Royal Gold
Annual Report 2016

Plain-text annual report

2 0 1 6 A N N U A L R E P O R T E X P A N D I N G T H E P O R T F O L I O R O Y A L G O L D , I N C . 2 0 1 6 A N N U A L R E P O R T Table of Contents 2 Selected Financial Data 3 Financial Highlights 4 Letter to Shareholders 7 Property Portfolio Principal Producing Properties 14 Portfolio Map 16 Property Tables 20 Property Table Footnotes 22 The Gold Market 23 Corporate Responsibility 24 Non-GAAP Financial Measures 25 Total Return to Shareholders 26 Glossary 27 Form 10-K Corporate Information LAST PAGE OF 10-K Board of Directors INSIDE BACK COVER Management INSIDE BACK COVER 46594cov.indd 3-4 Royal Gold, Inc. acquires and manages precious metals royalty and stream interests, with a primary focus on gold. The Royal Gold, Inc. acquires and manages precious metals royalty and stream interests, with a primary focus on gold. The Company’s portfolio provides investors with a unique opportunity to capture value in the precious metals sector without Company’s portfolio provides investors with a unique opportunity to capture value in the precious metals sector without incurring many of the costs and risks associated with mine operations. incurring many of the costs and risks associated with mine operations. To acquire a royalty, Royal Gold buys a percentage of the metal produced from a mineral property in exchange for an initial payment. Existing royalties are acquired outright from either a mineral resource company or a private party; new royalties are generally created by providing capital to an operator or explorer in exchange for a royalty. Precious metal streams are purchase agreements with mine operators that provide, 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. Except for one joint venture property where we conduct exploration, we do not conduct work on the properties in which we hold royalty and streaming interests, and we are not responsible for contributing to exploration, operating, environmental or capital costs on those properties. Royal Gold owns a large portfolio of producing, development, evaluation and exploration stage royalties and streams located in some of the world’s most prolific gold regions. Approximately 90% of our reserves and revenue in fiscal 2016 was derived from North America, the Dominican Republic and Chile. With this high quality portfolio, Royal Gold maintains upside potential through exploration successes by the operators and generally benefits when new reserves are discovered and produced. This successful business model generates strong cash flow and high margins with a lower cost structure, providing shareholders with a premium precious metals investment. Royal Gold is based in Denver, Colorado, and is traded on the NASDAQ Global Select Market, under the symbol “RGLD.” Notes: • Certain information, including the Company’s audited financial statements, required to be included in this Annual Report, is contained in the Form 10-K. Certain information has been provided to the Company by the operators of those properties or is publicly available information filed by these operators with applicable securities regulatory bodies, including the Securities and Exchange Commission. The Company has not verified, and is not in a position to verify, and expressly disclaims any responsibility for the accuracy, completeness or fairness of such third-party information, and refers readers to the public reports filed by the operators for information regarding those properties. 46594nar.indd 1 9/26/16 12:18 PM Corporate ProfileSelected Financial Data SELECTED STATEMENTS OF OPERATIONS DATA (Amounts in thousands, except per share data) 2016 2015 2014 2013 2012 Fiscal Years Ended June 30, Revenue Revenue Operating income Net (loss) income 11 Net (loss) income Net (loss) income available to $ 359,790 $ 359,790 $ 278,019 $ 278,019 $ 237,162 $ 289,224 $ 237,162 $ 263,054 $ 289,224 $ 263,054 $ 4,816 $ 87,235 $ 108,720 $ 171,167 $ 156,634 $ (82,438) $ (82,438) $ 52,678 $ 52,678 $ 63,472 $ 73,409 $ 63,472 $ 98,309 $ 73,409 $ 98,309 Royal Gold common stockholders 2 $ (77,149) $ 51,965 $ 62,641 $ 69,153 $ 92,476 Net (loss) income per share available to Net (loss) income per share available to Royal Gold common stockholders: Royal Gold common stockholders: Basic Basic Diluted Diluted $ (1.18) $ (1.18) $ 0.80 $ 0.80 $ 0.96 $ 1.09 $ 0.96 $ 1.61 $ 1.09 $ 1.61 $ (1.18) $ (1.18) $ 0.80 $ 0.80 $ 0.96 $ 1.09 $ 0.96 $ 1.61 $ 1.09 $ 1.61 Dividends declared per common share 3 $ 0.91 $ 0.87 $ 0.83 $ 0.75 $ 0.56 SELECTED BALANCE SHEET DATA As of June 30, (Amounts in thousands) 2016 2015 2014 2013 2012 Stream and royalty interests, net Stream and royalty interests, net $ 2,083,608 $ 2,848,087 $ 2,083,608 $ 2,848,087 $ 2,120,268 $ 2,109,067 $ 2,120,268 $ 2,109,067 $ 1,890,988 $ 1,890,988 Total assets Debt Debt Total liabilities $ 3,066,552 $ 2,917,191 $ 2,882,316 $ 2,895,747 $ 2,365,290 $ 313,869 $ 600,685 $ 313,869 $ 600,685 $ 302,632 $ 292,669 $ 302,632 $ 282,172 $ 292,669 $ 282,172 $ 780,667 $ 501,264 $ 509,759 $ 525,111 $ 501,861 Total Royal Gold stockholders’ equity Total Royal Gold stockholders’ equity $ 2,353,122 $ 2,229,016 $ 2,353,122 $ 2,229,016 $ 2,348,887 $ 2,354,725 $ 2,348,887 $ 2,354,725 $ 1,838,459 $ 1,838,459 1. The term “net (loss) 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. 2. Fiscal 2016 earnings were impacted by impairments reported in the March 2016 quarter and discrete tax expenses reported in the September 2015 quarter resulting in a net loss attributable to stockholders of $77.1 million, or ($1.18) per share, compared to fiscal 2015 net income of $52.7 million, or $0.80 per share. Absent the adjustments for impairments and the discrete tax expenses, fiscal 2016 adjusted net income would have been $65.0 million, or $1.00 per share. 3. Dividends are paid on a calendar year basis and do not correspond with the fiscal year dividend amounts shown in the Selected Financial Data. The dividend for calendar year 2016 was $0.92; the dividend paid during fiscal year 2016 was $0.91. 2 46594nar.indd 2 9/26/16 8:28 AM Financial Highlights Revenue For the Fiscal Years Ended June 30, ($Millions) $400 $300 $200 $100 $0 263.1 289.2 278.0 237.2 359.8 2012 2013 2014 2015 2016 THE kEY ELEMENTS OF OuR BuSINESS STRATEGY INCLuDE: Business Model: Royal Gold’s royalty and streaming business model provides investors with a diversified portfolio of 38 producing assets without incurring many of the costs and risks associated with mine operations. Gold Focused: 85% of Royal Gold’s revenue in fiscal 2016 was generated from gold. Adjusted EBITDA 1 For the Fiscal Years Ended June 30, ($Millions) 260.5 237.6 202.1 216.5 Growth: Royal Gold emphasizes investment in long lived assets that we believe will provide our 259.8 shareholders resource to reserve conversion upside. Capital Deployment: Royal Gold maintains a strong balance sheet that allows us to opportunistically invest at favorable times in the price cycle and during counter-party needs. Financial Flexibility: Royal Gold’s unique business model allows us to source our capital efficiently, with a preference to grow our business from free cash flow. Return to Shareholders: Royal Gold concentrates on margin expansion by maintaining a lean cost structure, measures success on a per share metrics, and believes paying a sustainable and growing dividend is important. $300 $200 $100 $0 2012 2013 2014 2015 2016 Calendar Year Dividends 2 ($ Per share) $1.00 $.80 $.60 $.40 $.20 $.00 0.80 0.84 0.88 0.92 0.60 2012 2013 2014 2015 2016 Footnotes: Footnotes: The term “Adjusted EBITDA” is a non-GAAP financial measure. 1. 1. The term “Adjusted EBITDA” is a non-GAAP financial measure. Adjusted EBITDA is defined by the Company as net income plus Adjusted EBITDA is defined by the Company as net income plus depreciation, depletion and amortization, non-cash charges, income depreciation, depletion and amortization, non-cash charges, income tax expense, interest and other expense, and any impairment of tax expense, interest and other expense, and any impairment of mining assets, less non-controlling interests in operating income mining assets, less non-controlling interests in operating income of consolidated subsidiaries, interest and other income, and any of consolidated subsidiaries, interest and other income, and any royalty portfolio restructuring gains or losses. A reconciliation of royalty portfolio restructuring gains or losses. A reconciliation of Net Income to Adjusted EBITDA is provided on page 24. Net Income to Adjusted EBITDA is provided on page 24. Dividends are paid on a calendar year basis. The dividend for 2. 2. Dividends are paid on a calendar year basis. The dividend for calendar year 2016 was $0.92; the dividend paid during fiscal year calendar year 2016 was $0.92; the dividend paid during fiscal year 2016 was $0.91. 2016 was $0.91. 46594nar.indd 3 9/24/16 2:52 PM 3 | ROYAL GOLD, INC. | 2016 ANNUAL REPORT Our strategic positioning provided many opportunities to Royal Gold; and in fiscal 2016 we were perfectly positioned to buy quality assets at a favorable entry point in the commodity price cycle when others were selling. Letter to Shareholders DEAR FELLOw SHAREHOLDER, By many measures, the last several years have been By many measures, the last several years have been difficult for the gold industry. The gold price drifted from difficult for the gold industry. The gold price drifted from historical highs in 2011 and 2012 to a six year low in historical highs in 2011 and 2012 to a six year low in December 2015. Many operating companies implemented December 2015. Many operating companies implemented aggressive debt and cost reduction campaigns in search of aggressive debt and cost reduction campaigns in search of to margins and survival. While others responded defensively to margins and survival. While others responded defensively a weak metal price environment, we positioned ourselves a weak metal price environment, we positioned ourselves to take advantage of it. to take advantage of it. Royal Gold went into this difficult period from a position Royal Gold went into this difficult period from a position of strength, with a strong balance sheet and a lean cost of strength, with a strong balance sheet and a lean cost structure. Our resulting financial performance was strong structure. Our resulting financial performance was strong with volume and adjusted EBITDA growing by 41% and 29%, with volume and adjusted EBITDA growing by 41% and 29%, respectively, over the last three fiscal years. respectively, over the last three fiscal years. Our strategic positioning provided many opportunities Our strategic positioning provided many opportunities to Royal Gold; and in fiscal 2016 we were perfectly to Royal Gold; and in fiscal 2016 we were perfectly positioned to buy quality assets at a favorable entry point positioned to buy quality assets at a favorable entry point in the commodity price cycle when others were selling. in the commodity price cycle when others were selling. We closed $1.4 billion of new acquisitions in the first We closed $1.4 billion of new acquisitions in the first quarter of fiscal 2016. quarter of fiscal 2016. New investments at Andacollo, Pueblo Viejo, Wassa and New investments at Andacollo, Pueblo Viejo, Wassa and Prestea are already among our top five revenue producers, Prestea are already among our top five revenue producers, and we look forward to Rainy River’s production in the near and we look forward to Rainy River’s production in the near future. These acquisitions contributed to a 21% increase future. These acquisitions contributed to a 21% increase in attributable precious metal reserves, totaling 6.4 million in attributable precious metal reserves, totaling 6.4 million gold equivalent ounces, and are expected to drive industry gold equivalent ounces, and are expected to drive industry leading growth in volume of about 25% over the next three leading growth in volume of about 25% over the next three fiscal years. fiscal years. Specifically, our fiscal 2016 investments included the Specifically, our fiscal 2016 investments included the following: following: In July 2015, we expanded our economic and geographic • • In July 2015, we expanded our economic and geographic interest at the Andacollo mine in Chile, operated by Teck interest at the Andacollo mine in Chile, operated by Teck Resources Limited. This increased interest in gold from Resources Limited. This increased interest in gold from Andacollo helps offset the declining gold grade profile Andacollo helps offset the declining gold grade profile at the mine and is expected to provide revenue to Royal at the mine and is expected to provide revenue to Royal Gold for the next several decades. Gold for the next several decades. 4 46594nar.indd 4 9/24/16 2:52 PM Also in July 2015, we entered into a gold and silver stream • • Also in July 2015, we entered into a gold and silver stream with New Gold, Inc. on its Rainy River project in Ontario, with New Gold, Inc. on its Rainy River project in Ontario, Canada. Rainy River is expected to become a strong revenue Canada. Rainy River is expected to become a strong revenue contributor when production commences, which is projected contributor when production commences, which is projected in calendar 2017. in calendar 2017. We closed a gold streaming and loan agreement with Golden • • We closed a gold streaming and loan agreement with Golden Star Resources Ltd. related to its assets in Ghana in July, and Star Resources Ltd. related to its assets in Ghana in July, and expanded that streaming interest in December 2015. We are expanded that streaming interest in December 2015. We are receiving production from the existing Wassa and Prestea receiving production from the existing Wassa and Prestea operations while funding for the development of two new operations while funding for the development of two new underground operations. We are particularly interested in underground operations. We are particularly interested in the exploration opportunities at these assets, and for the the exploration opportunities at these assets, and for the potential to expand mine lives. potential to expand mine lives. In September 2015, we closed the Pueblo Viejo gold and • • In September 2015, we closed the Pueblo Viejo gold and silver streaming transaction with Barrick Gold Corporation, silver streaming transaction with Barrick Gold Corporation, adding yet another world class, high quality, long-lived asset adding yet another world class, high quality, long-lived asset with substantial resource conversion opportunity to Royal with substantial resource conversion opportunity to Royal Gold’s portfolio. Opportunities of this caliber and magnitude Gold’s portfolio. Opportunities of this caliber and magnitude are rare. Here too, we expect production for the next several are rare. Here too, we expect production for the next several decades. decades. However, fiscal 2016 was not without its challenges: However, fiscal 2016 was not without its challenges: After completing our investments during the fiscal first • • After completing our investments during the fiscal first quarter, we turned our attention for much of the remainder quarter, we turned our attention for much of the remainder of the year to liquidity concerns at Thompson Creek Metals of the year to liquidity concerns at Thompson Creek Metals Company Inc. and to protecting our investment at Mount Company Inc. and to protecting our investment at Mount Milligan. We were a catalyst in generating a free market Milligan. We were a catalyst in generating a free market solution to this situation. Our work culminated in an solution to this situation. Our work culminated in an agreement with Centerra Gold Inc. in July 2016 to amend our agreement with Centerra Gold Inc. in July 2016 to amend our streaming interest, while retaining the economic value of this streaming interest, while retaining the economic value of this investment for our shareholders. This facilitated Centerra’s investment for our shareholders. This facilitated Centerra’s pending acquisition of Thompson Creek, which is expected pending acquisition of Thompson Creek, which is expected to close, with our stream amendment, in the second half of to close, with our stream amendment, in the second half of calendar 2016. We believe the amended stream and the calendar 2016. We believe the amended stream and the Centerra acquisition will be an excellent outcome for Royal Centerra acquisition will be an excellent outcome for Royal Gold, and we anticipate Centerra’s stronger balance sheet Gold, and we anticipate Centerra’s stronger balance sheet and gold-focused skill set will further benefit our investment and gold-focused skill set will further benefit our investment at Mount Milligan. at Mount Milligan. We believe the amended stream and the Centerra acquisition will be an excellent outcome for Royal Gold, and we anticipate Centerra’s stronger balance sheet and gold-focused skill set will further benefit our investment at Mount Milligan. 46594nar.indd 5 9/24/16 2:52 PM 5 | ROYAL GOLD, INC. | 2016 ANNUAL REPORT At Rubicon Minerals, the Phoenix project experienced • • At Rubicon Minerals, the Phoenix project experienced I am very proud of our dedicated employees at Royal Gold I am very proud of our dedicated employees at Royal Gold a significant reduction in resources that resulted in a a significant reduction in resources that resulted in a and was pleased to introduce nearly half our employees and was pleased to introduce nearly half our employees suspension of development and an impairment of our suspension of development and an impairment of our to you at our Investor Day seminar this year. They, and to you at our Investor Day seminar this year. They, and interest. We continue to seek opportunities to recover interest. We continue to seek opportunities to recover our outstanding Board of Directors, are among the most our outstanding Board of Directors, are among the most value for this investment. value for this investment. talented in the business and are focused diligently on talented in the business and are focused diligently on We advanced the Tetlin Gold Project in Alaska during • • We advanced the Tetlin Gold Project in Alaska during executing our strategy. executing our strategy. the fiscal year with an investment of $5.7 million. the fiscal year with an investment of $5.7 million. While the path was not linear from the start to the end While the path was not linear from the start to the end Exploration results continue to expand our knowledge base Exploration results continue to expand our knowledge base of the fiscal year, we delivered on our corporate objectives of the fiscal year, we delivered on our corporate objectives of the project and have justified further work in fiscal of the project and have justified further work in fiscal of providing shareholder exposure to growth, quality and of providing shareholder exposure to growth, quality and 2017 at the same or higher levels. This is another example 2017 at the same or higher levels. This is another example opportunity. I sincerely thank our shareholders for your opportunity. I sincerely thank our shareholders for your of an opportunistic investment, which we structured of an opportunistic investment, which we structured support of our efforts. support of our efforts. to permit us to exit the project and return to our core to permit us to exit the project and return to our core business at the appropriate time. business at the appropriate time. Our strategy is focused on long term value: Our strategy is focused on long term value: We will continue to invest opportunistically in assets • • We will continue to invest opportunistically in assets Tony Jensen Tony Jensen that we believe will provide our shareholders resource to that we believe will provide our shareholders resource to President and CEO President and CEO reserve conversion upside and gold price leverage. reserve conversion upside and gold price leverage. We will continue to maintain a lean structure to maximize • • We will continue to maintain a lean structure to maximize margins. margins. We will continue to emphasize per share metrics to • • We will continue to emphasize per share metrics to measure our success. measure our success. We will continue to source our capital needs as efficiently • • We will continue to source our capital needs as efficiently as possible with a preference to grow our business from as possible with a preference to grow our business from free cash flow. free cash flow. We will continue to provide a return of capital to our • • We will continue to provide a return of capital to our shareholders. shareholders. Similarly, we take a long term view of the gold market. Similarly, we take a long term view of the gold market. In the second half of fiscal 2016, there was renewed In the second half of fiscal 2016, there was renewed market appreciation for the safe haven and strong currency market appreciation for the safe haven and strong currency characteristics of gold. Simply stated, we believe gold characteristics of gold. Simply stated, we believe gold is largely valued as a currency, and the supply of gold is is largely valued as a currency, and the supply of gold is increasing at a much slower rate than fiat currency increasing at a much slower rate than fiat currency throughout the world. These long-term market dynamics throughout the world. These long-term market dynamics are favorable for gold and remain in place, with a projected are favorable for gold and remain in place, with a projected decline in gold mine production and continued soft fiat decline in gold mine production and continued soft fiat monetary policies resulting in negative interest rates. monetary policies resulting in negative interest rates. 6 46594nar.indd 6 9/24/16 2:52 PM Principal Producing Properties Principal Producing Properties Approximately 77% of Royal Gold’s fiscal 2016 revenue derived from our Principal Producing Properties. This includes Mount Milligan, Andacollo, Pueblo Viejo, Wassa and Prestea, Peñasquito, Holt and Cortez. Our principal properties are located in some of the world’s most prolific gold-producing regions. Our producing properties are further distinguished by their long mine lives, strong production profiles, impressive unit economics and resource to reserve conversion potential. For example, our principal properties have over 15 years of remaining reserve life, on average, with several properties, such as Pueblo Viejo, Mount Milligan and Andacollo, featuring reserve lives in excess of 20 years. Pueblo Viejo is also one of just three gold mines in the world today producing approximately 1 million ounces of gold annually, while Mount Milligan ranks amongst the world’s lowest cost gold-copper mines. The operators of the Peñasquito, Pueblo Viejo and Wassa and Prestea mines are currently engaged in the analysis and/or implementation of new production technology, tailings dam expansion, and exploration to potentially convert future resources to reserves. Notes for pages 8-13: 1. Reserves, estimated production and mine start-up information were provided by the operators and have not been verified by Royal Gold. 2. Metal prices for the reserve figures can be found on page 20, footnote number 3. 7 | ROYAL GOLD, INC. | 2016 ANNUAL REPORT 46594nar.indd 7 9/26/16 10:08 AM FY2016 Revenue: $4$499.2M.2M FY2016 SALeS: 441,600 1,600 ooz gold z gold ReSeRveS: 1 1.609M ooz gold 1.609M z gold REgiON iV, CHiLE Royal Gold’s wholly-owned subsidiary, RGLD Gold AG (“RGLD Gold”), owns the right to purchase 100% of payable gold until 900,000 ounces have been delivered; and 50% thereafter, subject to a fixed payable percentage of 89%. The purchase price for gold ounces delivered is 15% of the monthly average gold price for the month preceding the delivery date. 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: Stream deliveries from Andacollo were 41,700 ounces of gold during our fiscal year 2016. We sold approximately 41,600 ounces of gold during the year. Teck has indicated that they expect calendar 2016 gold grade and production to exceed calendar 2015. 1. Reserves as of December 31, 2015. 8 46594nar.indd 8 9/24/16 2:52 PM AndacolloFY2016 SALES: $12$1255..4M4M FY2016 SALES: 108,800 ooz gold 108,800 z gold RESERvES: 1 55.68.689M 9M ooz gold z gold BRiTiSh COLUmBiA, CANADA RGLD Gold owns the right to purchase 52.25% of the payable gold from the Mount Milligan project, at a cash purchase price of $435 for each payable ounce of gold delivered to RGLD Gold, subject to a fixed payable percentage of 97%. Mount Milligan is an open-pit copper-gold mine operated by a subsidiary of Thompson Creek Metals Company, Inc. (“Thompson Creek”), located in central British Columbia, Canada. On July 5, 2016, Royal Gold signed a commitment letter and binding term sheet with Centerra Gold Inc. (“Centerra”) related to our streaming interest at the Mount Milligan mine. Centerra entered into a definitive arrangement agreement to acquire Thompson Creek and pay its outstanding bonds. Under the terms of the commitment letter, Royal Gold’s 52.25% gold streaming interest at Mount Milligan will be amended, conditional and effective on closing of Centerra’s acquisition of Thompson Creek, to a 35% gold stream and 18.75% copper stream. Royal Gold will continue to pay $435 per ounce of gold delivered and will pay 15% of the spot price per metric tonne of copper delivered. Production Status: Stream deliveries from Mount Milligan were 111,000 ounces of gold during our fiscal year 2016, an increase of approximately 50% when compared to our fiscal year 2015. The increase was due to higher mill throughput and gold grade. We sold approximately 108,800 ounces of gold during the year. Thompson Creek estimates that Mount Milligan gold production will be at the lower end of their calendar 2016 production guidance of 240,000 to 270,000 ounces. 1. Reserves as of December 31, 2015. 46594nar.indd 9 9/26/16 8:28 AM 9 9 | | ROROYYAL GOLD AL GOLD, INC. , INC. | 2 | 2016 ANNU AL REPORTT 016 ANNUAL REPOR Mount MilliganFY2016 REvEnuE: $$222.8M2.8M FY2016 PRoduction: 1 558484,,000 000 ooz gold z gold 21.21.4M 4M ooz silv z silverer .2M lblbs les leadad 134134.2M 333333..00MM lblbs zinc s zinc RESERvES: 2 1010..180M180M o oz gold z gold 55881.1.9960M 60M ooz silv 33..7701B 01B lblbs les leadad 8.886B lblbs zinc 8.886B s zinc z silverer ZACATECAS, mExiCO Royal Gold owns a 2.0% NSR royalty on all metals produced from 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, silver, lead and zinc production attributable to our royalty interest at Peñasquito decreased approximately 21%, 13%, 15% and 2%, respectively, during our fiscal year 2016, when compared to our fiscal year 2015. The decrease in production is attributable to lower throughput, grades and recovery. Over the next three calendar years, Goldcorp expects mining activities in the pit to be focused on lower grade ore in the upper parts of the Peñasco pit while stripping is emphasized to ensure an economically optimal pit shell design to maximize the net asset value of the operation. By calendar 2019, Goldcorp expects Peñasquito’s gold production to benefit from mining higher grades at the bottom of the Peñasco pit and significantly enhanced metallurgical recoveries with the planned completion of the Pyrite Leach Project (“PLP”) approved in July 2016. The PLP is expected to increase overall gold and silver recovery by treating the zinc tailings before discharge to the tailings storage facility. 1. Reported production for FY2016 relates to the amount of metal sales subject to our royalty interests as reported to us by Goldcorp. 2. Reserves as of December 31, 2015. 10 46594nar.indd 10 9/26/16 8:28 AM PeñasquitoFY2016 REvEnuE: $$3399.7.7MM FY2016 SALES: 331,21,20000 o oz gold z gold 2208,08,900900 o oz silv z silverer 8.9960M 60M ooz gold z gold RESERvES: 1 8. 5454..14145M 5M ooz silv z silverer Pueblo Viejo SANChEZ RAmiREZ, DOmiNiCAN REPUBLiC RGLD Gold owns the right to purchase 7.5% of Barrick’s 60% interest in payable gold produced from the Pueblo Viejo mine until 990,000 ounces have been delivered; and 3.75% thereafter. The purchase price for gold ounces delivered is 30% of the spot price until 550,000 ounces have been delivered, and 60% thereafter. RGLD Gold also owns the right to purchase 75% of Barrick’s 60% interest in the payable silver produced from the Pueblo Viejo mine until 50 million ounces of payable silver have been delivered; and 37.5% thereafter. The purchase price for silver ounces delivered is 30% of the spot price until 23.1 million ounces have been delivered, and 60% thereafter. Silver deliveries are based on a fixed 70% recovery rate. Pueblo Viejo is an open-pit gold mine owned by a joint venture in which Barrick holds a 60% interest and is responsible for operations. Goldcorp holds the remaining 40% interest. The mine is located in the central part of the Dominican Republic on the Caribbean island of Hispaniola. Production Status: Stream deliveries from Pueblo Viejo were 42,200 ounces of gold and 532,600 ounces of silver during our fiscal year 2016. Our silver stream was effective January 1, 2016, thus stream deliveries only reflect half of a fiscal year. We sold approximately 31,200 ounces of gold and 208,900 ounces of silver during the year. In calendar 2016, Barrick expects improved throughput and plant availability as compared to calendar 2015 primarily due to overcoming the issues related to the oxygen plant motor failures which negatively impacted 2015 throughput. In addition, Barrick is focused on improving efficiency and throughput by a combination of ore blending optimization, increasing autoclave availability, and optimization of maintenance strategies. A prefeasibility study is expected to be commissioned in the second half of calendar 2016 to evaluate a possible increase in tailings storage capacity, giving the potential to move a significant portion of the mine’s 7.7 million ounces of gold and 44.7 million ounces of silver in measured and indicated resources to reserves. 1. Reserves as of December 31, 2015. 46594nar.indd 11 9/26/16 8:28 AM 11 | | ROROYYAL GOLD 11 AL GOLD, INC. , INC. | 2 | 2016 ANNU AL REPORTT 016 ANNUAL REPOR FY2016 REvEnuE: $$2323..33MM FY2016 SALES: 2200,,100100 o oz gold z gold RESERvES:1 2.2.143M143M o oz gold z gold Wassa and Prestea WESTERN REgiON, ghANA RGLD Gold owns the right to purchase 9.25% of payable gold produced from the Wassa and Prestea projects, until the earlier of (i) December 31, 2017 or (ii) the date at which the Wassa and Prestea underground projects achieve commercial production; and 10.5% thereafter. The purchase price for gold ounces delivered is 20% of the spot price until 240,000 ounces have been delivered, and thereafter the stream percentage decreases to 5.5% of payable gold produced from the Wassa and Prestea projects at a purchase price equal to 30% of the spot price. The Wassa and Prestea projects are operated by Golden Star Resources Ltd. (“Golden Star”). The Wassa open-pit mine and oxide ore mill are located in the Wassa East District, in the Western Region of Ghana. The Prestea open-pit operation produces oxide ore from the Ashanti Gold District in the central eastern section of the Western Region of Ghana. Production Status: Stream deliveries from Wassa and Prestea were 21,500 ounces of gold during our fiscal year 2016. We sold approximately 20,100 onces during the year. Golden Star’s total production in calendar 2016 is expected to be between 180,000 and 205,000 ounces of gold. We are currently receiving production from the existing Wassa and Prestea operations while contributing funds for the development of two new underground operations. On July 12, 2016, Golden Star announced pre-commercial production commenced at Wassa underground gold mine. The Prestea underground project is currently in development with a planned average annual gold production of 90,000 ounces at a cash operating cost of $468 per ounce. 1. Reserves as of December 31, 2015. 12 46594nar.indd 12 9/26/16 8:28 AM Additional Principal Producing Properties Cortez (Pipeline mining Complex) NEVADA, UNiTED STATES As of June 30, 2016, Royal Gold held the following royalties at the Cortez open-pit and underground mine, operated by Barrick: sliding-scale 0.40% to 5.0% GSR1 and GSR2; 0.7125% GSR3; 1.014% NVR1; and 0.618% NVR1C. As of September 19, 2016, we acquired a royalty that increased our interest in NVR1 from 1.014% to 4.76%; and our interest in NVR1C increased from 0.618% to 4.37%. Production Status: Production attributable to our royalty interest at Cortez decreased approximately 68% compared to the prior fiscal year. The decrease was primarily due to Barrick’s production focus on Cortez Hills, where we do not have a royalty interest, and reduced production from the Pipeline, South Pipeline and Gap pits, where our royalty applies, compared to the prior fiscal year. Barrick expects calendar 2016 gold production at Cortez, in the area subject to our royalty interests, to be lower compared to calendar 2015 production. Waste stripping at Crossroads, which is subject to our royalty interest, is expected to restart later in calendar 2016. holt ONTARiO, CANADA Royal Gold holds a sliding-scale NSR royalty, derived by multiplying 0.00013 by the quarterly average gold price, on gold produced from the Holt mine now operated by Kirkland Lake Gold Inc. (“Kirkland Lake”), through their acquisition of St Andrew Goldfields Ltd. on January 26, 2016.4 Production Status: Production attributable to our royalty interest at Holt decreased approximately 5% when compared to the prior fiscal year. 1. Reported production relates to the amount of metal sales that are subject to our royalty interests for the fiscal year ended June 30, 2016, as reported to us by the operators of the mines. 2. Reserves as of December 31, 2015. 3. Cumulative reserves subject to our royalties at Cortez. 4. Newmont Canada Corporation is responsible for payment of our royalty at Holt. 5. Reserves as of December 31, 2014. FY2016 REvEnuE: $6.1M$6.1M FY2016 PRoduction: 1 74,000 oz gold 74,000 oz gold RESERvES: 2, 3 7.871M7.871M oz gold oz gold FY2016 REvEnuE: $10.3M $10.3M FY2016 PRoduction: 1 58,300 oz gold 58,300 oz gold RESERvES: 5 0.439M oz gold 0.439M oz gold 13 | | ROYAL GOLD, INC. 13 | 2016 ANNUAL REPORT ROYAL GOLD, INC. | 2016 ANNUAL REPORT 46594nar.indd 13 9/26/16 8:28 AM 193 Properties 38 PRODUCING 24 DEVELOPMENT 50 EVALUATION 81 ExPLORATION 4 9 3 5 2 6 8 1 14 46594nar.indd 14 9/24/16 2:52 PM Portfolio MapPRINCIPAL PROPERTIES Andacollo – Region iV, Chile Cortez – Nevada, USA Holt – Ontario, Canada Mount Milligan – British Columbia, Canada Peñasquito – Zacatecas, mexico Pueblo Viejo – Sanchez Ramirez, Dominican Republic Wassa and Prestea – Western Region, ghana Pascua-Lama - Region iii, Chile Rainy River- Ontario, Canada 8 9 4 4 9 9 3 3 5 5 2 2 6 6 7 7 8 1 8 1 46594nar.indd 15 9/24/16 2:52 PM 15 | ROYAL GOLD, INC. | 2016 ANNUAL REPORT Producing Properties ProPerty Location oPerator royaLty/MetaL StreaM 1 (gold unless otherwise stated) reServeS 2,3,4,5 (contained oz or lbs) M 6 MetaL revenue FY2016 ($M) Gwalia Deeps Australia, W. Australia St Barbara 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 southern Cross Australia, W. Australia China Hanking Holdings 1.5% NSR Don Mario Bolivia, Chiquitos Orvana 3.0% NSR (gold, silver and copper) 1.900 0.028 0.516 0.229 0.018 0.472 11.319 taparko inata Burkina Faso, Namantenga Nord Gold 2.0% GSR; 0.75% GSR (milling royalty) 8 0.502 Burkina Faso, Soum Avocet 2.5% NSR Mount MilliGan Canada, British Columbia Thompson Creek 52.25% of payable gold 10 voiseY’s BaY Canada, Labrador Vale 2.7% NSR (copper, nickel and cobalt) raMBler north Canada, Newfoundland Rambler Metals and Mining 1.0% NSR (gold, silver, copper and zinc) holt williaMs Canada, Ontario Kirkland Lake Gold 0.00013 x Au price (NSR) Canada, Ontario Barrick 0.97% NSR CanaDian MalartiC Canada, Quebec Yamana / Agnico-Eagle 1.0% to 1.5% NSR 11 0.326 5.689 834.075 1779.968 103.331 N.A. 0.439 0.483 3.035 allan Canada, Saskatchewan Potash Corporation of Saskatchewan $0.36 to $1.44 and $0.25 per ton (potash) 12 N.A. anDaCollo Chile, Region IV Teck 100% of payable gold 13 el toqui Chile Region xI Nyrstar 0% to 3.0% NSR (gold, silver, lead and zinc) 14 wassa anD prestea Ghana, Western Region Golden Star 9.25% of payable gold 15 Dolores Mulatos Mexico, Chihuahua Pan American Silver 3.25% NSR (gold) 2.0% NSR (silver) Mexico, Sonora Alamos 1.0% to 5.0% NSR 16 peñasquito Mexico, Zacatecas Goldcorp 2.0% NSR (gold, silver, lead and zinc) el liMon Nicaragua, El Limon B2Gold 3.0% NSR pueBlo viejo Dominican Republic, Sanchez Ramirez Barrick / Goldcorp 7.5% of payable gold 19 75% of payable silver 20 las CruCes Spain, Andalucia First Quantum Minerals 1.5% NSR (copper) 21 johnson CaMp United States, Arizona Excelsior Mining 2.5% NSR (copper) troY United States, Montana Hecla Mining 3.0% GSR (silver and copper) BalD Mountain United States, Nevada Kinross 1.75% to 2.5% NSR 23 Cortez (pipeline MininG CoMplex) United States, Nevada Barrick GSR1: 0.40% to 5.0% GSR 24 GSR2: 0.40% to 5.0% GSR 24 GSR3: 0.71% GSR NVR1: 1.014% NVR NVR1C: 0.618% NVR26 1.609 0.194 1.185 22.509 493.712 2.143 1.57 53.100 1.543 10.180 581.960 3701.260 8885.920 0.173 8.960 54.145 804.026 656.000 17.080 119.750 0.423 0.591 3.116 0.744 0.457 2.963 GolD hill United States, Nevada Kinross 1.0% to 2.0% NSR 27, 28 0.6% to 0.95 NSR (M-ACE) (gold and silver) 29 0.124 1.823 GolDstrike United States, Nevada Barrick leeville MariGolD United States, Nevada Newmont United States, Nevada Silver Standard 0.9% NSR 1.8% NSR 2.0% NSR pinson United States, Nevada Waterton Precious Metals 3.0% NSR – Cordilleran 30 2.94% NSR – Rayrock 31 roBinson United States, Nevada KGHM 3.0% NSR (gold and copper) ruBY hill United States, Nevada Waterton Precious Metals 3.0% NSR twin Creeks United States, Nevada Newmont 2.0% GV United States, South Dakota Coeur Mining 0.0% to 2.0% NSR 32 United States, Utah Bowie Resources 1.41% GV (coal) wharF skYline 16 3.756 1.005 1.867 0.483 0.827 1375.67 0.024 0.075 0.763 N.A. Au Au Au Au Au Ag Cu Au Au Au Cu Ni Co Au Au Au Au Au Ag Pb Zn Au Au Ag Au 17 Au 18 Ag 18 Pb 18 Zn 18 Au Au Ag Cu Cu Ag Cu Au Au Au Au 25 Au 25 Au 25 Au Ag Au Au Au Au Au Cu Au Au Au 4.6 0.4 2.7 2.1 0.6 1.9 - 9 125.4 11.0 0.2 10.3 1.7 6.3 1.1 49.2 0.1 23.3 4.4 8.1 22.8 1.6 39.7 5.4 - 22 0.1 0.9 6.1 1.3 5.2 2.2 4.6 0.7 8.1 0.2 1.6 2.4 1.9 *One oil and gas royalty is not included 46594nar.indd 16 9/24/16 2:52 PM Development Properties ProPerty Location oPerator royaLty/MetaL StreaM 1 (gold unless otherwise stated) reServeS 2,3,4,5 (contained oz or lbs) M6 MetaL Don niColas Argentina, Santa Cruz Compañía Inversora en Minas 2.0% NSR (gold, silver) BalCooMa Australia, Queensland Consolidated Tin 1.5% NSR CeltiC/wonDer north Australia, W. Australia Bligh Resources 1.5% NSR kunDip Australia, W. Australia ACH Minerals 1.0% to 1.5% NSR 7 Meekatharra - nannine Meekatharra - paDDY’s Flat Meekatharra - reeDYs reD DaM Mara rosa BelCourt sChaFt Creek Australia, W. Australia Metals x 1.5% NSR Australia, W. Australia Metals x 1.5% NSR; AU$10 per ounce produced 8 Australia, W. Australia Metals x Australia, W. Australia Phoenix Gold Brazil, Goiás Amarillo Gold 1.5% to 2.5% NSR 9 1.0% NSR 9 1.5% NSR 2.5% GSR 1.0% NSR Canada, British Columbia Canada, British Columbia Walter Energy 0.103% GV (coal) Copper Fox / Teck Resources 3.5% NPI (gold, silver, copper and molybdenum) kutCho Creek Canada, British Columbia Capstone Mining 2.0% NSR (gold, silver, copper and zinc) pine Cove Canada, Newfoundland Anaconda Mining 7.5% NPI 10 BaCk river Canada, Nunavut Sabina Gold & Silver George Lake: 2.35% NSR 11 Goose Lake: 1.95% NSR 12 phoenix GolD Canada, Ontario Rubicon Minerals 6.3% of payable gold 13 rainY river Canada, Ontario New Gold 6.5% of payable gold 14 60% of payable silver 14 CaBer Canada, Quebec Nyrstar 1.0% NSR (copper and zinc) el Morro Chile, Region III Goldcorp 1.4% NSR (gold, copper) 15 pasCua-laMa Chile, Region III Barrick 0.78% to 5.45% NSR (gold) 16, 17 1.09% NSR (copper) 18 iloviCa la inDia Macedonia, Bosilovo Euromax Resources 25% payable gold 19 Nicaragua, Leon Condor Gold 3.0% NSR svetloYe Russia, Khabarovsk Krai Polymetal International 1.0% NSR (gold and silver) soleDaD Mountain United States, California Golden Queen / Gauss LLC 3.0% NSR (gold and silver) 20 hasBrouCk Mountain United States, Nevada West Kirkland Mining / Clover Nevada 1.5% NSR 0.196 0.401 0.001 0.380 32.466 7.879 29.274 0.097 0.307 0 0.483 0.092 0.111 0.946 N.A. 5.775 51.895 5630.715 373.340 0.124 11.618 462.678 734.300 0.175 0 2.503 N.A. 3.772 9.410 11.355 116.036 2.674 1959.099 14.680 548.177 2.45 0.675 1.185 0.664 0.765 0.984 16.516 0.588 10.569 Au Ag Au Ag Cu Pb Zn Au Au Au Au Au Au Au coal Au Ag Cu Mo Au Ag Cu Zn Au Au Au Au Au Ag Cu Zn Au Cu Au Cu Au Au Ag Au Ag Au Ag Au Ag 46594nar.indd 17 9/24/16 2:52 PM 17 | ROYAL GOLD, INC. | 2016 ANNUAL REPORT Evaluation Properties1 ProPerty argentina Chispas Martha auStraLia aveBurY ownerShiP royaLty rate ProPerty Location royaLty rate Compañía Inversora en Minas 2.0% NSR Hunt Mining 2.0% NSR GolD river hiGh lake Tahoe Resources MMG Limited 1.5% NSR 1.5% NSR horizon Coal Anglo American 0.50% GV (coal) canada (continued) MMG Limited Bell Creek Metallica Minerals 2.0% NSR AUD$1 to AUD$2/tonne Bellevue Burnakura Golden Spur Resources 2.0% NSR Monument Mining 1.5% to 2.5% NSR 2 Cheritons FinD Hanking Gold Mining eDna MaY Evolution Mining kinG oF the hills Saracen Mineral 1.5% NSR 0.5% GSR 1.5% NSR Meekatharra - saBBath Avitus Capital AUD$1.00/tonne 3 Mt. Fisher Mt. GooDe (CosMos) Rox Resources AUD$5.00/oz 4 Western Areas 1.5% NSR (nickel) north well Chilkoot Saracen Mineral 2.5% to 4.0% NSR 5 paDDinGton Zijin Mining Group 1.75% NSR phillips FinD Barra Resources AUD$10.00/oz 6 quinns austin CNN Investments teMora Sandfire Resources van uDen GolD Deposit MH Gold / St Barbara weMBleY DuraCk Metals x westMorelanD Laramide Resources YunDaMinDera Nex Metals 1.5% NSR 12.5% NPI 1.5% NSR 1.0% NSR 1.0% NSR 1.5% NSR hushaMu ulu wilanour (CoChenour) wolverine ghana NorthIsle Copper and Gold 10.0% NPI Mandalay Resources 5.0% NSR 8 Goldcorp Yukon Zinc 5% NPI 0.0% to 9.445% NSR 9 kuBi villaGe Asante Gold 3.0% NPI guateMaLa taMBor Mexico nieves ruSSia Kappes, Cassiday & Associates 4.0% NSR Blackberry Ventures 2.0% NSR FeDorova Barrick / Pana PGM united StateS alMaDen GolDrush Terraco Gold Barrick islanD Mountain Victoria Gold la jara Laramide Resources lonG valleY Vista Gold 0.75% or 1.0% NSR 0.5% NSR 1.25% or 1.5% NSR 10 1.0% to 2.0% NSR 11 1.0% NVR 2.0% NSR $0.25/lb 12 (uranium) 1.0% NSR 3.0% NSR Burkina FaSo seGa canada Perseus Mining 3.0% NSR MCDonalD (keep Cool) niBlaCk Newmont Heatherdale Resources 1.0% to 3.0% NSR 13 Barraute (swanson) Agnico-Eagle 1.0% or 2.0% NSR 7 BerG Thompson Creek 1.0% NSR Bousquet- CaDillaC-joannes Agnico-Eagle 2.0% NSR Bronson slope Seabridge Gold 1.0% NSR FollansBee Goldcorp / Premier Gold 2.0% NSR relieF CanYon Pershing Gold roCk Creek Hecla Mining san juan silver (BullDoG) Hecla Mining 2.0% NSR 1.0% NSR 3.0% NSR 14 1.0% NSR 14 tetlin wilDCat Contango ORE 2.0% and 3.0% NSR 15 Clover Nevada 1.0% NSR 16 1.0% to 2.0% NSR 17 18 46594nar.indd 18 9/24/16 2:52 PM Exploration Properties ProPerty argentina ownerShiP royaLty rate ProPerty ownerShiP royaLty rate canada (continued) MiChelle Compañía Inversora en Minas 2.0% NSR lazY eDwarD BaY Denison Mines Mina CanCha Yamana Gold 2.50% NSR MCkenzie reD lake Goldcorp 2.5% NSR 9 1.0% NSR auStraLia aBBotts BunDarra Doray Minerals Terrain Minerals 1.5% NSR 1.5% NSR Mike lake Pitchblack Resources 2.0% NSR MonuMent New Nadina Explorations / Archon Minerals 1.0% GV ButterCup Bore Panoramic Resources 2.0% GPR niGhthawk lake aFriDi lake Shear Diamonds 1.5% NSR ashMore aviat one HudBay Minerals 1.5% NSR Stornoway Diamond 1.0% GV apex BsC ChesterFielD Galaxy Resources CopperheaD St Barbara 1.5% NSR 1.5% NSR Croesus Zijin Mining Group AUD$1.25/tonne 1 Forrestania Western Areas 1.5% NSR 2 jaGuar niCkel Independence Group 1.5% NSR kalGoorlie east Malanti Pty Ltd lake BallarD Eastern Goldfields lounGe lizarD Western Areas Maori lass St Barbara MelBa Flats MMG Limited Merlin orBit Merlin Diamonds Mt. GooDe Bellevue Golden Spur Resources Mt newMan-viCtorY Australia, St Barbara reD hill west Cullen Resources southern Cross niCkel Western Areas 1.125% NSR 0.60% NSR 1.5% NSR 2 1.5% NSR 2.0% NSR 1.0% GV 2.0% NSR 3 1.5% NSR 3 1.5% NSR 2.5% NSR 1.5% NSR 4 stakewell Diversified Asset Holdings 1.5% NSR west wYalonG Argent Minerals / HQ Mining 2.5% NSR canada Barrow lake anD north kellet river Carswell lake ChurChill ChurChill west DarBY (haYes river) Hunter Exploration 1.0% GV Repsol Oil & Gas / Capstone Mining Shear Diamonds / Stornoway Diamond Shear Diamonds / Stornoway Diamond Teck Resources / Hunter Exploration 5.0% NSR 1.0% GV 1.0% GV 1.0% GV DuvernY Threegold Resources 2.0% NSR 5 Franquet Gauthier GoDFreY ii GolD DoMe Nuinsco Resources / Ocean Partner Holdings 2.0% NSR 6 3.0% NSR 6 Yamana /Agnico Eagle 3.0% NSR Moneta Porcupine Mines 2.0% NSR Golden Predator 2.0% NSR GolDen Bear Goldcorp hiCkeY’s ponD Krinor Resources hooD river Shear Diamonds jewel Stornoway Diamond joe Mann Jessie Resources 2.0% NSR 1.0% NSR 1.0% GV 1.0% GV 0.0% to 2.0% NSR 7 2.0% NSR 7 juBilee kizMet Stornoway Diamond 1.0% GV Kiska Metals Corporation 1.0% NSR 8 Imperial Metals / Rainy Mountain Royalty / White Metal Resources 2.5% NSR 10 qiMMiq Commander Resources 1.0% to 3.0% NSR 11 2.0% NSR 11 1.0% GV 11 railroaD Eastmain Resources 3.0% NSR 12 raMBler south Krinor Resources Sable Resources Independence Gold 5.0% NSR 13 1.0% NSR 0.5% NSR shasta tak voiseY’s BaY DiaMonDs Vale YellowkniFe lithiuM Erex International 3.0% GV 2.0% NPI doMinican rePuBLic Minera hispanola Energold Drilling 0.40% NSR 14 honduraS vueltas De rio Lundin 2.0% NSR Mexico san jeroniMo Goldcorp 2.0% NSR tuniSia trozza united StateS China Minmetals 2.5% NSR aMBrosia lake Uranium Resources 2.0% NVR Teck / Pennaroya Utah 3.0% NSR 15 McEwen Mining BuCkhorn south Barrick Cooks Creek/Ferris Creek Barrick DoBY GeorGe Western Exploration 2.0% NSR 17 horse Mountain Barrick 0.25% NVR hot pot iCBM keYstone Nevada Exploration 1.25% NSR Timberline Resources 0.75% NSR Energy Fuels Mule CanYon Newmont oro BlanCo Pan American Silver pinson – other Barrick reese river MV Portfolios rYe Barrick 2.5% NSR 15.0% NPI 16 14.0% NPI 16 1.5% NVR 2.0% NSR 5.0% NSR 3.0% NSR 0.489% to 5.979% NSR 18 2.0% NSR 0.5% NSR san raFael Rio Grande Resources 2.0% NVR silver ClouD Rimrock Gold siMon Creek Barrick trenton CanYon Newmont 1.2% NSR 1.0% NSR 3.0% GSR 19 10.0% NPI 19 unCle saM winDFall Coventry Resources 2.0% NSR Timberline Resources 3.2% NSR wooD GulCh Western Exploration wooDruFF Creek McEwen Mining 5.0% NSR 1.0% NSR 19 | ROYAL GOLD, INC. | 2016 ANNUAL REPORT 46594nar.indd 19 9/24/16 2:52 PM Footnotes Producing ProPerties 1. Royalty and Metal Stream definitions are included in the glossary on page 24 of this annual report. 