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2013 ANNUAL REPORT
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G R O W T H
E M B E D D E D G R O W T H
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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.
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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
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1660 Wynkoop Street, Suite 1000
Denver, Colorado 80202
www.royalgold.com
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