements and restrictions and any changes in those regulations; (cid:129) challenges by non-mining interests to existing permits and mining rights, and to applications for permits and mining rights; (cid:129) community or civil unrest; (cid:129) labor shortages, increased labor costs, and labor disputes, strikes or work stoppages at mines; (cid:129) unanticipated geological conditions or metallurgical characteristics (cid:129) unanticipated ground or water conditions; (cid:129) pit wall or tailings dam failures or any underground stability issues; (cid:129) fires, explosions and other industrial accidents; (cid:129) environmental hazards and natural catastrophes such as floods, earthquakes or inclement or hazardous weather conditions; (cid:129) injury to persons, property or the environment; (cid:129) the ability of operators to maintain or increase production or to replace reserves as properties are mined; and (cid:129) uncertain domestic and foreign political and economic environments. The occurrence of any of the above mentioned risks or hazards could result in an interruption, suspension or termination of operations or development work at any of the properties in which we hold a royalty interest and have a material adverse effect on our business, results of operations, cash flows and financial condition. 8 Acquired royalty interests, particularly on development stage properties, are subject to the risk that they may not produce anticipated revenues. The royalty interests we acquire may not produce anticipated revenues. The success of our acquisitions of royalty interests is based on our ability to make accurate assumptions regarding the valuation, timing and amount of revenues to be derived from our royalty interests, particularly with respect to acquisitions of royalty interests on development stage properties. If an operator does not bring a property into production and operate in accordance with feasibility studies, technical or reserve reports or other plans due to lack of capital, inexperience, unexpected problems, delays, or otherwise, then the acquired royalty interest may not yield sufficient revenues to be profitable. Furthermore, operators of development stage properties must obtain and maintain all necessary environmental permits and access to water, power and other raw materials needed to begin production, and there can be no assurance that operators will be able to do so. The Mt. Milligan mining project in Canada and the Pascua-Lama mining project in Chile and Argentina are among our principal development stage acquisitions. Construction work is nearing completion at Mt. Milligan, and Thompson Creek expects to commission the project in August 2013. However, construction activities on the Chilean side of Barrick’s Pascua-Lama mining project are currently suspended pursuant to a court ruling while Barrick addresses environmental and other regulatory requirements to the satisfaction of Chilean authorities. Barrick has submitted a plan for review by the regulators to construct a water management system in compliance with permit conditions for completion by the end of 2014, after which it expects to resume the remaining construction work in Chile. Barrick intends to re-sequence construction of the process plant and other facilities in Argentina in order to target first production by mid-2016. Barrick expects capital costs for this project to total $8.0 to $8.5 billion, though Barrick has stated that it is unable to fully assess the impact on the overall capital budget, operating costs and schedule of the Pascua-Lama project until the regulatory and legal issues are clarified. The failure of the Mt. Milligan or Pascua-Lama project, or any of our other principal properties, to produce anticipated revenues on schedule or at all could have a material adverse effect on our business, results of operations, cash flows, financial condition or the other benefits we expect to achieve from the acquisition of royalty interests. Further, as mines on which we have royalty interests mature, we can expect overall declines in production over the years unless operators are able to replace reserves that are mined through mine expansion or successful new exploration. There can be no assurance that the operators of properties where we hold royalty interests will be able to maintain or increase production or replace reserves as they are mined. Several of our royalty interests are significant to us and any adverse development related to these properties could adversely affect our revenues. Our investments in the Andacollo, Voisey’s Bay and Pe˜nasquito properties are currently significant to us, as our royalty interests in these properties resulted in approximately $142.8 million in revenue in fiscal year 2013, which was nearly 50% of our revenue for the period. In addition, we anticipate the Mt. Milligan and Pascua-Lama mining projects to contribute significantly to our revenues if and when they begin producing streaming or royalty revenues, respectively. Any adverse development affecting the operation of or production from these operations may have a material adverse effect on our business, results of operations, cash flows and financial condition. In addition, we have limited or no control over operational decisions made by third party operators of these projects. Any adverse decision made by the operators, such as changes to mine plans, production schedules or metallurgical processes, may impact the timing and amount of revenue that we receive. 9 Potential litigation affecting the properties that we have royalty interests in could have an adverse effect on us. Potential litigation may arise between the operators of properties on which we have royalty interests and third parties. As holder of a royalty interest, we generally will not have any influence on the litigation and generally will not have access to non-public information concerning such litigation. Any such litigation that results in the reduction, cessation or termination of production from a property, whether temporary or permanent, could have a material adverse effect on our business, results of operations, cash flows and financial condition. We depend on our operators for the calculation of payments of our royalty interests. We may not be able to detect errors and later payment calculations may call for retroactive adjustments. The payments of our royalty interests are calculated by the operators of the properties on which we have royalty interests based on their reported production. Each operator’s calculation of our payments is subject to and dependent upon the adequacy and accuracy of its production and accounting functions, and, given the complex nature of mining and ownership of mining interests, errors may occur from time to time in the allocation of production and the various other calculations made by an operator. Any of these errors may render calculations of such payments inaccurate. Certain agreements governing our royalty interests require the operators to provide us with production and operating information that may, depending on the completeness and accuracy of such information, enable us to detect errors in the calculation of payments of royalty interests that we receive. We do not, however, have the contractual right to receive production information for all of our royalty interests. As a result, our ability to detect payment errors through our royalty interest monitoring program and its associated internal controls and procedures is limited, and the possibility exists that we will need to make retroactive revenue adjustments. Some contracts governing our royalty interests provide us the right to audit the operational calculations and production data for the associated payments of royalty interests; however, such audits may occur many months following our recognition of the revenue and may require us to adjust our revenue in later periods, which could require us to restate our financial statements. Development and operation of mines is very capital intensive and any inability of the operators of properties where we hold royalty interests to meet liquidity needs, obtain financing or operate profitably could have material adverse effects on the value of and revenue from our royalty interests. The development and operation of mines is very capital intensive, and if operators of properties where we hold royalty interests do not have the financial strength or sufficient credit or other financing capability to cover the costs of developing or operating a mine, the operator may curtail, delay or cease development or operations at a mine site. Operators’ ability to raise and service sufficient capital may be affected by, among other things, macroeconomic conditions, future commodity prices of metals to be mined, or further economic volatility in the U.S. and global financial markets as has been experienced in recent years. If any of the operators of the properties on which we have royalty interests suffer these material adverse effects, then our royalty interests and the value of and revenue from our royalty interests may be materially adversely affected. In addition, continued economic volatility or a credit crisis could adversely affect the ability of operators to obtain debt or equity financing for the exploration, development and operation of their properties. Certain of our royalty interests are subject to payment or production caps or rights in favor of the operator or third parties that could reduce the revenues generated from the royalty interest. Some of our principal royalty interests are subject to limitations, such that the royalty interest will extinguish after threshold production is achieved or payments at stated thresholds are made. For example, a portion of our royalty at Pascua-Lama and our royalty at Mulatos are subject to production caps. Furthermore, certain other agreements governing our royalty interests contain rights that favor the operator or third parties. For example, in fiscal year 2011, Osisko, the operator of Canadian 10 Malartic, one of our principal producing properties, exercised its buy-down right that reduced our royalty from a 3% NSR royalty to a 1.5% NSR royalty. Also, certain individuals from whom we purchased portions of our royalties at Pascua-Lama are entitled to one-time payments if the price of gold exceeds certain thresholds. If any of these thresholds are met or similar rights are exercised or we fail to make the required payment, our future revenue could be reduced. We may enter into acquisitions or other material transactions at any time. In the ordinary course of business, we engage in a continual review of opportunities to acquire existing royalty interests, to create new royalty interests through the financing of mining projects or to acquire companies that hold 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, technical, financial and other confidential information, submission of indications of interest and participation in discussions or negotiations for acquisitions. We also often consider obtaining or providing debt commitments for acquisition financing. Any such acquisition could be material to us. We could issue common stock or incur additional indebtedness to fund our acquisitions. Issuances of common stock may dilute existing stockholders and reduce some or all of our financial measures on a per share basis. In addition, any such acquisition or other transaction may have other transaction specific risks associated with it, including risks related to the completion of the transaction, the project, its operators, or the jurisdictions in which the project is located. In addition, we may consider opportunities to restructure our royalty interests where we believe such restructuring would provide a long-term benefit to the Company, though such restructuring may reduce near-term revenues or result in the incurrence of transaction related costs. We could enter into one or more acquisition or restructuring transactions at any time. We may be unable to successfully acquire additional royalty interests at appropriate valuations. Our future success largely depends upon our ability to acquire royalty interests at appropriate valuations, including through royalty interest and corporate acquisitions and other financing transactions. Most of our revenues are derived from royalty interests that we acquire or finance, rather than through exploration of properties. There can be no assurance that we will be able to identify and complete the acquisition of such royalty interests or businesses that own desired interests, at reasonable prices or on favorable terms, or, if necessary, that we will have, or be able to obtain, sufficient financing on reasonable terms to complete such acquisitions. Continued economic volatility or a credit crisis could adversely affect our ability to obtain debt or equity financing for acquisitions of additional royalty interests. In addition, we face competition in the acquisition of royalty interests. We have competitors that are engaged in the acquisition of royalty interests, including companies with greater financial resources, and we may not be able to compete successfully against these companies in acquiring new royalty interests. If we are unable to successfully acquire additional royalty interests, the reserves subject to our royalty interests will decline as the producing properties on which we have such royalty interests are mined or payment or production caps on certain of our royalty interests are met. We also may experience negative reactions from the financial markets or operators of properties on which we seek royalty interests if we are unable to successfully complete acquisitions of royalty interests or businesses that own desired royalty interests. Each of these factors could have a material adverse effect on our business, results of operations, cash flows and financial condition. Estimates of reserves and mineralization by the operators of mines in which we have royalty interests are subject to significant revision. There are numerous uncertainties inherent in estimating proven and probable reserves and mineralization, including many factors beyond our control and the control of the operators of properties in which we have royalty interests. Reserve estimates for our royalty interests are prepared 11 by the operators of the mining properties. We do not participate in the preparation or verification of such reports and have not independently assessed or verified the accuracy of such information. The estimation of reserves and of other mineralized material is a subjective process, and the accuracy of any such estimates is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, metallurgical testing and production, and the evaluation of mine plans subsequent to the date of any estimate, may cause a revision of such estimates. The volume and grade of reserves recovered and rates of production may be less than anticipated. Assumptions about gold and other precious metal prices are subject to great uncertainty, and such prices have fluctuated widely in the past. Declines in the market price of gold, silver, copper, nickel or other metals also may render reserves or mineralized material containing relatively lower ore grades uneconomical to exploit. Changes in operating costs and other factors including short-term operating factors, the processing of new or different ore grades, geotechnical characteristics and metallurgical recovery, may materially and adversely affect reserves. Finally, it is important to note that our royalty interests generally give us interests in only a small portion of the production from the operators’ aggregate reserves, and the size of those interests varies widely based on the individual documents governing the royalty interest. Estimates of production by the operators of mines in which we have royalty interests are subject to change, and actual production may vary materially from such estimates. Production estimates are prepared by the operators of mining properties. There are numerous uncertainties inherent in estimating anticipated production attributable to our royalty interests, including many factors beyond our control and the control of the operators of the properties in which we have royalty interests. We do not participate in the preparation or verification of production estimates and have not independently assessed or verified the accuracy of such information. The estimation of anticipated production is a subjective process and the accuracy of any such estimates is a function of the quality of available data, reliability of production history, variability in grade encountered, mechanical or other problems encountered, engineering and geological interpretation and operator judgment. Rates of production may be less than expected. Results of drilling, metallurgical testing and production, changes in commodity prices, and the evaluation of mine plans subsequent to the date of any estimate may cause actual production to vary materially from such estimates. If title to properties is not properly maintained by the operators, or is successfully challenged by third parties, our royalty interests could become invalid. Our business includes the risk that operators of mining projects and holders of mining claims, tenements, concessions, mining licenses or other interests in land and mining rights may lose their exploration or mining rights, or have their rights to mining properties contested by private parties or the government. Internationally, mining tenures are subject to loss for many reasons, including expiration, failure of the holder to meet specific legal qualifications, failure to pay maintenance fees, reduction in geographic extent upon passage of time or upon conversion from an exploration tenure to a mining tenure, failure of title and similar risks. Unpatented mining claims, for example, which constitute a significant portion of the properties on which we hold royalty interests in the United States, and which are generally considered subject to greater title risk than real property interests held by absolute title, are often uncertain and subject to contest by third parties and the government. If title to unpatented mining claims or other mining tenures subject to our royalty interests has not been properly established or is not properly maintained, or is successfully contested, our royalty interests could be adversely affected. 12 Royalty interests are subject to title and other defects and contest by operators of mining projects and holders of mining rights, and these risks may be hard to identify in acquisition transactions. While we seek to confirm the existence, validity, enforceability and geographic extent of the royalty interests we acquire, there can be no assurance that disputes over these and other matters will not arise. Confirming these matters, as well as the title to mining property on which we hold or seek to acquire a royalty interest, is a complex matter, and is subject to the application of the laws of each jurisdiction to the particular circumstances of each parcel of mining property. Similarly, our royalty interests generally are subject to uncertainties and complexities arising from the application of contract and property laws governing private parties and/or local or national governments in the jurisdiction where mining projects are located. Furthermore, royalty interests in many jurisdictions are contractual in nature, rather than interests in land, and therefore may be subject to change of control, bankruptcy or insolvency of operators, nonperformance and to challenges of various kinds brought by operators or third parties. We often do not have the protection of security interests over property that we could liquidate to recover all or part of our investment in a royalty interest. Even if we retain our royalty interests in a mining project after any change of control, bankruptcy or insolvency of the operator, the project may end up under the control of a new operator, who may or may not operate the project in a similar manner to the current operator, which may positively or negatively impact us. In addition, operators and other parties to the agreements governing our royalty interests may not abide by their contractual obligations and we could be forced to take legal action to enforce our contractual rights. Disputes also could arise challenging, among other things, the existence or geographic extent of the royalty interest, third party claims to the same royalty interest or to the property on which we have a royalty interest, various rights of the operator or third parties in or to the royalty interest, methods for calculating the royalty interest, production and other thresholds and caps applicable to payments of royalty interests, the obligation of an operator to make payments of royalty interests, and various defects or ambiguities in the agreement governing a royalty interest. Unknown defects in, non-performance of, or disputes relating to, the royalty interests we acquire may prevent us from realizing the anticipated benefits from the acquisition, and could have a material adverse effect on our business, results of operations, cash flows and financial condition. Operations in foreign jurisdictions are subject to many risks, which could decrease our revenues. We derived approximately 83% of our revenues from foreign sources during fiscal year 2013, compared to approximately 82% in fiscal year 2012 and 76% in fiscal year 2011. Our principal producing royalty interests on properties outside of the United States are located in Canada, Chile, Mexico and Spain. We currently have royalty interests in mines and projects in other countries, including Argentina, Australia, Bolivia, Brazil, Burkina Faso, Colombia, Dominican Republic, Finland, Ghana, Guatemala, Honduras, Nicaragua, Peru, Russia and Tunisia. In addition, future acquisitions may expose us to new jurisdictions. Our foreign activities are subject to the risks normally associated with conducting business in foreign countries. These risks include, depending on the country, such things as: (cid:129) expropriation or nationalization of property; (cid:129) exchange and currency controls and fluctuations; (cid:129) limitations on foreign exchange and repatriation of earnings; (cid:129) increased foreign taxation or imposition of new or increased mining royalty interests; (cid:129) restrictions on mineral production and price controls; (cid:129) import and export regulations, including restrictions on the export of gold, silver, copper, nickel or other metals; 13 (cid:129) changes in legislation, including changes related to taxation, royalty interests, imports, exports, duties, currency, foreign ownership, foreign trade and foreign investment; (cid:129) high rates of inflation; (cid:129) labor practices and disputes; (cid:129) enforcement of unfamiliar or uncertain foreign real estate, mineral tenure, contract, water use, mine safety and environmental laws and policies; (cid:129) challenges to mining, processing and related permits and licenses, or to applications for permits and licenses, by or on behalf of regulatory authorities, indigenous populations, non-governmental organizations or other third parties; (cid:129) renegotiation, nullification or forced modification of existing contracts, licenses, permits, approvals, concessions or the like; (cid:129) war, crime, terrorism, sabotage, civil unrest and uncertain political and economic environments; (cid:129) corruption; (cid:129) exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act and similar laws and regulations in other jurisdictions to which we, but not necessarily our competitors, may be subject; (cid:129) suspension of the enforcement of creditors’ rights and stockholders’ rights; (cid:129) risk of loss due to disease and other potential endemic health issues; and (cid:129) loss of access to government controlled infrastructure, such as roads, bridges, rails, ports, power sources and water supply. For example, in recent years Argentina, where a portion of the Pascua-Lama project is located, has experienced significant economic turmoil and its government has taken several actions that have troubled foreign investors, including the nationalization of YPF S.A., the largest oil and gas company in Argentina, from foreign owner Repsol S.A. and the enactment of a federal glacier protection law that restricts mining activities in areas on or near the nation’s glaciers (as discussed below in ‘‘The mining industry is subject to significant environmental risks’’). Our royalties in the Pascua-Lama project, which straddles the border between Chile and Argentina, are on the Chilean side of the project. These actions, or similar future actions, could have a material adverse effect on the feasibility of new mine development and the profitability of existing mining operations in Argentina. In addition, the Pascua-Lama project has been challenged by Chilean indigenous groups, and construction activities on the Chilean side of the Pascua-Lama project are currently suspended pursuant to a court ruling while Barrick addresses environmental and other regulatory requirements to the satisfaction of Chilean authorities, as discussed further in Part I, Item 2, Properties under the heading ‘‘Pascua-Lama Project (Region III, Chile).’’ As another example, in March 2012, the Australian federal government adopted new tax legislation that imposes a 30% tax on iron ore and coal mine profits. Similar legislation could be adopted in other foreign jurisdictions that could impose new or larger tax obligations or royalty interests on operators. Such legislation could have a material adverse effect on the feasibility of new mine development and the profitability of existing mining operations. In addition, many of our operators are organized outside of the United States. Our royalty interests may be subject to the application of foreign laws to our operators, and their stockholders, including laws relating to foreign ownership structures, corporate transactions, creditors’ rights, bankruptcy and liquidation. Foreign operations also could be adversely impacted by laws and policies of the United States affecting foreign trade, investment and taxation. 14 These risks may limit or disrupt operating mines or projects on which we hold royalty interests, restrict the movement of funds, or result in the deprivation of contract rights or the taking of property by nationalization or expropriation without fair compensation, and could have a material adverse effect on our business, results of operations, cash flows and financial condition. Certain of these risks may increase in an environment of relatively high metal prices. Changes in U.S. federal and state legislation, including changes in mining taxes and royalty interests payable to governments, could decrease our revenues. A number of properties where we hold royalty interests are located on U.S. public lands that are subject to federal mining and other public land laws. Changes in federal or state laws or the regulations promulgated under them could affect mine development and expansion, significantly increase regulatory obligations and compliance costs with respect to mine development and mine operations, increase the cost of holding mining claims or impose additional taxes on mining operations, all of which could adversely affect our revenue from such properties. In recent years, the United States Congress has considered a number of proposed major revisions to the General Mining Law, which governs the creation, maintenance and possession of mining claims and related activities on public lands in the United States. Congress also has recently considered bills, which if enacted, would impose royalty interests payable to the government on hardrock production, increase land holding fees, impose federal reclamation fees, impose additional environmental operating standards and afford greater public involvement and regulatory discretion in the mine permitting process. Such legislation, if enacted, could adversely affect the development of new mines and the expansion of existing mines, as well as increase the cost of all mining operations on public lands, and could materially and adversely affect mine operators and our revenue from mines located on public lands in the United States. The mining industry is subject to significant environmental risks. Mining is subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production. Laws and regulations in the United States and abroad intended to ensure the protection of the environment are constantly changing and evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability, and potentially increased capital expenditures and operating costs. Furthermore, mining may be subject to significant environmental and other permitting requirements regarding the use of raw materials needed for operations, particularly water and power. Compliance with such laws and regulations can require significant expenditures and a breach may result in the imposition of fines and penalties, which may be material. If an operator is forced to incur significant costs to comply with environmental regulations or becomes subject to environmental restrictions that limit its ability to continue or expand operations, or if an operator were to lose its right to use or access water or other raw materials necessary to operate a mine, our revenues could be reduced, delayed or eliminated. These risks are most salient with regard to our development stage properties where permitting may not be complete and/or where new legislation and regulation can lead to delays, interruptions and significant unexpected cost burdens for mine operators. For example, Argentina recently passed a federal glacier protection law that restricts mining activities in areas on or near the nation’s glaciers. We have royalties on the Chilean side of the Pascua-Lama project, which straddles the border between Chile and Argentina, and the glacier law could affect aspects of the design, development and operation of the Pascua-Lama project. In July 2012, the National Supreme Court of Justice of Argentina overturned preliminary injunctions suspending the application of the glacier law in the San Juan Province, where a portion of the Pascua-Lama project is located, but the Supreme Court must still rule on the constitutionality of the glacier law. Further, to the extent that we become subject to environmental liabilities for the time period during which we were operating properties, the satisfaction of any liabilities would reduce funds otherwise available to us and could have a material adverse effect on our business, results of operations, cash flows and financial condition. 