2. Reserves have been reported by the operators of record as of December 31, 2015, with the exception of the following properties: Don Mario – September 30, 2015; Gwalia Deeps, South Laverton – June 30, 2015; Hasbrouck Mountain – June 3, 2015; Wharf – June 1, 2015; Svetloye – January 1, 2015; Bald Mountain, El Morro, El Toqui, Gold Hill, Holt, Inata, La India, Meekatharra (Nannine, Paddy’s Flat, Reedys and Yaloginda), Pinson, Rainy River, Ruby Hill and Soledad Mountain – December 31, 2014; Back River – October 21, 2014; Kundip - June 30, 2014; Celtic/Wonder North – November 21, 2013; Schaft Creek – December 31, 2012; Don Nicolas, Johnson Camp and Pascua-Lama – 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. 3. Gold reserves were calculated by the operators at the following per ounce prices: A$1,500 – South Laverton; A$1,474 – Southern Cross $1,450 – Kundip; A$1,400 – Celtic/Wonder North and Meekatharra (Nannine, Paddy’s Flat, Reedys and Yaloginda); $1,366 – Schaft Creek; $1,350 – El Toqui; A$1,310 – Red Dam; $1,300 – El Morro, Pinson and Svetloye; $1,275 – Wharf; $1,250 – Back River, Holt, Inata, La India, Mount Milligan, Mulatos and Soledad Mountain; A$1,250 – Gwalia Deeps; $1,225 - Hasbrouck Mountain; $1,200 – Andacollo, El Limon, Gold Hill, Leeville, Pascua-Lama, Robinson, Taparko and Twin Creeks; $1,180 – Dolores; $1,150 – Canadian Malartic; $1,100 – Bald Mountain, Don Mario, Don Nicolas, Mara Rosa, Marigold, Peñasquito, Ruby Hill, Wassa, Bogoso and Prestea and Williams; $1,000 – Cortez, Goldstrike and Pueblo Viejo; and $983 – Pine Cove. No gold price was reported for Balcooma, Caber or Kutcho Creek Silver reserves were calculated by the operators at the following prices per ounce: $25.96 – Schaft Creek; $25.00 – Don Nicolas; $23.00 – El Toqui; $22.50 – Svetloye; $20.00 – Gold Hill; $17.50 – Hasbrouck Mountain; $17.00 – Dolores and Soledad; $16.50 – Don Mario and Peñasquito; and $15.00 – Pueblo Viejo. No silver price was reported for Balcooma or Kutcho Creek. Copper reserves were calculated by the operators at the following prices per pound: $3.52 – Schaft Creek; $3.21 – Robinson $3.00 – El Morro; $2.98 – Voisey’s Bay; $2.75 – Don Mario; $2.70 – Las Cruces; $2.50 – Johnson Camp; and $2.00 – Pascua-Lama. No copper reserve price was reported for Balcooma, Caber or Kutcho Creek. Lead reserve price was calculated by the operators at the following prices per pound: $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 $0.95 – Peñasquito. 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: $6.61 – Voisey’s Bay. Cobalt reserve price was calculated by the operator at the following price per pound: $12.81 – Voisey’s Bay. Molybdenum reserve price was calculated by the operator at the following price per pound: $15.30 – Schaft Creek.. 4. Set forth below are the definitions of proven and probable reserves used by the U.S. Securities and Exchange Commission. “Reserve” is that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. “Proven (Measured) Reserves” are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, and the grade is computed from the results of detailed sampling, and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that the size, shape, depth and mineral content of the reserves are well established. “Probable (Indicated) Reserves” are reserves for which the quantity and grade are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance of probable (indicated) reserves, although lower than that for proven (measured) reserves, is high enough to assume geological continuity between points of observation. 5. Royal Gold has disclosed a number of reserve estimates that are provided by operators that are foreign issuers and are not based on the U.S. Securities and Exchange Commission’s definitions for proven and probable reserves. For Canadian issuers, definitions of “mineral reserve,” “proven mineral reserve,” and “probable mineral reserve” conform to the Canadian Institute of Mining, Metallurgy and Petroleum definitions of these terms as of the effective date of estimation as required by National Instrument 43-101 of the Canadian Securities Administrators. For Australian issuers, definitions of “mineral reserve,” “proven mineral reserve,” and “probable mineral reserve” conform with the Australasian Code for Reporting of Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia, as amended (“JORC Code”). Royal Gold does not reconcile the reserve estimates provided by the operators with definitions of reserves used by the U.S. Securities and Exchange Commission. 6. “Contained ounces” or “contained pounds” do not take into account recovery losses in mining and processing the ore. 7. The $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. No revenue received during the fiscal year ended June 30, 2016. 10. Thompson Creek will deliver 52.25% of gold produced, at a purchase price equal to the lesser of $435 per ounce delivered or the prevailing spot price. 11. NSR sliding-scale schedule (price of gold per ounce – royalty rate): $0.00 to $350 – 1.0%; above $350 – 1.5%. 12. 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. 13. Teck will deliver gold in amounts equal to 100% of payable gold until 900,000 ounces have been delivered, and 50% of payable gold thereafter, subject to a fixed payable percentage of 89%, at a purchase price equal to 15% of the monthly average gold price for the month preceding the delivery date for each ounce delivered. 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. Golden Star will deliver 9.25% of gold produced, until the earlier of (a) December 31, 2017 or (b) the date at which the Wassa and Prestea underground projects achieve commercial production, at which point Golden Star will deliver 10.5% (or 10.9% if Royal Gold’s total investment increases from $145 million to $150 million) of gold produced until 240,000 ounces have been delivered (or 250,000 ounces if the total investment increases from $145 million to $150 million), at a purchase price equal to 20% of the spot price per ounce delivered. Thereafter Golden Star will deliver 5.5% of gold produced, at a purchase price equal to 30% of the spot price per ounce delivered. 16. The Company’s royalty is subject to a 2.0 million ounce cap on gold production. There have been approximately 1.55 million ounces of cumulative production as of June 30, 2016. 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%. 17. Reserve shown is “capped” assuming 70% recovery. 18. Operator reports reserves by material type. The sulfide material will be processed by milling. The oxide material will be processed by heap leaching. 19. Barrick will deliver gold in amounts equal to 7.50% of Barrick’s 60% interest in gold produced until 990,000 ounces have been delivered, and 3.75% of Barrick’s 60% interest in gold produced thereafter, at a purchase price equal to 30% of the spot price per ounce delivered until 550,000 ounces have been delivered, and 60% of the spot price per ounce delivered thereafter. 20. Barrick will deliver silver in amounts equal to 75% of Barrick’s 60% interest in silver produced, subject to a minimum silver recovery of 70%, until 50 million ounces have been delivered, and 37.50% of Barrick’s 60% interest in silver produced thereafter, at a purchase price equal to 30% of the spot price per ounce delivered until 23.10 million ounces of silver have been delivered, and 60% of the spot price per ounce delivered thereafter. 21. Royalty is payable only when LME cash settlement price for Grade A copper is equivalent or greater than $0.80 per pound of copper. 22. The Company has not recognized revenue from this property since the acquisition of International Royalty Corporation in February 2010. 23. 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. 24. 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%. 25. NVR1, NVR1C and GSR3 reserves and additional mineralized material are subsets of the reserves covered by GSR1 and GSR2. 26. NVR1C is the Crossroads portion of NVR1. 27. The royalty is capped at $10 million. As of June 30, 2016, royalty payments of approximately $4.2 million have been received. 28. 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. 20 46594nar.indd 20 9/24/16 2:52 PM 29. The 0.6% to 0.9% sliding-scale NSR applies to the M-ACE claims. 8. Royalty applies to production above 675,000 ounces. 30. Royalty only applies to Section 29 which currently holds about 95% of the 9. Gold royalty rate is based on the price of silver per ounce. NSR sliding-scale reserves reported for the property. An additional Cordilleran royalty applies to a portion of Section 28. schedule (price of silver per ounce – royalty rate): Below $5.00 – 0.0%; $5.00 to $7.50 – 3.778%; >$7.50 – 9.445%. 31. Royalty only applies to Section 29 which currently holds about 95% of the 10. The 0.75% NSR royalty applies to gold and silver and the 1.0% NSR royalty 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, 2016, approximately 103,000 ounces have been produced. 32. 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%. Development pRopeRtIeS *For footnotes 1-6, see corresponding footnotes under Producing Footnotes. 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. 11. 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%. 12. Royalty is payable on per pound of uranium produced above eight million 7. The royalty rate is 1.0% until 250,000 ounces of gold has been produced, 1.5% pounds. 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. Operation is currently in production; estimated pay-back of capital, a requisite to royalty payments, to occur by 2020. 11. George Lake royalty applies to production above 800,000 ounces. 12. Goose Lake royalty applies to production above 400,000 ounces. 13. 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. 13. Royalty rate is 1.0% for each ton of ore having a value of less than $115 per ton; 2.0% for each ton of ore having a value between $115 and $135 per ton; and 3.0% for each ton of ore having a value greater than $135 per ton. 14. Royalty rate is 3.0% on Homestake and Emerald unpatented claims; 1.0% on Emerald patented claims. 15. Royalty rate depends on claim group. 16. The 1.0% royalty rate applies to the SS lode claims only. 17. An additional 1.0% NSR applies to gold production between 500,000 ounces and 1.0 million ounces. The royalty increases to a 2.0% NSR on production in excess of 1.0 million ounces. This royalty applies to various claims on the mining property. exploRatIon pRopeRtIeS 1. Royalty paid on dollars per tonne of ore above 50,000 tonnes up to 500,000 tonnes. 2. Royalty payable on gold only. 14. This is a metal stream whereby Royal Gold is entitled to 6.5% of the gold 3. Royalty rate is 2.0% for gold and 1.5% for all other metals. produced until 230,000 ounces have been delivered, 3.25% thereafter; and 60% of the silver produced until 3.1 million ounces have been delivered, 30% thereafter. The purchase price for gold or silver ounces delivered is 25% of the spot price per ounce of gold or silver. 15. The royalty covers approximately 30% of the La Fortuna deposit. Reserves attributable to Royal Gold’s royalty represent 3/7 of Goldcorp’s reporting of 70% of the total reserve. 16. 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. 17. 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. 18. 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. 19. This is a metal stream whereby Royal Gold is entitled to 25% payable gold until 525,000 ounces of payable gold has been delivered; 12.5% thereafter, whereby the purchase price for gold 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. 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. 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 development of a mine on the property. 9. Operator has the option to purchase 1.25% of the 2.5% NSR for $1 million at any time prior to a production decision or within 30 days thereafter. 10. Operator may purchase 1.5% of the 2.5% NSR at any time for CDN$1.5 million. 11. The 1.0 to 3.0% NSR sliding-scale royalty only applies to gold production. The 2.0% NSR royalty applies to commercial production of all minerals excluding diamonds and industrial minerals. The 1.0% GV royalty applies to commercial production of all diamonds and industrial minerals. 12. Owner has the option to purchase one-third of the 3.0% NSR for $1 million at any time. 20. Royalty is capped at $300,000 plus simple interest. 13. Operator has the right to purchase 2.5% of the 5.0% NSR at any time for $1 evaluatIon pRopeRtIeS 1. Royal Gold considers and categorizes an exploration stage property to be an “evaluation stage” property if mineralized material has been identified on the property but reserves have yet to be identified. The U.S. Securities and Exchange Commission does not recognize the term “mineralized material.” Investors are cautioned not to assume that any part or all of the mineralized material identified on these properties will ever be converted into reserves. 2. The 1.5% to 2.5% NSR sliding-scale royalty 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. 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. 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. 46594nar.indd 21 9/26/16 2:07 PM 21 | ROYAL GOLD, INC. | 2016 ANNUAL REPORT The Gold Market1 GOLD PRICe AND DemAND OveRvIew tonnes. Other notable accumulations occurred in China Demand for gold was steady when comparing 2015 to Jordan (22 tonnes). Faced with economic pressures, El the prior year. Gold traded at an average price of $1,160 Salvador (-5 tonnes) and Colombia (-7 tonnes) shed a per ounce for the year and demand was in line with the portion of their gold reserves. (104 tonnes) and Kazakhstan (30 tonnes) followed by long term average. In 2016, the gold market experienced a resurgence in investment demand. As markets opened for trading at the beginning of 2016, gold was priced at $1,060 per ounce; by June 30, 2016, it increased 25% to $1,320 per ounce, distinguishing itself as one of the best performing asset classes of the year thus far. Calendar Year 2015 The gold market encountered many hurdles in 2015 and recorded a slight decline in gold demand to 4,212 metric tons (“tonnes”). The demand for gold used in the technology sector fell 5% in 2015. Substitutions and more cost-effective alternatives were familiar themes, along with weaker sales in key sectors. Mine production saw its slowest annual growth rate since 2008, and recycling activity continued to shrink to multi-year lows in the fourth quarter. The widespread decline was largely due to reduced output from many established mines. Annual production totaled 92.9 million ounces in 2015, compared with 91.5 million ounces of gold produced in 2014. A decline in The demand for jewelry declined 3% to 2,415 tonnes production and lower gold output was seen at some from 2,481 tonnes in 2014. Turkish, Russian and Middle of the world’s largest gold mines. Many producers Eastern markets were impacted by financial and turned their focus to cost reduction and efficiency socio-political factors during the course of the year. rather than capital spending on project development. In 2015, rural incomes and government regulations in The impact of cost-cutting measures, combined with India took a toll on the jewelry sector. India rallied in the reductions in ore grades, was expected to affect second half of the year to yield 5% annual growth, its production throughout 2016. highest level since 2010. Although a challenging year, bar and coin demand held Six months to June 30, 2016 up with consumers seeking gold’s wealth protection In the first six months of 2016, investment properties and risk diversification. In particular, weakness accounted for the largest component of the gold of the Chinese currency was cited as a main driver of demand. US and European investors fueled much of demand for gold bars and coins; currency deflation the upsurge in gold bars, coins and especially exchange remains a concern and limits imposed on the purchase traded funds (ETFs). ETF inflows counterbalanced the of foreign currency highlight gold’s role as a wealth unfavorable conditions of the weak jewelry market preservation tool in China. amongst rising prices. Central banks continued to strengthen reserves and fuel Gold-backed ETF assets under management increased the sector demand for gold. Central bank net purchases 69% in the first half of 2016 to reach US$93 billion, increased 1% over the prior year. Reserve management their highest level since Q3 2013. Demand during and diversification remained a top priority due to the six months to of 2016 reached historic levels economic and political uncertainties. Russia tipped the worth US$41.6 billion. Heightened levels of doubt scales with purchases during the year in excess of 200 across Western markets triggered the release of 1. This information is derived from the World Gold Council and represents the data and opinions of those sources. Royal Gold has not verified this data and presents this information as a representative overview of views on the gold business from gold industry sources. No assurance can be given that this data or these opinions will prove accurate. Investors are urged to reach their own conclusions regarding the gold market. 22 46594nar.indd 22 9/26/16 10:08 AM considerable investment demand in bars, coins and Organizational Involvement ETFs. Specifically, global uncertainty remains high and influenced by unparalleled loosening of global monetary policy and the relaxed pace of US interest rate hikes. 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 Jewelry demand lurked well below its five-year on the board of the National Mining Association; by its average, declining 17% from 1,110 tonnes in the first Chief Financial Officer and Treasurer on the boards of half of 2015 to 925 tonnes in the first half of 2016. The the Northwest Mining Association and the Nevada Mining sharp rise in the gold price has taken its toll on the Association; and by its Vice President Investor Relations jewelry sector. According to the World Gold Council’s who serves as Chairman of the Board of Directors of the Gold Demand Trends — Second Quarter 2016, while Denver Gold Group. there have been improvements in a few markets (most notably, the US and Iran), jewelry has suffered across For more information on gold, you can visit the following the globe. India and China had the most influential web sites: impact on demand largely due to geopolitical and economic challenges. Denver Gold Group – www.denvergold.org Minerals Information Institute – www.mii.org National Mining Association - www.nma.org Nevada Mining Association - www.nevadamining.org Northwest Mining Association - www.nwma.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. We strive to balance various stakeholder interests in our endeavors to conduct our activities in a responsible manner, and we expect and encourage the operators of properties where we hold royalty and stream interests to do the same. As demonstrated by our associate 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. 46594nar.indd 23 9/26/16 8:28 AM 23 | ROYAL GOLD, INC. | 2016 ANNUAL REPORT Non-gAAP Financial measures The Company computes and discloses Adjusted EBiTDA. The Company computes and discloses Adjusted EBiTDA. AAP financial measure. Adjusted EBiTDA is a non-gAAP financial measure. Adjusted EBiTDA is a non-g Adjusted EBITDA is defined by the Company as net income Adjusted EBITDA is defined by the Company as net income shareholder dividends and to service the Company’s debt shareholder dividends and to service the Company’s debt plus depreciation, depletion and amortization, non-cash plus depreciation, depletion and amortization, non-cash obligations. This information differs from measures of obligations. This information differs from measures of charges, income tax expense, interest and other expense, charges, income tax expense, interest and other expense, performance determined in accordance with U.S. generally performance determined in accordance with U.S. generally and any impairment of mining assets, less non-controlling and any impairment of mining assets, less non-controlling accepted accounting principles (“GAAP”) and should not accepted accounting principles (“GAAP”) and should not interests interests in operating in operating loss (income) of consolidated loss (income) of consolidated be considered in isolation or as a substitute for measures be considered in isolation or as a substitute for measures subsidiaries, interest and other income, and any royalty subsidiaries, interest and other income, and any royalty of performance determined in accordance with U.S. GAAP. of performance determined in accordance with U.S. GAAP. or stream portfolio restructuring gains or losses. Other or stream portfolio restructuring gains or losses. Other Adjusted EBITDA, as defined, is most directly comparable Adjusted EBITDA, as defined, is most directly comparable companies may define and calculate this measure companies may define and calculate this measure to net income in the Company’s Statements of Operations. to net income in the Company’s Statements of Operations. differently. Management believes that Adjusted EBITDA differently. Management believes that Adjusted EBITDA Below is the reconciliation of net income to adjusted EBITDA: Below is the reconciliation of net income to adjusted EBITDA: is a useful measure of the performance of our royalty is a useful measure of the performance of our royalty and stream portfolio. Adjusted EBITDA identifies the cash and stream portfolio. Adjusted EBITDA identifies the cash generated in a given period that will be available to fund generated in a given period that will be available to fund the Company’s future operations, growth opportunities, the Company’s future operations, growth opportunities, ADJuSTED EBITDA RECONCILIATION Years Ending June 30 (Unaudited in thousands) Net (loss) income 2016 2015 2014 2013 2012 $ (82,438) $ 52,678 $ 63,472 $ 73,409 $ 98,309 Depreciation, depletion and amortization 141,108 93,486 91,342 85,020 75,001 Non-cash employee stock compensation 10,039 5,141 2,580 5,701 6,507 Impairment of stream and royalty interests 98,588 31,335 Restructuring on royalty interests in mineral properties Interest and other, net Income tax expense Non-controlling interests in operating loss (income) - - - - - 1,328 3,869 - - 26,574 24,992 25,793 34,000 60,680 9,566 19,455 63,759 54,710 of consolidated subsidiaries 5,289 (666) (572) (1,420) (2,108) Adjusted EBITDA $ 259,840 $ 216,532 $ 202,070 $ 260,469 $ 237,616 24 46594nar.indd 24 9/24/16 2:52 PM Total Return To Shareholders (Includes reinvestment of dividends) COMPARISON OF CUMULATIvE FIvE YEAR TOTAL RETURN Years Ending June 30 $200 $150 $100 $50 $0 PHLX GOLD/SILvER SECTOR CONSTITUENTS Agnico Eagle Mines Ltd Gold Resource Corp Primero Mining Corp Anglogold Ltd Goldcorp Inc. Randgold Resources Ltd Barrick Gold Corp Harmony Gold Mining Co Ltd Royal Gold, Inc Coeur Mining Inc Hecla Mining Co Sandstorm Gold Ltd Compania De Minas Buenaventura SA Eldorado Gold Corp First Majestic Silver Corp Freeport-McMoRan Inc Gold Fields Ltd IAMGold Corp Seabridge Gold Inc Kinross Gold Corp Sibanye Gold Ltd McEwen Mining Inc Silver Standard Resources Inc New Gold Inc Silver Wheaton Corp Newmont Mining Corp Stillwater Mining Co NovaGold Resources Inc Yamana Gold Inc 2011 2012 2013 2014 2015 2016 Pan American Silver Corp Royal Gold, Inc. S&P 500 Index PHLX Gold/Silver Sector Source: S&P Capital IQ ANNUAL RETURN PERCENTAGE TO SHAREHOLDERS Years Ending June 30 Company Name / Index Royal Gold, Inc. S&P 500 Index PHLX Gold/Silver Sector 2012 2013 34.68 (45.79) 20.60 (20.25) (39.11) 5.45 2014 2015 83.79 (17.71) 24.61 7.42 17.37 (37.87) 2016 19.30 3.99 46.11 INDEXED RETURNS TO SHAREHOLDERS Years Ending June 30 Company Name / Index Royal Gold, Inc. S&P 500 Index PHLX Gold/Silver Sector 2011 100.00 100.00 100.00 2012 134.68 105.45 79.75 2013 73.01 127.17 48.56 2014 134.18 158.46 57.00 2015 110.41 170.22 35.41 2016 131.72 177.02 51.74 FORWARD LOOKING STATEMENTS With the exception of historical matters, the matters discussed in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. With the exception of historical matters, the matters discussed in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from the projections and estimates Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from the projections and estimates contained herein and include, but are not limited to: expected industry leading growth in volume; providing our stockholders a premium prescious metals investment; our competitiveness contained herein and include, but are not limited to: expected industry leading growth in volume; providing our stockholders a premium prescious metals investment; our competitiveness for royalty and streaming acquisitions; benefits relating to the proposed amendment to the Mount Milligan stream and related proposed acquisition by Centerra; Rainy River’s near-term for royalty and streaming acquisitions; benefits relating to the proposed amendment to the Mount Milligan stream and related proposed acquisition by Centerra; Rainy River’s near-term production; benefits of the Pyrite Leach Project at Penasquito; re-starting waste stripping at the Crossroads project; recovering value at the Pheonix project; exploration opportunities at production; benefits of the Pyrite Leach Project at Penasquito; re-starting waste stripping at the Crossroads project; recovering value at the Pheonix project; exploration opportunities at Wassa and Prestea, including estimates relating to a future Prestea underground project; continuing to provide a return of capital to shareholders, source capital efficiently and grow the Wassa and Prestea, including estimates relating to a future Prestea underground project; continuing to provide a return of capital to shareholders, source capital efficiently and grow the business from free cash flow; and calendar 2016 and other production, mine life and reserves estimates from the operators of our stream and royalty interests. Factors that could cause business from free cash flow; and calendar 2016 and other production, mine life and reserves estimates from the operators of our stream and royalty interests. Factors that could cause actual results to differ materially from these forward-looking statements include, among others: the risks inherent in the operation of mining properties; a decreased price environment for actual results to differ materially from these forward-looking statements include, among others: the risks inherent in the operation of mining properties; a decreased price environment for gold and other metals on which our stream and royalty interests are paid; performance of and production at properties, and variation of actual performance from the production estimates gold and other metals on which our stream and royalty interests are paid; performance of and production at properties, and variation of actual performance from the production estimates and forecasts made by the operators of those properties; the successful closing of Centerra’s acquisition of Thompson Creek; decisions and activities of the Company’s management and forecasts made by the operators of those properties; the successful closing of Centerra’s acquisition of Thompson Creek; decisions and activities of the Company’s management affecting margins, use of capital and strategy; unexpected operating costs, decisions and activities of the operators of the Company’s royalty and stream properties; changes in operators’ affecting margins, use of capital and strategy; unexpected operating costs, decisions and activities of the operators of the Company’s royalty and stream properties; changes in operators’ mining and processing techniques or royalty calculation methodologies; resolution of regulatory and legal proceedings; unanticipated grade, geological, metallurgical, environmental, mining and processing techniques or royalty calculation methodologies; resolution of regulatory and legal proceedings; unanticipated grade, geological, metallurgical, environmental, processing or other problems at the properties; revisions or inaccuracies in technical reports, reserve, resources and production estimates; changes in project parameters as plans of processing or other problems at the properties; revisions or inaccuracies in technical reports, reserve, resources and production estimates; changes in project parameters as plans of the operators are refined; the results of current or planned exploration activities; errors or disputes in calculating royalty payments or stream deliveries, or payments or deliveries not the operators are refined; the results of current or planned exploration activities; errors or disputes in calculating royalty payments or stream deliveries, or payments or deliveries not made in accordance with royalty or stream agreements; the liquidity and future financial needs of the Company; economic and market conditions; the impact of future acquisitions and made in accordance with royalty or stream agreements; the liquidity and future financial needs of the Company; economic and market conditions; the impact of future acquisitions and royalty and stream financing transactions; the impact of issuances of additional common stock; and risks associated with conducting business in foreign countries, including application royalty and stream financing transactions; the impact of issuances of additional common stock; and risks associated with conducting business in foreign countries, including application of foreign laws to contract and other disputes, environmental laws, enforcement and uncertain political and economic environments. These risks and other factors are discussed in more of foreign laws to contract and other disputes, environmental laws, enforcement and uncertain political and economic environments. These risks and other factors are discussed in more detail in the Company’s public filings with the Securities and Exchange Commission. Statements made herein are as of the date hereof and should not be relied upon as of any subsequent detail in the Company’s public filings with the Securities and Exchange Commission. Statements made herein are as of the date hereof and should not be relied upon as of any subsequent date. The Company’s past performance is not necessarily indicative of its future performance. The Company disclaims any obligation to update any forward-looking statements. date. The Company’s past performance is not necessarily indicative of its future performance. The Company disclaims any obligation to update any forward-looking statements. Third-party information: The Company does not own, develop or mine the properties on which it holds stream or royalty interests. Certain information provided in this report Third-party information: The Company does not own, develop or mine the properties on which it holds stream or royalty interests. Certain information provided in this report has been provided to the Company by the operators of those properties or is publicly available information filed by these operators with applicable securities regulatory has been provided to the Company by the operators of those properties or is publicly available information filed by these operators with applicable securities regulatory bodies, including the Securities and Exchange Commission. The Company has not verified, and is not in a position to verify, and expressly disclaims any responsibility for the bodies, including the Securities and Exchange Commission. The Company has not verified, and is not in a position to verify, and expressly disclaims any responsibility for the accuracy, completeness or fairness of such third-party information and refers readers to the public reports filed by the operators for information regarding those properties. accuracy, completeness or fairness of such third-party information and refers readers to the public reports filed by the operators for information regarding those properties. 25 25 | | ROYAL GOLD, INC. | 2016 ANNUAL REPORT ROYAL GOLD, INC. | 2016 ANNUAL REPORT 46594nar.indd 25 9/26/16 2:07 PM glossary Concentrate: A mineral-rich, intermediate, product obtained from processing ore, by gravity or flotation operations. Concentrates typically require additional processing to obtain refined metal. 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 troy pound or 14.583 troy ounces per avoirdupois 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 Stream: A purchase agreement that provides, in exchange for an upfront advance payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. Milling Royalty: A royalty on ore throughput at a mill. Mineralized Material: That part of a mineral system that has potential economic significance but is not included in the proven and probable ore reserve estimates until further drilling and metallurgical work is completed, and until other economic and technical feasibility factors based upon such work have been resolved. Net Profits Interest (NPI) Royalty: A defined percentage of the gross revenue from a resource extraction operation, after recovery of certain contract-defined pre-production costs, and after a deduction of certain contract-defined mining, milling, processing, transportation, administrative, marketing and other costs. Net Smelter Return (NSR) Royalty: A defined percentage of the gross revenue from a resource extraction operation, less a proportionate share of incidental transportation, insurance, refining and smelting costs. Net value Royalty (NvR): A defined percentage of the gross revenue from a resource extraction operation, less certain contract-defined costs. Probable Reserve: Ore reserves for which quantity and grade are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume geological continuity between points of observation. Proven Reserve: Ore reserves for which: (a) the quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, and grade is computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established. Reserve: That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Reserves are categorized as proven or probable reserves (see separate definitions). Resource: A mineralized deposit which has been delineated by drilling and/or underground sampling to establish continuity and support an estimate of tonnage with an average grade of the selected metals under Canadian securities regulations. “Mineralized resources” are not reserves and are categorized, in order of increasing geological confidence, into “inferred resources,” “indicated resources” and “measured resources.” None of these terms are recognized by the U.S. Securities and Exchange Commission and are not permitted to be used in documents filed with the SEC. Readers are cautioned that mineral resources cannot be classified as reserves unless and until it is demonstrated that they may be legally and economically produced and, as a result, resources may never be converted into reserves. Royalty: The right to receive a percentage or other denomination of mineral production from a mining operation. Sliding-Scale Royalty: A royalty rate that fluctuates based on contract-specified variables such as metal price or production volume. Ton: A unit of weight equal to 2,000 pounds or 907.2 kilograms. Tonne: A unit of weight equal to 2,204.6 pounds or 1,000 kilograms. 