02273009-00000001-00017700-z@#RoyalGold#2015#10Q-1st-Quarter#RGI-10Q-2015-1stQ-Sep-30-2014-PDF 002002001130Royal Gold, Inc. 2014103020141030190451101
02273009-00000001-00017700-z@#RoyalGold#2015#10Q-1st-Quarter#RGI-10Q-2015-1stQ-Sep-30-2014-PDF
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Other Issuers
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Interim financial statements/report - English
20141030
20141030
BC
AB
SK
MB
ON
QC
NB
NS
PE
NF
00017700
Royal Gold, Inc.
Royal Gold, Inc.
Karen Gross
303
575-6504
303
595-9385
Delaware
780287
099199000000000000000090000000999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999
004
19810105
0630
004
00111111111100000999
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Computershare Trust Company of Canada
Computershare Trust Company of Canada
005
20100602
09:09:32
0
RGL
20140930
002
1660 Wynkoop Street
Suite 1000
Denver
Colorado
United States
80202
303
573-1660
303
595-9385
1660 Wynkoop Street
Suite 1000
Denver
Colorado
United States
80202
303
573-1660
303
595-9385
Table of Contents
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets 3
Consolidated Statements of Operations and Comprehensive Income4
Consolidated Statements of Cash Flows5
Notes to Consolidated Financial Statements6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures about Market Risk27
Item 4. Controls and Procedures 28
PART II OTHER INFORMATION
Item 1. Legal Proceedings 29
Item 1A. Risk Factors 29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds29
Item 3. Defaults Upon Senior Securities 29
Item 4. Mine Safety Disclosure 29
Item 5. Other Information 29
Item 6. Exhibits 29
SIGNATURES 30
Table of Contents
ITEM 1. FINANCIAL STATEMENTS
ROYAL GOLD, INC.
Consolidated Balance Sheets
(Unaudited, in thousands except share data)
The accompanying notes are an integral part of these consolidated financial statements.
3
September 30, June 30,
2014 2014
ASSETS
Cash and equivalents
$ 691,411
$ 659,536
Royalty receivables
43,227
46,654
Income tax receivable 16,271 21,947
Prepaid expenses and other
6,469
7,840
Total current assets
757,378
735,977
Royalty and stream interests, net (Note 3)
2,091,323
2,109,067
Available-for-sale securities (Note 4)
8,268
9,608
Other assets
35,894
36,892
Total assets
$ 2,892,863
$ 2,891,544
LIABILITIES
Accounts payable
2,311
3,897
Dividends payable
13,691
13,678
Foreign withholding taxes payable
879
2,199
Other current liabilities
3,904
2,730
Total current liabilities 20,785 22,504
Debt (Note 5)
314,333
311,860
Deferred tax liabilities
164,490
169,865
Uncertain tax positions (Note 9)
14,208
13,725
Other long-term liabilities
707
1,033
Total liabilities
514,523
518,987
Commitments and contingencies (Note 12)
EQUITY
Preferred stock, $.01 par value, authorized 10,000,000 shares authorized; and 0 shares issued
—
—
Common stock, $.01 par value, 100,000,000 shares authorized; and 64,594,419 and 64,578,401
shares outstanding, respectively
646
646
Exchangeable shares, no par value, 1,806,649 shares issued, less 1,426,792 and 1,426,792
redeemed shares, respectively
16,718
16,718
Additional paid-in capital
2,149,996
2,147,650
Accumulated other comprehensive loss
(1,500) (160)
Accumulated earnings
194,859
189,871
Total Royal Gold stockholders’ equity
2,360,719
2,354,725
Non-controlling interests
17,621
17,832
Total equity
2,378,340
2,372,557
Total liabilities and equity
$ 2,892,863
$ 2,891,544
Table of Contents
ROYAL GOLD, INC.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited, in thousands except share data)
The accompanying notes are an integral part of these consolidated financial statements.
4
For The Three Months Ended
September 30, September 30,
2014 2013
Revenue
$ 69,026
$ 56,487
Costs and expenses
Cost of sales
6,674
—
General and administrative 7,142 6,566
Production taxes
1,690
1,783
Depreciation, depletion and amortization 22,212 22,400
Impairment of mining assets
1,769
—
Total costs and expenses
39,487 30,749
Operating income
29,539
25,738
Interest and other income
51
194
Interest and other expense
(6,712
)
(5,809
)
Income before income taxes
22,878
20,123
Income tax expense
(3,959
)
(4,842
)
Net income 18,919 15,281
Net income attributable to non-controlling interests
(239
)
(86
)
Net income attributable to Royal Gold common stockholders
$ 18,680
$ 15,195
Net income
$ 18,919
$ 15,281
Adjustments to comprehensive income, net of tax
Unrealized change in market value of available-for-sale securities
(1,340
)
1,131
Comprehensive income
17,579
16,412
Comprehensive income attributable to non-controlling interests
(239
)
(86
)
Comprehensive income attributable to Royal Gold stockholders
$ 17,340 $ 16,326
Net income per share available to Royal Gold common stockholders:
Basic earnings per share
$ 0.29
$ 0.23
Basic weighted average shares outstanding
64,962,883
64,858,354
Diluted earnings per share
$ 0.29
$ 0.23
Diluted weighted average shares outstanding
65,107,481
64,980,599
Cash dividends declared per common share
$ 0.21
$ 0.20
Table of Contents
ROYAL GOLD, INC.
