T
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P
E
R
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A
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A
4
1
0
2
SOLID PORTFOLIO. SOLID FUTURE.
TabLE OF COnTEnTS
Corporate Profile/Business Strategy ....................................1
Selected Financial Data .............................................................2
Financial Highlights ....................................................................3
Letter to Shareholders ................................................................4
Portfolio Map .................................................................................8
Property Portfolio
Principal Properties ............................................................... 10
Property Tables ....................................................................... 16
Property Table Footnotes ........................................................ 20
The Gold Market ........................................................................ 22
Corporate Responsibility ........................................................ 23
Non-GAAP Financial Measures .............................................. 24
Glossary ........................................................................................ 25
Five-Year Return to Shareholders ........................................ 26
Form 10-K ..................................................................................... 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.
2. We do not own or operate the properties on which we have royalty interests 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 the status of development at the properties.
CORPORATE PROFILE
Royal Gold, Inc. acquires and manages precious metals 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 metal sector without incurring many of the
costs and risks associated with mine operations.
To acquire a royalty, Royal Gold buys a percentage of the
Royal Gold owns a large portfolio of producing, development,
metal produced from a mineral property in exchange for an
evaluation and exploration stage royalties and streams located
initial payment. Existing royalties are acquired outright from
in some of the world’s most prolific gold regions. With this
either a mineral resource company or a private party; new
high quality portfolio, Royal Gold maintains upside potential
royalties are generally created by providing capital to an
through exploration successes by the operators and generally
operator or explorer in exchange for a royalty. Precious metal
benefits when new reserves are discovered and produced.
streams are obtained by providing financing to operators,
allowing them to monetize a portion of their production. A
This successful business model generates strong cash flow
metal stream is similar to a royalty but typically has a smaller
and high margins with a lower cost structure, providing
front end payment, and requires that payments be made as
shareholders with a premium precious metal investment.
metal is delivered over the life of the mine. In a royalty or
stream investment, Royal Gold does not contribute to the
Royal Gold is based in Denver, Colorado, and is traded on the
exploration, operating, or capital costs at the mine after the
NASDAQ Global Select Market, under the symbol “RGLD,”
investment is made, and does not assume any responsibility
and on the Toronto Stock Exchange, under the symbol “RGL.”
for actual mine operations.
BUSINESS STRATEGY
The key elemenTs of our business sTraTegy include:
1. focus on gold. Royal Gold is a precious metals investment vehicle focused on gold.
2. business model. Royal Gold’s lower risk business model is based on acquiring royalty interests in precious metals properties
or entering into precious metals stream transactions rather than engaging in costly and more complex mining operations.
3. growTh and diversificaTion. Royal Gold is determined to add to its broad-based and geopolitically stable portfolio of
precious metals interests through accretive transactions.
4. margin enhancemenT. Royal Gold’s unique business model allows us to efficiently grow revenue without adding
significant overhead costs.
5. 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.
1
SELECTED FINANCIAL DATA
SELECTED STATEMENTS OF OPERATIONS DATA
Fiscal Years Ended June 30,
(Amounts in thousands, except per share data)
2014
2013
2012
2011
2010
Revenue
Adjusted EBITDA 1
Operating income
Net income
Net income attributable to
Royal Gold common stockholders 3, 4, 5, 6
Net income per share available to
Royal Gold common stockholders:
$
$
$
$
237,1 6 2
$ 289,224
$ 263,054
$ 216,469
$ 136,565
202,070
$ 260,469
$
237,616
108,720
63,472
$
$
171,167
$
156,634
73,409
$ 98,309
$
$
$
190,172
$ 100,068
118,925
$ 41,035
77,299
$
29,422
$
62,641
$
69,153
$
92,476
$
71,395
$
21,492
Basic
Diluted
Dividends declared per common share
$
$
$
0.96
0.96
0.83
$
$
$
1.09
1.09
0.75
$
$
$
1.61
1.61
0.56
$
$
$
1.29
1.29
0.42
$
$
$
0.49
0.49
0.34
SELECTED BALANCE SHEET DATA
As of June 30,
(Amounts in thousands)
2014
2013
2012
2011
2010
Royalty and stream interests, net
$ 2,109,067
$ 2,120,268
$ 1,890,988
$ 1,690,439
$ 1,476,799
Total assets
Debt
Total liabilities
$ 2,891,544
$ 2,905,341
$ 2,376,366
$ 1,902,702
$ 1,865,333
$
$
311,860
$ 302,263
$ 293,248
$ 226,100
$ 248,500
518,987
$ 534,705
$ 512,937
$ 415,007
$ 431,785
Total Royal Gold stockholders’ equity
$ 2,354,725
$ 2,348,887
$ 1,838,459
$ 1,460,162
$ 1,403,716
1. 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.
2. The term “net income” represents net income attributable to Royal Gold shareholders as shown on the Company’s Consolidated Statement of Operations and
Comprehensive Income in our Annual Report on Form 10-K.
3. Net income for FY2010 was impacted by pre-tax effects of severance and acquisition cost of $19.4 million, or $0.33 per share, related to the International Royalty
Corporation transaction.
2
FINANCIAL HIGHLIGHTS
REVENUE
For the Fiscal Years Ended June 30, ($Millions)
ADJUSTED EBITDA1
For the Fiscal Years Ended June 30, ($Millions)
289.2
263.1
216.5
237.2
$350
$300
$250
$200
$150
$100
$50
$0
136.6
260.5
237.6
190.2
202.1
$300
$250
$200
$150
$100
100.1
$50
$0
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
NET INCOME2
For the Fiscal Years Ended June 30, ($Millions)
CALENDAR YEAR DIVIDENDS7
($Per share)
92.54
71.4
69.25
62.66
$100
$80
$60
$40
$20
$0
21.53
0.84
0.80
0.60
0.44
$1.00
$0.80
$0.60
$0.40
0.36
$0.20
$0.00
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
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 expense.
6. Net income for FY2014 was impacted by an impairment loss recognized on available-for-sale securities of $4.5 million, or $0.07 per basic share after taxes.
7. Dividends are paid on a calendar year basis and do not correspond with the fiscal year dividend amounts show in the Selected Financial Data. Fiscal 2014
dividends totaled $0.83 per share; calendar 2014 total includes the estimated fourth quarter dividend.
3
LETTER TO SHAREHOLDERS
dear fellow shareholder,
During fiscal 2014, our industry adapted to the “new
• We achieved a total shareholder return of 84%; and
normal” of weaker precious metals prices following
the dramatic decline in gold and silver prices in late
• We added significant talent to our board of directors
fiscal 2013. The average gold price for fiscal year
during the fiscal year.
2014 was down 19% relative to the prior year. These
prices compressed financial results for all precious
FInanCIally RobusT
metal companies, particularly in high debt and low
Prior to the gold price declines experienced in late fiscal
margin companies. Many operators responded to the
2013, we took several measures that I reported on last
lower price environment by cutting operating costs,
year to make sure we were well positioned to grow the
eliminating growth expenditures, scaling back projects,
company in any metal price environment. We furthered
selling assets, and reducing or eliminating dividends.
those efforts in fiscal 2014 by increasing our credit
line to $450 million, with improved terms and with an
Royal Gold stands in stark contrast to pressures
extended maturity.
experienced by others in the precious metal industry:
• We are financially robust with over $700 million
of very strong operating cash flow, which totaled $147
in working capital and a $450 million untapped
million during the fiscal year. We have slightly less than
credit facility, giving us more than $1 billion in
$100 million in future commitments, leaving us with
uncommitted liquidity;
one of the strongest uncommitted balance sheets in
We funded over $75 million in new opportunities out
• We continued to invest in the business, adding four new
interests to our portfolio over the fiscal year, consisting
new busIness
the business.
of royalties at El Morro, Cortez and Goldrush, as well as
Over the last fiscal year we’ve given our shareholders
a new streaming interest at Phoenix;
exposure to properties with excellent development
potential by investing in Goldcorp’s and New Gold’s El
• We believe this is an excellent time to add new
Morro project, Barrick’s Cortez mining complex and
interests to our portfolio as royalty and stream
its nearby Goldrush project and Rubicon Minerals’
products offer a compelling cost of capital to
Phoenix project.
operators in the current environment;
In August 2013, we acquired a royalty from Xstrata
• We experienced significant volume growth as Mt.
covering an estimated one-third of the total reserves
Milligan entered production during the fiscal year and
at the El Morro copper gold project in Chile. Goldcorp
is now our largest single source of revenue;
holds 70% of the El Morro project, with the remaining
30% held by New Gold. El Morro is among the world’s
• We returned over $53 million to shareholders in the
highest grade undeveloped gold and copper porphyries,
form of dividends, which equates to about 36% of
with reserves of 9.5 million ounces of gold and 7 billion
operating cash flow, marking our 13th straight year of
pounds of copper.
increasing dividends;
4
“as mt. milligan production began to ramp up and our other properties continued
to perform, investors took note of that growth and rewarded royal gold. we
outperformed our sector and gold for fiscal 2014, delivering a total shareholder
return of approximately 84%.“
In January 2014, we expanded our business in Nevada.
Our royalty and streaming products complement
We purchased a royalty on the southern end of
the industry’s focus on per share returns by limiting
Barrick’s Goldrush deposit. Goldrush has approximately
dilution and delivering a compelling cost of capital
15 million ounces of gold resource and the system
to our counterparties. We do our own due diligence,
remains open in multiple directions, including lands
leveraging our operating experience carefully and
subject to Royal Gold’s new royalty interest. We also
seeking out strong management teams for long-term
increased our interests in certain portions of the
relationships. Our recent transaction with Rubicon at
Pipeline complex at Barrick’s Cortez gold mine. These
the Phoenix project is an excellent example.
new interests complement a host of other royalty
interests we have in the area.
We continue to be encouraged by the amount of deal
In February 2014, we completed a stream financing
investments, seeking opportunities that we believe will
transaction with Rubicon to help develop its Phoenix
provide strong total shareholder return.
flow in the business; but we will remain selective in our
gold project in Ontario, Canada. Rubicon projects a
total life of mine production of 2.2 million ounces,
sTRonG volume
with average estimated annual production of 165,300
Thompson Creek’s Mt. Milligan mine commenced
ounces based on a 13 year mine life. The Phoenix
production in September 2013. After three quarters of
project is currently under construction with first
progressively higher production, it is now our largest
production expected in mid-calendar 2015.
single revenue generator even though it ended our
fiscal year at only about 65% of design capacity.
exCellenT envIRonmenT
Thompson Creek expects the mine will be near 80%
Royal Gold is navigating this challenging commodity
capacity by calendar 2014 year end, with beginning
environment from a position of strength. While many in
production capacity scheduled for 2015. We estimate
the industry are seeking capital to advance projects, we
Mt. Milligan, once in full production, could become the
have the capital resources to invest in quality projects.
largest gold stream in the business, and we are very
enthusiastic about the returns we expect Mt. Milligan to
Royal Gold’s main competitors are debt and equity
generate for our shareholders.
financings. Equity financing for many companies today is
unavailable and, when available, it is often quite dilutive
The new production from Mt. Milligan adds to 36 other
to per share financial results. Debt also has limited
producing properties also providing revenue to Royal
availability for smaller entities and is rarely a complete
Gold. An operating or investment-oriented metals
solution for project financing. By contrast, royalty and
company would be hard pressed to replicate this level
stream financing is available, its attributes are well
of diversification.
understood by the industry, and it is gaining market share.
5
LETTER TO SHAREHOLDERS (continued)
Teck’s Andacollo property in Chile and Goldcorp’s
that growth and rewarded Royal Gold. We outperformed
Peñasquito mine in Mexico were our other top producers.
our sector and gold for fiscal 2014, delivering a total
At Andacollo, production was 27% lower than a year
shareholder return of approximately 84%.
ago as a lower grade portion of the deposit was mined
according to schedule, while Peñasquito’s production
TalenT ReInFoRCed
increased 44% as Goldcorp accessed a higher grade
From a personal standpoint, we bid farewell to our
portion of the deposit.
Founder and Chairman Stanley Dempsey, who retired in
May 2014, after 31 years of leadership with Royal Gold.
We continue to monitor progress on more than 160
Stan was the driving force behind Royal Gold’s evolution
development, evaluation and exploration investments.
from an oil and gas company to a gold exploration
This includes our royalty on Barrick’s Pascua-Lama
and production company, and ultimately to one of the
project. In late 2013, after investing over $5.4 billion on
world’s largest royalty and streaming companies. Jim
project development, Barrick announced the temporary
Stuckert and Denny Howell also retired from the board
suspension of construction at Pascua-Lama, and noted
after decades of service to the company. Both were
that a decision to restart development will depend on
instrumental in financing the company in its earliest days
improved economics and reduced uncertainty related
and each provided excellent guidance over those many
to legal and regulatory requirements. We believe that
years. Our current management team owes a large debt
Pascua-Lama is a world class deposit, with total gold
of gratitude to these three gentlemen for establishing
reserves of 15 million ounces subject to our interests.
a strong and stable base from which the company can
When this project commences production, it has the
continue to grow.
potential to be among our largest sources of revenue
without the need for any additional capital contributions
We took this time of change and used it to our advantage
on the part of Royal Gold.
by adding two well-respected and experienced gold
industry executives to the board. Kevin McArthur joined
ToTal shaReholdeR ReTuRn
the board in February. Among other positions, Kevin
We are proud to have developed a business that rewards
was the prior President and CEO of Goldcorp and Glamis
shareholders with a sustainable dividend. We returned
Gold, and is the current Vice Chairman and CEO of
over $53 million to shareholders in the form of dividends,
Tahoe Resources. Kevin brings a unique combination
which equates to about 36% of operating cash flow. This
of operational and executive-level expertise, as well as
was our 13th consecutive year of increasing dividends.
common sense cultivated during his involvement in some
of the most exciting growth developments in the mining
As Mt. Milligan production began to ramp up and our other
industry over the last three decades. Chris Thompson
properties continued to perform, investors took note of
joined the board in May. He is the prior President and
“we are financially robust with over $700 million in working capital and a $450 million
untapped credit facility, giving us more than $1 billion in uncommitted liquidity.”
6
“royal gold is navigating this challenging commodity environment from
a position of strength. while many in the industry are seeking capital to
advance projects, we have the capital resources to invest in quality projects.”
CEO of Gold Fields and the Founder and CEO of Castle
Group, which managed venture capital funds to finance
the development of new gold mines. Chris has vast
international transactional and operational experience
in the mining industry and we will be well served by his
knowledge of the business.
The board appointed William Hayes to lead the company
as Chairman. Bill has served on the Royal Gold board of
directors since 2008 and knows our business well. We
welcome his leadership in this new role.
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 support.
Sincerely,
Tony A. Jensen
Tony Jensen
President & CEO
7
PORTFOLIO MAP
MT. MILLIGAN
MULATOS
PEÑASQUITO
VOISEY’S BAY
HOLT
CORTEZ
PASCUA-LAMA
ROBINSON
ANDACOLLO
8
201 PROPERTIES
37 23 46 95
PRODUCING
DEVELOPMENT
EVALUATION
EXPLORATION
PRINCIPAL PROPERTY
PRODUCING PROPERTY
VOISEY’S BAY
HOLT
MT. MILLIGAN
MULATOS
PEÑASQUITO
CORTEZ
PASCUA-LAMA
ROBINSON
ANDACOLLO
201 PROPERTIES
37 23 46 95
PRODUCING
DEVELOPMENT
EVALUATION
EXPLORATION
PRINCIPAL PROPERTY
PRODUCING PROPERTY
9
PRINCIPAL PRODUCING PROPERTIES
Approximately 71% of Royal Gold’s fiscal 2014 revenue was derived from
our Principal Producing Properties. This includes Andacollo, Peñasquito,
Mt. Milligan, Voisey’s Bay, Holt, Mulatos, Cortez and Robinson. The
following pages highlight fiscal 2014 performance from each of them.
The Company considers both historical and future
We also have a principal development property, which
potential revenues in determining which interests in
is a 0.78% to 5.23% sliding-scale NSR royalty on
our portfolio are principal to our business. Estimated
Barrick’s Pascua-Lama project that straddles the
future potential revenues from both producing and
border between Argentina and Chile. Our royalty
development properties are based on a number of
interest is applicable to all gold production from
factors, including reserves subject to our royalty
the portion of the Pascua-Lama project lying on the
interests, production estimates, feasibility studies, metal
Chilean side of the border. Pascua-Lama is one of the
price assumptions, mine life, legal status and other
world’s largest gold and silver deposits with 15 million
factors and assumptions, any of which could change and
ounces of proven and probable gold reserves subject
could cause the Company to conclude that one or more
to our interests. During the fourth quarter of calendar
of such interests are no longer principal to our business.
2013, Barrick announced the temporary suspension
of construction at Pascua-Lama, except for activities
required for environmental and regulatory compliance.
NOTE: Reserves, estimated production and mine start-up information were provided by the operators and have not been
verified by Royal Gold. Metal prices for the reserve figures can be found on page 20, footnote number 3.
10
region iv, chile
FY2014 REvENUE:
$48.8M
FY2014 PRODUCTION:2
50,400 oz gold
RESERvES:3
1.8M oz gold
Royal Gold owns a net smelter return (“NSR”) royalty equal to 75% of all gold produced from the mine until
910,000 payable ounces have been sold, and 50% of the payable gold thereafter.1 Andacollo is an open-pit
copper mine and milling operation operated by a subsidiary of Teck Resources Limited (“Teck”). Gold is
produced as a by-product of copper production. The mine is located in Coquimbo Province, Region IV, Chile,
adjacent to the town of Andacollo.
PRoduCTIon sTaTus: Year-over-year production decreased approximately 27% due to lower grades,
as expected in the mine plan. Mill throughput averaged approximately 51,000 tonnes per day during the
fourth quarter of fiscal 2014. Teck’s full-year calendar 2014 guidance is 38,500 payable ounces.
Footnotes:
1. As of June 30, 2014, approximately 217,000 payable ounces of gold have been sold.
2. Reported production for FY2014 relates to the amount of metal sales subject to our royalty interests as reported to us by the operators of the mines.
3. Reserves as of December 31, 2013.
11
AndAcollo Zacatecas, mexico
FY2014 REvENUE:
$29.3M
FY2014 PRODUCTION:1
534,200 oz gold; 27.7M oz silver;
175.5M lbs lead; 310.9M lbs zinc
RESERvES:2
11.6M oz gold; 605.3M oz silver;
3.7B lbs lead; 9.0B lbs zinc
Royal Gold owns a 2.0% NSR royalty on all metals at the Peñasquito mine. The open-pit 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. Peñasquito is operated by a subsidiary of Goldcorp Inc.
(“Goldcorp”) and is situated in the western half of the Concepción Del Oro district in the northeast corner of
Zacatecas State, Mexico.
PRoduCTIon sTaTus: Gold production at Peñasquito increased approximately 44% and reported
production for silver, lead and zinc also increased over the prior fiscal year. Goldcorp reported that it is
mining in the higher grade portion of the pit, which is expected to continue throughout calendar 2014.
Goldcorp’s full-year calendar 2014 guidance is between 530,000 and 560,000 ounces of gold.
Footnotes:
1. Reported production for FY2014 relates to the amount of metal sales subject to our royalty interests as reported to us by the operators of the mines.
2. Reserves as of December 31, 2013.
12
Peñasquito british columbia, canada
FY2014 REvENUE:
$27.2M
FY2014 PRODUCTION:1
80,800 oz gold
RESERvES:2
6.0M oz gold
Royal Gold’s wholly-owned subsidiary owns the right to purchase 52.25% of the payable gold from the Mt.
Milligan project, at a cash purchase price of $435 for each payable ounce of gold delivered to Royal Gold.1
Mt. Milligan is an open-pit copper-gold mine located in central British Columbia, Canada and operated by a
subsidiary of Thompson Creek Metals Company (“Thompson Creek”).
PRoduCTIon sTaTus: Thompson Creek reported that the mine reached commercial production, defined
as operating the mill at 60% of design capacity for 30 days, on February 18, 2014. The ramp-up at Mt. Milligan
continues to progress well with grades and metal recoveries as expected, and mill throughput steadily improving.
Thompson Creek expects mill throughput will achieve approximately 80% of design capacity by the end of
calendar year 2014.
During our fiscal year 2014, we purchased 25,750 ounces of physical gold, which came from a combination of
provisional and final settlements associated with the first seven shipments of concentrate from Mt. Milligan.
We sold approximately 21,100 ounces of gold during the year at an average price of $1,292 per ounce, and had
approximately 7,800 ounces of gold in inventory as of June 30, 2014. Thompson Creek expects Mt. Milligan to
produce between 185,000 and 195,000 ounces during the 2014 calendar year.
Footnotes
1. This is a metal stream whereby the purchase price for each gold ounce delivered is $435 per ounce, or the prevailing market price of
gold, if lower; no inflation adjustment. Payable gold for this stream is set at 97% of the contained ounces in concentrate.
2. Reserves as of December 31, 2013.
13
Mt. Milligan labrador, canada
FY2014 REvENUE:1
$25.1M
FY2014 PRODUCTION:2
123.7M lbs nickel; 80.5M lbs
of copper
RESERvES:3
902.2M lbs nickel; 507.6M lbs
copper; 42.2M lbs cobalt
Royal Gold holds a 2.7% NSR royalty on all metals from the Voisey’s Bay mine operated by a subsidiary of Vale
S.A. (“Vale”). Voisey’s Bay is presently a surface nickel-copper-cobalt mine and will transition into an underground
operation in the future. The mines is located in northern Labrador, Canada.
PRoduCTIon sTaTus: Nickel production at Voisey’s Bay decreased approximately 14% and copper production
decreased approximately 21% compared to the prior fiscal year. Vale reports the decrease in production is due
to a combination of items, including a failure in the grinding section of the mill in January 2014, a maintenance
stoppage at Sudbury during the June 2014 quarter and decreasing ore grades.
Vale will transition the processing of Voisey’s Bay nickel concentrate from its Sudbury and Thompson smelters
to its new Long Harbour Hydrometallurgical Plant.4 Initially, Vale will process a combination of matte from its
Indonesian operations and concentrate from Voisey’s Bay, moving to processing solely concentrate from Voisey’s
Bay at a later stage.
Footnotes:
1. Revenues consist of provisional payments for concentrates produced during the current period and final settlements for prior production periods.
2. Reported production for FY2014 relates to the amount of metal sales subject to our royalty interests as reported to us by the operators of the mines.
3. Reserves as of December 31, 2013.
4. In anticipation of the transition from processing Voisey’s Bay nickel concentrates at Vale’s Sudbury and Thompson smelters to processing at the
Long Harbour Hydrometallurgical Plant, Royal Gold is engaged in discussions with Vale concerning calculation of the royalty once Voisey’s Bay nickel
concentrates are processed at Long Harbour. Vale proposed a calculation of the royalty that Royal Gold estimates could result in the substantial reduction
of royalty on Voisey’s Bay nickel concentrates processed at Long Harbour. For further information, see Royal Gold’s Annual Report on Form 10-K.
14
Voisey’s Bay OTHER PRINCIPAL PROPERTIES
HOLT (Ontario, Canada)
Fy2014 Revenue: $13.8M | Fy2014 PRoduCTIon:1 63,100 oz gold
ReseRves:2 0.5M oz gold
Royal Gold holds a sliding-scale NSR royalty derived by multiplying 0.00013 by the
quarterly average gold price on the Holt mine operated by St Andrew Goldfields Ltd
(“St Andrew”).
PRoduCTIon sTaTus: Reported production at Holt increased 12% compared to
the prior fiscal year which St Andrew credited to additional mine infrastructure
and mine development.
MULATOS (Sonora, Mexico)
Fy2014 Revenue: $9.4M | Fy2014 PRoduCTIon:1, 3 149,800 oz gold
ReseRves:2 1.1M oz gold
Royal Gold holds a 1.0%-5.0% sliding-scale NSR royalty on the Mulatos open-pit mine
and heap leach operation, operated by subsidiary of Alamos Gold, Inc. (“Alamos”).
PRoduCTIon sTaTus: Production at Mulatos decreased approximately 31% compared
to the prior fiscal year, primarily attributable to lower than expected grades from the
Escondida deposit.
CORTEz - PIPELINE COMPLEX (Nevada, United States)
Fy2014 Revenue: $8.1M | Fy2014 PRoduCTIon: 1 95,400 oz gold
ReseRves:2 9.9M oz gold
Royal Gold holds the following royalties at the Cortez open-pit, operated by Barrick: sliding-
scale 0.40% to 5.0% GSR1 and GSR2; 0.7125% GSR3; and 1.014% NVR14. In FY2014 Royal
Gold increased its ownership interest in the NVR1 royalty.