26 46594nar.indd 26 9/24/16 2:52 PM FORM 10-KF O R M 1 0 - K 27 | ROYAL GOLD, INC. | 2016 ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) (cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30, 2016 or (cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to Commission File Number 001-13357 Royal Gold, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware (State or Other Jurisdiction of Incorporation or Organization) 1660 Wynkoop Street, Suite 1000 Denver, Colorado (Address of Principal Executive Offices) 84-0835164 (I.R.S. Employer Identification No.) 80202 (Zip Code) (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:2) No (cid:3) Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes (cid:3) No (cid:2) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:2) No (cid:3) Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes (cid:2) No (cid:3) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:2) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of ‘‘accelerated filer’’, ‘‘large accelerated filer’’ and ‘‘smaller reporting company’’ in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer (cid:2) Accelerated filer (cid:3) Non-accelerated filer (cid:3) (Do not check if a smaller reporting company) Smaller reporting company (cid:3) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:3) No (cid:2) Aggregate market value of the voting common stock held by non-affiliates of the registrant, based upon the closing sale price of Royal Gold common stock on December 31, 2015, as reported on the NASDAQ Global Select Market was $2,361,359,998. There were 65,269,476 shares of the Company’s common stock, par value $0.01 per share, outstanding as of July 28, 2016. Portions of the Proxy Statement for the 2015 Annual Meeting of Stockholders scheduled to be held on November 16, 2016, and to be filed within 120 days after June 30, 2016, are incorporated by reference into Part III, Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10-K. DOCUMENTS INCORPORATED BY REFERENCE INDEX PART I. ITEM 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 4. Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART II. ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . ITEM 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART III. ITEM 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . ITEM 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ITEM 13. Certain Relationships and Related Transactions, and Director Independence . . . . . ITEM 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART IV. ITEM 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 1 9 25 25 37 37 37 38 38 55 56 93 93 95 95 95 95 95 95 96 97 99 ii 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. Royal Gold does not own, develop, or mine the properties on which it holds stream or royalty interests. Certain information provided in this Annual Report on Form 10-K, including, without limitation, all reserves, historical production and production estimates, descriptions of properties and developments at properties included herein, has been provided to us by the operators of those properties or is publicly available information filed by these operators with applicable securities regulatory bodies, including the Securities and Exchange Commission. Royal Gold has not verified, and is not in a position to verify, and expressly disclaims any responsibility for the accuracy, completeness or fairness of, such third-party information and refers the reader to the public reports filed by the operators for information regarding those properties. 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 metal streams, royalties, and similar interests. We seek to acquire existing stream and royalty interests or to finance projects that are in production or in the development stage in exchange for stream or royalty interests. We manage our business under two segments: Acquisition and Management of Stream Interests—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 term of the agreement. As of June 30, 2016, we owned stream interests on four producing properties and three development stage properties. As discussed further below, we invested approximately $1.3 billion in stream interests in our fiscal year 2016, including stream interests relating to Pueblo Viejo, Carmen de Andacollo (‘‘Andacollo’’), Wassa and Prestea, and Rainy River. Our stream interests accounted for approximately 66% and 34% of our total revenue for the fiscal years ended June 30, 2016 and 2015, respectively. We expect stream interests to continue growing as a proportion of our total revenue. Acquisition and Management of Royalty 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. As of June 30, 2016, we owned royalty interests on 34 producing properties, 21 development stage properties and 131 exploration stage properties, of which we consider 50 to be evaluation stage projects. We use ‘‘evaluation stage’’ to describe exploration stage properties that contain mineralized material and on which operators are engaged in the search for reserves. Royalties accounted for approximately 34% and 66% of our total revenue for the fiscal years ended June 30, 2016 and 2015, respectively. We do not conduct mining operations on the properties in which we hold stream and royalty interests, and except for our interest in the Peak Gold, LLC joint venture (‘‘Peak Gold’’), we are not required to contribute to capital costs, exploration costs, environmental costs or other operating costs on those properties. 1 In the ordinary course of business, we engage in a continual review of opportunities to acquire existing stream and royalty interests, to establish new streams on operating mines, to create new stream and royalty interests through the financing of mine development or exploration, or to acquire companies that hold stream and 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 and term sheets, participation in preliminary discussions and negotiations and involvement as a bidder in competitive processes. As discussed in further detail throughout this report, some significant developments to our business during fiscal year 2016 were as follows: (1) Our revenue increased 29% to $359.8 million, compared to $278.0 million during fiscal year 2015; (2) We acquired a gold and silver stream on the Pueblo Viejo mine located in the Dominican Republic; (3) We acquired a gold stream on the Andacollo copper-gold mine located in Chile and terminated the previously held royalty at Andacollo; (4) We acquired a gold stream on the Wassa and Prestea mines located in Ghana; (5) We acquired a gold and silver stream on the Rainy River Project located in Canada; and (6) We increased our calendar year dividend to $0.92 per basic share, which is paid in quarterly installments throughout calendar year 2016. This represents a 5% increase compared with the dividend paid during calendar year 2015. Certain Definitions Dollar or ‘‘$’’: Unless we have indicated otherwise, or the context otherwise requires, references in this Annual Report on Form 10-K to ‘‘$’’ or ‘‘dollar’’ are to the currency of the United States. We refer to Canadian dollars as C$. 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. Metal Stream: A purchase agreement that provides, in exchange for an upfront advance 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. Mineralized Material: That part of a mineral system that have potential economic significance, but is not included in the proven and probably reserve estimates until further drilling and metallurgical work is completed, and until other economic and technical feasibility factors based on such work have been resolved. 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. Net Revenue: Net revenue is calculated as Royal Gold’s Revenue minus Cost of sales. 2 Probable Reserves: 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 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. 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 which could 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 mining 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 Developments Mount Milligan Commitment Letter On July 5, 2016, we entered into a binding commitment letter with Centerra Gold Inc. (‘‘Centerra’’) setting forth the key terms and conditions of a future amendment to our Mount Milligan streaming agreement in connection with the proposed acquisition by Centerra of Thompson Creek Metals Company Inc. (‘‘Thompson Creek’’) by Plan of Arrangement under the Arrangement Agreement executed between Centerra and Thompson Creek, as announced on July 5, 2016 (the ‘‘Centerra Acquisition’’). Thompson Creek is the parent company of Terrane Metals Corp. (‘‘Terrane’’), which owns and operates the Mount Milligan copper-gold mine. Our obligation to amend the Mount Milligan streaming agreement is subject to the consummation of the Centerra Acquisition and other customary conditions set forth in the commitment letter. Under the commitment letter, we also agreed to an exclusivity arrangement with Centerra that prohibits us from negotiating and entering into any agreement with any person (other than Centerra) relating to Thompson Creek’s obligations under the streaming agreement until the earliest of (i) the closing or abandonment of the Centerra Acquisition, (ii) the date, if any, on which shareholders of Thompson Creek decline to approve the Centerra Acquisition, or (iii) November 30, 2016. Pursuant to the terms of the commitment letter, we and Centerra have agreed to amend the streaming agreement, effective on the closing of the Centerra Acquisition, as follows: • the existing 52.25% gold streaming interest will be amended to 35.00%; • we will obtain an 18.75% copper streaming interest at Mount Milligan at a price equal to 15% of the spot price for each metric tonne of copper delivered; • the existing restriction of $400 million on senior secured debt covered by the Mount Milligan assets will be extended until we receive the full return of our $781.5 million deposit (the ‘‘Payment Deposit’’); 3 • until we have received the full return of the Payment Deposit and an additional 35,000 metric tonnes of copper, Terrane will maintain a leverage ratio of total consolidated indebtedness to its earnings before interest, taxes, depreciation and amortization of no greater than 3:1 (including intercompany debt that ranks parri passu with or in priority to our streaming agreement); • Terrane will not make distributions of cash or property to any of its affiliates if Terrane or Thompson Creek is in default under the streaming agreement; and • we will enter into an intercreditor agreement with lenders providing $325 million in senior secured debt financing to Centerra in connection with the Centerra Acquisition, pursuant to which we will (i) retain our first priority security interest in 35.00% of the payable gold produced from Mount Milligan and all proceeds thereof, (ii) obtain a first priority security interest in 18.75% of the payable copper produced from Mount Milligan and all proceeds thereof, and (iii) otherwise agree to subordinate our security interests on all other assets of Terrane on terms and conditions substantially similar to those contained in our existing intercreditor agreement with the security agent for the benefit of the holders of Thompson Creek’s 9.75% Senior Secured First Priority Notes due 2017. In connection with the closing of the Centerra Acquisition, Centerra will redeem all of Thompson Creek’s secured and unsecured notes at their call price plus accrued and unpaid interest, which Centerra expects to finance through the combination of the $325 million senior secured debt referred to above and approximately C$185.7 million in net proceeds from a recent equity offering. The Centerra Acquisition will require the approval of the holders of two-thirds of Thompson Creek’s outstanding common stock and will be subject to court and applicable regulatory approvals, in addition to other customary closing conditions. The Centerra Acquisition is expected to close in the fall of calendar 2016. Fiscal 2016 Business Developments Please refer to Item 7, MD&A, for discussion on recent liquidity and capital resource developments. Acquisition of Gold and Silver Stream at Pueblo Viejo On September 29, 2015, RGLD Gold AG (‘‘RGLD Gold’’), a wholly-owned subsidiary of the Company, closed a Precious Metals Purchase and Sale Agreement with Barrick Gold Corporation (‘‘Barrick’’) and its wholly-owned subsidiary, BGC Holdings Ltd. (‘‘BGC’’) for a percentage of the gold and silver production attributable to Barrick’s 60% interest in the Pueblo Viejo mine located in the Dominican Republic. Pursuant to the Precious Metals Purchase and Sale Agreement, RGLD Gold made a single advance payment of $610 million to BGC as part of the closing. The transaction was effective as of July 1, 2015 for the gold stream and January 1, 2016 for the silver stream. BGC will deliver gold to RGLD Gold in amounts equal to 7.50% of Barrick’s interest in the gold produced at the Pueblo Viejo mine until 990,000 ounces of gold have been delivered, and 3.75% of Barrick’s interest in gold produced thereafter. RGLD Gold will pay BGC 30% of the spot price per ounce of gold delivered until 550,000 ounces of gold have been delivered, and 60% of the spot price per ounce delivered thereafter. RGLD Gold received its first delivery of gold from Pueblo Viejo on December 15, 2015. BGC will deliver silver to RGLD Gold in amounts equal to 75% of Barrick’s interest in the silver produced at the Pueblo Viejo mine, subject to a minimum silver recovery of 70%, until 50.0 million ounces of silver have been delivered, and 37.50% of Barrick’s interest in silver produced thereafter. RGLD Gold will pay BGC 30% of the spot price per ounce of silver delivered until 23.10 million ounces of silver have been delivered, and 60% of the spot price per ounce of silver delivered 4 thereafter. RGLD Gold received its first delivery of 209,800 ounces of silver from Pueblo Viejo on March 15, 2016 for the period January through February 2016. The Pueblo Viejo mine is an open-pit mining operation located approximately 60 miles northwest of Santo Domingo, in the Dominican Republic, and is owned by a joint venture in which Barrick holds a 60% interest and is responsible for operations, and in which Goldcorp Inc. (‘‘Goldcorp’’) holds a 40% interest. The mine began production in 2013. Barrick reported calendar 2016 production forecast, on a 60% basis, of 600,000-650,000 ounces of gold. Barrick also reported proven and probable gold reserves attributable to Barrick of 9.0 million contained ounces at 2.97 grams per tonne, and attributable proven and probable silver reserves of 54.1 million contained ounces grading 17.9 grams per tonne, in each case as of December 31, 2015. Acquisition and Amendment of Gold Stream on Wassa and Prestea On July 28, 2015, RGLD Gold closed a $130 million gold stream transaction with a wholly-owned subsidiary of Golden Star Resources Ltd. (together ‘‘Golden Star’’). On December 30, 2015, the parties executed an amendment providing for an additional $15 million investment (for a total investment of $145 million) by RGLD Gold. Funds will be used for ongoing development of Golden Star’s Wassa and Prestea mines in Ghana. As of June 30, 2016, RGLD Gold has advanced $95 million. On July 1, 2016, RGLD Gold made an advance payment of $20 million and expects to advance the balance in two quarterly payments as follows: (i) $20 million on October 1, 2016, and (ii) $10 million on January 1, 2017; however this schedule may be modified based on the actual spending on the Wassa and Prestea underground projects and these funds are subject to satisfaction of certain conditions. In return, Golden Star will deliver to RGLD Gold 9.25% of gold produced from the Wassa and Prestea mines, until the earlier of (i) December 31, 2017 or (ii) the date at which the Wassa and Prestea underground projects achieve commercial production. At that point, the stream percentage will increase to 10.5% of gold produced from the Wassa and Prestea mines until an aggregate 240,000 ounces have been delivered. Once the applicable delivery threshold is met, the stream percentage will decrease to 5.5% for the remaining term of the transaction. RGLD Gold will pay Golden Star a cash price equal to 20% of the spot price for each ounce of gold delivered at the time of delivery until the applicable delivery threshold is met, and 30% of the spot price for each ounce of gold delivered thereafter. The Wassa mine is located approximately 90 miles west of Accra and has operated continuously since 2005. Golden Star forecasts calendar 2016 production of 100,000 to 110,000 ounces of gold from the single Wassa open pit and 20,000 to 25,000 ounces of gold from pre-commercial production from the developing Wassa underground. Open pit proven and probable reserves are 878,000 ounces at 1.59 grams per tonne, as of December 31, 2015. RGLD Gold’s investment will fund development of the Wassa underground deposit, which has 796,000 ounces of probable gold reserves at 4.59 grams per tonne. Once the underground deposit is in production, Golden Star expects average annual gold production of approximately 160,000 ounces of gold over the life of mine from the combined open pit and underground at Wassa. Prestea is located approximately 125 miles west of Accra and has produced over 9 million ounces of gold from both open pit and underground sources over the last 100 years. Prestea underground probable gold reserves are 469,000 ounces at 14.02 grams per tonne as of December 31, 2015. Golden Star forecasts calendar 2016 production of 60,000 to 70,000 ounces of gold from the open pit operations. Underground development at Prestea is already well advanced. Golden Star expects to spend $36 million of capital investment on Prestea, which includes hoist and shaft upgrades, electrical infrastructure, ventilation and a process plant upgrade. Once in full production, Golden Star expects 5 annual production of approximately 90,000 ounces from Prestea, with estimated life of mine production of 450,000 ounces. Golden Star forecasts underground gold production from the Wassa and Prestea mines by mid-calendar 2016 and mid-calendar 2017, respectively. Also on July 28, 2015 and separate from the stream transaction by RGLD Gold, the Company funded a $20 million, 4-year term loan to a wholly-owned subsidiary of Golden Star and received warrants to purchase 5 million shares of Golden Star common stock. Interest under the term loan is due quarterly at a rate equal to 62.5% of the average daily gold price for the relevant quarter divided by 10,000, but not to exceed 11.5%. The warrants have a term of four years and an exercise price of $0.27. Acquisition of Gold and Silver Stream at Rainy River On July 20, 2015, RGLD Gold entered into a $175 million Purchase and Sale Agreement with New Gold, Inc. (‘‘New Gold’’), for a percentage of the gold and silver production from the Rainy River Project located in Ontario, Canada (‘‘Rainy River’’). Pursuant to the Purchase and Sale Agreement, RGLD Gold made an advance payment to New Gold, consisting of $100 million on July 20, 2015, and will make an additional advance payment of $75 million once capital spending at Rainy River is 60% complete (currently expected during the second half of calendar 2016). Under the Purchase and Sale Agreement, New Gold will deliver to RGLD Gold 6.50% of the gold produced at Rainy River until 230,000 gold ounces have been delivered, and 3.25% thereafter. New Gold also will deliver to RGLD Gold 60% of the silver produced at Rainy River until 3.10 million silver ounces have been delivered, and 30% thereafter. RGLD Gold will pay New Gold 25% of the spot price per ounce of gold and silver at the time of delivery. The Rainy River Project is located approximately 40 miles northwest of Fort Frances in western Ontario, Canada. Over its first nine years of full production, the 21,000 tonne per day, combined open pit-underground operation is scheduled to produce an average of 325,000 ounces of gold per year. Construction was initiated in calendar 2015 and at the end of June 2016, overall construction was over 40% complete. Rainy River has an estimated fourteen year mine life based on current reserves and is projected by New Gold to start-up in mid-calendar 2017. Acquisition of Gold Stream at Carmen de Andacollo On July 9, 2015, RGLD Gold entered into a Long Term Offtake Agreement (the ‘‘Andacollo Stream Agreement’’) with Compa˜n´ıa Minera Teck Carmen de Andacollo (‘‘CMCA’’), a 90% owned subsidiary of Teck Resources Limited (‘‘Teck’’). Pursuant to the Andacollo Stream Agreement, CMCA will sell and deliver to RGLD Gold 100% of payable gold from the Andacollo copper-gold mine until 900,000 ounces have been delivered, and 50% thereafter, subject to a fixed payable percentage of 89%. RGLD Gold made a $525 million advance payment in cash to CMCA upon entry into the Andacollo Stream Agreement, and RGLD Gold will also pay CMCA 15% of the monthly average gold price for the month preceding the delivery date for all gold purchased under the Andacollo Stream Agreement. The transaction encompasses certain of CMCA’s presently owned mining concessions on the Andacollo mine, as well as any other mining concessions presently owned or acquired by CMCA or any of its affiliates within a 1.5 kilometer area of interest, and certain other mining concessions that CMCA or its affiliates may acquire. The Andacollo Stream Agreement was effective as of July 1, 2015, and applies to all final settlements of gold received on or after that date. Termination of Royalty Interest at Carmen de Andacollo On July 9, 2015, Royal Gold Chile Limitada (‘‘RG Chile’’), a wholly owned subsidiary of the Company, entered into a Royalty Termination Agreement with CMCA. The Royalty Termination Agreement terminated an amended Royalty Agreement originally dated January 12, 2010, which 6 provided RG Chile with a royalty equivalent to 75% of the gold produced from the sulfide portion of the Andacollo mine until 910,000 payable ounces have been produced, and 50% of the gold produced thereafter. CMCA paid total consideration of $345 million to RG Chile in connection with the Royalty Termination Agreement. The royalty termination transaction was taxable in Chile and the United States. Our Operational Information Reportable Segments, Geographical and Financial Information The Company manages its business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Royal Gold’s long-lived assets (stream and royalty interests, net) are geographically distributed as shown in the following table: As of June 30, 2016 As of June 30, 2015 Canada . . . . . . . . . . . . . . Chile . . . . . . . . . . . . . . . . Dominican Republic . . . . . Mexico . . . . . . . . . . . . . . United States . . . . . . . . . . Africa . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . Stream interest Royalty interest $ 809,692 369,896 588,502 $228,566 453,629 — — 118,899 — 102,385 697 42,547 32,649 88,596 — 12,029 Total stream and royalty interests, net $1,038,258 823,525 588,502 118,899 102,385 89,293 42,547 44,678 Stream interest Royalty interest $823,091 — — — — — — 8,183 $ 251,688 653,019 — 131,742 110,286 12,760 50,119 42,720 Total stream and royalty interests, net $1,074,779 653,019 — 131,742 110,286 12,760 50,119 50,903 Total . . . . . . . . . . . . . . . . . . $1,868,715 $979,372 $2,848,087 $831,274 $1,252,334 $2,083,608 The Company’s revenue, costs of sales and net revenue by reportable segment for our fiscal years ended June 30, 2016, 2015 and 2014 is geographically distributed as shown in the following table: Fiscal Year Ended June 30, 2016 Fiscal Year Ended June 30, 2015 Revenue Cost of sales Net revenue Revenue Cost of sales Net revenue Streams: Canada . . . . . . . . . . . . . . . Chile . . . . . . . . . . . . . . . . . Dominican Republic . . . . . . Africa . . . . . . . . . . . . . . . . $125,755 49,243 39,684 23,346 $47,417 7,280 11,625 4,657 $ 78,338 41,963 28,059 18,689 $ 94,104 — — — $33,450 — — — $ 60,654 — — — Total streams . . . . . . . . . . . . . Royalties: $238,028 $70,979 $167,049 $ 94,104 $33,450 $ 60,654 Mexico . . . . . . . . . . . . . . . . United States . . . . . . . . . . . Canada . . . . . . . . . . . . . . . Chile . . . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other $ 35,267 35,483 30,676 84 10,462 1,868 7,922 $ — — — — — — — $ 35,267 35,483 30,676 84 10,462 1,868 7,922 $ 43,008 42,675 37,496 39,508 8,494 3,075 9,659 $ — — — — — — — $ 43,008 42,675 37,496 39,508 8,494 3,075 9,659 Total royalties . . . . . . . . . . . . $121,762 $ — $121,762 $183,915 $ — $183,915 Total royalties and streams . . $359,790 $70,979 $288,811 $278,019 $33,450 $244,569 7 Fiscal Year Ended June 30, 2015 Fiscal Year Ended June 30, 2014 Revenue Cost of sales Net revenue Revenue Cost of sales Net revenue Streams: Canada . . . . . . . . . . . . . . . $ 94,104 $33,450 $ 60,654 $ 27,209 $9,158 $ 18,051 Royalties: Mexico . . . . . . . . . . . . . . . . United States . . . . . . . . . . . Chile . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other $ 43,008 42,675 39,508 37,496 8,494 3,075 9,659 $ — — — — — — — $ 43,008 42,675 39,508 37,496 8,494 3,075 9,659 $ 43,093 34,671 50,733 54,277 8,353 7,943 10,883 Total royalties . . . . . . . . . . . . $183,915 $ — $183,915 $209,953 Total royalties and streams . . $278,019 $33,450 $244,569 $237,162 $ — — — — — — — $ — $9,158 $ 43,093 34,671 50,733 54,277 8,353 7,943 10,883 $209,953 $228,004 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 and copper, together with the amounts of production from our producing stage stream and royalty interests. During the fiscal year ended June 30, 2016, Royal Gold derived approximately 91% of its revenue from precious metals (including 88% from gold and 3% from silver), 4% from copper and 5% from other minerals. The price of gold, silver, copper and other metals has fluctuated widely in recent years, having declined from highs experienced in the first half of our fiscal year 2013, with the price of gold and silver having rebounded during the second half of our fiscal 2016. The marketability and the price of metals are influenced by numerous factors beyond our control. Competition The mining industry in general and streaming and royalty segments in particular are competitive. We compete with other streaming and royalty companies, mine operators, and financial buyers in efforts to acquire existing royalty interests, and with the lenders, investors, and streaming and royalty companies providing financing to operators of mineral properties in our efforts to create new royalty interests. Our competitors in the lending and mining business may be larger than we are and may have greater resources and access to capital than we have. Key competitive factors in the stream and royalty acquisition and financing business include the ability to identify and evaluate potential opportunities, transaction structure and consideration, and access to capital. Regulation Operators of the mines that are subject to our stream and royalty interests must comply with numerous environmental, mine safety, land use, waste disposal, remediation and public health laws and regulations promulgated by federal, state, provincial and local governments in the United States, Canada, Chile, Mexico, Dominican Republic and other countries where we hold interests. Although we are not responsible as a stream and royalty interest owner for ensuring compliance with these laws and regulations, failure by the operators of the mines on which we have stream and royalty interests to comply with applicable laws, regulations and permits can result in injunctive action, damages and civil and criminal penalties on the operators. 8 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. Company Personnel We currently have 21 employees, 18 of whom are located in Denver, Colorado, one who is located in Zug, Switzerland, and two who are located in Toronto, Canada. 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 stream and royalty interests and may reduce our revenues. Certain contracts governing our royalty stream interests have features that may amplify the negative effects of a drop in metals prices. The profitability of our stream and 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 we derive a majority of our revenue from gold stream and royalty interests. 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 9 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. Volatility in gold, silver, copper and nickel prices is demonstrated by the annual high and low prices for those metals over the past decade: Gold ($/ounce) Silver ($/ounce) Copper ($/pound) Nickel ($/pound) Calendar Year High Low High Low High Low High Low 2006 - 2007 . . . . . . . . . . . . . . . . . . . . 2008 - 2009 . . . . . . . . . . . . . . . . . . . . 2010 - 2011 . . . . . . . . . . . . . . . . . . . . 2012 - 2013 . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . 2016 to-date . . . . . . . . . . . . . . . . . . . $ 841 $1,213 $1,895 $1,792 $1,385 $1,296 $1,366 $ 525 $15.82 $20.92 $ 713 $48.70 $1,058 $37.23 $1,192 $22.05 $1,142 $18.23 $1,049 $20.47 $1,077 $ 8.83 $ 8.88 $26.16 $18.61 $15.28 $13.71 $13.58 $4.29 $4.08 $4.60 $3.93 $3.37 $2.92 $2.31 $2.01 $1.26 $2.76 $3.01 $2.86 $2.05 $1.96 $23.41 $15.10 $13.17 $ 9.90 $ 9.62 $ 7.01 $ 3.50 $6.30 $4.00 $7.68 $5.97 $6.06 $3.70 $4.84 Declines in market prices for gold, silver, copper, nickel and certain other metals such as those experienced during our fiscal year 2015 and first half of fiscal 2016, decreased our revenues. 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 stream and royalty interests. Certain streaming agreements provide us the right to purchase metals at a specified percentage of the spot price. Our margin between the price at which we can purchase metals pursuant to streaming agreements and the price at which we sell metals in the market will vary as metal prices vary; in the event of metal price declines, we would generate lower cash flow or earnings, or possibly losses. Our Mount Milligan streams provide us the right to purchase gold at fixed prices of $435 per ounce. Further, our sliding-scale royalties, such as Cortez, Holt, Mulatos and other properties, amplify the effect of declines in market prices for gold, silver, copper, nickel and certain other metals, because when metal prices fall below certain thresholds in a sliding- scale royalty, a lower royalty rate will apply. A price decline may result in a material and adverse effect on our profitability, results of operations and financial condition. Price fluctuations between the time that decisions about development and construction of a mine 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 stream and royalty interests on the property. Where gold and silver are produced as by-product metals at the properties where we hold stream and royalty interests, such as at Mount Milligan and Andacollo, an operator’s production decisions and the economic cut-off applied to its reporting of gold and silver reserves and resources may be influenced by changes in the commodity prices of the principal metals produced at the mines. Moreover, certain agreements governing our royalty interests, such as those relating to our royalty interests in the Robinson, Pe˜nasquito and Voisey’s Bay properties, are based on the operator’s concentrate sales to smelters, which include price adjustments between the operator and the smelter based on metals prices at a later date, typically three to five months after shipment to the smelter. In such cases, our payments from the operator include a component of these later price adjustments, which can result in decreased revenue in later periods if metals prices have fallen. 10 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 stream and royalty interests on properties operated by third parties. The holder of a stream or 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 stream or royalty interest, and we have limited legal rights to influence those decisions. Our strategy of acquiring and holding stream and royalty interests on properties operated by third parties 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. As a result, our revenue is dependent upon the activities of third parties, which creates the risk that at any time those third parties may: (i) have business interests that are inconsistent with ours, (ii) take action contrary to our interests, policies or objectives, or (iii) be unable or unwilling to fulfill their obligations under their agreements with us. At any time, any of the operators of our mining properties may decide to suspend or discontinue operations. Except in limited circumstances, we will not be entitled to material compensation if operations are shut down, suspended or discontinued on a temporary or permanent basis. Although we attempt to secure contractual rights when we create new stream or 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 stream or 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 our interest in the Peak Gold, LLC joint venture and for other transactions where we finance mine development or actively fund or participate ourselves in exploration or development projects or in certain other limited circumstances) or operating costs on projects on which we hold stream or royalty interests, our financial results are indirectly subject to hazards and risks normally associated with developing and operating mining properties where we hold stream and royalty interests. Some of these risks include: • insufficient ore reserves; • 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; • declines in the price of gold, silver, copper, nickel and other metals; • mine operating and ore processing facility problems; • economic downturns and operators’ insufficient financing; • default by an operator on its obligations to us or its creditors; • insolvency, bankruptcy or other financial difficulty of the operator; • significant permitting, environmental and other regulatory requirements and restrictions and any changes in those regulations or their enforcement; • challenges by non-mining interests to existing permits and mining rights, and to applications for permits and mining rights; 11 • opposition by local communities, indigenous populations and non-governmental organizations; • community or civil unrest; • labor ; shortage of miners, geologists and mining experts, changes in labor laws, increased labor costs, and labor disputes, strikes or work stoppages at mines • unavailability of mining, drilling and related equipment; • unanticipated geological conditions or metallurgical characteristics; • unanticipated ground or water conditions; • pit wall or tailings dam failures or any underground stability issues; • fires, explosions and other industrial accidents; • environmental hazards and natural catastrophes such as floods, earthquakes or inclement or hazardous weather conditions; • injury to persons, property or the environment; • the ability of operators to maintain or increase production or to replace reserves as properties are mined; • potential increased operating costs arising from climate change initiatives and their impact on energy costs in the U.S. and foreign jurisdictions; and • uncertain domestic and foreign political and economic environments. The occurrence of any of the above mentioned risks or hazards, among others, could result in an interruption, suspension or termination of operations or development work at any of the properties in which we hold a stream or royalty interest and have a material adverse effect on our business, results of operations, cash flows and financial condition. Many of our stream and royalty interests are important to us and any adverse development related to these properties could adversely affect our revenues and financial condition. Our investments in the Mount Milligan, Andacollo, Pueblo Viejo, Wassa and Presta and Pe˜nasquito properties generated approximately $260.5 million in revenue in fiscal year 2016, or nearly 72% of our revenue for the period. We expect these properties and others to be important to us in fiscal year 2017 and beyond. Any adverse development affecting the operation of or production from any of these properties could have a material adverse effect on our results of operations, cash flows and financial condition. Any adverse decision made by the operators, such as changes to mine plans, production schedules, metallurgical processes or royalty calculation methodologies, may materially and adversely impact the timing and amount of revenue that we receive. If Centerra’s acquisition of Thompson Creek or the anticipated amendment to our Mount Milligan streaming agreement is not consummated, Thompson Creek may be unable to find another buyer and may experience liquidity issues or seek bankruptcy protection, and we may not be able to realize the benefits of our stream interest on the Mount Milligan mine. There are a number of uncertainties relating to Centerra’s proposed acquisition of Thompson Creek, including, among other things, those relating to Thompson Creek obtaining stockholder approval and the acquisition receiving court and applicable regulatory approvals. If Centerra’s proposed acquisition of Thompson Creek is not consummated for any reason, there can be no assurance that Thompson Creek will be able to secure another buyer for itself or Mount Milligan, or that another buyer will seek to amend our Mount Milligan streaming agreement on terms we find acceptable. Any 12 failure of Centerra’s proposed acquisition of Thompson Creek to close could result in Thompson Creek experiencing liquidity issues that impact operations at Mount Milligan or could result in Thompson Creek seeking bankruptcy protection, which could limit our ability to realize the future benefits from our stream interest on the Mount Milligan mine and could materially and adversely affect our business. Further, while we believe our proposed amendment to our stream interest at Mount Milligan will be value neutral on a discounted cash flow basis to our existing stream interest, we cannot guaranty that this will prove to be the case. Problems concerning the existence, validity, enforceability, terms or geographic extent of our stream and royalty interests could adversely affect our business and revenues, and our interests may similarly be materially and adversely impacted by change of control, bankruptcy or the insolvency of operators. Defects in or disputes relating to the stream and royalty interests we hold or acquire may prevent us from realizing the anticipated benefits from our stream and royalty interests, and could have a material adverse effect on our business, results of operations, cash flows and financial condition. Material changes could also occur that may adversely affect management’s estimate of the carrying value of our stream and royalty interests and could result in impairment charges. While we seek to confirm the existence, validity, enforceability, terms and geographic extent of the stream and royalty interests we acquire, there can be no assurance that disputes or other problems concerning these and other matters or other problems will not arise. Confirming these matters is complex 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 stream or royalty interest. Similarly, stream and 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, and our stream or royalty interests could be materially restricted or set aside through judicial or administrative proceedings. We often do not have the protection of security interests that could help us recover all or part of our investment in a stream or royalty interest. We have limited access to data and disclosure regarding the operation of the properties on which we have stream and royalty interests, which may limit our ability to assess the performance of a stream or royalty interest. Although certain agreements governing our stream and royalty interests require the operators to provide us with production, operating and other information, we do not have the contractual right to receive such information for all of our stream and royalty interests. As a result, we may have limited access to data about the operations and the properties themselves, which could affect our ability to assess the performance of a stream or royalty interest. This could result in delays in, or reductions of, our cash flow from the amounts that we anticipate based on the stage of development of or production from the properties which could have an adverse impact on our results of operations, and financial condition. Acquired stream and royalty interests, particularly on development stage properties, are subject to the risk that they may not produce anticipated revenues. The stream and royalty interests we acquire may not produce anticipated revenues. The success of our acquisitions of stream and royalty interests is based on our ability to make accurate assumptions regarding the valuation, timing and amount of revenues to be derived from our stream and royalty interests and, for development projects, the geological, metallurgical and other technical aspects of the project as well as the costs, timing and conduct of development. 