15 Regulations and pending legislation governing issues involving climate change could result in increased operating costs to the operators of the properties on which we have royalty interests. A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to the potential impacts of climate change. The December 1997 Kyoto Protocol, which has been extended to 2020, establishes a set of greenhouse gas emission targets for countries that have ratified the Protocol, which include Ghana, Australia and Peru. Canada ratified the Protocol but renounced its ratification in December 2011. Furthermore, the U.S. Congress and several states have initiated legislation regarding climate change that will affect energy prices and demand for carbon intensive products. Additionally, the Australian government recently implemented a national emissions trading scheme and renewable energy targets. Legislation and increased regulation regarding climate change could impose significant costs on the operators of properties where we hold royalty interests, including increased energy, capital equipment, environmental monitoring and reporting and other costs to comply with such regulations. If an operator of a property on which we have a royalty interest is forced to incur significant costs to comply with climate change regulation or becomes subject to environmental restrictions that limit its ability to continue or expand operations, our revenues from that property could be reduced, delayed or eliminated. We depend on the services of our President and Chief Executive Officer and other key employees and on the participation of our Chairman. We believe that our success depends on the continued service of our key executive management personnel. Tony Jensen has served as our President and Chief Executive Officer since July 2006. Mr. Jensen’s extensive commercial experience, mine operations background and industry contacts give us an important competitive advantage. Furthermore, our Chairman, Stanley Dempsey, who served as our Executive Chairman until his retirement as an officer of the Company in January 2009, has extensive knowledge of the royalty business and maintains long-standing relationships with the mining industry, both of which are important to our success. The loss of the services of Mr. Jensen, other key members of management or other key employees could jeopardize our ability to maintain our competitive position in the industry. From time to time, we may also need to identify and retain additional skilled management and specialized technical personnel to efficiently operate our business. The number of persons skilled in the acquisition, exploration and development of royalty interests is limited and competition for such persons is intense. Recruiting and retaining qualified personnel is critical to our success and there can be no assurance of such success. If we are not successful in attracting and retaining qualified personnel, our ability to execute our business model and growth strategy could be affected, which could have a material adverse effect on our business, results of operations, cash flows and financial condition. We currently do not have key person life insurance for any of our officers or directors. Our disclosure controls and internal control over our financial reporting are subject to inherent limitations. Management has concluded that as of June 30, 2013, our disclosure controls and procedures and our internal control over financial reporting were effective. Such controls and procedures, however, may not be adequate to prevent or identify existing or future internal control weaknesses due to inherent limitations therein, which may be beyond our control, including, but not limited to, our dependence on operators for the calculation of payments of royalty interests as discussed above in ‘‘We depend on our operators for the calculation of payments of our royalty interests. We may not be able to detect errors and later payment calculations may call for retroactive adjustments’’. Given our dependence on third party calculations, there is a risk that material misstatements in results of operations and financial condition may not be prevented or detected on a timely basis by our internal controls over financial reporting and may require us to restate our financial statements. 16 We have incurred indebtedness in connection with our business and could incur additional indebtedness that could limit cash flow available for our operations, limit our ability to borrow additional funds and have a material adverse effect on our business, results of operations, cash flows and financial condition. As of June 30, 2013, we had $370 million aggregate principal amount of our 2.875% convertible senior notes due 2019 (the ‘‘2019 Notes’’) outstanding, which we incurred in June 2012. In addition, we may incur additional indebtedness in connection with financing acquisitions, strategic transactions or for other purposes. As of June 30, 2013, we had $350 million available for borrowing under our revolving credit facility. Our indebtedness increases the risk that we may be unable to generate enough cash to pay amounts due in respect of our indebtedness. Our indebtedness could have a material adverse effect on our business, results of operations, cash flows and financial condition. For example, it could: (cid:129) make it more difficult for us to satisfy our debt obligations; (cid:129) increase our vulnerability to general adverse economic and industry conditions; (cid:129) require us to dedicate a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the availability of our cash flow to fund acquisitions of royalty interests, working capital, pay dividends and other general corporate purposes; (cid:129) limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; (cid:129) restrict us from exploiting business opportunities; (cid:129) place us at a competitive disadvantage compared to our competitors that have less indebtedness; (cid:129) dilute our existing stockholders if we elect to issue common stock instead of paying cash in the event the holders convert the 2019 Notes, or any other convertible securities issued in the future; (cid:129) require the consent of our existing lenders to borrow additional funds, as was required in connection with the issuance of the 2019 Notes; and (cid:129) limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general corporate purposes. In addition, the agreement governing our revolving credit facility contains, and the agreements that may govern any future indebtedness that we may incur may contain, financial and other restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interests. Among other restrictions, the agreement governing our revolving credit facility contains covenants limiting our ability to make certain investments, consummate certain mergers, incur certain debt or liens and dispose of assets. We may be required to pay a significant amount of money or issue a significant amount of shares of our common stock or both upon the exercise of any put, redemption or call right and conversion of the 2019 Notes, which could dilute existing stockholders and have a material adverse effect on our business, results of operations, cash flows and financial condition. Holders of the 2019 Notes may convert their 2019 Notes at their option prior to the close of business on the business day immediately preceding March 15, 2019, but only under the following circumstances: (1) during any fiscal quarter commencing after June 30, 2012 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of 17 the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on each applicable trading day; (2) during the five consecutive business day period after any five consecutive trading day period (the ‘‘measurement period’’) in which the trading price per $1,000 principal amount of notes for each trading day of such measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable conversion rate on each such trading day; (3) upon the occurrence of certain corporate events; or (4) if we call any 2019 Notes for redemption, at any time until the close of business on the business day preceding the redemption date. On or after March 15, 2019 until the close of business on the scheduled trading day immediately preceding June 15, 2019, the maturity date, holders may convert their 2019 Notes at any time, regardless of the foregoing circumstances. On or after June 15, 2015, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending within 10 trading days immediately prior to the date we provide the notice of redemption exceeds 130% of the applicable conversion price of the 2019 Notes on each applicable trading day, subject to certain limited exceptions, we may redeem any or all of the 2019 Notes. The redemption price for the 2019 Notes to be redeemed on any redemption date will equal 100% of the principal amount of the 2019 Notes being redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, plus $90 per each $1,000 principal amount of 2019 Notes being redeemed. If we call any 2019 Notes for redemption, holders may convert their 2019 Notes at any time until the close of business on the business day preceding the redemption date. Upon conversion of any of the 2019 Notes, whether upon maturity, the exercise of any put, call or redemption right, or otherwise, we will be required to pay or deliver, at our election, cash, shares of our common stock or a combination of cash and shares of our common stock. Any such payment or delivery of cash, shares or a combination of cash and shares upon conversion of the 2019 Notes could dilute existing stockholders and may have an adverse effect on our business, results of operations, cash flows and financial condition. We may not be able to satisfy our debt obligations which could have a material adverse effect on our business, results of operations, cash flows and financial condition. We are subject to the risks normally associated with debt financing, including the risk that our cash flows may be insufficient to meet required principal and interest payments and the risk that we will be unable to refinance our indebtedness when it becomes due, or that the terms of such refinancing will not be as favorable as the terms of our indebtedness. As of June 30, 2013, our annual debt service obligation on the 2019 Notes was approximately $10.6 million. In addition, the 2019 Notes include provisions providing for the lump sum payment of significant amounts of principal, whether upon maturity, upon the exercise of any applicable put, redemption or call rights or otherwise and all amounts, if any, due under our revolving credit facility are due at maturity. Our ability to make these payments when due will depend upon several factors, which may not be in our control. These factors include our liquidity or our ability to liquidate assets owned by us on or prior to such put, redemption, call or maturity dates and the amount by which we have been able to reduce indebtedness prior to such date though exchanges, refinancing, extensions, collateralization or other similar transactions (any of which transactions may also have the effect of reducing liquidity or liquid assets). If we are unable to maintain cash reserves or generate sufficient cash flow or otherwise obtain funds necessary to make required payments, or if we fail to comply with the various covenants and requirements of the 2019 Notes, our revolving credit facility or any indebtedness which we may incur in the future, this could result in an event of default that, if not cured or waived, could result in the acceleration of all of our debt. Any default under the 2019 Notes, our revolving credit facility or any indebtedness which we may incur in the future could have a material adverse effect on our business, results of operations, cash flows and financial condition. 18 The accounting method for convertible debt securities that may be settled in cash, such as the 2019 Notes, could have a material effect on our reported net income, net working capital or other financial results. Under the Financial Accounting Standards Board Accounting Standards Codification Section 470-20, Debt with Conversion and other Options (‘‘ASC 470-20’’), an entity must separately account for the liability and equity components of convertible debt instruments (such as the 2019 Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the 2019 Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component of the 2019 Notes. As a result, we are required to record a greater amount of non-cash interest expense as a result of the amortization of the discounted carrying value of the 2019 Notes to their face amount over the term of the 2019 Notes. We report lower net income in our financial results because ASC 470-20 will require interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results, the market price of our common stock and the trading price of the 2019 Notes. In addition, under certain circumstances, convertible debt instruments (such as the 2019 Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the 2019 Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the 2019 Notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the 2019 Notes, then our diluted earnings per share would be adversely affected. Risks Related to Our Common Stock Our stock price may continue to be volatile and could decline. The market price of our common stock has fluctuated and may decline in the future. The high and low sale prices of our common stock on the NASDAQ Global Select Market were $62.33 and $42.15 for the fiscal year ended June 30, 2011, $83.87 and $57.00 for the fiscal year ended June 30, 2012, and $100.84 and $38.63 for the fiscal year ended June 30, 2013. The fluctuation of the market price of our common stock has been affected by many factors that are beyond our control, including: (cid:129) market prices of gold, silver, copper, nickel and other metals; (cid:129) interest rates; (cid:129) expectations regarding inflation; (cid:129) ability of operators to advance development projects, produce precious metals and develop new reserves; (cid:129) currency values; (cid:129) credit market conditions; (cid:129) general stock market conditions; and (cid:129) global and regional political and economic conditions. 19 Additional issuances of equity securities by us could dilute our existing stockholders, reduce some or all of our financial measures on a per share basis, reduce the trading price of our common stock or impede our ability to raise future capital. Substantial sales of shares may negatively impact the market price of our common stock. We may issue equity in the future in connection with acquisitions, strategic transactions or for other purposes. To the extent we issue additional equity securities, our existing stockholders could be diluted and some or all of our financial measures on a per share basis could be reduced. In addition, the shares of common stock that we issue in connection with an acquisition may not be subject to resale restrictions. The market price of our common stock could decline if our stockholders sell substantial amounts of our common stock, including shares issued upon the conversion of the outstanding 2019 Notes or are perceived by the market as intending to sell these shares other than in an orderly manner. In addition, the existence of the 2019 Notes may encourage short selling by market participants because the conversion of the 2019 Notes could depress the price of our common stock. These sales also could impair our ability to raise capital through the sale of additional equity or equity related securities in the future at a time and price that we deem appropriate. We are unable to predict the effect that sales may have on the then-prevailing market price of our common stock. Conversion of the 2019 Notes may dilute the ownership interest of existing stockholders. At our election, we may settle the 2019 Notes tendered for conversion entirely or partly in shares of our common stock. An aggregate of approximately 3.5 million shares of our common stock are issuable upon conversion of the outstanding 2019 Notes at the initial conversion rate of 9.4955 shares of common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $105.31 per share of common stock). In addition, the number of shares of common stock issuable upon conversion of the 2019 Notes, and therefore the dilution of existing common stockholders, could increase under certain circumstances described in the indenture under which the 2019 Notes are governed. We may issue all of these shares without any action or approval by our stockholders. As a result, the conversion of some or all of the 2019 Notes may dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. We may change our practice of paying dividends. We have paid a cash dividend on our common stock for each fiscal year beginning in fiscal year 2000. Our board of directors has discretion in determining whether to declare a dividend based on a number of factors, including prevailing gold prices, economic market conditions, future earnings, cash flows, financial condition, and funding requirements for future opportunities or operations. In addition, there may be corporate law limitations or future contractual restrictions on our ability to pay dividends. If our board of directors declines or is unable to declare dividends in the future or reduces the current dividend level, our stock price could fall, and the success of an investment in our common stock would depend largely upon any future stock price appreciation. We have increased our dividends in prior years. There can be no assurance, however, that we will continue to do so or that we will pay any dividends at all. Certain provisions of Delaware law, our organizational documents, our rights plan and the indenture governing the 2019 Notes could impede, delay or prevent an otherwise beneficial takeover or takeover attempt of us. Certain provisions of Delaware law, our organizational documents, our rights plans and the indenture governing the 2019 Notes could make it more difficult or more expensive for a third party to acquire us, even if a change of control would be beneficial to our stockholders. Delaware law prohibits, subject to certain exceptions, a Delaware corporation from engaging in any business combination with 20 any ‘‘interested stockholder,’’ which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock, for a period of three years following the date that the stockholder became an interested stockholder. Additionally, our certificate of incorporation and bylaws contain provisions that could similarly delay, defer or discourage a change in control of us or management. These provisions could also discourage a proxy contest and make it more difficult for stockholders to elect directors and take other corporate actions. Such provisions provide for the following, among other things: (i) the ability of our board of directors to issue shares of common stock and preferred stock without stockholder approval, (ii) the ability of our board of directors to establish the rights and preferences of authorized and unissued preferred stock, (iii) a board of directors divided into three classes of directors serving staggered three year terms, (iv) permitting only the chairman of the board of directors, chief executive officer, president or board of directors to call a stockholders’ meeting and (v) requiring advance notice of stockholder proposals and related information. Furthermore, we have a stockholder rights plan that may have the effect of discouraging unsolicited takeover proposals. The rights issued under the stockholder rights plan could cause significant dilution to a person or group that attempts to acquire us on terms not approved in advance by our board of directors. In addition, if an acquisition event constitutes a fundamental change, holders of the 2019 Notes will have the right to require us to purchase their 2019 Notes in cash. If an acquisition event constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders who convert their 2019 Notes in connection with such make-whole fundamental change. These provisions could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, which may cause the market price of our common stock to decline. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES We do not own or operate the properties in which we have royalty interests and therefore much of the information disclosed in this Form 10-K regarding these properties is provided to us by the operators. For example, the operators of the various properties provide us information regarding metals production, estimates of mineral reserves and additional mineralized material and production estimates. A list of our producing and development stage royalties, as well their respective reserves are summarized below in Table 1 within this Item 2. More information is available to the public regarding certain properties in which we have royalties, including reports filed with the SEC or with the Canadian securities regulatory agencies available at www.sec.gov or www.sedar.com, respectively. The description of our principal royalties set forth below includes the location, operator, royalty rate, access and any material current developments at the property. For any reported production amounts discussed below, the Company considers reported production to relate to the amount of metal sales subject to our royalty interests. Please refer to Item 7, MD&A, for discussion on production estimates, historical production and revenue for our principal properties. The map below illustrates the location of our principal producing and development stage properties. Principal Royalties on Producing Properties The Company considers both historical and future potential revenues in determining which royalty interests in our portfolio are principal to our business. Estimated future potential royalty revenues from both producing and development properties are based on a number of factors, including reserves subject to our 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 Royal Gold to conclude that one or more of such royalty interests are no longer principal to our business. As 21 of June 30, 2013, the Company considers the properties discussed below (listed alphabetically) to be principal to our business. 6AUG201306343182 Andacollo (Region IV, Chile) We own a royalty on all gold produced from the sulfide portion of the Andacollo copper and gold deposit. The Andacollo royalty equals 75% of the gold produced from the sulfide portion of the deposit at the Andacollo mine until 910,000 payable ounces of gold have been sold, and 50% of the gold produced in excess of 910,000 payable ounces of gold. As of June 30, 2013, approximately 167,000 payable ounces of gold have been sold. Andacollo is an open-pit copper mine and milling operation located in central Chile, Region IV in the Coquimbo Province and is operated by Compa˜n´ıa Minera Teck Carmen de Andacollo (‘‘Teck’’). Andacollo is located in the foothills of the Andes Mountains approximately 1.5 miles southwest of the town of Andacollo. The regional capital of La Serena and the coastal city of Coquimbo are approximately 34 miles northwest of the Andacollo project by road, and Santiago is approximately 215 miles south by air. Access to the mine is provided by Route 43 (R-43) south from La Serena to El Pe˜non. From El Pe˜non, D-51 is followed east and eventually curving to the south to Andacollo. Both R-43 and D-51 are paved roads. Reported production at Andacollo increased approximately 33% during our fiscal year ended June 30, 2013, when compared to the fiscal year ended June 30, 2012. The increase in reported production is partially due to increased mill throughput and improved mill recoveries, partially offset by lower grades. Over the last few quarters of our fiscal year 2013, Andacollo has established steady state operations will mill throughput averaging about 47,000 tonnes per day during our fourth quarter of fiscal 2013. 22 Canadian Malartic (Quebec, Canada) We own a 1.0% to 1.5% sliding-scale NSR royalty ($0.00 to $350.00 - 1.0%; above $350 - 1.5%) on the Canadian Malartic open-pit gold mine and milling operation located in Quebec, Canada, and owned by Osisko Mining Corporation (‘‘Osisko’’). The Canadian Malartic gold property is located in the Abitibi Gold Belt in Quebec, Canada, immediately south of the town of Malartic, Quebec, approximately 16 miles west of the town of Val d’Or. The northern extent of the Canadian Malartic property can be accessed directly from the Trans Canadian Highway 117. Reported production at Canadian Malartic increased approximately 17% during our fiscal year ended June 30, 2013, when compared to the fiscal year ended June 30, 2012, as a result of the continued ramp-up of mill throughput as operations progressed towards steady state. Cortez (Nevada, USA) Cortez is a large open-pit and underground mine, utilizing mill and heap leach processing. The operation is located approximately 60 air miles southwest of Elko, Nevada, in Lander County. The site is reached by driving west from Elko on Interstate 80 approximately 46 miles, and proceeding south on State Highway 306 approximately 23 miles. Our royalty interest at Cortez applies to the Pipeline, South Pipeline, Gap and Crossroads deposits which are operated by subsidiaries of Barrick. The royalty interests we hold at Cortez include: (a) Reserve Claims (‘‘GSR1’’). This is a sliding-scale GSR royalty for all products from an area originally known as the ‘‘Reserve Claims,’’ which includes the majority of the Pipeline and South Pipeline deposits. The GSR royalty rate on the Reserve Claims is tied to the gold price as shown in the table below and does not include indexing for inflation or deflation. (b) GAS Claims (‘‘GSR2’’). This is a sliding-scale GSR royalty for all products from an area outside of the Reserve Claims, originally known as the ‘‘GAS Claims,’’ which encompasses approximately 50% of the Gap deposit and all of the Crossroads deposit. The GSR royalty rate on the GAS Claims, as shown in the table below, is tied to the gold price, without indexing for inflation or deflation. (c) Reserve and GAS Claims Fixed Royalty (‘‘GSR3’’). The GSR3 royalty is a fixed rate GSR royalty of 0.7125% and covers the same cumulative area as is covered by our two sliding-scale GSR royalties, GSR1 and GSR2, except mining claims that comprise the undeveloped Crossroads deposit. (d) Net Value Royalty (‘‘NVR1’’). This is a fixed 1.25% NVR on production from the GAS Claims located on a portion of Cortez that excludes the Pipeline open pit. The Company owns 31.6% of the 1.25% NVR (or 0.39%) while limited partners (including certain directors of the Company) in the partnership, which is consolidated in our financial statements, own the remaining portion of the 1.25% NVR. Our 0.39% portion of the NVR1 royalty does not cover the mining claims that comprise the undeveloped Crossroads deposit. We also own three other royalties in the Cortez area where there is currently no production and no reserves attributed to these royalty interests. 23 The following shows the current sliding-scale GSR1 and GSR2 royalty rates under our royalty agreement with Cortez: London P.M. Quarterly Average Price of Gold Per Ounce ($U.S.) Below $210.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $210.00 - $229.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $230.00 - $249.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $250.00 - $269.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $270.00 - $309.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $310.00 - $329.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $330.00 - $349.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $350.00 - $369.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $370.00 - $389.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $390.00 - $409.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $410.00 - $429.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $430.00 - $449.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $450.00 - $469.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $470.00 - and above . . . . . . . . . . . . . . . . . . . . . . . . . . . GSR1 and GSR2 Royalty Percentage 0.40% 0.50% 0.75% 1.30% 2.25% 2.60% 3.00% 3.40% 3.75% 4.00% 4.25% 4.50% 4.75% 5.00% Reported production at Cortez decreased approximately 30% during our fiscal year ended June 30, 2013, when compared to the fiscal year ended June 30, 2012, as Barrick continued to prioritize production from their higher grade Cortez Hills operation that is not covered by our royalty interest. During our fourth quarter of fiscal 2013, mining resumed at the Pipeline and Gap pits as surface mining equipment returned from the Cortez Hills pit. Our royalty interests cover all of the Pipeline pit and part of the Gap pit. Holt (Ontario, Canada) We own a sliding-scale NSR royalty on the Holt portion of the Holloway-Holt mining project located in Ontario, Canada and owned 100% by St Andrew Goldfields Ltd. (‘‘St Andrew’’). The Holloway-Holt project straddles Ontario Provincial Highway 101 for approximately 25 miles beginning east of Matheson, Ontario, Canada and extending to the Quebec, Canada border. The sliding-scale NSR royalty rate on gold produced from the Holt portion of the mining project is calculated by multiplying 0.00013 by the quarterly average gold price. For example, at a quarterly average gold price of $1,300 per ounce, the effective royalty rate payable would be 16.9%. Reported production at Holt increased 37% during our fiscal year ended June 30, 2013, when compared to the fiscal year ended June 30, 2012. St Andrews credited additional mine infrastructure and mine development for the operational improvements. Las Cruces (Andaluc´ıa, Spain) We own a 1.5% NSR royalty on the Las Cruces copper mine and milling operation located in Andaluc´ıa, Spain and operated by First Quantum Minerals Ltd. (‘‘First Quantum’’). First Quantum completed an acquisition of Inmet Mining Corporation in April 2013 and now operates the Las Cruces mine. The Las Cruces mine is located in the Seville Province of southern Spain, about 12 miles northwest of the Provincial capital city of Seville. Access to the site is by well-maintained paved roads. Reported production at Las Cruces increased approximately 29% during our fiscal year ended June 30, 2013, when compared to the fiscal year ended June 30, 2012. The increase in reported production is primarily due to continued work on process optimization and improved plant maintenance. First Quantum plans to test the plant at higher ore throughput and lower grade to assess 24 the metallurgical performance before Las Cruces enters into lower copper grade areas of the mine, which is expected in calendar 2014. Mulatos (Sonora, Mexico) We own a 1.0% to 5.0% sliding-scale NSR royalty on the Mulatos open-pit mine and heap leach operation in southeastern Sonora, Mexico. The Mulatos mine is located approximately 137 miles east of the city of Hermosillo and 186 miles south of the border with the United States and is operated by a subsidiary of Alamos Gold, Inc. (‘‘Alamos’’). Access to the mine from the city of Hermosillo can be made via private chartered flight or paved and gravel road. The sliding-scale NSR royalty is based on the gold price as shown in the following table: London Bullion Market Association P.M. Monthly Average Price of Gold per Ounce (US$) $0.00 - $299.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300.00 - $324.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $325.00 - $349.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $350.00 - $374.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $375.00 - $399.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400 or greater . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NSR Royalty Percentage 1.00% 1.50% 2.00% 3.00% 4.00% 5.00% The Mulatos royalty is capped at 2.0 million gold ounces of production. As of June 30, 2013, approximately 1.1 million cumulative ounces of gold have been produced. Reported production at Mulatos increased approximately 29% during our fiscal year ended June 30, 2013, when compared to the fiscal year ended June 30, 2012. Alamos reported that the increase in reported production was primarily attributable to higher crusher throughput and the benefit of two quarters of production from the Escondida high-grade zone that was not in production in the prior year. Alamos reported that the Escondida high-grade deposit is expected to continue to provide high grade mill feed until early calendar 2014, at which point the Escondida deep zone will be accessed to provide mill feed for an additional quarter. Alamos also reported that they anticipate receiving the permit to begin development of the El Victor and San Carlos deposit areas in the third quarter of calendar 2013, following which development activities will commence in anticipation of processing high grade from San Carlos in mid-calendar 2014. Pe˜nasquito (Zacatecas, Mexico) We own a production payment equivalent to a 2.0% NSR royalty on all metal production from the Pe˜nasquito open-pit mine, located in the State of Zacatecas, Mexico, and operated by a subsidiary of Goldcorp. The Pe˜nasquito project is located approximately 17 miles west of the town of Concepci´on del Oro, Zacatecas, Mexico. The project, composed of two main deposits called Pe˜nasco and Chile Colorado, hosts large gold, silver, zinc and lead reserves. The deposits contain both oxide and sulfide material, resulting in heap leach and mill processing. Access to the site is via either paved or cobbled roads west out of Concepci´on del Oro nine miles to the town of Mazapil and then further approximately seven miles west from Mazapil. Direct access to the mine site can also be achieved via chartered flight. Reported production for gold at Pe˜nasquito increased approximately 26% during our fiscal year ended June 30, 2013, while reported production for silver, lead and zinc decreased when compared to our fiscal year ended June 30, 2012. Goldcorp’s annual guidance for Pe˜nasquito anticipated lower production in the first half of calendar 2013 as the mine moves from a lower grade portion of the pit 25 to higher grade ore. The sulphide plant achieved throughput of over 105,000 tonnes per day during the second quarter of calendar 2013 following the completion of crusher maintenance, blasting improvements, and the addition of new fresh water wells. In the month of June 2013, the sulphide plant achieved throughput of over 120,000 tonnes per day. Goldcorp has also reported that ongoing studies to develop a long-term water strategy continue to progress and that they have identified a new water source within their current permitted basin that has the potential to supply sufficient water to continue the plant ramp-up to full design capacity. The addition of the new water source provides the flexibility to resume ramp-up to the design throughput of 130,000 tonnes per day. Construction is expected to begin in the fourth quarter of calendar 2013 with completion expected in the second half of calendar 2014. Goldcorp is currently working to acquire necessary rights-of-way and is evaluating alternative routes to access the well field. Robinson Mine (Nevada, USA) We own a 3.0% NSR royalty on all mineral production from the Robinson open-pit mine operation operated by a subsidiary of KGHM International Ltd. (‘‘KGHM’’). Access to the property is via Nevada State Highway 50, 6.5 miles west of Ely, Nevada, in White Pine County. Reported copper production at Robinson increased approximately 39% during our fiscal year ended June 30, 2013, when compared to the fiscal year ended June 30, 2012, primarily due to improved mill recovery and higher productivity at the mine. Mining of higher grade gold areas in the pit have resulted in favorable gold production during calendar 2013. Gold production during the remainder of calendar 2013 is likely to return to more normal gold grades. Voisey’s Bay (Labrador, Canada) We own 90% of a 3.0% NSR royalty (or an effective 2.7% NSR royalty) on the Voisey’s Bay nickel-copper-cobalt mine located in Newfoundland and Labrador, Canada and operated by Vale Newfoundland & Labrador Limited (‘‘Vale’’). A non-controlling interest owns the remainder. The Voisey’s Bay project is located on the northeast coast of Labrador, on a peninsula bordered to the north by Anaktalak Bay and to the south by Voisey’s Bay. The property is 560 miles north-northwest of St. John’s, the capital of the Province. Access to the property is primarily by helicopter or small aircraft. We have disputed the manner of calculation of our royalty payments. Please refer to Note 15 of the notes to consolidated financial statements for more information regarding the dispute. Reported nickel production at Voisey’s Bay increased approximately 9% during our fiscal year ended June 30, 2013, while reported copper production decreased approximately 5% when compared to the fiscal year ended June 30, 2012. In late March 2013, the Government of Newfoundland and Labrador, announced amendments to their Voisey’s Bay Development Agreement including a commitment from Vale to pursue underground mining to extend the mine life. The agreement also allows Vale to continue processing concentrate outside of the province while construction is being finalized at the Long Harbour processing plant. Wolverine (Yukon Territory, Canada) We own a 0.00% to 9.445% sliding-scale NSR royalty on all gold and silver produced from the Wolverine underground mine and milling operation located in Yukon Territory, Canada, and operated by Yukon Zinc Corporation (‘‘Yukon Zinc’’). The Wolverine property is located 106 miles north- northwest of Watson Lake in south central Yukon Territory. Access to the property is provided by a 17 mile gravel road heading south and then northeast to the Robert Campbell Highway at a point approximately 120 miles north of Watson Lake. Direct access to the mine site can also be achieved via chartered flight. 