PRoduCTIon sTaTus: Production at Cortez increased approximately 16% compared to the
prior fiscal year, as surface mining activity at the Pipeline and Gap pits increased during the
current period.
ROBINSON (Nevada, United States)
Fy2014 Revenue: $6.4M | Fy2014 PRoduCTIon:1 27,600 oz gold; 69.6M lbs copper
ReseRves:2 0.8M oz gold; 1.3B lbs copper
Royal Gold owns a 3.0% NSR royalty on all mineral production from the Robinson open-pit
mine, operated by KGHM International Ltd. (“KGHM”).
PRoduCTIon sTaTus: Copper production at Robinson decreased approximately 52% and gold
production decreased approximately 44% compared to the prior fiscal year, due to the planned
mine sequence moving to the lower grade Kimbley pit during the second half of fiscal 2014.
Other Principal Property Footnotes:
1. Reported production relates to the amount of metal sales that are subject to our royalty interests for the fiscal year ended June 30, 2014, as reported to
us by the operators of the mines.
2. Reserves as of December 31, 2013 – Holt, Mulatos and Cortez; and December 31, 2011 – Robinson.
3. The royalty is capped at 2.0 million ounces of production. As of June 30, 2014, approximately 1.27 million cumulative ounces of gold have been produced.
4. Royalty rate for the Crossroads portion of NVR1 is 0.618%.
15
PRODUCING PROPERTIES
ProPerTy
locaTion
oPeraTor
royalTy/meTal sTream 1
(gold unless otherwise stated)
reserves 2,3,4,5
(contained oz or lbs) M 6
revenue
FY2014 ($M)
gwalia deePs
Australia, W. Australia
king of The hills
Australia, W. Australia
St Barbara
St Barbara
1.5% NSR
1.5% NSR
meekaTharra -
yaloginda
Australia, W. Australia
Metals X
0.45% NSR
souTh laverTon
Australia, W. Australia
Saracen
1.5% NSR; $6.00/oz 7
don mario
Bolivia, Chiquitos
Orvana
3.0% NSR (gold, silver and copper)
TaParko
Burkina Faso, Namantenga
Nord Gold
2.0% GSR; 0.75% GSR (milling royalty) 8
inaTa
sega
Burkina Faso, Soum
Avocet
Burkina Faso, Yatenga
Amara Mining
2.5% NSR
3.0% NSR
mT. milligan
Canada, British Columbia
Thompson Creek
52.25% of payable gold 9
voisey’s bay
Canada, Labrador
Vale
2.7% NSR (copper, nickel and cobalt)
2.220 Au
0.063 Au
0.097 Au
0.747 Au
0.073 Au
2.238 Ag
52.407 Cu
0.703 Au
0.491 Au
N.A.
5.950 Au
507.592 Cu
902.220 Ni
42.241 Co
rambler norTh
Canada, Newfoundland
Rambler Metals and Mining
1.0% NSR (gold, silver, copper and zinc)
N.A.
holT
Canada, Ontario
St Andrew Goldfields
0.00013 x Au price (NSR)
williams
Canada, Ontario
Barrick
0.97% NSR
canadian malarTic
Canada,Quebec
Yamana/Agnico-Eagle
1.0% to 1.5% NSR 10
allan
Canada, Saskatchewan
Potash Corporation
of Saskatchewan
$0.36 to $1.44 and $0.25
per ton (potash) 11
wolverine
Canada, Yukon Territory
Yukon Zinc
andacollo
Chile, Region IV
Teck
el Toqui
Chile, Region XI
Nyrstar
dolores
Mexico, Chihuahua
Pan American Silver
mulaTos
Mexico, Sonora
Alamos
PeñasquiTo
Mexico, Zacatecas
Goldcorp
0.0% to 9.445% NSR (royalty on
gold and silver only) 12
75% gold until 910,000 payable
ounces; 50% thereafter (NSR) 13
1.0% to 3.0% NSR (gold, silver,
lead and zinc) 14
3.25% NSR (gold)
2.0% NSR (silver)
1.0% to 5.0% NSR 15
2.0% NSR (gold, silver,
lead and zinc)
el limon
Nicaragua, El Limon
B2Gold
3.0% NSR
las cruces
Spain, Andalucia
First Quantum Minerals
1.5% NSR (copper) 18
Johnson camP
United States, Arizona
Nord Resources
2.5% NSR (copper)
Troy
United States, Montana
Revett
3.0% GSR (silver and copper)
bald mounTain
United States, Nevada
Barrick
1.75% to 2.5% NSR 21
corTeZ (PiPeline
mining comPlex)
United States, Nevada
Barrick
gold hill
United States, Nevada
Kinross/Barrick
goldsTrike
(sJ claims)
United States, Nevada
Barrick
leeville
United States, Nevada
Newmont
marigold
United States, Nevada
Silver Standard
GSR1: 0.40% to 5.0% GSR 22
GSR2: 0.40% to 5.0% GSR 22
GSR3: 0.71% GSR
NVR1: 1.014% NVR
NVR1C: 0.618% NVR 23
1.0% to 2.0% NSR 25, 26
0.6% to 0.95 NSR (M-ACE) (gold and silver) 27
0.9% NSR
1.8% NSR
2.0% NSR
robinson
United States, Nevada
ruby hill
United States, Nevada
KGHM
Barrick
Twin creeks
United States, Nevada
Newmont
3.0% NSR (gold and copper)
3.0% NSR
2.0% GV
wharf
skyline
United States, South Dakota
Goldcorp
0.0% to 2.0% NSR 28
United States, Utah
Bowie Resources
1.41% GV (coal)
*One oil and gas royalty is not included
16
4.2
1.4
0.2
2.6
1.0
3.0
3.4
1.5
27.2
25.1
0.4
13.8
1.5
7.8
1.6
4.1
0.473 Au
0.703 Au
3.879 Au
N.A.
0.193 Au
39.475 Ag
1.797 Au
48.8
0.229 Au
1.369 Ag
27.481 Pb
535.207 Zn
1.752 Au
72.600 Ag
1.140 Au 16
11.610 Au 17
605.270 Ag 17
3688.000 Pb 17
8959.000 Zn 17
0.289 Au
1520.218 Cu
656.000 Cu
17.160 Ag
120.920 Cu
0.478 Au
0.896 Au
3.617 Au
1.304 Au 24
0.874 Au 24
3.209 Au 24
0.323 Au
5.696 Ag
4.548 Au
1.291 Au
3.518 Au
0.812 Au
1329.473 Cu
0.140 Au
0.181 Au
0.432 Au
N.A.
2.0
4.4
9.4
29.3
2.1
7.7
– 19
– 20
1.7
8.1
0.7
4.1
4.3
2.5
6.4
3.2
0.1
1.5
1.7
DEvELOPMENT PROPERTIES
ProPerTy
locaTion
oPeraTor
royalTy/meTal sTream 1
(gold unless otherwise stated)
reserves 2,3,4,5
(contained oz or lbs) m 6
don nicolas
Argentina, Santa Cruz
Compañía Inversora
en Minas
2.0% NSR (gold, silver)
balcooma
Australia, Queensland
Snow Peak Mining
1.5% NSR
celTic/wonder
norTh
Australia, W. Australia
SR Mining
1.5% NSR
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
Metals X
1.5% NSR
Australia, W. Australia
Metals X
Australia, W. Australia
Metals X
1.5% NSR;
AU$10 per ounce produced 8
1.5% to 2.5% NSR 9
1.0% NSR 9
1.5% NSR
red dam
Australia, W. Australia
Phoenix Gold
2.5% GSR
souThern cross
Australia, W. Australia
China Hanking Holdings
1.5% NSR
mara rosa
Brazil, Goiás
Amarillo Gold
1.0% NSR
belcourT
Canada, British Columbia Walter Energy
0.103% GV (coal)
schafT creek
Canada, British Columbia
Copper Fox/ Teck Resources
3.5% NPI (gold, silver, copper and
molybdenum)
kuTcho creek
Canada, British Columbia
Capstone Mining
Tulsequah chief
Canada, British Columbia
Chieftain Metals
2.0% NSR (gold, silver, copper
and zinc)
17.5% of payable gold; 10
25% of payable silver 11
Pine cove
Canada, Newfoundland
Anaconda Mining
7.5% NPI 12
back river
Canada, Nunavut
Sabina Gold & Silver
George Lake: 2.35% NSR 13
Goose Lake: 1.95% NSR 14
Phoenix gold
Canada, Ontario
Rubicon Minerals
6.3% of payable gold 15
caber
Canada, Quebec
Nyrstar
1.0% NSR (copper and zinc)
el morro
Chile, Region III
Goldcorp/ New Gold
1.4% NSR (gold, copper) 16
Pascua-lama
Chile, Region III
Barrick
0.78% to 5.23% NSR (gold) 17, 18
1.05% NSR (copper) 19
sveTloye
Russia, Khabarovsk Krai
Polymetal International
1.0% NSR (gold and silver)
soledad mounTain United States, California
Golden Queen
3.0% NSR (gold and silver) 20
Pinson
United States, Nevada
Atna Resources
3.0% NSR – Cordilleran 21
2.94% NSR – Rayrock 22
0.196 Au
0.401 Ag
0.001 Au
0.380 Ag
32.466 Cu
7.879 Pb
29.274 Zn
0.097 Au
0.307 Au
0.021 Au
0.451 Au
0.114 Au
0.111 Au
0.119 Au
0.946 Au
N.A. coal
5.775 Au
51.895 Ag
5630.715 Cu
373.340 Mo
0.124 Au
11.618 Ag
462.678 Cu
734.300 Zn
0.477 Au
16.870 Ag
0.175 Au
0.203 Au
2.537 Au
N.A. Au
11.355 Cu
116.036 Zn
2.884 Au
2094.000 Cu
14.680 Au
548.177 Cu
0.664 Au
0.765 Ag
1.233 Au
22.396 Ag
0.645 Au
17
locaTion
owershiP
royalTy raTe
norTh well chilkooT
Australia
Saracen Mineral
2.5% to 4.0% NSR 5
EvALUATION PROPERTIES1
ProPerTy
chisPas
marTha
avebury
bell creek
bellevue
burnakura
cheriTons find
edna may
Argentina
Argentina
Australia
Australia
Australia
Australia
Australia
Australia
Compañía Inversora en Minas
Coeur Mining
MMG Limited
Metallica Minerals
Glencore Xstrata
Monument Mining
Riedel Resources
Evolution Mining
meekaTharra - sabbaTh Australia
Avitus Capital
mT. fisher
mT. goode (cosmos)
Australia
Australia
Rox Resources
Glencore Xstrata
PaddingTon
PhilliPs find
quinns ausTin
Temora
Australia
Australia
Australia
Australia
Norton Gold Fields
Barra Resources
Cue Minerals
Straits Resources
van uden gold dePosiT
Australia
Convergent Minerals/St Barbara
Australia
Australia
Australia
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Ghana
Grosvenor Gold/Horseshoe Gold Mine
Laramide Resources
Nex Metals
Agnico-Eagle
Thompson Creek
Agnico-Eagle
Goldcorp/Premier Gold
Lake Shore Gold
MMG Limited
Anglo American
NorthIsle Copper and Gold
Mandalay Resources
Asanko Gold
Guatemala
Kappes, Cassiday & Associates
Mexico
Quaterra Resources/Blackberry
Nicaragua
Condor Gold
wembley durack
wesTmoreland
yundamindera
barrauTe (swanson)
berg
bousqueT-cadillac-
Joannes
follansbee
gold river
high lake
horiZon coal
hushamu
ulu
kubi village
Tambor
nieves
la india
fedorova
almaden
goldrush
2.0% NSR
2.0% NSR
2.0% NSR
AUD$1 to AUD$2/tonne
2.0% NSR
1.5% to 2.5% NSR 2
1.5% NSR
0.5% GSR
AUD$1.00/tonne 3
AUD$5.00/oz 4
1.5% NSR (nickel)
1.75% NSR
AUD$10.00/oz 6
1.5% NSR
12.5% NPI
1.5% NSR
1.0% NSR
1.0% NSR
1.5% NSR
1.0% or 2.0% NSR 7
1.0% NSR
2.0% NSR
2.0% NSR
1.5% NSR
1.5% NSR
0.50% GV (coal)
10.0% NPI
5.0% NSR 8
3.0% NPI
4.0% NSR
2.0% NSR
3.0% NSR
1.0% NVR
1.5% NSR
2.0% NSR
Russia
Barrick/Pana PGM
0.75% or 1.0% NSR; 0.5% NSR; 1.25% or 1.5% NSR 9
United States
Terraco Gold Corp.
1.0% to 2.0% NSR 10
United States
Barrick
hasbrouck mounTain
United States
West Kirkland Mining/Allied Nevada
island mounTain
United States
Victoria Gold
la Jara mesa
United States
Laramide Resources
$0.25/lb 11 (uranium)
long valley
United States
Vista Gold
mcdonald (keeP cool)
United States
Newmont
1.0% NSR
3.0% NSR
niblack
United States
Heatherdale Resources
1.0% to 3.0% NSR 12
relief canyon
United States
Pershing Gold
rock creek
United States
Revett
2.0% NSR
1.0% NSR
san Juan silver
(bulldog)
United States
Hecla
3.0% NSR 13; 1.0% NSR 13
wildcaT
United States
Allied Nevada
1.0% NSR 14; 1.0% to 2.0% NSR 15
18
EXPLORATION PROPERTIES
ownershiP
royalTy raTe
ProPerTy
ownershiP
royalTy raTe
Compañía Inversora en Minas
2.0% NSR
Yamana Gold
2.50% NSR
canada (conTinued)
Lazy Edward Bay
Denison Mines
McKenzie Red Lake
Goldcorp
2.5% NSR 9
1.0% NSR
Mike Lake
Monument
Pitchblack Resources
2.0% NSR
New Nadina Explorations/
Archon Minerals
ProPerTy
argenTina
Michelle
Mina Cancha
ausTralia
Abbotts
Chesterfield
Copperhead
Croesus
Jaguar Nickel
Kalgoorlie East
Lake Ballard
Lounge Lizard
Maori Lass
Melba Flats
Merlin Orbit
Doray Minerals
Blue Haze Gold
St Barbara
Blue Haze Nickel
Hannans Reward/Kagara
Bourkes
Bundarra
Doray Minerals
Terrain Minerals
Buttercup Bore
Panoramic Resources
1.5% NSR
1.5% NSR
1.5% NSR
1.5% NSR
1.5% NSR
2.0% GPR
1.5% NSR
1.5% NSR
1.5% NSR
2.5% NSR
1.5% NSR 4
1.5% NSR 4
1.5% NSR
2.5% 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
General Mining
St Barbara
Norton Gold Fields
AUD$1.25/tonne 1
Independence Group
Malanti Pty Ltd
Swan Gold Mining
Western Areas
St Barbara
MMG Limited
Merlin Diamonds
1.5% NSR
1.125% NSR
0.60% NSR
1.5% NSR 2
1.5% NSR
2.0% NSR
1.0% GV
Mt. Goode Bellevue
Glencore Xstrata
2.0% NSR 3, 1.5% NSR 3
Mt Newman-Victory
St Barbara
Red Hill West
Cullen Resources
Southern Cross Nickel
(Kagara)
Southern Cross Nickel
(Western Areas)
Kagara Nickel
Western Areas
Stakewell
Munarra Metals
West Wyalong
Yagahong
canada
Afridi Lake
Ashmore
Aviat One
Barrow Lake and
North Kellet River
Argent Minerals/
Golden Cross Resources
Doray Minerals
1.5% NSR
Shear Diamonds
HudBay Minerals
Stornoway Diamond
Bluestone Resources/
Hunter Exploration
Bronson Slope
SnipGold
Boothia Peninsula
Bluestone Resources
Carswell Lake
Churchill
Churchill West
Darby (Hayes River)
Talisman Energy/Capstone
Mining
Shear Diamonds/Stornoway
Diamond
Shear Diamonds/
Stornoway Diamond
Teck Resources/
Bluestone Resources/
Hunter Exploration
Duverny
Franquet
Gauthier
Godfrey II
Gold Dome
Golden Bear
Hickey’s Pond
Hood River
Jewel
Joe Mann
Jubilee
Kizmet
Hecla Mining
2.0% NSR 5
Nuinsco Resources/
Ocean Partner Holdings
Osisko Mining
Moneta Porcupine Mines
Golden Predator
Goldcorp
Krinor Resources
Shear Diamonds
Stornoway Diamond
Nuinsco Resources/
Ocean Partner Holdings
2.0% 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
Stornoway Diamond
1.0% GV
Kiska Metals Corporation
1.0% NSR 8
Motherlode Greyhound
Veris Gold
Nighthawk Lake
Noyon
Qimmiq
Railroad
Rambler South
Shasta
TAK
Imperial Metals/
Rainy Mountain Royalty/
White Metal
Nuinsco Resources/
Ocean Partner Holdings
Commander Resources
Eastmain Resources
Krinor Resources
Sable Resources
Independence Gold
Voisey’s Bay Diamonds
Vale
Wilanour
Goldcorp
Yellowknife Lithium
Erex International
dominican rePublic
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
Minera Hispanola
Energold Drilling
0.40% NSR 14
finland
Kettukuusikko
Naakenavaara
honduras
Vueltas de Rio
mexico
San Jeronimo
Peru
Alto Dorado
Tunisia
Trozza
uniTed sTaTes
Ambrosia Lake
Apex
BSC
Taranis Resources
Taranis Resources
Lundin
Goldcorp
2.0% NSR
2.0% NSR
2.0% NSR
2.0% NSR
Candente Gold
2.5% NSR
China Minmetals
2.5% NSR
Uranium Resources
Teck/Pennaroya Utah
McEwen Mining
2.0% NVR
3.0% NSR 15
2.5% NSR
Buckhorn South
Cooks Creek/Ferris Creek
Barrick
Barrick
Doby George
Western Exploration
Fletcher Junction
Nevada Exploration
Horse Mountain
Barrick
Hot Pot
ICBM
Keystone
Mule Canyon
Oro Blanco
Nevada Exploration
Timberline Resources
Energy Fuels
Newmont
Pan American Silver
Pinson – Other
Barrick
Reese River
Rye
San Rafael
Silver Cloud
Simon Creek
Trenton Canyon
Uncle Sam
Windfall
Wood Gulch
Valor Gold
Barrick
Rio Grande Resources
Rimrock Gold
Barrick
Newmont
Timberline Resources
Western Exploration
Woodruff Creek
McEwen Mining
Coventry Resources
2.0% NSR
15.0% NPI 16, 14.0% NPI 16
1.5% NVR
2.0% NSR 17
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
3.2% NSR
5.0% NSR
1.0% NSR
19
FOOTNOTES
Producing ProPerties
1. Royalty and Metal Stream definitions are included in the glossary on page 25 of this
annual report.
2. Reserves have been reported by the operators of record as of December 31, 2013,
with the exception of the following properties: Gwalia Deeps, King of the Hills –
June 30, 2014; Red Dam – February 28, 2014; Svetloye – January 1, 2014; Kundip,
South Laverton – June 30, 2013; Don Mario – June 1, 2013; Schaft Creek and
Williams – December 31, 2012; Soledad – September 6, 2012; Southern Cross – June
30, 2012; Pinson – May 18, 2012; Tulsequah Chief – March 15, 2012; Don Nicolas,
Johnson Camp, Pascua-Lama, Robinson and Wolverine – December 31, 2011; Mara
Rosa – October 28, 2011; Balcooma – June 30, 2011; Kutcho Creek – February 15,
2011; Pine Cove – June 30, 2010; and Caber – July 18, 2007.
6. “Contained ounces” or “contained pounds” do not take into account recovery
losses in mining and processing the ore.
7. 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.
8. 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 that is 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.
9. 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; not increased for inflation.
3. Gold reserves were calculated by the operators at the following per ounce prices:
10. NSR sliding-scale schedule (price of gold per ounce – royalty rate): $0.00 to $350 –
$1,500 – Williams; $1,450 – Kundip; A$1,400 – Celtic/Wonder North, South Laverton
and Southern Cross; A$1,390 – King of the Hills; $1,366 – Schaft Creek; $1,350 – El
Limon, El Morro, El Toqui and Tulsequah Chief; $1,310 – Soledad; A$1,310 – Red Dam;
$1,300 – Canadian Malartic, Dolores, Holt, Leeville, Peñasquito, Pinson, Svetloye,
Twin Creeks and Wharf; A$1,300 – Meekatharra (Nannine, Paddy’s Flat; Reedys
and Yaloginda); $1,250 – Back River, Mulatos and Taparko; A$1,250 - Gwalia Deeps;
$1,200 – Gold Hill and Pascua-Lama; $1,100 – Andacollo, Bald Mountain, Cortez, Don
Mario, Don Nicolas, Goldstrike, Mara Rosa and Ruby Hill; $1,000 – Robinson; $950
– Inata; $983 – Pine Cove; and $690 – Mt. Milligan. No gold price was reported for
Balcooma, Caber, Kutcho Creek, Marigold or Wolverine.
Silver reserves were calculated by the operators at the following prices per ounce:
$25.96 – Schaft Creek; $25.06 – Troy; $25.00 – Don Nicolas; $24.05 – Soledad;
$24.00 – Peñasquito; $23.00 – El Toqui; $22.50 – Svetloye; $22.00 – Dolores, Gold
Hill, Peñasquito and Tulsequah Chief; and $20.00 – Don Mario. No silver price was
reported for Balcooma, Kutcho Creek or Wolverine.
Copper reserves were calculated by the operators at the following prices per pound:
$3.64 – Voisey’s Bay; $3.52 – Schaft Creek; $3.32 – Troy; $3.10 – Tulsequah Chief;
$3.00 – El Morro; $2.75 – Don Mario, Robinson and Las Cruces; $2.50 – Johnson
Camp; $2.00 – Pascua-Lama; and $1.60 – Mt. Milligan. 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: $1.04 – El Toqui; and $0.90 – Peñasquito. No lead reserve price was reported
for Balcooma.
Zinc reserve price was calculated by the operators at the following prices per
pound: $1.13 – El Toqui; and $0.90 – Peñasquito. No zinc reserve price was reported
for Balcooma, Caber, or Kutcho Creek.
1.0%; above $350 – 1.5%.
11. 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.
12. 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%.
13. The royalty rate is 75% until 910,000 payable ounces of gold have been produced;
50% thereafter. There have been approximately 217,000 cumulative payable
ounces produced as of June 30, 2014. Gold is produced as a by-product of copper.
14. 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%.
15. The Company’s royalty is subject to a 2.0 million ounce cap on gold production.
There have been approximately 1.27 million ounces of cumulative production as of
June 30, 2014. 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%.
16. Reserve shown is “capped” assuming 70% recovery.
Nickel reserve price was calculated by the operator at the following price per pound:
by milling. The oxide material will be processed by heap leaching.
17. Operator reports reserves by material type. The sulfide material will be processed
$8.38 – Voisey’s Bay.
Cobalt reserve price was calculated by the operator at the following price per
equivalent or greater than $0.80 per pound of copper.
pound: $13.75 – Voisey’s Bay.
Molybdenum reserve price was calculated by the operator at Schaft Creek at $15.30
of International Royalty Corporation in February 2010.
19. The Company has not recognized revenue from this property since the acquisition
18. Royalty is payable only when LME cash settlement price for Grade A copper is
per pound.
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.
21. 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.
20. No revenue received during the fiscal year ended June 30, 2014.
“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.
22. 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%.
“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
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.
23. NVR1C is the Crossroads portion of NVR1.
24. NVR1, NVR1C and GSR3 reserves and additional mineralized material are subsets
of the reserves covered by GSR1 and GSR2.
25. The royalty is capped at $10 million. As of June 30, 2014, royalty payments of
approximately $1.7 million have been received.
26. 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.
27. The 0.6% to 0.9% sliding-scale NSR applies to the M-ACE claims.
28. 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%.
20
develoPment ProPerties
*For footnotes 1-6, see corresponding footnotes under Producing Footnotes.
7. The royalty rate is 1.0% until 250,000 ounces of gold has been produced,
1.5% thereafter.
8. The A$10 per ounce royalty applies on production above 50,000 ounces. Royalty
payable on gold only.
9. The 1.5% to 2.5% NSR sliding-scale royalty pays at a rate of 1.5% for the first
75,000 ounces produced in any 12 month period and at a rate of 2.5% on
production above 75,000 ounces during that 12 month period. The 1.0% NSR
royalty applies to the Rand area only.
10. This is a metal stream whereby Royal Gold is entitled to 17.5% of payable gold until
65,000 ounces of payable gold have been delivered; and 8.75% of gold production
thereafter, payable at 30% of the daily London price quotation.
7. Royalty rate is 1.0% on Exploration claims and 2.0% on Gold claims. The 2.0%
royalty on Gold claims has a 50% buy back for $1 million.