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 stream or royalty interest may not yield sufficient revenues to be profitable for us. 13 Furthermore, operators of development stage properties must obtain and maintain all necessary environmental permits and access to water, power and other raw materials, as well as financing, necessary to begin or sustain production, and there can be no assurance that operators will be able to do so. The failure of any of our principal properties to produce anticipated revenues on schedule or at all would have a material adverse effect on our asset carrying values and potentially our business, results of operations, financial condition or the other benefits we expect to realize from the acquisition of stream and royalty interests. For example, we experienced a write-down for the Phoenix Gold mining project in the third quarter of fiscal 2016 after examining updated technical reports prepared by Rubicon, the operator of the mining project. Further, as mines on which we have stream and royalty interests mature, we can expect overall declines in production over the years from those operations 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 stream and royalty interests will be able to maintain or increase production or replace reserves as they are mined. Operators may interpret our stream and 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 stream and 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 stream and royalty interests may interpret our 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 stream or 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, methods for calculating the stream or royalty interest, including whether certain operator costs may properly be deducted from gross proceeds when calculating royalties determined on a net basis; various rights of the operator or third parties in or to the stream or royalty interest or the underlying property; the obligations of a current or former operator to make payments on stream and royalty interests; and various defects or ambiguities in the agreement governing a stream and royalty interest. For example, in December 2014, the Labrador Nickel Royalty Limited Partnership (‘‘LNRLP’’), of which the Company is the indirect majority owner, amended its October 2009 statement of claim against Vale and certain subsidiaries of Vale. LNRLP alleges that Vale has been calculating LNRLP’s 3% NSR royalty on nickel, copper and cobalt produced from the Voisey’s Bay mine incorrectly since production began in late 2005 and that Vale has breached its contractual duties of good faith and honest performance. One of the claims asserted by LNRLP relates to Vale’s calculation of the royalty since Vale began processing nickel concentrates from Voisey’s Bay at its new Long Harbour hydrometallurgical plant. Vale currently deducts full Long Harbour operating costs, depreciation and cost of capital from actual proceeds when calculating the net smelter return royalty, which has the effect of reducing or eliminating royalty payments to LNRLP. Royal Gold strongly disagrees with Vale’s position that full operating costs, depreciation and cost of capital are permissible net smelter return deductions pursuant to the royalty agreement and is aggressively pursuing its legal remedies. For fiscal 2015, the Voisey’s Bay royalty comprised 6% of our revenue. We did not receive any revenue from Vale for the fourth quarter of fiscal 2016. The Voisey’s Bay royalty comprised 3% of our total revenue for fiscal 2016. 14 Potential litigation affecting the properties that we have stream and royalty interests in could have an adverse effect on us. Potential litigation may arise between the operators of properties on which we have stream and 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 a holder of stream and royalty interests, we generally will not have any influence on litigation such as this 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 a project or production from a property, whether temporary or permanent, could have a material adverse effect on our business, results of operations, cash flows and financial condition. We 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 stream and royalty interests, to establish new streams on operating mines, to create new stream and royalty interests through financing mine development or exploration, or to acquire companies that hold stream and 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 and term sheets, participation in preliminary discussions and negotiations and involvement as a bidder in competitive processes. We also consider obtaining debt commitments for acquisition financing. In the event that we choose to raise debt capital to finance any acquisition, our leverage may be increased. We also could issue common stock or incur additional indebtedness to fund our acquisitions. Issuances of common stock could dilute existing stockholders and may reduce some or all of our per share financial measures. Any such acquisition could be material to us. In pursuit of such opportunities, we may fail to select appropriate acquisition candidates or negotiate acceptable arrangements, including arrangements to finance acquisitions. 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 and other risks discussed in this Annual Report on Form 10-K. There can be no assurance that any acquisitions completed will ultimately benefit the Company. In addition, we may consider opportunities to restructure our stream or 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 stream or royalty interests at appropriate valuations. Our future success largely depends upon our ability to acquire stream and royalty interests at appropriate valuations, including through royalty, stream and corporate acquisitions and other financing transactions. Most of our revenues are derived from stream and 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 stream and royalty interests or businesses that own desirable 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. In addition, changes to tax rules, accounting policies, or the treatment of stream 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 stream or royalty interests. 15 We face substantial competition, and we may not be able to compete successfully in acquiring new stream and royalty interests. We have competitors that are engaged in the acquisition of stream and royalty interests and companies holding such interests, including competitors with greater financial resources, and we may not be able to compete successfully against these companies in new acquisitions. If we are unable to successfully acquire additional stream or royalty interests, the reserves subject to our stream and royalty interests may decline as the producing properties on which we have such stream and 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 stream and royalty interests if we are unable to successfully complete acquisitions of such interests or complete them at satisfactory rates of return. 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 stream and royalty interests. We may not be able to detect errors and later payment calculations may call for retroactive adjustments. The payments of our stream and royalty interests are calculated by the operators of the properties on which we have stream and royalty interests based on their reported production. Each operator’s calculation of our payments is subject to and dependent upon the adequacy and accuracy of its production and accounting functions, and, given the complex nature of mining and ownership of mining interests, errors may occur from time to time in the allocation of production and the various other calculations made by an operator. Any of these errors may render calculations of such payments inaccurate. Certain agreements governing our stream and 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 deliveries under metal streams and in the calculation of payments of royalties. We do not, however, have the contractual right to receive production information for all of our stream and royalty interests. As a result, our ability to detect payment errors through our stream and royalty 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 stream and royalty interests provide us the right to audit the operational calculations and production data for the associated royalty payments and metal stream deliveries; however, such audits may occur many months following our recognition of the revenue and we may be required 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 stream and royalty interests to meet liquidity needs, obtain financing or operate profitably could have material adverse effects on the value of and revenue from our stream and royalty interests. If operators of properties where we hold stream and 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. For example, in 2015, Yukon Zinc shut down its Wolverine mine, on which we own a sliding-scale NSR royalty on all gold and silver produced, and later filed for and completed bankruptcy proceedings in the Supreme Court of British Columbia. 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 stream and royalty interests suffer these material adverse effects, then our interests, including the value of and revenue from them, and the ability of operators to obtain debt or equity financing for the exploration, development and operation of their properties may be materially adversely affected. 16 Certain of the agreements governing our stream and royalty interests contain terms that reduce or cap the revenues generated from the interests. Revenue from some of our stream and royalty interests will stop or decrease after threshold production, delivery or payment milestones are achieved. For example, our gold stream at Pueblo Viejo decreases from 7.5% of Barrick’s interest in gold produced at Pueblo Viejo to 3.75% after 990,000 ounces of gold have been delivered. Similarly, our silver stream at Pueblo Viejo decreases from 75% of Barrick’s interest in silver produced at Pueblo Viejo to 37.50% after 50.00 million ounces of silver have been delivered. Our streams at Wassa and Prestea, Andacollo and many other properties are subject to similar limitations contained in our stream and royalty agreements, and therefore current production and revenue results from our interests may not be indicative of future results. Estimates of reserves and mineralization by the operators of mines in which we have stream and 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 stream and royalty interests. Reserve estimates for our stream and 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. Mineral resources as reported by some operators do not constitute mineral reserves and do not have demonstrated economic viability. Due to the uncertainty of mineral resources, there can be no assurance that such resources will be upgraded to proven and probable mineral reserves as a result of continued exploration. It should not be assumed that any part or all of mineral resources on properties where we hold stream and royalty interests constitute or will be converted into mineral reserves. Estimates of production by the operators of mines in which we have stream and 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 stream and royalty interests, including many factors beyond our control and the control of the operators of the properties in which we have stream and 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 17 plans subsequent to the date of any estimate may cause actual production to vary materially from such estimates. If title to or concessions, licenses or leases from governments on mine properties are not properly maintained by the operators, or are successfully challenged by third parties, our stream and royalty interests could be found to be 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 or meet expenditure requirements, reduction in geographic extent upon passage of time or upon conversion from an exploration tenure to a mining tenure, failure of title and similar risks. If title to unpatented mining claims or other mining tenures subject to our stream and royalty interests have not been properly established or not properly maintained, or are successfully contested, our stream and royalty interests could be adversely affected. Operations in foreign countries or other sovereign jurisdictions are subject to many risks, which could decrease our revenues. We derived approximately 90% of our revenues from foreign sources during fiscal year 2016, compared to approximately 85% in fiscal year 2015 and 2014. Our principal producing stream and royalty interests on properties outside of the United States are located in Canada, Chile, Mexico, the Dominican Republic and Ghana. We currently have stream and royalty interests in mines and projects in other countries, including Argentina, Australia, Bolivia, Brazil, Burkina Faso, Finland, Guatemala, Honduras, Macedonia, Nicaragua, Peru, Russia, Spain and Tunisia. Various indigenous peoples may be recognized as sovereign jurisdictions and may enforce their own laws and regulations within the United States, Canada and other countries. 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: • expropriation or nationalization of mining property in foreign countries; • seizure of mineral production; • exchange and currency controls and fluctuations; • limitations on foreign exchange and repatriation of earnings; • increased foreign taxation or imposition of new or increased mining royalty interests; • restrictions on mineral production and price controls; • import and export regulations, including restrictions on the export of gold, silver, copper, nickel or other metals; • changes in legislation, including changes related to taxation, royalty interests, imports, exports, duties, currency, foreign ownership, foreign trade and foreign investment; • high rates of inflation; • labor practices and disputes; • enforcement of unfamiliar or uncertain foreign real estate, mineral tenure, contract, water use, mine safety and environmental laws and policies; 18 • 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; • renegotiation, nullification or forced modification of existing contracts, licenses, permits, approvals, concessions or the like; • war, crime, terrorism, sabotage, civil unrest and uncertain political and economic environments; • corruption; • 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; • suspension of the enforcement of creditors’ rights and stockholders’ rights; and • loss of access to government controlled infrastructure, such as roads, bridges, rails, ports, power sources and water supply. In addition, many of our operators are organized outside of the United States. Our stream and 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 stream and 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. Opposition from indigenous people may delay or suspend development or operations at the properties where we hold stream and royalty interests, which could decrease our revenues. Various international and national, state and provincial laws, regulations and other materials relate to the rights of indigenous peoples. Some of the properties where we hold stream and royalty interests are located in areas presently or previously inhabited or used by indigenous peoples. Many of these laws impose obligations on government to respect the rights of indigenous people. Some mandate that government consult with indigenous people regarding government actions which may affect indigenous people, including actions to approve or grant mining rights or permits. One or more groups of indigenous people may oppose continued operation, further development, or new development of the properties where we hold stream and royalty interests. Such opposition may be directed through legal or administrative proceedings or protests, roadblocks or other forms of public expression, and claims and protests of indigenous peoples may disrupt or delay activities of the operators of the properties. For example, 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)’’ in this Annual Report on Form 10-K. Similarly, construction activities at the El Morro project were suspended during the same period. Changes in mining taxes and royalties payable to governments could decrease our revenues. Changes in mining and tax laws in any of the United States, Canada, Chile, Dominican Republic, Mexico or any other country in which we have stream and royalty interests in mines or projects could affect mine development and expansion, significantly increase regulatory obligations and compliance 19 costs with respect to mine development and mine operations, increase the cost of holding mining tenures 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 of 1872, and other laws, which govern 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 a royalty payable to the government on hardrock production, increase land holding fees, impose federal reclamation fees and financial assurances, 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 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 or our plans 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 stream and royalty interests located outside the United States. Present U.S. income taxes and foreign withholding taxes have not been provided for on undistributed earnings for one of our non-U.S. subsidiaries, because such earnings are intended to be indefinitely reinvested in the operations of that subsidiary. The current Executive branch of the U.S. 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 current or future years, they could have a negative impact on our financial position and results of operations. In addition, the possibility exists that amounts determined to be indefinitely reinvested outside of the United States may ultimately be repatriated. Any repatriation of foreign earnings may require the accrual and payment of U.S. federal and certain state taxes, which could negatively impact our results of operations and/or the amount of available funds. While we currently have no intention to repatriate cash from our foreign subsidiaries, should the need arise domestically, there is no guarantee that we could do so without adverse consequences. The mining industry is subject to environmental risks in the U.S. and in the foreign jurisdictions where our interests are located. 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, 20 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, if strictly applied, could restrict 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, if and when it becomes effective, could affect some 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. We are dependent upon information technology systems, which are subject to cyber threats, disruption, damage and failure. Information systems and other technologies, including those related to our financial and operational management, are an integral part of our business activities. Network and information systems-related events, such as computer hackings, cyber-attacks, computer viruses, worms or other destructive or disruptive software, process breakdowns, denial of service attacks, malicious social engineering or other malicious activities, or any combination of the foregoing, or power outages, natural disasters, terrorist attacks or other similar events, could result in damage to our property, equipment and data. These events also could result in significant expenditures to repair or replace the damaged property or information systems or to protect them from similar events in the future. Further, any security breaches, such as misappropriation, misuse, leakage, falsification or accidental release or loss of information maintained in our information technology systems, including personnel and other data, could damage our reputation and require us to expend significant capital and other resources to remedy any such security breach. There can be no assurance that these events and security breaches will not occur in the future or not have an adverse effect on our business. 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 stream and 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. 21 Our disclosure controls and internal control over our financial reporting are subject to inherent limitations. Management has concluded that as of June 30, 2016, 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 royalty payments and deliveries of metal streams that translate to our revenues as discussed above in ‘‘We depend on our operators for the calculation of payments of our stream and 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, if we were unable to repay our debt when due, would have a material adverse effect on our business, results of operations, cash flows and financial condition. As of June 30, 2016, 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. Since June 30, 2015, we entered into several transactions that resulted in drawing down our revolving credit facility and reducing our availability under the facility. As of June 30, 2016 there was $275 million outstanding on the revolving credit facility, resulting in $375 million of available revolver capacity. We are also subject to the risks normally associated with debt obligations, 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. We may seek additional debt or equity financing if we deem it available. Our indebtedness could have a material adverse effect on our business, results of operations, cash flows and financial condition. For example, it could: • increase our vulnerability to general adverse economic and industry conditions; • 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 stream and royalty interests, working capital, pay dividends and other general corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • restrict us from exploiting business opportunities; • place us at a competitive disadvantage compared to our competitors that have less indebtedness; • 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; • require the consent of our existing lenders to borrow additional funds, as was required in connection with the issuance of the 2019 Notes; and 22 • 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. 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, an event of default could occur 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 results of the United Kingdom’s referendum on withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business. In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union in a national referendum. The referendum was advisory, and the terms of any withdrawal are subject to a negotiation period that could last at least two years after the government of the United Kingdom formally initiates a withdrawal process. Nevertheless, the referendum has created significant uncertainty about the future relationship between the United Kingdom and the European Union, including with respect to the laws and regulations that will apply as the United Kingdom determines which European Union laws to replace or replicate in the event of a withdrawal. The referendum has also given rise to calls for the governments of other European Union member states to consider withdrawal. These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations and reduce the price of our securities. 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 $76.85 and $40.45 for the fiscal year ended June 30, 2014, $82.84 and $55.55 for the fiscal year ending June 30, 2015, and $72.04 and $24.68 for the fiscal year ending June 30, 2016. The fluctuation of the market price of our common stock has been affected by many factors that are beyond our control, including: • market prices of gold, silver, copper, nickel and other metals; • Central Bank interest rates; • expectations regarding inflation; • ability of operators to service their financial obligations, advance development projects, produce precious metals and develop new reserves; 23 • currency values; • credit market conditions; • general stock market conditions; and • 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 per share financial measures, 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 additional 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 per share financial measures could be reduced. In addition, the shares of common stock that we issue in connection with an acquisition may not be subject to resale restrictions. The market price of our common stock could decline if our stockholders sell substantial amounts of our common stock, including shares issued upon the conversion of the outstanding 2019 Notes or are perceived by the market as intending to sell these shares other than in an orderly manner. 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, 24 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 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 stream or royalty interests, except for our interest in Peak Gold, 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 streams and royalties, as well their respective reserves, are summarized below in Table 1 within this Item 2. More information is available to the public regarding certain properties in which we have royalties, including reports filed with the SEC or with the Canadian securities regulatory agencies available at www.sec.gov or www.sedar.com, respectively. The Company manages its business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. The description of our principal streams and royalties set forth below includes the location, operator, stream or 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 stream and 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 Producing Properties The Company considers both historical and future potential revenues in determining which stream and royalty interests in our portfolio are principal to our business. Estimated future potential revenues 25 from both producing and development properties are based on a number of factors, including reserves subject to our stream and 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 stream and royalty interests are no longer principal to our business. Currently, the Company considers the properties discussed below (listed alphabetically by stream and royalty interest) to be principal to our business. 9AUG201610591010 Stream Interests Andacollo (Region IV, Chile) As discussed in further detail in Item 1, Business, Fiscal 2016 Business Developments, RGLD Gold owns the right to purchase 100% of the gold produced from the Andacollo copper-gold mine until 900,000 ounces of payable gold have been delivered, 50% thereafter. The cash purchase price equals 15% of the monthly average gold price for the month preceding the delivery date for all gold purchased. Andacollo is an open-pit mine and milling operation located in central Chile, Region IV in the Coquimbo Province and is operated by CMCA. The Andacollo mine 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 mine 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. Stream deliveries from Andacollo were 41,700 ounces of gold during the fiscal year ended June 30, 2016. Production attributable to our royalty interest at Andacollo during the fiscal year ended June 30, 2015, was 41,500 ounces of gold. Teck has indicated that they expect calendar 2016 gold grade and production to exceed calendar 2015. 26 Mount Milligan (British Columbia, Canada) As of June 30, 2016, RGLD Gold owns the right to purchase 52.25% of the payable gold produced from the Mount Milligan copper-gold project in British Columbia, Canada, which is operated by Terrane, a subsidiary of Thompson Creek. The cash purchase price is equal to the lesser of $435 per ounce, with no inflation adjustment, or the prevailing market price. Please refer to Item 1, Business, Recent Business Developments, for a description of a proposed amendment to our stream interest at Mount Milligan in connection with the sale of Thompson Creek to Centerra. The Mount Milligan project is an open-pit mine and 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 Mount 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 Mount Milligan property site is 482 miles from Prince Rupert and 158 miles from Prince George. Stream deliveries from Mount Milligan were 111,000 ounces of gold during the fiscal year ended June 30, 2016, an increase of approximately 50% when compared to the fiscal year ended June 30, 2015. The increase was due to higher mill throughput and gold grade. Thompson Creek estimates that Mount Milligan gold production will be at the lower end of their calendar 2016 production guidance of 240,000 to 270,000 ounces. Pueblo Viejo (Sanchez Ramirez, Dominican Republic) On September 29, 2015, RGLD Gold acquired the right to purchase 7.5% of Barrick’s interest in the gold produced from the Pueblo Viejo mine until 990,000 ounces of gold have been delivered, and 3.75% thereafter. The cash purchase price of the gold is 30% of the spot price of gold delivered until 550,000 ounces of gold have been delivered, and 60% of the spot price of gold per ounce delivered thereafter. RGLD Gold also owns the right to purchase 75% of Barrick’s interest in the silver produced from the Pueblo Viejo mine, subject to a minimum silver recovery of 70%, until 50 million ounces of silver have been delivered, and 37.5% thereafter. The cash purchase price of the silver is 30% of the spot price of silver delivered until 23.1 million ounces of silver have been delivered, and 60% of the spot price per ounce of silver delivered thereafter. The Pueblo Viejo mine is located in the province of Sanchez Ramirez, Dominican Republic, approximately 60 miles northwest of Santo Domingo, and is owned by a joint venture in which Barrick holds a 60% interest and is responsible for operations, and in which Goldcorp holds a 40% interest. Pueblo Viejo is accessed from Santo Domingo by traveling northwest on Autopista Duarte, Highway #1, approximately 48 miles to Piedra Blanca and proceeding east for approximately 14 miles on Highway #17 to the gatehouse for Pueblo Viejo. Both Highway #1 and Highway #17 are paved. Stream deliveries from Pueblo Viejo were 42,200 ounces of gold and 532,600 ounces of silver during the fiscal year ended June 30, 2016. In November 2015, Barrick announced that two of three electric motors at the Pueblo Viejo oxygen plant experienced unexpected failures and that a comprehensive plan to mitigate the impact of the motor failure was implemented in December 2015, which involved installing a number of portable compressors. Barrick was able to restore capacity to 100% by mid-January 2016 with portable compressor motors. The first repaired motor was reinstalled and commissioned in late January 2016 and the second motor was repaired and reinstalled early February 2016. In calendar 2016, Barrick expects improved throughput and plant availability as compared to calendar 2015 primarily due to overcoming the issues related to the oxygen plant motor failures which negatively impacted 2015 throughput. In addition, Barrick is focused on improving efficiency and 27 throughput through ore blending optimization, increasing autoclave availability, and optimization of maintenance strategies. A prefeasibility study is expected to be commissioned in the second half of calendar 2016 to evaluate a possible increase in tailings storage capacity, giving the potential to move a significant portion of the mine’s 7.7 million ounces of gold and 44.7 million ounces of silver in measured and indicated resources to reserves. Barrick delivers gold and silver to RGLD Gold on a quarterly basis (mid-March, June, September and December) based on Barrick’s 60% indirect share of any provisional and final offtake settlements in the prior three calendar month period, subject to certain specific terms of the agreement (including a fixed silver recovery assumption of 70%). RGLD Gold usually sells gold and silver ounces over the three month period following physical receipt. All of these factors may result in a difference of produced ounces reported by Barrick and those reported as sold by Royal Gold for each quarter. Wassa and Prestea (Western Region, Ghana) As discussed in further detail in Item 1, Business, Fiscal 2016 Business Developments, on July 28, 2015, RGLD Gold acquired the right to purchase 9.25% of the gold produced from the Wassa and Prestea projects, operated by Golden Star, until the earlier of (i) December 31, 2017 or (ii) the date at which the Wassa and Prestea underground projects achieve commercial production. At that point, the stream percentage will increase to 10.5% of gold produced from the Wassa and Prestea mines until an aggregate 240,000 ounces have been delivered. Once the applicable delivery threshold is met, the stream percentage will decrease to 5.5% for the remaining term of the transaction. The Wassa open pit mine and oxide ore mill are located near the village of Akyempim in the Wassa East District, in the Western Region of Ghana, approximately 50 miles north of Cape Coast and 93 miles west of the capital Accra. The main access to the site is from the east, via the Cape Coast to Twifo-Praso road, then over the combined road-rail bridge on the Pra River. There is also an access road from Takoradi in the south via Mpohor. An airport at Takoradi is capable of handling jet aircraft and is serviced by several commercial flights each day. Future Wassa production will come from both open pit and underground operations. Prestea is currently an open pit operation producing oxide ore located in the Ashanti gold district in the central eastern section of the Western Region of Ghana, approximately 6 miles south of the town of Bogoso. Access to the property is by commercial air carrier to Accra and then by vehicle on a paved and gravel road. Stream deliveries from Wassa and Prestea were 21,500 ounces of gold during the fiscal year ended June 30, 2016. Golden Star’s total production in calendar 2016 is expected to be between 180,000 - 205,000 ounces of gold. On July 12, 2016, Golden Star announced pre-commercial production commenced at Wassa underground gold mine, as scheduled. Wassa underground is expected to achieve commercial production in early calendar 2017, at which time it is expected to deliver 2,000 to 2,500 tonnes of ore per day. The Prestea underground project is currently in development with a planned average annual gold production of 90,000 ounces at a cash operating cost of $468 per ounce. Golden Star expects first production from the Prestea underground project in mid-calendar 2017. Royalty Interests Cortez (Nevada, USA) Cortez is a series of large open-pits and underground mines, utilizing mill and heap leach processing, and is operated by Barrick. 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 28 royalty interest at Cortez applies to the Pipeline, South Pipeline, part of the Gap pit and the Crossroads deposit, 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 Crescent Valley Partners, L.P., 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 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.) GSR1 and GSR2 Royalty Percentage Below $210 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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% Production attributable to our royalty interest at Cortez decreased approximately 68% during our fiscal year ended June 30, 2016, when compared to the fiscal year ended June 30, 2015. The decrease was primarily due to Barrick’s production focus on Cortez Hills, where we do not have a royalty interest, and reduced production from the Pipeline, South Pipeline and Gap pits, where our royalty applies, compared to the prior fiscal year. Barrick expects calendar 2016 gold production at Cortez, 29 subject to our royalty interests to be down compared to calendar 2015 production. Waste stripping at Crossroads, which is subject to our royalty interest, is expected to restart later in calendar 2016. 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 Inc. (‘‘Goldcorp’’). The Pe˜nasquito project is located approximately 17 miles west of the town of Concepci´on del Oro, Zacatecas, Mexico. The project, composed of two main deposits called Pe˜nasco and Chile Colorado, hosts large gold, silver, zinc and lead reserves. The deposits contain both oxide and sulfide material, resulting in heap leach and mill processing. 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. Gold, silver, lead and zinc production attributable to our royalty interest at Pe˜nasquito decreased approximately 21%, 13%, 15% and 2%, respectively, during the fiscal year ended June 30, 2016, when compared to the fiscal year ended June 30, 2015. The decrease in production is attributable to lower throughput, grades and recovery. Additionally, production decreased as a result of a 10-day shutdown during the June 2016 quarter for planned mill maintenance. By July 2016, the mill returned to normal operations. Over the next three calendar years, Goldcorp expects mining activities in the pit to be focused on lower grade ore in the upper parts of the Pe˜nasco pit while stripping is emphasized to ensure an economically optimal pit shell design to maximize the net asset value of the operation. By calendar 2019, Goldcorp expects Pe˜nasquito’s gold production to benefit from mining higher grades at the bottom of the Pe˜nasco pit and significantly enhanced metallurgical recoveries with the planned completion of the approval of the Pyrite Leach Project (‘‘PLP’’) in July 2016. The PLP is expected to increase overall gold and silver recovery by treating the zinc tailings before discharge to the tailings storage facility. Construction activities continued on the Northern Well Field (‘‘NWF’’) project with 15% of the total water production commissioned by June 30, 2016. The NWF remains on schedule for completion by the end of the September 2016 quarter. Principal Development Stage Properties The following is a description of our principal development stage properties. 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 5.45% 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 1.09% 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 interests are applicable to all gold and copper 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 30 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% 5.45% 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. Barrick expects Pascua-Lama to produce an average of 800,000 to 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. 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. Rainy River (Ontario, Canada) As discussed in further detail in Item 1, Business, Fiscal 2016 Business Developments, RGLD Gold owns the right to purchase 6.50% of the gold produced from the Rainy River project until 230,000 gold ounces have been delivered, and 3.25% thereafter; and 60% of the silver produced from the Rainy River project until 3.1 million silver ounces have been delivered, and 30% thereafter. The cash purchase price for the gold and silver ounces is 25% of the spot price per ounce of gold or silver at the time of delivery. The Rainy River project is centered within the Richardson Township in northwestern Ontario, Canada, and is operated by New Gold. The project is approximately 40 miles northwest of Fort Frances and approximately 100 miles south of Kenora and approximately 260 miles west of Thunder Bay. The project site is easily accessible by a network of secondary all-weather roads that branch off the well-maintained Trans-Canada Highways 11 and 71. Construction was initiated in calendar 2015. In July 2016, New Gold reported that overall construction was approximately 40%. During the June 2016 quarter, installation of the mechanical, piping, electrical and instrumentation equipment commenced in the grinding building and the primary crusher, and the first ball mill shell was installed. During the course of the construction of the water management facility earlier in calendar 2016, New Gold identified areas where the strength of the foundation is less than was estimated for the original designs. As a result, during the June 2016 quarter, New Gold submitted revised construction designs for regulatory review. New Gold anticipates receipt of the requisite permit amendments to begin remediation work on the water management facility within the September 2016 quarter. New Gold also is finalizing its review of the tailings management facility design, parts of which are similarly impacted by the foundation conditions, and plans to submit its proposed redesigns for regulatory review by mid-August 2016. With construction of the processing facilities and other components of the project on schedule, and the process of amending the water and tailings management facilities advancing as planned, New Gold continues to target first production at Rainy River in mid-2017. 