26 The sliding-scale NSR royalty on all gold and silver is based on the silver price as shown in the following table: London Bullion Market Association Monthly Average Price of Silver per Ounce (US$) less than $5.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5.00 - $7.50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7.51 or greater . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NSR Royalty Percentage 0% 3.778% 9.445% Reported production at Wolverine increased significantly over the prior year. Yukon Zinc reported that the mine reached its design capacity rate of 1,700 tonnes per day during the first quarter of calendar 2013, and that process circuit modifications and the integration of new equipment have improved plant performance. In June 2013, Yukon Zinc announced that it reduced production at Wolverine by 40% and its workforce by 30% in an effort to reduce costs and improve its working capital situation. Yukon Zinc reported that the cost reduction steps are a result of current lower metal prices and market conditions. Milling operations will be batch processed in two week periods to efficiently process 1,900 tonnes per day. Mining will reduce to a one shift per day operation. Yukon Zinc reported that they are committed to review the project economics in October 2013 and evaluate the possibility to resume full production. Principal Royalties on Development Stage Properties The following is a description of our principal royalty interests on development stage properties (listed alphabetically). Reserves for our development stage properties are summarized below in Table 1 as part of this Item 2, Properties. Mt. Milligan (British Columbia, Canada) We own the right to purchase 52.25% of the payable gold produced from the Mt. Milligan copper-gold project in British Columbia, Canada, and operated by Thompson Creek. The Mt. Milligan project is located within the Omenica Mining Division in North Central British Columbia, approximately 96 miles northwest of Prince George, 53 miles north of Fort St. James, and 59 miles west of Mackenzie. The Mt. Milligan project is accessible by commercial air carrier to Prince George, British Columbia, then by vehicle from the east via Mackenzie on the Finlay Philip Forest Service Road and the North Philip Forest Service Road. Upon commencement of production at the Mt. Milligan project, RGLD Gold AG, a wholly-owned subsidiary of the Company, will purchase 52.25% of the payable ounces of gold at a cash purchase price equal to the lesser of $435, with no inflation adjustment, or the prevailing market price for each payable ounce of gold. As of May 2013, Thompson Creek estimated that project completion was at 92%. Thompson Creek also reported that the Mt. Milligan project remains on schedule with mill commissioning to commence in August 2013, followed by commercial production expected in the fourth quarter of calendar 2013. Pascua-Lama Project (Region III, Chile) We own a 0.78% to 5.23% sliding-scale NSR royalty on the Pascua-Lama project, which straddles the border between Argentina and Chile, and is being developed by Barrick. The Company owns an additional royalty equivalent to 1.05% of proceeds from copper produced from the Chilean portion of the project, net of allowable deductions, sold on or after January 1, 2017. The Pascua-Lama project is located within 7 miles of Barrick’s operating Veladero mine. Access to the project is from the city of 27 Vallenar, Region III, Chile, via secondary roads C-485 to Alto del Carmen, Chile, and C-489 from Alto del Carmen to El Corral, Chile. Our royalty interest is applicable to all gold production from the portion of the Pascua-Lama project lying on the Chilean side of the border. In addition, our interest at Pascua-Lama contains certain contingent rights and obligations. Specifically, (i) if gold prices exceed $600 per ounce for any six month period during the first 36 months of commercial production from the project, the Company would make a one-time payment of $8.4 million, (ii) approximately 20% of the royalty is limited to 14.0 million ounces of gold produced from the project, while 24% of the royalty can be extended beyond 14.0 million ounces of gold produced for a one-time payment of $4.4 million; and (iii) Royal Gold also increased its interest in two one-time payments from $0.5 million to $1.5 million, which are payable by Barrick upon the achievement of certain production thresholds at Pascua-Lama. The sliding-scale NSR royalty is based upon the gold price as shown in the following table: London Bullion Market Association P.M. Monthly Average Price of Gold per Ounce (US$) less than $325 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $600 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $700 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $800 or greater . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NSR Royalty Percentage 0.78% 1.57% 2.72% 3.56% 4.39% 5.23% Note: Royalty rate is interpolated between the upper and lower endpoints. Pascua-Lama is one of the world’s largest gold and silver desposit with nearly 18 million ounces of proven and probable gold reserves, 676 million ounces of silver contained within the gold reserves, and an expected mine life of 25 years. It is expected to produce an average of 800,000-850,000 ounces of gold and 35 million ounces of silver annually during its first full five years of operation. Construction activities on the Chilean side of the Pascua-Lama mining project are currently suspended pursuant to a court ruling while Barrick addresses environmental and other regulatory requirements to the satisfaction of Chilean authorities. Barrick has submitted a plan for review by the regulators to construct a water management system in compliance with permit conditions for completion by the end of 2014, after which it expects to resume the remaining construction work in Chile. Barrick intends to re-sequence construction of the process plant and other facilities in Argentina in order to target first production by mid-2016. Barrick expects capital costs for this project to total $8.0 to $8.5 billion, though Barrick has stated that it is unable to fully assess the impact on the overall capital budget, operating costs and schedule of the Pascua-Lama project until the regulatory and legal issues are clarified. Reserve Information Table 1 below summarizes proven and probable reserves for gold, silver, copper, nickel, zinc, lead, cobalt and molybdenum that are subject to our royalty interests as of December 31, 2012, as reported to us by the operators of the mines. Properties are currently in production unless noted as development (‘‘DEV’’) within the table. The exploration royalties we own do not contain proven and probable reserves as of December 31, 2012. Please refer to pages 31-33 for the footnotes to Table 1. 28 Table 1 Proven and Probable Gold Reserves As of December 31, 2012(1) Gold(2) PROPERTY ROYALTY OPERATOR LOCATION PROVEN + PROBABLE RESERVES(3)(4)(5) Average Gold Tons of Ore Grade (opt) (M) Gold Contained Ozs(6) (M) Bald Mountain . . . . . . . . . . . . 1.75% - 2.5% NSR(7) Cortez (Pipeline) GSR1 . . . . . . . 0.40 - 5.0% GSR(8) Cortez (Pipeline) GSR2 . . . . . . . 0.40 - 5.0% GSR(8) Cortez (Pipeline) GSR3 . . . . . . . 0.71% GSR Cortez (Pipeline) NVR1 . . . . . . 0.39% NVR Gold Hill . . . . . . . . . . . . . . . 1.0 - 2.0% NSR(10)(11) 0.6 - 0.9% NSR(12) Goldstrike (SJ Claims) . . . . . . . 0.9% NSR Leeville . . . . . . . . . . . . . . . . 1.8% NSR Marigold . . . . . . . . . . . . . . . . 2.0% NSR Pinson (DEV) . . . . . . . . . . . . 3.0% NSR(13) 2.94% NSR(14) Barrick Barrick Barrick Barrick Barrick Kinross/Barrick Barrick Newmont Goldcorp/Barrick Atna Robinson . . . . . . . . . . . . . . . 3.0% NSR Ruby Hill . . . . . . . . . . . . . . . 3.0% NSR Soledad Mountain (DEV) Twin Creeks . . . . . . . . . . . . . . 2.0% GPR Wharf Bousquet-Cadillac-Joannes (DEV) Canadian Malartic . . . . . . . . . . 1.0 - 1.5% NSR(17) Holt . . . . . . . . . . . . . . . . . 0.0 - 2.0% NSR(16) . . . . . 3.0% NSR(15) 2.0% NSR KGHM Barrick Golden Queen Newmont Goldcorp Agnico-Eagle Osisko . . . . . . . . . . . . . . . . . . 0.00013 (cid:2) quarterly avg. St Andrew . . . . . . . 52.25% of payable gold gold price Kutcho Creek (DEV) . . . . . . . . 1.6% NSR Mt. Milligan (DEV)(18) Pine Cove (DEV) . . . . . . . . . . 7.5% NPI Schaft Creek (DEV) . . . . . . . . . 3.5% NPI Tulsequah Chief (DEV)(19) Williams . . . . . . . . . . . . . . . . 0.97% NSR Wolverine . . . . . . . . . . . . . . . 0.0 - 9.445% NSR(20) . . . . . . . . . . . . . . . . 3.25% NSR Dolores . . . . . . . . . . . . . . . . 1.0 - 5.0% NSR(21) Mulatos Pe˜nasquito(22) . . . . . . . . . . . . . 2.0% NSR (Oxide) 2.0% NSR (Sulfide) . . . . . 12.5% payable gold . . . . . . . 0.78 - 5.23% NSR(26) . . . . . . . . . . . . . . . . 0 - 3.0% NSR(24) Andacollo . . . . . . . . . . . . . . . 75% NSR(23) El Toqui Pascua-Lama (DEV)(25) Don Mario . . . . . . . . . . . . . . 3.0% NSR Don Nicolas (DEV) . . . . . . . . . 2.0% NSR El Limon . . . . . . . . . . . . . . . 3.0% NSR Mara Rosa (DEV) . . . . . . . . . . 1.0% NSR Balcooma (DEV) . . . . . . . . . . . 1.5% NSR Gwalia Deeps . . . . . . . . . . . . . 1.5% NSR King of the Hills . . . . . . . . . . . 1.5% NSR Kundip (DEV) . . . . . . . . . . . . 1.0 - 1.5% GSR(27) Meekatharra (Nannine) (DEV) . . 1.5% NSR Meekatharra (Paddy’s Flat) Capstone Mining Thompson Creek Anaconda Mining Copper Fox/Teck Chieftian Metals Barrick Yukon Zinc Pan American Alamos Goldcorp Goldcorp Teck Nyrstar Barrick Orvana Minera IRL B2Gold Amarillo Gold Snow Peak Mining St . Barbara St. Barbara Silver Lake Resources Reed Resources United States United States United States United States United States United States United States United States United States United States United States United States United States United States United States Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Mexico Mexico Mexico Mexico Chile Chile Chile Bolivia Argentina Nicaragua Brazil Australia Australia Australia Australia Australia 85.970 66.408 121.474 101.128 70.752 24.610 50.410 6.700 293.100 1.750 143.090 7.820 66.750 1.320 19.830 3.240 144.990 3.300 11.510 531.750 2.900 1037.050 7.110 12.550 4.140 96.780 75.860 132.002 1171.327 543.480 4.640 320.650 4.780 1.330 1.810 18.870 0.760 10.560 1.050 3.100 0.420 0.021 0.024 0.033 0.022 0.022 0.015 0.098 0.232 0.014 0.369 0.006 0.042 0.018 0.098 0.023 0.055 0.029 0.149 0.011 0.011 0.060 0.006 0.067 0.066 0.047 0.017 0.019 0.004 0.013 0.003 0.055 0.046 0.037 0.148 0.138 0.050 0.002 0.213 0.145 0.098 0.051 1.831 1.617(9) 3.986(9) 2.265(9) 1.536(9) 0.371 4.924 1.552 4.131 0.645 0.812 0.326 1.233 0.129 0.457 0.178 4.275 0.491 0.124 6.020 0.175 5.775 0.477 0.833 0.193 1.617 1.422 0.520 15.170 1.802 0.254 14.680 0.177 0.196 0.249 0.946 0.001 2.254 0.153 0.305 0.021 (DEV) . . . . . . . . . . . . . . . . 1.5% NSR Reed Resources Australia 7.250 0.062 0.451 A$10 per gold ounce produced(28) Meekatharra (Reedys) (DEV) . . . 1.5%, 1.5 - 2.5%, 1% Reed Resources Australia 1.370 0.083 0.114 NSR(29) Meekatharra (Yaloginda) (DEV) . 0.45% NSR South Laverton . . . . . . . . . . . . 1.5% NSR Southern Cross (DEV) . . . . . . . 1.5% NSR Inata . . . . . . . . . . . . . . . . . . 2.5% NSR Taparko(30) . . . . . . . . . . . . . . . 2.0% GSR Reed Resources Australia Australia Saracen China Hanking Holdings Australia Avocet Nord Gold Burkina Faso Burkina Faso 3.270 17.090 1.580 15.100 9.550 0.051 0.052 0.075 0.061 0.074 0.165 0.891 0.119 0.915 0.703 29 Proven and Probable Silver Reserves As of December 31, 2012(1) Silver(31) PROPERTY ROYALTY OPERATOR LOCATION PROVEN + PROBABLE RESERVES(3)(4)(5) Average Silver Tons of Ore Grade (opt) (M) Silver Contained Ozs(6) (M) Gold Hill . . . . . . . . . . . . . . . . . Soledad Mountain (DEV) . . . . . . . Troy . . . . . . . . . . . . . . . . . . . . . Kutcho Creek (DEV) . . . . . . . . . . Schaft Creek (DEV) . . . . . . . . . . . . . . . . . . . . . . . . Tulsequah Chief Wolverine . . . . . . . . . . . . . . . . . Dolores . . . . . . . . . . . . . . . . . . . Pe˜nasquito(22) . . . . . . . . . . . . . . . Pe˜nasquito(22) . . . . . . . . . . . . . . . Don Mario . . . . . . . . . . . . . . . . Don Nicolas (DEV) . . . . . . . . . . . El Toqui . . . . . . . . . . . . . . . . . . Balcooma (DEV) . . . . . . . . . . . . . 1.0 - 2.0% NSR(10)(11) 0.6 - 0.9% NSR(12) 3.0% NSR 3.0% GSR 1.6% NSR 3.5% NPI 22.5% payable Ag(32) 0.0 - 9.445% NSR(20) 2.0% NSR 2.0% NSR (Oxide) 2.0% NSR (Sulfide) 3.0% NSR 2.0% NSR 0 - 3.0% NSR(24) 1.5% NSR Kinross/Barrick United States 24.610 0.211 5.203 Golden Queen Revett Capstone Mining Copper Fox/Teck Chieftain Metals Yukon Zinc Pan American Goldcorp Goldcorp Orvana Minera IRL Nyrstar Snow Peak Mining Australia United States United States Canada Canada Canada Canada Mexico Mexico Mexico Bolivia Argentina Chile 66.750 11.060 11.510 1037.050 7.110 4.140 96.780 132.000 1171.330 4.780 1.330 4.640 0.760 0.336 1.009 1.009 0.050 2.374 9.546 0.786 0.320 0.742 1.154 0.302 0.288 0.498 22.396 11.163 11.618 51.895 16.876 39.475 76.100 42.279 869.523 5.514 0.401 1.338 0.380 Proven and Probable Base Metal Reserves As of December 31, 2012(1) Copper(33) PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) Average Base Metal Grade (%) Base Metal Contained Lbs(6) (M) 111.200 143.090 11.060 0.680 11.510 1,037.050 21.500 0.760 4.780 320.650 15.580 0.290% 0.460% 0.390% 0.840% 2.010% 0.270% 1.360% 2.130% 1.270% 0.090% 5.430% 656.000 1,329.473 87.246 11.355 462.678 5,630.715 586.694 32.466 120.992 548.177 1,693.150 PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) 0.760 1,171.330 4.640 Average Base Metal Grade (%) 0.520% 0.230% 0.300% Base Metal Contained Lbs(6) (M) 7.879 5,831.953 27.414 PROPERTY ROYALTY OPERATOR LOCATION Johnson Camp . . . . . . . . . . . . . . . Robinson . . . . . . . . . . . . . . . . . . Troy . . . . . . . . . . . . . . . . . . . . . Caber (DEV) . . . . . . . . . . . . . . . . Kutcho Creek (DEV) . . . . . . . . . . . . . . . . . . . . . . Schaft Creek (DEV) Voisey’s Bay(34) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balcooma (DEV) Don Mario . . . . . . . . . . . . . . . . . Pascua-Lama (DEV)(35) . . . . . . . . . . . . . . . . . . . . . . . . . . . Las Cruces Lead(36) Nord Resources 2.5% NSR KGHM 3.0% NSR 3.0% GSR Revett Nyrstar 1.0% NSR Capstone Mining 1.6% NSR Copper Fox/Teck 3.5% NPI Vale 2.7% NSR Snow Peak Mining Australia 1.5% NSR 3.0% NSR Orvana 1.05% NSR Barrick 1.5% NSR United States United States United States Canada Canada Canada Canada Bolivia Chile Spain First Quantum PROPERTY ROYALTY OPERATOR LOCATION Balcooma (DEV) . . . . . . . . . Pe˜nasquito(22) . . . . . . . . . . . . El Toqui . . . . . . . . . . . . . . . 1.5% NSR 2.0% NSR (Sulfide) Goldcorp 0 - 3.0% NSR(24) Nyrstar Snow Peak Mining Australia Mexico Chile 30 Zinc(37) PROPERTY ROYALTY OPERATOR LOCATION Caber (DEV) . . . . . . . . . . . . Kutcho Creek (DEV) . . . . . . . Balcooma (DEV) . . . . . . . . . Pe˜nasquito(22) . . . . . . . . . . . . El Toqui . . . . . . . . . . . . . . . NICKEL(38) 1.0% NSR 1.6% NSR 1.5% NSR 2.0% NSR (Sulfide) Goldcorp 0 - 3.0% NSR(24) Nyrstar Nyrstar Capstone Mining Snow Peak Mining Australia Canada Canada Mexico Chile PROPERTY ROYALTY OPERATOR LOCATION PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) 0.680 11.510 0.760 1,171.330 4.640 Average Base Metal Grade (%) Base Metal Contained Lbs(6) (M) 8.580% 3.190% 1.920% 0.540% 6.060% 116.036 734.300 29.274 13,940.788 562.681 PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) Average Base Metal Grade (%) Base Metal Contained Lbs(6) (M) Voisey’s Bay . . . . . . . . . . . . . . . . . . . . . . 2.7% NSR Vale Canada 21.500 2.430% 1,046.270 COBALT(39) PROPERTY ROYALTY OPERATOR LOCATION PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) Average Base Metal Grade (%) Base Metal Contained Lbs(6) (M) Voisey’s Bay . . . . . . . . . . . . . . . . . . . . . . 2.7% NSR Vale Canada 21.500 0.110% 48.832 MOLYBDENUM(40) PROPERTY ROYALTY OPERATOR LOCATION PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) Average Base Metal Grade (%) Base Metal Contained Lbs(6) (M) Schaft Creek . . . . . . . . . . . . . . . . . . . 3.5% NPI Copper Fox/Teck Canada 1,037.050 0.020% 373.340 (1) (2) (3) Reserves have been reported by the operators of record as of December 31, 2012, with the exception of the following properties: Don Mario—October 2012; Soledad—September 2012; Gwalia Deeps, King of the Hills, South Laverton and Southern Cross—June 2012; Meekatharra (Nannine, Paddy’s Flat, Reedys and Yaloginda) and Tulsequah Chief—March 2012; Pascua-Lama (Au), Don Nicolas, Gold Hill, Johnson Camp, Mt. Goode (Cosmos), Robinson and Wolverine—December 2011; Mara Rosa—October 2011; Balcooma—June 2011; Kutcho Creek—February 2011; Kundip and Pascua- Lama (copper only)—December 2010; Pine Cove—June 2010; Mt. Milligan—October 2009; Caber—July 2007. Gold reserves were calculated by the operators at the following per ounce prices: A$1,600—Paddington; $1,500—Bald Mountain, Cortez, Gold Strike, and Williams; A$1,500—South Laverton; $1,490—Bousquet/Cadillac/Joannes; $1,475—Canadian Malartic; $1,400—Don Mario, Holt, Leeville, Mulatos, and Twin Creeks; A$1,400—Southern Cross; $1,366—Schaft Creek; $1,350—Dolores, Pe˜nasquito, Tulsequah Chief, and Wharf; $1,310—Soledad; $1,300—Pinson; A$1,300—Meekatharra: Nannine, Paddy’s Flat; Reedys and Yaloginda; $1,250—El Limon, Gwalia Deeps, King of the Hills, and Taparko; $1,200—Gold Hill, Inata, and Pascua Lama; $1,100—Don Nicolas and Mara Rosa; $1,010—Andacollo; $1,000—Robinson; $983—Pine Cove; $690—Mt. Milligan. No gold price was reported for Balcooma, El Toqui, Kundip, Kutcho Creek, Marigold, and Wolverine. Set forth below are the definitions of proven and probable reserves used by the U.S. Securities and Exchange Commission. ‘‘Reserve’’ is that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. ‘‘Proven (Measured) Reserves’’ are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, and the grade is computed from the results of detailed sampling, and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that the size, shape, depth and mineral content of the reserves are well established. ‘‘Probable (Indicated) Reserves’’ are reserves for which the quantity and grade are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance of probable (indicated) reserves, although lower than that for proven (measured) reserves, is high enough to assume geological continuity between points of observation. (4) Royal Gold has disclosed a number of reserve estimates that are provided by operators that are foreign issuers and are not based on the U.S. Securities and Exchange Commission’s definitions for proven and probable reserves. For Canadian issuers, definitions of 31 ‘‘mineral reserve,’’ ‘‘proven mineral reserve,’’ and ‘‘probable mineral reserve’’ conform to the Canadian Institute of Mining, Metallurgy and Petroleum definitions of these terms as of the effective date of estimation as required by National Instrument 43-101 of the Canadian Securities Administrators. For Australian issuers, definitions of ‘‘mineral reserve,’’ ‘‘proven mineral reserve,’’ and ‘‘probable mineral reserve’’ conform with the Australasian Code for Reporting of Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia, as amended (‘‘JORC Code’’). Royal Gold does not reconcile the reserve estimates provided by the operators with definitions of reserves used by the U.S. Securities and Exchange Commission. The reserves reported are either estimates received from the various operators or are based on documentation material provided to Royal Gold or which is derived from recent publicly-available information from the operators of the various properties or various recent National Instrument 43-101 or JORC Code reports filed by operators. Accordingly, Royal Gold is not able to reconcile the reserve estimates prepared in reliance on National Instrument 43-101 or JORC Code with definitions of the U.S. Securities and Exchange Commission. ‘‘Contained ounces’’ or ‘‘contained pounds’’ do not take into account recovery losses in mining and processing the ore. NSR sliding-scale schedule (price of gold per ounce—royalty rate): Below $375—1.75%; >$375 to $400—2.0%; >$400 to $425— 2.25%; >$425—2.5%. All price points are stated in 1986 dollars and are subject to adjustment in accordance with a blended index comprised of labor, diesel fuel, industrial commodities and mining machinery. GSR sliding-scale schedule (price of gold per ounce—royalty rate): Below $210—0.40%; $210 to $229.99—0.50%; $230 to $249.99— 0.75%; $250 to $269.99—1.30%; $270 to $309.99—2.25%; $310 to $329.99—2.60%; $330 to $349.99—3.00%; $350 to $369.99— 3.40%; $370 to $389.99—$3.75%; $390 to $409.99—4.0%; $410 to $429.99—4.25%; $430 to $449.99—4.50%; $450 to $469.99— 4.75%; $470 and higher—5.00%. NVR1 and GSR3 reserves and additional mineralized material are subsets of the reserves and additional mineralized material covered by GSR1 and GSR2. Round Mountain, a joint venture between Kinross and Barrick, has the right, at any time, to purchase the royalty interest for $10.0 million less any royalty payments paid prior to the purchase option being exercised. The royalty is subject to a minimum royalty payment of $100,000 per year, which is capped at $1.0 million. As of March 31, 2013, minimum royalty payments totaling $975,000 have been received. Once all royalty payments and the minimum royalty payment equals $10.0 million, the royalty terminates. The 1.0% to 2.0% sliding-scale NSR royalty will pay 2.0% when the price of gold is above $350 per ounce and 1.0% when the price of gold falls to $350 per ounce or below. The 0.6% to 0.9% NSR sliding-scale schedule (price of gold per ounce—royalty rate): Below $300—0.6%; $300 to $350—0.7%; > $350 to $400—0.8%; > $400—0.9%. The silver royalty rate is based on the price of gold. The 0.6% to 0.9% sliding-scale NSR applies to the M-ACE claims. The operator did not break out reserves or resources subject to the M-ACE claims royalty. Royalty only applies to Section 29 which currently holds about 95% of the reserves reported for the property. An additional Cordilleran royalty applies to a portion of Section 28. Royalty only applies to Section 29 which currently holds about 95% of the reserves reported for the property. Additional Rayrock royalties apply to Sections 28, 32 and 33; these royalty rates vary depending on pre-existing royalties. The Rayrock royalties take effect once 200,000 ounces of gold have been produced from open pit mines on the property. As of March 31, 2012, approximately 103,000 ounces have been produced. Royalty is capped at $300,000 plus simple interest. NSR sliding-scale schedule (price of gold per ounce—royalty rate): $0.00 to under $350—0.0%; $350 to under $400—0.5%; $400 to under $500—1.0%; $500 or higher—2.0%. NSR sliding-scale schedule (price of gold per ounce—royalty rate): $0.00 to $350—1.0%; above $350—1.5%. This is a metal stream whereby the purchase price for gold ounces delivered is $435 per ounce, or the prevailing market price of gold, if lower; no inflation. This is a metal stream whereby Royal Gold is entitled to 12.5% of payable gold until 48,000 ounces of payable gold have been delivered; 7.5% thereafter, whereby the purchase price for gold ounces delivered is $450 per ounce on the first 48,000 ounces of gold; $500 per ounce thereafter, or the prevailing market price, if lower. (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19) (20) Gold royalty rate is based on the price of silver per ounce. NSR sliding-scale schedule (price of silver per ounce—royalty rate): Below $5.00—0.0%; $5.00 to $7.50—3.778%; >$7.50—9.445%. (21) The Company’s royalty is subject to a 2.0 million ounce cap on gold production. There have been approximately 1.1 million ounces of cumulative production as of March 31, 2013. NSR sliding-scale schedule (price of gold per ounce—royalty rate): $0.00 to $299.99—1.0%; $300 to $324.99—1.50%; $325 to $349.99—2.0%; $350 to $374.99—3.0%; $375 to $399.99—4.0%; $400 or higher— 5.0%. (22) Operator reports reserves by material type. The sulfide material will be processed by milling. The oxide material will be processed by heap leaching. (23) The royalty rate is 75% until 910,000 payable ounces of gold have been produced; 50% thereafter. There have been approximately 155,000 cumulative payable ounces produced as of March 31, 2013. Gold is produced as a by-product of copper. 32 (24) (25) (26) (27) (28) (29) (30) (31) (32) (33) (34) (35) (36) (37) (38) (39) All metals are paid based on zinc prices. NSR sliding-scale schedule (price of zinc per pound—royalty rate): Below $0.50—0.0%; $0.50 to below $0.55—1.0%; $0.55 to below $0.60—2.0%; $0.60 or higher—3.0%. Royalty applies to all gold production from an area of interest in Chile. Only that portion of the reserves pertaining to our royalty interest in Chile is reflected here. Approximately 20% of the royalty is limited to the first 14.0 million ounces of gold produced from the project. Also, 24% of the royalty can be extended beyond 14.0 million ounces produced for $4.4 million. In addition, a one-time payment totaling $8.4 million will be made if gold prices exceed $600 per ounce for any six-month period within the first 36 months of commercial production. NSR sliding-scale schedule (price of gold per ounce—royalty rate): less than or equal to $325—0.78%; $400—1.57%; $500—$2.72%; $600—3.56%; $700—4.39%; greater than or equal to $800—5.23%. Royalty is interpolated between lower and upper endpoints. Royalty pays 1.0% for the first 250,000 ounces of production and then 1.5% for production above 250,000 ounces. The A$10 per ounce royalty applies on production above 50,000 ounces. The 1.5% to 2.5% NSR sliding-scale royalty applies to cumulative production above 300,000 ounces at both the Burnakura and Meekatharra-Reedys properties. Once 300,000 ounces have been produced, the royalty begins paying at a per year rate of 1.5% for the next 75,000 ounces per year produced and at a rate of 2.5% on production above 75,000 ounces per year. Cumulative production is estimated at 271,000 ounces as of December 31, 2012. The 1.0% NSR royalty applies to the Rand area only. There is a 0.75% GSR milling royalty that applies to ore that is mined outside of the defined area of the Taparko-Bouroum project that is processed through the Taparko facilities up to a maximum of 1.1 million tons per year. Silver reserves were calculated by the operators at the following prices per ounce: $30.00—Gold Hill; $28.83—Troy; $25.96—Schaft Creek; $25.00—Don Nicolas, Dolores, and Don Mario; $24.05—Soledad; $24.00—Pe˜nasquito and $22.00—Tulsequah Chief. No silver price was reported for Balcooma, El Toqui, Kutcho Creek and Wolverine. This is a metal stream whereby Royal Gold is entitled to 22.5% of payable silver until 2.78 million ounces of payable silver have been delivered; 9.75% thereafter, whereby the purchase price for silver ounces delivered is $5.00 per ounce on the first 2.78 million ounces of silver; $7.50 per ounce thereafter, or the prevailing market price of the metal, if lower. Copper reserves were calculated by the operators at the following prices per pound: $3.67—Voisey’s Bay and Troy; $3.52—Schaft Creek; $3.10—Tulsequah Chief; $3.00—Don Mario; $2.75—Robinson and Las Cruces; $2.50—Johnson Camp; and $2.00— Pascua-Lama. No copper reserve price was reported for Balcooma, Caber or Kutcho Creek. Additional mineralized material figures are from December 31, 2005 and have not been updated by the operator. Royalty applies to all copper production from an area of interest in Chile. Only that portion of the reserves pertaining to our royalty interest in Chile is reflected here. This royalty will take effect after January 1, 2017. Lead reserve price was calculated by the operators at the following prices per pound: $0.80—Pe˜nasquito. No lead reserve price was reported for Balcooma or El Toqui. Zinc reserve price was calculated by the operators at the following prices per pound: $0.85—Pe˜nasquito. No zinc reserve price was reported for Balcooma, Caber, El Toqui or Kutcho Creek. Nickel reserve price was calculated by the operator at Voisey’s Bay at $9.41 per pound. No nickel price was reported for Mt. Goode or Avebury. Cobalt reserve price was calculated by the operator at Voisey’s Bay at $15.66 per pound. (40) Molybdenum reserve price was calculated by the operator at Schaft Creek at $15.30 per pound. ITEM 3. LEGAL PROCEEDINGS Refer to Note 15 of the notes to consolidated financial statements for a discussion on litigation associated with our Voisey’s Bay royalty. ITEM 4. MINE SAFETY DISCLOSURE Not applicable. 33 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Current Stockholders Our common stock is traded on the NASDAQ Global Select Market (‘‘NASDAQ’’) under the symbol ‘‘RGLD’’ and on the TSX under the symbol ‘‘RGL.’’ The following table sets forth, for each of the quarterly periods indicated, the range of high and low sales prices, in U.S. dollars, for our common stock on NASDAQ for each quarter since July 1, 2011. Fiscal Year: 2012 2013 First Quarter (July, Aug., Sept.—2011) . . . . . . . . . . . Second Quarter (Oct., Nov., Dec.—2011) . . . . . . . . . . Third Quarter (Jan., Feb., March—2012) . . . . . . . . . . Fourth Quarter (April, May, June—2012) . . . . . . . . . First Quarter (July, Aug., Sept.—2012) . . . . . . . . . . . Second Quarter (Oct., Nov., Dec.