8. Royalty applies to production above 675,000 ounces.
9. 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.
10. 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%.
11. Royalty is payable on per pound of uranium produced above eight million pounds.
11. This is a metal stream whereby Royal Gold is entitled to 25% of payable silver
12. Royalty rate is 1.0% for each ton of ore having a value of less than $115 per ton;
until 3.0 million ounces of payable silver have been delivered; and 12.5% of silver
production thereafter, payable at 25% of a recognized silver price quotation.
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.
12. Operation is currently in production; estimated pay-back of capital, a requisite to
13. Royalty rate is 3.0% on Homestake and Emerald unpatented claims; 1.0% on
royalty payments, to occur by 2016.
Emerald patented claims.
13. George Lake royalty applies to production above 800,000 ounces.
14. The 1.0% royalty rate applies to the SS lode claims only.
14. Goose Lake royalty applies to production above 400,000 ounces.
15. An additional 1.0% NSR applies to gold production between 500,000 ounces and
15. This is a metal stream whereby Royal Gold is entitled to 6.3% payable gold until
135,000 ounces of payable gold has been delivered; 3.15% thereafter, whereby the
purchase price for gold ounces delivered is 25% of the London PM gold fixing price
as quoted in United States dollars per ounce by the LBMA on the Date of Delivery.
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
16. The royalty covers approximately 30% of the La Fortuna deposit. Reserves
1. Royalty paid on dollars per tonne of ore above 50,000 tonnes up to 500,000 tonnes.
attributable to Royal Gold’s royalty represent 3/7 of Goldcorp’s reporting of 70%
of the total reserve.
2. Royalty payable on gold only.
17. Royalty applies to all gold production from an area of interest in Chile. Only that
3. Royalty rate is 2.0% for gold and 1.5% for all other metals.
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.
4. Royalty payable on all minerals, except nickel or any by-products in whatever
form or state.
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.
18. 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.
19. 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.
20. Royalty is capped at $300,000 plus simple interest.
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
21. Royalty only applies to Section 29 which currently holds about 95% of the
development of a mine on the property.
reserves reported for the property. An additional Cordilleran royalty applies to a
portion of Section 28.
22. 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 June 30, 2014, approximately 103,000
ounces have been produced.
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.
evaluation ProPerties
12. Owner has the option to purchase one-third of the 3.0% NSR for $1 million at any time.
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 pays at a rate of 1.5% for the first
75,000 ounces produced in any 12 month period and at a rate of 2.5% on
production above 75,000 ounces during that 12 month period.
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.
13. Operator has the right to purchase 2.5% of the 5.0% NSR at any time for $1 million.
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.
21
THE GOLD MARKET1
Gold maRkeT oveRvIew
In 2013, gold supply flowed from west to east as lower
relative prices fueled record sales for gold bars, jewelry
and coins, particularly in Asia and the Middle East.
Several central banks in those regions also embraced the
opportunity to add to their gold reserves. The gold price
was impacted by increased supply from gold exchange-
traded funds (“ETFs”), as improved expectations for
growth in the US attracted some capital away from gold.
The gold price declined on a year-over-year basis for
the first time in 12 years, averaging $1,411 per ounce in
calendar 2013 compared with an average of $1,669 per
ounce in calendar 2012, representing a decrease of 15%.
Total gold demand was 3,756 metric tons (“tonnes”) in
2013, which is equivalent to $US170.4 billion.
CalendaR yeaR 2013
Jewelry, bar and coin purchases set the pace for gold
demand in 2013. Two factors strongly influenced
consumers: first, low prices, fueled by ETF selling in April
and June 2013, respectively, prompted consumers to take
advantage of favorable market rates, particularly in China;
second, India imposed import restrictions on gold in 2013,
which limited officially imported gold supply, resulting in
higher consumer demand for gold.
Jewelry comprised 59% of total gold demand in 2013,
up 17% in volume terms from 2012. This was the largest
volume increase since 1997, as the sector grew steadily
throughout the year. Record gold jewelry demand was
reported in India, China, and Turkey, with western markets
also noting strength towards the end of the year.
Bar and coin purchases also increased briskly, up 28%
in volume terms from 2012. The strongest year on year
growth occurred in China, Thailand, Turkey, and India. It
was reported that many bar and coin purchases were
made by consumers for whom the lower relative prices
was a strong incentive for accumulation.
Central banks were net purchasers of gold for the fourth
straight year. Russia (77 tonnes), Kazakhstan (28 tonnes),
Azerbaijan (20 tonnes) and South Korea (20 tonnes)
made large purchases. A 3.5 tonne sale from Germany
related to its coin minting program was the lone central
bank sale in 2013.
The amount of gold used in technology was stable from
2012, driven by use in smartphones and tablets, offset by
lower industrial, decorative, and dental use.
Gold mine production increased 5%. While several new
mines ramped up production or expanded capacity
around the globe, this new production is exhibiting
lower average gold grades, resulting in muted overall
production gains. This slightly higher overall gold
production was offset by the sixth consecutive year of
lower gold recycling, which was down approximately 14%
from 2012 levels.
sIx monThs To June 30, 2014
In the first six months of 2014, the gold market is
experiencing a steadier price environment than a year
ago, trading within a rather narrow range and averaging
$1,291 per ounce. This is down 15% from the average price
of $1,522 per ounce in the first half of calendar 2013.
Early 2014 reports from the most active gold buying
regions such as China and India suggest that consumer
demand for jewelry in particular has returned to post-
financial crisis levels as the price volatility has moderated.
Investment demand from the combination of bars, coins
and ETFs was little changed from a year ago, up 1% from
the first half of 2013. Industry analysts suggest this
may be a function of the strong bar and coin demand a
year ago being absorbed into the market, while gold ETF
investors held onto their positions during the period.
Central banks continued to be net buyers, adding 241
tonnes in the first half of 2014, which is in line with the
recent historical averages. Notable accumulations came
from Russia, Kazakhstan, and Tajikistan, while Ecuador
announced it would engage in a 3-year gold swap to help
improve its domestic finance situation.
Through the end of June, gold mine production has
increased by approximately 58 tonnes over the same
period a year ago. However, the World Gold Council
predicts that mine supply recently may have peaked,
suggesting that the current rate of gold production
growth will slow down over the next few quarters as the
low gold price environment results in less production
from the industry’s highest cost operations. Recycling
1. This information is derived from the World Gold Council and represents the data and opinions of that source. 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.
22
activity has also declined to levels not seen since early
2007, as the lower price environment is less advantageous
for consumer and industry recycling.
oRGanIzaTIonal InvolvemenT
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 board of the American Exploration
and Mining Association; 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 websites:
american exPloraTion and mining associaTion
www.miningamerica.org
colorado mining associaTion
www.coloradomining.org
denver gold grouP
www.denvergold.org
minerals informaTion insTiTuTe
www.mii.org
naTional mining associaTion
www.nma.org
nevada mining associaTion
www.nevadamining.org
world gold council
www.gold.org
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.
23
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. Adjusted EBITDA,
as defined, is most directly comparable to net income in
the Company’s Statements of Operations. Below is the
reconciliation of net income to adjusted EBITDA:
adjusted ebITda Reconciliation
For the Fiscal Years Ended June 30,
(Unaudited in thousands)
Net income
Depreciation, depletion and amortization
Non-cash employee stock compensation
Restructuring on royalty interests
2014
$ 63,472
91,342
2,580
2012
$ 98,309
75,001
6,507
2013
$ 73,409
85,020
5,701
2011
$ 77,299
67,399
6,494
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
of consolidated subsidiaries
-
4,499
-
(2,132)
23,426
19,455
-
12,121
-
(2,902)
24,780
63,759
1,328
-
-
(3,836)
7,705
54,710
-
-
-
(5,088)
7,740
38,974
2010
$ 29,422
53,793
7,279
-
-
-
(6,360)
3,809
14,164
(572)
(1,420)
(2,108)
(2,646)
(2,039)
Adjusted EBITDA
$ 202,070
$ 260,469
$ 237,616
$ 190,172
$ 100,068
24
GLOSSARY
ConCenTRaTe: A mineral-rich, intermediate, product
obtained from processing ore, general by gravity or
flotation operations. Concentrates typically require
additional processing to obtain refined metal.
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.
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.
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).
mIllInG RoyalTy: A royalty on ore throughput at a mill.
RoyalTy: The right to receive a percentage or other
denomination of mineral production from a mining operation.
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.
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.
25
FIvE-YEAR RETURN TO SHAREHOLDERS
Includes dividend reinvestment
ReTuRn To shaReholdeRs
$300
$200
$100
$0
2009 2010 2011 2012 2013 2014
Royal Gold, Inc.
S&P 500 Index
PHLX Gold/Silver Sector XAU
Source: S+P Capital IQ
Phlx Gold/sIlveR seCToR xau ConsTITuenTs
Agnico Eagle Mines Ltd
Allied Nevada Gold Corp
Anglogold Ltd
AuRico Gold Inc
Barrick Gold Corp
Buenaventura Mining
Coeur Mining Inc
Eldorado Gold Corp
First Majestic Silver Corp
Freeport-McMoRan Inc
Gold Fields Ltd
Gold Resource Corp
Goldcorp Inc.
Kinross Gold Corp
McEwen Mining Inc
New Gold Inc
Newmont Mining Corp
Seabridge Gold Inc
Silver Standard Resources Inc
Silver Wheaton Corp
Stillwater Mining Co
NovaGold Resources Inc
Tanzanian Royalty Exploration Corp
Harmony Gold Mining Co Ltd
Pan American Silver Corp
Yamana Gold Inc
Hecla Mining Co
IAMGold Corp
Randgold Resources Ltd
Royal Gold Inc
26
annual ReTuRn PeRCenTaGe
Company Name / Index
Royal Gold, Inc.
S&P 500 Index
PHLX Gold/Silver Sector
Indexed Returns
Years Ended June 30,
2010
16.00
14.43
32.52
2011
23.02
30.69
14.24
2012
34.68
5.45
-20.32
2013
-45.79
20.60
-39.68
2014
83.79
24.61
15.68
Base Period
Company Name / Index
Royal Gold, Inc.
S&P 500 Index
PHLX Gold/Silver Sector
2009
100
100
100
2010
116.00
114.43
132.52
2011
142.70
149.55
151.39
2012
192.19
157.70
120.63
2013
104.18
190.18
72.77
2014
191.48
236.98
84.18
Years Ended June 30,
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 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 the Company’s business model allows revenue growth without adding significant
overhead costs; that the Company’s business model allows for tight control on costs; that the Company is in an excellent financial position;
that this is an excellent time to add new royalty and stream interests; that the Company’s fiscal year 2014 investments have excellent
development potential; that the Company seeks opportunities believed to provide strong total shareholder return; that Mt. Milligan, once
in full production, could become the largest gold stream in the business; that Pascua-Lama is a world class deposit that could become
one of the Company’s largest sources of revenue; and estimated proven and probable reserves, production estimates, time frames for
construction and startup, and mill throughput recovery and grade reported by various operators. 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 the Company’s producing royalty properties; unanticipated grade, geological, metallurgical, processing or other problems at the royalty
properties; economic and market conditions, changes in operators’ mining and processing techniques, 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.
27
28
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
(cid:1) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 2014
or
(cid:2) 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)
(303) 573-1660
Registrant’s telephone number, including area code:
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:1) No (cid:2)
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:2) No (cid:1)
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:1) No (cid:2)
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:1) No (cid:2)
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:1)
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:1)
Accelerated filer (cid:2)
Non-accelerated filer (cid:2)
(Do not check if a
smaller reporting company)
Smaller reporting company (cid:2)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes (cid:2) No (cid:1)
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 31, 2013, as reported on the NASDAQ Global Select Market was $2,891,571,031. There
were 64,754,869 shares of the Company’s common stock, par value $0.01 per share, outstanding as of July 28, 2014. In addition, as of
such date, there were 380,482 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 dividends
and other rights economically equivalent to those of the Company’s common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2014 Annual Meeting of Stockholders scheduled to be held on November 14, 2014, and
to be filed within 120 days after June 30, 2014, are incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this
Annual Report on Form 10-K.
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
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(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, metal
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. A metal
stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to
purchase all or a portion of one or more metals produced from a mine, at a price determined for the
life of the transaction by the purchase agreement. We may 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 the 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, 2014, the Company owned royalty interests on 37 producing properties,
23 development stage properties and 141 exploration stage properties, of which the Company considers
46 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 search for
reserves. We do not conduct mining operations nor are we required to contribute to capital costs,
exploration costs, environmental costs or other mining, processing and operating costs on the properties
in which we hold royalty interests. During the fiscal year ended June 30, 2014, we focused on the
management of our existing royalty and streaming interests and the acquisition of royalty and streaming
interests.
As discussed in further detail throughout this report, some significant developments to our
business during fiscal year 2014 were as follows:
(1) Production at Mt. Milligan began during the fourth quarter of calendar 2013, with commercial
production reached during the first quarter of calendar 2014;
(2) We acquired a gold stream on the Phoenix Gold Project in Ontario, Canada;
(3) We acquired a 70% interest in a 2.0% net smelter return royalty (‘‘NSR’’) on certain portions
of the El Morro copper project in Chile;
1
(4) We increased our interest in a net value royalty covering certain portions of the Pipeline
mining complex, and we acquired a royalty interest at the Goldrush deposit, both interests in
Nevada, USA;
(5) We expanded and extended our revolving credit facility from a $350 million facility maturing
in May 2017 to a $450 million facility maturing in January 2019; and
(6) We increased our calendar year dividend to $0.84 per basic share, which is paid in quarterly
installments throughout calendar year 2014. This represents a 5% increase compared with the
dividend paid during calendar year 2013.
Certain Definitions
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.
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.
Mineralized Material: Mineralized material is mineralization that has been sufficiently sampled at
close enough intervals to reasonably assume continuity and support an estimate of tonnage and an
average grade of the selected metals or salable product. A deposit of this sort does not qualify as a
reserve until a comprehensive evaluation, based upon unit costs, grade, recoveries and other factors,
concludes economic and legal feasibility. Investors are cautioned not to assume that any part or all of
the mineral deposits in these categories will ever be converted into reserves.
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 costs.
Proven (Measured) Reserves: 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 the size, shape, depth and mineral content of reserves
are well established.
Probable (Indicated) Reserves: Ore reserves for which 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,
although lower than that for proven (measured) reserves, is high enough to assume geological
continuity between points of observation.
2
Payable Metal: Ounces or pounds of metal in concentrate after deduction of a percentage of
metal in concentrate by a third-party smelter pursuant to smelting contracts.
Reserve: That part of a mineral deposit that can be economically and legally extracted or
produced at the time of the reserve determination.
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
Tulsequah Chief Gold and Silver Stream Amendment
On July 4, 2014, the Company, through its wholly-owned subsidiary RGLD Gold AG (‘‘RGLD
Gold’’) entered into an Amended and Restated Gold and Silver Purchase and Sale Agreement (the
‘‘Amended Purchase Agreement’’) with Chieftain Metals Inc. (‘‘Chieftain’’) whereby the parties
amended and restated the terms of their December 22, 2011 Purchase and Sale Agreement in relation
to Chieftain’s Tulsequah Chief mining project in British Columbia, Canada. Among other things, the
parties agreed to: (i) reduce the aggregate payment advances to Chieftain from $60 million to
$55 million (of which $10 million was paid in December 2011, with the remainder payable upon
satisfaction of certain conditions set forth in the Amended Purchase Agreement); (ii) increase the gold
stream percentage from 12.50% to 17.50% of payable gold until 65,000 ounces have been delivered to
RGLD Gold, and 8.75% of payable gold thereafter, up from 7.50%; (iii) increase the silver stream
percentage from 22.50% to 25% of payable silver until 3.0 million ounces have been delivered, and
12.50% of payable silver thereafter, up from 9.75%; (iv) revise the cash payments for each ounce of
gold and silver delivered to a constant 30% and 25%, respectively, of the spot prices of gold and silver
on the date of each delivery, instead of payments of $450 to $500 for each payable ounce of gold and
$5.00 to $7.50 for each payable ounce of silver (or the prevailing market prices, if lower); and
(v) increase the area subject to the gold and silver streams to include Chieftain’s Big Bull property.
RGLD Gold retains the right to terminate the Amended Purchase Agreement and receive repayment
of its initial $10 million payment advance if certain conditions set forth in the Amended Purchase
Agreement are not satisfied before December 22, 2014.
Fiscal 2014 Business Developments
Please refer to Item 7, MD&A, for discussion on recent liquidity and capital resource
developments.
Phoenix Gold Project Stream Acquisition
On February 11, 2014, the Company, through its wholly-owned subsidiary RGLD Gold, entered
into a $75 million Purchase and Sale Agreement (the ‘‘Agreement’’) for a gold stream transaction with
Rubicon Minerals Corporation (‘‘Rubicon’’). Pursuant to the Agreement, the $75 million payment
deposit from RGLD Gold is to be used by Rubicon to help pay a significant portion of the
construction costs of the Phoenix Gold Project located in Ontario, Canada, which is currently in the
development stage.
Pursuant to the Agreement, the $75 million payment deposit to Rubicon as prepayment of the
purchase price for refined gold is payable in five installments. The first installment of $10 million was
made in conjunction with execution of definitive documents on February 11, 2014. The second
3
installment of $20 million was paid on March 20, 2014, while the third, fourth and fifth installments of
$15 million each are payable upon satisfaction of certain conditions precedent.
Upon commencement of production at the Phoenix Gold Project, RGLD Gold will purchase and
Rubicon will sell 6.30% of any gold produced from the Phoenix Gold Project until 135,000 ounces have
been delivered, and 3.15% thereafter. For each delivery of gold, RGLD Gold will pay a purchase price
per ounce of 25% of the spot price of gold at the time of delivery. In the event that RGLD Gold’s
interests are subordinated to more than $50 million of senior debt, RGLD Gold’s per ounce purchase
price will be reduced by 5.4% times the amount of the senior debt outstanding and drawn in excess of
$50 million, divided by $50 million.
The Phoenix Gold Project is located in Red Lake, Ontario, Canada. The Red Lake greenstone belt
is host to one of Canada’s preeminent gold producing districts, the Red Lake District, which also hosts
the Red Lake and Cochenour mines. The deposit extends 5,400 feet below surface, and remains open
at depth and along strike. The Phoenix Gold Project is fully permitted for initial production at
1,250 tonnes per day. Construction has substantially advanced on the Phoenix Gold Project, with
project construction and development remaining on budget and on schedule for projected production in
mid-calendar 2015.
Goldrush Royalty Acquisition
On January 7, 2014, Royal Gold, acquired a 1.0% net revenue royalty on the southern end of
Barrick Gold Corporation’s (‘‘Barrick’’) Goldrush deposit in Nevada from a private landowner for total
consideration of $8.0 million, of which $1.0 million was paid at closing and the remaining $7.0 million
will be paid in seven annual installments. Goldrush is located approximately four miles from the Cortez
mine and is currently in the exploration stage. As of December 31, 2013, Barrick reported 75.5 million
tons of mineralized material with an average grade of 0.132 ounces of gold per ton. Investors are
cautioned not to assume that any part or all of the mineralized material will ever be converted into
reserves.
Barrick indicated that as the Goldrush project advances through prefeasibility, a number of
development options are being considered, including open pit mining, underground mining, or a
combination of both. Drilling currently is focused on establishing confidence in the continuity of high
grade portions of the deposit in support of the underground development option.
NVR1 Royalty at Cortez
On January 2, 2014, Royal Gold, through a wholly-owned subsidiary, increased its ownership
interest in the limited partnership that owns the 1.25% net value royalty (‘‘NVR1’’) covering certain
portions of the Pipeline Complex at Barrick’s Cortez gold mine in Nevada. As a result of the
transaction, the NVR1 royalty rate attributable to our interest increased from 0.39% to 1.014% on
production from all of the lands covered by the NVR1 royalty excluding production from the mining
claims comprising the Crossroad deposit (the ‘‘Crossroad Claims’’), and from zero to 0.618% on
production from the Crossroad Claims. Total consideration for the transaction was approximately
$11.5 million. Refer to Note 17 of the notes to the consolidated financial statements for a discussion of
certain related party interests in this transaction.
El Morro Royalty Acquisition
In August 2013, Royal Gold, through a 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.
4
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 project continues with community engagement, optimization of project
economics and evaluation of alternatives for a long-term power supply.
During the period of temporary suspension, El Morro worked with the Chilean authorities and
local communities to address any perceived deficiencies in respect of the environmental permit. El
Morro subsequently filed an addendum to its environmental permit and it was reinstated on
October 22, 2013. Certain local communities and groups filed constitutional actions challenging the
reinstated permit, and on November 22, 2013, the Copiapo Court of Appeals granted an injunction
suspending development of the El Morro project. On April 28, 2014, the Copiapo Court of Appeals
rejected the constitutional actions and consequently the injunction was lifted.
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. Our revenue and long-lived assets (royalty and stream interests,
net) are geographically distributed as shown in the following table.
Revenue
Royalty and Stream
Interests, net
Fiscal Year Ended
June 30,
Fiscal Year Ended
June 30,
2014
2013
2012
2014
2013
2012
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . .
Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34% 24% 24% 53% 52% 43%
21% 29% 25% 31% 30% 35%
18% 19% 20% 7% 7% 9%
15% 17% 18% 3% 4% 5%
4% 4% 5% 3% 3% 3%
3% 3% 4% 1% 1% 1%
5% 4% 4% 2% 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, 2014, we derived approximately 78% of our revenue from precious metals (including
72% from gold and 6% from silver), 8% from copper and 8% from nickel.
Competition
The mining industry in general and the royalty and streaming segment in particular are
competitive. We compete with other royalty and streaming companies, mine operators, and financial
buyers in efforts to acquire existing royalty interests, and with the lenders, investors, and royalty and
5
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
and stream 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 royalty interests 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.
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 Securities and Exchange
Commission (‘‘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 our 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.
6
Company Personnel
We currently have 20 employees, 19 of whom are located in Denver, Colorado, and one who is
located in Zug, Switzerland. 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 our fiscal years 2013 and 2014, decreased our revenues. Severe declines in market
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 will apply. 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
7
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:127) High and low gold prices per ounce, based on the London Bullion Market Association P.M. fix,
have ranged from $454 to $375 in 2004, from $725 to $525 in 2006, from $1,212 to $810 in 2009,
from $1,895 to $1,319 in 2011, from $1,792 to $1,540 in 2012, from $1,694 to $1,192 in 2013, and
$1,385 to $1,221 year to date 2014.
(cid:127) High and low silver prices per ounce, based on the London Bullion Market Association fix, have
ranged from $8.29 to $5.50 in 2004, from $14.94 to $8.83 in 2006, from $19.18 to $10.51 in 2009,
from $48.70 to $26.68 in 2011, from $37.23 to $26.67 in 2012, from $32.23 to $18.61 year in
2013, and $22.05 to $18.76 year to date 2014.
(cid:127) High and low copper prices per pound, based on the London Metal Exchange cash settlement
price for Grade A copper, have ranged from $1.49 to $1.06 in 2004, from $3.99 to $2.06 in 2006,
from $3.33 to $1.38 in 2009, from $4.60 to $3.08 in 2011, from $3.93 to $3.29 in 2012, from $3.75
to $3.01 in 2013, and $3.37 to $2.92 year to date 2014.
(cid:127) High and low nickel prices per pound, based on the London Metal Exchange cash settlement
price for nickel, have ranged from $7.79 to $4.81 in 2004, from $16.16 to $6.25 in 2006, from
$9.31 to $4.25 in 2009, from $13.17 to $7.68 in 2011, from $9.90 to $6.89 in 2012, from $8.46 to
$6.00 in 2013, and $9.62 to $6.06 year to date 2014.
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 typically 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.
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 actively fund or participate ourselves in exploration or development projects) 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:127) insufficient ore reserves;
8
(cid:127) 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:127) declines in the price of gold, silver, copper, nickel and other metals;
(cid:127) mine operating and ore processing facility problems;
(cid:127) economic downturns and operators’ insufficient financing;
(cid:127) insolvency or bankruptcy of the operator;
(cid:127) significant permitting, environmental and other regulatory requirements and restrictions and any
changes in those regulations;
(cid:127) challenges by non-mining interests to existing permits and mining rights, and to applications for
permits and mining rights;
(cid:127) opposition by local communities, indigenous populations and non-governmental organizations;
(cid:127) community or civil unrest;
(cid:127) labor shortages, increased labor costs, and labor disputes, strikes or work stoppages at mines;
(cid:127) unanticipated geological conditions or metallurgical characteristics;
(cid:127) unanticipated ground or water conditions;
(cid:127) pit wall or tailings dam failures or any underground stability issues;
(cid:127) fires, explosions and other industrial accidents;
(cid:127) environmental hazards and natural catastrophes such as floods, earthquakes or inclement or
hazardous weather conditions;
(cid:127) injury to persons, property or the environment;
(cid:127) the ability of operators to maintain or increase production or to replace reserves as properties
are mined; and
(cid:127) 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.