31 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 stream and royalty interests as of December 31, 2015, 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, 2015. Please refer to pages 35-36 for the footnotes to Table 1. Proven and Probable Gold Reserves As of December 31, 2015(1) Gold(2) PROVEN + PROBABLE RESERVES(3)(4)(5) PROPERTY ROYALTY OPERATOR LOCATION Average Gold Grade (opt) Gold Contained Ozs(6) (M) . . Bald Mountain . . Cortez (Pipeline) GSR1 Cortez (Pipeline) GSR2 Cortez (Pipeline) GSR3 Cortez (Pipeline) NVR1 Cortez (Pipeline) . . NVR1C . Gold Hill(9) . . . . . . . . . . . . . Goldstrike (SJ Claims) . . Hasbrouck (DEV) . Leeville . . . Marigold (DEV) . . Pinson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Robinson . Ruby Hill . . Soledad Mountain . . . . (DEV) . . Twin Creeks . Wharf . . . . Back River - Goose . . . . . . . . . . . . . . . Lake (DEV) . . Canadian Malartic Holt . . . . . Kutcho Creek (DEV) . . Mount Milligan . . . Rainy River (DEV) . . Pine Cove (DEV) . . . Schaft Creek (DEV) . . . Williams . . . . Dolores . . Mulatos . . . Pe˜nasquito(21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Andacollo . . . El Morro . El Toqui . . . . Pascua-Lama (DEV)(25) . . Don Mario . . . Don Nicolas (DEV) . . . Pueblo Viejo . . . . El Limon . . . . La India (DEV) . . . Mara Rosa (DEV) Balcooma (DEV) . . . Celtic/Wonder North . . . . . . . Gwalia Deeps . Kundip (DEV) . Meekatharra (Nannine) . . (DEV) (DEV) . . . . . . . . . . . . . . . . . . . . . . 1.75% - 2.5% NSR(7) 0.40 - 5.0% GSR(8) 0.40 - 5.0% GSR(8) 0.71% GSR 1.01% NVR 0.62% NVR 1.0 - 2.0% NSR(10) 0.6 - 0.9% NSR(11) 0.9% NSR 1.5% NSR 1.8% NSR 2.0% NSR 3.0% NSR(12) 2.94% NSR(13) 3.0% NSR 3.0% NSR 3.0% NSR(14) 2.0% GPR 0.0 - 2.0% NSR(15) Kinross Barrick Barrick Barrick Barrick Barrick Kinross Barrick West Kirkland/Clover Nevada Newmont Silver Standard Waterton Precious Metals Fund United States United States United States United States United States United States United States United States United States United States United States United States KGHM Waterton Precious Metals Fund United States United States Golden Queen/Gauss LLC Newmont Coeur United States United States United States 1.95% NSR(16) 1.0 - 1.5% NSR(17) 0.00013 (cid:4) quarterly avg. gold price 2.0% NSR 52.25% of gold produced(18) 6.5% of gold produced(19) 7.5% NPI 3.5% NPI 0.97% NSR 3.25% NSR 1.0 - 5.0% NSR(20) 2.0% NSR (Oxide) 2.0% NSR (Sulfide) 100% of gold produced(22) 1.4% NSR(23) 0.0 - 3.0% NSR(24) 0.78 - 5.23% NSR(26) 3.0% NSR 2.0% NSR 7.5% of gold produced(27) 3.0% NSR 3.0% NSR 1.0% NSR 1.5% NSR 1.5% NSR 1.5% NSR 1.0 - 1.5% GSR(28) Sabina Gold & Silver Agnico Eagle/Yamana Kirkland Lake Capstone Mining Thompson Creek New Gold Anaconda Mining Copper Fox/Teck Barrick Pan American Alamos Goldcorp Teck Goldcorp Nyrstar Barrick Orvana Compa˜n´ıa Inversora en Minas Barrick (60%) B2Gold Condor Gold Amarillo Gold Consolidated Tin Bligh Resources St . Barbara ACH Minerals/Silver Lake . 1.5% NSR Metals X 32 Canada Canada Canada Canada Canada Canada Canada Canada Canada Mexico Mexico Mexico Chile Chile Chile Chile Bolivia Argentina Dominican Republic Nicaragua Nicaragua Brazil Australia Australia Australia Australia Australia Tons of Ore (M) 15.911 22.370 91.607 32.641 17.383 81.336 6.552 0.000 35.616 4.614 148.220 7.557 159.465 1.726 51.052 0.932 28.670 13.623 100.267 3.109 11.509 558.219 114.945 2.905 1037.054 8.847 57.541 49.287 24.008 646.704 459.664 198.103 4.145 320.645 0.638 1.327 103.481 1.378 7.606 18.868 0.762 1.507 8.666 3.097 0.027 0.026 0.034 0.023 0.026 0.036 0.019 0.000 0.017 0.218 0.013 0.064 0.005 0.014 0.019 0.080 0.027 0.184 0.030 0.141 0.011 0.010 0.033 0.060 0.006 0.055 0.027 0.031 0.013 0.015 0.004 0.013 0.047 0.046 0.029 0.148 0.087 0.126 0.089 0.050 0.002 0.064 0.219 0.099 0.000 0.000 0.423 0.591 3.116 0.744 0.457 2.963 0.124 0.000 0.588 1.005 1.867 0.483 0.827 0.024 0.984 0.075 0.763 2.503 3.035 0.439 0.124 5.689 3.772 0.175 5.775 0.483 1.570 1.543 0.310 9.870 1.609 2.674 0.194 14.680 0.018 0.196 8.960 0.173 0.675 0.946 0.001 0.097 1.900 0.307 0.000 PROPERTY ROYALTY OPERATOR LOCATION PROVEN + PROBABLE Tons of Ore (M) Average Gold Grade (opt) RESERVES(3)(4)(5) Gold Contained Ozs(6) (M) Gold(2) Meekatharra (Paddy’s . Flat) (DEV) . . Meekatharra (Reedys) (DEV) . . Meekatharra . . . . . (Yaloginda) . . . . . Red Dam . . . South Laverton . . Southern Cross . . . Inata . . Taparko(31) . . Wassa and Prestea . . Svetloye (DEV) . . . . . . . . . . . . . . . 1.5% NSR A$10 per gold ounce produced(29) Metals X Australia 3.858 0.125 0.483 . . . . . . . . . . . . . . . . . . 1.5%, 1.5 - 2.5%, 1% NSR(30) Metals X Australia 0.992 0.092 0.45% NSR 2.5% NSR 1.5% NSR 1.5% NSR 2.5% GSR 2.0% GSR 10.5% of gold produced(32) 1.0% NSR Metals X Evolution Mining Saracen China Hanking Holding Avocet Nord Gold Golden Star Resources Polymetal Australia Australia Australia Australia Burkina Faso Burkina Faso Ghana Russia 3.858 1.764 7.961 3.286 5.820 5.978 26.044 8.069 0.007 0.063 0.065 0.070 0.056 0.084 0.082 0.082 0.092 0.028 0.111 0.516 0.229 0.326 0.502 2.143 0.664 Proven and Probable Silver Reserves As of December 31, 2015(1) Silver(33) PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) 6.552 35.616 51.052 11.509 114.945 1037.054 57.541 24.008 646.704 7.606 0.638 1.327 103.481 7.606 0.762 8.069 Average Silver Grade (opt) Silver Contained Ozs(6) (M) 0.278 0.297 0.324 1.009 0.082 0.050 0.923 0.642 0.876 0.156 0.740 0.302 0.523 0.156 0.498 0.095 1.823 10.569 16.516 11.618 9.410 51.895 53.100 15.410 566.550 1.185 0.472 0.401 54.145 1.185 0.380 0.765 PROPERTY ROYALTY OPERATOR LOCATION Gold Hill . . . . . . . . . . . . Hasbrouck (DEV) . . Soledad Mountain (DEV) . . Kutcho Creek (DEV) . . . Rainy River (DEV) . . . Schaft Creek (DEV) . . . . Dolores . . Pe˜nasquito(21) . . . . . . . . . . . . . . . . . El Toqui . . Don Mario Don Nicolas (DEV) . . . . . . . . . . Pueblo Viejo . . La India (DEV) . Balcooma (DEV) Svetloye (DEV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0 - 2.0% NSR(10) 0.6 - 0.9% NSR(11) 1.5% NSR 3.0% NSR(14) 2.0% NSR 60% Stream 3.5% NPI 2.0% NSR 2.0% NSR (Oxide) 2.0% NSR (Sulfide) 0.0 - 3.0% NSR(24) 3.0% NSR 2.0% NSR 75% of silver produced(27) 3.0% NSR 1.5% NSR 1.0% NSR Kinross West Kirkland/Clover Nevada Golden Queen/Gauss LLC Capstone Mining New Gold Copper Fox/Teck Pan American Goldcorp Nyrstar Orvana Compa˜n´ıa Inversora en Minas Barrick (60%) Condor Gold Consolidated Tin Polymetal United States United States United States Canada Canada Canada Mexico Mexico Chile Bolivia Argentina Dominican Republic Nicaragua Australia Russia 33 Proven and Probable Base Metal Reserves As of December 31, 2015(1) Copper(34) PROPERTY ROYALTY OPERATOR LOCATION . Johnson Camp . . . . Robinson . Caber (DEV) . . . Kutcho Creek (DEV) . . . . . . . . . . . . . . Schaft Creek (DEV) . . . Voisey’s Bay . . . . . Don Mario . El Morro (DEV) . . . . Pascua-Lama (DEV)(35) . . Balcooma (DEV) . . . . . . Las Cruces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5% NSR 3.0% NSR 1.0% NSR 2.0% NSR 3.5% NPI 2.7% NSR 3.0% NSR 1.4% NSR 1.05% NSR 1.5% NSR 1.5% NSR Excelsior Mining KGHM Nyrstar Capstone Mining Copper Fox/Teck Vale Orvana Goldcorp Barrick Consolidated Tin First Quantum Lead(36) United States United States Canada Canada Canada Canada Bolivia Chile Chile Australia Spain PROPERTY ROYALTY OPERATOR LOCATION Pe˜nasquito(21) . El Toqui . . . Balcooma (DEV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0% NSR (Sulfide) 0.0 - 3.0% NSR(24) 1.5% NSR Goldcorp Nyrstar Consolidated Tin Mexico Chile Australia Zinc(37) PROPERTY ROYALTY OPERATOR LOCATION . . . . Caber (DEV) . . Kutcho Creek (DEV) . Pe˜nasquito(21) . . . El Toqui . . . . Balcooma (DEV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0% NSR 2.0% NSR 2.0% NSR (Sulfide) 0.0 - 3.0% NSR(24) 1.5% NSR Nyrstar Capstone Mining Goldcorp Nyrstar Consolidated Tin Canada Canada Mexico Chile Australia NICKEL(38) PROPERTY ROYALTY OPERATOR LOCATION PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) Average Base Metal Grade (%) Base Metal Contained Lbs(6) (M) 111.200 159.465 0.676 11.509 1037.054 39.793 0.638 198.103 320.645 0.762 0.295% 0.431% 0.839% 2.010% 0.271% 1.048% 0.887% 0.494% 0.085% 2.130% 656.000 1375.670 11.355 462.678 5630.715 834.075 11.319 1959.099 548.177 32.466 8.047 4.996% 804.026 PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) 646.704 4.145 0.762 Average Base Metal Grade (%) 0.261% 0.272% 0.517% Base Metal Contained Lbs(6) (M) 3701.260 22.509 7.879 PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) 0.676 11.509 646.704 4.145 0.762 Average Base Metal Grade (%) 8.577% 3.190% 0.626% 5.956% 1.921% Base Metal Contained Lbs(6) (M) 116.036 734.300 8885.920 493.712 29.274 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 39.793 2.237% 1779.968 COBALT(39) PROPERTY ROYALTY OPERATOR LOCATION PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) Average Base Metal Grade (%) Base Metal Contained Lbs(6) (M) Voisey’s Bay . . . . . . . . . . . . . . . . . . . . . . 2.7% NSR Vale Canada 39.793 0.130% 103.331 34 MOLYBDENUM(40) PROPERTY ROYALTY OPERATOR LOCATION PROVEN + PROBABLE RESERVES(3)(4)(5) Tons of Ore (M) Average Base Metal Grade (%) Base Metal Contained Lbs(6) (M) Schaft Creek (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) (13) Reserves have been reported by the operators of record as of December 31, 2015, with the exception of the following properties: Don Mario—September 30, 2015; Gwalia Deeps, South Laverton—June 30, 2015; Hasbrouck Mountain—June 3, 2015; Wharf—June 1, 2015; Svetloye—January 1, 2015; Bald Mountain, El Morro, El Toqui, Gold Hill, Holt, Inata, La India, Meekatharra (Nannine, Paddy’s Flat, Reedys and Yaloginda), Pinson, Rainy River, Ruby Hill and Soledad Mountain—December 31, 2014; Back River—October 21, 2014; Kundip—June 30, 2014; Celtic/Wonder North—November 21, 2013; Schaft Creek—December 31, 2012; Don Nicolas, Johnson Camp and Pascua-Lama—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: A$1,500—South Laverton; A$1,474—Southern Cross $1,450—Kundip; A$1,400—Celtic/Wonder North and Meekatharra (Nannine, Paddy’s Flat, Reedys and Yaloginda); $1,366—Schaft Creek; $1,350—El Toqui; A$1,310—Red Dam; $1,300—El Morro, Pinson and Svetloye; $1,275—Wharf; $1,250—Back River, Holt, Inata, La India, Mount Milligan, Mulatos and Soledad Mountain; A$1,250—Gwalia Deeps; $1,225—Hasbrouck Mountain; $1,200—Andacollo, El Limon, Gold Hill, Leeville, Pascua-Lama, Robinson, Taparko and Twin Creeks; $1,180—Dolores; $1,150—Canadian Malartic; $1,100—Bald Mountain, Don Mario, Don Nicolas, Mara Rosa, Marigold, Pe˜nasquito, Ruby Hill, Wassa, Bogoso and Prestea and Williams; $1,000—Cortez, Goldstrike and Pueblo Viejo; and $983—Pine Cove. No gold price was reported for Balcooma, Caber or Kutcho Creek. 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 material provided to Royal Gold or which is derived from recent publicly-available information from the operators of the various properties or various recent National Instrument 43-101 or JORC Code reports filed by operators. Royal Gold did not prepare reserve or feasibility studies and does not have the ability to independently confirm any reserve information presented. 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%. The royalty is capped at $10 million. As of June 30, 2016, royalty payments of approximately $4.2 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. 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. 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, 2016, approximately 103,000 ounces have been produced. 35 (14) (15) (16) (17) (18) (19) (20) (21) (22) (23) (24) (25) (26) (27) (28) (29) (30) (31) (32) (33) (34) (35) (36) (37) (38) (39) 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%. Goose Lake royalty applies to production above 400,000 ounces. NSR sliding-scale schedule (price of gold per ounce—royalty rate): $0.00 to $350 - 1.0%; above $350 - 1.5%. Thompson Creek will deliver 52.25% of gold produced, at a purchase price equal to the lesser of $435 per ounce delivered or the prevailing spot price. New Gold will deliver: (a) gold in amounts equal to 6.50% of gold produced until 230,000 ounces have been delivered, and 3.25% of gold produced thereafter, and (b) silver in amounts equal to 60% of silver produced until 3.10 million ounces have been delivered, and 30% of silver produced thereafter, in each case at a purchase price equal to 25% of the spot price per ounce delivered. The Company’s royalty is subject to a 2.0 million ounce cap on gold production. There have been approximately 1.55 million ounces of cumulative production as of June 30, 2016. 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%. Operator reports reserves by material type. The sulfide material will be processed by milling. The oxide material will be processed by heap leaching. Teck will deliver gold in amounts equal to 100% of payable gold until 900,000 ounces have been delivered, and 50% of payable gold thereafter, subject to a fixed payable percentage of 89%, at a purchase price equal to 15% of the monthly average gold price for the month preceding the delivery date for each ounce delivered. The royalty covers approximately 30% of the La Fortuna deposit. Reserves attributable to Royal Gold’s royalty represent 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. Barrick will deliver: (a) gold in amounts equal to 7.50% of Barrick’s 60% interest in gold produced until 990,000 ounces have been delivered, and 3.75% of Barrick’s 60% interest in gold produced thereafter, at a purchase price equal to 30% of the spot price per ounce delivered until 550,000 ounces have been delivered, and 60% of the spot price per ounce delivered thereafter; and (b) silver in amounts equal to 75% of Barrick’s 60% interest in silver produced, subject to a minimum silver recovery of 70%, until 50 million ounces have been delivered, and 37.50% of Barrick’s 60% interest in silver produced thereafter, at a purchase price equal to 30% of the spot price per ounce delivered until 23.10 million ounces of silver have been delivered, and 60% of the spot price per ounce delivered thereafter. 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. Golden Star will deliver 9.25% of gold produced, until the earlier of (a) December 31, 2017 or (b) the date at which the Wassa and Prestea underground projects achieve commercial production, at which point Golden Star will deliver 10.5% (or 10.9% if Royal Gold’s total investment increases from $145 million to $150 million) of gold produced until 240,000 ounces have been delivered (or 250,000 ounces if the total investment increases from $145 million to $150 million), at a purchase price equal to 20% of the spot price per ounce delivered. Thereafter Golden Star will deliver 5.5% of gold produced, at a purchase price equal to 30% of the spot price per ounce delivered. Silver reserves were calculated by the operators at the following prices per ounce: $25.96—Schaft Creek; $25.00—Don Nicolas; $23.00—El Toqui; $22.50—Svetloye; $20.00—Gold Hill; $17.50—Hasbrouck Mountain; $17.00—Dolores and Soledad; $16.50—Don Mario and Pe˜nasquito; and $15.00—Pueblo Viejo. No silver price was reported for Balcooma or Kutcho Creek. Copper reserves were calculated by the operators at the following prices per pound: $3.52—Schaft Creek; $3.21—Robinson $3.00—El Morro; $2.98—Voisey’s Bay; $2.75—Don Mario; $2.70—Las Cruces; $2.50—Johnson Camp; and $2.00—Pascua-Lama. 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. 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 $0.95—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: $6.61—Voisey’s Bay. Cobalt reserve price was calculated by the operator at the following price per pound: $12.81—Voisey’s Bay. (40) Molybdenum reserve price was calculated by the operator at the following price per pound: $15.30—Schaft Creek. 36 ITEM 3. LEGAL PROCEEDINGS Refer to Note 15 of the notes to consolidated financial statements for a discussion on litigation associated with our Voisey’s Bay royalty. ITEM 4. MINE SAFETY DISCLOSURE Not applicable. 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’’ on the TSX under the symbol ‘‘RGL’’ until July 8, 2016, when we voluntarily delisted from the TSX. 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, 2014. As of July 28, 2016, there were 884 stockholders of record of our common stock. First Quarter (July, Aug., Sept.—2015) . . . . . . . . . . . . . . . . . . . . . . . . . . Second Quarter (Oct., Nov., Dec.—2015) . . . . . . . . . . . . . . . . . . . . . . . . Third Quarter (Jan., Feb., Mar.—2016) . . . . . . . . . . . . . . . . . . . . . . . . . Fourth Quarter (April, May, June—2016) . . . . . . . . . . . . . . . . . . . . . . . . First Quarter (July, Aug., Sept.—2014) . . . . . . . . . . . . . . . . . . . . . . . . . . Second Quarter (Oct., Nov., Dec.—2014) . . . . . . . . . . . . . . . . . . . . . . . . Third Quarter (Jan., Feb., Mar.—2015) . . . . . . . . . . . . . . . . . . . . . . . . . Fourth Quarter (April, May, June—2015) . . . . . . . . . . . . . . . . . . . . . . . . Sales Prices High Low $63.99 $53.47 $53.32 $72.04 $82.84 $72.81 $77.20 $67.99 $42.21 $34.42 $24.68 $49.50 $63.86 $55.55 $57.55 $61.00 Fiscal Year: 2016 2015 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 2016, our annual dividend is $0.92 per share of common stock. We paid the first payment of $0.23 per share on January 22, 2016, to common stockholders of record at the close of business on January 8, 2016. We paid the second payment of $0.23 per share on April 15, 2016, to common stockholders of record at the close of business on April 1, 2016. We paid the third payment of $0.23 per share on July 15, 2016 to common stockholders of record at the close of business on July 1, 2016. Subject to board approval, we anticipate paying the fourth payment of $0.23 per share on October 14, 2016, to common shareholders of record at the close of business on September 30, 2016. For calendar year 2015, our annual dividend was $0.88 per share of common stock and exchangeable shares (for April 2015 and July 2015 dividend payments only), paid on a quarterly basis of $0.22 per share. For calendar year 2014, we paid an annual dividend of $0.84 per share of common stock and exchangeable shares in four quarterly payments of $0.21 each. 37 ITEM 6. SELECTED FINANCIAL DATA Revenue(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . Net (loss) income . . . . . . . . . . . . . . . . . . . . . . Net (loss) income available to Royal Gold common stockholders . . . . . . . . . . . . . . . . . Net (loss) income per share available to Royal Gold common stockholders: Fiscal Years Ended June 30, 2016 2015 2014 2013 2012 $278,019 $359,790 $ $ 87,235 4,816 $ (82,438) $ 52,678 (Amounts in thousands, except per share data) $237,162 $108,720 $ 63,472 $289,224 $171,167 $ 73,409 $263,054 $156,634 $ 98,309 $ (77,149) $ 51,965 $ 62,641 $ 69,153 $ 92,476 Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends declared per common share(2) . . . . . $ $ $ (1.18) $ (1.18) $ $ 0.91 0.80 0.80 0.87 $ $ $ 0.96 0.96 0.83 $ $ $ 1.09 1.09 0.75 $ $ $ 1.61 1.61 0.56 2016 2015 2014 2013 2012 As of June 30, Stream and royalty interests, net . . . . . Total assets . . . . . . . . . . . . . . . . . . . . Debt . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . Total Royal Gold stockholders’ equity . $2,848,087 $3,066,552 $ 600,685 $ 780,667 $2,229,016 $2,083,608 $2,917,191 $ 313,869 $ 501,264 $2,353,122 (Amounts in thousands) $2,109,067 $2,882,316 $ 302,632 $ 509,759 $2,354,725 $2,120,268 $2,895,747 $ 292,669 $ 525,111 $2,348,887 $1,890,988 $2,365,290 $ 282,172 $ 501,861 $1,838,459 (1) Please refer to Item 7, MD&A, of this report for a discussion of recent developments that contributed to our 29% increase in revenue during fiscal year 2016 when compared to fiscal year 2015 and the 17% increase in revenue during fiscal year 2015 when compared to fiscal year 2014. (2) The 2016, 2015, 2014, 2013 and 2012 calendar year dividends were $0.92, $0.88, $0.84, $0.80 and $0.60, 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 metal streams, royalties, and similar interests. We seek to acquire existing stream and royalty interests or to finance projects that are in production or in the development stage in exchange for stream or royalty interests. We manage our business under two segments: Acquisition and Management of Stream Interests—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 term of the agreement. As of June 30, 2016, we owned stream interests on four producing properties and three development stage properties. As discussed further in Item 1, Business, Fiscal 2016 Business Developments, we invested approximately $1.3 billion in stream interests in our fiscal year 2016, including stream interests relating to Pueblo Viejo, Andacollo, Wassa and Prestea, and Rainy River. Stream interests accounted for 38 approximately 66% and 34% of our total revenue for the fiscal years ended June 30, 2016 and 2015, respectively. We expect stream interests to continue growing as a proportion of our total revenue. Acquisition and Management of Royalty 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. As of June 30, 2016, we owned royalty interests on 34 producing properties, 21 development stage properties and 131 exploration stage properties, of which we consider 50 to be evaluation stage projects. We use ‘‘evaluation stage’’ to describe exploration stage properties that contain mineralized material and on which operators are engaged in the search for reserves. Royalties accounted for approximately 34% and 66% of our total revenue for the fiscal years ended June 30, 2016 and 2015, respectively. We do not conduct mining operations on the properties in which we hold stream and royalty interests, and except for our interest in the Peak Gold, LLC joint venture, we are not required to contribute to capital costs, exploration costs, environmental costs or other operating costs on those properties. In the ordinary course of business, we engage in a continual review of opportunities to acquire existing stream and royalty interests, to establish new streams on operating mines, to create new stream and royalty interests through the financing of mine development or exploration, or to acquire companies that hold stream and 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 and term sheets, participation in preliminary discussions and negotiations and involvement as a bidder in competitive processes. Our financial results are primarily tied to the price of gold and, to a lesser extent, the price of silver and copper, together with the amounts of production from our producing stage stream and royalty interests. For the fiscal years ended June 30, 2016, 2015 and 2014, gold, silver, and copper price averages and percentage of revenue by metal were as follows: Metal Gold ($/ounce . . . . . . . . . . . . . . . . . . . . . Silver ($/ounce) . . . . . . . . . . . . . . . . . . . Copper ($/pound) . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . June 30, 2016 June 30, 2015 June 30, 2014 Fiscal Year Ended Average Price $1,168 $15.32 $ 2.22 N/A Percentage of Revenue Average Price Percentage of Revenue Average Price Percentage of Revenue 88% $1,224 3% $17.36 4% $ 2.89 N/A 5% 81% $1,296 3% $20.57 7% $ 3.18 N/A 9% 72% 6% 8% 14% Operators’ Production Estimates by Stream and Royalty Interest for Calendar 2016 We received annual production estimates from many of the operators of our producing mines during the first calendar quarter of 2016. The following table shows such production estimates for our principal producing properties for calendar 2016 as well as the actual production reported to us by the various operators through June 30, 2016. 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. 39 Operators’ Estimated and Actual Production by Stream and Royalty Interest for Calendar 2016 Principal Producing Properties Calendar 2016 Operator’s Production Estimate(1) Silver (oz.) Base Metals (lbs.) Gold (oz.) Calendar 2016 Operator’s Production Actual(2)(3) Silver (oz.) Base Metals (lbs.) Gold (oz.) 57,600 240,000 - 270,000 600,000 - 650,000 — — Not provided — — 25,300 99,700 — — 321,900 Not provided — — — Stream/Royalty Stream: Andacollo(4) . . . . Mount Milligan(5) . Pueblo Viejo(6) . . Wassa and Prestea(7) . . . . . 180,000 - 205,000 Royalty: Cortez GSR1 . . . Cortez GSR2 . . . Cortez GSR3 . . . Cortez NVR1 . . . Pe˜nasquito(8)(9) . . . . . . . . . . . . . Lead(8)(9) Zinc(8)(9) 119,200 1,300 120,500 68,900 520,000 - 580,000 — — — — 22 - 24 million 95,700 31,800 2,700 34,400 23,700 161,000 — — — — — 145 - 155 million 375 - 400 million — — — — 7.8 million — — — — — 46.1 million 109.4 million (1) Production estimates received from our operators are for calendar 2016. 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) Actual production figures shown are for the period January 1, 2016 through June 30, 2016, unless otherwise noted. (3) Actual production figures for Cortez are based on information provided to us by the operators, and actual production figures for Andacollo, Mount Milligan, Pe˜nasquito (gold) and Wassa and Prestea are the operators’ publicly reported figures. (4) (5) (6) (7) (8) (9) The estimated and actual production figures shown for Andacollo are contained gold in concentrate. The estimated and actual production figures shown for Mount Milligan are payable gold in concentrate. The estimated and actual production figures shown are payable gold in dor´e and represent Barrick’s 60% interest in Pueblo Viejo. The estimated production figure shown is payable gold in dor´e. The estimated gold and silver production figures reflect payable gold and silver in concentrate and dor´e, while the estimated lead and zinc production figures reflect payable metal in concentrate. The Company’s royalty interest at Pe˜nasquito includes gold, silver, lead and zinc. Actual production for the quarter ended March 31, 2016, was not available from the operator as of the date of this report. 40 Historical Production The following table discloses historical production for the past three fiscal years for the principal producing properties that are subject to our stream and royalty interests, as reported to us by the operators of the mines: Historical Production(1) by Stream and Royalty Interest Principal Producing Properties For the Fiscal Years Ended June 30, 2016, 2015 and 2014 Metal 2016 2015 2014 Stream/Royalty Stream: Mount Milligan . . . . . . . . . . . Andacollo . . . . . . . . . . . . . . . Pueblo Viejo . . . . . . . . . . . . . Wassa and Prestea . . . . . . . . . Gold Gold Gold Silver Gold 108,800 oz. 41,600 oz. 31,200 oz. 208,900 oz. 20,100 oz. 76,900 oz. N/A N/A N/A N/A 21,100 oz. N/A N/A N/A N/A Royalty: Pe˜nasquito . . . . . . . . . . . . . . . Gold Silver Lead Zinc Gold Gold Gold Gold Gold . . . . . . . . . . . . Nickel Copper Gold Cortez GSR1 . . . . . . . . . . . . . Cortez GSR2 . . . . . . . . . . . . . Cortez GSR3 . . . . . . . . . . . . . Cortez NVR1 . . . . . . . . . . . . Holt(2) . . . . . . . . . . . . . . . . . . Voisey’s Bay(2) Andacollo . . . . . . . . . . . . . . . 584,000 oz. 21.4M oz. 134.2 Mlbs. 333.0 Mlbs. 62,600 oz. 11,400 oz. 74,000 oz. 52,100 oz. 58,300 oz. 78.6 Mlbs. 56.2 Mlbs. — oz. 742,100 oz. 24.6M oz. 158.4 Mlbs. 340.8 Mlbs. 153,000 oz. 76,000 oz. 229,000 oz. 167,000 oz. 61,500 oz. 62.8 Mlbs. 64.8 Mlbs. 41,500 oz. 534,200 oz. 27.7M oz. 175.5 Mlbs. 310.9 Mlbs. 7,600 oz. 87,800 oz. 95,400 oz. 84,400 oz. 63,100 oz. 123.7 Mlbs. 80.5 Mlbs. 50,400 oz. (1) Historical production relates to the amount of metal sales, subject to our stream and royalty interests for each fiscal year presented, as reported to us by the operators of the mines, and may differ from stream deliveries discussed in Item 2, Properties, or from the operators’ public reporting. (2) Royalty no longer considered principal to our business as of June 30, 2016. 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. 41 Our most critical accounting estimates relate to our assumptions regarding future gold, silver, copper, nickel 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 stream and royalty interests. These estimates and the underlying assumptions affect the potential impairments of long-lived assets and the ability to realize income tax benefits associated with deferred tax assets. These estimates and assumptions also affect the rate at which we recognize revenue or charge depreciation, depletion and amortization to earnings. On an ongoing basis, management evaluates these estimates and assumptions; however, actual amounts could differ from these estimates and assumptions. Differences between estimates and actual amounts are adjusted and recorded in the period that the actual amounts are known. Stream and Royalty Interests Stream and royalty interests include acquired stream and royalty interests in production, development and exploration stage properties. The costs of acquired stream and royalty interests are capitalized as tangible assets as such interests do not meet the definition of a financial asset under the Accounting Standards Codification (‘‘ASC’’) guidance. Acquisition costs of production stage stream and royalty interests are depleted using the units of production method over the life of the mineral property (as sales occur under stream interests or royalty payments are recognized), which are estimated using proven and probable reserves as provided by the operator. Acquisition costs of stream and royalty interests on development stage mineral properties, which are not yet in production, are not amortized until the property begins production. Acquisition costs of stream or 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. 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 stream and royalty interests in production and development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each stream and royalty interest using estimates of proven and probable 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 and other metals, and whenever new information regarding the mineral properties is obtained from the operator indicating that production will not likely occur or may be reduced in the future, thus potentially affecting the future recoverability of our stream or royalty interests. Impairments in the carrying value of each property are measured and recorded to the extent that the carrying value in each property exceeds its estimated fair value, which is generally calculated using estimated future discounted cash flows. Estimates of gold, silver, copper, nickel and other metal prices, operators’ estimates of proven and probable reserves or mineralized material related to our stream or royalty properties, and operators’ estimates of operating and capital costs are subject to certain risks and uncertainties which may affect the recoverability of our investment in these stream and royalty interests in mineral properties. It is possible that changes could occur to these estimates, which could adversely affect the net cash flows expected to be generated from these stream and royalty interests. Refer to Note 4 of the notes to consolidated financial statements for discussion and the results of our impairment assessments for the fiscal years ended June 30, 2016 and 2015. 42 Revenue Revenue is recognized pursuant to guidance in ASC 605 and based upon amounts contractually due pursuant to the underlying streaming or royalty agreement. Specifically, revenue is recognized in accordance with the terms of the underlying stream or royalty agreements subject to (i) the pervasive evidence of the existence of the arrangements; (ii) the risks and rewards having been transferred; (iii) the stream or royalty being fixed or determinable; and (iv) the collectability being reasonably assured. For our streaming agreements, we recognize revenue when the metal is sold. Metal Sales Gold and silver received under our metal streaming agreements is taken into inventory and then is sold primarily using average spot rate gold and silver forward contracts. The sales price for our gold and silver sold in average spot rate forward contracts is determined by the average daily gold or silver spot prices under the term of the contract, typically over a consecutive number of trading days between 10 days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policy in effect at the time) commencing shortly after receipt and purchase of the metal. Revenue from gold and silver sales is recognized on the date of the settlement, which is also the date that title to the gold or silver passes to the purchaser. Cost of Sales Cost of sales is specific to our stream agreements and is the result of our purchase of gold and silver for a cash payment. The cash payment at Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold or silver spot price near the date of metal delivery. Exploration Costs Exploration costs are specific to our Peak Gold joint venture for exploration and advancement of the Tetlin gold project, as discussed further in Note 3 of our notes to consolidated financial statements. Exploration costs associated with Peak Gold’s exploration and advancement of the Tetlin gold project are expensed when incurred. Income Taxes The Company accounts for income taxes in accordance with the guidance of ASC 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 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. 43 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 11 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, 2016, we had current assets of $164.8 million compared to current liabilities of $22.7 million resulting in a working capital surplus of $142.1 million and a current ratio of 7 to 1. This compares to current assets of $797.0 million and current liabilities of $25.0 million at June 30, 2015, resulting in a working capital surplus of $772.0 million and a current ratio of approximately 32 to 1. The decrease in our working capital was primarily attributable to a decrease in our cash and equivalents as a result of the recent stream acquisitions, as discussed earlier under Item 1, Business, Fiscal 2016 Business Developments. 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, 2016, liquidity needs were met from $288.8 million in net revenue and our available cash resources. As of June 30, 2016, the Company had $375 million available and $275 million outstanding under its revolving credit facility. Working capital, combined with the Company’s undrawn revolving credit facility, resulted in $517.1 million of total liquidity at June 30, 2016. The Company was in compliance with each financial covenant under its revolving credit facility as of June 30, 2016. Refer to Note 6 of our notes to consolidated financial statements and below (‘‘Recent Liquidity and Capital Resource Developments’’) for further discussion on our debt. 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 stream and royalty interests, including the remaining conditional commitments incurred in connection with the Ilovica, Golden Star and Rainy River stream acquisitions and the Peak Gold joint venture. 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 stream and 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. 44 Recent Liquidity and Capital Resource Developments Amendment to Revolving Credit Facility On March 16, 2016, the Company entered into Amendment No. 2 (the ‘‘Amendment’’) to the Sixth Amended and Restated Revolving Credit Agreement, dated as of January 29, 2014 (as amended by Amendment No. 1 thereto as of April 29, 2015, the ‘‘Revolving Credit Agreement’’), by and among the Company, certain subsidiaries of the Company as guarantors, certain lenders from time to time party thereto, and HSBC Bank USA, National Association, as administrative agent for the lenders. The Amendment revises the Revolving Credit Agreement to extend the scheduled maturity date from January 29, 2019 to March 16, 2021. As of June 30, 2016, the Company had $275.0 million outstanding under the Revolving Credit Agreement. Dividend Increase On November 10, 2015, we announced an increase in our annual dividend for calendar 2016 from $0.88 to $0.92, payable on a quarterly basis of $0.23 per share. The newly declared dividend is 5% higher than the dividend paid during calendar 2015. Royal Gold has steadily increased its annual dividend since calendar 2001. Summary of Cash Flows Operating Activities Net cash provided by operating activities totaled $169.9 million for the fiscal year ended June 30, 2016, compared to $192.1 million for the fiscal year ended June 30, 2015. The decrease was primarily due to an increase in income taxes paid of approximately $55.8 million primarily related to the sale of the Andacollo royalty, an increase in exploration costs of approximately $6.4 million and an increase in interest paid of approximately $7.3 million. These decreases in net cash provided by operating activities were partially offset by an increase in proceeds received from our stream and royalty interest interests, net of production taxes and cost of sales, of $47.5 million. Net cash provided by operating activities totaled $192.1 million for the fiscal year ended June 30, 2015, compared to $147.2 million for the fiscal year ended June 30, 2014. The increase was primarily due to an increase in proceeds received from our stream and royalty interests, net of production taxes and cost of sales, of approximately $31.2 million. The increase was also due to a decrease in income tax payments, net of refunds, of approximately $7.1 million. Investing Activities Net cash used in investing activities totaled $1.0 billion for the fiscal year ended June 30, 2016, compared to $51.2 million for the fiscal year ended June 30, 2015. The increase in cash used in investing activities is primarily due to an increase in acquisitions of stream and royalty interests in mineral properties (primarily the Pueblo Viejo and Andacollo stream acquisitions) compared to the prior year period. Please refer to Item 1, Business, Fiscal 2016 Business Developments, for further discussion on our recently acquired streams. Net cash used in investing activities totaled $51.2 million for the fiscal year ended June 30, 2015, compared to $84.8 million for the fiscal year ended June 30, 2014. The decrease in cash used in investing activities was primarily due to a decrease in funding for stream or royalty acquisitions and the termination of the Tulsequah streaming agreement, resulting in the return of the original $10.0 million advance payment. The Company made approximately $52.5 million in commitment payments during the fiscal year ended June 30, 2015, as part of the Phoenix Gold and Ilovica stream acquisitions. 