—2012) . . . . . . . . . . Third Quarter (Jan., Feb., March—2013) . . . . . . . . . . Fourth Quarter (April, May, June—2013) . . . . . . . . . Sales Prices High Low $ 83.87 $ 82.70 $ 78.32 $ 80.97 $100.71 $100.84 $ 83.44 $ 71.33 $57.04 $58.14 $61.60 $57.00 $71.36 $76.17 $62.67 $38.63 As of July 29, 2013, there were 961 stockholders of record of our common stock. Dividends We have paid a cash dividend on our common stock for each year beginning in calendar year 2000. Our board of directors has discretion in determining whether to declare a dividend based on a number of factors including prevailing gold prices, economic market conditions and funding requirements for future opportunities or operations. For calendar year 2013, our annual dividend is $0.80 per share of common stock and exchangeable shares. We paid the first payment of $0.20 per share on January 18, 2013, to common stockholders and the holders of exchangeable shares of record at the close of business on January 4, 2013. We paid the second payment of $0.20 per share on April 19, 2013, to common stockholders and the holders of exchangeable shares of record at the close of business on April 5, 2013. We paid the third payment of $0.20 per share on July 19, 2013 to common stockholders and holders of exchangeable shares of record at the close of business on July 5, 2013. Subject to board approval, we anticipate paying the fourth payment of $0.20 per share on October 18, 2013, to common shareholders and holders of exchangeable shares of record at the close of business on October 4, 2013. For calendar year 2012, we paid an annual dividend of $0.60 per share of common stock and exchangeable shares in four quarterly payments of $0.15 each. We paid the first payment of $0.15 per share on January 20, 2012, to common stockholders and the holders of exchangeable shares of record at the close of business on January 6, 2012. We paid the second payment of $0.15 per share on April 20, 2012, to common stockholders and the holders of exchangeable shares of record at the close of business on April 5, 2012. We paid the third payment of $0.15 per share on July 20, 2012 to common stockholders and holders of exchangeable shares of record at the close of business on July 6, 2012. We paid the fourth payment of $0.15 per share on October 19, 2012, to common shareholders and holders of exchangeable shares of record at the close of business on October 5, 2012. For the last two quarters of calendar 2011, we paid dividends of $0.11 per share of common stock and exchangeable shares in each quarter. We paid the third quarter payment of $0.11 per share on July 15, 2011 to common stockholders and holders of exchangeable shares of record at the close of business on July 1, 2011. We paid the fourth quarter payment of $0.11 per share on October 14, 2011, to common shareholders and holders of exchangeable shares of record at the close of business on September 30, 2011. 34 ITEM 6. SELECTED FINANCIAL DATA Royalty revenue(1) . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income available to Royal Gold common Fiscal Years Ended June 30, 2013 2012 2011 2010 2009 $289,224 $171,504 $ 73,409 (Amounts in thousands, except per share data) $216,469 $118,925 $ 77,299 $263,054 $156,888 $ 98,309 $136,565 $ 41,035 $ 29,422 $73,771 $27,292 $41,357 stockholders . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,153 $ 92,476 $ 71,395 $ 21,492 $38,348 Net income per share available to Royal Gold common stockholders: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends declared per common share(2) . . . . . . $ $ $ 1.09 1.09 0.75 $ $ $ 1.61 1.61 0.56 $ $ $ 1.29 1.29 0.42 $ $ $ 0.49 0.49 0.34 $ $ $ 1.09 1.07 0.30 As of June 30, 2013 2012 2011 2010 2009 (Amounts in thousands) Royalty interests in mineral properties, net . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . Debt . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . Total Royal Gold stockholders’ equity . . $2,120,268 $2,905,341 $ 302,263 $ 534,705 $2,348,887 $1,890,988 $2,376,366 $ 293,248 $ 512,937 $1,838,459 $1,690,439 $1,902,702 $ 226,100 $ 415,007 $1,460,162 $1,476,799 $1,865,333 $ 248,500 $ 431,785 $1,403,716 $455,966 $809,924 $ 19,250 $ 49,513 $749,441 (1) Please refer to Item 7, MD&A, of this report for a discussion of recent developments that contributed to our 10% increase in royalty revenue during fiscal year 2013 when compared to fiscal year 2012 and the 22% increase in royalty revenue during fiscal year 2012 when compared to fiscal year 2011. (2) The 2013, 2012, 2011, 2010 and 2009 calendar year dividends were $0.80, $0.60, $0.44, $0.36 and $0.32, respectively, as approved by our board of directors. Please refer to Item 5 of this report for further information on our dividends. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Royal Gold, together with its subsidiaries, is engaged in the business of acquiring and managing precious metals royalties, precious metals streams and similar 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. We use the term ‘‘royalty interest’’ in this Annual Report on Form 10-K to refer to royalties, gold, silver or other metal stream interests, and other similar interests. We seek to acquire existing royalty interests or to finance projects that are in production or in development stage in exchange for royalty interests. In the ordinary course of business, we engage in a continual review of opportunities to acquire existing royalty interests, to create new royalty interests through the financing of mine development or exploration, or to acquire companies that hold 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, analysis of technical, financial and other confidential information, submission of 35 indications of interest, participation in preliminary discussions and negotiations and involvement as a bidder in competitive processes. As of June 30, 2013, the Company owned royalties on 36 producing properties, 21 development stage properties and 147 exploration stage properties, of which the Company considers 50 to be evaluation stage projects. The Company uses ‘‘evaluation stage’’ to describe exploration stage properties that contain mineralized material and on which operators are engaged in the development of reserves. We do not conduct mining operations nor are we required to contribute to capital costs, exploration costs, environmental costs or other mining, processing or other operating costs on the properties in which we hold royalty interests. During the fiscal year ended June 30, 2013, we focused on the management of our existing royalty interests and the acquisition of royalty interests. Our financial results are primarily tied to the price of gold and, to a lesser extent, the price of silver, copper and nickel, together with the amounts of production from our producing stage royalty interests. The price of gold, silver, copper, nickel and other metals have fluctuated widely in recent years and most recently have experienced declines from highs experienced in the first half of our fiscal year 2013. 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, copper or nickel could have a material and adverse effect on the Company’s results of operations and financial condition. For the fiscal years ended June 30, 2013, 2012 and 2011, gold, silver, copper and nickel price averages and percentage of royalty revenues by metal were as follows: June 30, 2013 June 30, 2012 June 30, 2011 Fiscal Year Ended Metal Gold ($/ounce) . . . . . . . Silver ($/ounce) . . . . . . Copper ($/pound) . . . . . Nickel ($/pound) . . . . . . Other . . . . . . . . . . . . . . Average Price $1,605 $28.97 $ 3.48 $ 7.44 N/A Percentage of Royalty Revenue Average Price Percentage of Royalty Revenue Average Price Percentage of Royalty Revenue 70% $1,673 7% $33.26 11% $ 3.71 8% $ 8.77 N/A 4% 68% $1,369 7% $28.61 11% $ 3.92 11% $10.86 N/A 3% 64% 6% 10% 15% 5% Operators’ Production Estimates by Royalty for Calendar Year 2013 We received annual production estimates from many of the operators of our producing mines during the first calendar quarter of 2013. The following table shows such production estimates for our principal producing properties for calendar 2013 as well as the actual production reported to us by the various operators through June 30, 2013. 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 the accuracy of such information. Please refer to Part I, Item 2, Properties, of this report for further discussion on any updates at our principal producing and development properties. 36 Operators’ Production Estimate by Royalty for Calendar Year 2013 and Reported Production Principal Producing Properties For the period January 1, 2013 through June 30, 2013 Royalty Calendar 2013 Operator’s Production Estimate(1) Silver (oz.) Base Metals (lbs.) Gold (oz.) Andacollo . . . . . . . . . 63,000 Canadian Malartic . . . . 485,000 - 510,000 48,000 Cortez GSR1 . . . . . . . 16,000 Cortez GSR2 . . . . . . . 64,000 Cortez GSR3 . . . . . . . 53,000 Cortez NVR1 . . . . . . . Holt 52,000 - 58,000 . . . . . . . . . . . . . Las Cruces — — — — — — — Reported Production through June 30, 2013(2) Gold (oz.) Silver (oz.) Base Metals (lbs.) — 34,700 — 159,000 — 37,600 — 500 — 38,100 — 28,500 — 28,400 — — — — — — — — — — — — — — Copper . . . . . . . . . . — 151 - 159 million — Mulatos . . . . . . . . . . . 180,000 - 200,000 — Pe˜nasquito . . . . . . . . . 360,000 - 400,000 20 - 21 million — — 114,300 — 68.9 million — — 148,900 9.0 million Lead . . . . . . . . . . . Zinc . . . . . . . . . . . . Robinson(3) . . . . . . . . . Copper . . . . . . . . . . Voisey’s Bay(3) Copper . . . . . . . . . . Nickel . . . . . . . . . . . . . . . . . . . Wolverine(3) 145 - 160 million 285 - 305 million N/A — 28,400 — N/A N/A N/A N/A N/A 6,900 1.6 million 61.0 million 112.2 million 68.2 million 27.0 million 81.2 million (1) There can be no assurance that production estimates received from our operators will be achieved. Please 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 this report for information regarding factors that could affect actual results. (2) Reported production relates to the amount of metal sales, subject to our royalty interests, for the period January 1, 2013 through June 30, 2013, as reported to us by the operators of the mines. (3) The Company did not receive calendar 2013 production guidance from the operator. 37 Historical Production The following table discloses historical production for the past three fiscal years for the principal producing properties that are subject to our royalty interests, as reported to us by the operators of the mines: Historical Production(1) by Royalty Principal Producing Properties For the Fiscal Years Ended June 30, 2013, 2012 and 2011 Royalty Metal 2013 2012 2011 Andacollo . . . . . . . . . . . . . . . Gold Canadian Malartic . . . . . . . . . Gold Cortez GSR1 . . . . . . . . . . . . . Gold Cortez GSR2 . . . . . . . . . . . . . Gold Cortez GSR3 . . . . . . . . . . . . . Gold Cortez NVR1 . . . . . . . . . . . . Gold Holt . . . . . . . . . . . . . . . . . . . Gold Las Cruces . . . . . . . . . . . . . . Copper Mulatos . . . . . . . . . . . . . . . . . Gold Pe˜nasquito . . . . . . . . . . . . . . . Gold Silver Lead Zinc Robinson . . . . . . . . . . . . . . . . Gold Copper Voisey’s Bay . . . . . . . . . . . . . Nickel Copper Wolverine . . . . . . . . . . . . . . . Gold Silver 68,600 oz. 347,000 oz. 81,200 oz. 900 oz. 82,100 oz. 60,400 oz. 56,400 oz. 153.4 million lbs. 218,000 oz. 371,100 oz. 21.1 million oz. 126.3 million lbs. 282.3 million lbs. 49,100 oz. 146.2 million lbs. 143.9 million lbs. 101.9 million lbs. 11,300 oz. 2.8 million oz. 51,400 oz. 297,500 oz. 115,900 oz. 800 oz. 116,700 oz. 82,000 oz. 41,200 oz. 119.1 million lbs. 169,300 oz. 294,500 oz. 21.5 million oz. 164.0 million lbs. 312.6 million lbs. 31,000 oz. 105.3 million lbs. 131.6 million lbs. 107.2 million lbs. 1,300 oz. 1.0 million oz. 42,300 oz. 35,300 oz. 191,400 oz. 800 oz. 192,200 oz. 120,000 oz. 11,800 oz. 74.7 million lbs. 150,500 oz. 206,700 oz. 17.3 million oz. 132.9 million lbs. 217.0 million lbs. 49,700 oz. 93.7 million lbs. 112.5 million lbs. 67.8 million lbs. 900 oz. 258,500 oz. (1) Historical production relates to the amount of metal sales, subject to our royalty interests for each fiscal year presented, as reported to us by the operators of the mines. Critical Accounting Policies Listed below are the accounting policies that the Company believes are critical to its financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue or expense being reported. Please refer to Note 2 of the notes to consolidated financial statements for a discussion on recently adopted accounting pronouncements. Use of Estimates The preparation of our financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. 38 Our most critical accounting estimates relate to our assumptions regarding future gold, silver, nickel, copper and other metal prices and the estimates of reserves and recoveries of third-party mine operators. We rely on reserve estimates reported by the operators on the properties in which we have 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 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. Royalty Interests in Mineral Properties Royalty interests in mineral properties include acquired royalty interests in production, development and exploration stage properties. The costs of acquired royalty interests in mineral properties are capitalized as tangible assets as such interests do not meet the definition of a financial asset under the Accounting Standards Codification (‘‘ASC’’) guidance. Acquisition costs of production stage royalty interests are depleted using the units of production method over the life of the mineral property, which is estimated using proven and probable reserves as provided by the operator. Acquisition costs of royalty interests on development stage mineral properties, which are not yet in production, are not amortized until the property begins production. Acquisition costs of royalty interests on exploration stage mineral properties, where there are no proven and probable reserves, are not amortized. At such time as the associated exploration stage mineral interests are converted to proven and probable reserves, the cost basis is amortized over the remaining life of the mineral property, using proven and probable reserves. The carrying values of exploration stage mineral interests are evaluated for impairment at such time as information becomes available indicating that the production will not occur in the future. Exploration costs are expensed when incurred. 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 royalty interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each royalty interest property using estimates of proven and probable reserves 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, nickel 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 affecting the future recoverability of our 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. Our estimates of gold, silver, copper, nickel and other metal prices, operator’s estimates of proven and probable reserves related to our royalty properties, and operator’s estimates of operating, capital and reclamation costs are subject to certain risks and uncertainties which may affect the recoverability of our investment in these royalty interests in mineral properties. Although we have made our best assessment of these factors based on current market conditions, it is possible that changes could occur, which could adversely affect the net cash flows expected to be generated from these royalty interests. As part of the Company’s regular asset impairment analysis, the Company determined that two insignificant valued exploration stage royalty interests should be written down to zero as of June 30, 2013. 39 Available-for-Sale Securities Investments in securities that management does not have the intent to sell in the near term and that have readily determinable fair values are classified as available-for-sale securities. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive income as a separate component of stockholders’ equity, except that declines in market value judged to be other than temporary are recognized in determining net income. When investments are sold, the realized gains and losses on these investments, determined using the specific identification method, are included in determining net income. The Company’s policy for determining whether declines in fair value of available-for-sale securities are other than temporary includes a quarterly analysis of the investments and a review by management of all investments for which the cost exceeds the fair value. Any temporary declines in fair value are recorded as a charge to other comprehensive income. This evaluation considers a number of factors including, but not limited to, the length of time and extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, and management’s ability and intent to hold the securities until fair value recovers. If such impairment is determined by the Company to be other-than-temporary, the investment’s cost basis is written down to fair value and recorded in net income during the period the Company determines such impairment to be other-than-temporary. The new cost basis is not changed for subsequent recoveries in fair value. The most significant available-for-sale security is the investment in Seabridge common stock, acquired in June 2011 and discussed in greater detail within Note 3 of our notes to consolidated financial statements. During the fiscal year ended June 30, 2013, the Company corrected the original cost basis of the shares, which was overstated by $2.4 million. Based on the Company’s quarterly impairment analysis, including the severity of the market decline in Seabridge common stock during the fiscal year ended June 30, 2013, the Company determined that the impairment of its investment in Seabridge common stock is other-than-temporary. As a result of the impairment, the Company recognized a loss on available-for-sale securities of $12.1 million during our fiscal year ended June 30, 2013. There were no impairments recognized on our available-for-sale securities during our fiscal year ended June 30, 2012. The Company will continue to evaluate its investment in Seabridge common stock considering additional facts and circumstances as they arise, including, but not limited to, the progress of development of Seabridge’s KSM project. Royalty Revenue Royalty revenue is recognized pursuant to guidance in ASC 605 and based upon amounts contractually due pursuant to the underlying royalty agreement. Specifically, revenue is recognized in accordance with the terms of the underlying royalty agreements subject to (i) the pervasive evidence of the existence of the arrangements; (ii) the risks and rewards having been transferred; (iii) the royalty being fixed or determinable; and (iv) the collectability of the royalty being reasonably assured. For royalty payments received in-kind, royalty revenue is recorded at the average spot price of gold for the period in which the royalty was earned. Revenue recognized pursuant to the Robinson royalty agreement is based upon 3.0% of revenue received by the operator of the mine, KGHM, for the sale of minerals from the Robinson mine, reduced by certain costs incurred by KGHM. KGHM’s concentrate sales contracts with third-party smelters, in general, provide for an initial sales price payment based upon provisional assays and quoted metal prices at the date of shipment. Final true-up sales price payments to KGHM are subsequently based upon final assay and market metal prices on a specified future date, typically one to three months after the date the concentrate arrives at the third-party smelter (which generally occurs four to five months after the shipment date from the Robinson mine). We do not have all the key information regarding the terms of the operator’s smelter contracts, such as the terms of specific 40 concentrate shipments to a smelter or quantities of metal or expected settlement arrangements at the time of an operator’s shipment of concentrate. Each monthly payment from KGHM is typically a combination of revenue received by KGHM for provisional payments during the month and any upward or downward adjustments for final assays and commodity prices for earlier shipments. Whether the payment to Royal Gold is based on KGHM’s revenue in the form of provisional or final payments, Royal Gold records royalty revenue and the corresponding receivable based on the monthly amounts it receives from KGHM, as determined pursuant to the royalty agreement. The royalty contract does not provide Royal Gold with rights or obligations to settle any final assay and commodity price adjustments with KGHM. Therefore, once a given monthly payment is received by Royal Gold it is not subject to later adjustment based on adjustments for assays or commodity prices. Under the royalty agreement, KGHM may include such final adjustments as a component of future royalty payments. Income Taxes The Company accounts for income taxes in accordance with the guidance of ASC 740. The Company’s 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. The deferred tax assets and liabilities reflect management’s best assessment of estimated future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. 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. A valuation allowance is provided for deferred tax assets when management concludes it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company’s 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. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due. The Company adjusts these reserves in light of changing facts and circumstances; 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. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Liquidity and Capital Resources Overview At June 30, 2013, we had current assets of $744.5 million compared to current liabilities of $35.1 million for a current ratio of 21 to 1. This compares to current assets of $445.2 million and current liabilities of $15.2 million at June 30, 2012, resulting in a current ratio of approximately 29 to 1. The decrease in our current ratio was primarily attributable to an increase in the amount of foreign withholding taxes payable on certain of our foreign royalty interests. The increase in our foreign withholding taxes payable was partially offset by an increase in our cash and equivalents during the period due to our October 2012 common stock offering as discussed below. During the fiscal year ended June 30, 2013, liquidity needs were met from $289.2 million in royalty revenues and our available cash resources. As of June 30, 2013, the Company had $350 million available and no amounts outstanding under its revolving credit facility. The Company was in 41 compliance with each financial covenant under its revolving credit facility as of June 30, 2013. Refer to Note 6 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, exploration costs and capital expenditures for the foreseeable future. Our current financial resources are also available to fund dividends and for acquisitions of royalty interests, including the remaining commitments incurred in connection with the Mt. Milligan and Tulsequah Chief acquisitions. 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 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 this report for a discussion of certain risks that may impact the Company’s liquidity and capital resources. Recent Liquidity and Capital Resource Developments Amendment to Revolving Credit Agreement On January 21, 2013, Royal Gold entered into Amendment No. 2 to Fifth Amended and Restated Revolving Credit Agreement (the ‘‘Amendment’’), which amended the Company’s existing Fifth Amended and Restated Revolving Credit Agreement, dated May 30, 2012 (as amended from time to time, the ‘‘Revolving Credit Agreement’’), among Royal Gold, as the borrower, certain subsidiaries of Royal Gold, as guarantors, HSBC Bank USA, National Association, as administrative agent and a lender, The Bank of Nova Scotia, as a lender, Goldman Sachs Bank USA, as a lender, and the other lenders from time to time party thereto, HSBC Securities (USA) Inc., as the sole lead arranger and joint bookrunner, and ScotiaBank, as syndication agent and joint bookrunner. The Amendment revised the Revolving Credit Agreement to, among other things, (i) remove the current ratio, interest coverage ratio and debt service coverage ratio financial covenants, (ii) add a financial covenant requiring the Company to maintain a secured debt ratio below a certain level, (iii) increase the amount of unsecured indebtedness the Company is permitted to incur subject to its pro forma compliance with a leverage ratio test and to allow certain prepayments, refinancing and replacement of such unsecured indebtedness, (iv) increase the interest rate for borrowings under the Revolving Credit Agreement when the leverage ratio exceeds 3.0 to 1.0 and (v) take certain acquisitions into account in determining compliance with financial covenants. Except as set forth in the Amendment, all other terms and conditions of the Revolving Credit Agreement remain in full force and effect. Dividend Increase On November 14, 2012, we announced an increase in our annual dividend for calendar 2013 from $0.60 to $0.80, payable on a quarterly basis of $0.20 per share. The newly declared dividend is 33% higher than the dividend paid during calendar 2012. The first quarter calendar 2013 dividend of $0.20 per share was paid on January 18, 2013, to shareholders of record at the close of business on January 4, 2013. The quarterly dividend of US$0.20 is also payable to holders of exchangeable shares of RG Exchangeco Inc. (‘‘RG Exchangeco’’). Common Stock Offering On October 15, 2012, we sold 5,250,000 shares of our common stock, at a price of $90.00 per share, resulting in proceeds of $472.5 million before expenses. The Company has invested the proceeds from this offering in United States treasury bills or cash bank accounts and intends to use the net 42 proceeds from the offering for the acquisition of additional royalty interests and for general corporate purposes. Summary of Cash Flows Operating Activities Net cash provided by operating activities totaled $172.6 million for the fiscal year ended June 30, 2013, compared to $162.2 million for the fiscal year ended June 30, 2012. The increase was primarily due to an increase in proceeds received from our royalty interests, net of production taxes, of approximately $14.8 million. The increase was partially offset by an increase in interest payments made of approximately $5.9 million. Net cash provided by operating activities totaled $162.2 million for the fiscal year ended June 30, 2012, compared to $147.0 million for the fiscal year ended June 30, 2011. The increase was primarily due to an increase in proceeds received from our royalty interests, net of production taxes, of approximately $48 million. This increase was partially offset by an increase in tax payments of approximately $20.7 million. Investing Activities Net cash used in investing activities totaled $309.4 million for the fiscal year ended June 30, 2013, compared to $271.4 million for the fiscal year ended June 30, 2012. The increase in cash used in investing activities is primarily due to an increase in acquisitions of royalty interests in mineral properties (primarily Mt. Milligan funding) compared to our fiscal year 2012. Net cash used in investing activities totaled $271.4 million for the fiscal year ended June 30, 2012, compared to $306.3 million for the fiscal year ended June 30, 2011. The decrease in cash used in investing activities is primarily due to a decrease in cash used for acquisitions of royalty interests in mineral properties compared to our fiscal year 2011. Financing Activities Net cash provided by financing activities totaled $425.4 million for the fiscal year ended June 30, 2013, compared to cash provided by financing activities of $370.5 million for the fiscal year ended June 30, 2012. The increase is primarily attributable to proceeds received ($472.5 million) from our October 2012 equity offering. During the fiscal year ended June 30, 2013 and 2012, the Company made debt repayments of $0 and $326.1 million, respectively, and paid common stock dividends of $43.9 million and $29.5 million, respectively. Net cash provided by financing activities totaled $370.5 million for the fiscal year ended June 30, 2012, compared to cash used in financing activities of $51.4 million for the fiscal year ended June 30, 2011. The increase in net cash provided by financing activities is primarily due to (i) net proceeds from the 2019 Notes ($359.0 million) and (ii) the sale by the Company in January 2012 of 4,000,000 shares of its common stock, at a price of $67.10 per share, resulting in proceeds of approximately $268.4 million. In December 2011, the Company borrowed $100 million under its revolving credit facility to help fund the Mt. Milligan II Acquisition. In February 2012, the Company used a portion of the net proceeds of the sale of its securities to repay the outstanding amounts under its revolving credit facility. In June 2012, the Company used a portion of the proceeds from the issuance of the 2019 Notes and repaid all amounts ($110.6 million) outstanding under the term loan. During the fiscal year ended June 30, 2012 and 2011, the Company made debt repayments of $326.1 and $41.9 million, respectively, and paid common stock dividends of $29.5 million and $22.1 million, respectively. 43 Contractual Obligations Our contractual obligations as of June 30, 2013, are as follows: Contractual Obligations Payments Due by Period (in thousands) Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years 2019 Notes(1) . . . . . . . . . . . . $433,825 $10,637 $21,275 $21,275 $380,638 Total . . . . . . . . . . . . . . . . . . $433,825 $10,637 $21,275 $21,275 $380,638 (1) Amounts represent principal ($370 million) and estimated interest payments ($63.8 million) assuming no early extinguishment. For information on our contractual obligations, see Note 6 of the notes to consolidated financial statements under Part II, Item 8, ‘‘Financial Statements and Supplementary Data’’ of this report. Royal Gold believes it will be able to fund all existing obligations from net cash provided by operating activities. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Results of Operations Fiscal Year Ended June 30, 2013, Compared with Fiscal Year Ended June 30, 2012 For the fiscal year ended June 30, 2013, we recorded net income available to Royal Gold common stockholders of $69.2 million, or $1.09 per basic share and diluted share, compared to net income available to Royal Gold common stockholders of $92.5 million, or $1.61 per basic share and diluted share, for the fiscal year ended June 30, 2012. The decrease in our net income available to Royal Gold common stockholders and earnings per share were primarily attributable to an other-than-temporary impairment loss recognized on our available-for-sale securities, an increase in general and administrative expense, an increase in depletion expense, and an increase interest expense associated with our 2019 Notes, each of which are discussed below. The decrease in our earnings per share was also attributable to the issuance of 5.25 million shares of common stock in October 2012 as part of a registered offering. The decrease in our net income available to Royal Gold common stockholders and earnings per share were partially offset by an increase in royalty revenue during the period, which is discussed below. For fiscal year ended June 30, 2013, we recognized total royalty revenue of $289.2 million, at an average gold price of $1,605 per ounce, an average silver price of $28.97 per ounce, an average nickel price of $7.44 per pound and an average copper price of $3.48 per pound, compared to total royalty revenue of $263.1 million, at an average gold price of $1,673 per ounce, an average silver price of $33.26 per ounce, an average nickel price of $8.77 per pound and an average copper price of $3.71 per pound, for fiscal year ended June 30, 2012. Royalty revenue and the corresponding production, 44 attributable to our royalty interests, for the fiscal year ended June 30, 2013 compared to the fiscal year ended June 30, 2012 is as follows: Royalty Revenue and Production Subject to our Royalty Interests Fiscal Years Ended June 30, 2013 and 2012 (In thousands, except reported production in ozs. and lbs.) Fiscal Year Ended June 30, 2013 Fiscal Year Ended June 30, 2012 Royalty Metal(s) Andacollo . . . . . . . . . . . . . . Gold Voisey’s Bay . . . . . . . . . . . . Royalty Revenue $ 82,272 $ 32,517 Nickel Copper Pe˜nasquito . . . . . . . . . . . . . $ 28,005 Gold Silver Lead Zinc Holt . . . . . . . . . . . . . . . . . . Gold Mulatos . . . . . . . . . . . . . . . Gold Robinson . . . . . . . . . . . . . . $ 19,028 $ 17,376 $ 15,664 Gold Copper Cortez . . . . . . . . . . . . . . . . Gold Canadian Malartic . . . . . . . Gold Las Cruces . . . . . . . . . . . . . Copper Leeville . . . . . . . . . . . . . . . Gold Wolverine . . . . . . . . . . . . . . $ 8,980 $ 8,043 $ 8,012 $ 6,893 6,353 $ Dolores . . . . . . . . . . . . . . . Gold Silver Gold Silver $ 4,767 Other(2) . . . . . . . . . . . . . . . Various $ 51,314 Total Royalty Revenue . . . $289,224 Reported Production(1) 68,600 oz. 143.9 million lbs. 101.9 million lbs. 371,100 oz. 21.1 million oz. 126.3 million lbs. 282.3 million lbs. 56,400 oz. 218,000 oz. 49,100 oz. 146.2 million lbs. 82,100 oz. 347,000 oz. 153.4 million lbs. 232,000 oz. 11,300 oz. 2.8 million oz. 56,700 oz. 3.2 million oz. N/A Royalty Revenue $ 64,075 $ 36,030 $ 28,468 $ 14,966 $ 13,794 $ 11,687 $ 13,160 7,133 $ 6,448 $ 9,159 $ 2,155 $ $ 5,323 $ 50,656 $263,054 Reported Production(1) 51,400 oz. 131.6 million lbs. 107.2 million lbs. 294,500 oz. 21.5 million oz. 164.0 million lbs. 312.6 million lbs. 41,200 oz. 169,300 oz. 31,000 oz. 105.3 million lbs. 116,700 oz. 297,500 oz. 119.1 million lbs. 305,100 oz. 1,300 oz. 1.0 million oz. 61,200 oz. 3.1 million oz. N/A (1) Reported production relates to the amount of metal sales, subject to our royalty interests, for the twelve months ended June 30, 2013 and June 30, 2012, as reported to us by the operators of the mines. (2) Individually, no royalty included within the ‘‘Other’’ category contributed greater than 5% of our total royalty revenue for either period. The increase in royalty revenue for the fiscal year ended June 30, 2013, compared with the fiscal year ended June 30, 2012, resulted primarily from reported production increases at Andacollo, Holt, Las Cruces, Mulatos and Robinson and the continued ramp-up at Canadian Malartic and Wolverine. These increases were partially offset by a decrease in the average gold, silver, copper and nickel prices and decreases in reported production at Voisey’s Bay (copper), Cortez , Leeville and Dolores. Refer to Part I, Item 2, Properties, for discussion and any updates on our principal producing properties. 