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.
9
The Pascua-Lama mining project in Chile and Argentina is among our principal development stage
acquisitions. During the fourth calendar quarter of 2013, Barrick announced the suspension of
construction at the Pascua-Lama project, except for those activities required for environmental and
regulatory compliance. Barrick has indicated that a decision to restart development will depend on
improved economics and reduced uncertainty related to legal and regulatory requirements. The failure
of the Pascua-Lama project, or any of our other principal properties, to produce anticipated revenues
on schedule or at all would have a material adverse effect on our business, results of operations,
financial condition or the other benefits we expect to realize 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 Mt. Milligan, Andacollo, Voisey’s Bay and Pe˜nasquito properties, among
others, are currently significant to us, as our interests in these properties generated approximately
$130.4 million in revenue in fiscal year 2014, which was nearly 55% of our revenue for the period. In
addition, we anticipate that the portion of our revenue attributable to Mt. Milligan will increase
significantly as it reaches full production and that the Pascua-Lama mining project will contribute
meaningfully to our revenues if and when it begins producing revenue. 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 typically 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.
Royalty interests are subject to title and other defects, and these risks may be hard to identify in acquisition
transactions.
While we seek to confirm the existence, validity, enforceability, terms 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 and to the documents
reflecting the royalty interest. Similarly, 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. 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.
Unknown defects in or disputes relating to the royalty interests we hold or acquire may prevent us
from realizing the anticipated benefits from the royalty interests, and could have a material adverse
effect on our business, results of operations, cash flows and financial condition.
10
Operators may interpret our royalty interests in a manner adverse to us or otherwise may not abide by their
contractual obligations, and we could be forced to take legal action to enforce our contractual rights.
Our royalty interests generally are subject to uncertainties and complexities arising from the
application of contract and property laws in the jurisdictions where the mining projects are located.
Operators and other parties to the agreements governing our royalty interests may interpret our royalty
interests in a manner adverse to us or otherwise may not abide by their contractual obligations, and we
could be forced to take legal action to enforce our contractual rights. We may or may not be successful
in enforcing our contractual rights, and our revenues relating to any challenged royalty interests may be
delayed, curtailed or eliminated during the pendency of any such dispute or in the event our position is
not upheld, which could have a material adverse effect on our business, results of operations, cash
flows and financial condition. Disputes could arise challenging, among other things:
(cid:127) the existence or geographic extent of the royalty interest;
(cid:127) methods for calculating the royalty interest, including whether certain operator costs may
properly be deducted from gross proceeds when calculating royalties determined on a net basis;
(cid:127) third party claims to the same royalty interest or to the property on which we have a royalty
interest;
(cid:127) various rights of the operator or third parties in or to the royalty interest;
(cid:127) production and other thresholds and caps applicable to payments of royalty interests;
(cid:127) the obligation of an operator to make payments on royalty interests; and
(cid:127) various defects or ambiguities in the agreement governing a royalty interest.
For example, in October 2009, the Labrador Nickel Royalty Limited Partnership (‘‘LNRLP’’), of
which the Company is the indirect majority owner, stated a claim in the Supreme Court of
Newfoundland and Labrador Trial Division against certain subsidiaries of Vale, alleging that Vale has
been incorrectly calculating LNRLP’s 3% NSR royalty on the sale of nickel and copper concentrates
from the Voisey’s Bay mine. Vale is commissioning its new Long Harbour Processing Plant with nickel
matte from its Indonesian operations and intends to begin introducing nickel concentrates from
Voisey’s Bay in coming quarters. In anticipation of the transition from processing Voisey’s Bay nickel
concentrates at Vale’s Sudbury and Thompson smelters to processing at the Long Harbour
hydrometallurgical plant, the Company is engaged in discussions with Vale concerning calculation of the
royalty once Voisey’s Bay nickel concentrates are processed at Long Harbour. Vale proposed a
calculation of the royalty that the Company estimates could result in the substantial reduction of
royalty payable to LNRLP on Voisey’s Bay nickel concentrates processed at Long Harbour. While the
Company may continue to engage in discussions concerning calculation of the royalty on nickel
concentrates processed at Long Harbour, there is no guaranty that the Company and Vale will reach
agreement on the proper calculation under the terms of the royalty agreement. If no agreement is
reached, the Company intends to vigorously pursue all legal remedies to ensure the appropriate
calculation of the royalty and to enforce LNRLP’s royalty interests at Voisey’s Bay.
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. For example, Barrick’s Pascua-Lama mining project has been the subject of
litigation by local farmers and indigenous communities alleging that the project’s water management
system is not in compliance with environmental permits and that the project has damaged glaciers
located in the Pascua-Lama project area. 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.
11
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 exploration,
development or producing mining projects, and 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 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. 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, or severe declines in market prices
for gold, silver, copper, nickel and certain other metals, could adversely affect our ability to obtain debt
or equity financing for acquisitions of additional royalty interests. In addition, changes to tax rules,
accounting policies, or the treatment of royalty interests by ratings agencies could make royalties,
streams or other investments by the Company less attractive to counterparties. Such changes could
adversely affect our ability to acquire new royalty interests.
We also 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 may 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.
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
12
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 certain 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 or decrease after threshold production is achieved or payments at stated thresholds are
made. For example:
(cid:127) the royalty rate at Andacollo decreases from 75% of payable gold to 50% of payable gold once
910,000 payable ounces of gold have been produced, of which approximately 217,000 cumulative
payable ounces have been produced as of June 30, 2014;
(cid:127) our royalty at Mulatos is subject to a 2.0 million ounce cap on gold production, of which there
has been approximately 1.27 million ounces of cumulative production as of June 30, 2014;
(cid:127) approximately 20% of our royalty at Pascua-Lama is limited to the first 14.0 million ounces of
gold produced from the project, and another 24% of the royalty can be extended beyond
14.0 million ounces produced for a payment of $4.4 million; and
(cid:127) our stream at the Phoenix Gold project decreases from 6.3% of gold production to 3.15% of
gold production once 135,000 payable ounces of gold have been delivered.
Furthermore, certain other agreements governing our royalty interests contain rights that favor the
operator or third parties. For example, Round Mountain, a joint venture between Kinross and Barrick,
has the right, at any time, to purchase a portion of our Gold Hill royalty interest for $10.0 million less
13
any royalty payments paid prior to the purchase option being exercised. 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.
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
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 agreements 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 them.
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
14
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.
Operations in foreign jurisdictions are subject to many risks, which could decrease our revenues.
We derived approximately 85% of our revenues from foreign sources during fiscal year 2014,
compared to approximately 83% in fiscal year 2013 and 82% in fiscal year 2012. Our principal
producing royalty interests on properties outside of the United States are located in Canada, Chile and
Mexico. We currently have royalty interests in mines and projects in other countries, including
Argentina, Australia, Bolivia, Brazil, Burkina Faso, Dominican Republic, Finland, Ghana, Guatemala,
Honduras, Nicaragua, Peru, Russia, Spain 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:127) expropriation or nationalization of property;
(cid:127) exchange and currency controls and fluctuations;
(cid:127) limitations on foreign exchange and repatriation of earnings;
(cid:127) increased foreign taxation or imposition of new or increased mining royalty interests;
(cid:127) restrictions on mineral production and price controls;
(cid:127) import and export regulations, including restrictions on the export of gold, silver, copper, nickel
or other metals;
(cid:127) changes in legislation, including changes related to taxation, royalty interests, imports, exports,
duties, currency, foreign ownership, foreign trade and foreign investment;
(cid:127) high rates of inflation;
(cid:127) labor practices and disputes;
(cid:127) enforcement of unfamiliar or uncertain foreign real estate, mineral tenure, contract, water use,
mine safety and environmental laws and policies;
(cid:127) 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:127) renegotiation, nullification or forced modification of existing contracts, licenses, permits,
approvals, concessions or the like;
(cid:127) war, crime, terrorism, sabotage, civil unrest and uncertain political and economic environments;
(cid:127) corruption;
(cid:127) 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:127) suspension of the enforcement of creditors’ rights and stockholders’ rights;
(cid:127) risk of loss due to disease and other potential endemic health issues; and
15
(cid:127) 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 and El Morro projects have been challenged by Chilean indigenous groups and other
third parties. During the fourth calendar quarter of 2013, Barrick suspended construction activities at
the Pascua-Lama project, except for those activities required for environmental and regulatory
compliance, as discussed further in Part I, Item 2, Properties under the heading ‘‘Pascua-Lama Project
(Region III, Chile).’’ Similarly, construction activities at the El Morro project were suspended during
the same period.
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. While the government repealed this tax in
July 2014, 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.
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 mining taxes and royalty interests payable to governments could decrease our revenues.
Changes in mining and tax laws in any of the United States, Canada, Chile, Mexico or any other
country in which we have royalty interests in mines or projects 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. 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. 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, or
similar legislation in other countries, could adversely affect the development of new mines and the
16
expansion of existing mines, as well as increase the cost of all mining operations, and could materially
and adversely affect mine operators and our revenue.
Changes in United States tax legislation regarding our foreign earnings could adversely impact our business.
We are subject to income taxes in the United States and various foreign jurisdictions. Currently,
the majority of our revenue is generated from royalty interests located outside, and taxed in, the
United States. United States income and foreign withholding taxes have not been provided for on
specific foreign earnings which are intended to be indefinitely reinvested within a foreign subsidiary.
The current Executive branch of government has proposed various international tax measures, some of
which, if enacted into law, would substantially reduce our ability to defer United States taxes on such
indefinitely reinvested non-United States earnings, eliminate certain tax deductions until foreign
earnings are repatriated to the United States and/or otherwise cause the total tax cost of U.S.
multinational corporations to increase. If these or similar proposals are enacted in the current or future
years, they could have a negative impact on our financial position and results of operations.
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
passed a federal glacier protection law in 2010 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 any time period during which we operated 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.
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
17
states have initiated legislation regarding climate change that will affect energy prices and demand for
carbon intensive products. 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.
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. 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 there
is competition for such persons. 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, 2014, 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.
We have incurred indebtedness in connection with our business and may in the future 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, 2014, 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, 2014, we had $450 million available for borrowing under our revolving
credit facility, which amount we may increase to $600 million subject to the satisfaction of certain
conditions. Our indebtedness increases the risk that we may be unable to generate enough cash to pay
amounts due in respect of our indebtedness.
18
Our indebtedness could have a material adverse effect on our business, results of operations, cash
flows and financial condition. For example, it could:
(cid:127) make it more difficult for us to satisfy our debt obligations;
(cid:127) increase our vulnerability to general adverse economic and industry conditions;
(cid:127) 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:127) limit our flexibility in planning for, or reacting to, changes in our business and the industry in
which we operate;
(cid:127) restrict us from exploiting business opportunities;
(cid:127) place us at a competitive disadvantage compared to our competitors that have less indebtedness;
(cid:127) 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:127) 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:127) 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
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 the June 15, 2019 maturity date, holders may convert their 2019 Notes at any time,
regardless of the foregoing circumstances.
19
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, 2014, 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.
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
20
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 requires
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 $83.87 and $57.00
for the fiscal year ended June 30, 2012, $100.84 and $38.63 for the fiscal year ended June 30, 2013, and
$76.85 and $40.45 for the fiscal year ending June 30, 2014. The fluctuation of the market price of our
common stock has been affected by many factors that are beyond our control, including:
(cid:127) market prices of gold, silver, copper, nickel and other metals;
(cid:127) Central Bank interest rates;
(cid:127) expectations regarding inflation;
(cid:127) ability of operators to advance development projects, produce precious metals and develop new
reserves;
(cid:127) currency values;
(cid:127) credit market conditions;
(cid:127) general stock market conditions; and
(cid:127) global and regional political and economic conditions.
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
21
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
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
22
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 or streaming 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 and streams, 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 and streams 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 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 the Company to
conclude that one or more of such royalty interests are no longer principal to our business. Currently,
23
the Company considers the properties discussed below (listed alphabetically) to be principal to our
business.
16SEP201400564056
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, 2014, approximately 217,000
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 curves to the south to Andacollo. Both
R-43 and D-51 are paved roads.
Reported production at Andacollo decreased approximately 27% during our fiscal year ended
June 30, 2014, when compared to the fiscal year ended June 30, 2013. The decrease in reported
production is due to lower grades as expected in the mine plan. Teck continues to expect a lower
calendar year 2014 grade profile, with gold production for the year at Andacollo anticipated to be
weighted toward the second half of calendar 2014.
24
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, part of the Gap pit 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
81.098% of the 1.25% NVR (or 1.014%) while limited partners in the partnership, which is
consolidated in our financial statements, own the remaining portion of the 1.25% NVR. A
0.618% portion of our NVR1 royalty covers 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.
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%
25
Reported production at Cortez increased approximately 16% during our fiscal year ended June 30,
2014, when compared to the fiscal year ended June 30, 2013, as surface mining activity at the Pipeline
and Gap pits increased during the current period. Additionally, after deferrals in the first half of our
fiscal year ended June 30, 2014, Barrick resumed shipments of roaster ore stockpiled at Cortez to
Goldstrike for processing, which occurred during the March 2014 quarter.
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 derived 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 12% during our fiscal year ended June 30, 2014, when
compared to the fiscal year ended June 30, 2013. Although production at Holt increased, our royalty
rate and corresponding revenue decreased due to the decrease in gold price. St Andrew credited
additional mine infrastructure and mine development for the operational improvements.
Mt. Milligan (British Columbia, Canada)
RGLD Gold, a wholly-owned subsidiary of the Company, owns the right to purchase 52.25% of
the payable gold produced from the Mt. Milligan copper-gold project in British Columbia, Canada,
which is operated by Thompson Creek. The cash purchase price is equal to the lesser of $435 per
ounce, with no inflation adjustment, or the prevailing market price. 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, and from the west via Fort St. James on the North Road and Rainbow Forest
Service Road. Road travel to the Mt. Milligan property site is 482 miles from Prince Rupert and 158
miles from Prince George.
Thompson Creek reported that the mine reached commercial production, defined as operating the
mill at 60% of design capacity for 30 days, on February 18, 2014. The ramp-up at Mt. Milligan
continues to progress well with mine pit grades and metal recoveries as expected, and mill throughput
steadily improving. Thompson Creek expects mill throughput will achieve 75% to 85% of design
capacity by the end of calendar year 2014. In August 2014, Thompson Creek announced that estimated
calendar 2014 gold production will be between 185,000 and 195,000 ounces of gold compared to earlier
guidance of 165,000 and 175,000 ounces of gold.
Deliveries of gold to RGLD Gold are a product of the gold ounces contained in concentrates from
Mt. Milligan, a 97% payable factor, and our 52.25% stream interest; and, for the first 12 concentrate
shipments from Mt. Milligan, are based on Thompson Creek’s receipt of provisional payments under
each of its concentrate sales agreements. For shipments 1-4, 75% of the gold is delivered based upon
Thompson Creek’s receipt of the provisional payment under each concentrate sales agreement and 25%
of the gold ounces are delivered based upon final settlement under each agreement. For shipments 5-8,
those percentages are 50% and 50%, respectively, and for shipments 9-12, the percentages are 25% and
75%, respectively. Thereafter, all deliveries to RGLD Gold will be based solely on final settlement
timing and volumes under Thompson Creek’s concentrate sales agreements.
26
Gold deliveries to RGLD Gold can be affected by several factors that make it difficult to calculate
our quarterly Mt. Milligan revenue based solely on Thompson Creek’s reported quarterly production.
These factors include the timing of Thompson Creek’s concentrate shipments, and the provisional and
final settlement terms applicable to each shipment, neither of which are known to RGLD Gold prior to
the shipment date. RGLD Gold receives physical metal within two days after Thompson Creek records
a sale, which in turn can take between five days and several weeks post-shipment. RGLD Gold
currently sells most of the delivered gold within three weeks of receipt, and recognizes revenue on its
streaming transactions when the metal received is sold.
During the fiscal year ended June 30, 2014, RGLD Gold purchased 25,750 ounces of physical gold,
which came from a combination of provisional and final settlements associated with the first seven
shipments of concentrate from Mt. Milligan. RGLD Gold sold approximately 21,100 ounces of gold
during our fiscal year 2014 at an average price of $1,292 per ounce, and had approximately 7,800
ounces of gold in inventory as of June 30, 2014. Of the approximately 7,800 ounces of gold in inventory
as of June 30, 2014, approximately 3,100 ounces were received but not yet purchased from Thompson
Creek per the stream agreement. The Company purchased these ounces on July 2, 2014.
Mulatos (Sonora, Mexico)
We own a 1.0% to 5.0% sliding-scale NSR royalty on the Mulatos open-pit mine and heap leach
operation in southeastern Sonora, Mexico. The Mulatos mine is located approximately 137 miles east of
the city of Hermosillo and 186 miles south of the border with the United States and is operated by a
subsidiary of Alamos Gold, Inc. (‘‘Alamos’’). Access to the mine from the city of Hermosillo is available
via private chartered flight or ground transportation on a paved and gravel road.
The sliding-scale NSR royalty is based on the gold price as shown in the following table:
London Bullion Market Association P.M. Monthly Average Price of Gold per Ounce (US$)
$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, 2014,
approximately 1.27 million cumulative ounces of gold have been produced.
Reported production at Mulatos decreased approximately 31% during our fiscal year ended
June 30, 2014, when compared to the fiscal year ended June 30, 2013. Alamos reported that the
decrease in production was primarily attributable to lower than expected grades from the Escondida
deposit. Alamos commenced underground mining at Escondida Deep during the March 2014 quarter
and expects to transition to San Carlos in the second half of calendar 2014. Underground throughput
rates at San Carlos are expected to gradually ramp-up to mill capacity of 800 tonnes per day in the
second half of 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
27
Colorado, hosts large gold, silver, zinc and lead reserves. The deposits contain both oxide and sulfide
material, resulting in heap leach and mill processing. There are two access routes to the site. The first
is via a turnoff from Highway 54 onto the State La Pardita road, then onto the Mazapil to Cedros
State road. The second access is via the Salaverna by-pass road from Highway 54 approximately 16
miles south of Concepci´on del Oro. There is a private airport on site and commercial airports in the
cities of Saltillo, Zacatecas and Monterrey.
Reported production for gold at Pe˜nasquito increased approximately 44% during our fiscal year
ended June 30, 2014. Reported production for silver, lead and zinc also increased when compared to
our fiscal year ended June 30, 2013. Goldcorp reported that it is mining in the higher grade portion of
the pit, which it expects will continue throughout calendar 2014 at a projected throughput of 110,000
tonnes per day.
Robinson Mine (Nevada, USA)
We own a 3.0% NSR royalty on all mineral production from the Robinson open-pit mine 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 decreased approximately 52% during our fiscal year
ended June 30, 2014, when compared to the fiscal year ended June 30, 2013, while reported gold
production decreased approximately 44% when compared to the fiscal year ended June 30, 2013. The
lower production was due to the planned mine sequence moving to the Kimbley pit, which has lower
metal grades. It is expected that mining will return to the higher grade Ruth pit in the second half of
calendar 2014.
Voisey’s Bay (Labrador, Canada)
Labrador Nickel Royalty Limited Partnership (‘‘LNRLP’’), of which the Company is the indirect
90% owner, holds a 3.0% NSR royalty (or an effective 2.7% NSR royalty for the Company interest) 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 of LNRLP. 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.
In October 2009, LNRLP stated a claim in the Supreme Court of Newfoundland and Labrador
Trial Division against certain subsidiaries of Vale, alleging that Vale has been incorrectly calculating
LNRLP’s 3% NSR royalty on the sale of nickel and copper concentrates from the Voisey’s Bay mine.
Vale is commissioning its new Long Harbour Processing Plant with nickel matte from its Indonesian
operations and intends to begin introducing nickel concentrates from Voisey’s Bay in coming quarters.
In anticipation of the transition from processing Voisey’s Bay nickel concentrates at Vale’s Sudbury and
Thompson smelters to processing at the Long Harbour hydrometallurgical plant, the Company is
engaged in discussions with Vale concerning calculation of the royalty once Voisey’s Bay nickel
concentrates are processed at Long Harbour. Vale proposed a calculation of the royalty that the
Company estimates could result in the substantial reduction of royalty payable to LNRLP on Voisey’s
Bay nickel concentrates processed at Long Harbour. While the Company may continue to engage in
discussions concerning calculation of the royalty on nickel concentrates processed at Long Harbour,
there is no guaranty that the Company and Vale will reach agreement on the proper calculation under
the terms of the royalty agreement. If no agreement is reached, the Company intends to vigorously
pursue all legal remedies to ensure the appropriate calculation of the royalty and to enforce LNRLP’s
royalty interests at Voisey’s Bay.
28
Reported nickel production at Voisey’s Bay decreased approximately 14% during our fiscal year
ended June 30, 2014 and reported copper production decreased approximately 21% when compared to
the fiscal year ended June 30, 2013.
Principal Royalties on Development Stage Properties
The following is a description of our principal royalty interest in the development stage. Reserves
for our development stage properties are summarized below in Table 1 as part of this Item 2,
Properties.
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
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) we also
increased our 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note: Royalty rate is interpolated between the upper and lower endpoints.
NSR
Royalty
Percentage
0.78%
1.57%
2.72%
3.56%
4.39%
5.23%
Pascua-Lama is one of the world’s largest gold and silver deposits 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.
During the fourth quarter of calendar 2013, Barrick announced the temporary suspension of
construction at Pascua-Lama, except for activities required for environmental and regulatory
compliance. The ramp-down is on schedule for completion by mid-2014 and the majority of
demobilization has already occurred. Barrick reports that it will incur costs of about $300 million
during calendar 2014 for the ramp-down and environmental and social obligations.
29
According to Barrick, a decision to restart development will depend on improved economics and
reduced uncertainty related to legal and regulatory requirements. Accordingly, the timing of any such
decision to restart, permitting timelines, construction schedule and timing of first production are
uncertain. Once a decision to restart is taken, remaining development will take place in distinct stages
with specific work programs and budgets to facilitate more efficient execution and improved cost
control.
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, 2013, 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, 2013. Please refer to pages 33-35 for the footnotes to Table 1.