45 Financing Activities Net cash provided by financing activities totaled $213.4 million for the fiscal year ended June 30, 2016, compared to cash used in financing activities of $57.6 million for the fiscal year ended June 30, 2015. The increase in cash provided by financing activities is primarily due to the Company’s $275 million borrowing (net of repayment) under its revolving credit facility to fund stream acquisitions during the current period. Refer to Item 1, Business, Fiscal 2016 Business Developments, for further discussion on our recently acquired streams. Net cash used in financing activities totaled $57.6 million for the fiscal year ended June 30, 2015, compared to cash provided by financing activities of $66.9 million for the fiscal year ended June 30, 2014. The decrease was the result of a purchase of an additional royalty interest from a non-controlling interest of approximately $11.5 million during fiscal year 2014. This decrease was partially offset by an increase in the common stock dividend payment, which was the result of an increase in the dividend rate when compared to fiscal year 2014. Contractual Obligations Our contractual obligations as of June 30, 2016, are as follows: Contractual Obligations Total 2019 Notes(1) Revolving credit facility(2) . . . . . . . . . . . . . . . $401,913 $320,458 Payments Due by Period (in thousands) Less than 1 Year $10,638 $ 7,960 1 - 3 Years 3 - 5 Years $391,275 $ 15,919 $ — $296,579 Total . . . . . . . . . . . . . . . . . . $722,371 $18,598 $407,194 $296,579 More than 5 Years $— $— $— (1) Amounts represent principal ($370 million) and estimated interest payments ($31.9 million) assuming no early extinguishment. (2) Amounts represent principal ($275 million) and estimated interest payments ($45.5 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 stream or royalty commitments as discussed in Note 15 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, 2016, Compared with Fiscal Year Ended June 30, 2015 For the fiscal year ended June 30, 2016, we recorded a net loss available to Royal Gold common stockholders of $77.1 million, or ($1.18) per basic share and diluted share, compared to net income available to Royal Gold common stockholders of $52.0 million, or $0.80 per basic share and diluted share, for the fiscal year ended June 30, 2015. The decrease in our earnings per share was primarily attributable to impairment charges of approximately $98.6 million (including a royalty receivable write 46 down of approximately $2.9 million) on our stream interest at the Phoenix Gold Project and certain other non-principal royalty interests during our quarter ended March 31, 2016, as discussed further below. The decrease in our earnings per share was also attributable to an increase in tax expense of approximately $56.0 million due to the Company’s termination of the Andacollo royalty interest, as discussed below, and the planned liquidation of our Chilean subsidiary during the quarter ended September 30, 2015. These decreases were partially offset by an increase in our revenue, which is also discussed below. The effect of the impairment charges during our fiscal year ended June 30, 2016, was $1.33 per basic share, after taxes, while the effect of the tax expense attributable to the termination of the Andacollo royalty interest during the current period, was $0.86 per basic share. During the prior year period, our earnings per share were negatively impacted by impairment charges of approximately $31.3 million (including a royalty receivable write down of $3.0 million) on certain non-principal royalty interests. The effect of the impairment charges during the fiscal year ended June 30, 2015, was $0.37 per basic share, after taxes. For the fiscal year ended June 30, 2016, we recognized total revenue of $359.8 million, which is comprised of stream revenue of $238.0 million and royalty revenue of $121.8 million, at an average gold price of $1,168 per ounce, an average silver price of $15.32 per ounce and an average copper price of $2.22 per pound, compared to total revenue of $278.0 million, which is comprised of stream revenue of $94.1 million and royalty revenue of $183.9 million, at an average gold price of $1,224 per ounce, an average silver price of $17.36 per ounce and an average copper price of $2.89 per pound, for the fiscal year ended June 30, 2015. Revenue and the corresponding production, attributable to our stream and 47 royalty interests, for the fiscal year ended June 30, 2016 compared to the fiscal year ended June 30, 2015 is as follows: Revenue and Reported Production Subject to our Stream and Royalty Interests Fiscal Years Ended June 30, 2016 and 2015 (In thousands, except reported production in ozs. and lbs.) Stream/Royalty Stream(2): Fiscal Year Ended June 30, 2016 Fiscal Year Ended June 30, 2015 Metal(s) Revenue Reported Production(1) Revenue Reported Production(1) Mount Milligan . . . . . . . . . . . . . . . . . . Gold Andacollo . . . . . . . . . . . . . . . . . . . . . . Gold Pueblo Viejo . . . . . . . . . . . . . . . . . . . . Gold Silver Wassa and Prestea . . . . . . . . . . . . . . . . Gold Other(5) . . . . . . . . . . . . . . . . . . . . . . . . Gold Total stream revenue . . . . . . . . . . . . . . . . Royalty: Pe˜nasquito . . . . . . . . . . . . . . . . . . . . . . $125,438 $ 49,243 $ 39,683 $ 23,346 318 $ $238,028 $ 22,760 Gold Silver Lead Zinc $ 94,104 N/A N/A N/A N/A N/A $ 94,104 $ 30,306 108,800 oz. 41,600 oz. 31,200 oz. 208,900 oz. 20,100 oz. 300 oz. 584,000 oz. 21.4 Moz. 134.2 Mlbs. 333.0 Mlbs. Voisey’s Bay(3) . . . . . . . . . . . . . . . . . . . $ 11,044 $ 16,665 Nickel Copper Holt(3) . . . . . . . . . . . . . . . . . . . . . . . . . Gold Cortez . . . . . . . . . . . . . . . . . . . . . . . . . Gold Andacollo(4) . . . . . . . . . . . . . . . . . . . . . Gold Other(5) . . . . . . . . . . . . . . . . . . . . . . . . Various Total royalty revenue . . . . . . . . . . . . . . . . Total Revenue . . . . . . . . . . . . . . . . . . . . . 78.6 Mlbs. 56.2 Mlbs. 58,300 oz. 74,000 oz. — oz. $ 11,954 $ 18,044 $ 38,033 N/A $ 68,913 $183,915 $278,019 $ 10,295 6,107 $ $ — $ 71,556 $121,762 $359,790 76,900 oz. N/A N/A N/A N/A N/A 742,100 oz. 24.6 Moz. 158.4 Mlbs. 340.8 Mlbs. 62.8 Mlbs. 64.8 Mlbs. 61,500 oz. 229,000 oz. 41,500 oz. N/A (1) Reported production relates to the amount of metal sales, subject to our stream and royalty interests, for the twelve months ended June 30, 2016 and 2015, and may differ from the operators’ public reporting. (2) Refer to Item 2, Properties, for further discussion on our principal stream interests. Our streams at Andacollo, Pueblo Viejo and Wassa and Prestea were acquired during the quarter ended September 30, 2015. Refer to Item 1, Business, Fiscal 2016 Business Developments, for further discussion on the recent stream acquisitions. (3) Royalty no longer considered principal to our business as of June 30, 2016. (4) Refer to Item 1, Business, Fiscal 2016 Business Developments, for further discussion on the recent Andacollo royalty sale. 48 (5) Individually, no stream or royalty included within the ‘‘Other’’ category contributed greater than 5% of our total revenue for either period. The increase in our total revenue for the fiscal year ended June 30, 2016, compared with the fiscal year ended June 30, 2015, resulted primarily from an increase in our stream revenue, which was a result of increased production at Mount Milligan and new production from our recently acquired streams, Wassa and Prestea, Pueblo Viejo, and Andacollo. Gold and silver ounces purchased and sold during the fiscal year ended June 30, 2016 and 2015, and gold and silver ounces in inventory as of June 30, 2016 and 2015, for our streaming interests were as follows: Gold Stream Purchases (oz.) Sales (oz.) Purchases (oz.) Sales (oz.) Fiscal Year Ended June 30, 2016 Fiscal Year Ended June 30, 2015 As of June 30, 2016 As of June 30, 2015 Ounces in Ounces in inventory inventory Mount Milligan . . . . . . . . . . Andacollo . . . . . . . . . . . . . . Wassa and Prestea . . . . . . . . Pueblo Viejo . . . . . . . . . . . . Phoenix Gold . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . 111,000 41,700 21,400 42,200 300 216,600 108,800 41,600 20,100 31,200 300 202,000 74,400 N/A N/A N/A N/A 74,400 76,900 N/A N/A N/A N/A 76,900 7,500 — 1,300 11,000 — 19,800 5,300 N/A N/A N/A N/A 5,300 Silver Stream Purchases (oz.) Sales (oz.) Purchases (oz.) Sales (oz.) Fiscal Year Ended June 30, 2016 Fiscal Year Ended June 30, 2015 As of June 30, 2016 As of June 30, 2015 Ounces in Ounces in inventory inventory Pueblo Viejo . . . . . . . . . . . . 532,600 208,900 N/A N/A 323,700 N/A Our royalty revenue decreased during the fiscal year ended June 30, 2016, compared with the fiscal year ended June 30, 2015, due to decreases in the average metal prices, the recent sale of the Andacollo royalty, and production decreases at Pe˜nasquito and Cortez. Refer to Part I, Item 2, Properties, for discussion and any updates on our principal producing properties. Cost of sales were approximately $71.0 million for the fiscal year ended June 30, 2016, compared to $33.5 million for the fiscal year ended June 30, 2015. The increase is primarily attributable to an increase in production at Mount Milligan and new stream production at Andacollo, Pueblo Viejo, and Wassa and Prestea. Cost of sales is specific to our stream agreements and is the result of RGLD Gold’s purchase of gold and silver for a cash payment. The cash payment for Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold or silver spot price near the date of metal delivery. General and administrative expenses increased to $31.7 million for the fiscal year ended June 30, 2016, from $24.9 million for the fiscal year ended June 30, 2015. The increase during the current period was primarily due to an increase in non-cash stock based compensation of approximately $4.9 million as a result of management’s change in estimate for the number of performance shares that are expected to vest. Depreciation, depletion and amortization expense increased to $141.1 million for the fiscal year ended June 30, 2016, from $93.5 million for the fiscal year ended June 30, 2015. The increase was primarily attributable to the ramp-up in production at Mount Milligan ($11.4 million) and new production from the recently acquired streams at Pueblo Viejo ($21.9 million), Wassa and Prestea ($7.8 million) and Andacollo ($9.0 million). 49 Exploration costs increased to $8.6 million for the fiscal year ended June 30, 2016, from $2.2 million for the fiscal year ended June 30, 2015. Exploration costs are specific to our Peak Gold joint venture for exploration and advancement of the Tetlin gold project, as discussed further in Note 3 of the notes to consolidated financial statements. Impairment of stream and royalty interests and royalty receivables was $98.6 million for the fiscal year ended June 30, 2016 compared to $31.3 million for the fiscal year end June 30, 2015. The impairment of stream and royalty interests ($96.1 million) was the result of our regular impairment analysis conducted during the quarter ended March 31, 2016, and was primarily due to the presence of impairment indicators on our stream interest at the Phoenix Gold Project and two non-principal producing royalty interests, Inata and Wolverine. Also during the current fiscal year, the Company recognized an allowance of approximately $2.9 million on the entire outstanding royalty receivable associated with the Inata interest. The Company will continue to pursue collection efforts of all past due payments. Refer to Note 4 of our notes to consolidated financial statements for further discussion on the impairments recognized during fiscal year 2016. During the fiscal year ended June 30, 2016, we recognized income tax expense totaling $60.7 million compared with $9.6 million during the fiscal year ended June 30, 2015. This resulted in an effective tax rate of (278.9%) during the current period, compared with 15.4% in the prior period. The increase in the effective tax rate for the year ending June 30, 2016 is primarily related to the impacts attributable to the Company’s Andacollo transactions, the liquidation of our Chilean subsidiary, and impairment charges during the current fiscal year. Fiscal Year Ended June 30, 2015, Compared with Fiscal Year Ended June 30, 2014 For the fiscal year ended June 30, 2015, we recorded net income available to Royal Gold common stockholders of $52.0 million, or $0.80 per basic share and diluted share, compared to net income available to Royal Gold common stockholders of $62.6 million, or $0.96 per basic share and diluted share, for the fiscal year ended June 30, 2014. The decrease in our earnings per share was primarily attributable to impairment charges of approximately $31.3 million (including a royalty receivable write down of $3.0 million) on certain non-principal royalty interests during our quarter ended December 31, 2014, as discussed further below. This decrease was partially offset by an increase in our revenue and a decrease in our income tax expense, which are also discussed below. The effect of the impairment charges on our fiscal year ended June 30, 2015, earnings per share was $0.37 per basic share, after taxes. For the fiscal year ended June 30, 2015, we recognized total revenue of $278.0 million, at an average gold price of $1,224 per ounce, an average silver price of $17.36 per ounce, an average copper price of $2.89 per pound and an average nickel price of $7.02 per pound, compared to 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, for the fiscal year ended June 30, 2014. Revenue and the corresponding production, attributable to our 50 stream and royalty interests, for the fiscal year ended June 30, 2015 compared to the fiscal year ended June 30, 2014 is as follows: Revenue and Reported Production Subject to our Stream and Royalty Interests Fiscal Years Ended June 30, 2015 and 2014 (In thousands, except reported production in ozs. and lbs.) Stream/Royalty Stream: Fiscal Year Ended June 30, 2015 Fiscal Year Ended June 30, 2014 Metal(s) Revenue Reported Production(1) Revenue Reported Production(1) Mount Milligan . . . . . . . . . . . . . . . . . . Gold $ 94,104 76,900 oz. $ 27,209 21,100 oz. Total stream revenue . . . . . . . . . . . . . . . Royalty: Andacollo . . . . . . . . . . . . . . . . . . . . . . Gold Pe˜nasquito . . . . . . . . . . . . . . . . . . . . . $ 94,104 $ 38,033 $ 30,306 Gold Silver Lead Zinc Cortez . . . . . . . . . . . . . . . . . . . . . . . . Gold Voisey’s Bay . . . . . . . . . . . . . . . . . . . . $ 18,044 $ 16,665 41,500 oz. 742,100 oz. 24.6 Moz. 158.4 Mlbs. 340.8 Mlbs. 229,000 oz. $ 27,209 $ 48,777 $ 29,281 $ 8,138 $ 25,128 Nickel Copper Holt . . . . . . . . . . . . . . . . . . . . . . . . . . Gold Other(2) . . . . . . . . . . . . . . . . . . . . . . . Various Total royalty revenue . . . . . . . . . . . . . . . Total Revenue . . . . . . . . . . . . . . . . . . . . 62.8 Mlbs. 64.8 Mlbs. 61,500 oz. $ 13,813 N/A $ 84,816 $209,953 $237,162 $ 11,954 $ 68,913 $183,915 $278,019 50,400 oz. 534,200 oz. 27.7 Moz. 175.5 Mlbs. 310.9 Mlbs. 95,400 oz. 123.7 Mlbs. 80.5 Mlbs. 63,100 oz. N/A (1) Reported production relates to the amount of metal sales, subject to our stream and royalty interests, for the twelve months ended June 30, 2015 and 2014, as reported to us by the operators of the mines, and may differ from the operators’ public reporting. (2) Individually, no royalty included within the ‘‘Other’’ category contributed greater than 5% of our total revenue for either period. The increase in our total revenue for the fiscal year ended June 30, 2015, compared with the fiscal year ended June 30, 2014, resulted primarily from an increase in our stream revenue, which was a result of increased production at Mount Milligan. Gold ounces purchased and sold during the fiscal year ended June 30, 2015 and 2014, and gold ounces in inventory as of June 30, 2015 and 2014, for our streaming interests were as follows: Gold Stream Purchases (oz.) Sales (oz.) Purchases (oz.) Sales (oz.) Fiscal Year Ended June 30, 2015 Fiscal Year Ended June 30, 2014 As of June 30, 2015 As of June 30, 2014 Ounces in Ounces in inventory inventory Mount Milligan . . . . . . . . . . 74,400 76,900 28,900 21,100 5,300 N/A 51 Our royalty revenue decreased during the fiscal year ended June 30, 2015, compared with the fiscal year ended June 30, 2014, due to decreases in the average gold, silver and copper prices and due to production decreases primarily at Andacollo and Voisey’s Bay. These decreases were partially offset by increased production at Cortez. Refer to Part I, Item 2, Properties, for discussion and any updates on our principal producing properties. Cost of sales were approximately $33.5 million for the fiscal year ended June 30, 2015, compared to $9.2 million for the fiscal year ended June 30, 2014. The increase is attributable to an increase in production at Mount Milligan. During fiscal 2015, cost of sales was specific to our stream agreement for Mount 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. General and administrative expenses increased to $24.9 million for the fiscal year ended June 30, 2015, from $21.2 million for the fiscal year ended June 30, 2014. The increase was primarily due an increase in non-cash stock based compensation expense of approximately $2.6 million as a result of management’s change in estimate for the number of performance shares that are expected to vest. Depreciation, depletion and amortization expense increased to $93.5 million for the fiscal year ended June 30, 2015, from $91.3 million for the fiscal year ended June 30, 2014. The increase was primarily attributable to the ramp-up in production at Mount Milligan. Impairment of stream and royalty interests was $31.3 million for the fiscal year ended June 30, 2015. The impairment charges were the result of our regular impairment analysis and were primarily due to the presence of impairment indicators on a non-principal producing royalty interest, Wolverine, during the three months ended December 31, 2014. The Company also determined during the three months ended September 30, 2014, that a non-principal production stage royalty interest and one exploration stage royalty interest should be written down to zero for an impairment charge of $1.8 million. Refer to Note 4 of our notes to consolidated financial statements for further discussion on the impairments recognized during fiscal year 2015. During the fiscal year ended June 30, 2015, we recognized income tax expense totaling $9.6 million compared with $19.5 million during the fiscal year ended June 30, 2014. This resulted in an effective tax rate of 15.4% during fiscal year 2015, compared with 23.5% during fiscal year 2014. The decrease in the effective tax rate for the fiscal year ended June 30, 2015, is primarily attributable to (i) a decrease in tax expense relating to a decrease in unrealized taxable foreign currency exchange gains, (ii) a favorable tax rate associated with certain operations in lower-tax jurisdictions, (iii) a valuation allowance release as a result of the strengthening U.S. dollar, (iv) a decrease in tax expense due to the Chilean tax legislation enacted in the quarter ended September 30, 2014, and the corresponding re-measurement of the Chilean long term deferred tax asset to the higher corporate income tax rate, and (v) the impairment charge on the Wolverine royalty interest and the corresponding tax benefit recorded in the quarter ended December 31, 2014, and (vi) net of the effect of an increase in tax expense due to Canadian tax legislation enacted in the quarter ended June 30, 2015, which resulted in the re-measurement of Canadian deferred tax liabilities at the higher tax rate. Excluding the enactment of the Chilean tax legislation during the quarter ended September 30, 2014, the impairment charge on the Wolverine royalty interest during the quarter ended December 31, 2014, and the enactment of Canadian tax legislation during the quarter ended June 30, 2015, the effective tax rate for the twelve months ended June 30, 2015, would have been 19.6%. 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, 52 without limitation, statements regarding projected production estimates and estimates pertaining to timing and commencement of production from the operators of properties where we hold stream and royalty 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 stream and 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: • a low price environment for gold and other metal prices on which our stream and royalty interests are paid or a low price environment for the primary metals mined at properties where we hold stream and royalty interests; • the production at or performance of properties where we hold stream and royalty interests, and variation of actual performance from the production estimates and forecasts made by the operators of these properties; • the successful closing of Centerra’s acquisition of Thompson Creek and simultaneous redemption and pay down of Thompson Creek’s 9.75% secured notes due in 2017, 7.375% unsecured notes due in 2018, and 12.5% unsecured notes due in 2019; • the ability of operators to bring projects, particularly development stage properties, into production on schedule or operate in accordance with feasibility studies; • acquisition and maintenance of permits and authorizations, completion of construction and commencement and continuation of production at the properties where we hold stream and royalty interests; • 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; • liquidity or other problems our operators may encounter, including shortfalls in the financing required to complete construction and a bring a mine into production; • decisions and activities of the operators of properties where we hold stream and royalty interests; • hazards and risks at the properties where we hold stream and royalty interests that are normally associated with developing and mining properties, including unanticipated grade, continuity 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 operators’ mining, processing and treatment techniques, which may change the production of minerals subject to our stream and royalty interests; • changes in the methodology employed by our operators to calculate our stream and royalty interests in accordance with the agreements that govern them; • changes in project parameters as plans of the operators of properties where we hold stream and royalty interests are refined; 53 • accuracy of and decreases in estimates of reserves and mineralization by the operators of properties where we hold stream and royalty interests; • contests to our stream and royalty interests and title and other defects to the properties where we hold stream and royalty interests; • adverse effects on market demand for commodities, the availability of financing, and other effects from adverse economic and market conditions; • future financial needs of the Company and the operators of properties where we hold stream or royalty interests; • federal, state and foreign legislation governing us or the operators of properties where we hold stream and royalty interests; • the availability of stream and 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 stream and royalty interests when evaluating acquisitions; • risks associated with conducting business in foreign countries, including application of foreign laws to contract and other disputes, validity of security interests, environmental, governmental consents for granting interests in exploration and exploration licenses, real estate, contract and permitting laws, currency fluctuations, expropriation of property, repatriation of earnings, taxation, price controls, inflation, import and export regulations, community unrest and labor disputes, endemic health issues, corruption, enforcement and uncertain political and economic environments; • changes in laws governing us, the properties where we hold stream and 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; • changes in management and key employees; and • failure to complete future acquisitions or the failure of transactions involving the operators to close; 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. 54 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. During the fiscal year ended June 30, 2016, we reported revenue of $359.8 million, with an average gold price for the period of $1,168 per ounce, an average silver price for the period of $15.32 per ounce and an average copper price of $2.22 per pound. Approximately 88% of our total recognized revenues for the fiscal year ended June 30, 2016 were attributable to gold sales from our gold producing interests, as shown within the MD&A. For the fiscal year ended June 30, 2016, 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 $33 million. Approximately 3% of our total reported revenue for the fiscal year ended June 30, 2016 was attributable to silver sales from our silver producing interests. For the fiscal year ended June 30, 2016, 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 $1.1 million. Approximately 4% of our total reported revenue for the fiscal year ended June 30, 2016 was attributable to copper sales from our copper producing interests. For the fiscal year ended June 30, 2016, 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 $1.9 million. 55 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 (LOSS) INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY . . . . . . . . . . . . . . . . . . . . . . . CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 57 58 59 60 61 62 56 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, 2016 and 2015, and the related consolidated statements of operations and comprehensive (loss) income, changes in equity and cash flows for each of the three years in the period ended June 30, 2016. 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, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2016, 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, 2016, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated August 11, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Denver, Colorado August 11, 2016 57 ROYAL GOLD, INC. Consolidated Balance Sheets As of June 30, (In thousands except share data) ASSETS Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Royalty receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stream inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Available-for-sale securities (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 2015 $ 116,633 17,990 20,043 9,489 — 614 $ 742,849 37,681 6,422 2,287 6,273 1,511 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,769 797,023 Stream and royalty interests, net (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,848,087 53,696 2,083,608 36,560 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,066,552 $2,917,191 LIABILITIES Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Uncertain tax positions (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,114 15,012 3,554 22,680 600,685 133,867 16,996 6,439 780,667 $ 4,911 14,341 5,721 24,973 313,869 146,603 15,130 689 501,264 Commitments and contingencies (Note 15) EQUITY Preferred stock, $.01 par value, authorized 10,000,000 shares authorized; and 0 shares issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock, $.01 par value, 100,000,000 shares authorized; and 65,093,950 and 65,033,547 shares outstanding, respectively . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Royal Gold stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 651 2,179,781 — 48,584 2,229,016 56,869 650 2,170,643 (3,292) 185,121 2,353,122 62,805 Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,285,885 2,415,927 Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,066,552 $2,917,191 The accompanying notes are an integral part of these consolidated financial statements. 58 Consolidated Statements of Operations and Comprehensive (Loss) Income ROYAL GOLD, INC. For the Years Ended June 30, (In thousands except share data) Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 359,790 $ 278,019 $ 237,162 2016 2015 2014 Costs and expenses Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative . . . . . . . . . . . . . . . . . . . . . . . Production taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation, depletion and amortization . . . . . . . . . . . . . Impairments of stream and royalty interests and royalty receivables (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on available-for-sale securities . . . . . . . . . . . . . . Interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . . Interest and other expense . . . . . . . . . . . . . . . . . . . . . . . . . (Loss) income before income taxes . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net loss (income) attributable to non-controlling interests . . . Net (loss) income attributable to Royal Gold common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to comprehensive (loss) income, net of tax Unrealized change in market value of available-for-sale 70,979 31,720 3,978 8,601 141,108 98,588 354,974 4,816 2,340 3,711 (32,625) (21,758) (60,680) (82,438) 5,289 33,450 24,873 5,446 2,194 93,486 31,335 190,784 87,235 (183) 883 (25,691) 62,244 (9,566) 52,678 (713) 9,158 21,186 6,756 — 91,342 — 128,442 108,720 (4,499) 2,050 (23,344) 82,927 (19,455) 63,472 (831) $ $ (77,149) $ 51,965 (82,438) $ 52,678 $ $ 62,641 63,472 securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,632 (3,292) (98) Reclassification adjustment for (gains) losses included in net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . Comprehensive loss (income) attributable to non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive (loss) income attributable to Royal Gold (2,340) (79,146) 160 49,546 4,510 67,884 5,289 (713) (831) stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (73,857) $ 48,833 $ 67,053 Net (loss) income per share available to Royal Gold common stockholders: Basic (loss) earnings per share . . . . . . . . . . . . . . . . . . . . . . . Basic weighted average shares outstanding . . . . . . . . . . . . . . Diluted (loss) earnings per share . . . . . . . . . . . . . . . . . . . . . Diluted weighted average shares outstanding . . . . . . . . . . . . Cash dividends declared per common share . . . . . . . . . . . . . $ $ $ (1.18) $ 0.80 65,074,455 65,007,861 (1.18) $ 0.80 65,074,455 65,125,173 0.91 $ 0.87 $ $ $ 0.96 64,909,149 0.96 65,026,256 0.83 The accompanying notes are an integral part of these consolidated financial statements. 59 l a t o T y t i u q E g n i l l o r t n o c - n o N d e t a l u m u c c A s t s e r e t n i s g n i n r a E s r e d l o h k c o t S d l o G l a y o R d e t a l u m u c c A r e h t O e v i s n e h e r p m o C ) s s o L ( e m o c n I l a n o i t i d d A n I - d i a P l a t i p a C t n u o m A s e r a h S t n u o m A s e r a h S e l b a e g n a h c x E s e r a h S s e r a h S n o m m o C 6 3 6 , 0 7 3 , 2 $ 9 4 7 , 1 2 $ 9 7 2 , 1 8 1 $ ) 2 7 5 , 4 ( $ 3 7 1 , 2 4 1 , 2 $ 5 6 3 , 9 2 $ 9 2 2 , 7 6 6 2 4 6 $ 6 3 0 , 4 8 1 , 4 6 — ) 3 1 7 , 3 1 ( 7 9 2 , 4 2 7 4 , 3 6 2 1 4 , 4 ) 8 9 4 , 2 ( ) 9 4 0 , 4 5 ( — ) 0 5 2 , 2 ( — 1 3 8 — — ) 8 9 4 , 2 ( — — — — — 1 4 6 , 2 6 ) 9 4 0 , 4 5 ( — — — — — — 2 1 4 , 4 — — — — 4 4 6 , 2 1 ) 3 6 4 , 1 1 ( 6 9 2 , 4 — — — — — — — — — — — — ) 7 4 6 , 2 1 ( ) 2 7 3 , 7 8 2 ( 3 — 1 — — — — — — — — — 2 7 3 , 7 8 2 3 9 9 , 6 0 1 7 5 5 , 2 7 3 , 2 $ 2 3 8 , 7 1 $ 1 7 8 , 9 8 1 $ ) 0 6 1 ( $ 0 5 6 , 7 4 1 , 2 $ 8 1 7 , 6 1 $ 7 5 8 , 9 7 3 6 4 6 $ 1 0 4 , 8 7 5 , 4 6 — 0 0 7 , 5 4 9 7 2 , 6 8 7 6 , 2 5 ) 2 3 1 , 3 ( ) 0 4 4 , 1 ( ) 5 1 7 , 6 5 ( — 0 0 7 , 5 4 — — 3 1 7 — ) 0 4 4 , 1 ( — — — — — 5 6 9 , 1 5 ) 5 1 7 , 6 5 ( — — — — — — ) 2 3 1 , 3 ( — — — — — 5 1 7 , 6 1 8 7 2 , 6 7 2 9 , 5 1 4 , 2 $ 5 0 8 , 2 6 $ 1 2 1 , 5 8 1 $ ) 2 9 2 , 3 ( $ 3 4 6 , 0 7 1 , 2 $ 9 3 1 , 9 ) 8 3 4 , 2 8 ( ) 7 4 6 ( 2 9 2 , 3 ) 8 8 3 , 9 5 ( — ) 7 4 6 ( — — ) 9 8 2 , 5 ( 5 8 8 , 5 8 2 , 2 $ 9 6 8 , 6 5 $ — — — ) 9 4 1 , 7 7 ( ) 8 8 3 , 9 5 ( 4 8 5 , 8 4 $ — — — — — 2 9 2 , 3 — — — — 8 3 1 , 9 $ 1 8 7 , 9 7 1 , 2 $ — — — — — — — — — — — — — $ $ — — — — — — — — — — — — — ) 8 1 7 , 6 1 ( ) 7 5 8 , 9 7 3 ( 3 — 1 — — — — — — — — — 7 5 8 , 9 7 3 9 8 2 , 5 7 0 5 6 $ 7 4 5 , 3 3 0 , 5 6 1 — — — — — — — — 3 0 4 , 0 6 1 5 6 $ 0 5 9 , 3 9 0 , 5 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C N I , D L O G L A Y O R y t i u q E n i s e g n a h C f o s t n e m e t a t S d e t a d i l o s n o C 4 1 0 2 d n a 5 1 0 2 , 6 1 0 2 , 0 3 e n u J d e d n E s r a e Y e h t r o F ) a t a d e r a h s t p e c x e s d n a s u o h t n I ( e r a h s d e t a l e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s t s e r e t n i . . . . . . . . . . . . . . . . . . . . . . . e r u t n e v t n i o j l d o G k a e P d n a n o i t a s n e p m o c d e s a b - k c o t S . . . . . . . . . . . . . . . . . . . . . . . . . s e c n a u s s i e m o c n i t e N s s o l e v i s n e h e r p m o c r e h t O g n i l l o r t n o c - n o n o t n o i t u b i r t s i D . . . . . . . . . . d e r a l c e d s d n e d i v i D 5 1 0 2 , 0 3 e n u J t a e c n a l a B s e r a h s e l b a e g n a h c x e f o e g n a h c x E : r o f k c o t s n o m m o c f o e c n a u s s I e r a h s d e t a l e r d n a n o i t a s n e p m o c d e s a b - k c o t S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s t s e r e t n i . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s e c n a u s s i . . s s o l t e N e m o c n i e v i s n e h e r p m o c r e h t O g n i l l o r t n o c - n o n o t n o i t u b i r t s i D . . . . . . . . . . d e r a l c e d s d n e d i v i D 6 1 0 2 , 0 3 e n u J t a e c n a l a B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 0 2 , 0 3 e n u J t a e c n a l a B s e r a h s e l b a e g n a h c x e f o e g n a h c x E t n e m n g i s s a t s e r e t n i g n i l l o r t n o c - n o N : r o f k c o t s n o m m o c f o e c n a u s s I e r a h s d e t a l e r d n a n o i t a s n e p m o c d e s a b - k c o t S . . . . . . . . . . . . . . . s t s e r e t n i . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . s e c n a u s s i e m o c n i t e N e m o c n i e v i s n e h e r p m o c r e h t O g n i l l o r t n o c - n o n o t n o i t u b i r t s i D . . . . . . . . . . d e r a l c e d s d n e d i v i D 4 1 0 2 , 0 3 e n u J t a e c n a l a B 60 . s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i n a e r a s e t o n g n i y n a p m o c c a e h T ROYAL GOLD, INC. Consolidated Statements of Cash Flows For the Years Ended June 30, (In thousands) Cash flows from operating activities: Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation, depletion and amortization . . . . . . . . . . . . . . . . . . . . . . . . Impairment of stream and royalty interests . . . . . . . . . . . . . . . . . . . . . . . Amortization of debt discount and issuance costs . . . . . . . . . . . . . . . . . . Non-cash employee stock compensation expense . . . . . . . . . . . . . . . . . . . Tax benefit of stock-based compensation exercises . . . . . . . . . . . . . . . . . . (Gain) loss on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . Deferred tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in assets and liabilities: Royalty receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stream inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign withholding taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 2015 2014 $ (82,438) $ 52,678 $ 63,472 141,108 98,588 12,985 10,039 548 (2,340) (4,983) (390) 17,221 (7,203) (14,177) (153) (849) (199) 1,867 235 93,486 31,335 12,100 5,141 (364) 183 (27,651) (46) 5,977 1,110 15,525 2,527 150 (2,000) 1,405 543 91,342 — 11,332 2,580 (597) 4,499 (8,166) (259) 3,731 (3,396) (6,183) 11,417 1,105 (13,319) (7,441) (2,915) Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . $ 169,859 $192,099 $147,202 Cash flows from investing activities: Acquisition of stream and royalty interests . . . . . . . . . . . . . . . . . . . . . . . Andacollo royalty termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Golden Star term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sale of available-for-sale securities . . . . . . . . . . . . . . . . . . Tulsequah stream termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,346,109) 345,000 (20,000) 11,905 — (309) (60,429) — — — 10,000 (773) (80,019) — — — — (4,782) Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,009,513) $ (51,202) $ (84,801) Cash flows from financing activities: Borrowings from revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . Repayment of revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . Net (payments) proceeds from issuance of common stock . . . . . . . . . . . . . Common stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase of additional royalty interest from non-controlling interest . . . . . . Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution to non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . Tax (benefit) expense of stock-based compensation exercises . . . . . . . . . . . 350,000 (75,000) (353) (58,720) — (1,111) (830) (548) — — 775 (56,054) — — 1,120 (53,380) — (11,522) (1,284) (2,431) 597 (864) (1,805) 364 Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . $ 213,438 $ (57,584) $ (66,900) Net (decrease) increase in cash and equivalents . . . . . . . . . . . . . . . . . . . . . Cash and equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . (626,216) 742,849 83,313 659,536 (4,499) 664,035 Cash and equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 116,633 $742,849 $659,536 See Note 12 for supplemental cash flow information. The accompanying notes are an integral part of these consolidated financial statements. 61 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED AND 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, copper, nickel 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 stream and royalty interests. These estimates and the underlying assumptions affect the potential impairments of long-lived assets and the ability to realize income tax benefits associated with deferred tax assets. These estimates and assumptions also affect the rate at which we recognize revenue or charge depreciation, depletion and amortization to earnings. On an ongoing basis, management evaluates these estimates and assumptions; however, actual amounts could differ from these estimates and assumptions. Differences between estimates and actual amounts 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., its wholly-owned subsidiaries and an entity over which control is achieved through means other than voting right (see Note 3). The Company follows the Accounting Standards Codification (‘‘ASC’’) guidance for identification and reporting for entities over which control is achieved through means other than voting rights. 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 were primarily held in cash deposit accounts as of June 30, 2016 and 2015. 62 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS (Continued) Stream and Royalty Interests Stream and royalty interests include acquired stream and royalty interests in production, development and exploration stage properties. The costs of acquired stream and royalty interests are capitalized as tangible assets as such interests do not meet the definition of a financial asset under the Accounting Standards Codification (‘‘ASC’’) guidance. Acquisition costs of production stage stream and royalty interests are depleted using the units of production method over the life of the mineral property (as sales occur under stream interests or royalty payments are recognized), which are estimated using proven and probable reserves as provided by the operator. Acquisition costs of stream and royalty interests on development stage mineral properties, which are not yet in production, are not amortized until the property begins production. Acquisition costs of stream or 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. 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 (loss) 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 (loss) 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 stream and royalty interests in production and development stage 63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS (Continued) mineral properties is evaluated based upon estimated future undiscounted net cash flows from each stream and royalty interest 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 potentially affecting the future recoverability of our stream or royalty interests. Impairments in the carrying value of each property are measured and recorded to the extent that the carrying value in each property exceeds its estimated fair value, which is generally calculated using estimated future discounted cash flows. Estimates of gold, silver, copper, nickel and other metal prices, operators’ estimates of proven and probable reserves or mineralized material related to our stream or royalty properties, and operators’ estimates of operating and capital costs are subject to certain risks and uncertainties which may affect the recoverability of our investment in these stream and royalty interests in mineral properties. It is possible that changes could occur to these estimates, which could adversely affect the net cash flows expected to be generated from these stream and royalty interests. Refer to Note 4 for discussion and the results of our impairment assessments for the fiscal years ended June 30, 2016 and 2015. Revenue Revenue is recognized pursuant to guidance in ASC 605 and based upon amounts contractually due pursuant to the underlying streaming or royalty agreement. Specifically, revenue is recognized in accordance with the terms of the underlying stream or royalty agreements subject to (i) the pervasive evidence of the existence of the arrangements; (ii) the risks and rewards having been transferred; (iii) the stream or royalty being fixed or determinable; and (iv) the collectability being reasonably assured. For our streaming agreements, we recognize revenue when the metal is sold. Metal Sales Gold and silver received under our metal streaming agreements is taken into inventory, and this is sold primarily using average spot rate gold and silver forward contracts. The sales price for our gold and silver sold in average spot rate forward contracts is determined by the average daily gold or silver spot prices under the term of the contract, typically over a consecutive number of trading days between 10 days and three months (depending on the frequency of deliveries under the respective streaming agreement and our sales policy in effect at the time) commencing shortly after receipt and purchase of the metal. Revenue from gold and silver sales is recognized on the date of the settlement, which is also the date that title to the gold or silver passes to the purchaser. Cost of Sales Cost of sales is specific to our stream agreements and is the result of our purchase of gold and silver for a cash payment. The cash payment at Mount Milligan is the lesser of $435 per ounce or the prevailing market price of gold when purchased, while the cash payment for our other streams is a set contractual percentage of the gold or silver spot price near the date of metal delivery. 64 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED AND 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 (loss) income. Exploration Costs Exploration costs are specific to the Peak Gold LLC (‘‘Peak Gold’’) joint venture for exploration and advancement of the Tetlin gold project, as discussed further in Note 3. Exploration costs associated with Peak Gold for the exploration and advancement of the Tetlin gold project are expensed when incurred. 