45 General and administrative expenses increased to $23.7 million for the fiscal year ended June 30, 2013, from $20.4 million for the fiscal year ended June 30, 2012. The increase was primarily due to an increase in legal fees, tax consulting and general consulting fees associated with business development activities during the period. Depreciation, depletion and amortization expense increased to $85.0 million for the fiscal year ended June 30, 2013, from $75.0 million for the fiscal year ended June 30, 2012. The increase was primarily attributable to production increases at Andacollo, Holt, Las Cruces, Mulatos and Robinson, which resulted in additional depletion expense of approximately $6.9 million during the period. The increase was also attributable to the continued ramp-up at Canadian Malartic and Wolverine, which resulted in additional depletion expense of approximately $5.0 million during the period. These increases were partially offset by production decreases at Leeville and certain of the Company’s non-principal properties, which resulted in a decrease in depletion expense of $1.9 million during the period. During the fiscal year ended June 30, 2013, the Company recognized a $12.1 million loss on available-for-sale securities related to an other-than-temporary impairment on its investment in Seabridge common stock. The effect of the recognized loss, net of tax, during the fiscal year ended June 30, 2013, was $0.23 per basic share. Refer to Note 5 of the notes to consolidated financial statements in this Annual Report on Form 10-K for further discussion on the other-than-temporary impairment loss. Interest and other expense increased to $25.1 million for the fiscal year ended June 30, 2013, from $7.7 million for the fiscal year ended June 30, 2012. The increase was primarily attributable to interest expense associated with our 2019 Notes issued in June 2012. Interest expense recognized on the 2019 Notes for the fiscal year ended June 30, 2013, was $20.7 million and included the contractual coupon interest ($10.6 million), the accretion of the debt discount ($9.0 million) and amortization of the debt issuance costs ($1.1 million). During the fiscal year ended June 30, 2013, the Company made $10.5 million in interest payments on our 2019 Notes. The Company is required to make semi-annual interest payments on the outstanding principal balance of the 2019 Notes on June 15 and December 15 of each year. During the fiscal year ended June 30, 2013, we recognized income tax expense totaling $63.8 million compared with $54.7 million during the fiscal year ended June 30, 2012. This resulted in an effective tax rate of 46.5% during the current period, compared with 35.8% in the prior period. The increase in the effective tax rate for the twelve months ended June 30, 2013 is primarily related to (i) no tax benefit on the recognized loss on available-for-sale securities, (ii) an increase in tax expense associated with the increase in foreign currency exchange gains, and (iii) an increase in tax expense related to changes in estimates for uncertain tax positions. Excluding the recognized loss on available-for-sale securities, the effective tax rate for the fiscal year ended June 30, 2013 would have been 40.9%. Fiscal Year Ended June 30, 2012, Compared with Fiscal Year Ended June 30, 2011 For the fiscal year ended June 30, 2012, we recorded net income available to Royal Gold common stockholders of $92.5 million, or $1.61 per basic share and diluted share, compared to net income available to Royal Gold common stockholders of $71.4 million, or $1.29 per basic and diluted share, for the fiscal year ended June 30, 2011. The increase in our earnings per share was primarily attributable to an increase in royalty revenue, as discussed further below. This increase was partially offset by an increase in production taxes, depletion expense, income tax expense and the royalty restructuring charge during the period, each of which are discussed further below. For fiscal year ended June 30, 2012, we recognized total royalty revenue of $263.1 million, at an average gold price of $1,673 per ounce, an average silver price of $33.26 per ounce, an average nickel 46 price of $8.77 per pound and an average copper price of $3.71 per pound, compared to total royalty revenue of $216.5 million, at an average gold price of $1,369 per ounce, an average silver price of $28.61 per ounce, an average nickel price of $10.86 per pound and an average copper price of $3.92 per pound, for fiscal year ended June 30, 2011. Royalty revenue and the corresponding production, attributable to our royalty interests, for the fiscal year ended June 30, 2012 compared to the fiscal year ended June 30, 2011 is as follows: Royalty Revenue and Production Subject to our Royalty Interests Fiscal Years Ended June 30, 2012 and 2011 (In thousands, except reported production in ozs. and lbs.) Fiscal Year Ended June 30, 2012 Fiscal Year Ended June 30, 2011 Royalty Metal(s) Andacollo . . . . . . . . . . . . . . . . Gold Voisey’s Bay . . . . . . . . . . . . . . Royalty Revenue $ 64,075 $ 36,030 Nickel Copper Pe˜nasquito . . . . . . . . . . . . . . . $ 28,468 Gold Silver Lead Zinc Holt . . . . . . . . . . . . . . . . . . . . Gold Mulatos . . . . . . . . . . . . . . . . . Gold Cortez . . . . . . . . . . . . . . . . . . Gold Robinson . . . . . . . . . . . . . . . . $ 14,966 $ 13,794 $ 13,160 $ 11,687 Gold Copper Leeville . . . . . . . . . . . . . . . . . . Gold Canadian Malartic . . . . . . . . . . Gold Las Cruces . . . . . . . . . . . . . . . Copper Dolores . . . . . . . . . . . . . . . . . . $ $ $ $ 9,159 7,133 6,448 5,323 Wolverine . . . . . . . . . . . . . . . . Gold Silver Gold Silver $ 2,155 Reported Production(1) 51,400 oz. 131.6 million lbs. 107.2 million lbs. 294,500 oz. 21.5 million oz. 164.0 million lbs. 312.6 million lbs. 41,200 oz. 169,300 oz. 116,700 oz. 31,000 oz. 105.3 million lbs. 305,100 oz. 297,500 oz. 119.1 million lbs. 61,200 oz. 3.1 million oz. 1,300 oz. 1.0 million oz. Royalty Revenue $ 43,604 $ 32,677 $ 21,540 $ 3,190 $ 10,152 $ 17,240 $ 12,377 $ 10,692 797 $ 4,467 $ 4,457 $ $ 667 Other(2) . . . . . . . . . . . . . . . . . . Various $ 50,656 Total Royalty Revenue . . . . . $263,054 N/A $ 54,609 $216,469 Reported Production(1) 42,300 oz. 112.5 million lbs. 67.8 million lbs. 206,700 oz. 17.3 million oz. 132.9 million lbs. 217.0 million lbs. 11,800 oz. 150,500 oz. 192,200 oz. 49,700 oz. 93.7 million lbs. 443,300 oz. 35,300 oz. 74.7 million lbs. 60,000 oz. 2.6 million oz. 900 oz. 258,500 oz. N/A (1) Reported production relates to the amount of metal sales, subject to our royalty interests, for the twelve months ended June 30, 2012 and June 30, 2011, as reported to us by the operators of the mines. (2) Individually, no royalty included within the ‘‘Other’’ category contributed greater than 5% of our total royalty revenue for either period. The increase in royalty revenue for the fiscal year ended June 30, 2012, compared with the fiscal year ended June 30, 2011, resulted primarily from an increase in the average gold and silver prices, increased reported production at Andacollo, Voisey’s Bay, Mulatos and Dolores, the continued ramp-up 47 at Pe˜nasquito, Holt, Las Cruces, Canadian Malartic and Wolverine. These increases were partially offset during the period due to decreases in reported production at Cortez, Leeville and Robinson. Refer to Part I, Item 2, Properties, for discussion and any updates on our principal producing properties. Depreciation, depletion and amortization expense increased to $75.0 million for the fiscal year ended June 30, 2012, from $67.4 million for the fiscal year ended June 30, 2011. The increase was primarily attributable to an increase in production at Andacollo, Voisey’s Bay and Las Cruces, which resulted in additional depletion expense of approximately $8.3 million during the period. The increase was also attributable to the continued ramp-up at Holt and Canadian Malartic, which resulted in additional depletion expense of approximately $4.3 million during the period. These increases were partially offset by a decrease in depletion at Taparko of approximately $4.3 million, which was due to the dollar cap being met during fiscal year 2011. During the fiscal year ended June 30, 2012, we recognized income tax expense totaling $54.7 million compared with $39.0 million during the fiscal year ended June 30, 2011. This resulted in an effective tax rate of 35.8% during the current period, compared with 33.5% in the prior period. The increase in the effective tax rate for the twelve months ended June 30, 2012 is primarily related to an increase in tax expense and valuation allowances related to earnings from non-U.S. subsidiaries offset by a decrease in tax expense associated with the decrease in foreign currency exchange gains and the effect of excess depletion. 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 Annual Report on Form 10-K 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 production estimates and estimates pertaining to timing and commencement of production from the operators of properties where we hold royalty interests; the adequacy of financial resources and funds to cover anticipated expenditures for general and administrative expenses as well as costs associated with exploration and business development and capital expenditures, and our expectation that substantially all our revenues will be derived from 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 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: (cid:129) changes in gold and other metals prices on which our royalty interests are paid or changes in prices of the primary metals mined at properties where we hold royalty interests; (cid:129) the production at or performance of properties where we hold royalty interests; (cid:129) the ability of operators to bring projects, particularly development stage properties, into production on schedule or operate in accordance with feasibility studies; (cid:129) 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 or other third parties; (cid:129) decisions and activities of the operators of properties where we hold royalty interests; 48 (cid:129) liquidity or other problems our operators may encounter; (cid:129) hazards and risks at the properties where we hold royalty interests that are normally associated with developing and mining properties, including unanticipated grade 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 floods or earthquakes and access to raw materials, water and power; (cid:129) changes in project parameters as plans of the operators of properties where we hold royalty interests are refined; (cid:129) changes in estimates of reserves and mineralization by the operators of properties where we hold royalty interests; (cid:129) contests to our royalty interests and title and other defects to the properties where we hold royalty interests; (cid:129) economic and market conditions; (cid:129) future financial needs; (cid:129) federal, state and foreign legislation governing us or the operators of properties where we hold royalty interests; (cid:129) the availability of royalty interests for acquisition or other acquisition opportunities and the availability of debt or equity financing necessary to complete such acquisitions; (cid:129) our ability to make accurate assumptions regarding the valuation, timing and amount of revenue to be derived from our royalty interests when evaluating acquisitions; (cid:129) risks associated with conducting business in foreign countries, including application of foreign laws to contract and other disputes, environmental, real estate, contract 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; (cid:129) changes in laws governing us, the properties where we hold royalty interests or the operators of such properties; (cid:129) 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; (cid:129) acquisition and maintenance of permits and authorizations, completion of construction and commencement and continuation of production at the properties where we hold royalty interests; (cid:129) changes in management and key employees; and (cid:129) failure to complete future acquisitions. as well as other factors described elsewhere in this report and our other reports filed with the SEC. 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. 49 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE 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, nickel 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 royalty interests and reduce our revenues. Certain contracts governing our royalty interests have features that may amplify the negative effects of a drop in metal prices,’’ under Part I, Item 1A, Risk Factors, of this report for more information on factors that can affect gold, silver, copper, nickel and other metal prices as well as historical gold, silver, copper and nickel prices. During the fiscal year ended June 30, 2013, we reported royalty revenues of $289.2 million, with an average gold price for the period of $1,605 per ounce, an average silver price for the period of $28.97 per ounce, an average copper price of $3.48 per pound and an average nickel price of $7.44 per pound. Approximately 70% of our total recognized revenues for the fiscal year ended June 30, 2013 were attributable to gold sales from our gold producing interests, as shown within the MD&A. For the fiscal year ended June 30, 2013, 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 $22.6 million and $22.2 million, respectively. Approximately 7% of our total recognized revenues for the fiscal year ended June 30, 2013 were attributable to silver sales from our silver producing interests. For the fiscal year ended June 30, 2013, if the price of silver had averaged 10% higher or lower per ounce, we would have recorded an increase or decrease in revenues of approximately $2.3 million. Approximately 11% of our total recognized revenues for the fiscal year ended June 30, 2013 were attributable to copper sales from our copper producing interests. For the fiscal year ended June 30, 2013, if the price of copper had averaged 10% higher or lower per pound, we would have recorded an increase or decrease in revenues of approximately $3.6 million. Approximately 8% of our total recognized revenues for the fiscal year ended June 30, 2013 were attributable to nickel sales from our nickel producing interests. For the fiscal year ended June 30, 2013, if the price of nickel had averaged 10% higher or lower per pound, we would have recorded an increase or decrease in revenues of approximately $3.3 million. 50 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM . . . . . . . . . . . CONSOLIDATED BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME . . . CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY . . . . . . . . . . . . . . . . . . . . . . . CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 52 53 54 55 56 57 51 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Royal Gold, Inc. We have audited the accompanying consolidated balance sheets of Royal Gold, Inc. as of June 30, 2013 and 2012, and the related consolidated statements of operations and comprehensive income, changes in equity and cash flows for each of the three years in the period ended June 30, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Royal Gold, Inc. at June 30, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2013, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Royal Gold, Inc.’s internal control over financial reporting as of June 30, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated August 8, 2013 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Denver, Colorado August 8, 2013 52 ROYAL GOLD, INC. Consolidated Balance Sheets As of June 30, (In thousands except share data) ASSETS Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Royalty receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Royalty interests in mineral properties, net (Note 4) . . . . . . . . . . . . . . . . . . . Available-for-sale securities (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 2012 $ 664,035 50,385 15,158 14,919 744,497 2,120,268 9,695 30,881 $ 375,456 53,946 11,046 4,760 445,208 1,890,988 15,015 25,155 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,905,341 $2,376,366 LIABILITIES Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign withholding taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Uncertain tax positions (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,838 13,009 15,518 3,720 35,085 302,263 174,267 21,166 1,924 534,705 $ 2,615 8,947 224 3,423 15,209 293,248 182,037 19,469 2,974 512,937 Commitments and contingencies (Note 15) EQUITY Preferred stock, $.01 par value, authorized 10,000,000 shares authorized; and 0 shares issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock, $.01 par value, 100,000,000 shares authorized; and 64,184,036 and 58,614,221 shares outstanding, respectively . . . . . . . . . . . . . . . . . . . . . Exchangeable shares, no par value, 1,806,649 shares issued, less 1,139,420 and 1,007,823 redeemed shares, respectively . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Royal Gold stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 642 — 586 29,365 2,142,173 (4,572) 181,279 2,348,887 21,749 35,156 1,656,357 (13,763) 160,123 1,838,459 24,970 Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,370,636 1,863,429 Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,905,341 $2,376,366 The accompanying notes are an integral part of these consolidated financial statements. 53 Consolidated Statements of Operations and Comprehensive Income ROYAL GOLD, INC. For The Years Ended June 30, (In thousands except share data) Royalty revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 289,224 $ 263,054 $ 216,469 2013 2012 2011 Costs and expenses General and administrative . . . . . . . . . . . . . . . . . . . . . . . Production taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation, depletion and amortization . . . . . . . . . . . . . Restructuring on royalty interests in mineral properties . . . Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on available-for-sale securities . . . . . . . . . . . . . . . . . . . Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . . Interest and other expense . . . . . . . . . . . . . . . . . . . . . . . . . 23,690 9,010 85,020 — 117,720 171,504 (12,121) 2,902 (25,117) 20,393 9,444 75,001 1,328 106,166 156,888 — 3,836 (7,705) 21,106 9,039 67,399 — 97,544 118,925 — 5,088 (7,740) Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . 137,168 153,019 116,273 Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63,759) (54,710) (38,974) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income attributable to non-controlling interests . . . . . . . Net income available to Royal Gold common stockholders . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to comprehensive income, net of tax Unrealized change in market value of available for sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recognized loss on available-for-sale securities . . . . . . . . . Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive income attributable to non-controlling 73,409 (4,256) 69,153 73,409 $ $ 98,309 (5,833) 92,476 98,309 $ $ $ $ (4,526) 13,716 82,599 (13,817) — 84,492 77,299 (5,904) 71,395 77,299 89 — 77,388 interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,256) (5,833) (5,904) Comprehensive income attributable to Royal Gold stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,343 $ 78,659 $ 71,484 Net income per share available to Royal Gold common stockholders: Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.09 $ 1.61 $ 1.29 Basic weighted average shares outstanding . . . . . . . . . . . . . . 63,250,247 57,220,040 55,053,204 Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.09 $ 1.61 $ 1.29 Diluted weighted average shares outstanding . . . . . . . . . . . . 63,429,822 57,463,850 55,323,410 Cash dividends declared per common share . . . . . . . . . . . . . $ 0.75 $ 0.56 $ 0.42 The accompanying notes are an integral part of these consolidated financial statements. 54 Balance at June 30, 2011 . . Issuance of common stock for: . . . . . . . . . . . . . . . Equity offering . . . Exchange of exchangeable shares . . 2019 convertible senior notes, net of tax . Stock-based compensation and related share . . . . . . . . . . issuances . . Net income . . . Other comprehensive income (loss) . Distribution to non-controlling interests . . Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at June 30, 2012 . . Issuance of common stock for: . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity offering . . Exchange of exchangeable shares . . . . . . . Other Stock-based compensation and related share . . . . . . . . . . issuances . . Net income . . Other comprehensive income . . Distribution to non-controlling interests . . Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ROYAL GOLD, INC. Consolidated Statements of Changes in Equity For the Years Ended June 30, 2013, 2012 and 2011 (In thousands except share data) Royal Gold Stockholders Common Shares Exchangeable Shares Shares Amount Shares Amount Additional Accumulated Other Paid-In Comprehensive Accumulated Capital Income (Loss) Earnings Treasury Stock Shares Amount Non- controlling interests Total Equity Balance at June 30, 2010 . . Issuance of common stock for: . . . . . . . . . 53,324,171 $534 1,630,109 $ 71,741 $1,284,087 $ (34) $ 51,862 96,675 $(4,474) $29,832 $1,433,548 . . . . . . . Exchange of exchangeable shares . . Retirement of treasury stock . . . Stock-based compensation and related share . . . . . . . . . . issuances . . Net income . . Other comprehensive income . . Distribution to non-controlling interests . . Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 724,314 (22,245) 6 (1) (724,314) — (31,877) — 31,871 (4,502) 205,547 — — — — 4 — — — — — — — — — — — — — — 8,241 — — — — . . . . . . . . . 54,231,787 $543 905,795 $ 39,864 $1,319,697 $ . . . . . . . . 4,000,000 106,969 — 275,465 — — — — 40 1 — 2 — — — — — (106,969) — — 267,393 4,707 47,605 (4,708) — — — — — — — — — — — 16,955 — — — — — — (13,817) — — — — — — 88 — — 54 — — — — — — (96,675) — 4,474 — — — 71,395 — — (23,253) — — — — — — — — — — — 5,904 — (8,203) — — (29) 8,245 77,299 88 (8,203) (23,253) $100,004 — $ — $27,533 $1,487,695 — — — — 92,476 — — (32,357) — — — — — — — — — — — — — — — — — — — — 5,833 — (8,396) — 267,433 — 47,605 16,957 98,309 (13,817) (8,396) (32,357) . . . . . . . . . 58,614,221 $586 798,826 $ 35,156 $1,656,357 $(13,763) $160,123 — $ — $24,970 $1,863,429 . . . . . . . . 5,250,000 131,597 — 188,218 — — — — 53 1 — 2 — — — — — (131,597) — — 471,815 5,790 765 (5,791) — — — — — — — — — — — 7,446 — — — — — — — — — 9,191 — — — — — — 69,153 — — (47,997) — — — — — — — — — — — — — — — — — — — — 4,256 — (7,477) — 471,868 — 765 7,448 73,409 9,191 (7,477) (47,997) Balance at June 30, 2013 . . . . . . . . . . . 64,184,036 $642 667,229 $ 29,365 $2,142,173 $ (4,572) $181,279 — $ — $21,749 $2,370,636 The accompanying notes are an integral part of these consolidated financial statements. 55 ROYAL GOLD, INC. Consolidated Statements of Cash Flows For the Years Ended June 30, (In thousands) Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization . . . . . . . . . . . . . . . . . . . . . . . . Non-cash employee stock compensation expense . . . . . . . . . . . . . . . . . . . Gain on distribution to non-controlling interest . . . . . . . . . . . . . . . . . . . . Amortization of debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recognized loss on available-for-sale securities . . . . . . . . . . . . . . . . . . . . Restructuring on royalty interests in mineral properties . . . . . . . . . . . . . . Tax benefit of stock-based compensation exercises . . . . . . . . . . . . . . . . . . Deferred tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in assets and liabilities: Royalty receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign withholding taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes payable (receivable) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 2012 2011 $ 73,409 $ 98,309 $ 77,299 85,020 5,701 (2,837) 9,015 12,121 — (2,966) (11,419) 100 3,562 (12,300) 113 15,294 (3,127) 944 75,001 6,507 (3,725) — — 1,328 (6,348) 1,571 2,117 (5,118) 88 530 19 (7,179) (936) 67,399 6,494 (3,258) — — — (1,325) (5,136) — (8,465) 2,247 (930) 205 5,527 6,900 Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . $ 172,630 $ 162,164 $ 146,957 Cash flows from investing activities: Acquisition of royalty interests in mineral properties . . . . . . . . . . . . . . . . Acquisition of available for sale securities . . . . . . . . . . . . . . . . . . . . . . . Proceeds on sale of inventory—restricted . . . . . . . . . . . . . . . . . . . . . . . . Deferred acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (314,262) — 4,916 — (96) (276,683) — 5,514 (11) (176) (280,009) (28,574) 5,097 (117) (2,660) Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(309,442) $(271,356) $(306,263) Cash flows from financing activities: Net proceeds from debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . Common stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution to non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . Tax benefit of stock-based compensation exercises . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457,023 — — (326,100) 271,536 (29,504) (8,810) 6,348 — 473,771 (43,934) (7,412) 2,966 — 18,532 (41,900) — (22,130) (7,158) 1,325 (54) Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . $ 425,391 $ 370,493 $ (51,385) Net increase (decrease) in cash and equivalents . . . . . . . . . . . . . . . . . . . . . Cash and equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . 288,579 375,456 261,301 114,155 (210,691) 324,846 Cash and equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 664,035 $ 375,456 $ 114,155 See Note 12 for supplemental cash flow information. The accompanying notes are an integral part of these consolidated financial statements. 56 ROYAL GOLD, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY Royal Gold, Inc. (‘‘Royal Gold’’, the ‘‘Company’’, ‘‘we’’, ‘‘us’’, or ‘‘our’’), together with its subsidiaries, is engaged in the business of acquiring and managing precious metals royalties, precious metals streams and similar 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, and we use the term ‘‘royalty interest’’ in these notes to the consolidated financial statements to refer to royalties, gold, silver or other metal stream interests, and other similar interests. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS Summary of Significant Accounting Policies Use of Estimates The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from those estimates. Basis of Consolidation The consolidated financial statements include the accounts of Royal Gold, Inc., its wholly-owned subsidiaries and an entity over which control is achieved through means other than voting rights. The Company follows the Accounting Standards Codification (‘‘ASC’’) guidance for identification and reporting for entities over which control is achieved through means other than voting rights. The guidance defines such entities as Variable Interest Entities (‘‘VIEs’’). As discussed further in Note 16, the Company identified Crescent Valley Partners, L.P. (‘‘CVP’’) as a VIE due to the legal structure and certain related factors. The identified VIEs are not material to the Company’s overall operations or consolidated balance sheets either individually or in the aggregate. Intercompany transactions and account balances have been eliminated in consolidation. Cash and Equivalents Cash and equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Cash and equivalents are primarily held in cash deposit accounts and United States treasury bills with maturities less than 90 days. Royalty Interests in Mineral Properties Royalty interests in mineral properties include acquired royalty interests in production, development and exploration stage properties. The cost of acquired royalty interests in mineral properties are capitalized as tangible assets as such interests do not meet the definition of a financial asset under ASC guidance. Acquisition costs of production stage royalty interests are depleted using the units of production method over the life of the mineral property, which is estimated using proven and probable reserves as provided by the operator. Acquisition costs of royalty interests on development stage mineral properties, which are not yet in production, are not amortized until the property begins production. 57 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS (Continued) Acquisition costs of royalty interests on exploration stage mineral properties, where there are no proven and probable reserves, are not amortized. At such time as the associated exploration stage mineral interests are converted to proven and probable reserves, the cost basis is amortized over the remaining life of the mineral property, using proven and probable reserves. The carrying values of exploration stage mineral interests are evaluated for impairment at such time as information becomes available indicating that the costs may not be recoverable from future production. Exploration costs are charged to operations when incurred. Available-for-Sale Securities Investments in securities that management does not have the intent to sell in the near term and that have readily determinable fair values are classified as available-for-sale securities. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive income as a separate component of stockholders’ equity, except that declines in market value judged to be other than temporary are recognized in determining net income. When investments are sold, the realized gains and losses on these investments, determined using the specific identification method, are included in determining net income. The Company’s policy for determining whether declines in fair value of available-for-sale securities are other than temporary includes a quarterly analysis of the investments and a review by management of all investments for which the cost exceeds the fair value. Any temporary declines in fair value are recorded as a charge to other comprehensive income. This evaluation considers a number of factors including, but not limited to, the length of time and extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, and management’s ability and intent to hold the securities until fair value recovers. If such impairment is determined by the Company to be other-than-temporary, the investment’s cost basis is written down to fair value and recorded in net income during the period the Company determines such impairment to be other-than-temporary. The new cost basis is not changed for subsequent recoveries in fair value. Refer to Note 5 for further discussion on our available-for-sale securities. 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 royalty interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each royalty interest property using estimates of proven and probable reserves and other relevant information received from the operator. 