Table 1
Proven and Probable Gold Reserves
As of December 31, 2013(1)
Gold(2)
PROPERTY
ROYALTY
OPERATOR
LOCATION
PROVEN + PROBABLE
RESERVES(3)(4)(5)
Average
Gold
Tons of Ore Grade
(opt)
Gold
Contained
Ozs(6)
(M)
(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 . . . . . . 1.01% NVR
Cortez (Pipeline) NVR1C . . . . . 0.62% NVR
Gold Hill
. . . . . . . . . . . . . . . 1.0 - 2.0% NSR(10)(11)
0.6 - 0.9% NSR(12)
. . . . . . . 0.9% NSR
Goldstrike (SJ Claims)
Leeville . . . . . . . . . . . . . . . . 1.8% NSR
Marigold . . . . . . . . . . . . . . . . 2.0% NSR
Pinson (DEV)
. . . . . . . . . . . . 3.0% NSR(13)
2.94% NSR(14)
Barrick
Barrick
Barrick
Barrick
Barrick
Barrick
Kinross/Barrick
Barrick
Newmont
Silver Standard
Atna
. . . . . 3.0% NSR(15)
. . . . . . . . . . . . . . . . . 0.0 - 2.0% NSR(16)
Robinson . . . . . . . . . . . . . . . 3.0% NSR
Ruby Hill
. . . . . . . . . . . . . . . 3.0% NSR
Soledad Mountain (DEV)
Twin Creeks . . . . . . . . . . . . . . 2.0% GPR
Wharf
2.35% NSR(17)
Back River—George Lake (DEV)
Back River—Goose Lake (DEV) . 1.95% NSR(18)
Canadian Malartic . . . . . . . . . . 1.0 - 1.5% NSR(19)
Holt
Kutcho Creek (DEV) . . . . . . . . 2.0% NSR
Mt. Milligan . . . . . . . . . . . . . . 52.25% of payable
. . . . . . . . . . . . . . . . . . 0.00013 (cid:3) gold price
gold(20)
. . . . . . . . . . 7.5% NPI
Pine Cove (DEV)
Schaft Creek (DEV) . . . . . . . . . 3.5% NPI
Tulsequah Chief (DEV) . . . . . . . 12.5% payable gold(21)
Williams . . . . . . . . . . . . . . . . 0.97% NSR
Wolverine . . . . . . . . . . . . . . . 0.0 - 9.445% NSR(22)
. . . . . . . . . . . . . . . . 3.25% NSR
Dolores
. . . . . . . . . . . . . . . . 1.0 - 5.0% NSR(23)
Mulatos
Pe˜nasquito(24)
. . . . . . . . . . . . . 2.0% NSR (Oxide)
2.0% NSR (Sulfide)
Andacollo . . . . . . . . . . . . . . . 75% NSR(25)
El Morro (DEV) . . . . . . . . . . . 1.4% NSR(26)
El Toqui
Pascua-Lama (DEV)(28)
. . . . . . . . . . . . . . . . 0 - 3.0% NSR(27)
. . . . . . . 0.78 - 5.23% NSR(29)
KGHM
Barrick
Golden Queen
Newmont
Goldcorp
Sabina Gold & Silver
Sabina Gold & Silver
Yamana/Agnico Eagle
St Andrew
Capstone Mining
Thompson Creek
Anaconda Mining
Copper Fox/Teck
Chieftian Metals
Barrick
Yukon Zinc
Pan American
Alamos
Goldcorp
Goldcorp
Teck
Goldcorp/New Gold
Nyrstar
Barrick
30
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
United States
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Mexico
Mexico
Mexico
Mexico
Chile
Chile
Chile
Chile
18.804
29.955
104.467
50.567
29.172
83.855
24.607
45.848
6.029
238.354
1.746
143.089
4.963
66.751
1.694
19.630
1.404
15.119
128.813
3.419
11.509
526.311
2.905
1037.054
7.107
10.449
4.135
75.619
33.939
91.999
584.192
525.354
212.357
4.354
320.645
0.025
0.030
0.035
0.026
0.030
0.038
0.015
0.099
0.214
0.015
0.369
0.006
0.028
0.018
0.107
0.022
0.145
0.168
0.030
0.138
0.011
0.011
0.060
0.006
0.067
0.067
0.047
0.023
0.034
0.011
0.018
0.003
0.014
0.053
0.046
0.478
0.896
3.617
1.304(9)
0.874(9)
3.209(9)
0.371
4.548
1.291
3.518
0.645
0.812
0.140
1.233
0.181
0.432
0.203
2.537
3.879
0.473
0.124
5.950
0.175
5.775
0.477
0.703
0.193
1.752
1.140
0.990
10.620
1.797
2.884
0.229
14.680
Gold(2)
PROPERTY
ROYALTY
OPERATOR
LOCATION
PROVEN + PROBABLE
RESERVES(3)(4)(5)
Average
Gold
Tons of Ore Grade
(opt)
Gold
Contained
Ozs(6)
(M)
(M)
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
Celtic/Wonder North (DEV) . . . . 1.5% NSR
Gwalia Deeps . . . . . . . . . . . . . 1.5% NSR
King of the Hills . . . . . . . . . . . 1.5% NSR
Kundip (DEV) . . . . . . . . . . . . 1.0 - 1.5% GSR(30)
Meekatharra (Nannine) (DEV) . . 1.5% NSR
Meekatharra (Paddy’s Flat)
Orvana
Minera IRL
B2Gold
Amarillo Gold
Snow Peak Mining
SR Mining
St . Barbara
St. Barbara
Silver Lake Resources
Metals X
Bolivia
Argentina
Nicaragua
Brazil
Australia
Australia
Australia
Australia
Australia
Australia
2.203
1.327
1.970
18.868
0.762
1.507
10.077
0.547
3.097
0.423
0.033
0.148
0.147
0.050
0.002
0.064
0.204
0.124
0.099
0.051
0.073
0.196
0.289
0.946
0.001
0.097
2.060
0.068
0.307
0.021
(DEV) . . . . . . . . . . . . . . . . 1.5% NSR
Metals X
Australia
7.249
0.062
0.451
A$10 per gold ounce
produced(31)
Meekatharra (Reedys) (DEV) . . . 1.5%, 1.5 - 2.5%, 1%
Metals X
Australia
1.368
0.083
0.114
NSR(32)
Meekatharra (Yaloginda) . . . . . . 0.45% NSR
Red Dam (DEV) . . . . . . . . . . . 2.5% NSR
South Laverton . . . . . . . . . . . . 1.5% NSR
Southern Cross (DEV) . . . . . . . 1.5% NSR
Inata . . . . . . . . . . . . . . . . . . 2.5% GSR
Taparko . . . . . . . . . . . . . . . . 2.0% GSR(33)
Svetloye (DEV)
. . . . . . . . . . . 1.0% NSR
Australia
Metals X
Australia
Phoenix Gold
Saracen
Australia
China Hanking Holdings Australia
Avocet
Nord Gold
Polymetal
Burkina Faso
Burkina Faso
Russia
2.027
1.764
14.138
1.582
7.716
9.555
8.069
0.048
0.063
0.053
0.075
0.064
0.074
0.082
0.097
0.111
0.747
0.119
0.491
0.703
0.664
Proven and Probable Silver Reserves
As of December 31, 2013(1)
Silver(34)
PROPERTY
ROYALTY
OPERATOR
LOCATION
PROVEN + PROBABLE
RESERVES(3)(4)(5)
Average
Silver
Tons of Ore Grade
(opt)
Silver
Contained
Ozs(6)
(M)
(M)
Gold Hill
. . . . . . . . . . . . . . . . .
Soledad Mountain (DEV)
. . . . . . .
Troy . . . . . . . . . . . . . . . . . . . . .
Kutcho Creek (DEV) . . . . . . . . . .
Schaft Creek (DEV) . . . . . . . . . . .
Tulsequah Chief (DEV) . . . . . . . . .
Wolverine . . . . . . . . . . . . . . . . .
Dolores . . . . . . . . . . . . . . . . . . .
Pe˜nasquito(24)
. . . . . . . . . . . . . . .
Pe˜nasquito(24)
. . . . . . . . . . . . . . .
Don Mario . . . . . . . . . . . . . . . .
Don Nicolas (DEV) . . . . . . . . . . .
El Toqui
. . . . . . . . . . . . . . . . . .
Balcooma (DEV) . . . . . . . . . . . . .
Svetloye (DEV) . . . . . . . . . . . . . .
1.0 - 2.0% NSR(10)(11)
0.6 - 0.9% NSR(12)
3.0% NSR(15)
3.0% GSR
2.0% NSR
3.5% NPI
22.5% payable Ag(35)
0.0 - 9.445% NSR(22)
2.0% NSR
2.0% NSR (Oxide)
2.0% NSR (Sulfide)
3.0% NSR
2.0% NSR
0 - 3.0% NSR(27)
1.5% NSR
1.0% NSR
Kinross/Barrick
United States
24.607
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
Polymetal
United States
United States
Canada
Canada
Canada
Canada
Mexico
Mexico
Mexico
Bolivia
Argentina
Chile
Russia
66.751
16.570
11.509
1037.054
7.107
4.135
75.619
91.999
584.192
2.203
1.327
4.354
0.762
8.069
0.336
1.036
1.009
0.050
2.374
9.546
0.960
0.836
0.905
1.016
0.302
0.315
0.498
0.095
22.396
17.160
11.618
51.895
16.870
39.475
72.600
76.940
528.330
2.238
0.401
1.369
0.380
0.765
31
Proven and Probable Base Metal Reserves
As of December 31, 2013(1)
Copper(36)
PROPERTY
ROYALTY
OPERATOR
LOCATION
(M)
(%)
Average
Base
Metal
Tons of Ore Grade
Base Metal
Contained Lbs(6)
(M)
PROVEN + PROBABLE
RESERVES(3)(4)(5)
Johnson Camp . . . . . . . . . . . . . . . .
Robinson . . . . . . . . . . . . . . . . . . . .
Troy . . . . . . . . . . . . . . . . . . . . . . .
Caber (DEV) . . . . . . . . . . . . . . . . .
Kutcho Creek (DEV) . . . . . . . . . . . .
Schaft Creek (DEV) . . . . . . . . . . . . .
Voisey’s Bay . . . . . . . . . . . . . . . . . .
Balcooma (DEV) . . . . . . . . . . . . . . .
Don Mario . . . . . . . . . . . . . . . . . .
El Morro (DEV) . . . . . . . . . . . . . . .
Pascua-Lama (DEV)(37)
. . . . . . . . . . .
Las Cruces . . . . . . . . . . . . . . . . . . .
Lead(38)
Nord Resources
2.5% NSR
3.0% NSR
KGHM
3.0% GSR Revett
Nyrstar
1.0% NSR
Capstone Mining
2.0% NSR
Copper Fox/Teck
3.5% NPI
Vale
2.7% NSR
1.5% NSR
Snow Peak Mining
3.0% NSR Orvana
1.4%
NSR(26)
1.05% NSR Barrick
1.5% NSR
First Quantum
United States
United States
United States
Canada
Canada
Canada
Canada
Australia
Bolivia
Chile
Spain
Goldcorp/New Gold Chile
111.200
143.089
16.570
0.676
11.509
1037.054
18.960
0.762
2.203
212.357
320.645
14.415
0.295%
0.465%
0.365%
0.839%
2.010%
0.271%
1.339%
2.130%
1.189%
0.493%
0.085%
5.273%
656.000
1329.473
120.920
11.355
462.678
5630.715
507.592
32.466
52.407
2094.000
548.177
1520.218
PROPERTY
ROYALTY
OPERATOR
LOCATION
Balcooma (DEV) . . . . . . . . .
Pe˜nasquito(24) . . . . . . . . . . . .
El Toqui . . . . . . . . . . . . . . .
Zinc(39)
1.5% NSR
2.0% NSR (Sulfide) Goldcorp
0 - 3.0% NSR(27)
Nyrstar
Snow Peak Mining Australia
Mexico
Chile
PROPERTY
ROYALTY
OPERATOR
LOCATION
Caber (DEV) . . . . . . . . . . . .
Kutcho Creek (DEV) . . . . . . .
Balcooma (DEV) . . . . . . . . .
Pe˜nasquito(24) . . . . . . . . . . . .
El Toqui . . . . . . . . . . . . . . .
NICKEL(40)
1.0% NSR
2.0% NSR
1.5% NSR
2.0% NSR (Sulfide) Goldcorp
0 - 3.0% NSR(27)
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)
0.762
584.192
4.354
Average
Base Metal
Grade
(%)
0.517%
0.284%
0.316%
Base Metal
Contained Lbs(6)
(M)
7.879
3688.000
27.481
PROVEN + PROBABLE RESERVES(3)(4)(5)
Tons of Ore
(M)
Average
Base Metal
Grade
(%)
Base Metal
Contained Lbs(6)
(M)
0.676
11.509
0.762
584.192
4.354
8.577%
3.190%
1.921%
0.694%
6.146%
116.036
734.300
29.274
8959.000
535.207
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
18.960
2.379%
902.220
COBALT(41)
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
18.960
0.111%
42.241
32
MOLYBDENUM(42)
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 (DEV)
. . . . . . . . . . . . . .
3.5% NPI Copper Fox/Teck Canada
1037.054
0.018%
373.340
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
Reserves have been reported by the operators of record as of December 31, 2013, with the exception of the following properties:
Red Dam—February 28, 2014; Svetloye—January 1, 2014; Gwalia Deeps, King of the Hills, Kundip, South Laverton—June 30, 2013;
Don Mario—June 1, 2013; Schaft Creek and Williams—December 31, 2012; Soledad—September 6, 2012; Southern Cross—
June 30, 2012; Pinson—May 18, 2012; Tulsequah Chief—March 15, 2012; Don Nicolas, Gold Hill, Johnson Camp, Pascua-Lama,
Robinson and Wolverine—December 31, 2011; Mara Rosa—October 28, 2011; Balcooma—June 30, 2011; Kutcho Creek—
February 15, 2011; Pine Cove—June 30, 2010; and Caber—July 18, 2007.
Gold reserves were calculated by the operators at the following per ounce prices: $1,500—Williams; $1,450—Kundip; A$1,400—
Celtic/Wonder North, South Laverton and Southern Cross; $1,366—Schaft Creek; $1,350—El Limon, El Morro, El Toqui and
Tulsequah Chief; $1,310—Soledad; A$1,310—Red Dam; $1,300—Canadian Malartic, Dolores, Holt, Leeville, Pe˜nasquito, Pinson,
Svetloye, Twin Creeks and Wharf; A$1,300—Meekatharra (Nannine, Paddy’s Flat; Reedys and Yaloginda); $1,250—Back River,
Martha, Mulatos and Taparko; A$1,250—Gwalia Deeps and King of the Hills; $1,200—Gold Hill and Pascua-Lama; $1,100—
Andacollo, Bald Mountain, Cortez, Don Mario, Don Nicolas, Goldstrike, Mara Rosa and Ruby Hill; $1,000—Robinson; $950—
Inata; $983—Pine Cove; and $690—Mt. Milligan. No gold price was reported for Balcooma, Caber, Kutcho Creek, Marigold or
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.
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
‘‘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 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 are subsets of the reserves covered by GSR1 and GSR2.
The royalty is capped at $10 million. As of June 30, 2014, royalty payments of approximately $1.7 million have been received.
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.
33
(13)
(14)
(15)
(16)
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 June 30, 2014, 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%.
(17) George Lake royalty applies to production above 800,000 ounces.
(18) Goose Lake royalty applies to production above 400,000 ounces.
(19)
(20)
(21)
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.
(22) 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%.
(23)
The Company’s royalty is subject to a 2.0 million ounce cap on gold production. There have been approximately 1.27 million ounces
of cumulative production as of June 30, 2014. 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%.
(24) Operator reports reserves by material type. The sulfide material will be processed by milling. The oxide material will be processed
by heap leaching.
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
(33)
(34)
(35)
(36)
(37)
The royalty rate is 75% until 910,000 payable ounces of gold have been produced; 50% thereafter. There have been approximately
217,000 cumulative payable ounces produced as of June 30, 2014. Gold is produced as a by-product of copper.
The royalty covers approximately 30% of the La Fortuna deposit. Reserves attributable to Royal Gold’s royalty represent
approximately 3⁄7 of Goldcorp’s reporting of 70% of the total reserve.
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 pays at a rate of 1.5% for the first 75,000 ounces produced in any 12 month period and
at a rate of 2.5% on production above 75,000 ounces during that 12 month period. 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; $25.96—Schaft Creek;
$25.06—Troy; $25.00—Don Nicolas; $24.05—Soledad; $24.00—Pe˜nasquito; $23.00—El Toqui; $22.50—Svetloye; $22.00—Dolores,
Pe˜nasquito and Tulsequah Chief; and $20.00—Don Mario. No silver price was reported for Balcooma, Kutcho Creek or 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: $3.64—Voisey’s Bay; $3.52—Schaft Creek;
$3.32—Troy; $3.10—Tulsequah Chief; $3.00—El Morro; $2.75—Don Mario, Robinson and Las Cruces; $2.50—Johnson Camp;
$2.00—Pascua-Lama; and $1.60—Mt. Milligan. No copper reserve price was reported for Balcooma, Caber or Kutcho Creek.
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.
34
(38)
(39)
(40)
(41)
Lead reserve price was calculated by the operators at the following prices per pound: $1.04—El Toqui; and $0.90—Pe˜nasquito. No
lead reserve price was reported for Balcooma.
Zinc reserve price was calculated by the operators at the following prices per pound: $1.13—El Toqui; and $0.90—Pe˜nasquito. No
zinc reserve price was reported for Balcooma, Caber, or Kutcho Creek.
Nickel reserve price was calculated by the operator at the following price per pound: $8.38—Voisey’s Bay.
Cobalt reserve price was calculated by the operator at the following price per pound: $13.75—Voisey’s Bay.
(42) Molybdenum reserve price was calculated by the operator at Schaft Creek at $15.30 per pound.
ITEM 3. LEGAL PROCEEDINGS
Refer to Note 16 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.
35
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, 2012.
Fiscal Year:
2014
2013
Sales Prices
High
Low
First Quarter (July, Aug., Sept.—2013) . . . . . . . . . . .
Second Quarter (Oct., Nov., Dec.—2013) . . . . . . . . . .
Third Quarter (Jan., Feb., March—2014) . . . . . . . . . .
Fourth Quarter (April, May, June—2014) . . . . . . . . .
First Quarter (July, Aug., Sept.—2012) . . . . . . . . . . .
Second Quarter (Oct., Nov., Dec.—2012) . . . . . . . . . .
Third Quarter (Jan., Feb., March—2013) . . . . . . . . . .
Fourth Quarter (April, May, June—2013) . . . . . . . . .
$ 67.25
$ 53.76
$ 72.90
$ 76.85
$100.71
$100.84
$ 83.44
$ 71.33
$40.45
$42.56
$47.02
$58.86
$71.36
$76.17
$62.67
$38.63
As of July 28, 2014, there were 986 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 2014, our annual dividend is $0.84 per share of common stock and exchangeable
shares. We paid the first payment of $0.21 per share on January 17, 2014, to common stockholders and
the holders of exchangeable shares of record at the close of business on January 3, 2014. We paid the
second payment of $0.21 per share on April 18, 2014, to common stockholders and the holders of
exchangeable shares of record at the close of business on April 4, 2014. We paid the third payment of
$0.21 per share on July 18, 2014 to common stockholders and holders of exchangeable shares of record
at the close of business on July 3, 2014. Subject to board approval, we anticipate paying the fourth
payment of $0.21 per share on October 17, 2014, to common shareholders and holders of exchangeable
shares of record at the close of business on October 3, 2014.
For calendar year 2013, our annual dividend was $0.80 per share of common stock and
exchangeable shares, paid on a quarterly basis of $0.20 per share. 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.
36
ITEM 6. SELECTED FINANCIAL DATA
Revenue(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income available to Royal Gold common
Fiscal Years Ended June 30,
2014
2013
2012
2011
2010
$237,162
$108,720
$ 63,472
(Amounts in thousands, except per share data)
$263,054
$156,634
$ 98,309
$216,469
$118,925
$ 77,299
$289,224
$171,167
$ 73,409
$136,565
$ 41,035
$ 29,422
stockholders . . . . . . . . . . . . . . . . . . . . . . . .
$ 62,641
$ 69,153
$ 92,476
$ 71,395
$ 21,492
Net income per share available to Royal Gold
common stockholders:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per common share(2)
. . . . .
$
$
$
0.96
0.96
0.83
$
$
$
1.09
1.09
0.75
$
$
$
1.61
1.61
0.56
$
$
$
1.29
1.29
0.42
$
$
$
0.49
0.49
0.34
2014
2013
2012
2011
2010
As of June 30,
Royalty and stream interests, net
. . . .
Total assets . . . . . . . . . . . . . . . . . . . .
Debt . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . .
Total Royal Gold stockholders’ equity .
$2,109,067
$2,891,544
$ 311,860
$ 518,987
$2,354,725
$2,120,268
$2,905,341
$ 302,263
$ 534,705
$2,348,887
(Amounts in thousands)
$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
(1) Please refer to Item 7, MD&A, of this report for a discussion of recent developments that
contributed to our 18% decrease in revenue during fiscal year 2014 when compared to fiscal year
2013 and the 10% increase in revenue during fiscal year 2013 when compared to fiscal year 2012.
(2) The 2014, 2013, 2012, 2011 and 2010 calendar year dividends were $0.84, $0.80, $0.60, $0.44 and
$0.36, 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, 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, metal
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. A metal
stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to
purchase all or a portion of one or more metals produced from a mine, at a price determined for the
life of the transaction by the purchase agreement. We may 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 the 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
37
information, submission of indications of interest, participation in preliminary discussions and
negotiations and involvement as a bidder in competitive processes.
As of June 30, 2014, the Company owned royalty interests on 37 producing properties,
23 development stage properties and 141 exploration stage properties, of which the Company considers
46 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 search for
reserves. We do not conduct mining operations nor are we required to contribute to capital costs,
exploration costs, environmental costs or other mining, processing and operating costs on the properties
in which we hold royalty interests. During the fiscal year ended June 30, 2014, 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, 2014, 2013 and 2012, gold, silver, copper and nickel price
averages and percentage of revenue by metal were as follows:
June 30, 2014
June 30, 2013
June 30, 2012
Fiscal Year Ended
Metal
Gold ($/ounce . . . . . . .
Silver ($/ounce) . . . . . .
Copper ($/pound) . . . . .
Nickel ($/pound) . . . . .
Other . . . . . . . . . . . . .
Average
Price
$1,296
$20.57
$ 3.18
$ 6.89
N/A
Percentage
of Revenue
Average
Price
Percentage
of Revenue
Average
Price
Percentage
of Revenue
72% $1,605
6% $28.97
8% $ 3.48
8% $ 7.44
N/A
6%
70% $1,673
7% $33.26
11% $ 3.71
8% $ 8.77
N/A
4%
68%
7%
11%
11%
3%
Operators’ Production Estimates by Royalty for Calendar Year 2014
We received annual production estimates from many of the operators of our producing mines
during the first calendar quarter of 2014. The following table shows such production estimates for our
principal producing properties for calendar 2014 as well as the actual production reported to us by the
various operators through June 30, 2014. 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.
38
Operators’ Production Estimate by Royalty for Calendar Year 2014 and Reported Production
Principal Producing Properties
For the period January 1, 2014 through June 30, 2014
Royalty/Stream
Calendar 2014 Operator’s Production Estimate(1)
Silver
(oz.)
Base Metals
(lbs.)
Gold
(oz.)
Andacollo(3)
. . . . . . .
Canadian Malartic . . .
Cortez GSR1 . . . . . .
Cortez GSR2 . . . . . .
Cortez GSR3 . . . . . .
Cortez NVR1 . . . . . .
Holt . . . . . . . . . . . . .
Las Cruces
Copper
38,500
344,000
125,000
151,000
276,000
228,000
66,000
—
—
—
—
—
—
—
Reported Production through June 30,
2014(2)
Gold
(oz.)
Silver
(oz.)
Base Metals
(lbs.)
— 20,500
— 214,900
— 21,000
— 60,400
— 81,400
— 69,400
— 33,200
—
—
—
—
—
—
—
—
—
—
—
—
—
—
. . . . . . . . .
—
Mt. Milligan(3) . . . . . . 185,000 - 195,000
—
Mulatos . . . . . . . . . . 150,000 - 170,000
Pe˜nasquito . . . . . . . . 530,000 - 560,000 22 - 25 million
— 152 - 159 million
—
75,300
— 68,000
286,900
Lead(3)
. . . . . . . . .
Zinc(3) . . . . . . . . . .
Robinson(3)(4) . . . . . . .
. . . . . . . . .
Copper
Voisey’s Bay(3)(4)
Copper
. . . . . . . . .
Nickel(5) . . . . . . . . .
135 - 145 million
315 - 325 million
N/A
N/A
9,700
N/A
N/A
N/A
— 82.7million
—
—
—
—
14.9million
— 88.6million
167.1million
29.8million
19.4million
66.8million
(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, 2014 through June 30, 2014, as reported to us by the operators of the mines. For our streaming
interest at Mt. Milligan, reported production represents payable gold shipped, subject to our stream interest,
during the January 1, 2014 through June 30, 2014 period.
(3)
(4)
Payable metal and deliveries are subject to shipping and settlement schedules.
The operator did not release public production guidance for calendar 2014.
(5) Vale is commissioning its new Long Harbour Processing Plant and intends to begin introducing nickel
concentrates from Voisey’s Bay in coming quarters. In anticipation of the transition from processing Voisey’s
Bay nickel concentrates at Vale’s Sudbury and Thompson smelters to processing at the Long Harbour
hydrometallurgical plant, the Company is engaged in discussions with Vale concerning calculation of the
royalty once Voisey’s Bay nickel concentrates are processed at Long Harbour. Vale proposed a calculation of
the royalty that the Company estimates could result in the substantial reduction of royalty payable to LNRLP
on Voisey’s Bay nickel concentrates processed at Long Harbour. Please see ‘‘Principal Royalties on Producing
Properties—Voisey’s Bay (Labrador, Canada)’’ in Part I, Item 2, for further information.
39
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 Property
Principal Producing Properties
For the Fiscal Years Ended June 30, 2014, 2013 and 2012
Property
Metal
2014
2013
2012
Andacollo . . . . . . . . . . . . . . Gold
Canadian Malartic . . . . . . . . Gold
Cortez GSR1 . . . . . . . . . . . Gold
Cortez GSR2 . . . . . . . . . . . Gold
Cortez GSR3 . . . . . . . . . . . Gold
Cortez NVR1 . . . . . . . . . . . Gold
Holt . . . . . . . . . . . . . . . . . . Gold
Las Cruces . . . . . . . . . . . . . Copper
Mt. Milligan . . . . . . . . . . . . Gold
Mulatos . . . . . . . . . . . . . . . Gold
Pe˜nasquito . . . . . . . . . . . . . Gold
Silver
Lead
Zinc
Robinson . . . . . . . . . . . . . . Gold
Copper
Voisey’s Bay . . . . . . . . . . . . Nickel
Copper
50,400 oz.