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 shares, in its financial statements based upon their fair values. Reportable Segments and Geographical Information The Company manages its business under two reportable segments, consisting of the acquisition and management of stream interests and the acquisition and management of royalty interests. Royal Gold’s long-lived assets (stream and royalty interests, net) as of June 30, 2016 and 2015 are geographically distributed as shown in the following table: As of June 30, 2016 As of June 30, 2015 Canada . . . . . . . . . . . . . . Chile . . . . . . . . . . . . . . . . Dominican Republic . . . . . Mexico . . . . . . . . . . . . . . United States . . . . . . . . . . Africa . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . Stream interest Royalty interest $ 809,692 369,896 588,502 $228,566 453,629 — — 118,899 — 102,385 697 42,547 32,649 88,596 — 12,029 Total stream and royalty interests, net $1,038,258 823,525 588,502 118,899 102,385 89,293 42,547 44,678 Stream interest Royalty interest $823,091 — — — — — — 8,183 $ 251,688 653,019 — 131,742 110,286 12,760 50,119 42,720 Total stream and royalty interests, net $1,074,779 653,019 — 131,742 110,286 12,760 50,119 50,903 Total . . . . . . . . . . . . . . . . . . $1,868,715 $979,372 $2,848,087 $831,274 $1,252,334 $2,083,608 65 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS (Continued) The Company’s revenue, cost of sales and net revenue by reportable segment for our fiscal year’s ended June 30, 2016, 2015 and 2014 is geographically distributed as show in the following table: Fiscal Year Ended June 30, 2016 Fiscal Year Ended June 30, 2015 Revenue Cost of sales Net revenue Revenue Cost of sales Net revenue Streams: Canada . . . . . . . . . . . . . . . . . . . . . Chile . . . . . . . . . . . . . . . . . . . . . . Dominican Republic . . . . . . . . . . . Africa . . . . . . . . . . . . . . . . . . . . . . $125,755 49,243 39,684 23,346 $47,417 7,280 11,625 4,657 $ 78,338 41,963 28,059 18,689 $ 94,104 — — — $33,450 — — — $ 60,654 — — — Total streams . . . . . . . . . . . . . . . . . . $238,028 $70,979 $167,049 $ 94,104 $33,450 $ 60,654 Royalties: Mexico . . . . . . . . . . . . . . . . . . . . . United States . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . Chile . . . . . . . . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . . . . . . . Africa . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . $ 35,267 35,483 30,676 84 10,462 1,868 7,922 $ — $ 35,267 35,483 30,676 84 10,462 1,868 7,922 — — — — — — $ 43,008 42,675 37,496 39,508 8,494 3,075 9,659 $ — $ 43,008 42,675 37,496 39,508 8,494 3,075 9,659 — — — — — — Total royalties . . . . . . . . . . . . . . . . . . $121,762 $ — $121,762 $183,915 $ — $183,915 Total royalties and streams . . . . . . . . $359,790 $70,979 $288,811 $278,019 $33,450 $244,569 Fiscal Year Ended June 30, 2015 Fiscal Year Ended June 30, 2014 Revenue Cost of sales Net revenue Revenue Cost of sales Net revenue Streams: Canada . . . . . . . . . . . . . . . . . . . . . . $ 94,104 $33,450 $ 60,654 $ 27,209 $9,158 $ 18,051 Royalties: Mexico . . . . . . . . . . . . . . . . . . . . . . United States . . . . . . . . . . . . . . . . . Chile . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . . . . . . . . Africa . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . $ 43,008 42,675 39,508 37,496 8,494 3,075 9,659 $ — $ 43,008 42,675 39,508 37,496 8,494 3,075 9,659 — — — — — — $ 43,093 34,671 50,733 54,277 8,353 7,943 10,883 $ — $ 43,093 34,671 50,733 54,277 8,353 7,943 10,883 — — — — — — Total royalties . . . . . . . . . . . . . . . . . . . $183,915 $ — $183,915 $209,953 $ — $209,953 Total royalties and streams . . . . . . . . . $278,019 $33,450 $244,569 $237,162 $9,158 $228,004 66 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS (Continued) Income Taxes The Company accounts for income taxes in accordance with the guidance of ASC 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 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 11 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 (Loss) Income In addition to net income, comprehensive (loss) 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. 67 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS (Continued) 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. Reclassified amounts were not material to the financial statements. Recently Adopted Accounting Standards In April 2015, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) guidance related to debt issuance costs. This update simplifies the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. The recognition and measurement guidance for debt issuance costs are not affected by the updated guidance. Early adoption is permitted and the Company elected to early adopt this guidance as of June 30, 2016, and the effects of the updated guidance were applied retrospectively to our fiscal year ended June 30, 2015. The effect of the change in accounting principle as of June 30, 2016 and 2015, was that $7.4 million and $8.2 million, respectively, of our debt issuance costs have been reclassified from Other assets to Debt on the Company’s consolidated financial statements. In February 2015, ASU guidance was issued related to consolidations. This update affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. This update makes some targeted changes to current consolidation guidance and impacts both the voting and the variable interest consolidation models. In particular, the update will change how companies determine whether limited partnerships or similar entities are variable interest entities (‘‘VIEs’’). The Company adopted the updated guidance as of June 30, 2016. The effects of the adoption had no impact on the Company’s consolidated financial statements. In November 2015, the FASB issued guidance on the presentation of deferred income taxes that requires deferred tax assets and liabilities, along with related valuation allowances, to be classified as non-current on the balance sheet. As a result, each tax jurisdiction will now only have one net non-current deferred tax asset or liability. The new guidance does not change the existing requirement that prohibits offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The Company adopted the updated guidance as of June 30, 2016, on a prospective basis and it only resulted in a change of presentation of the deferred taxes on our consolidated balances sheet. The change in accounting principle was not retrospectively applied to prior period balances. 68 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS (Continued) Recently Issued Accounting Standards In March 2016, the FASB issued ASU guidance to simplify several aspects of accounting for share- based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation with actual forfeitures as they occur, as well as certain classifications on the statement of cash flows. The new guidance is effective for the Company’s fiscal year beginning July 1, 2017. Early adoption is permitted, as long as all of the amendments are adopted in the same period. We are currently evaluating the impact this guidance will have on our consolidated financial statements and footnote disclosures. In February 2016, the FASB issued ASU guidance which changes the accounting for leases. The new guidance is effective for the Company’s fiscal year beginning July 1, 2019, and early adoption is permitted. We are currently evaluating the impact, if any, this guidance will have on our consolidated financial statements and footnote disclosures. In January 2016, the FASB issued ASU guidance on the recognition and measurement of financial instruments. The amended guidance requires, among other things that equity securities classified as available-for-sale be measured at fair value with changes in fair value recognized in net income rather than other comprehensive (loss) income as required under previous guidance. The new guidance is effective for the Company’s fiscal year beginning July 1, 2018. We are currently evaluating the impact this guidance will have on our consolidated financial statements. In May 2014, the FASB issued ASU guidance for the recognition of revenue from contracts with customers. Subsequent to the issuance of this ASU guidance, the FASB issued additional related ASU’s on revenue recognition. The effective date and transition requirements for all of these ASU’s are the same. Specifically, the guidance under these ASU’s is to be applied using a full retrospective method or a modified retrospective method, as described in the guidance, and is effective for the Company’s fiscal year beginning July 1, 2018. The Company is currently evaluating the level of effort needed to implement the guidance, evaluating the provisions of each new guidance, and assessing their impact on the Company’s consolidated financial statements and disclosures, as well as which transitions method we intend to use. 3. ACQUISITIONS Acquisition of Gold and Silver Stream at Pueblo Viejo On September 29, 2015, RGLD Gold AG (‘‘RGLD Gold’’) closed its Precious Metals Purchase and Sale Agreement with Barrick Gold Corporation (‘‘Barrick’’) and its wholly-owned subsidiary, BGC Holdings Ltd. (‘‘BGC’’) for a percentage of the gold and silver production attributable to Barrick’s 60% interest in the Pueblo Viejo mine located in the Dominican Republic. Pursuant to the Precious Metals Purchase and Sale Agreement, RGLD Gold made a single advance payment of $610 million to BGC as part of the closing. The transaction is effective as of July 1, 2015 for the gold stream and January 1, 2016 for the silver stream. BGC will deliver gold to RGLD Gold in amounts equal to 7.50% of Barrick’s interest in the gold produced at the Pueblo Viejo mine until 990,000 ounces of gold have been delivered, and 3.75% of Barrick’s interest in gold produced thereafter. RGLD Gold will pay BGC 30% of the spot price per ounce of gold delivered until 550,000 ounces of gold have been delivered, and 60% of the spot price 69 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 3. ACQUISITIONS (Continued) per ounce delivered thereafter. RGLD Gold began receiving gold deliveries during the quarter ended December 31, 2015. BGC will deliver silver to RGLD Gold in amounts equal to 75% of Barrick’s interest in the silver produced at the Pueblo Viejo mine, subject to a minimum silver recovery of 70%, until 50 million ounces of silver have been delivered, and 37.50% of Barrick’s interest in silver produced thereafter. RGLD Gold will pay BGC 30% of the spot price per ounce of silver delivered until 23.10 million ounces of silver have been delivered, and 60% of the spot price per ounce of silver delivered thereafter. RGLD Gold began receiving silver deliveries during the quarter ended March 31, 2016. The Pueblo Viejo gold and silver stream acquisition has been accounted for as an asset acquisition. The advance payment of $610 million, plus direct transaction costs, have been recorded as a production stage stream interest within Stream and royalty interests, net on our consolidated balance sheets. The acquisition cost of the Pueblo Viejo gold and silver stream interest will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, as provided by Barrick. Acquisition and Amendment of Gold Stream on Wassa and Prestea On July 28, 2015, RGLD Gold, a wholly-owned subsidiary of the Company, closed a $130 million gold stream transaction with a wholly-owned subsidiary of Golden Star Resources Ltd. (together ‘‘Golden Star’’). On December 30, 2015, the parties executed an amendment providing for an additional $15 million investment (for a total investment of $145 million) by RGLD Gold. Also on July 28, 2015 and separate from the stream transaction by RGLD Gold, the Company also funded a $20 million, 4-year term loan to Golden Star and received warrants to purchase 5 million shares of Golden Star common stock, with a grant date fair value of approximately $0.8 million. Interest under the term loan is due quarterly at a rate equal to 62.5% of the average daily gold price for the relevant quarter divided by 10,000, but not to exceed 11.5%. The warrants have a term of four years and an exercise price of $0.27. Funds will be used for ongoing development of Golden Star’s Wassa and Prestea mines in Ghana. As of June 30, 2016, RGLD Gold has advanced $95 million. On July 1, 2016, RGLD Gold made an advance payment of $20 million and expects to advance the balance in two quarterly payments as follows: (i) $20 million on October 1, 2016, and (ii) $10 million on January 1, 2017; however this schedule may be modified based on the actual spending on the Wassa and Prestea underground projects and these funds are subject to satisfaction of certain conditions. In return, Golden Star will deliver to RGLD Gold 9.25% of gold produced from the Wassa and Prestea mines, until the earlier of (i) December 31, 2017 or (ii) the date at which the Wassa and Prestea underground projects achieve commercial production. At that point, the stream percentage will increase to 10.5% of gold produced from the Wassa and Prestea projects until an aggregate 240,000 ounces have been delivered. Once the applicable delivery threshold is met, the stream percentage will decrease to 5.5% for the remaining life of the mines. RGLD Gold will pay Golden Star a cash price equal to 20% of the spot price for each ounce of gold delivered at the time of delivery until the applicable delivery threshold is met, and 30% of the spot price for each ounce of gold delivered thereafter. 70 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 3. ACQUISITIONS (Continued) The Wassa and Prestea gold stream acquisition has been accounted for as an asset acquisition. The $95 million paid as part of the aggregate advance payments of $145 million, plus direct acquisition costs, have been recorded as a production stage stream interest within Stream and royalty interests, net on our consolidated balance sheets. Future advance payments, plus any direct acquisition costs incurred, will be recorded as a production stage interest accordingly. The acquisition cost of the Wassa and Prestea gold stream interest will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, as provided by Golden Star. The $20 million four-year term loan and the received warrants have been recorded within Other assets on our consolidated balance sheets. The warrants have been classified as a financial asset instrument and are recorded at fair value at each reporting period using the Black-Scholes model. Any change in the fair value of the warrants at subsequent reporting periods will be recorded within Interest and other income on our consolidated statements of operations and comprehensive (loss) income. Acquisition of Gold and Silver Stream at Rainy River On July 20, 2015, RGLD Gold entered into a $175 million Purchase and Sale Agreement with New Gold, Inc. (‘‘New Gold’’), for a percentage of the gold and silver production from the Rainy River Project located in Ontario, Canada (‘‘Rainy River’’). Pursuant to the Purchase and Sale Agreement, RGLD Gold made an advance payment to New Gold, consisting of $100 million on July 20, 2015, and will make an additional advance payment of $75 million once capital spending at Rainy River is 60% complete (currently expected during the second half of calendar 2016). Under the Purchase and Sale Agreement, New Gold will deliver to RGLD Gold 6.50% of the gold produced at Rainy River until 230,000 gold ounces have been delivered, and 3.25% thereafter. New Gold also will deliver to RGLD Gold 60% of the silver produced at Rainy River until 3.10 million silver ounces have been delivered, and 30% thereafter. RGLD Gold will pay New Gold 25% of the spot price per ounce of gold and silver at the time of delivery. The Rainy River gold and silver stream acquisition has been accounted for as an asset acquisition. The $100 million paid as part of the aggregate advance payments of $175 million, plus direct transaction costs, have been recorded as a development stage stream interest within Stream and royalty interests, net on our consolidated balance sheets. Acquisition of Gold Stream at Carmen de Andacollo On July 9, 2015, RGLD Gold entered into a Long Term Offtake Agreement (the ‘‘Andacollo Stream Agreement’’) with Compa˜n´ıa Minera Teck Carmen de Andacollo (‘‘CMCA’’), a 90% owned subsidiary of Teck Resources Limited (‘‘Teck’’). Pursuant to the Andacollo Stream Agreement, CMCA will sell and deliver to RGLD Gold 100% of payable gold from the Carmen de Andacollo (‘‘Andacollo’’) copper-gold mine located in Chile until 900,000 ounces have been delivered, and 50% thereafter, subject to a fixed payable percentage of 89%. RGLD Gold made a $525 million advance payment in cash to CMCA upon entry into the Andacollo Stream Agreement, and RGLD Gold will also pay CMCA 15% of the monthly average gold price for the month preceding the delivery date for all gold purchased under the Andacollo Stream Agreement. The transaction encompasses certain of CMCA’s presently owned mining concessions on the Andacollo mine, as well as any other mining concessions presently owned or acquired by CMCA or any of its affiliates within an approximate 1.5 kilometer area of interest, and certain other mining 71 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 3. ACQUISITIONS (Continued) concessions that CMCA or its affiliates may acquire. The Andacollo Stream Agreement was effective July 1, 2015, and applies to all final settlements of gold received on or after that date. Deliveries to RGLD Gold will be made monthly, and RGLD Gold began receiving gold deliveries during the quarter ended September 30, 2015. The Company accounted for the acquisition of the stream interest at Andacollo as an asset acquisition. For US GAAP financial reporting purposes on the date of acquisition, the Company’s new consolidated carrying value in its stream interest at Andacollo was approximately $388.2 million, which included direct acquisition costs, and has been recorded as a production stage stream interest within Stream and royalty interests, net on our consolidated balance sheets. The Andacollo gold stream interest will be depleted using the units of production method, which is estimated using aggregate proven and probable reserves, as provided by Teck. Termination of Royalty Interest at Carmen de Andacollo On July 9, 2015, Royal Gold Chile Limitada (‘‘RG Chile’’), a wholly owned subsidiary of the Company, entered into a Royalty Termination Agreement with CMCA. The Royalty Termination Agreement terminated an amended Royalty Agreement originally dated January 12, 2010, which provided RG Chile with a royalty equivalent to 75% of the gold produced from the sulfide portion of the Andacollo mine until 910,000 payable ounces have been produced, and 50% of the gold produced thereafter. CMCA paid total consideration of $345 million to RG Chile in connection with the Royalty Termination Agreement. The net carrying value of the Andacollo royalty on the date of termination was approximately $207.5 million. The royalty termination transaction was taxable in Chile and the United States. Acquisition of Gold Stream on Euromax’s Ilovica Project On October 20, 2014, RGLD Gold, a wholly owned subsidiary of the Company, entered into a $175.0 million gold stream transaction with Euromax Resources Ltd (‘‘Euromax’’) that will finance a definitive feasibility study, permitting work, early stage engineering and a significant portion of the construction at Euromax’s Ilovica gold-copper project located in southeast Macedonia. RGLD Gold will make two advance deposit payments to Euromax totaling $15.0 million, which are to be used for completion of the definitive feasibility study and permitting of the project, followed by payments aggregating $160 million towards project construction, in each case subject to certain conditions. Payment of the first $7.5 million deposit was completed in March 2015. RGLD Gold advanced $3.75 million of the second $7.5 million deposit in November 2015 and a decision to proceed with the remaining portion of the second deposit ($3.75 million) and the construction payments is conditioned upon, among other things, its satisfaction with the progress of definitive feasibility study and environmental evaluations, demonstrated project viability, and, in the case of the construction payments, sufficient project financing and permits to construct and operate the mine. The construction payments would be paid pro-rata with the balance of the project funding. In exchange, Euromax will deliver physical gold equal to 25% of gold produced from the Ilovica project until 525,000 ounces have been delivered, and 12.5% thereafter (in each case subject to adjustment). RGLD Gold’s purchase price per ounce will be 25% of the spot price at the time of delivery. The Ilovica gold stream acquisition has been accounted for as an asset acquisition. The $11.25 million paid as part of the aggregate pre-production commitment of $175 million, plus direct 72 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 3. ACQUISITIONS (Continued) transaction costs, have been recorded as a development stage stream interest within Stream and royalty interests, net on our consolidated balance sheets. Tetlin Royalty Acquisitions and Peak Gold Joint Venture On September 30, 2014, Royal Gold acquired a 2.0% net smelter return (‘‘NSR’’) royalty and a 3.0% NSR royalty held by private parties over areas comprising the Tetlin gold project located near Tok, Alaska, for total consideration of $6.0 million. As discussed below, the Tetlin gold project is now held by Peak Gold LLC (‘‘Peak Gold’’), a joint venture between subsidiaries of Royal Gold and Contango ORE Inc. The acquisition of the Tetlin royalties has been accounted for as an asset acquisition. The total purchase price of $6.0 million, plus direct transaction costs, has been recorded as an exploration stage royalty interest within Stream and royalty interests, net on our consolidated balance sheets. On January 8, 2015, Royal Gold, through its wholly-owned subsidiary, Royal Alaska, LLC (‘‘Royal Alaska’’), and Contango ORE, Inc., through its wholly-owned subsidiary CORE Alaska, LLC (together, ‘‘Contango’’), entered into a limited liability company agreement for Peak Gold, a joint venture for exploration and advancement of the Tetlin gold project located near Tok, Alaska (the ‘‘Tetlin Project’’). Contango contributed all of its assets relating to the Tetlin Project to Peak Gold, including a mining lease and certain state of Alaska mining claims. Royal Alaska contributed $5.0 million in cash to Peak Gold. Contango will initially hold a 100% membership interest in Peak Gold. Royal Alaska has the right to obtain up to 40% of the membership interest in Peak Gold by making contributions of up to $30.0 million (including Royal Alaska’s initial $5.0 million contribution) in cash to Peak Gold by October 31, 2018. As of June 30, 2016, Royal Alaska has contributed $5.7 million and has obtained an 11% membership interest in Peak Gold. Royal Alaska will act as the manager of Peak Gold. As manager of Peak Gold, Royal Alaska is responsible for managing, directing and controlling the overall operations during the earn-in period, and thereafter, provided Royal Alaska holds at least a 40% interest. Royal Alaska will act as manager unless and until it is unanimously removed or resigns that position in the manner provided in Peak Gold’s limited liability company agreement. The Company follows the ASC guidance for identification and reporting of entities for which control is achieved through means other than voting rights. The guidance defines such entities as VIEs. The Company has identified Peak Gold as a VIE, with Royal Alaska as the primary beneficiary, due to the legal structure and certain related factors of the limited liability company agreement for Peak Gold. The Company determined that Peak Gold should be fully consolidated at fair value initially. The fair value of the Company’s non-controlling interest is $45.7 million and is based on the underlying value of the mineral property assigned to Peak Gold, which is recorded as an exploration stage property within Stream and royalty interests, net on our consolidated balance sheets. 73 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 4. STREAM AND ROYALTY INTERESTS, NET The following summarizes the Company’s stream and royalty interests as of June 30, 2016 and 2015: As of June 30, 2016 (Amounts in thousands): Production stage stream interests: Cost Accumulated Depletion Impairments Net Mount Milligan . . . . . . . . . . . . . . . . . . . . . . . . . Pueblo Viejo . . . . . . . . . . . . . . . . . . . . . . . . . . . Andacollo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wassa and Prestea . . . . . . . . . . . . . . . . . . . . . . . $ 783,046 610,404 388,182 96,413 $ (74,060) (21,902) (18,286) (7,816) $ — $ 708,986 588,502 — 369,896 — 88,597 — Total production stage stream interests . . . . . . . . 1,878,045 (122,064) — 1,755,981 Production stage royalty interests: Voisey’s Bay . . . . . . . . . . . . . . . . . . . . . . . . . . . Pe˜nasquito . . . . . . . . . . . . . . . . . . . . . . . . . . . . Holt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cortez . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205,724 99,172 34,612 10,630 531,735 (85,671) (29,898) (17,124) (10,000) (342,460) — — — — (18,605) Total production stage royalty interests . . . . . . . . 881,873 (485,153) (18,605) 120,053 69,274 17,488 630 170,670 378,115 Production stage stream and royalty interests . . . . . 2,759,918 (607,217) (18,605) 2,134,096 Development stage stream interests: Rainy River . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total development stage stream interests . . . . . . . Development stage royalty interests: Pascua-Lama . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total development stage royalty interests . . . . . . . Development stage stream and royalty interests . . . Exploration stage royalty interests . . . . . . . . . . . . . 100,706 87,883 188,589 380,657 66,414 447,071 635,660 155,997 — (153) (153) — (75,702) (75,702) — — — — — — (153) — (75,702) (1,811) 100,706 12,028 112,734 380,657 66,414 447,071 559,805 154,186 Total stream and royalty interests . . . . . . . . . . . . . . $3,551,575 $(607,370) $(96,118) $2,848,087 74 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 4. STREAM AND ROYALTY INTERESTS, NET (Continued) As of June 30, 2015 (Amounts in thousands): Production stage stream interests: Cost Accumulated Depletion Impairments Net Mount Milligan . . . . . . . . . . . . . . . . . . . . . . . . . $ 783,046 $ (35,195) $ — $ 747,851 Production stage royalty interests: Andacollo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Voisey’s Bay . . . . . . . . . . . . . . . . . . . . . . . . . . . Pe˜nasquito . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mulatos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Holt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Robinson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cortez . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272,998 150,138 99,172 48,092 34,612 17,825 10,630 495,763 (65,467) (76,141) (24,555) (32,313) (13,950) (12,748) (9,933) (265,727) — — — — — (27,586) Total production stage royalty interests . . . . . . . . 1,129,230 (500,834) (27,586) 207,531 73,997 74,617 15,779 20,662 5,077 697 202,450 600,810 Production stage stream and royalty interests . . . . . 1,912,276 (536,029) (27,586) 1,348,661 Development stage stream interests: Phoenix Gold . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total development stage stream interests . . . . . . . Development stage royalty interests: Pascua-Lama . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total development stage royalty interests . . . . . . . Development stage stream and royalty interests . . . 75,843 8,183 84,026 372,105 67,017 439,122 523,148 Exploration stage royalty interests . . . . . . . . . . . . . 212,552 — — — — — — — — — (603) (603) — — — (603) (150) 75,843 7,580 83,423 372,105 67,017 439,122 522,545 212,402 Total stream and royalty interests . . . . . . . . . . . . . . $2,647,976 $(536,029) $(28,339) $2,083,608 Impairment of stream and royalty interests and royalty receivables In accordance with our impairment accounting policy discussed in Note 1, impairments in the carrying value of each stream or royalty interest are measured and recorded to the extent that the carrying value in each stream or royalty interest exceeds its estimated fair value, which is generally calculated using estimated future discounted cash-flows. As part of the Company’s regular asset impairment analysis, which included the presence of impairment indicators, the Company recorded 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 4. STREAM AND ROYALTY INTERESTS, NET (Continued) impairment charges for the fiscal years ended June 30, 2016, 2015 and 2014, as summarized in the following table: Phoenix Gold(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inata(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wolverine(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal Years Ended June 30, 2016 2015 2014 (Amounts in thousands) $75,702 11,982 5,307 3,127 $ — $— — — 25,967 — 2,372 — Total impairment of stream and royalty interests . . . . . . . . Inata royalty receivable . . . . . . . . . . . . . . . . . . . . . . . . . . Wolverine royalty receivable . . . . . . . . . . . . . . . . . . . . . . $96,118 2,855 (385) $28,339 $— — — 2,996 — Total impairment of stream and royalty interests and royalty receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . $98,588 $31,335 $— (1) (2) Included in Other development stage stream interests in the above stream and royalty interests table. Included in Other production stage royalty interests in the above stream and royalty interests table. Phoenix Gold RGLD Gold owns the right to purchase 6.30% of any gold produced from the Phoenix Gold Project until 135,000 ounces have been delivered, and 3.15% thereafter. The Phoenix Gold Project is located in Red Lake, Ontario, Canada, and operated by Rubicon Minerals Corporation (‘‘Rubicon’’). On January 11, 2016, Rubicon provided an updated geologic model and mineralized material statement for the Phoenix Gold Project, which included a significant reduction in mineralized material compared to previous statements provided by Rubicon. Rubicon also announced that they were evaluating strategic alternatives, including merger and divestiture opportunities either at the corporate or asset level, obtaining new financing or capital restructurings. A significant reduction in mineralized material, along with recent decreases in the long-term metal price assumptions used by the industry, are indicators of impairment. During the quarter ended March 31, 2016, the Company independently evaluated the updated geologic model and mineralized material statement in an effort to properly assess the recoverability of our carrying value. The Company’s technical evaluation was completed by internal and external personnel and included an econcomic analysis of the Phoenix Gold Project and a detailed review of the geological model and mineralized material statement. Based upon the results of the Company’s review of the updated geological model and mineralized material statement, and other factors, it was determined that our stream interest at the Phoenix Gold Project should be written down to zero as of March 31, 2016. The Company will continue to pursue commercial alternatives for potential recovery of our investment. 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 4. STREAM AND ROYALTY INTERESTS, NET (Continued) Inata The Company owns a 2.5% gross smelter return royalty on all gold and silver produced from the Inata mine, located in Burkina Faso, West Africa, and operated by a subsidiary of Avocet Mining PLC (‘‘Avocet’’). The Company’s carrying value for its royalty interest at Inata was approximately $12.0 million as of December 31, 2015. As part of the Company’s impairment assessment for the three months ended March 31, 2016, the Company was notified of an updated mine plan at Inata, which included a significant reduction in the life of the mine. Based upon our review of the updated mine plan, our royalty interest was written down to zero as of March 31, 2016. The Company also had a royalty receivable of approximately $2.8 million associated with past due royalty payments on the Inata interest. As a result of Avocet’s financial and operational difficulties and our review of the updated mine plan at Inata, the Company believes payment of the receivable is uncertain and provided for an allowance against the entire royalty receivable as of March 31, 2016. The Company will continue to pursue collection of all past due payments. Wolverine The Company owns a 0.00% to 9.445% sliding-scale NSR royalty on all gold and silver produced from the Wolverine underground mine and milling operation located in Yukon Territory, Canada, and operated by Yukon Zinc Corporation (‘‘Yukon Zinc’’). As part of the Company’s impairment assessment for the three months ended December 31, 2014, the Company was notified of an updated mine plan at Wolverine, which included a significant reduction in reserves and resources when compared to the previous mine plan. A significant reduction in reserves and resources, along with decreases in the long-term metal price assumptions used by the industry, are indicators of impairment. As part of the impairment determination, the fair value for Wolverine was estimated by calculating the net present value of the estimated future cash-flows expected to be generated by the mining of the Wolverine deposits subject to our royalty interest. The estimates of future cash-flows were derived from a life-of-mine model developed by the Company using Yukon Zinc’s updated mine plan information. The metal price assumptions used in the Company’s model were supported by consensus price estimates obtained from a number of industry analysts. The future cash-flows were discounted using a discount rate which reflects specific market risk factors the Company associates with the Wolverine royalty interest. Following the impairment charge during the three months ended December 31, 2014, the Wolverine royalty interest has a carrying value of $5.3 million as of June 30, 2015. The Company had a royalty receivable of approximately $3.0 million associated with past due royalty payments on the Wolverine interest. As a result of recent financial and operational results experienced by Yukon Zinc and their decision to put the mine on care and maintenance, the Company believes payment of the receivable is uncertain and provided for an allowance against the entire receivable as of June 30, 2015. The expense associated with the allowance is recorded within General and administrative expense on the Company’s consolidated statements of operations and comprehensive (loss) income. During the second half of calendar 2015, Yukon Zinc completed bankruptcy proceedings in the Supreme Court of British Columbia and during the quarter ended March 31, 2016, we were made aware of no further intentions to recommission the mine. Based upon the updated developments and 77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 4. STREAM AND ROYALTY INTERESTS, NET (Continued) limited remaining mineralized material at Wolverine, the Company wrote down the remaining carrying value at Wolverine to zero as of March 31, 2016. Other As part of the Company’s regular asset impairment analysis during the three months ended March 31, 2016, including consideration of recent operator/property updates and developments, the Company determined that one production stage royalty interest and three exploration stage royalty interests should be written down to zero for a total impairment of approximately $3.1 million. As part of the Company’s regular asset impairment analysis during the three months ended September 30, 2014, the Company determined that one production stage royalty interest and one exploration stage royalty interest should be written down to zero for a total impairment of $1.8 million. As part of the termination of the Tulsequah Chief gold and silver stream, as discussed below, the Company wrote-off approximately $0.6 million of direct acquisition costs during the three months ended December 31, 2014. Termination of the Tulsequah Chief Gold and Silver Stream On December 22, 2014, RGLD Gold terminated the Amended and Restated Gold and Silver Purchase and Sale Agreement (the ‘‘Tulsequah Agreement’’), between RGLD Gold, the Company, Chieftain Metals Inc. and Chieftain Metals Corp. (together, ‘‘Chieftain’’), relating to Chieftain’s Tulsequah Chief mining project located in British Columbia, Canada. Pursuant to the terms of the Agreement, Chieftain repaid RGLD Gold’s original $10.0 million advance payment. As a result of the termination of the Tulsequah Agreement and repayment of our investment, the carrying value of the Tulsequah Chief gold and silver stream, which included our $10.0 million investment and approximately $0.6 million of direct acquisition costs, was reduced to zero during the three months ended December 31, 2014. 5. AVAILABLE-FOR-SALE SECURITIES The Company’s available-for-sale securities as of June 30, 2016 and 2015 consist of the following: Non-current: Seabridge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As of June 30, 2016 (Amounts in thousands) Unrealized Cost Basis Gain Loss Fair Value $— $— — — $— $— $— $— 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 5. AVAILABLE-FOR-SALE SECURITIES (Continued) Non-current: Seabridge . . . . . . . . . . . . . . . . . . . . . . . . . . . As of June 30, 2015 (Amounts in thousands) Unrealized Cost Basis Gain Loss Fair Value $9,565 $9,565 — (3,292) $6,273 $— $(3,292) $6,273 Our only significant available-for-sale security was the investment in Seabridge Gold, Inc. (‘‘Seabridge’’) common stock, acquired in June 2011. During the fiscal year ended June 30, 2016, the Company sold all of its Seabridge common stock, resulting in a realized gain of approximately $2.3 million. 6. DEBT The Company’s debt as of June 30, 2016 and 2015 consists of the following: As of June 30, 2016 Unmortized Issuance Debt As of June 30, 2015 Unmortized Issuance Debt Principal Discount Costs Total Principal Discount Costs Total (Amounts in thousands) (Amounts in thousands) Convertible notes due 2019 . . . . . . . . . . . . . . $370,000 $(36,943) $(3,934) $329,123 $370,000 $(47,890) $(5,180) $316,930 (3,061) — (3,438) 271,562 Revolving credit facility . . — (3,061) 275,000 — Total debt . . . . . . . . . . . $645,000 $(36,943) $(7,372) $600,685 $370,000 $(47,890) $(8,241) $313,869 Convertible Senior Notes Due 2019 In June 2012, the Company completed an offering of $370 million aggregate principal amount of 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, 2016, 2015 and 2014 was approximately $22.8 million, $22.1 million and $21.4 million, respectively. Interest expense recognized includes the contractual coupon interest, the accretion of the debt discount and amortization of the debt issuance costs, and is recorded in Interest and other expense consolidated statements of operations and comprehensive income. During the fiscal years ended June 30, 2016 and 2015, the Company made $10.6 million in interest payments on our 2019 Notes. Revolving credit facility The Company maintains a $650 million revolving credit facility. As of June 30, 2016, the Company had $275.0 million outstanding and $375.0 million available under the revolving credit facility. The Company had no amount outstanding under the revolving credit facility as of June 30, 2015. 79 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 6. DEBT (Continued) 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, 2016, the interest rate on borrowings under the revolving credit facility was LIBOR plus 2.25% for an all-in rate of 2.89%. Royal Gold may repay any borrowings under the revolving credit facility at any time without premium or penalty. On March 16, 2016, the Company entered into Amendment No. 2 (the ‘‘Amendment’’) to the Sixth Amended and Restated Revolving Credit Agreement, dated as of January 29, 2014 (as amended by Amendment No. 1 thereto as of April 29, 2015, the ‘‘Revolving Credit Agreement’’), by and among the Company, certain subsidiaries of the Company as guarantors, certain lenders from time to time party thereto, and HSBC Bank USA, National Association, as administrative agent for the lenders. The Amendment revises the Revolving Credit Agreement to extend the scheduled maturity date from January 29, 2019 to March 16, 2021. At June 30, 2016, the Company was in compliance with each financial covenant (leverage ratio and consolidated net worth, as defined therein). 