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, nickel and other metals, and whenever new information regarding the mineral properties is obtained from the operator indicating that production will not likely occur in the future, thus affecting the future recoverability of our 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. 58 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS (Continued) Our estimates of gold, silver, copper, nickel and other metal prices, operator’s estimates of proven and probable reserves related to our royalty interests, and operator’s estimates of operating, capital and reclamation costs are subject to certain risks and uncertainties which may affect the recoverability of our investment in these royalty interests in mineral properties. Although we have made our best assessment of these factors based on current conditions, it is possible that changes could occur, which could adversely affect the net cash flows expected to be generated from these royalty interests. As part of the Company’s regular asset impairment analysis, the Company determined that two insignificant valued exploration stage royalty interests should be written down to zero as of June 30, 2013. Royalty Revenue Royalty revenue is recognized in accordance with the guidance of ASC 605 and based upon amounts contractually due pursuant to the underlying royalty agreement. Specifically, revenue is recognized in accordance with the terms of the underlying royalty agreements subject to (i) the pervasive evidence of the existence of the arrangements; (ii) the risks and rewards having been transferred; (iii) the royalty being fixed or determinable; and (iv) the collectability of the royalty being reasonably assured. For royalty payments received in-kind, royalty revenue is recorded at the average spot price of gold for the period in which the royalty was earned. Revenue recognized pursuant to the Robinson royalty agreement is based upon 3.0% of revenue received by the operator of the mine, KGHM International Ltd. (‘‘KGHM’’), for the sale of minerals from the Robinson mine, reduced by certain costs incurred by KGHM. KGHM’s concentrate sales contracts with third-party smelters, in general, provide for an initial sales price payment based upon provisional assays and quoted metal prices at the date of shipment. Final true-up sales price payments to KGHM are subsequently based upon final assay and market metal prices on a specified future date, typically one to three months after the date the concentrate arrives at the third-party smelter (which generally occurs four to five months after the shipment date from the Robinson mine). We do not have all the key information regarding the terms of the operator’s smelter contracts, such as the terms of specific concentrate shipments to a smelter or quantities of metal or expected settlement arrangements at the time of an operator’s shipment of concentrate. Each monthly payment from KGHM is typically a combination of revenue received by KGHM for provisional payments during the month and any upward or downward adjustments for final assays and commodity prices for earlier shipments. Whether the payment to Royal Gold is based on KGHM’s revenue in the form of provisional or final payments, Royal Gold records royalty revenue and the corresponding receivable based on the monthly amounts it receives from KGHM, as determined pursuant to the royalty agreement. The royalty contract does not provide Royal Gold with rights or obligations to settle any final assay and commodity price adjustments with KGHM. Therefore, once a given monthly payment is received by Royal Gold it is not subject to later adjustment based on adjustments for assays or commodity prices. Under the royalty agreement, KGHM may include such final adjustments as a component of future royalty payments. Income Taxes The Company accounts for income taxes in accordance with the guidance of ASC 740. The Company’s deferred income taxes reflect the impact of temporary differences between the reported 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS (Continued) amounts of assets and liabilities for financial reporting purposes and such amounts measured by tax laws and regulations. The deferred tax assets and liabilities reflect management’s best assessment of estimated future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. 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. A valuation allowance is provided for deferred tax assets when management concludes it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company’s 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. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due. The Company adjusts these reserves in light of changing facts and circumstances; 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. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with the guidance of ASC 718. The Company recognizes all share-based payments to employees, including grants of employee stock options, stock-settled stock appreciation rights (‘‘SSARs’’), restricted stock and performance stock, in its financial statements based upon their fair values. Operating Segments and Geographical Information The Company manages its business under a single operating segment, consisting of the acquisition and management of royalty interests. Royal Gold’s royalty revenue and long-lived assets (royalty interests in mineral properties, net) are geographically distributed as shown in the following table. Royalty Revenue Fiscal Year Ended June 30, Royalty Interests in Mineral Property, net Fiscal Year Ended June 30, 2013 2012 2011 2013 2012 2011 Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . United States . . . . . . . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . . . . . . . . . . . . Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 29% 25% 21% 30% 35% 40% 24% 24% 19% 52% 43% 36% 19% 20% 18% 7% 9% 11% 17% 18% 24% 4% 5% 3% 4% 5% 5% 3% 3% 5% 3% 4% 9% 1% 1% 2% 4% 4% 4% 3% 4% 3% 60 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS (Continued) Comprehensive Income In addition to net income, comprehensive income includes changes in equity during a period associated with cumulative unrealized changes in the fair value of marketable securities held for sale, net of tax effects. Earnings per Share Basic earnings per share is computed by dividing net income available to Royal Gold common stockholders by the weighted average number of outstanding common shares for the period, considering the effect of participating securities, and include the outstanding exchangeable shares. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts that may require issuance of common shares were converted. Diluted earnings per share is computed by dividing net income available to common stockholders by the diluted weighted average number of common shares outstanding, including outstanding exchangeable shares, during each fiscal year. Production taxes Certain royalty payments are subject to production taxes (or mining proceeds taxes), which are recognized at the time of revenue recognition. Production taxes are not income taxes and are included within the costs and expenses section in the Company’s consolidated statements of operations and comprehensive income. Reclassification Certain amounts in the prior period financial statements have been reclassified for comparative purposes to conform with the presentation in the current period financial statements. Recently Adopted Accounting Standards In February 2013, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (‘‘ASU 2013-02’’), which amends the Comprehensive Income Topic of the Accounting Standards Codification. The updated standard requires the presentation of information out of accumulated other comprehensive income. ASU 2013-02 is effective for the Company’s fiscal year beginning July 1, 2013, but early adoption is permitted. The Company elected to early adopt ASU 2013-02. The adoption of ASU 2013-02 did not have an impact on the Company’s consolidated financial position or results of operations. In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income (‘‘ASU 2011-05’’). ASU 2011-05 addresses the presentation of comprehensive income and provides entities with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The Company has elected the single continuous statement of comprehensive income. Pursuant to ASU No. 2011-12, Comprehensive Income (Topic 220)—Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting for Standards Update 61 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS (Continued) No. 2011-05, the provisions of ASU 2011-05 became effective for the Company’s fiscal year beginning July 1, 2012. Since ASU 2011-05 addresses financial presentation only, its adoption did not impact the Company’s consolidated financial position or results of operations. 3. ACQUISITIONS Mt. Milligan II and III Gold Stream Acquisitions On December 14, 2011, Royal Gold and one of its wholly-owned subsidiaries entered into an Amended and Restated Purchase and Sale Agreement with Thompson Creek Metals Company Inc. (‘‘Thompson Creek’’) and one of its wholly-owned subsidiaries. Among other things, Royal Gold agreed to purchase an additional 15% of the payable ounces of gold from the Mt. Milligan copper-gold project in exchange for payment advances totaling $270 million, of which $112 million was paid on December 19, 2011, and, when production is reached, cash payments for each payable ounce of gold delivered to Royal Gold, as discussed further below (the ‘‘Milligan II Acquisition’’). On August 8, 2012, Royal Gold entered into an amendment to its purchase and sale agreement with Thompson Creek whereby Royal Gold, among other things, agreed to purchase an additional 12.25% of the payable gold from the Mt. Milligan copper-gold project in exchange for a total of $200 million, of which $75 million was paid shortly after closing, and, when production is reached, cash payments for each payable ounce of gold delivered to Royal Gold, as discussed further below (the ‘‘Milligan III Acquisition’’). Thompson Creek intends to use the proceeds from the Milligan II and the Milligan III Acquisition to finance a portion of the construction of the Mt. Milligan project and related costs. Under the Milligan III Acquisition, Royal Gold increased its aggregate pre-production commitment in the Mt. Milligan project from $581.5 million to $781.5 million and agreed to purchase a total of 52.25% of the payable ounces of gold produced from the Mt. Milligan project at a cash purchase price equal to the lesser of $435, with no inflation adjustment, or the prevailing market price for each payable ounce of gold (regardless of the number of payable ounces delivered to Royal Gold). As of June 30, 2013, the Company has paid $768.6 million of the aggregate pre-production commitment of $781.5 million. The final remaining scheduled quarterly payment of $12.9 million is due September 1, 2013. Royal Gold’s obligation to make this quarterly payment is subject to the satisfaction of certain conditions included in the agreement governing the Milligan III Acquisition (including that the aggregate amount of historical payments made by Royal Gold plus the final quarterly payment is less than the aggregate costs of developing the Mt. Milligan project incurred or accrued by Thompson Creek as of the date of the quarterly payment). The Mt. Milligan acquisitions have been accounted for as an asset acquisition. The $768.6 million paid as part of the aggregate pre-production commitment of $781.5 million, plus direct transaction costs, have been recorded as a development stage royalty interest within Royalty interests in mineral properties, net on our consolidated balance sheets. Acquisition of Royalty Options on the Kerr-Sulphurets-Mitchell Project and Investment in Seabridge Gold, Inc. On June 16, 2011, the Company, through its wholly-owned subsidiary RG Exchangeco Inc., (‘‘RG Exchangeco’’) entered into a Subscription Agreement and an Option Agreement with Seabridge 62 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 3. ACQUISITIONS (Continued) Gold, Inc. (‘‘Seabridge’’) to (i) make a $30.7 million (C$30 million) initial equity investment in the common shares of Seabridge, (ii) acquire an option to purchase a 1.25% net smelter return royalty (the ‘‘Initial Royalty’’) on all of the gold and silver production from the Kerr-Sulphurets-Mitchell project (the ‘‘Project’’) in northwest British Columbia, (iii) acquire an option to make a second equity investment in the common shares of Seabridge of up to C$18 million and (iv) acquire a second option to increase the Initial Royalty to a 2.00% net smelter return royalty (the ‘‘Increased Royalty’’). Pursuant to the Subscription Agreement, on June 29, 2011, the Company purchased 1,019,000 common shares of Seabridge (the ‘‘Initial Shares’’) in a private placement for $30.7 million (C$30 million) at a per share price equal to $30.14 (C$29.4), which represented a premium of 15% to the volume weighted average trading price of the Seabridge common shares on the Toronto Stock Exchange (‘‘TSX’’) for the five trading day period that ended June 14, 2011. Pursuant to the Option Agreement (as amended by the Amending Agreement dated October 28, 2011, the ‘‘Option Agreement’’), by having held the Initial Shares for more than 270 days from the date they were acquired, the Company obtained the right to purchase the Initial Royalty for C$100 million, payable in three installments over a 540 day period, subject to currency rate adjustments. As of June 30, 2013, the Company continues to hold the Initial Shares but has not exercised its option to acquire the Initial Royalty. On December 13, 2012, RG Exchangeco exercised its option to make a second equity investment in the common shares of Seabridge and purchased 1,004,491 common shares of Seabridge (the ‘‘Additional Shares’’) at a 15% premium to the volume weighted-average trading price of the Seabridge common shares on the TSX for a five day trading period that ended December 11, 2012, for $18.3 million (C$18.0 million). Effective December 13, 2012, the Company entered into a Second Amending Agreement (the ‘‘Seabridge Amendment’’) to the Option Agreement to, among other things, remove the 270 day minimum holding period applicable to the Additional Shares. Upon the Company’s purchase of the Additional Shares, the Company obtained the right, under the Option Agreement, as amended by the Seabridge Amendment, to purchase the Increased Royalty for C$60 million, payable in three installments over a 540 day period. Accordingly, the Company now holds the right to purchase either a 1.25% NSR royalty on all of the gold and silver production from the Project for C$100 million, or a 2.0% NSR royalty for C$160 million. Royal Gold sold the Additional Shares in a private transaction to an unrelated party for $14.6 million (C$14.4 million) on December 13, 2012. The options to purchase the Initial Royalty and the Increased Royalty will remain exercisable by the Company for 60 days following the Company’s satisfaction that, among other items, the Project has received all material approvals and permits and that Seabridge has demonstrated that it has sufficient funding for construction of and commencement of commercial production from the Project. The investment in Seabridge and the Project was accounted for as an asset purchase. As such, the Company has recorded the Initial Shares as an investment in Available-for-sale securities on the consolidated balance sheets; refer to Note 5 for further detail on our investment in available for sale securities. The 15% premium on the Initial Shares and Additional Shares, which represented the value of the option to acquire the Initial Royalty and Increased Royalty, plus direct acquisition costs, has been recorded within Other assets on the consolidated balance sheets. The purchase and same day sale of the Additional Shares resulted in a realized loss on trading securities of approximately $1.3 million, 63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 3. ACQUISITIONS (Continued) which is recorded within Interest and other expense on our consolidated statements of operations and comprehensive income. Ruby Hill Royalty Acquisition On May 23, 2012, the Company entered into and closed a Purchase and Sale Agreement (the ‘‘Agreement’’) with International Minerals Corporation (‘‘IMC’’) and Metallic Ventures (U.S.), Inc., a wholly-owned indirect subsidiary of IMC, pursuant to which the Company acquired a 3.0% net smelter return (‘‘NSR’’) royalty interest on all ores and minerals mined or otherwise recovered from the Ruby Hill mine owned and operated by an affiliate of Barrick Gold Corporation (‘‘Barrick’’) in Eureka County, Nevada, for a purchase price of $38 million. The acquisition of the Ruby Hill royalty interest has been accounted for as an asset acquisition. The total purchase price of $38 million, plus direct transaction costs, has been recorded as a component of Royalty interests in mineral properties, net in our consolidated balance sheets. We have allocated $24.3 million as a production stage royalty interest and $13.7 million as an exploration stage royalty interest. Tulsequah Chief Gold and Silver Stream Acquisition On December 22, 2011, Royal Gold, through one of its wholly-owned subsidiaries, entered into a Purchase and Sale Agreement (the ‘‘Tulsequah Agreement’’) with Chieftain Metals, Inc. (‘‘Chieftain’’) whereby Royal Gold, among other things, agreed to purchase specified percentages of the payable gold and the payable silver produced from the Tulsequah Chief project in British Columbia from Chieftain in exchange for aggregate payment advances to Chieftain of $60 million, $10 million of which was paid on December 28, 2011. Chieftain will use these payment advances to fund a portion of the development costs of the Tulsequah Chief project. Following the initial $10 million payment advance, upon satisfaction of certain conditions set forth in the Tulsequah Agreement, Royal Gold will make additional payments (each, an ‘‘Additional Payment’’) to Chieftain in an amount not to exceed $50 million in the aggregate. Upon commencement of production at the Tulsequah Chief project, Royal Gold will purchase (i) 12.50% of the payable gold with a cash payment equal to the lesser of $450 or the prevailing market price for each payable ounce of gold until 48,000 ounces have been delivered to Royal Gold and 7.50% of the payable gold with a cash payment equal to the lesser of $500 or the prevailing market price for each additional ounce of payable gold thereafter, and (ii) 22.50% of the payable silver with a cash payment equal to the lesser of $5.00 or the prevailing market price for each payable ounce of silver until 2,775,000 ounces have been delivered to Royal Gold and 9.75% of the payable silver with a cash payment equal to the lesser of $7.50 or the prevailing market price for each additional ounce of payable silver thereafter. Under the circumstances described in the Tulsequah Agreement, Royal Gold has the right to suspend its obligations to make all Additional Payments. Upon such a suspension, the streaming percentages for payable gold and payable silver described above will each be reduced to 6.50% for all payable gold and payable silver from the Tulsequah Chief project, although the per ounce cash payment prices will remain the same. The Tulsequah Chief acquisition has been accounted for as an asset acquisition. The $10 million paid at closing, plus direct transaction costs, has been recorded as a development stage royalty interest within Royalty interests in mineral properties, net on our consolidated balance sheets. As of June 30, 2013, Royal Gold has $50 million remaining in Additional Payments to Chieftain. 64 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 4. ROYALTY INTERESTS IN MINERAL PROPERTIES The following summarizes the Company’s principal royalty interests in mineral properties as of June 30, 2013 and 2012: As of June 30, 2013 (Amounts in thousands): Production stage royalty interests: Cost Accumulated Depletion Net Andacollo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Voisey’s Bay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pe˜nasquito . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Las Cruces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mulatos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wolverine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dolores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian Malartic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Holt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gwalia Deeps Inata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ruby Hill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leeville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Robinson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cortez . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 272,998 150,138 99,172 57,230 48,092 45,158 44,878 38,800 34,612 31,070 24,871 24,335 18,322 17,825 10,630 190,702 $ (44,317) $ 228,681 98,257 86,779 45,517 23,547 37,267 36,692 32,480 28,048 23,876 15,568 21,281 2,838 6,601 914 69,048 (51,881) (12,393) (11,713) (24,545) (7,891) (8,186) (6,320) (6,564) (7,194) (9,303) (3,054) (15,484) (11,224) (9,716) (121,654) Development stage royalty interests: Mt. Milligan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pascua-Lama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration stage royalty interests . . . . . . . . . . . . . . . . . . . . . . . 1,108,833 (351,439) 757,394 770,093 372,105 43,352 1,185,550 177,324 — — — 770,093 372,105 43,352 — 1,185,550 177,324 — Total royalty interests in mineral properties . . . . . . . . . . . . . . . . $2,471,707 $(351,439) $2,120,268 65 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 4. ROYALTY INTERESTS IN MINERAL PROPERTIES (Continued) As of June 30, 2012 (Amounts in thousands): Production stage royalty interests: Andacollo . . . . . . . . . . . . . . . . . . . . . . . . . . . . Voisey’s Bay . . . . . . . . . . . . . . . . . . . . . . . . . . . Pe˜nasquito . . . . . . . . . . . . . . . . . . . . . . . . . . . . Las Cruces . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mulatos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wolverine . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dolores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian Malartic . . . . . . . . . . . . . . . . . . . . . . Gwalia Deeps . . . . . . . . . . . . . . . . . . . . . . . . . Holt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ruby Hill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leeville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Robinson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cortez . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost Restructuring Accumulated Depletion Net $ 272,998 150,138 99,172 57,230 48,092 45,158 44,878 38,800 28,119 25,428 24,871 24,321 18,322 17,825 10,630 184,142 1,090,124 $ — — — — — — — — — — — — — — — — $ (27,345) $ 245,653 116,946 90,097 50,731 29,371 43,533 38,857 35,508 23,721 22,448 17,551 24,034 3,886 7,953 957 72,324 (33,192) (9,075) (6,499) (18,721) (1,625) (6,021) (3,292) (4,398) (2,980) (7,320) (287) (14,436) (9,872) (9,673) (111,818) — (266,554) 823,570 Development stage royalty interests: Mt. Milligan . . . . . . . . . . . . . . . . . . . . . . . . . . . Pascua-Lama . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration stage royalty interests . . . . . . . . . . . . . 455,943 372,105 40,022 868,070 200,676 — — (1,328) (1,328) — — — — — — 455,943 372,105 38,694 866,742 200,676 Total royalty interests in mineral properties . . . . . . $2,158,870 $(1,328) $(266,554) $1,890,988 66 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 5. AVAILABLE-FOR-SALE SECURITIES The Company’s available-for-sale securities as of June 30, 2013 and 2012 consist of the following: Non-current: Seabridge . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current: Seabridge . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As of June 30, 2013 (Amounts in thousands) Unrealized Cost Basis Gain Loss Fair Value $14,064 203 — (4,509) (63) — $9,555 140 $14,267 $— $(4,572) $9,695 As of June 30, 2012 (Amounts in thousands) Unrealized Cost Basis Gain Loss Fair Value $28,574 203 — (13,716) $14,858 157 (46) — $28,777 $— $(13,762) $15,015 The most significant available-for-sale security is the investment in Seabridge common stock, acquired in June 2011 and discussed in greater detail within Note 3 of our notes to consolidated financial statements. During the fiscal year ended June 30, 2013, the Company corrected the original cost basis of the shares, which was overstated by $2.4 million. Based on the Company’s quarterly impairment analysis, including the severity of the market decline in Seabridge common stock during the third quarter of our fiscal year ended June 30, 2013, the Company determined that the impairment of its investment in Seabridge common stock is other-than-temporary. As a result of the impairment, the Company recognized a loss on available-for-sale securities of $12.1 million during the third quarter of our fiscal year ended June 30, 2013. The recognized loss has been reclassified out of comprehensive income. There were no impairments recognized on our available-for-sale securities during our fiscal year ended June 30, 2012. The Company will continue to evaluate its investment in Seabridge common stock considering additional facts and circumstances as they arise, including, but not limited to, the progress of development of Seabridge’s KSM project. 6. DEBT The Company’s debt as of June 30, 2013 and 2012 consists of the following: Convertible notes due 2019, net . . . . . . . . . . . . . . . . . . . . . As of June 30, 2013 As of June 30, 2012 Non-current Non-current (Amounts in thousands) $293,248 $302,263 Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $302,263 $293,248 67 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 6. DEBT (Continued) Convertible Senior Notes Due 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’’). Net proceeds from the offering were approximately $359.0 million, after deducting underwriting discounts and commission and offering expenses. The Company used approximately $110.6 million of the net proceeds from the offering to repay amounts outstanding under, and to terminate, its term loan facility. The Company intends to use the remaining net proceeds from the offering for general corporate purposes, including acquisitions of additional royalty interests. The 2019 Notes bear interest at the rate of 2.875% per annum, and the Company is required to make semi-annual interest payments on the outstanding principal balance of the 2019 Notes on June 15 and December 15 of each year, which began on December 15, 2012. The 2019 Notes mature on June 15, 2019. The 2019 Notes may be converted at the option of the holder on any day prior to the close of business on the business day immediately preceding March 15, 2019, in multiples of $1,000 principal amount, under any of the following circumstances: (1) during any fiscal quarter beginning after June 30, 2012, if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on each applicable trading day; (2) during the five consecutive business day period after any five consecutive trading day period (the ‘‘measurement period’’) in which the trading price per $1,000 principal amount of 2019 Notes for each trading day of such measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such day; (3) upon the occurrence of certain corporate events specified in the indenture governing the 2019 Notes; or (4) if the Company calls any 2019 Notes for redemption, at any time until the close of business on the business day preceding the redemption date. On or after March 15, 2019 until the close of business on the scheduled trading day immediately preceding the maturity date of June 15, 2019, holders may convert their 2019 Notes at any time, regardless of the foregoing circumstances. The 2019 Notes are convertible at an initial conversion rate of 9.4955 shares of common stock per $1,000 principal amount, representing an initial conversion price of approximately $105.31 per share for a total of approximately 3.5 million underlying shares. The conversion rate is subject to adjustment upon the occurrence of certain events, but will not be adjusted for any accrued and unpaid interest. Upon conversion, the Company’s conversion obligation may be satisfied, at the Company’s option, in cash, shares of common stock or a combination of cash and shares of common stock. The Company currently intends to settle the $1,000 principal amount of each 2019 Note in cash and settle the excess conversion value in shares, plus cash in lieu of fractional shares. On or after June 15, 2015, the Company may redeem for cash all or part of the 2019 Notes, except for the 2019 Notes that the Company is required to purchase in connection with a fundamental change (as discussed below), but only if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending within 10 trading days immediately prior to the date the Company provides the redemption notice exceeds 130% of the applicable conversion price for the 2019 Notes on each such day. The redemption price for the 2019 Notes will equal 100% of the principal amount being redeemed, plus 68 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 6. DEBT (Continued) accrued and unpaid interest, if any, to, but excluding, the redemption date, plus $90 per each $1,000 principal amount being redeemed. Holders may elect to convert upon notice of redemption. Holders may require the Company to purchase some or all of their 2019 Notes upon the occurrence of certain fundamental changes, as set forth in the indenture governing the 2019 Notes, at 100% of the principal amount of the 2019 Notes to be purchased, plus any accrued and unpaid interest, if any, to, but excluding, the purchase date. If a fundamental change occurs that is also a specific type of change of control under the indenture governing the 2019 Notes, or if the Company issues a redemption notice for the 2019 Notes, the Company will increase the conversion rate for notes converted under such circumstances. In accordance with FASB Accounting Standards Codification Topic 470-20, Debt with Conversion and Other Options (‘‘ASC 470-20’’), we separately accounted for the liability and equity components of our 2019 Notes. The estimated fair value of the liability component at the date of issuance was $293.0 million, and was calculated based on the fair value of similar debt instruments that do not include a conversion feature. The equity component of $77.0 million was recognized as a debt discount and recorded as Additional paid-in capital on our consolidated balance sheets. The debt discount represents the difference between the $370 million principal amount of the 2019 Notes and the $293.0 million estimated fair value of the liability component at the date of issuance. The debt discount will be amortized over the expected life of a similar liability without the equity component. We determined this expected life to be equal to the term of the 2019 Notes, resulting in an amortization period for seven years, ending on June 15, 2019. The effective interest rate used to amortize the debt discount is approximately 6.64%, which was based on our estimated non-convertible borrowing rate as of the date the 2019 Notes were issued. Issuance costs of approximately $11.0 million related to the issuance of the 2019 Notes were allocated to the liability and equity components in proportion to the allocation of the proceeds and accounted for as capitalized debt issuance costs and equity issuance costs. The net carrying amount of the liability component of the 2019 Notes was $302.3 million and $293.2 million as of June 30, 2013 and 2012, respectively. Interest expense recognized on the 2019 Notes for the fiscal years ended June 30, 2013 and 2012 was approximately $20.7 million and $0.6 million, respectively, and included the contractual coupon interest, the accretion of the debt discount and amortization of the debt issuance costs. During the fiscal year ended June 30, 2013 and 2012, the Company made $10.5 million and $0, respectively, in interest payments on our 2019 Notes. Revolving credit facility The Company maintains a $350 million revolving credit facility. Borrowings under the revolving credit facility bear interest at a floating rate of LIBOR plus a margin of 1.75% to 3.0%, based on Royal Gold’s leverage ratio. As of June 30, 2013, the interest rate on borrowings under the revolving credit facility was LIBOR plus 1.75%. Royal Gold may repay any borrowings under the revolving credit facility at any time without premium or penalty. As of June 30, 2013, Royal Gold had no amounts outstanding under the revolving credit facility. On January 21, 2013, Royal Gold entered into Amendment No. 2 to Fifth Amended and Restated Revolving Credit Agreement (the ‘‘Amendment’’), which amended the Company’s existing Fifth Amended and Restated Revolving Credit Agreement, dated May 30, 2012 (as amended from time to 69 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 6. DEBT (Continued) time, the ‘‘Revolving Credit Agreement’’), among Royal Gold, as the borrower, certain subsidiaries of Royal Gold, as guarantors, HSBC Bank USA, National Association, as administrative agent and a lender, The Bank of Nova Scotia, as a lender, Goldman Sachs Bank USA, as a lender, and the other lenders from time to time party thereto, HSBC Securities (USA) Inc., as the sole lead arranger and joint bookrunner, and ScotiaBank, as syndication agent and joint bookrunner. The Amendment revised the Revolving Credit Agreement to, among other things, (i) remove the current ratio, interest coverage ratio and debt service coverage ratio financial covenants, (ii) add a financial covenant requiring the Company to maintain a secured debt ratio below a certain level, (iii) increase the amount of unsecured indebtedness the Company is permitted to incur subject to its pro forma compliance with a leverage ratio test and to allow certain prepayments, refinancing and replacement of such unsecured indebtedness, (iv) increase the interest rate for borrowings under the Revolving Credit Agreement when the leverage ratio exceeds 3.0 to 1.0, and (v) take certain acquisitions into account in determining compliance with financial covenants. Except as set forth in the Amendment, all other terms and conditions of the Revolving Credit Agreement remain in full force and effect. At June 30, 2013, the Company was in compliance with each financial covenant. 