417,800 oz.
7,600 oz.
87,800 oz.
95,400 oz.
84,400 oz.
63,100 oz.
161.2 Mlbs.
80,800 oz.
149,800 oz.
534,200 oz.
27.7 Moz.
175.5 Mlbs.
310.9 Mlbs.
27,600 oz.
69.6 Mlbs.
123.7 Mlbs.
80.5 Mlbs.
68,600 oz.
347,000 oz.
81,200 oz.
900 oz.
82,100 oz.
60,400 oz.
56,400 oz.
153.4 Mlbs.
N/A
218,000 oz.
371,100 oz.
21.1 Moz.
126.3 Mlbs.
282.3 Mlbs.
49,100 oz.
146.2 Mlbs.
143.9 Mlbs.
101.9 Mlbs.
51,400 oz.
297,500 oz.
115,900 oz.
800 oz.
116,700 oz.
82,000 oz.
41,200 oz.
119.1 Mlbs.
N/A
169,300 oz.
294,500 oz.
21.5 Moz.
164.0 Mlbs.
312.6 Mlbs.
31,000 oz.
105.3 Mlbs.
131.6 Mlbs.
107.2 Mlbs.
(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 issued 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.
Our most critical accounting estimates relate to our assumptions regarding future gold, silver,
nickel, copper and other metal prices and the estimates of reserves, production 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
40
tax assets. These estimates and assumptions also affect the rate at which we recognize revenue or
charge depreciation, depletion and amortization to earnings. On an ongoing basis, management
evaluates these estimates and assumptions; however, actual amounts could differ from these estimates
and assumptions. Differences between estimates and actual amounts are adjusted and recorded in the
period that the actual amounts are known.
Royalty and Stream Interests
Royalty and stream interests include acquired royalty and stream interests in production,
development and exploration stage properties. The costs of acquired royalty and stream interests 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 and stream interests are depleted using the units of
production method over the life of the mineral property (as royalty payments are recognized or sales
occur under stream interests), which are estimated using proven and probable reserves as provided by
the operator. Acquisition costs of royalty and stream 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 or streaming 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.
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
41
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. Please refer to Note 5 of our
notes to consolidated financial statements for further information on our available-for-sale securities.
Revenue
Revenue is recognized pursuant to guidance in ASC 605 and based upon amounts contractually
due pursuant to the underlying royalty or streaming agreement. Specifically, revenue is recognized in
accordance with the terms of the underlying royalty or stream agreements subject to (i) the pervasive
evidence of the existence of the arrangements; (ii) the risks and rewards having been transferred;
(iii) the royalty or stream being fixed or determinable; and (iv) the collectability being reasonably
assured. For royalty payments received in-kind, revenue is recorded at the average spot price of gold
for the period in which the royalty was earned. For our streaming agreements, we sell most of the
delivered gold within three weeks of receipt and recognize revenue when the metal received is sold.
Gold Sales
Gold received under our metal streaming agreements is sold primarily in the spot market or using
average rate gold forward contracts. For our gold sold in the spot market, the sales price is fixed at the
delivery date based on the gold spot price, while the sales price for our gold sold in average rate gold
forward contracts is determined by the average gold price under the term of the contract, typically
15 consecutive trading days shortly after the receipt and purchase of the gold. Revenue from gold sales
is recognized on the date of the settlement, which is also the date that title to the gold passes to the
purchaser.
Cost of Sales
Cost of sales is specific to our streaming agreement for Mt. Milligan and is the result of the
Company’s purchases of gold for a cash payment of the lesser of $435 per ounce, or the prevailing
market price of gold when purchased.
Income Taxes
The Company accounts for income taxes in accordance with the guidance of Accounting Standards
Codification Topic 740. The Company’s annual tax rate is based on income, statutory tax rates in effect
and tax planning opportunities available to us in the various jurisdictions in which the Company
operates. Significant judgment is required in determining the annual tax expense, current tax assets and
liabilities, deferred tax assets and liabilities, and our future taxable income, both as a whole and in
various tax jurisdictions, for purposes of assessing our ability to realize future benefit from our deferred
42
tax assets. Actual income taxes could vary from these estimates due to future changes in income tax
law, significant changes in the jurisdictions in which we operate or unpredicted results from the final
determination of each year’s liability by taxing authorities.
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. In evaluating the realizability of the deferred tax assets, management
considers both positive and negative evidence that may exist, such as earnings history, reversal of
taxable temporary differences, forecasted operating earnings and available tax planning strategies in
each tax jurisdiction. A valuation allowance may be established to reduce our deferred tax assets to the
amount that is considered more likely than not to be realized through the generation of future taxable
income and other tax planning strategies.
The Company has asserted the indefinite reinvestment of certain foreign subsidiary earnings as
determined by management’s judgment about and intentions concerning the future operations of the
Company. As a result, the Company does not record a U.S. deferred tax liability for the excess of the
book basis over the tax basis of its investments in foreign corporations to the extent that the basis
difference results from earnings that meet the indefinite reversal criteria. Refer to Note 12 of our notes
to consolidated financial statements for further discussion on our assertion.
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, such as the progress of a tax audit;
however, due to the complexity of some of these uncertainties, the ultimate resolution could result in a
payment that is materially different from our current estimate of the tax liabilities. These differences
will be reflected as increases or decreases to income tax expense in the period which they are
determined. 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, 2014, we had current assets of $736.0 million compared to current liabilities of $22.5
million for a current ratio of 33 to 1. This compares to current assets of $744.5 million and current
liabilities of $35.1 million at June 30, 2013, resulting in a current ratio of approximately 21 to 1. The
increase in our current ratio was primarily attributable to a decrease in the amount of foreign
withholding taxes payable on certain of our foreign royalty interests. This decrease in foreign
withholding taxes was partially offset by a decrease in our cash and equivalents and royalty receivables
during the period. Please refer to ‘‘Summary of Cash Flows’’ below for further discussion on changes to
our cash and equivalents during the period.
During the fiscal year ended June 30, 2014, liquidity needs were met from $237.2 million in
revenue and our available cash resources. As of June 30, 2014, the Company had $450 million available
and no amounts outstanding under its revolving credit facility. The Company was in compliance with
each financial covenant under its revolving credit facility as of June 30, 2014. Refer to Note 6 of our
notes to consolidated financial statements and below (‘‘Recent Liquidity and Capital Resource
Developments’’) for further discussion on our long-term debt.
43
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
and capital expenditures for the foreseeable future. Our current financial resources are also available to
fund dividends and for acquisitions of royalty and stream interests, including the remaining
commitments incurred in connection with the Phoenix Gold Project and Tulsequah Chief stream
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 I, 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 Facility
On January 29, 2014, Royal Gold entered into a Sixth Amended and Restated Revolving Credit
Agreement (the ‘‘revolving credit facility’’) 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, Goldman Sachs Bank USA, Bank of America, N.A., and Canadian
Imperial Bank of Commerce and such other banks and financial institutions from time to time party
thereto, as lenders, HSBC Securities (USA) Inc., as the sole lead arranger and joint bookrunner, and
Scotiabank, as syndication agent and joint bookrunner. The revolving credit facility replaces Royal
Gold’s $350 million revolving credit facility under the Fifth Amended and Restated Revolving Credit
Agreement, dated as of May 30, 2012.
Key modifications to the revolving credit facility include, among other items: (1) an increase in the
maximum availability from $350 million to $450 million; (2) an extension of the final maturity from
May 2017 to January 2019; (3) an increase of the accordion feature from $50 million to $150 million
which allows the Company to increase availability under the revolving credit facility at its option,
subject to satisfaction of certain conditions, to $600 million; (4) a reduction in the commitment fee
from 0.375% to 0.25%; (5) a reduction in the drawn interest rate from LIBOR + 1.75% to
LIBOR + 1.25%; (6) removal of the secured debt ratio covenant, and (7) maintaining the leverage
ratio (as defined therein) less than or equal to 3.5 to 1.0, with an increase to 4.0 to 1.0 for the two
quarters following the completion of a material permitted acquisition, as defined in the revolving credit
facility.
Dividend Increase
On November 20, 2013, we announced an increase in our annual dividend for calendar 2014 from
$0.80 to $0.84, payable on a quarterly basis of $0.21 per share. The newly declared dividend is 5%
higher than the dividend paid during calendar 2013. Royal Gold has steadily increased its annual
dividend since calendar 2001. The quarterly dividend of US$0.21 is also payable to holders of
exchangeable shares of RG Exchangeco Inc. (‘‘RG Exchangeco’’).
Summary of Cash Flows
Operating Activities
Net cash provided by operating activities totaled $147.2 million for the fiscal year ended June 30,
2014, compared to $172.6 million for the fiscal year ended June 30, 2013. The decrease was primarily
due to a decrease in proceeds received from our royalty interests, net of production taxes, of
44
approximately $58.1 million. This decrease was partially offset by a decrease in income and other
foreign withholding tax payments of $15.9 million.
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.
Investing Activities
Net cash used in investing activities totaled $84.8 million for the fiscal year ended June 30, 2014,
compared to $309.4 million for the fiscal year ended June 30, 2013. The decrease in cash used in
investing activities is primarily due to a decrease in funding for the Mt. Milligan streaming interest
compared to the prior fiscal year. This decrease was offset by the Company’s acquisition of the Phoenix
Gold Project gold stream and El Morro royalty of approximately $30.6 million and $35 million,
respectively, in the current fiscal year. The Company made its final commitment payment to Thompson
Creek as part of the Mt. Milligan gold stream acquisition during the quarter ended September 30,
2013.
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.
Financing Activities
Net cash used in financing activities totaled $66.9 million for the fiscal year ended June 30, 2014,
compared to cash provided by financing activities of $425.4 million for the fiscal year ended June 30,
2013. The decrease in cash provided by financing activities is primarily due to the sale of 5,250,000
shares of our common stock, resulting in proceeds of $472.5 million, during the prior fiscal year. This
decrease is also due to an increase in the common stock dividend payment, which was the result of an
increase in the dividend rate and an increase in the total number of common shares outstanding when
compared to the prior fiscal year.
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 compared to proceeds received ($370.0 million) from our June 2012
offering of the 2019 Notes. 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.
45
Contractual Obligations
Our contractual obligations as of June 30, 2014, are as follows:
Contractual Obligations
Payments Due by Period (in thousands)
Total
Less than
1 Year
1 - 3 Years
3 - 5 Years
2019 Notes(1)
. . . . . . . . . . . .
$423,187
$10,637
$21,275
$391,275
Total
. . . . . . . . . . . . . . . . . .
$423,187
$10,637
$21,275
$391,275
More than
5 Years
$—
$—
(1) Amounts represent principal ($370 million) and estimated interest payments
($53.2 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. The
above table does not include royalty or stream commitments as discussed in Note 16 of the notes to
consolidated financial statements. The Company 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, 2014, Compared with Fiscal Year Ended June 30, 2013
For the fiscal year ended June 30, 2014, we recorded net income available to Royal Gold common
stockholders of $62.6 million, or $0.96 per basic share and diluted share, compared to net income
available to Royal Gold common stockholders of $69.2 million, or $1.09 per basic share and diluted
share, for the fiscal year ended June 30, 2013. The decrease in our earnings per share was primarily
attributable to a decrease in revenue and an increase in certain costs and expenses, as discussed further
below.
For the fiscal year ended June 30, 2014, we recognized total revenue of $237.2 million, at an
average gold price of $1,296 per ounce, an average silver price of $20.57 per ounce, an average nickel
price of $6.89 per pound and an average copper price of $3.18 per pound, compared to total 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, for
the fiscal year ended June 30, 2013. Revenue and the corresponding production, attributable to our
46
royalty and stream interests, for the fiscal year ended June 30, 2014 compared to the fiscal year ended
June 30, 2013 is as follows:
Revenue and Reported Production Subject to our Royalty and Stream Interests
Fiscal Years Ended June 30, 2014 and 2013
(In thousands, except reported production in ozs. and lbs.)
Royalty/Stream
Royalty:
Fiscal Year Ended
June 30, 2014
Fiscal Year Ended
June 30, 2013
Metal(s)
Revenue
Reported
Production(1)
Revenue
Reported
Production(1)
Andacollo . . . . . . . . . . . . . . . . . . . . Gold
Pe˜nasquito . . . . . . . . . . . . . . . . . . .
$ 48,777
$ 29,281
Gold
Silver
Lead
Zinc
Voisey’s Bay . . . . . . . . . . . . . . . . . .
$ 25,128
Nickel
Copper
Holt . . . . . . . . . . . . . . . . . . . . . . . . Gold
Mulatos . . . . . . . . . . . . . . . . . . . . . Gold
Las Cruces . . . . . . . . . . . . . . . . . . . Copper
Canadian Malartic . . . . . . . . . . . . . . Gold
Robinson . . . . . . . . . . . . . . . . . . . .
$ 13,813
9,443
$
7,743
$
7,758
$
6,354
$
Gold
Copper
Cortez . . . . . . . . . . . . . . . . . . . . . . Gold
Other(2) . . . . . . . . . . . . . . . . . . . . . . Various
$
8,138
$ 53,518
Stream:
50,400 oz.
534,200 oz.
27.7M oz.
175.5 Mlbs.
310.9 Mlbs.
123.7 Mlbs.
80.5 Mlbs.
63,100 oz.
149,800 oz.
161.2 Mlbs.
417,800 oz.
27,600 oz.
69.6 Mlbs.
95,400 oz.
N/A
$ 82,272
$ 28,005
$ 32,517
$ 19,028
$ 17,376
8,012
$
$
8,043
$ 15,664
$
8,980
$ 69,327
68,600 oz.
371,100 oz.
21.1M oz.
126.3 Mlbs.
282.3 Mlbs.
143.9 Mlbs.
101.9 Mlbs.
56,400 oz.
218,000 oz.
153.4 Mlbs.
347,000 oz.
49,100 oz.
146.2 Mlbs.
82,100 oz.
N/A
Mt. Milligan(3) . . . . . . . . . . . . . . . . . Gold
Total Revenue . . . . . . . . . . . . . . . . . . .
$ 27,209
$237,162
80,800 oz.
$
—
N/A
$289,224
(1) Reported production relates to the amount of metal sales, subject to our royalty interests, for the
twelve months ended June 30, 2014 and June 30, 2013, 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 revenue for either period.
(3) For our streaming interest at Mt. Milligan, our revenue is a product of the reported production,
our 52.25% stream interest, an applicable provisional percentage (for the first 12 shipments only)
and an average gold sale price of $1,292 per ounce. During the fiscal year 2014, the Company sold
approximately 21,100 ounces and had approximately 7,800 ounces of gold in inventory as of
June 30, 2014.
The decrease in total revenue for the fiscal year ended June 30, 2014, compared with the fiscal
year ended June 30, 2013, resulted primarily from a decrease in the average gold, silver, copper and
nickel prices and decreases in production primarily at Andacollo, Voisey’s Bay, Mulatos, and Robinson.
These decreases during the current period were partially offset by new production at Mt. Milligan and
47
production increases at Pe˜nasquito. Refer to Part I, Item 2, Properties, for discussion and any updates
on our principal producing properties.
Cost of sales were approximately $9.2 million for the fiscal year ended June 30, 2014, compared to
zero for the fiscal year ended June 30, 2013. Cost of sales for our fiscal year 2014 is specific to our
streaming agreement for Mt. Milligan, which began production during the current period, and is the
result of the Company’s purchases of gold for a cash payment of the lesser of $435 per ounce, or the
prevailing market price of gold when purchased.
General and administrative expenses decreased to $21.2 million for the fiscal year ended June 30,
2014, from $24.0 million for the fiscal year ended June 30, 2013. The decrease was primarily due to a
decrease in non-cash stock based compensation expense of approximately $3.1 million as a result of
management’s change in estimate for the number of performance shares that are expected to vest in
future periods.
Production taxes decreased to $6.8 million for the fiscal year ended June 30, 2014, from
$9.0 million for the fiscal year ended June 30, 2013. The decrease is primarily due to a decrease in the
mining proceeds tax expense associated with our Voisey’s Bay royalty, which was due to decreased
revenue from the Voisey’s Bay royalty during the current period.
Depreciation, depletion and amortization expense increased to $91.3 million for the fiscal year
ended June 30, 2014, from $85.0 million for the fiscal year ended June 30, 2013. The increase was
primarily attributable to new production at Mt. Milligan and a production increase at Pe˜nasquito, which
resulted in additional depletion expense of approximately $9.8 million during the period. The increase
was also attributable to an increase in depletion rates at certain of our non-principal properties, which
resulted in additional depletion of approximately $7.6 million. These increases were partially offset by
decreases in production primarily at Andacollo, Voisey’s Bay, Mulatos and Robinson, which resulted in
a decrease in depletion expense of approximately $10.8 million during the period.
During the fiscal years ended June 30, 2014 and 2013, the Company recognized losses of
$4.5 million and $12.1 million on available-for-sale securities, respectively, related to
other-than-temporary impairments on its investment in Seabridge common stock. The effect of the
recognized loss, net of any tax, during the fiscal years ended June 30, 2014 and 2013, was $0.07 and
$0.23 per basic share, respectively. 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.
During the fiscal year ended June 30, 2014, we recognized income tax expense totaling
$19.5 million compared with $63.8 million during the fiscal year ended June 30, 2013. This resulted in
an effective tax rate of 23.5% during the current period, compared with 46.5% in the prior period. The
decrease in the effective tax rate for the fiscal year ended June 30, 2014, is primarily attributable to
(i) a favorable tax rate associated with certain operations in lower tax jurisdictions, (ii) a decrease in
tax expense resulting from a reduction in uncertain tax positions, (iii) an increase in foreign tax credits
claimed, and (iv) a reduction of the tax effect on the recognized loss on available-for-sale securities
when compared to the prior period.
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 in interest expense associated
48
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 forgoing factors were partially offset by an increase in royalty revenue during
the period, which is discussed below.
For the fiscal year ended June 30, 2013, we recognized total 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 the fiscal year ended June 30, 2012. Revenue and the corresponding production, 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:
Revenue and Reported Production Subject to our Royalty Interests
Fiscal Years Ended June 30, 2013 and 2012
(In thousands, except reported production in ozs. and lbs.)
Royalty/Stream
Royalty:
Fiscal Year Ended
June 30, 2013
Fiscal Year Ended
June 30, 2012
Metal(s)
Revenue
Reported
Production(1)
Revenue
Reported
Production(1)
Andacollo . . . . . . . . . . . . . . . . . . . . Gold
Voisey’s Bay . . . . . . . . . . . . . . . . . .
$ 82,272
$ 32,517
Nickel
Copper
Pe˜nasquito . . . . . . . . . . . . . . . . . . .
$ 28,005
Gold
Silver
Lead
Zinc
Holt . . . . . . . . . . . . . . . . . . . . . . . . Gold
Mulatos . . . . . . . . . . . . . . . . . . . . . Gold
Robinson . . . . . . . . . . . . . . . . . . . .
Gold
Copper
Cortez . . . . . . . . . . . . . . . . . . . . . . Gold
Canadian Malartic . . . . . . . . . . . . . . Gold
Las Cruces . . . . . . . . . . . . . . . . . . . Copper
Other(2) . . . . . . . . . . . . . . . . . . . . . . Various
Total Revenue . . . . . . . . . . . . . . . . . . .
$ 19,028
$ 17,376
$ 15,664
8,980
$
8,043
$
$
8,012
$ 69,327
$289,224
68,600 oz.
143.9 Mlbs.
101.9 Mlbs.
371,100 oz.
21.1 Moz.
126.3 Mlbs.
282.3 Mlbs.
56,400 oz.
218,000 oz.
49,100 oz.
146.2 Mlbs.
82,100 oz.
347,000 oz.
153.4 Mlbs.
N/A
$ 64,075
$ 36,030
$ 28,468
$ 14,966
$ 13,794
$ 11,687
$ 13,160
7,133
$
$
6,448
$ 67,293
$263,054
51,400 oz.
131.6 Mlbs.
107.2 Mlbs.
294,500 oz.
21.5 Moz.
164.0 Mlbs.
312.6 Mlbs.
41,200 oz.
169,300 oz.
31,000 oz.
105.3 Mlbs.
116,700 oz.
297,500 oz.
119.1 Mlbs.
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 total 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,
49
Las Cruces, Mulatos and Robinson and the continued ramp-up at Canadian Malartic. 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) and Cortez. Refer to Part I, Item 2, Properties, for
discussion and any updates on our principal producing properties.
General and administrative expenses increased to $24.0 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 $24.8 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 fiscal year ended June 30, 2013, 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%.
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
50
timing and commencement of production from the operators of properties where we hold royalty and
stream interests; effective tax rate estimates; 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:
• 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;
• the production at or performance of properties where we hold royalty interests;
• the ability of operators to bring projects, particularly development stage properties, into
production on schedule or operate in accordance with feasibility studies;
• 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;
• decisions and activities of the operators of properties where we hold royalty interests;
• liquidity or other problems our operators may encounter;
• 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;
• changes in project parameters as plans of the operators of properties where we hold royalty
interests are refined;
• changes in estimates of reserves and mineralization by the operators of properties where we hold
royalty interests;
• contests to our royalty interests and title and other defects to the properties where we hold
royalty interests;
• economic and market conditions;
• future financial needs;
• federal, state and foreign legislation governing us or the operators of properties where we hold
royalty interests;
• the availability of royalty interests for acquisition or other acquisition opportunities and the
availability of debt or equity financing necessary to complete such acquisitions;
• our ability to make accurate assumptions regarding the valuation, timing and amount of revenue
to be derived from our royalty interests when evaluating acquisitions;
• 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,
51
inflation, import and export regulations, community unrest and labor disputes, endemic health
issues, corruption, enforcement and uncertain political and economic environments;
• changes in laws governing us, the properties where we hold royalty interests or the operators of
such properties;
• 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;
• acquisition and maintenance of permits and authorizations, completion of construction and
commencement and continuation of production at the properties where we hold royalty interests;
• changes in management and key employees; and
• 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.
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, 2014, we reported revenue of $237.2 million, with an average
gold price for the period of $1,296 per ounce, an average silver price for the period of $20.57 per
ounce, an average copper price of $3.18 per pound and an average nickel price of $6.89 per pound.
Approximately 72% of our total recognized revenues for the fiscal year ended June 30, 2014 were
attributable to gold sales from our gold producing interests, as shown within the MD&A. For the fiscal
year ended June 30, 2014, 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 $19.2 million and $18.9 million,
respectively.
Approximately 6% of our total reported revenue for the fiscal year ended June 30, 2014 was
attributable to silver sales from our silver producing interests. For the fiscal year ended June 30, 2014,
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 $1.8 million.
Approximately 8% of our total reported revenue for the fiscal year ended June 30, 2014 was
attributable to copper sales from our copper producing interests. For the fiscal year ended June 30,
2014, 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 $2.3 million.
Approximately 8% of our total reported revenue for the fiscal year ended June 30, 2014 was
attributable to nickel sales from our nickel producing interests. For the fiscal year ended June 30, 2014,
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 $2.6 million.
52
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
54
55
56
57
58
59
53
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,
2014 and 2013, 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, 2014. 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, 2014 and 2013, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended June 30,
2014, 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, 2014, 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 7, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Denver, Colorado
August 7, 2014
54
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalty and stream interests, net (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale securities (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
$ 659,536
46,654
21,947
7,840
735,977
2,109,067
9,608
36,892
$ 664,035
50,385
15,158
14,919
744,497
2,120,268
9,695
30,881
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,891,544
$2,905,341
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 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note 16)
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 64,578,401
and 64,184,036 shares outstanding, respectively . . . . . . . . . . . . . . . . . . . . .
Exchangeable shares, no par value, 1,806,649 shares issued, less 1,426,792 and
1,139,420 redeemed shares, respectively . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Royal Gold stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,897
13,678
2,199
2,730
22,504
311,860
169,865
13,725
1,033
518,987
2,838
13,009
15,518
3,720
35,085
302,263
174,267
21,166
1,924
534,705
—
646
—
642
16,718
2,147,650
(160)
189,871
2,354,725
17,832
29,365
2,142,173
(4,572)
181,279
2,348,887
21,749
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,372,557
2,370,636
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,891,544
$2,905,341
The accompanying notes are an integral part of these consolidated financial statements.
55
Consolidated Statements of Operations and Comprehensive Income
ROYAL GOLD, INC.
For the Years Ended June 30,
(In thousands except share data)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
237,162
$
289,224
$
263,054
2014
2013
2012
Costs and expenses
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . .
Production taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation, depletion and amortization . . . . . . . . . . . . .
Restructuring on royalty interests . . . . . . . . . . . . . . . . . . .
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on available-for-sale securities . . . . . . . . . . . . . . . . . . .
Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other expense . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . .
9,158
21,186
6,756
91,342
—
128,442
108,720
(4,499)
2,132
(23,426)
82,927
—
24,027
9,010
85,020
—
118,057
171,167
(12,121)
2,902
(24,780)
—
20,647
9,444
75,001
1,328
106,420
156,634
—
3,836
(7,451)
137,168
153,019
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19,455)
(63,759)
(54,710)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to non-controlling interests . . . . . . .
Net income attributable 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
63,472
(831)
62,641
63,472
$
$
73,409
(4,256)
69,153
73,409
$
$
98,309
(5,833)
92,476
98,309
$
$
(98)
4,510
67,884
(4,526)
13,716
82,599
(13,817)
—
84,492
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(831)
(4,256)
(5,833)
Comprehensive income attributable to Royal Gold
stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
67,053
$
78,343
$
78,659
Net income per share available to Royal Gold common
stockholders:
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
0.96
$
1.09
$
1.61
Basic weighted average shares outstanding . . . . . . . . . . . . . .
64,909,149
63,250,247
57,220,040
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . .
$
0.96
$
1.09
$
1.61
Diluted weighted average shares outstanding . . . . . . . . . . . .
65,026,256
63,429,822
57,463,850
Cash dividends declared per common share . . . . . . . . . . . . .
$
0.83
$
0.75
$
0.56
The accompanying notes are an integral part of these consolidated financial statements.
56
ROYAL GOLD, INC.
Consolidated Statements of Changes in Equity
For the Years Ended June 30, 2014, 2013 and 2012
(In thousands except share data)
Royal Gold Stockholders
Common Shares
Exchangeable
Shares
Shares
Amount
Shares Amount
Additional
Paid-In
Capital
Accumulated
Other
Non-
Comprehensive Accumulated controlling
interests
Income (Loss)
Earnings
Total
Equity
.
.
.
. 54,231,787
$543
905,795 $ 39,864 $1,319,697
$
$100,004
$27,533
$1,487,695
4,000,000
106,969
—
275,465
—
—
—
—
40
1
—
2
—
—
—
—
—
(106,969)
—
(4,708)
267,393
4,707
—
—
—
—
—
—
—
—
—
—
—
—
47,605
16,955
—
—
—
—
54
—
—
—
—
—
(13,817)
—
—
—
—
92,476
—
—
—
—
—
5,833
—
—
—
—
(32,357)
(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)
—
—
(5,791)
—
471,815
5,790
765
—
—
—
—
—
—
—
—
—
—
7,446
—
—
—
—
—
—
—
—
—
9,191
—
—
—
—
—
—
69,153
—
—
—
—
—
4,256
—
471,868
—
765
7,448
73,409
9,191
—
(47,997)
(7,477)
—
(7,477)
(47,997)
. 64,184,036
$642
667,229 $ 29,365 $2,142,173
$ (4,572)
$181,279
$21,749
$2,370,636
.
.
.
.
.
.
.
.
.
.
.
.
.
tax
Balance at June 30, 2011 .
.
Issuance of common stock for:
.
Equity offering .
.
Exchange of exchangeable shares .
2019 convertible senior notes, net of
.
. .
.
.
.
Stock-based compensation and
.
related share issuances .
.
.
.
.
.
.
.
Net income .
Other comprehensive income (loss) .
Distribution to non-controlling
.
.
.
.
.
Dividends declared .
interests
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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
.
.
.
.
.
Dividends declared .
interests
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Balance at June 30, 2013 .
.
.
.
Issuance of common stock for:
Exchange of exchangeable shares .
Non-controlling interest assignment .
Stock-based compensation and
.
related share issuances .
.
.
.
.
Net income .
.
.
Other comprehensive income .
Distribution to non-controlling
.
.
.
.
.
Dividends declared .
interests
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
287,372
—
106,993
—
—
.
.
—
—
.
.
.
.
.
.
3
—
1
—
—
—
—
(287,372)
—
(12,647)
—
12,644
(11,463)
—
—
—
—
—
—
—
—
—
—
4,296
—
—
—
—
—
—
—
—
4,412
—
—
—
—
—
(2,250)
—
(13,713)
—
62,641
—
—
831
—
4,297
63,472
4,412
—
(54,049)
(2,498)
—
(2,498)
(54,049)
Balance at June 30, 2014 .
.
.
.
. 64,578,401
$646
379,857 $ 16,718 $2,147,650
$
(160)
$189,871
$17,832
$2,372,557
The accompanying notes are an integral part of these consolidated financial statements.
57
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 . . . . . . . . . . . . . . . . . .
Recognized loss on available-for-sale securities . . . . . . . . . . . . . .
Non-cash employee stock compensation expense . . . . . . . . . . . . .
Gain on distribution to non-controlling interest . . . . . . . . . . . . . .
Amortization of debt discount . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring on royalty interests . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit of stock-based compensation exercises . . . . . . . . . . . .
Deferred tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:
Royalty receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign withholding taxes payable . . . . . . . . . . . . . . . . . . . . . . .
Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
2012
$ 63,472
$ 73,409
$ 98,309
91,342
4,499
2,580
(259)
9,597
—
(597)
(8,166)
—
3,731
9,756
1,105
(13,319)
(6,183)
(7,441)
(2,915)
85,020
12,121
5,701
(2,837)
9,015
—
(2,966)
(11,419)
100
3,562
(12,300)
113
15,294
(3,127)
1,697
(753)
75,001
—
6,507
(3,725)
—
1,328
(6,348)
1,571
2,117
(5,118)
88
530
19
(7,179)
633
(1,569)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . .
$147,202
$ 172,630
$ 162,164
Cash flows from investing activities:
Acquisition of royalty and stream interests . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(80,019)
(4,782)
(314,262)
4,820
(276,683)
5,327
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . .
$ (84,801) $(309,442) $(271,356)
Cash flows from financing activities:
Net proceeds from issuance of common stock . . . . . . . . . . . . . . .
Net proceeds from debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of additional royalty interest from non-controlling
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution to non-controlling interests . . . . . . . . . . . . . . . . . . .
Tax expense of stock-based compensation exercises . . . . . . . . . . .
1,120
—
—
(53,380)
(11,522)
(1,284)
(2,431)
597
271,536
473,771
—
457,023
— (326,100)
(29,504)
(43,934)
—
—
(7,412)
2,966
—
—
(8,810)
6,348
Net cash (used in) provided by financing activities . . . . . . . . . . . . .
$ (66,900) $ 425,391
$ 370,493
Net (decrease) increase in cash and equivalents . . . . . . . . . . . . . . .
(4,499)
288,579
Cash and equivalents at beginning of period . . . . . . . . . . . . . . . . . .
664,035
375,456
261,301
114,155
Cash and equivalents at end of period . . . . . . . . . . . . . . . . . . . . . .
$659,536
$ 664,035
$ 375,456
The accompanying notes are an integral part of these consolidated financial statements.
58
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, metal
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. A metal
stream is a purchase agreement that provides, in exchange for an upfront deposit payment, the right to
purchase all or a portion of one or more metals produced from a mine, at a price determined for the
life of the transaction by the purchase agreement. We may 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 ISSUED
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.
Our most critical accounting estimates relate to our assumptions regarding future gold, silver,
nickel, copper and other metal prices and the estimates of reserves, production 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 recognize revenue or
charge depreciation, depletion and amortization to earnings. On an ongoing basis, management
evaluates these estimates and assumptions; however, actual amounts could differ from these estimates
and assumptions. Differences between estimates and actual amounts could differ significantly and are
recorded in the period that the actual amounts are known.
Basis of Consolidation
The consolidated financial statements include the accounts of Royal Gold, Inc. and its wholly-
owned subsidiaries. All intercompany accounts, transactions, income and expenses, and profits or losses
have been eliminated on 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.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS (Continued)
Royalty and Stream Interests
Royalty and stream interests include acquired royalty and stream interests in production,
development and exploration stage properties. The costs of acquired royalty and stream interests are
capitalized as tangible assets as such interests do not meet the definition of a financial asset under
Accounting Standards Codification (‘‘ASC’’) guidance.
Acquisition costs of production stage royalty and stream interests are depleted using the units of
production method over the life of the mineral property (as royalty payments are recognized or sales
occur under stream interests), which is estimated using proven and probable reserves as provided by
the operator. Acquisition costs of royalty and stream 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 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
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS (Continued)
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.
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.
Revenue
Revenue is recognized in accordance with the guidance of ASC 605 and based upon amounts
contractually due pursuant to the underlying royalty or stream agreement. Specifically, revenue is
recognized in accordance with the terms of the underlying royalty or stream agreements subject to
(i) the pervasive evidence of the existence of the arrangements; (ii) the risks and rewards having been
transferred; (iii) the royalty or stream being fixed or determinable; and (iv) the collectability being
reasonably assured. For royalty payments received in-kind, revenue is recorded at the average spot
price of gold for the period in which the royalty was earned. For our streaming agreements, we sell
most of the delivered gold within three weeks of receipt and recognize revenue when the metal
received is sold.
Gold Sales
Gold received under our metal streaming agreements is sold primarily in the spot market or under
average rate gold forward contracts. For our gold sold in the spot market, the sales price is fixed at the
delivery date based on the gold spot price, while the sales price for our gold sold under average rate
gold forward contracts is determined by the average gold price under the term of the contract, typically
15 consecutive trading days shortly after the receipt and purchase of the gold. Revenue from gold sales
is recognized on the date of the settlement, which is also the date that title to the gold passes to the
purchaser.
Cost of Sales
Cost of sales is specific to our streaming agreement for Mt. Milligan and is the result of the
Company’s purchases of gold for a cash payment of the lesser of $435 per ounce, or the prevailing
market price of gold when purchased.
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS (Continued)
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.
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 and stream interests. Royal Gold’s revenue and long-lived assets (royalty
and stream interests, net) are geographically distributed as shown in the following table.
Revenue
Fiscal Year Ended
June 30,
Royalty and Stream
Interests, net
Fiscal Year Ended
June 30,
2014
2013
2012
2014
2013
2012
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . .
Australia . . . . . . . . . . . . . . . . . . . . . . . . . . .
Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34% 24% 24% 53% 52% 43%
21% 29% 25% 31% 30% 35%
18% 19% 20% 7% 7% 9%
15% 17% 18% 3% 4% 5%
4% 4% 5% 3% 3% 3%
3% 3% 4% 1% 1% 1%
5% 4% 4% 2% 3% 4%
Income Taxes
The Company accounts for income taxes in accordance with the guidance of Accounting Standards
Codification Topic 740. The Company’s annual tax rate is based on income, statutory tax rates in effect
and tax planning opportunities available to us in the various jurisdictions in which the Company
operates. Significant judgment is required in determining the annual tax expense, current tax assets and
liabilities, deferred tax assets and liabilities, and our future taxable income, both as a whole and in
various tax jurisdictions, for purposes of assessing our ability to realize future benefit from our deferred
tax assets. Actual income taxes could vary from these estimates due to future changes in income tax
law, significant changes in the jurisdictions in which we operate or unpredicted results from the final
determination of each year’s liability by taxing authorities.
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
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS (Continued)
by tax laws and regulations. In evaluating the realizability of the deferred tax assets, management
considers both positive and negative evidence that may exist, such as earnings history, reversal of
taxable temporary differences, forecasted operating earnings and available tax planning strategies in
each tax jurisdiction. A valuation allowance may be established to reduce our deferred tax assets to the
amount that is considered more likely than not to be realized through the generation of future taxable
income and other tax planning strategies.
The Company has asserted the indefinite reinvestment of certain foreign subsidiary earnings as
determined by management’s judgment about and intentions concerning the future operations of the
Company. As a result, the Company does not record a U.S. deferred tax liability for the excess of the
book basis over the tax basis of its investments in foreign corporations to the extent that the basis
difference results from earnings that meet the indefinite reversal criteria. Refer to Note 12 for further
discussion on our assertion.
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, such as the progress of a tax audit;
however, due to the complexity of some of these uncertainties, the ultimate resolution could result in a
payment that is materially different from our current estimate of the tax liabilities. These differences
will be reflected as increases or decreases to income tax expense in the period which they are
determined. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits
in income tax expense.
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.
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.
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS (Continued)
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Updated
(‘‘ASU’’) 2014-09, which establishes a comprehensive new revenue recognition model designed to depict
the transfer of good or services to a customer in an amount that reflects the consideration the entity
expects to receive in exchange for those goods and services. In doing so, companies may need to use
more judgment and make more estimates than under current revenue recognition guidance. The ASU
allows for the use of either the full or modified retrospective transition method, and the standard will
be effective for us in the first quarter of our fiscal year 2018; early adoption is not permitted. We are
currently evaluating the impact of this new standard on our consolidated financial statements, as well as
which transition method we intend to use.
3. ACQUISITIONS
Phoenix Gold Project Stream Acquisition
On February 11, 2014, the Company, through its wholly-owned subsidiary RGLD Gold AG
(‘‘RGLD Gold’’), entered into a $75 million Purchase and Sale Agreement (the ‘‘Agreement’’) for a
gold stream transaction with Rubicon Minerals Corporation (‘‘Rubicon’’). Pursuant to the Agreement,
the $75 million payment deposit from RGLD Gold is to be used by Rubicon to help pay a significant
portion of the construction costs of the Phoenix Gold Project located in Ontario, Canada, which is
currently in the development stage.
Pursuant to the Agreement, the $75 million payment deposit to Rubicon is prepayment of the
purchase price for refined gold and is payable in five installments. The first installment of $10 million
was made in conjunction with execution of definitive documents on February 11, 2014. The second
installment of $20 million was paid on March 20, 2014, while the third, fourth and fifth installments of
$15 million each are payable upon satisfaction of certain conditions precedent.
Upon commencement of production at the Phoenix Gold Project, RGLD Gold will purchase and
Rubicon will sell 6.30% of any gold produced from the Phoenix Gold Project until 135,000 ounces have
been delivered, and 3.15% thereafter. For each delivery of gold, RGLD Gold will pay a purchase price
per ounce of 25% of the spot price of gold at the time of delivery. In the event that RGLD Gold’s
interests are subordinated to more than $50 million of senior debt, RGLD Gold’s per ounce purchase
price will be reduced by 5.4% times the amount of the senior debt outstanding and drawn in excess of
$50 million, divided by $50 million.
The Phoenix Gold Project gold stream acquisition has been accounted for as an asset acquisition.
The $30 million paid as part of the aggregate pre-production commitment of $75 million, plus direct
transaction costs, have been recorded as a development stage stream interest within Royalty and stream
interests, net on our consolidated balance sheets.
Goldrush Royalty Acquisition
On January 7, 2014, Royal Gold acquired a 1.0% net revenue royalty on the southern end of
Barrick Gold Corporation’s (‘‘Barrick’’) Goldrush deposit in Nevada from a private landowner for total
consideration of $8.0 million, of which $1.0 million was paid at closing and the remaining $7.0 million
will be paid in seven annual installments. Goldrush is located approximately four miles from the Cortez
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
3. ACQUISITIONS (Continued)
mine. The acquisition has been recorded as an exploration stage royalty interest within Royalty and
stream interests, net on our consolidated balance sheets.
NVR1 Royalty at Cortez
On January 2, 2014, Royal Gold, through a wholly-owned subsidiary, increased its ownership
interest in the limited partnership that owns the 1.25% net value royalty (‘‘NVR1’’) covering certain
portions of the Pipeline Complex at Barrick’s Cortez gold mine in Nevada. As a result of the
transaction, the NVR1 royalty rate attributable to our interest increased from 0.39% to 1.014% on
production from all of the lands covered by the NVR1 royalty excluding production from the mining
claims comprising the Crossroad deposit (the ‘‘Crossroad Claims’’), and from zero to 0.618% on
production from the Crossroad Claims. Total consideration for the transaction was approximately
$11.5 million. Refer to Note 17 for a discussion of certain related party interests in this transaction.
El Morro Royalty Acquisition
In August 2013, Royal Gold, through a wholly-owned Chilean subsidiary, acquired a 70% interest
in a 2.0% net smelter return (‘‘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.
The acquisition of the El Morro royalty interest has been accounted for as an asset acquisition.
The total purchase price of $35 million, plus direct transaction costs, has been recorded as a
development stage royalty interest within Royalty and stream interests, net on our consolidated balance
sheets.
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.
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 (the ‘‘Milligan III Acquisition’’).
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, 2014, the
Company has paid the entire aggregate pre-production commitment of $781.5 million.
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
3. ACQUISITIONS (Continued)
The Mt. Milligan acquisitions have been accounted for as an asset acquisition. The aggregate
pre-production commitment of $781.5 million, plus direct transaction costs, is recorded as a production
stage stream interest within Royalty and stream interests, 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
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, 2014, 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
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
3. ACQUISITIONS (Continued)
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 Initial Shares was accounted for as a purchase of securities and the investment
in 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 during our fiscal year ended June 30,
2013, which is recorded within Interest and other expense on our consolidated statements of operations
and comprehensive income.
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
4. ROYALTY AND STREAM INTERESTS, NET
The following summarizes the Company’s royalty and stream interests as of June 30, 2014 and
2013:
As of June 30, 2014
(Amounts in thousands):
Production stage royalty interests:
Cost
Accumulated
Depletion
Net
Andacollo . . . . . . . . . . . . . . . . . . . . . . . . .
Voisey’s Bay . . . . . . . . . . . . . . . . . . . . . . .
Pe˜nasquito . . . . . . . . . . . . . . . . . . . . . . . .
LasCruces . . . . . . . . . . . . . . . . . . . . . . . . .
Dolores . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mulatos . . . . . . . . . . . . . . . . . . . . . . . . . .
Wolverine . . . . . . . . . . . . . . . . . . . . . . . . .
Canadian Malartic . . . . . . . . . . . . . . . . . . .
Holt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gwalia Deeps . . . . . . . . . . . . . . . . . . . . . .
Inata . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ruby Hill
. . . . . . . . . . . . . . . . . . . . . . . . .
Leeville . . . . . . . . . . . . . . . . . . . . . . . . . . .
Robinson . . . . . . . . . . . . . . . . . . . . . . . . .
Cortez . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 272,998
150,138
99,172
57,230
55,820
48,092
45,158
38,800
34,612
31,070
24,871
24,335
18,322
17,825
10,630
192,703
$ (56,147) $ 216,851
82,761
81,371
40,313
44,711
19,544
32,469
28,762
24,138
20,521
12,710
10,932
2,405
5,938
858
62,573
(67,377)
(17,801)
(16,917)
(11,109)
(28,548)
(12,689)
(10,038)
(10,474)
(10,549)
(12,161)
(13,403)
(15,917)
(11,887)
(9,772)
(130,130)
1,121,776
(434,919)
686,857
Production stage stream interests:
Mt. Milligan . . . . . . . . . . . . . . . . . . . . . . .
783,046
(7,741)
775,305
Production stage royalty and stream interests .
1,904,822
(442,660)
1,462,162
Development stage royalty interests:
Pascua-Lama . . . . . . . . . . . . . . . . . . . . . . .
El Morro . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
372,105
35,139
34,349
Development stage stream interests:
Phoenix Gold . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,620
10,483
Development stage royalty and stream
interests . . . . . . . . . . . . . . . . . . . . . . . . . .
482,696
Exploration stage royalty interests . . . . . . . . .
164,209
—
—
—
—
—
—
—
372,105
35,139
34,349
30,620
10,483
482,696
164,209
Total royalty and stream interests . . . . . . . . . .
$2,551,727
$(442,660) $2,109,067
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
4. ROYALTY AND STREAM INTERESTS, NET (Continued)
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)
1,108,833
(351,439)
757,394
Development stage royalty interests:
Pascua-Lama . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
372,105
32,934
Development stage stream interests:
Mt. Milligan . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
770,093
10,418
Development stage royalty and stream
—
—
—
—
372,105
32,934
770,093
10,418
interests . . . . . . . . . . . . . . . . . . . . . . . . . .
1,185,550
— 1,185,550
Exploration stage royalty interests . . . . . . . . .
177,324
—
177,324
Total royalty and stream interests . . . . . . . . . .
$2,471,707
$(351,439) $2,120,268
69
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, 2014 and 2013 consist of the following:
Non-current:
Seabridge . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current:
Seabridge . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of June 30, 2014
(Amounts
in thousands)
Unrealized
Cost Basis Gain
Loss
Fair Value
$9,565
203
$9,768
—
— (160)
— $9,565
43
$— $(160)
$9,608
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
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. Based on our quarterly impairment analysis, 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 $4.5 million during the
fourth quarter of our fiscal year ended June 30, 2014. The Company also recognized a loss on
available-for-sale securities related to our investment in Seabridge common stock of $12.1 million
during the third quarter of our fiscal year ended June 30, 2013. The recognized losses have been
reclassified out of comprehensive income in the respective periods. 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, 2014 and 2013 consists of the following:
Convertible notes due 2019, net . . . . . . . . . . . . . . . . . . .
$311,860
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$311,860
$302,263
$302,263
As of
June 30, 2014
As of
June 30, 2013
Non-current
Non-current
(Amounts in thousands)
70
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’’). 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, beginning
December 15, 2012. The 2019 Notes mature on June 15, 2019. Interest expense recognized on the 2019
Notes for the fiscal years ended June 30, 2014 and 2013 was approximately $21.4 million and $20.7
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, 2014 and 2013, the
Company made $10.6 million and $10.5 million, respectively, in interest payments on our 2019 Notes.
Revolving credit facility
The Company maintains a $450 million revolving credit facility. Borrowings under the revolving
credit facility bear interest at a floating rate of LIBOR plus a margin of 1.25% to 3.0%, based on
Royal Gold’s leverage ratio. As of June 30, 2014, the interest rate on borrowings under the revolving
credit facility was LIBOR plus 1.25%. Royal Gold may repay any borrowings under the revolving credit
facility at any time without premium or penalty. As of June 30, 2014, and during our fiscal year 2014,
Royal Gold had no amounts outstanding under the revolving credit facility.
Royal Gold amended and restated its revolving credit facility on January 29, 2014. Key
modifications to the revolving credit facility include, among other items: (1) an increase in the
maximum availability from $350 million to $450 million; (2) an extension of the final maturity from
May 2017 to January 2019; (3) an increase of the accordion feature from $50 million to $150 million
which allows the Company to increase availability under the revolving credit facility at its option,
subject to satisfaction of certain conditions, to $600 million; (4) a reduction in the commitment fee
from 0.375% to 0.25%; (5) a reduction in the drawn interest rate from LIBOR + 1.75% to
LIBOR + 1.25%; (6) removal of the secured debt ratio, and (7) maintaining the leverage ratio (as
defined therein) less than or equal to 3.5 to 1.0, with an increase to 4.0 to 1.0 for the two quarters
following the completion of a material permitted acquisition, as defined. At June 30, 2014, the
Company was in compliance with each financial covenant.
7. REVENUE
Revenue is comprised of the following:
Fiscal Years Ended June 30,
2014
2013
2012
Royalty interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Stream interests . . . . . . . . . . . . . . . . . . . . . . . . . .
(Amounts in thousands)
$289,224
—
$263,054
—
$209,953
27,209
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$237,162
$289,224
$263,054
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
8. 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:
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock appreciation rights . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Fiscal
Years Ended June 30,
2014
2013
2012
$
(Amounts in thousands)
$ 456
468
1,107
1,305
3,240
3,110
898
(2,303)
$ 446
1,219
2,757
2,085
Total stock-based compensation expense . . . . . . . . . . . . .
$ 2,580
$5,701
$6,507
Stock-based compensation expense is included within general and administrative expense in the
consolidated statements of operations and comprehensive income.
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,
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 2014, 2013
and 2012 grants are noted in the following table:
Stock Options
SSARs
2014
2013
2012
2014
2013
2012
Weighted-average expected volatility . . . . . . . . . . . . . . .
Weighted-average expected life in years . . . . . . . . . . . . .
Weighted-average dividend yield . . . . . . . . . . . . . . . . . .
Weighted-average risk free interest rate . . . . . . . . . . . .
43.6% 43.1% 45.1% 41.3% 43.7% 45.3%
5.5
1.00% 0.86% 0.76% 1.00% 0.90% 0.76%
1.7% 0.8% 1.1% 1.5% 1.0% 1.2%
6.1
4.8
6.4
5.7
5.5
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.
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
8. STOCK-BASED COMPENSATION (Continued)
Stock Options
A summary of stock option activity under the 2004 Plan for the fiscal year ended June 30, 2014, is
presented below.
Outstanding at July 1, 2013 . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . .
Weighted-
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic Value
(in thousands)
Weighted-
Average
Exercise
Price
$46.12
$59.99
$32.48
$68.11
Number
of Shares
119,313
24,775
(34,495)
(8,200)
Outstanding at June 30, 2014 . . . . . .