7. REVENUE Revenue is comprised of the following: Fiscal Years Ended June 30, 2016 2015 2014 Stream interests . . . . . . . . . . . . . . . . . . . . . . . . . . Royalty interests . . . . . . . . . . . . . . . . . . . . . . . . . . (Amounts in thousands) $ 94,104 183,915 $ 27,209 209,953 $238,028 121,762 Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $359,790 $278,019 $237,162 8. STOCK-BASED COMPENSATION In November 2015, shareholders of the Company approved the 2015 Omnibus Long-Term Incentive Plan (‘‘2015 LTIP’’). Under the 2015 LTIP, 2,500,000 shares of common stock have been authorized for future grants to officers, directors, key employees and other persons. The 2015 LTIP 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 2015 LTIP may be non-qualified stock options or incentive stock options. 80 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 8. STOCK-BASED COMPENSATION (Continued) The Company recognized stock-based compensation expense as follows: For the Fiscal Years Ended June 30, 2016 2015 2014 Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock appreciation rights . . . . . . . . . . . . . . . . . . . . . . . Restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ (Amounts in thousands) $ 417 454 1,422 1,687 2,511 3,686 791 4,212 468 1,305 3,110 (2,303) Total stock-based compensation expense . . . . . . . . . . . . $10,039 $5,141 $ 2,580 Stock-based compensation expense is included within General and administrative expense on the consolidated statements of operations and comprehensive (loss) 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 2016, 2015 and 2014 grants are noted in the following table: Stock Options SSARs 2016 2015 2014 2016 2015 2014 Weighted-average expected volatility . . . . . . . . . . . . . . . . Weighted-average expected life in years . . . . . . . . . . . . . Weighted-average dividend yield . . . . . . . . . . . . . . . . . . . Weighted-average risk free interest rate . . . . . . . . . . . . . 36.9% 37.3% 43.6% 36.9% 36.6% 41.3% 5.5 1.06% 1.00% 1.00% 1.00% 1.00% 1.00% 1.6% 1.7% 1.7% 1.6% 1.7% 1.5% 5.5 5.5 4.8 5.4 5.3 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. 81 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 8. STOCK-BASED COMPENSATION (Continued) Stock Options A summary of stock option activity for the fiscal year ended June 30, 2016, is presented below. Outstanding at July 1, 2015 . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . Number of Shares 96,155 25,437 (2,500) (1,269) Outstanding at June 30, 2016 . . . . . . 117,823 Weighted- Average Exercise Price $59.28 $55.71 $28.78 $69.94 $59.04 Exercisable at June 30, 2016 . . . . . . 73,366 $57.46 Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands) 6.4 5.1 $1,632 $1,129 The weighted-average grant date fair value of options granted during the fiscal years ended June 30, 2016, 2015 and 2014, was $18.05, $24.86 and $22.78, respectively. The total intrinsic value of options exercised during the fiscal years ended June 30, 2016, 2015 and 2014, were $0.1 million, $0.7 million, and $1.1 million, respectively. As of June 30, 2016, there was approximately $0.5 million of total unrecognized stock-based compensation expense related to non-vested stock options, which is expected to be recognized over a weighted-average period of 1.7 years. SSARs A summary of SSARs activity for the fiscal year ended June 30, 2016, is presented below. Outstanding at July 1, 2015 . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . Number of Shares 277,118 97,817 (7,000) (130) Outstanding at June 30, 2016 . . . . . . 367,805 Weighted- Average Exercise Price $63.91 $56.54 $30.96 $62.14 $62.58 Exercisable at June 30, 2016 . . . . . . 194,863 $62.24 Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands) 7.1 5.7 $3,861 $2,106 The weighted-average grant date fair value of SSARs granted during the fiscal years ended June 30, 2016, 2015 and 2014 was $18.35, $24.42 and $21.15, respectively. The total intrinsic value of SSARs exercised during the fiscal years ended June 30, 2016, 2015 and 2014, were $0.3 million, $0.2 million, and $0.1 million, respectively. 82 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 8. STOCK-BASED COMPENSATION (Continued) As of June 30, 2016, there was approximately $1.9 million of total unrecognized stock-based compensation expense related to non-vested SSARs, which is expected to be recognized over a weighted-average period of 1.7 years. Other Stock-based Compensation Performance Shares During fiscal 2016, officers and certain employees were granted 48,422 shares of restricted common stock that can be earned only upon the Company’s achievement of certain pre-defined performance measures. Specifically, for performance shares granted in fiscal 2016, one-half of the shares awarded may vest upon the Company’s achievement of annual growth in Net Gold Equivalent Ounces (‘‘Net GEOs’’) (‘‘GEO Shares’’). The second one-half of performance shares granted in fiscal 2016 may vest based on the Company’s total shareholder return (‘‘TSR’’) compared to the TSRs of other members of the Market Vectors Gold Miners ETF (GDX) (‘‘TSR Shares’’). GEO Shares and TSR Shares may vest by linear interpolation in a range between zero shares if neither threshold Net GEO and TSR metric is met; to 100% of GEO Shares and TSR Shares awarded if both target Net GEO and TSR metrics are met; to 200% of the Net GEO and TSR shares awarded if both the maximum Net GEO and TSR metrics are met. The GEO Shares will expire in five years from the date of grant if the performance measure is not met, while the TSR Shares will expire in three years from the date of grant if the TSR market condition and three year service condition are not met. Performance shares granted prior to fiscal 2016 can be earned only if a single pre-defined performance goal (growth of adjusted free cash flow on a per share, trailing twelve month basis) is met within five years of the date of grant. If the performance goal is not earned by the end of this five year period, the fiscal 2015 Performance Shares will be forfeited. Vesting of the fiscal 2015 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%. The Company measures the fair value of the GEO Shares and performance shares granted prior to fiscal 2016 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 GEO Shares and performance shares granted prior to fiscal 2016 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. In accordance with ASC 718, provided the market condition within the TSR Shares, the Company measured the grant date fair value using a Monte Carlo valuation model. The fair value of the TSR Shares ($35.15 per share) is multiplied by the target number of TSR Shares granted to determine total stock-based compensation expense. Total stock-based compensation expense of the TSR Shares is amortized on a straight-line basis over the requisite service period, or three years. Stock-based compensation expense for the TSR Shares is recognized provided the requisite service period is rendered, regardless of when, if ever, the TSR market condition is satisfied. The Company will reverse 83 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 8. STOCK-BASED COMPENSATION (Continued) previously recognized stock-based compensation expense attributable to the TSR Shares only if the requisite service period is not rendered. A summary of the status of the Company’s non-vested Performance Shares for the fiscal year ended June 30, 2016, is presented below: Weighted- Average Number of Grant Date Fair Value Shares Non-vested at July 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,325 48,422 (10,781) (23,750) (4,038) Non-vested at June 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . 210,178 $66.52 $45.63 $75.06 $49.66 $35.15 $63.78 As of June 30, 2016, total unrecognized stock-based compensation expense related to Performance Shares was approximately $2.3 million, which is expected to be recognized over the average remaining vesting period of 1.5 years. Restricted Stock Officers, non-executive directors and certain employees may be granted shares of restricted stock that vest on continued service alone (‘‘Restricted Stock’’). During fiscal 2016, officers and certain employees were granted 50,507 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 2016, our non-executive directors were granted 22,680 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. 84 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 8. STOCK-BASED COMPENSATION (Continued) A summary of the status of the Company’s non-vested Restricted Stock for the fiscal year ended June 30, 2016, is presented below: Weighted- Average Number of Grant Date Fair Value Shares Non-vested at July 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,807 73,187 (51,472) — Non-vested at June 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . 176,522 $66.23 $56.25 $61.54 $ — $63.46 As of June 30, 2016, total unrecognized stock-based compensation expense related to Restricted Stock was approximately $5.5 million, which is expected to be recognized over the weighted-average vesting period of 3.0 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, 2016 and 2015. Common Stock Issuances During the fiscal years ended June 30, 2016, 2015 and 2014, options to purchase 2,500, 20,488 and 34,495 shares, respectively, were exercised, resulting in proceeds of approximately $0.1 million, $0.8 million and $1.1 million, respectively. 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. 85 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 10. EARNINGS PER SHARE (‘‘EPS’’) Basic earnings (loss) 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 (loss) used to determine basic earnings (loss) 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 (loss) per common share. The following table summarizes the effects of dilutive securities on diluted EPS for the period: Fiscal Years Ended June 30, 2016 2015 2014 (in thousands, except share data) Net (loss) income available to Royal Gold common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (77,149) $ 51,965 $ 62,641 Weighted-average shares for basic EPS . . . . . . . . . . . . . . . . Effect of other dilutive securities . . . . . . . . . . . . . . . . . . . . . 65,074,455 — 65,007,861 117,312 64,909,149 117,107 Weighted-average shares for diluted EPS . . . . . . . . . . . . . . . 65,074,455 65,125,173 65,026,256 Basic (loss) earnings per share . . . . . . . . . . . . . . . . . . . . . . . Diluted (loss) earnings per share . . . . . . . . . . . . . . . . . . . . . $ $ (1.18) $ (1.18) $ 0.80 0.80 $ $ 0.96 0.96 The calculation of weighted average shares includes all of our outstanding common stock. The Company intends to settle the principal amount of the 2019 Notes in cash. As a result, there will be no impact to diluted earnings per share unless the share price of the Company’s common stock exceeds the conversion price of $105.31. 11. INCOME TAXES For financial reporting purposes, Income before income taxes includes the following components: Fiscal Years Ended June 30, 2016 2015 2014 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (Amounts in thousands) (230) $17,569 44,675 $17,033 65,894 (21,528) $(21,758) $62,244 $82,927 86 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 11. INCOME TAXES (Continued) The Company’s Income tax expense consisted of: Current: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred and others: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal Years Ended June 30, 2016 2015 2014 (Amounts in thousands) $45,878 135 19,650 $ 22,418 (36) 14,835 $ (3,663) 334 30,950 $65,663 $ 37,217 $27,621 $ (6,986) $ (5,506) $ (4,122) (26) (4,018) (49) (22,096) (78) 2,081 Total income tax expense . . . . . . . . . . . . . . . . . . . . . $60,680 $ 9,566 $19,455 $ (4,983) $(27,651) $ (8,166) The provision for income taxes for the fiscal years ended June 30, 2016, 2015 and 2014, differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to pre-tax income (net of non-controlling interest in income of consolidated subsidiary and loss from equity investment) from operations as a result of the following differences: Total expense computed by applying federal rates . . . . . . . . . . . . . . . . . State and provincial income taxes, net of federal benefit . . . . . . . . . . . . Excess depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estimates for uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory tax attributable to non-controlling interest . . . . . . . . . . . . . . . Effect of foreign earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of foreign earnings indefinitely reinvested . . . . . . . . . . . . . . . . . . Canadian rate adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chilean tax reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized foreign exchange gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiscal Years Ended June 30, 2016 2015 2014 (Amounts in thousands) $ (7,615) $ 21,786 25 (1,429) 1,404 (211) 6,536 (7,601) 4,070 (2,481) (10,949) (359) (1,225) (1) (882) 1,866 1,838 61,576 3,406 — — (2,439) 1,641 1,290 $29,024 334 (1,114) (7,386) (293) 1,141 (1,700) — — (367) (594) 410 $60,680 $ 9,566 $19,455 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. No deferred tax has been provided on the difference 87 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 11. INCOME TAXES (Continued) 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. The tax effects of temporary differences and carryforwards, which give rise to our deferred tax assets and liabilities at June 30, 2016 and 2015, are as follows: 2016 2015 (Amounts in thousands) Deferred tax assets: Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,691 12,385 4,610 22,686 (2,100) 4,393 16,087 3,904 24,384 (4,262) Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,586 $ 20,122 Deferred tax liabilities: Mineral property basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized foreign exchange gains . . . . . . . . . . . . . . . . . . . . 2019 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(127,337) $(133,646) 936 (16,384) (1,658) (1,273) (12,639) (124) Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . (141,373) (150,752) Total net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $(120,787) $(130,630) 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, 2016 and 2015, the Company had $2.1 million and $4.3 million of valuation allowances recorded, respectively. The valuation allowance remaining at June 30, 2016 is attributable to capital loss carryforwards in non-US subsidiaries. At June 30, 2016 and 2015, the Company had $59.5 million and $55 million of net operating loss carry forwards, respectively. The increase in the net operating loss carry forwards is primarily attributable to the impairment charges 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 2028 tax year, and the Company anticipates the losses will be fully utilized. As of June 30, 2016 and 2015, the Company had $16.9 million and $15.1 million of unrecognized tax benefits, respectively. If recognized, these unrecognized tax benefits would positively impact the 88 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 11. INCOME TAXES (Continued) Company’s effective income tax rate. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows: 2016 2015 2014 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 . . . . . . . . . . . . . . . . . . (Amounts in thousands) $13,725 1,662 (257) $21,166 (1,052) (296) — (6,093) $15,130 1,866 — — Total amount of gross unrecognized tax benefits at end of year . . . . . . . . $16,996 $15,130 $13,725 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 2010. As a result of (i) statutes of limitation 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) 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, 2016 and 2015, the amount of accrued income-tax-related interest and penalties was $5.7 million and $4.6 million, respectively. 12. SUPPLEMENTAL CASH FLOW INFORMATION The Company’s supplemental cash flow information for the fiscal years ending June 30, 2016, 2015 and 2014 is as follows: Cash paid during the period for: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes, net of refunds . . . . . . . . . . . . . . . . . . $17,691 $76,072 $10,638 $20,272 $10,638 $27,322 Non-cash investing and financing activities: Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . $59,388 $56,715 $54,049 2016 2015 2014 (Amounts in thousands) 89 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 13. FAIR VALUE MEASUREMENTS ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below: Level 1: Quoted prices for identical instruments in active markets; Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and Level 3: Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). The following table sets forth the Company’s financial assets measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. Carrying Amount At June 30, 2016 Fair Value Total Level 1 Level 2 Level 3 Assets (In thousands): Warrants(1) . . . . . . . . . . . . . . . $ 2,438 Total assets . . . . . . . . . . . . . . . . . Liabilities (In thousands): $ $ 2,438 2,438 $ $ — $2,438 — $2,438 $— $— Debt(2) . . . . . . . . . . . . . . . . . . $410,057 $390,813 $390,813 $ — $— Total liabilities . . . . . . . . . . . . . . $390,813 $390,813 $ — $— (1) (2) Included in Other assets on 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’s debt classified within Level 1 of the fair value hierarchy is valued using quoted prices in an active market. The carrying value of the Company’s revolving credit facility (Note 6) approximates fair value as of June 30, 2016. During the fiscal year ended June 30, 2016, the warrants issued by Golden Star (Note 3) were added to the Level 2 fair value hierarchy. As of June 30, 2016, 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 stream and royalty interests, 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. If recognition of these assets at their fair value becomes necessary, such measurements will be determined utilizing Level 3 inputs. Refer to Note 4 for discussion of inputs used to develop fair value for those stream and royalty interests that were determined to be impaired during the twelve months ended June 30, 2016 and 2015. 90 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 14. MAJOR SOURCES OF REVENUE Operators that contributed greater than 10% of the Company’s total revenue for any of fiscal years 2016, 2015 or 2014 were as follows (revenue amounts in thousands): Operator Thompson Creek . . . . . . . . . Barrick . . . . . . . . . . . . . . . . . Teck . . . . . . . . . . . . . . . . . . . Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Revenue $125,438 49,683 49,243 Percentage of total revenue 34.9% 13.8% 13.7% Percentage of total revenue 33.8% 8.9% 13.7% Percentage of total revenue 11.5% 8.2% 20.6% Revenue $27,209 19,456 48,777 Revenue $94,104 24,849 38,033 15. COMMITMENTS AND CONTINGENCIES Rainy River Gold and Silver Stream Acquisition As of June 30, 2016, the Company has a remaining commitment, subject to certain conditions, of $75.0 million as part of its Rainy River gold and silver stream acquisition in August 2015 (Note 3). Wassa and Prestea Gold Stream Acquisition and Amendment As of June 30, 2016, the Company has a remaining commitment, subject to certain conditions, of $50.0 million as part of its Wassa and Prestea gold stream acquisition (July 2015) and amendment (December 2015) as discussed further in Note 3. Ilovica Gold Stream Acquisition As of June 30, 2016, the Company has a remaining commitment, subject to certain conditions, of $163.75 million as part of its Ilovica gold stream acquisition in October 2014. Voisey’s Bay The Company indirectly owns a royalty on the Voisey’s Bay mine in Newfoundland and Labrador owned by Vale Newfoundland & Labrador Limited (‘‘VNL’’). The royalty is directly owned by the Labrador Nickel Royalty Limited Partnership (‘‘LNRLP’’), in which the Company’s wholly-owned indirect subsidiary, Voisey’s Bay Holding Corporation, is the general partner and 90% owner. The remaining 10% interest in LNRLP is owned by Altius Investments Limited, a company unrelated to Royal Gold. On December 5, 2014, LNRLP filed amendments to its October 16, 2009 Statement of 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 calculation of the NSR on the sale of concentrates, including nickel concentrates, from the Voisey’s Bay mine. LNRLP asserts that the defendants have incorrectly calculated the NSR since production at Voisey’s Bay began in late 2005, have indicated an intention to calculate the NSR in a manner LNRLP believes will violate the royalty agreement as Voisey’s Bay concentrates are processed at Vale’s new Long Harbour processing facility, and have breached their contractual duties of good faith and honest performance in several ways. LNRLP requests an order in respect of the correct calculation of future payments, and unspecified damages for non-payment and 91 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ROYAL GOLD, INC. 15. COMMITMENTS AND CONTINGENCIES (Continued) underpayment of past royalties to the date of the claim, together with additional damages until the date of trial, interest, costs and other damages. The litigation is in the discovery phase. 16. 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. Operating income (loss) Net (loss) income attributable to Royal Gold stockholders Basic (loss) earnings per share Diluted (loss) earnings per share Revenue (Amounts in thousands except per share data) Fiscal year 2016 quarter-ended: September 30 . . . . . . . . . . . . . . . . December 31 . . . . . . . . . . . . . . . . March 31 . . . . . . . . . . . . . . . . . . . June 30 . . . . . . . . . . . . . . . . . . . . . $ 74,056 98,118 93,487 94,129 $ 21,185 27,173 (72,058) 28,516 $359,790 $ 4,816 $(45,046) 15,114 (67,656) 20,439 $(77,149) $(0.69) 0.23 (1.04) 0.32 $(1.18) (Amounts in thousands except per share data) Fiscal year 2015 quarter-ended: September 30 . . . . . . . . . . . . . . . . December 31 . . . . . . . . . . . . . . . . March 31 . . . . . . . . . . . . . . . . . . . June 30 . . . . . . . . . . . . . . . . . . . . . $ 69,026 61,304 74,110 73,579 $ 29,539 (2,022) 32,150 27,568 $ 18,680 (6,548) 25,014 14,819 $278,019 $ 87,235 $ 51,965 $ 0.29 (0.10) 0.38 0.23 $ 0.80 $(0.69) 0.23 (1.04) 0.32 $(1.18) $ 0.29 (0.10) 0.38 0.23 $ 0.80 17. SUBSEQUENT EVENTS Mount Milligan Commitment Letter On July 5, 2016, we entered into a binding commitment letter with Centerra Gold Inc. (‘‘Centerra’’) setting forth the key terms and conditions of a future amendment to our Mount Milligan streaming agreement in connection with the proposed acquisition by Centerra of Thompson Creek Metals Company Inc. (‘‘Thompson Creek’’) by Plan of Arrangement under the Arrangement Agreement executed between Centerra and Thompson Creek, as announced on July 5, 2016 (the ‘‘Centerra Acquisition’’). Thompson Creek is the parent company of Terrane Metals Corp. (‘‘Terrane’’), which owns and operates the Mount Milligan copper-gold mine. Our obligation to amend the Mount Milligan streaming agreement is subject to the consummation of the Centerra Acquisition and other customary conditions set forth in the commitment letter. Pursuant to the terms of the commitment letter, we and Centerra have agreed to amend the existing streaming agreement, whereby, among other things, the existing 52.25% gold streaming interest will be amended to 35.00% and we will obtain an 18.75% copper streaming interest at Mount Milligan at a price equal to 15% of the spot price for each metric tonne of copper delivered. The Centerra Acquisition is expected to close in our first or second quarter of fiscal 2017. 92 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, 2016, 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, 2016, 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, 2016. 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 (2013 Framework). Based on management’s assessment and those criteria, management concluded that, as of June 30, 2016, 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 93 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, 2016. (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, 2016, 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, 2016, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 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, 2016, based on the COSO criteria. 94 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, 2016 and 2015, and the related consolidated statements of operations and comprehensive (loss) income, changes in equity and cash flows for each of the three years in the period ended June 30, 2016 of Royal Gold, Inc. and our report dated August 11, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Denver, Colorado August 11, 2016 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 2016 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2016, 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 2016 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2016, 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 2016 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2016, 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 2016 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2016, 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 2016 Annual Stockholders Meeting to be filed with the SEC within 120 days after June 30, 2016, and is incorporated by reference in this Annual Report on Form 10-K. 95 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 (Loss) Income . . . . . . . . . . . . . . . . Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 57 58 59 60 61 62 (b) Exhibits Reference is made to the Exhibit Index beginning on page 99 hereof. 96 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 11, 2016 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 11, 2016 By: /s/ TONY JENSEN Tony Jensen President, Chief Executive Officer and Director (Principal Executive Officer) Date: August 11, 2016 By: /s/ STEFAN L. WENGER Stefan Wenger Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Date: August 11, 2016 By: /s/ WILLIAM M. HAYES William M. Hayes Chairman Date: August 11, 2016 By: /s/ GORDON J. BOGDEN Gordon J. Bogden Director Date: August 11, 2016 By: /s/ M. CRAIG HAASE M. Craig Haase Director Date: August 11, 2016 By: /s/ KEVIN MCARTHUR Kevin McArthur Director 97 Date: August 11, 2016 By: /s/ JAMIE SOKALSKY Jamie Sokalsky Director Date: August 11, 2016 By: /s/ CHRIS M.T. THOMPSON Chris M. T. Thompson Director Date: August 11, 2016 By: /s/ RONALD J. VANCE Ronald J. Vance Director 98 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 on August 28, 2014 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on September 4, 2014 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(cid:2) 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) 99 Exhibit Number Description 10.2(cid:2) 2015 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.1 to Royal Gold’s Current Report on Form 8-K filed on November 16, 2015 and incorporated herein by reference) 10.3(cid:2) 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) 10.4(cid:2) 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) 10.5(cid:2) 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) 10.6(cid:2) 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) 10.7(cid:2) 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) 10.8(cid:2) 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) 10.9(cid:2) 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) 10.10(cid:2) 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) 10.11(cid:2) 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) 10.12(cid:2) 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) 10.13(cid:2) 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) 10.14(cid:2) Form of Stock Appreciation Rights Agreement under Royal Gold’s 2004 Omnibus Long-Term Incentive Plan (filed as Exhibit 10.6 to Royal Gold’s Current Report on Form 8-K filed on November 7, 2008 and incorporated herein by reference) 10.15(cid:2) 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) 100 Exhibit Number Description 10.16(cid:2) Form of Amended and Restated Indemnification Agreement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on September 4, 2014 and incorporated herein by reference) 10.17(cid:2) 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 July 8, 2016 and incorporated herein by reference) 10.18(cid:2) Form of Employment Agreement by and between Royal Gold, Inc. and each of the following: Karli Anderson, William Heissenbuttel, Mark Isto, Bruce Kirchhoff and Stefan Wenger (filed as Exhibit 10.2 to Royal Gold’s Current Report on Form 8-K filed on July 8, 2016 and incorporated herein by reference) 10.19(cid:2) 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) 10.20 10.21 10.22 10.23 10.24 10.25 Sixth Amended and Restated Revolving Credit Agreement among Royal Gold, Inc., High Desert Mineral Resources, Inc., RG Exchangeco Inc., RG Mexico, Inc., the additional guarantors from time to time party thereto, 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) Amendment No. 1 to Sixth Amended and Restated Revolving Credit Agreement, among Royal Gold, Inc., High Desert Mineral Resources, Inc., RG Exchangeco Inc., RG Mexico, Inc., the additional guarantors from time to time party thereto, the lenders from time to time party thereto, and HSBC Bank USA, National Association, as administrative agent for the lenders, dated April 29, 2015. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on April 30, 2015 and incorporated herein by reference) Amendment No. 2 to Sixth Amended and Restated Revolving Credit Agreement, among Royal Gold, Inc., High Desert Mineral Resources, Inc., RG Exchangeco Inc., RG Mexico, Inc., the additional guarantors from time to time party thereto, the lenders from time to time party thereto, and HSBC Bank USA, National Association, as administrative agent for the lenders, dated April 29, 2015. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on March 21, 2016 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) 101 Exhibit Number 10.26 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 10.35 Description Firm offer to purchase royalty interest of ‘‘Idaho Group’’ between Royal Gold, Inc. and Idaho Group dated July 22, 1999 (filed as Attachment A to the Company’s Current Report on Form 8-K on September 2, 1999 and incorporated herein by reference) Royalty Deed and Agreement, dated effective as of April 15, 1991, between ECM, Inc. and Royal Crescent Valley, Inc. (filed as Exhibit 10(1) to the Company’s Annual Report on Form 10-K for the year ended June 30, 1991 and incorporated herein by reference) Assignment and Assumption Agreement, dated December 6, 2002 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on December 23, 2002 and incorporated herein by reference) Royalty Assignment and Agreement, effective as of December 26, 2002, between High Desert Mineral Resources, Inc. and High Desert Gold Corporation (filed as Exhibit 99.4 to the Company’s Current Report on Form 8-K on September 22, 2005 and incorporated herein by reference) Royalty Assignment, Confirmation, Amendment, and Restatement of Royalty, and Agreement, dated as of November 30, 1995, among Barrick Bullfrog Inc., Barrick Goldstrike Mines Inc. and Royal Hal Co. (filed as Exhibit 99.5 to the Company’s Current Report on Form 8-K on September 22, 2005 and incorporated herein by reference) 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) 102 Exhibit Number 10.36 10.37 10.38 10.39 10.40 10.41 10.42 10.43 10.44† 10.45† Description Voting and Exchange Trust Agreement, dated as of February 22, 2010, among Royal Gold, Inc., RG Exchangeco Inc. and Computershare Trust Company of Canada (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K/A on February 23, 2010 and incorporated herein by reference) Labrador Option Agreement, dated May 18, 1993, between Diamond Fields Resources Inc. and Archean Resources Ltd., as amended (filed as Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q on May 7, 2010 and incorporated herein by reference) Robinson Property Trust Ancillary Agreement by and between Kennecott Holdings Corporation, Kennecott Rawhide Mining Company and Kennecott Nevada Copper Company and BHP Nevada Mining Company, dated September 12, 2003 (filed as Exhibit 10.60 to the Company’s Annual Report on Form 10-K on August 26, 2010 and incorporated herein by reference) Shares Purchase and Sale Agreement by Jaime Ugarte Lee and others to Compa˜nia Minera Barrick Chile Limitada, dated as of March 23, 2001 (English Translation) (filed as Exhibit 10.61 to the Company’s Annual Report on Form 10-K on August 26, 2010 and incorporated herein by reference) Royalty Deed between St Barbara Mines Limited and Resource Capital Funds III L.P., dated March 29, 2005, as supplemented and amended by the Supplemental Deed between St Barbara Mines Limited and Resource Capital Funds III L.P., dated May 20, 2005 (filed as Exhibit 10.64 to the Company’s Annual Report on Form 10-K on August 26, 2010 and incorporated herein by reference) 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) 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) 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) 103 Exhibit Number 10.46 10.47 10.48 10.49 10.50 10.51 10.52 10.53 10.54 10.55† 10.56 Description Second 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 December 11, 2014 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q on January 29, 2015 and incorporated herein by reference). Intercreditor Agreement by and among RGLD Gold AG, Terrane Metals Corp. and Valiant Trust Company dated November 27, 2012 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q on January 31, 2013 and incorporated herein by reference) Option Agreement between Seabridge Gold Inc. and RGLD Gold Canada, Inc. dated June 16, 2011 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on June 22, 2011 and incorporated herein by reference) Subscription Agreement between Seabridge Gold Inc. and RGLD Gold Canada, Inc. dated June 16, 2011 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on June 22, 2011 and incorporated herein by reference) Amending Agreement between Seabridge Gold Inc. and RG Exchangeco Inc., dated October 28, 2011 (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q on November 3, 2011 and incorporated herein by reference) Second Amending Agreement by and between RG Exchangeco Inc. and Seabridge Gold Inc. dated as of December 13, 2012 (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q on January 31, 2013 and incorporated herein by reference) Net Smelter Royalty Agreement between Barrick Gold Corporation and McWatters Mining Inc., dated April 3, 2003 (filed as Exhibit 10.50 to the Company’s Annual Report on Form 10-K on August 18, 2011 and incorporated herein by reference) Agreement between Rio Tinto Metals Limited and MK Gold Company, dated September 1, 1999 (filed as Exhibit 10.52 to the Company’s Annual Report on Form 10-K on August 18, 2011 and incorporated herein by reference) 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) 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) 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) 10.57*(cid:2) Form of Incentive Stock Option Agreement under Royal Gold’s 2015 Omnibus Long-Term Incentive Plan 104 Exhibit Number Description 10.58*(cid:2) Form of Restricted Stock Agreement under Royal Gold 2015 Omnibus Long-Term Incentive Plan 10.59*(cid:2) Form of Director Restricted Stock Agreement under Royal Gold’s 2015 Omnibus Long-Term Incentive Plan 10.60*(cid:2) Form of Performance Share Agreement under Royal Gold’s 2015 Omnibus Long-Term Incentive Plan 10.61*(cid:2) Form of Stock Appreciation Rights Agreement under Royal Gold’s 2015 Omnibus 21.1* 23.1* 31.1* 31.2* Long-Term Incentive Plan 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. * (cid:2) 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. 105 Royal Gold, Inc. and its Subsidiaries As of June 30, 2016 Name Royal Gold, Inc. High Desert Mineral Resources, Inc. Denver Mining Finance Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Crescent Valley Partners LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DFH Co. of Nevada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gold Ventures, Inc. RG Mexico, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RGLD Gold AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RGLD Holdings, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RGLD Gold (Canada) ULC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International Royalty Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 4324421 Canada Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Voisey’s Bay Holding Corporation . . . . . . . . . . . . . . . . . . . . . . . . Labrador Nickel Royalty Limited Partnership . . . . . . . . . . . . . . RGLD Precious Metals GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Royal Crescent Valley, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Royal Alaska, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Peak Gold, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXHIBIT 21.1 State / Province / Country of Incorporation Ownership Percentage Delaware Colorado Colorado Delaware Nevada Nevada Delaware Switzerland Delaware Alberta Canada Canada Canada Ontario Switzerland Nevada Delaware Delaware 100% 81% 100% 100% 100% 100% 100% 100% * 100% 100% 100% 90% 100% 100% 11% * Royal Gold, Inc. owns approximately 22% and RGLD Holdings, LLC owns approximately 78% of RGLD Gold (Canada) ULC Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-203743), Form S-4 (No. 333-111590 and No. 333-145213) and Form S-8 (No. 333-122877, No. 333-155384, No. 333-171364, and No. 333-209391) of our reports dated August 11, 2016, 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, 2016. EXHIBIT 23.1 /s/ Ernst & Young LLP Denver, Colorado August 11, 2016 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 11, 2016 /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 11, 2016 /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, 2016, 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 11, 2016 /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, 2016, 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 11, 2016 /s/ STEFAN WENGER Stefan Wenger Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Corporate Information ANNUAL MEETING CORPORATE HEADQUARTERS STOCK EXCHANGE LISTING Wednesday, November 16, 2016 Royal Gold, Inc. NASDAQ Global Select Market 1660 Wynkoop Street, Suite 1000 (Symbol: RGLD) 9:00 a.m. MST Ritz-Carlton Hotel 1881 Curtis Street Denver, CO 80202 BOARD OF DIRECTORS William M. Hayes Chairman Retired Mining Executive Tony A. Jensen Denver, Colorado 80202 (303) 573-1660 (phone) (303) 595-9385 (fax) E-mail: info@royalgold.com WEBSITE www.royalgold.com LEGAL COUNSEL President and Chief Executive Officer Hogan Lovells US LLP Royal Gold, Inc. Denver, Colorado Gordon J. Bogden Retired Mining Executive M. Craig Haase Retired Mining Executive Kevin C. McArthur Executive Chair Tahoe Resources Inc. Jamie C. Sokalsky Retired Mining Executive Chris M.T. Thompson Retired Mining Executive Ronald J. Vance Retired Mining Executive OFFICERS Tony Jensen President and Chief Executive Officer AUDITORS Ernst & Young LLP Denver, Colorado TRANSFER AGENT/REGISTRAR 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) Stefan Wenger (781) 575-3120 (International) Chief Financial Officer and Treasurer (303) 262-0700 (fax) Karli Anderson Website: Vice President Investor Relations www.computershare.com William Heissenbuttel Vice President Corporate Development Bruce C. Kirchhoff Vice President, General Counsel and Secretary Mark Isto Vice President Operations INVESTOR RELATIONS Copies of Royal Gold’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 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 receive 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. A1 | ROYAL GOLD, INC. | 2016 ANNUAL REPORT From Left to right From Left to right JAMIE C. SOKALSKY Retired Mining Executive KEVIN C. MCARTHUR Executive Chair Tahoe Resources Inc. GORDON J. BOGDEN Retired Mining Executive TONY A. JENSEN President and Chief Executive Officer Royal Gold, Inc. M. CRAIG HAASE Retired Mining Executive WILLIAM M. HAYES Chairman Retired Mining Executive RONALD J. VANCE Retired Mining Executive CHRIS M.T. THOMPSON Retired Mining Executive KARLI ANDERSON KARLI ANDERSON Vice President Vice President Investor Relations Investor Relations BILL HEISSENBUTTEL BILL HEISSENBUTTEL Vice President Vice President Corporate Development Corporate Development TONY JENSEN TONY JENSEN President & President & Chief Executive Officer Chief Executive Officer MARK ISTO MARK ISTO Vice President Vice President Operations Operations BRUCE KIRCHHOFF BRUCE KIRCHHOFF Vice President, Vice President, General Counsel & Secretary General Counsel & Secretary STEFAN WENGER STEFAN WENGER Chief Financial Officer Chief Financial Officer & Treasurer & Treasurer 9/23/16 8:00 PM Board of DirectorsManagementR o y a l G o l d , I n c . 1660 Wynkoop Street, Suite 1000 Denver, Colorado 80202 www.royalgold.com 46594cov.indd 1-2 2 0 1 6 A n n u A l R e p o R t 

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