7. STOCK-BASED COMPENSATION In November 2004, the Company adopted the Omnibus Long-Term Incentive Plan (‘‘2004 Plan’’). Under the 2004 Plan, 2,600,000 shares of common stock have been authorized for future grants to officers, directors, key employees and other persons. The 2004 Plan provides for the grant of stock options, unrestricted stock, restricted stock, dividend equivalent rights, SSARs and cash awards. Any of these awards may, but need not, be made as performance incentives. Stock options granted under the 2004 Plan may be non-qualified stock options or incentive stock options. The Company recognized stock-based compensation expense as follows: For the Fiscal Years Ended June 30, 2013 2012 2011 Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock appreciation rights . . . . . . . . . . . . . . . . . . . . . . . . . Restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Amounts in thousands) $ 446 1,219 2,757 2,085 $ 415 815 2,165 3,099 $ 456 1,107 3,240 898 Total stock-based compensation expense . . . . . . . . . . . . . $5,701 $6,507 $6,494 Stock-based compensation expense is included within general and administrative in the consolidated statements of operations and comprehensive income. As of June 30, 2013, there were 932,615 shares of common stock reserved for future issuance under the 2004 Plan. Stock Options and Stock Appreciation Rights Stock option and SSARs awards are granted with an exercise price equal to the closing market price of the Company’s stock at the date of grant. Stock option and SSARs awards granted to officers, 70 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 7. STOCK-BASED COMPENSATION (Continued) key employees and other persons vest based on one to three years of continuous service. Stock option and SSARs awards have 10 year contractual terms. To determine stock-based compensation expense for stock options and SSARs, the fair value of each stock option and SSAR is estimated on the date of grant using the Black-Scholes-Merton (‘‘Black- Scholes’’) option pricing model for all periods presented. The Black-Scholes model requires key assumptions in order to determine fair value. Those key assumptions during the fiscal year 2013, 2012 and 2011 grants are noted in the following table: Stock Options SSARs 2013 2012 2011 2013 2012 2011 Weighted-average expected volatility . . . . . . . . . . . . . . . . . Weighted-average expected life in years . . . . . . . . . . . . . . . Weighted-average dividend yield . . . . . . . . . . . . . . . . . . . . Weighted-average risk free interest rate . . . . . . . . . . . . . . 43.1% 45.1% 46.8% 43.7% 45.3% 46.0% 5.5 0.86% 0.76% 0.89% 0.90% 0.76% 0.89% 0.8% 1.1% 1.7% 1.0% 1.2% 1.8% 6.0 5.7 6.1 6.4 5.7 The Company’s expected volatility is based on the historical volatility of the Company’s stock over the expected option term. The Company’s expected option term is determined by historical exercise patterns along with other known employee or company information at the time of grant. The risk free interest rate is based on the zero-coupon U.S. Treasury bond at the time of grant with a term approximate to the expected option term. Stock Options A summary of stock option activity under the 2004 Plan for the fiscal year ended June 30, 2013, is presented below. Outstanding at July 1, 2012 . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . Number of Shares 166,050 19,904 (65,341) (1,300) Outstanding at June 30, 2013 . . . . . . 119,313 Weighted- Average Exercise Price $36.46 $72.87 $29.14 $75.32 $46.12 Exercisable at June 30, 2013 . . . . . . 84,021 $37.16 Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands) 6.0 4.9 $775 $775 The weighted-average grant date fair value of options granted during the fiscal years ended June 30, 2013, 2012 and 2011, was $26.76, $27.23 and $20.56, respectively. The total intrinsic value of options exercised during the fiscal years ended June 30, 2013, 2012 and 2011, were $4.1 million, $8.7 million, and $0.7 million, respectively. 71 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 7. STOCK-BASED COMPENSATION (Continued) A summary of the status of the Company’s non-vested stock options for the fiscal year ended June 30, 2013, is presented below: Weighted- Average Number of Grant Date Fair Value Shares Non-vested at July 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,597 19,904 (17,909) (1,300) Non-vested at June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . 35,292 $24.35 $26.76 $23.87 $27.55 $25.83 As of June 30, 2013, there was approximately $0.5 million of total unrecognized stock-based compensation expense related to non-vested stock options granted under the 2004 Plan, which is expected to be recognized over a weighted-average period of 1.7 years. SSARs A summary of SSARs activity under the 2004 Plan for the fiscal year ended June 30, 2013, is presented below. Outstanding at July 1, 2012 . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of Shares 191,216 55,421 (66,453) (17,900) Outstanding at June 30, 2013 . . . . . . . . . . . . . . . . . . . 162,284 Weighted- Average Exercise Price $49.93 $74.86 $43.48 $75.32 $49.93 Exercisable at June 30, 2013 . . . . . . . . . . . . . . . . . . . . 87,084 $50.10 Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands) 7.5 6.7 $195 $195 The weighted-average grant date fair value of SSARs granted during the fiscal years ended June 30, 2013, 2012 and 2011 was $29.78, $28.04 and $20.87, respectively. The total intrinsic value of SSARs exercised during the fiscal years ended June 30, 2013, 2012 and 2011, were $3.5 million, $0, and $0, respectively. 72 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 7. STOCK-BASED COMPENSATION (Continued) A summary of the status of the Company’s non-vested SSARs for the fiscal year ended June 30, 2013, is presented below: Weighted- Average Number of Grant Date Fair Value Shares Non-vested at July 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,573 55,421 (48,894) (17,900) Non-vested at June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . 75,200 $24.75 $29.78 $24.39 $30.01 $27.44 As of June 30, 2013, there was approximately $1.3 million of total unrecognized stock-based compensation expense related to non-vested SSARs granted under the 2004 Plan, which is expected to be recognized over a weighted-average period of 1.7 years. Other Stock-based Compensation Performance Shares During fiscal 2013, officers and certain employees were granted 48,600 shares of restricted common stock that can be earned only if a single pre-defined performance goal is met within five years of the date of grant (‘‘Performance Shares’’). If the performance goal is not earned by the end of this five year period, the Performance Shares will be forfeited. Vesting of Performance Shares is subject to certain performance measures being met and can be based on an interim earn out of 25%, 50%, 75% or 100%. For Performance Shares granted during fiscal year 2013, there is a single pre-defined performance goal, which is growth of adjusted free cash flow on a per share, trailing twelve month basis. The Company measures the fair value of the Performance Shares based upon the market price of our common stock as of the date of grant. In accordance with ASC 718, the measurement date for the Performance Shares will be determined at such time that the performance goals are attained or that it is probable they will be attained. At such time that it is probable that a performance condition will be achieved, compensation expense will be measured by the number of shares that will ultimately be earned based on the grant date market price of our common stock. Interim recognition of compensation expense will be made at such time as management can reasonably estimate the number of shares that will be earned. 73 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 7. STOCK-BASED COMPENSATION (Continued) A summary of the status of the Company’s non-vested Performance Shares for the fiscal year ended June 30, 2013, is presented below: Weighted- Average Number of Grant Date Fair Value Shares Non-vested at July 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,700 48,600 — (5,450) Non-vested at June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . 107,850 $60.09 $73.80 $ — $61.38 $66.20 As of June 30, 2013, total unrecognized stock-based compensation expense related to Performance Shares was approximately $2.5 million, which is expected to be recognized over the average remaining vesting period of 1.8 years. Restricted Stock As defined in the 2004 Plan, officers, non-executive directors and certain employees may be granted shares of restricted stock that vest on continued service alone (‘‘Restricted Stock’’). During fiscal 2013, officers and certain employees were granted 30,800 shares of Restricted Stock. Restricted Stock awards granted to officers and certain employees vest over three years beginning after a two-year holding period from the date of grant with one-third of the shares vesting in years three, four and five, respectively. Also during fiscal year 2013, our non-executive directors were granted 13,050 shares of Restricted Stock. The non-executive directors’ shares of Restricted Stock vest as to 50% immediately and 50% one year after the date of grant. Shares of Restricted Stock represent issued and outstanding shares of common stock, with dividend and voting rights. The Company measures the fair value of the Restricted Stock based upon the market price of our common stock as of the date of grant. Restricted Stock is amortized over the applicable vesting period using the straight-line method. Unvested shares of Restricted Stock are subject to forfeiture upon termination of employment or service with the Company. A summary of the status of the Company’s non-vested Restricted Stock for fiscal year ended June 30, 2013, is presented below: Non-vested at July 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237,551 43,850 (86,695) Non-vested at June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . 194,706 $42.93 $73.63 $37.73 $52.15 Weighted- Average Number of Grant Date Fair Value Shares 74 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 7. STOCK-BASED COMPENSATION (Continued) As of June 30, 2013, total unrecognized stock-based compensation expense related to Restricted Stock was approximately $5.2 million, which is expected to be recognized over the weighted-average vesting period of 3.4 years. 8. STOCKHOLDERS’ EQUITY Preferred Stock The Company has 10,000,000 authorized and unissued shares of $.01 par value Preferred Stock as of June 30, 2013 and 2012. Common Stock Issuances Fiscal Year 2013 During the fiscal year ended June 30, 2013, options to purchase 65,341 shares were exercised, resulting in proceeds of approximately $1.9 million. On October 15, 2012, we sold 5,250,000 shares of our common stock, at a price of $90.00 per share, resulting in proceeds of $472.5 million before expenses. Fiscal Year 2012 During the fiscal year ended June 30, 2012, options to purchase 184,357 shares were exercised, resulting in proceeds of approximately $4.1 million. In January 2012, we sold 4,000,000 shares of our common stock, at a price of $67.10 per share, resulting in proceeds of approximately $268.4 million. Exchangeable Shares In connection with acquisition of International Royalty Corporation (‘‘IRC’’) in February 2010, certain holders of IRC common stock received exchangeable shares of RG Exchangeco for each share of IRC common stock held. The exchangeable shares are convertible at any time, at the option of the holder, into shares of Royal Gold common stock on a one-for-one basis, and entitle holders to dividends and other rights economically equivalent to holders of Royal Gold common stock. Stockholders’ Rights Plan On September 10, 2007, the Company entered into the First Amended and Restated Rights Agreement, dated September 10, 2007 (the ‘‘Rights Agreement’’). The Rights Agreement expires on September 10, 2017. The Rights Agreement was approved by the Company’s board of directors (the ‘‘Board’’). The Rights Agreement is intended to deter coercive or abusive tender offers and market accumulations. The Rights Agreement is designed to encourage an acquirer to negotiate with the Board and to enhance the Board’s ability to act in the best interests of all the Company’s stockholders. Under the Rights Agreement, each stockholder of the Company holds one preferred stock purchase right (a ‘‘Right’’) for each share of Company common stock held. The Rights generally become exercisable only in the event that an acquiring party accumulates 15 percent or more of the 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 8. STOCKHOLDERS’ EQUITY (Continued) Company’s outstanding shares of common stock. If this were to occur, subject to certain exceptions, each Right (except for the Rights held by the acquiring party) would allow its holders to purchase one one-thousandth of a newly issued share of Series A junior participating preferred stock of Royal Gold or the Company’s common stock with a value equal to twice the exercise price of the Right, initially set at $175 under the terms and conditions set forth in the Rights Agreement. 9. RESTRUCTURING ON ROYALTY INTERESTS IN MINERAL PROPERTIES The Company owns an NSR royalty on the Relief Canyon property located in Nevada. From November 2010 to October 2011, the Company was involved in managing this interest in bankruptcy proceedings of the former owner of the Relief Canyon project. On August 24, 2011, the Company entered into an Amended and Restated Net Smelter Return Royalty Agreement with the former property owner, pursuant to which the royalty rate was reduced from 4% to 2%, and the ten mile area of interest was eliminated. The Company elected to amend the royalty agreement in order to enhance project economics and the probability of recognizing royalty revenue. As a result of the amendment to the Relief Canyon royalty agreement, the Company recorded a restructuring charge of approximately $1.3 million during the fiscal year ended June 30, 2012, which was based on the Company’s estimate of fair value. There were no additional impairments on our Relief Canyon royalty during the fiscal year ended June 30, 2013. The Company’s carrying value for the Relief Canyon royalty interest was approximately $1.2 million as of June 30, 2013 and 2012. 10. EARNINGS PER SHARE (‘‘EPS’’) Basic earnings 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 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 per common share. 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 10. EARNINGS PER SHARE (‘‘EPS’’) (Continued) The following table summarizes the effects of dilutive securities on diluted EPS for the period: Fiscal Years Ended June 30, 2013 2012 2011 (in thousands, except per share data) Net income available to Royal Gold common stockholders . . . . . . . . . . . . . . $ 69,153 $ 92,476 $ 71,395 Weighted-average shares for basic EPS . . . Effect of other dilutive securities . . . . . . . . 63,250,247 179,575 57,220,040 243,810 55,053,204 270,206 Weighted-average shares for diluted EPS . . 63,429,822 57,463,850 55,323,410 Basic earnings per share . . . . . . . . . . . . . . Diluted earnings per share . . . . . . . . . . . . $ $ 1.09 1.09 $ $ 1.61 1.61 $ $ 1.29 1.29 The calculation of weighted average shares includes all of the Company’s outstanding stock: common stock and exchangeable shares. Exchangeable shares are the equivalent of common shares in that they have the same dividend rights and share equitably in undistributed earnings and are exchangeable on a one-for-one basis for shares of our common stock. With respect to the 2019 Notes as discussed in Note 6, the Company intends to settle the principal amount of 2019 Notes in cash. 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 $105.31. 11. INCOME TAXES For financial reporting purposes, income before income taxes includes the following components: Fiscal Years Ended June 30, 2013 2012 2011 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Amounts in thousands) $110,189 42,830 $ 77,543 38,730 $ 65,851 71,317 $137,168 $153,019 $116,273 77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 11. INCOME TAXES (Continued) The Company’s Income tax expense consisted of: Current: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred and others: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal Years Ended June 30, 2013 2012 2011 (Amounts in thousands) $ 30,061 368 44,749 $35,556 310 17,273 $28,783 105 15,222 $ 75,178 $53,139 $44,110 $ (4,341) $ (27) (7,051) 77 — 1,494 $ (1,242) — (3,894) $(11,419) $ 1,571 $ (5,136) Total income tax expense . . . . . . . . . . . . . . . . . . . . . $ 63,759 $54,710 $38,974 The provision for income taxes for the fiscal years ended June 30, 2013, 2012 and 2011, differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to pre-tax income (net of minority interest in income of consolidated subsidiary and loss from equity investment) from operations as a result of the following differences: Fiscal Years Ended June 30, 2013 2012 2011 (Amounts in thousands) $53,557 $40,695 $48,009 368 310 — (1,007) (1,416) 551 (2,042) 511 — (546) — 1,075 1,116 2,601 (1,395) 1,868 (1,236) 4,223 4,239 1,146 4,979 — 1,272 286 105 (346) (1,446) 437 (2,066) (891) — 2,548 — — 215 (277) $63,759 $54,710 $38,974 Total expense computed by applying federal rates . . . . State and provincial income taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments of valuation allowance . . . . . . . . . . . . . . Excess depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estimates for uncertain tax positions . . . . . . . . . . . . . . . . Statutory tax attributable to non-controlling interest Effect of foreign earnings . . . . . . . . . . . . . . . . . . . . . . Effect of recognized loss on available-for-sale securities Unrealized foreign exchange gains . . . . . . . . . . . . . . . True up of prior year tax returns . . . . . . . . . . . . . . . . True up of prior year deferred assets . . . . . . . . . . . . . Excess 162(m) compensation . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 11. INCOME TAXES (Continued) The tax effects of temporary differences and carryforwards, which give rise to our deferred tax assets and liabilities at June 30, 2013 and 2012, are as follows: 2013 2012 (Amounts in thousands) Deferred tax assets: Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,853 25,943 4,460 34,256 (4,606) 3,984 23,815 2,615 30,414 (500) Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,650 $ 29,914 Deferred tax liabilities: Mineral property basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized foreign exchange gains . . . . . . . . . . . . . . . . . . . . 2019 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(165,936) $(172,146) (4,414) (27,126) (4,117) (3,684) (23,281) (3,561) Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . (196,462) (207,803) Total net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $(166,812) $(177,889) The Company reviews the measurement of its deferred tax assets at each balance sheet date. All available evidence, both positive and negative, is considered in determining whether, based upon the weight of the evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. As of June 30, 2013 and 2012, the Company had $4.6 million and $0.5 million of valuation allowances recorded, respectively. The valuation allowance increase of $4.1 million was primarily the result of (i) the recognized and unrealized loss on available-for-sale securities, and (ii) the change in foreign exchange rates. The valuation allowance remaining at June 30, 2013 is primarily attributable to deferred tax asset generated by the recognized loss on available-for-sale securities and the tax basis difference as a result of unrealized losses on foreign exchange. At June 30, 2013 and 2012, the Company had $108 million and $95 million of net operating loss carry forwards, respectively. The increase in the net operating loss carry forwards is attributable to (i) losses incurred in a non-U.S. subsidiary, and (ii) an increase in losses at non-U.S. subsidiaries resulting from the annual provision-to-return true-up, slightly offset by the utilization of net operating losses in non-U.S. subsidiaries of $26 million. The majority of the tax loss carry forwards are in jurisdictions that allow a twenty year carry forward period. As a result, these losses do not begin to expire until the 2025 tax year. As of June 30, 2013 and 2012, the Company had $21.2 million and $19.5 million of total gross unrecognized tax benefits, respectively. The increase in gross unrecognized tax benefits was primarily related to tax positions of IRC entities taken prior to the acquisition. If recognized, these unrecognized 79 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 11. INCOME TAXES (Continued) tax benefits would positively impact the Company’s effective income tax rate. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows: Total gross unrecognized tax benefits at beginning of year . . . . . . . Additions / Reductions for tax positions of prior years . . . . . . . . . . Additions / Reductions for tax positions of current year . . . . . . . . . Reductions due to settlements with taxing authorities . . . . . . . . . . Reductions due to lapse of statute of limitations . . . . . . . . . . . . . . (Amounts in thousands) $18,836 $19,469 — — 2,051 2,638 (941) — (1,418) — Total amount of gross unrecognized tax benefits at end of year . . . $21,166 $19,469 $12,479 20 6,337 — — $18,836 2013 2012 2011 Approximately $1.1 million of the increase in the unrecognized tax benefits for tax positions during fiscal year 2013 is included in tax expense computed by applying federal rates in the tax rate reconciliation as the unrecognized tax benefit is recorded on additional pre-tax income from non-U.S. subsidiaries. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal, state and local, and non-U.S. income tax examinations by tax authorities for fiscal years before 2009. As a result of (i) statute of limitations that will begin to expire within the next 12 months in various jurisdictions, (ii) possible settlements of audit-related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, and (iii) and additional accrual of exposure and interest on existing items the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease between $0 and $0.3 million in the next 12 months. The Company’s continuing practice is to recognize interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. At June 30, 2013 and 2012, the amount of accrued income-tax-related interest and penalties was $4.3 million and $2.8 million, respectively. During the quarter ended December 31, 2012, the Company made a foreign withholding tax payment associated with one of its foreign royalty interests of approximately $17.2 million. During the quarter ended March 31, 2013, the Company recovered approximately $8.5 million of the foreign withholding tax payment, and we expect to recover the remaining payment within the next twelve months. As of June 30, 2013, $8.7 million is recorded within Income tax receivable on our consolidated balance sheets. During the quarter ended June 30, 2013, the Company incurred additional foreign withholding tax obligations, which is included in Foreign withholding taxes payable on our consolidated balance sheets, on another of its foreign royalty interests of approximately $12.0 million, of which approximately $2.3 million has been recovered. The Company expects to recover the remaining payments within the next twelve months. As of June 30, 2013, $9.7 million is recorded within Prepaid expenses and other current assets on our consolidated balance sheets. 80 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 12. SUPPLEMENTAL CASH FLOW INFORMATION The Company’s supplemental cash flow information for the fiscal years ending June 30, 2013, 2012 and 2011 is as follows: 2013 2012 2011 (Amounts in thousands) Cash paid during the period for: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes, net of refunds . . . . . . . . . . . . . . . . . . $10,490 $48,809 $ 4,590 $58,520 $ 5,378 $37,847 Non-cash investing and financing activities: Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . $47,997 $23,253 $32,357 $ — $ — $ 4,474 13. FAIR VALUE MEASUREMENTS 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 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. Carrying Amount At June 30, 2013 Fair Value Total Level 1 Level 2 Level 3 Assets (In thousands): United States treasury bills(1) . . . . . . . . . . . . . . . . Marketable equity securities(2) . . . . . . . . . . . . . . . $500,000 9,695 $ $500,000 9,695 $ $500,000 9,695 $ Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $509,695 $509,695 Liabilities (In thousands): Debt(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $370,000 $345,025 $345,025 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $345,025 $345,025 $— $— $— $— $— $— $— $— $— $— (1) (2) (3) Included in Cash and equivalents in the Company’s consolidated balance sheets. Included in Available for sale securities in the Company’s consolidated balance sheets. 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 in the Company’s consolidated balance sheets. 81 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 13. FAIR VALUE MEASUREMENTS (Continued) The Company invests primarily in United States treasury bills with maturities of 90 days or less, which are classified within Level 1 of the fair value hierarchy. 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 multiplied by the quantity of shares held by the Company. The Company’s debt classified within Level 1 of the fair value hierarchy is valued using quoted prices in an active market. As of June 30, 2013, 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 royalty interests in mineral properties, 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. None of these assets were written down to fair value during the fiscal year ended June 30, 2013. If recognition of these assets at their fair value becomes necessary, such measurements will be determined utilizing Level 3 inputs. 14. MAJOR SOURCES OF REVENUE Operators that contributed greater than 10% of the Company’s total royalty revenue for any of fiscal years 2013, 2012 or 2011 were as follows (revenue amounts in thousands): Operator Teck . . . . . . . . . . . . . . . . . . . . . Vale Newfoundland & Labrador Limited . . . . . . . . . . . . . . . . . Goldcorp, Inc. . . . . . . . . . . . . . Barrick . . . . . . . . . . . . . . . . . . . Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Royalty revenue Percentage of total royalty revenue Royalty revenue Percentage of total royalty revenue Royalty revenue Percentage of total royalty revenue $82,272 28.4% $64,075 24.4% $43,604 20.1% 32,517 32,461 22,943 11.2% 11.2% 7.9% 36,030 31,407 21,891 13.7% 11.9% 8.3% 32,677 23,094 26,843 15.1% 10.7% 12.4% 15. COMMITMENTS AND CONTINGENCIES Mt. Milligan Gold Stream Acquisition Refer to Note 3 for discussion on the Company’s commitment to Thompson Creek as part of the Mt. Milligan gold stream acquisitions. Tulsequah Chief Gold and Silver Stream Acquisition Refer to Note 3 for discussion on the Company’s commitment to Chieftain as part of the Tulsequah Chief gold and silver stream acquisition. Voisey’s Bay The Company owns a royalty on the Voisey’s Bay mine in Newfoundland and Labrador owned by Vale Newfoundland & Labrador Limited (‘‘VNL’’). The royalty is owned by the Labrador Nickel Royalty Limited Partnership (‘‘LNRLP’’), in which the Company’s wholly-owned indirect subsidiary, Canadian Minerals Partnership, is the general partner and 89.99% owner. The remaining interests in 82 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 15. COMMITMENTS AND CONTINGENCIES (Continued) LNRLP are owned by Altius Investments Ltd. (10%), a company unrelated to Royal Gold, and the Company’s wholly-owned indirect subsidiary, Voisey’s Bay Holding Corporation (0.01%). On October 16, 2009, LNRLP filed a claim in the Supreme Court of Newfoundland and Labrador Trial Division against Vale Inco Limited, now known as Vale Canada Limited (‘‘Vale Canada’’) and its wholly-owned subsidiaries, Vale Inco Atlantic Sales Limited and VNL, related to the calculation of the NSR on the sale of concentrates, including nickel concentrates, from the Voisey’s Bay mine to Vale Canada. The claim asserts that Vale Canada is incorrectly calculating the NSR and requests an order in respect of the correct calculation of future payments. The claim also requests specific damages for underpayment of past royalties to the date of the claim in an amount not less than $29 million, together with additional damages until the date of trial, interest, costs and other damages. The litigation is in the discovery phase. 16. RELATED PARTY CVP was formed as a limited partnership in April 1992. It owns a 1.25% net value royalty on production of minerals from a portion of Cortez. Denver Mining Finance Company, our wholly-owned subsidiary, is the general partner and holds a 2.0% interest in CVP. In addition, Royal Gold holds a 29.6% limited partner interest in the partnership, while our Chairman of the Board of Directors, the Chairman of our Audit Committee and one other member of our board of directors hold an aggregate 35.56% limited partner interest. The general partner performs administrative services for CVP in receiving and processing the royalty payments from the operator, including the disbursement of royalty payments and record keeping for in-kind distributions to the limited partners. CVP receives its royalty from the Cortez Joint Venture in-kind. The Company, as well as certain other limited partners, sell their pro-rata shares of such gold immediately and receive distributions in cash, while CVP holds gold for certain other limited partners. Such gold inventories, which totaled 9,742 and 12,581 ounces of gold as of June 30, 2013 and 2012, respectively, are held by a third party refinery in Utah for the account of the limited partners of CVP. The inventories are carried at historical cost and are classified within Other assets on the Company’s consolidated balance sheets. The carrying value of the gold in inventory was approximately $6.1 million and $7.4 million as of June 30, 2013 and 2012, respectively, while the fair value of such ounces was approximately $11.6 million and $20.1 million as of June 30, 2013 and 2012, respectively. None of the gold currently held in inventory as of June 30, 2013 and 2012, is attributed to Royal Gold, as the gold allocated to Royal Gold’s CVP partnership interest is typically sold within five days of receipt. 