101,393
$52.37
Exercisable at June 30, 2014 . . . . . . .
63,531
$45.16
6.4
5.1
$2,410
$1,967
The weighted-average grant date fair value of options granted during the fiscal years ended
June 30, 2014, 2013 and 2012, was $22.78, $26.76 and $27.23, respectively. The total intrinsic value of
options exercised during the fiscal years ended June 30, 2014, 2013 and 2012, were $1.1 million, $4.1
million, and $8.7 million, respectively.
As of June 30, 2014, 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 1.8 years.
SSARs
A summary of SSARs activity under the 2004 Plan for the fiscal year ended June 30, 2014, is
presented below.
Outstanding at July 1, 2013 . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . .
Weighted-
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic Value
(in thousands)
Weighted-
Average
Exercise
Price
$58.28
$62.13
$32.52
$61.28
Number
of Shares
162,284
84,125
(1,614)
(15,739)
Outstanding at June 30, 2014 . . . . . .
229,056
$59.67
Exercisable at June 30, 2014 . . . . . . .
108,586
$53.42
7.5
6.1
$3,770
$2,466
The weighted-average grant date fair value of SSARs granted during the fiscal years ended
June 30, 2014, 2013 and 2012 was $21.15, $29.78 and $28.04, respectively. The total intrinsic value of
SSARs exercised during the fiscal years ended June 30, 2014, 2013 and 2012, were $0.1 million, $3.5
million, and $0, respectively.
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
8. STOCK-BASED COMPENSATION (Continued)
As of June 30, 2014, there was approximately $1.6 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 1.8 years.
Other Stock-based Compensation
Performance Shares
During fiscal 2014, officers and certain employees were granted 71,700 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 2014, 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. For shares that were previously
estimated to be probable of vesting and are no longer deemed to be probable of vesting, compensation
expense is reversed during the period in which it is determined they are no longer probable of vesting.
Interim recognition of compensation expense will be made at such time as management can reasonably
estimate the number of shares that will be earned.
A summary of the status of the Company’s non-vested Performance Shares for the fiscal year
ended June 30, 2014, is presented below:
Weighted-
Average
Grant Date
Fair Value
Number
of Shares
Non-vested at July 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
107,850
71,700
$66.20
$61.39
— $ —
— $ —
Non-vested at June 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . .
179,550
$64.28
As of June 30, 2014, total unrecognized stock-based compensation expense related to Performance
Shares was approximately $0.7 million, which is expected to be recognized over the average remaining
vesting period of 3.5 years.
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
8. STOCK-BASED COMPENSATION (Continued)
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 2014, officers and certain employees were granted 46,200 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 2014, our non-executive directors were granted 19,950 shares of
Restricted Stock. The non-executive directors’ shares of Restricted Stock vest 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 the fiscal year ended
June 30, 2014, is presented below:
Non-vested at July 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number
of Shares
194,706
66,150
(71,707)
(12,058)
Non-vested at June 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . .
177,091
Weighted-
Average
Grant Date
Fair Value
$52.15
$61.32
$44.95
$58.63
$58.06
As of June 30, 2014, total unrecognized stock-based compensation expense related to Restricted
Stock was approximately $5.3 million, which is expected to be recognized over the weighted-average
vesting period of 3.2 years.
9. STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has 10,000,000 authorized and unissued shares of $.01 par value Preferred Stock as
of June 30, 2014 and 2013.
Common Stock Issuances
Fiscal Year 2014
During the fiscal year ended June 30, 2014, options to purchase 34,495 shares were exercised,
resulting in proceeds of approximately $1.1 million.
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
9. STOCKHOLDERS’ EQUITY (Continued)
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.
Exchangeable Shares
In connection with the 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
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.
10. RESTRUCTURING ON ROYALTY AND STREAM INTERESTS
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 years
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
10. RESTRUCTURING ON ROYALTY AND STREAM INTERESTS (Continued)
ended June 30, 2014 and 2013. The Company’s carrying value for the Relief Canyon royalty interest
was approximately $1.2 million as of June 30, 2014 and 2013.
11. 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.
The following table summarizes the effects of dilutive securities on diluted EPS for the period:
Fiscal Years Ended June 30,
2014
2013
2012
(in thousands, except per share data)
Net income available to Royal Gold
common stockholders . . . . . . . . . . . . . .
$
62,641
$
69,153
$
92,476
Weighted-average shares for basic EPS . . .
Effect of other dilutive securities . . . . . . . .
64,909,149
117,107
63,250,247
179,575
57,220,040
243,810
Weighted-average shares for diluted EPS . .
65,026,256
63,429,822
57,463,850
Basic earnings per share . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . .
$
$
0.96
0.96
$
$
1.09
1.09
$
$
1.61
1.61
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.
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
12. INCOME TAXES
For financial reporting purposes, income before income taxes includes the following components:
Fiscal Years Ended June 30,
2014
2013
2012
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Company’s Income tax expense consisted of:
Current:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred and others:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Amounts in thousands)
$ 65,851
71,317
$110,189
42,830
$17,033
65,894
$82,927
$137,168
$153,019
Fiscal Years Ended June 30,
2014
2013
2012
(Amounts in thousands)
$ (3,663) $ 30,061
368
44,749
334
30,950
$35,556
310
17,273
$27,621
$ 75,178
$53,139
$ (4,122) $ (4,341) $
(26)
(4,018)
(27)
(7,051)
77
—
1,494
$ (8,166) $(11,419) $ 1,571
Total income tax expense . . . . . . . . . . . . . . . . . . . . .
$19,455
$ 63,759
$54,710
The provision for income taxes for the fiscal years ended June 30, 2014, 2013 and 2012, differs
from the amount of income tax determined by applying the applicable United States statutory federal
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
12. INCOME TAXES (Continued)
income tax rate to pre-tax income (net of non-controlling 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,
2014
2013
2012
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 foreign earnings indefinitely reinvested . . . . .
Effect of recognized loss on available-for-sale securities
Unrealized foreign exchange gains . . . . . . . . . . . . . . .
Changes in estimates and corrected errors of prior
year tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Amounts in thousands)
$48,009
$53,557
$29,024
334
—
(1,114)
(7,386)
(293)
1,141
(1,700)
562
(367)
368
310
— (1,007)
(1,416)
551
(2,042)
511
—
—
(546)
(1,395)
1,868
(1,236)
4,223
—
4,239
1,146
(594)
(152)
4,979
1,558
1,075
3,717
$19,455
$63,759
$54,710
The effective tax rate includes the impact of certain undistributed foreign subsidiary earnings for
which we have not provided U.S. taxes because we plan to reinvest such earnings indefinitely outside
the United States. The Company has the ability and intent to indefinitely reinvest these foreign
earnings based on revenue and cash projections of our other investments, current cash on hand, and
availability under our revolving credit facility. At June 30, 2014, the relevant foreign subsidiary had an
accumulated earnings deficit due to costs incurred prior to earning income in fiscal 2014. No deferred
tax has been provided on the difference between the tax basis in the stock of the consolidated
subsidiary and the amount of the subsidiary’s net equity determined for financial reporting purposes.
During the quarter ended September 30, 2013 as a result of continued review of the June 30, 2012
tax return and financial statement impacts of the return results, the Company recorded a $1.7 million
income tax benefit resulting from an identified error. Additionally, during the quarter ended June 30,
2014, the Company recorded a $2.6 million income tax expense as a result of continued review of prior
year’s tax accounts. In accordance with applicable U.S. GAAP, management quantitatively and
qualitatively evaluated the materiality of these errors and determined them to be immaterial to the
fiscal year 2014 or prior year consolidated financial statements.
79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
12. INCOME TAXES (Continued)
The tax effects of temporary differences and carryforwards, which give rise to our deferred tax
assets and liabilities at June 30, 2014 and 2013, are as follows:
2014
2013
(Amounts in thousands)
Deferred tax assets:
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,511
19,322
7,068
29,901
(4,933)
3,853
25,943
4,460
34,256
(4,606)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 24,968
$ 29,650
Deferred tax liabilities:
Mineral property basis . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized foreign exchange gains . . . . . . . . . . . . . . . . . . . .
2019 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(158,301) $(165,936)
(3,684)
(23,281)
(3,561)
(3,072)
(20,002)
(2,239)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
(183,614)
(196,462)
Total net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(158,646) $(166,812)
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, 2014 and 2013, the Company had $4.9 million and $4.6 million of
valuation allowances recorded, respectively. The valuation allowance remaining at June 30, 2014 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, 2014 and 2013, the Company had $77 million and $108 million of net operating loss
carry forwards, respectively. The decrease in the net operating loss carry forwards is attributable to
utilization of net operating losses in non-U.S. subsidiaries. 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, and the Company anticipates the losses will be fully utilized.
As of June 30, 2014 and 2013, the Company had $13.7 million and $21.2 million of total gross
unrecognized tax benefits, respectively. If recognized, these unrecognized tax benefits would positively
80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
12. INCOME TAXES (Continued)
impact the Company’s effective income tax rate. A reconciliation of the beginning and ending amount
of gross unrecognized tax benefits is as follows:
2014
2013
2012
(Amounts in
thousands)
Total gross unrecognized tax benefits at beginning of
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions / Reductions for tax positions of current year
Reductions due to settlements with taxing authorities .
Reductions due to lapse of statute of limitations . . . . .
$21,166
(1,052)
(296)
(6,093)
$19,469
2,638
(941)
$18,836
2,051
—
— (1,418)
Total amount of gross unrecognized tax benefits at end
of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,725
$21,166
$19,469
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 not decrease 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, 2014 and 2013, the amount of
accrued income-tax-related interest and penalties was $5.4 million and $4.3 million, respectively.
13. SUPPLEMENTAL CASH FLOW INFORMATION
The Company’s supplemental cash flow information for the fiscal years ending June 30, 2014, 2013
and 2012 is as follows:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes, net of refunds . . . . . . . . . . . . . . . . . .
$10,638
$27,322
$10,490
$48,809
$ 4,590
$58,520
Non-cash investing and financing activities:
Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . .
$54,049
$47,997
$32,357
2014
2013
2012
(Amounts in thousands)
14. 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
81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
14. FAIR VALUE MEASUREMENTS (Continued)
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, 2014
Fair Value
Total
Level 1
Level 2
Level 3
Assets (In thousands):
United States treasury bills(1) . . . . . . . . . . . . . . . .
Marketable equity securities(2)
. . . . . . . . . . . . . . .
$499,992
9,608
$
$499,992
9,608
$
$499,992
9,608
$
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$509,600
$509,600
Liabilities (In thousands):
Debt(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$388,860
$394,050
$394,050
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$394,050
$394,050
$—
$—
$—
$—
$—
$—
$—
$—
$—
$—
(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.
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, 2014, 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
82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
14. FAIR VALUE MEASUREMENTS (Continued)
ended June 30, 2014. If recognition of these assets at their fair value becomes necessary, such
measurements will be determined utilizing Level 3 inputs.
15. MAJOR SOURCES OF REVENUE
Operators that contributed greater than 10% of the Company’s total revenue for any of fiscal years
2014, 2013 or 2012 were as follows (revenue amounts in thousands):
Operator
Teck . . . . . . . . . . . . . . . . . . . . . . . . .
Goldcorp, Inc.
. . . . . . . . . . . . . . . . . .
Thompson Creek . . . . . . . . . . . . . . . .
Vale Newfoundland & Labrador
Fiscal Year 2014
Fiscal Year 2013
Fiscal Year 2012
Percentage
of total
revenue
Revenue
Percentage
of total
revenue
Revenue
20.6% $82,272
13.6% 32,461
N/A
11.5%
28.4% $64,075
11.2% 31,407
N/A
N/A
Percentage
of total
revenue
24.4%
11.9%
N/A
Revenue
$48,777
32,339
27,209
Limited . . . . . . . . . . . . . . . . . . . . .
25,128
10.6% 32,517
11.2% 36,030
13.7%
16. COMMITMENTS AND CONTINGENCIES
Phoenix Gold Project Stream Acquisition
As of June 30, 2014, the Company has a remaining commitment of $45 million as part of its
Phoenix Gold Project stream acquisition in February 2014 (Note 3).
Mt. Milligan Gold Stream Acquisition
The Company’s final commitment payment of $12.9 million to Thompson Creek as part of the
Mt. Milligan gold stream acquisition was made in September 2013. The Company has no remaining
commitment payments to Thompson Creek as part of the Mt. Milligan gold stream.
Tulsequah Chief Gold and Silver Stream Acquisition
As of June 30, 2014, the Company has a remaining commitment of $45 million as part of its
Tulsequah Chief gold and silver stream acquisition in December 2011, as amended in July 2014,
payment of which is subject to satisfaction of certain conditions precedent.
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
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
83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
16. COMMITMENTS AND CONTINGENCIES (Continued)
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.
17. RELATED PARTY
Crescent Valley Partners, L.P. (‘‘CVP’’) was formed as a limited partnership in April 1992. CVP
owns the NVR1 royalty on production of minerals from a portion of Cortez. Denver Mining Finance
Company (‘‘DMFC’’), our wholly-owned subsidiary, is the general partner and held an aggregate
31.633% limited partner interest as of December 31, 2013.
On January 2, 2014, Royal Gold, through its wholly-owned subsidiary, DMFC, increased its
ownership interest in the NVR1 royalty by acquiring all or a portion of the limited partnership interests
of nine limited partners in CVP, aggregating 49.465% of the outstanding limited partnership interests,
for approximately $11.5 million. The limited partners from whom DMFC acquired limited partnership
interests included our former Chairman of the Board of Directors, who sold 3.0% out of his total
3.063% interest; one former member of our Board of Directors, who sold his entire 24.5% interest; and
another former member of our Board of Directors, who sold his entire 8.0% interest. As a result of the
transaction, DMFC now holds 81.098% of the outstanding limited partnership interests in CVP,
equating to a 1.014% net value royalty on production from all of the lands covered by the NVR1
Royalty excluding production from the mining claims comprising the Crossroad Claims at Cortez, and a
0.618% net value royalty on production from the Crossroad Claims. The Crossroad Claims are part of
the Pipeline Complex.
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
7,708 and 9,742 ounces of gold as of June 30, 2014 and June 30, 2013, 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 $5.0 million and $6.1 million as of June 30,
2014 and June 30, 2013, respectively, while the fair value of such ounces was approximately
$10.1 million and $11.6 million as of June 30, 2014 and June 30, 2013, respectively. None of the gold
currently held in inventory as of June 30, 2014 and 2013, is attributed to Royal Gold, as the gold
allocated to Royal Gold’s CVP partnership interest is typically sold within five days of receipt.
84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ROYAL GOLD, INC.
18. 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.
Revenue
Operating
income
Net income
attributable to
Royal Gold
stockholders
Basic
earnings
per share
Diluted
earnings
per share
(Amounts in thousands except per share data)
Fiscal year 2014 quarter-ended:
September 30 . . . . . . . . . . . . . . . . . . . . . .
December 31 . . . . . . . . . . . . . . . . . . . . . .
March 31 . . . . . . . . . . . . . . . . . . . . . . . . .
June 30 . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 56,487
52,785
57,748
70,142
$ 25,738
22,916
28,614
31,452
$237,162
$108,720
Fiscal year 2013 quarter-ended:
September 30 . . . . . . . . . . . . . . . . . . . . . .
December 31 . . . . . . . . . . . . . . . . . . . . . .
March 31 . . . . . . . . . . . . . . . . . . . . . . . . .
June 30 . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 77,862
79,870
74,166
57,326
$ 47,646
50,665
42,932
29,924
$289,224
$171,167
$15,195
10,667
20,143
16,636
$62,641
$24,771
27,217
6,464
10,701
$69,153
$0.23
0.16
0.31
0.26
$0.96
$0.42
0.42
0.10
0.16
$1.09
$0.23
0.16
0.31
0.26
$0.96
$0.41
0.42
0.10
0.16
$1.09
85
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, 2014, 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, 2014, 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, 2014. 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, 2014, 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
86
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, 2014.
(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, 2014, 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, 2014,
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, 2014, based on the COSO criteria.
87
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,
2014 and 2013, 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, 2014 of
Royal Gold, Inc. and our report dated August 7, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Denver, Colorado
August 7, 2014
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 2014
Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2014, 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 and accounting 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 2014
Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2014, 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 2014
Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2014, 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 2014
Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2014, and is
incorporated by reference in this Annual Report on Form 10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is included in the Company’s Proxy Statement for its 2014
Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2014, and is
incorporated by reference in this Annual Report on Form 10-K.
88
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
54
55
56
57
58
59
(b) Exhibits
Reference is made to the Exhibit Index beginning on page 91 hereof.
89
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 7, 2014
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 7, 2014
By:
/s/ TONY JENSEN
Tony Jensen
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date: August 7, 2014
By:
/s/ STEFAN L. WENGER
Stefan Wenger
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
Date: August 7, 2014
By:
/s/ WILLIAM M. HAYES
William M. Hayes
Chairman
Date: August 7, 2014
By:
/s/ GORDON J. BOGDEN
Gordon J. Bogden
Director
Date: August 7, 2014
By:
/s/ M. CRAIG HAASE
M. Craig Haase
Director
Date: August 7, 2014
By:
/s/ KEVIN MCARTHUR
Kevin McArthur
Director
Date: August 7, 2014
By:
/s/ CHRIS M.T. THOMPSON
Chris M. T. Thompson
Director
Date: August 7, 2014
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 7, 2013 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 September 3, 2013 and incorporated herein
by reference)
91
Exhibit
Number
10.2**
10.3**
10.4**
10.5**
10.6**
10.7**
10.8**
10.9**
10.10**
10.11**
10.12**
10.13**
10.14**
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 Incentive Stock Option Agreement (Officer) 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 September 3, 2013 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 Director Restricted Stock 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 September 3, 2013 and incorporated herein by reference)
Form of Restricted Stock Agreement (Officer) 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 September 3, 2013 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 Performance Share Agreement (Officer) 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 September 3, 2013 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)
Form of Stock Appreciation Rights Agreement—Stock Settled (Officer) 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 September 3, 2013 and incorporated herein by
reference)
10.15**
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)
92
Exhibit
Number
10.16**
10.17**
10.18**
10.19**
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
Description
Form of Employment Agreement by and between Royal Gold, Inc. and Tony Jensen
(filed as Exhibit 10.1 to Royal Gold’s Current Report on Form 8-K filed on
September 19, 2013 and incorporated herein by reference)
Form of Employment Agreement by and between Royal Gold, Inc. and each of the
following: Stefan Wenger, William Heissenbuttel, Bruce Kirchhoff and William Zisch
(filed as Exhibit 10.2 to Royal Gold’s Current Report on Form 8-K filed on
September 19, 2013 and incorporated herein by reference)
Employment Agreement by and between Royal Gold, Inc. and Karli S. Anderson, dated
May 15, 2013 (filed as Exhibit 10.14 to the Company’s Annual Report on Form 10-K on
August 8, 2013 and incorporated herein by reference)
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)
Sixth Amended and Restated Revolving Credit Agreement among Royal Gold, Inc., High
Desert Mineral Resources, Inc., RG Exchangeco Inc., RG Mexico, Inc., the lenders from
time to time party thereto, and HSBC Bank USA, National Association, as administrative
agent for the lenders, dated January 29, 2014 (filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K on January 30, 2014 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)
93
Exhibit
Number
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
Description
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)
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)
94
Exhibit
Number
10.38
10.39
10.40
10.41
Description
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)
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)
10.42*** 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)
10.43*** 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)
10.44
10.45
10.46
10.47
10.48
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)
95
Exhibit
Number
10.49
10.50
10.51
Description
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)
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)
10.52*** 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)
10.53
21.1*
23.1*
31.1*
31.2*
Form of Agreement for Assignment of Partnership Interest in Crescent Valley
Partners, L.P. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on
January 8, 2014 and incorporated herein by reference)
Royal Gold and Its Subsidiaries
Consent of Independent Registered Public Accounting Firm
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.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
*
Filed or furnished 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, 2014
EXHIBIT 21.1
Name
State/Country of
Incorporation
Ownership
Percentage
Royal Gold, Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware, USA
Denver Mining Finance Company, Inc.* . . . . . . . . . . . . . . Colorado, USA 100%
Crescent Valley Partners LP . . . . . . . . . . . . . . . . . . . . . Colorado, USA Limited Partner
. . . . . . . . . . . . . . . . . . Bulgaria
50%
Greek American Exploration Ltd.
High Desert Mineral Resources, Inc.
Switzerland
DFH Co. of Nevada . . . . . . . . . . . . . . . . . . . . . . . . . . Nevada, USA
. . . . . . . . . . . . . . . . . . . . . . . . . . Nevada, USA
Gold Ventures, Inc.
. . . . . . . . . . . . . . . . Delaware, USA 100%
100%
100%
100%
RG Finance (Barbados) Limited . . . . . . . . . . . . . . . . . . . Barbados
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware, USA 100%
RG Mexico, Inc.
RGLD Gold AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
RGLD Holdings, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware, USA 100%
100%
100%
100%
100%
100%
100%
100%
90%
100% common shares
45%
100%
100%
100%
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
RG Callco Inc.
RG Exchangeco Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . Canada
International Royalty Corporation . . . . . . . . . . . . . . . . Canada
. . . . . . . . . . . . . . . . . . . . . . . . Canada
4324421 Canada Inc.
1809391 Alberta ULC . . . . . . . . . . . . . . . . . . . . . . . Canada
Voisey’s Bay Holding Corporation . . . . . . . . . . . . . . . Canada
Canadian Minerals Partnership . . . . . . . . . . . . . . . Canada
Labrador Nickel Royalty Limited Partnership . . . Canada
. . . . . . . . . . . . . . . . . . . . . Canada
. . . . . . . . . . . Canada
Sigma-Lamaque LP . . . . . . . . . . . . . . . . . . . . . . . . Canada
Royal Crescent Valley, Inc.
Royal Gold Chile Limitada . . . . . . . . . . . . . . . . . . . . . . . Chile
. . . . . . . . . . . . . . . . . . . . . . . Nevada, USA
Sigma-Lamaque Management Inc.
McWatters Mining Inc.
* 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 7, 2014, 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, 2014.
EXHIBIT 23.1
/s/ Ernst & Young LLP
Denver, Colorado
August 7, 2014
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 7, 2014
/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 7, 2014
/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, 2014, 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 7, 2014
/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, 2014, 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 7, 2014
/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
CORPORATE HEADQUARTERS
Friday, November 14, 2014
9:00 a.m. MST
Ritz-Carlton Hotel
1881 Curtis Street
Denver, Colorado 80202
BOARD OF DIRECTORS
William Hayes
Chairman
Retired Mining Executive
Tony Jensen
President and Chief Executive Officer
Royal Gold, Inc.
Gordon J. Bogden
President and Chief Executive Officer
Avanti Mining Inc.
M. Craig Haase
Retired Mining Executive
Kevin McArthur
Vice Chair, Chief Executive Officer
and Director
Tahoe Resources Inc.
Chris M.T. Thompson
Retired Mining Executive
Ronald J. Vance
Retired Mining Executive
OFFICERS
Tony Jensen
President and Chief Executive Officer
Stefan Wenger
Chief Financial Officer and Treasurer
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 30170
College Station, TX 77842-3170
For overnight/express delivery:
Computershare Investor Services
211 Quality Circle Suite 210
College Station, TX 77845
Telephone and Fax:
(800) 962-4284 (toll free)
(781) 575-3120 (International)
(303) 262-0700 (fax)
Website: www.computershare.com
Karli Anderson
Vice President Investor Relations
For Holders of Royal Gold
Exchangeable Shares:
William Heissenbuttel
Vice President Corporate Development
Bruce C. Kirchhoff
Vice President, General Counsel and
Secretary
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
William Zisch
Vice President Operations
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, 2014 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.
bOaRD OF DIRECTORS
KEVIN McARTHUR
Vice Chair & CEO
Tahoe Resources Inc.
M. CRAIg HAAsE
Retired Mining Executive
TONy JENsEN
President & Chief
Executive Officer
CHRIs THOMPsON
Retired Mining Executive
WILLIAM HAyEs
Chairman
Retired Mining Executive
gORdON J. BOgdEN
President & CEO
Avanti Mining Inc.
RONALd J. VANCE
Retired Mining Executive
ManaGEMEnT
KARLI ANdERsON
Vice President
Investor Relations
BILL HEIssENBUTTEL
Vice President
Corporate Development
TONy JENsEN
President & Chief
Executive Officer
BRUCE KIRCHHOff
Vice President, General
Counsel & Secretary
sTEfAN WENgER
Chief Financial Officer
& Treasurer
BILL ZIsCH
Vice President
Operations
1660 Wynkoop Street, Suite 1000
Denver, Colorado 80202
www.royalgold.com