83 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of selected quarterly financial information (unaudited). Some amounts in the below table may not sum-up in total as a result of rounding. Royalty revenues Operating income Net income attributable to Royal Gold stockholders Basic earnings per share Diluted earnings per share (Amounts in thousands except per share data) $ 77,862 79,870 74,166 57,326 $ 47,812 50,833 42,933 29,926 $289,224 $171,504 $ 64,465 68,842 69,638 60,109 $ 37,468 39,420 42,893 37,107 $263,054 $156,888 $24,770 27,216 6,464 10,703 $69,153 $22,495 23,411 25,999 20,571 $92,476 $0.42 0.42 0.10 0.16 $1.09 $0.41 0.42 0.44 0.35 $1.61 $0.41 0.42 0.10 0.16 $1.09 $0.40 0.42 0.44 0.34 $1.61 Fiscal year 2013 quarter-ended: September 30 . . . . . . . . . . . . . . . . . . . . . . December 31 . . . . . . . . . . . . . . . . . . . . . . March 31 . . . . . . . . . . . . . . . . . . . . . . . . . June 30 . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal year 2012 quarter-ended: September 30 . . . . . . . . . . . . . . . . . . . . . . December 31 . . . . . . . . . . . . . . . . . . . . . . March 31 . . . . . . . . . . . . . . . . . . . . . . . . . June 30 . . . . . . . . . . . . . . . . . . . . . . . . . . 18. SUBSEQUENT EVENT Proposed Acquisition of the El Morro Royalty In August 2013, Royal Gold, through its wholly-owned Chilean subsidiary, acquired a 70% interest in a 2.0% NSR royalty on certain portions of the El Morro copper gold project in Chile (‘‘El Morro’’), from Xstrata Copper Chile S.A., for $35 million. Goldcorp Inc. holds 70% ownership of the El Morro project and is the operator, with the remaining 30% held by New Gold Inc. 84 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures As of June 30, 2013, the Company’s management, with the participation of the President and Chief Executive Officer (the principal executive officer) and Chief Financial Officer and Treasurer (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 Treasurer have concluded that, as of June 30, 2013, 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 its Chief Financial Officer and Treasurer, 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 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. (b) Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2013. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (1992 Framework). Based on management’s assessment and those criteria, management concluded that, as of June 30, 2013, our internal control over financial reporting is effective. Our management, including our President and Chief Executive Office (the principal executive officer) and Chief Financial Officer and Treasurer (the principal financial and accounting officer), does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. 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 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 85 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. Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on our internal control over financial reporting as of June 30, 2013. (c) Changes in Internal Control over Financial Reporting There was no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act during our fourth fiscal quarter ended June 30, 2013, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. (d) Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Royal Gold, Inc. We have audited Royal Gold, Inc.’s internal control over financial reporting as of June 30, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). Royal Gold, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Royal Gold, Inc. maintained, in all material respects, effective internal control over financial reporting as of June 30, 2013, based on the COSO criteria. 86 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Royal Gold, Inc as of June 30, 2013 and 2012, and the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows for each of the three years in the period ended June 30, 2013 and our report dated August 8, 2013 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Denver, Colorado August 8, 2013 ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is included in the Company’s Proxy Statement for its 2013 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2013, and is incorporated by reference in this Annual Report on Form 10-K. The Company’s Code of Business Conduct and Ethics within the meaning of Item 406 of Regulation S-K adopted by the SEC under the Exchange Act that applies to our principal executive officer and principal financial officer is available on the Company’s website at www.royalgold.com and in print without charge to any stockholder who requests a copy. Requests for copies should be directed to Royal Gold, Inc., Attention: General Counsel and Secretary, 1660 Wynkoop Street, Suite 1000, Denver, Colorado, 80202. The Company intends to satisfy the disclosure requirements of Item 5.05 of Form 8-K regarding any amendment to, or a waiver from, a provision of the Company’s Code of Business Conduct and Ethics by posting such information on the Company’s website. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is included in the Company’s Proxy Statement for its 2013 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2013, and is incorporated by reference in this Annual Report on Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is included in the Company’s Proxy Statement for its 2013 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2013, and is incorporated by reference in this Annual Report on Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE The information required by this item is included in the Company’s Proxy Statement for its 2013 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2013, and is incorporated by reference in this Annual Report on Form 10-K. 87 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is included in the Company’s Proxy Statement for its 2013 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2013, and is incorporated by reference in this Annual Report on Form 10-K. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Financial Statements Index to Financial Statements Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Operations and Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 52 53 54 55 56 57 (b) Exhibits Reference is made to the Exhibit Index beginning on page 91 hereof. 88 Pursuant to the requirements of Section 13 or 15 (d) 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. SIGNATURES ROYAL GOLD, INC. Date: August 8, 2013 By: /s/ TONY JENSEN Tony Jensen President, Chief Executive Officer and Director (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: August 8, 2013 By: /s/ TONY JENSEN Tony Jensen President, Chief Executive Officer and Director (Principal Executive Officer) Date: August 8, 2013 By: /s/ STEFAN L. WENGER Stefan Wenger Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Date: August 8, 2013 By: /s/ STANLEY DEMPSEY Stanley Dempsey Chairman Date: August 8, 2013 By: /s/ GORDON J. BOGDEN Gordon J. Bogden Director Date: August 8, 2013 By: /s/ M. CRAIG HAASE M. Craig Haase Director Date: August 8, 2013 By: /s/ WILLIAM M. HAYES William M. Hayes Director 89 Date: August 8, 2013 By: /s/ S. ODEN HOWELL, JR. S. Oden Howell, Jr. Director Date: August 8, 2013 By: /s/ JAMES W. STUCKERT James W. Stuckert Director Date: August 8, 2013 By: /s/ RONALD J. VANCE Ronald J. Vance Director 90 Exhibit Number 2.1 3.1 3.2 3.3 3.4 4.1 4.2 4.3 4.4 4.5 4.6 Exhibit Index Description Amended and Restated Arrangement Agreement, dated January 15, 2010, among Royal Gold, Inc., RG Exchangeco Inc. (formerly, 7296355 Canada Ltd.) and International Royalty Corporation (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K on January 22, 2010 and incorporated herein by reference) Restated Certificate of Incorporation, as amended (filed as Exhibit 3.1 to the Company’s Quarterly Report on February 8, 2008 and incorporated herein by reference) Amended and Restated Bylaws, as amended (filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q on November 1, 2012 and incorporated herein by reference) Amended and Restated Certificate of Designations of Series A Junior Participating Preferred Stock of Royal Gold, Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on September 10, 2007 and incorporated herein by reference) Certificate of Designations, Preferences and Rights of the Special Voting Preferred Stock of Royal Gold, Inc. (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K on February 23, 2010 and incorporated herein by reference) First Amended and Restated Rights Agreement dated September 10, 2007 between Royal Gold, Inc. and Computershare Trust Company, N.A. (filed as Exhibit 4.1 to the Company’s Registration Statement on Form 8-A on September 10, 2007 and incorporated herein by reference) Stockholder Agreement dated April 3, 2009 by and among Royal Gold, Inc., Compa˜n´ıa Minera Carmen de Andacollo and Teck Cominco Limited (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 6, 2009 and incorporated herein by reference) Amendment No. 1 to the Stockholder Agreement, dated January 12, 2010 (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K on January 15, 2010 and incorporated herein by reference) Appendix I to Schedule B of the Amended and Restated Arrangement Agreement, dated January 15, 2010, among Royal Gold, Inc., RG Exchangeco Inc. (formerly, 7296355 Canada Ltd.) and International Royalty Corporation (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K on January 22, 2010 and incorporated herein by reference) Indenture among Royal Gold, Inc., Wells Fargo Bank, National Association and Computershare Trust Company of Canada, dated June 20, 2012 (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K on June 20, 2012 and incorporated herein by reference) Supplemental Indenture among Royal Gold, Inc., Wells Fargo Bank, National Association and Computershare Trust Company of Canada, dated June 20, 2012 (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K on June 20, 2012 and incorporated herein by reference) 10.1** 2004 Omnibus Long-Term Incentive Plan, as amended (filed as Exhibit 10.1 to Royal Gold’s Current Report on Form 8-K filed on November 5, 2010 and incorporated herein by reference) 91 Exhibit Number 10.2** 10.3** 10.4** 10.5** 10.6** 10.7** 10.8** 10.9** Description Form of Incentive Stock Option Agreement under Royal Gold’s 2004 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.2 to Royal Gold’s Current Report on Form 8-K filed on November 7, 2008 and incorporated herein by reference) Form of Non-qualified Stock Option Agreement under Royal Gold’s 2004 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.3 to Royal Gold’s Current Report on Form 8-K filed on November 7, 2008 and incorporated herein by reference) Form of Restricted Stock Agreement under Royal Gold’s 2004 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.4 to Royal Gold’s Current Report on Form 8-K filed on November 7, 2008 and incorporated herein by reference) Form of Restricted Stock Agreement under Royal Gold’s 2004 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.1 to Royal Gold’s Current Report on Form 8-K filed on August 17, 2012 and incorporated herein by reference) Form of Performance Share Agreement under Royal Gold’s 2004 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.5 to Royal Gold’s Current Report on Form 8-K filed on November 7, 2008 and incorporated herein by reference) Form of Performance Share Agreement under Royal Gold’s 2004 Omnibus Long-Term Incentive Plan (1) (filed as Exhibit 10.1 to Royal Gold’s Current Report on Form 8-K filed on August 24, 2011 and incorporated herein by reference) Form of Performance Share Agreement under Royal Gold’s 2004 Omnibus Long-Term Incentive Plan (2) (filed as Exhibit 10.2 to Royal Gold’s Current Report on Form 8-K filed on August 24, 2011 and incorporated herein by reference) Form of Stock Appreciation Rights Agreement under Royal Gold’s 2004 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.6 to Royal Gold’s Current Report on Form 8-K filed on November 7, 2008 and incorporated herein by reference) 10.10** Form of Amended and Restated Indemnification Agreement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on February 22, 2010 and incorporated herein by reference) 10.11** Employment Agreement by and between Royal Gold, Inc. and Tony Jensen dated September 15, 2008 (filed as Exhibit 10.1 to Royal Gold’s Current Report on Form 8-K filed on September 19, 2008 and incorporated herein by reference) 10.12** Form of Employment Agreement by and between Royal Gold, Inc. and each of the following: Stanley Dempsey, Karen Gross, Stefan Wenger and Bruce Kirchhoff (filed as Exhibit 10.2 to Royal Gold’s Current Report on Form 8-K filed on September 19, 2008 and incorporated herein by reference) 10.13** Employment Agreement by and between Royal Gold, Inc. and William M. Zisch, dated April 4, 2011 (filed as Exhibit 10.54 to the Company’s Annual Report on Form 10-K on August 18, 2011 and incorporated herein by reference) 10.14** Employment Agreement by and between Royal Gold, Inc. and Karli S. Anderson, dated May 15, 2013, filed herewith 10.15** Form of Award Modification Agreement by and between Royal Gold, Inc. and each of the following: Stanley Dempsey, Tony Jensen, Karen Gross and Bruce Kirchhoff (filed as Exhibit 10.3 to Royal Gold’s Current Report on Form 8-K filed on September 19, 2008 and incorporated herein by reference) 92 Exhibit Number 10.16 10.17 10.18 10.19 10.20 10.21 10.22 10.23 10.24 10.25 Description Fifth Amended and Restated Revolving Credit Agreement among Royal Gold, Inc., High Desert Mineral Resources, Inc., RG Exchangeco Inc., RG Mexico, Inc., HSBC Bank USA, National Association, as a lender and administrative agent, The Bank of Nova Scotia, as a lender, Goldman Sachs Bank USA, as a lender, and the other lenders from time to time party thereto, HSBC Securities (USA) Inc., as Sole lead arranger and joint bookrunner, and ScotiaBank, as syndication agent and joint bookrunner, dated May 30, 2012 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on June 1, 2012 and incorporated herein by reference) Amendment No. 2 to Fifth Amended and Restated Revolving Credit Agreement among Royal Gold, Inc., High Desert Mineral Resources, Inc., RG Exchangeco Inc., RG Mexico, Inc., HSBC Bank USA, National Association, as administrative agent and a lender, The Bank of Nova Scotia, as a lender, Goldman Sachs Bank USA, as a lender, and the other lenders from time to time party thereto, HSBC Securities (USA) Inc., as the sole lead arranger and joint bookrunner, and ScotiaBank, as syndication agent and joint bookrunner, dated January 21, 2013 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q on May 2, 2013 and incorporated herein by reference) Amended and Restated Security Agreement by and among Royal Gold, Inc., High Desert Mineral Resources, Inc., RG Mexico, Inc. and HSBC Bank USA, National Association dated February 1, 2011 (filed as Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q on February 4, 2011 and incorporated herein by reference) Amended and Restated Pledge Agreement by Royal Gold, Inc. in favor of HSBC Bank USA, National Association dated February 1, 2011 (filed as Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q on February 4, 2011 and incorporated herein by reference) Royalty Agreement between Royal Gold, Inc. and the Cortez Joint Venture dated April 1, 1999 (filed as part of Item 5 of the Company’s Current Report on Form 8-K on April 12, 1999 and incorporated herein by reference) Firm offer to purchase royalty interest of ‘‘Idaho Group’’ between Royal Gold, Inc. and Idaho Group dated July 22, 1999 (filed as Attachment A to the Company’s Current Report on Form 8-K on September 2, 1999 and incorporated herein by reference) Royalty Deed and Agreement, dated effective as of April 15, 1991, between ECM, Inc. and Royal Crescent Valley, Inc. (filed as Exhibit 10(1) to the Company’s Annual Report on Form 10-K for the year ended June 30, 1991 and incorporated herein by reference) Assignment and Assumption Agreement, dated December 6, 2002 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on December 23, 2002 and incorporated herein by reference) Royalty Assignment and Agreement, effective as of December 26, 2002, between High Desert Mineral Resources, Inc. and High Desert Gold Corporation (filed as Exhibit 99.4 to the Company’s Current Report on Form 8-K on September 22, 2005 and incorporated herein by reference) Royalty Assignment, Confirmation, Amendment, and Restatement of Royalty, and Agreement, dated as of November 30, 1995, among Barrick Bullfrog Inc., Barrick Goldstrike Mines Inc. and Royal Hal Co. (filed as Exhibit 99.5 to the Company’s Current Report on Form 8-K on September 22, 2005 and incorporated herein by reference) 93 Exhibit Number 10.26 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 10.35 Description Amendment to Royalty Assignment, Confirmation, Amendment, and Restatement of Royalty, and Agreement, effective as of October 1, 2004, among Barrick Bullfrog Inc., Barrick Goldstrike Mines Inc. and Royal Hal Co. (filed as Exhibit 99.6 to the Company’s Current Report on Form 8-K on September 22, 2005 and incorporated herein by reference) Purchase and Sale Agreement for Pe˜nasquito and Other Royalties among Minera Kennecott S.A. DE C.V., Kennecott Exploration Company and Royal Gold, Inc., dated December 28, 2006 (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q on February 9, 2007 and incorporated herein by reference) Contract for Assignment of Rights Granted, by Minera Kennecott, S.A. de C.V. Represented in this Agreement by Mr. Dave F. Simpson, and Minera Pe˜nasquito, S.A. de C.V., Represented in this Agreement by Attorney, Jose Maria Gallardo Tamayo (filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q on February 9, 2007 and incorporated herein by reference) Amended and Restated Master Agreement by and between Royal Gold, Inc. and Compa˜n´ıa Minera Teck Carmen de Andacollo, dated as of January 12, 2010, along with the related Form of Royalty Agreement attached thereto as Exhibit C (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on January 15, 2010 and incorporated herein by reference) Support Agreement, dated as of February 22, 2010, among Royal Gold, Inc., RG Callco Inc., and RG Exchangeco Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K/A on February 23, 2010 and incorporated herein by reference) Voting and Exchange Trust Agreement, dated as of February 22, 2010, among Royal Gold, Inc., RG Exchangeco Inc. and Computershare Trust Company of Canada (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K/A on February 23, 2010 and incorporated herein by reference) Labrador Option Agreement, dated May 18, 1993, between Diamond Fields Resources Inc. and Archean Resources Ltd., as amended (filed as Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q on May 7, 2010 and incorporated herein by reference) Robinson Property Trust Ancillary Agreement by and between Kennecott Holdings Corporation, Kennecott Rawhide Mining Company and Kennecott Nevada Copper Company and BHP Nevada Mining Company, dated September 12, 2003 (filed as Exhibit 10.60 to the Company’s Annual Report on Form 10-K on August 26, 2010 and incorporated herein by reference) Shares Purchase and Sale Agreement by Jaime Ugarte Lee and others to Compa˜nia Minera Barrick Chile Limitada, dated as of March 23, 2001 (English Translation) (filed as Exhibit 10.61 to the Company’s Annual Report on Form 10-K on August 26, 2010 and incorporated herein by reference) Royalty Deed between St Barbara Mines Limited and Resource Capital Funds III L.P., dated March 29, 2005, as supplemented and amended by the Supplemental Deed between St Barbara Mines Limited and Resource Capital Funds III L.P., dated May 20, 2005 (filed as Exhibit 10.64 to the Company’s Annual Report on Form 10-K on August 26, 2010 and incorporated herein by reference) 94 Exhibit Number 10.36 10.37 10.38 Description Net Smelter Return Royalty Agreement by and between Newmont Canada Limited and Barrick Gold Corporation, dated October 8, 2004 (filed as Exhibit 10.65 to the Company’s Annual Report on Form 10-K on August 26, 2010 and incorporated herein by reference) Royalty for Technical Expertise Agreement by and between Tenedoramex S. A. de C. V. and Kennecott Minerals Company, dated as of March 23, 2001 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on January 6, 2006 and incorporated herein by reference) Agreement for Amendment and Restatement of Royalty for Technical Expertise between Minas de Oro Nacional S.A. de C.V. and RG Mexico, Inc. dated May 27, 2011 (filed as Exhibit 10.51 to the Company’s Annual Report on Form 10-K on August 18, 2011 and incorporated herein by reference) 10.39*** Amended and Restated Purchase and Sale Agreement by and among Royal Gold, Inc., RGL Gold AG, Thompson Creek Metals Company Inc. and Terrane Metals Corp. dated as of December 14, 2011 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on December 15, 2011 and incorporated herein by reference) 10.40*** First Amendment to Amended and Restated Purchase and Sale Agreement by and among Royal Gold, Inc., RGLD Gold AG, Thompson Creek Metals Company Inc. and Terrane Metals Corp. dated as of August 8, 2012 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on August 9, 2012 and incorporated herein by reference) 10.41 10.42 10.43 10.44 10.45 10.46 10.47 Intercreditor Agreement by and among RGLD Gold AG, Terrane Metals Corp. and Valiant Trust Company dated November 27, 2012 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q on January 31, 2013 and incorporated herein by reference) Option Agreement between Seabridge Gold Inc. and RGLD Gold Canada, Inc. dated June 16, 2011 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on June 22, 2011 and incorporated herein by reference) Subscription Agreement between Seabridge Gold Inc. and RGLD Gold Canada, Inc. dated June 16, 2011 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on June 22, 2011 and incorporated herein by reference) Amending Agreement between Seabridge Gold Inc. and RG Exchangeco Inc., dated October 28, 2011 (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q on November 3, 2011 and incorporated herein by reference) Second Amending Agreement by and between RG Exchangeco Inc. and Seabridge Gold Inc. dated as of December 13, 2012 (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q on January 31, 2013 and incorporated herein by reference) Net Smelter Royalty Agreement between Barrick Gold Corporation and McWatters Mining Inc., dated April 3, 2003 (filed as Exhibit 10.50 to the Company’s Annual Report on Form 10-K on August 18, 2011 and incorporated herein by reference) Agreement between Rio Tinto Metals Limited and MK Gold Company, dated September 1, 1999 (filed as Exhibit 10.52 to the Company’s Annual Report on Form 10-K on August 18, 2011 and incorporated herein by reference) 95 Exhibit Number 10.48 Description Net Smelter Return Royalty Agreement between Expatriate Resources Ltd. and Atna Resources Ltd., dated June 16, 2004, as modified by Partial Assignment of Royalty between Atna Resources Ltd, Equity Engineering Ltd. and Yukon Zinc Corporation, dated August 20, 2007 (filed as Exhibit 10.53 to the Company’s Annual Report on Form 10-K on August 18, 2011 and incorporated herein by reference) 10.49*** Purchase and Sale Agreement by and between RGLD Gold AG and Chieftain Metals Inc., dated as of December 22, 2011 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on December 28, 2011 and incorporated herein by reference) 21.1* Royal Gold and Its Subsidiaries 23.1* Consent of Independent Registered Public Accounting Firm 31.1* 31.2* Certification of President and Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 Certification of Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Written Statement of the President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Written Statement of the Chief Financial Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 101* The following financial information from the annual report on Form 10-K of Royal Gold, Inc. for the year ended June 30, 2012, formatted to XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations and Comprehensive Income, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Changes in Equity, and (v) Notes to the Consolidated Financial Statements. * Filed herewith. ** Identifies each management contract or compensation plan or arrangement. *** Certain portions of this exhibit have been omitted by redacting a portion of the text (indicated by asterisks in the text). This exhibit has been filed separately with the U.S. Securities and Exchange Commission pursuant to a request for confidential treatment. 96 Royal Gold, Inc. and its Subsidiaries As of June 30, 2013 EXHIBIT 21.1 Name State/Country of Incorporation Ownership Percentage Royal Gold, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware, USA Denver Mining Finance Company, Inc.* . . . . . . . . Colorado, USA Crescent Valley Partners LP . . . . . . . . . . . . . . . Colorado, USA Greek American Exploration Ltd. High Desert Mineral Resources, Inc. . . . . . . . . . . . . Bulgaria . . . . . . . . . . Delaware, USA DFH Co. of Nevada . . . . . . . . . . . . . . . . . . . . . Nevada, USA . . . . . . . . . . . . . . . . . . . . . Nevada, USA Gold Ventures, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . Delaware, USA RG Finance (Barbados) Limited . . . . . . . . . . . . . Barbados RG Mexico, Inc. RGLD Gold AG . . . . . . . . . . . . . . . . . . . . . . . . . RGLD Holdings, LLC . . . . . . . . . . . . . . . . . . . . . Delaware, USA . . . . . . . . . . . . . . . . . . . . . . . . Ontario, Canada . . . . . . . . . . . . . . . . . . . . Ontario, Canada RG Callco Inc. RG Exchangeco Inc. International Royalty Corporation . . . . . . . . . . . Canada Switzerland Voisey’s Bay Holding Corporation . . . . . . . . . Newfoundland, Canada Canadian Minerals Partnership . . . . . . . . . . Ontario, Canada Labrador Nickel Royalty Limited Partnership . . . . . . . . . . . . . . . . . . . . . Ontario, Canada . . . . . . . . . . . . . . . Quebec, Canada McWatters Mining Inc. 4324421 Canada Inc. 4495152 Canada Inc. . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . Canada Royal Crescent Valley, Inc. Royal Gold Chile Limitada . . . . . . . . . . . . . . . . . Chile . . . . . . . . . . . . . . . . . Nevada, USA 100% Limited Partner 50% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 99.99% 89.90% 100% common shares 100% 100% 100% 100% * Denver Mining Finance Company, Inc. is the General Partner of the Crescent Valley Partners LP Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-178691 and No. 333-164975), Form S-4 (No. 333-111590) and Form S-8 (No. 333-122877, No. 333-155384, and No. 333-171364) of our reports dated August 8, 2013, with respect to the consolidated financial statements of Royal Gold, Inc., and the effectiveness of internal control over financial reporting of Royal Gold, Inc., included in this Annual Report (Form 10-K) for the year ended June 30, 2013. EXHIBIT 23.1 /s/ ERNST & YOUNG LLP Ernst & Young LLP Denver, Colorado August 8, 2013 EXHIBIT 31.1 I, Tony Jensen, certify that: (1) I have reviewed this Annual Report on Form 10-K of Royal Gold, Inc.; CERTIFICATION (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report fairly present, in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; (4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure control and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and (5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. August 8, 2013 /s/ TONY JENSEN Tony Jensen President and Chief Executive Officer (Principal Executive Officer) EXHIBIT 31.2 I, Stefan Wenger, certify that: (1) I have reviewed this Annual Report on Form 10-K of Royal Gold, Inc.; CERTIFICATION (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present, in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; (4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have: (a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and (5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. August 8, 2013 /s/ STEFAN WENGER Stefan Wenger Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 EXHIBIT 32.1 In connection with the Annual Report on Form 10-K of Royal Gold, Inc. (the ‘‘Company’’), for the year ending June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the ‘‘Report’’), I, Tony Jensen, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. August 8, 2013 /s/ TONY JENSEN Tony Jensen President and Chief Executive Officer (Principal Executive Officer) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 EXHIBIT 32.2 In connection with the Annual Report on Form 10-K of Royal Gold, Inc. (the ‘‘Company’’), for the year ending June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the ‘‘Report’’), I, Stefan Wenger, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that, to my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. August 8, 2013 /s/ STEFAN WENGER Stefan Wenger Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) (This page has been left blank intentionally.) CORPORATE INFORMATION ANNUAL MEETING Wednesday, November 20, 2013 9:30 a.m. MST Four Seasons Hotel 1111 14th St. Denver, CO 80202 BOARD OF DIRECTORS Stanley Dempsey Chairman Royal Gold, Inc. Tony Jensen President and Chief Executive Officer Royal Gold, Inc. Gordon J. Bogden Retired Investment Banker and Corporate Director M. Craig Haase Retired Mining Executive William Hayes Retired Mining Executive S. Oden Howell, Jr. President Howell & Howell Contractors James W. Stuckert Senior Executive Hilliard, Lyons, Inc. Ronald J. Vance Senior Mining Executive Teck Resources Limited OFFICERS Tony Jensen President and Chief Executive Officer Stefan Wenger Chief Financial Officer and Treasurer Karli Anderson Vice President Investor Relations William Heissenbuttel Vice President Corporate Development Bruce C. Kirchhoff Vice President, General Counsel and Secretary William Zisch Vice President Operations CORPORATE HEADQUARTERS Royal Gold, Inc. 1660 Wynkoop Street, Suite 1000 Denver, Colorado 80202 (303) 573-1660 (phone) (303) 595-9385 (fax) E-mail: info@royalgold.com WEBSITE: www.royalgold.com LEGAL COUNSEL Hogan Lovells US LLP Denver, Colorado AUDITORS Ernst & Young LLP Denver, Colorado TRANSFER AGENTS/ REGISTRARS For Holders of Royal Gold Common Stock: Computershare Investor Services Mailing addresses: For standard US postal mail Computershare Investor Services PO Box 43070 Providence, RI 02940-3070 For overnight/express delivery: Computershare Investor Services 250 Royall Street Canton, MA 02021 Telephone and Fax: (800) 962-4284 (toll free) (781) 575-3120 (International) (303) 262-0700 (fax) Web site: www.computershare.com For Holders of Royal Gold Exchangeable Shares: Computershare Trust Company of Canada Suite 600, 530 8th Ave. SW Calgary, Alberta T2P 3S8, Canada Attention: Manager, Client Services Phone: (403) 267-6800 Fax: (403) 267-6529 For inquiries on how to exchange International Royalty Corp. shares into Royal Gold shares, contact the Depositary: CIBC Mellon Trust Company c/o Canadian Stock Transfer Company Inc. PO Box 1036 Adelaide Street Postal Station Toronto, Ontario M5C 2K4, Canada Attention: Corporate Restructures Phone: 1-800-387-0825 Fax: (888) 486-7660. Email: inquiries@canstockta.com STOCK EXCHANGE LISTINGS Nasdaq Global Select Market (Symbol: RGLD) Toronto Stock Exchange (Symbol: RGL) INVESTOR RELATIONS Copies of Royal Gold’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013 are available at no charge. Please direct requests and investor relations questions to: Karli Anderson Vice President Investor Relations (303) 575-6517 E-mail: kanderson@royalgold.com SHAREHOLDER COMMUNICATION It is important for our shareholders to get timely information about Royal Gold. All shareholders are encouraged to visit the Company’s website at www.royalgold.com for the latest news or to sign up for our email list. A D A j E T D V A D I : y h p a r g o t o h p d r a o b d n a t n e m e g a n a M N O I T A R O P R O C L L I R R E M : g n i t n i r P S E T A I C O S S A N G I S E D K C O M K R A M : n g i s e D Royal Gold, Inc. BOARD OF DIRECTORS Seated Left to Right: WILLIAM HAYES – Retired Mining Executive STANLEY DEMPSEY – Chairman Standing Left to Right: M. CRAIG HAASE – Retired Mining Executive S. ODEN HOWELL, JR. – President, Howell & Howell Contractors TONY JENSEN – President and Chief Executive Officer RONALD J. VANCE – Senior Vice President, Corporate Development, Teck Resources Ltd. GORDON J. BOGDEN – Corporate Director and Retired Investment Banker JAMES W. STUCKERT – Senior Executive Officer – Hilliard, Lyons, Inc. Management KARLI ANDERSON BILL HEISSENBUTTEL TONY JENSEN BRUCE KIRCHHOFF STEFAN WENGER BILL ZISCH Vice President Investor Relations Vice President Corporate Development President & Chief Executive Officer Vice President General Counsel & Secretary Chief Financial Officer & Treasurer Vice President Operations 9/25/13 2:56 PM R R O O Y Y A A L L G G O O L L D D , , I I N N C C . . 1660 Wynkoop Street, Suite 1000 Denver, Colorado 80202 www.royalgold.com 33599cov.indd 1-3 2 0 1 3 A n n u a l R e p o r t 

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