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
The accompanying notes are an integral part of these consolidated financial statements.
5
For The Three Months Ended
September 30, September 30,
2014 2013
Cash flows from operating activities:
Net income $ 18,919 $ 15,281
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 22,212 22,400
Non-cash employee stock compensation expense
2,449
1,613
Amortization of debt discount
2,473
2,340
Impairment of mining assets
1,769
—
Tax expense of stock-based compensation exercises
303
28
Deferred tax benefit (5,374) (2,857)
Changes in assets and liabilities:
Royalty receivables 3,427 2,193
Prepaid expenses and other assets
2,147
10,297
Accounts payable
(1,570) (725)
Foreign withholding taxes payable
(1,320) (8,256)
Income taxes payable (receivable)
5,373
(9,010)
Other liabilities
1,650 2,183
Net cash provided by operating activities
$ 52,458
$ 35,487
Cash flows from investing activities:
Acquisition of royalty and stream interests
(6,209) (48,028)
Other
(127
)
(24
)
Net cash used in investing activities
$ (6,336
)
$ (48,052
)
Cash flows from financing activities:
Net proceeds from issuance of common stock
199
—
Common stock dividends (13,678) (13,010)
Distribution to non-controlling interests
(465) (533)
Tax benefit of stock-based compensation exercises
(303
)
(28
)
Net cash used in financing activities
$ (14,247
)
$ (13,571
)
Net increase (decrease) in cash and equivalents
31,875
(26,136
)
Cash and equivalents at beginning of period
659,536 664,035
Cash and equivalents at end of period
$ 691,411
$ 637,899
Table of Contents
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Royal Gold, Inc. (“Royal Gold”, the “Company”, “we”, “us”, or “our”), together with its subsidiaries, is engaged in the business of
acquiring and managing precious metals royalties, metal streams, and similar interests. Royalties are non-operating interests in mining
projects that provide the right to revenue or metals produced from the project after deducting specified costs, if any. A metal stream is
a purchase agreement that provides, in exchange for an upfront deposit payment, the right to purchase all or a portion of one or more
metals produced from a mine, at a price determined for the life of the transaction by the purchase agreement. We may use the term
“royalty interest” in these notes to the consolidated financial statements to refer to royalties, gold, silver or other metal stream
interests, and other similar interests.
Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted
accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and
footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments which are of a
normal recurring nature considered necessary for a fair presentation of our interim financial statements have been included in this
Form 10-Q. 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. Operating results for the three months ended September 30, 2014, are not
necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2015. These interim unaudited financial
statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2014
filed with the Securities and Exchange Commission on August 7, 2014 (“Fiscal 2014 10-K”).
Asset Impairment
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts
of an asset or group of assets may not be recoverable. The recoverability of the carrying value of royalty interests in production and
development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each royalty interest
property using estimates of proven and probable reserves and other relevant information received from the operators. We evaluate the
recoverability of the carrying value of royalty interests in exploration stage mineral properties in the event of significant decreases in
the price of gold, silver, copper, nickel and other metals, and whenever new information regarding the mineral properties is obtained
from the operator indicating that production will not likely occur or may be reduced in the future, thus affecting the future
recoverability of our royalty interests. Impairments in the carrying value of each property are measured and recorded to the extent that
the carrying value in each property exceeds its estimated fair value, which is generally calculated using estimated future discounted
cash flows.
Our estimates of gold, silver, copper, nickel and other metal prices, operator’s estimates of proven and probable reserves related to our
royalty or streaming properties, and operator’s estimates of operating, capital and reclamation costs are subject to certain risks and
uncertainties which may affect the recoverability of our investment in these royalty interests in mineral properties. Although we have
made our best assessment of these factors based on current market conditions, it is possible that changes could occur, which could
adversely affect the net cash flows expected to be generated from these royalty interests. As part of the Company’s regular asset
impairment analysis, the Company determined that one
6
Table of Contents
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
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 of September 30, 2014.
2. ACQUISITION
Tetlin Royalty Acquisitions
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 Contango ORE, Inc.’s Tetlin mining project located near Tok, Alaska, for total consideration of $6.0
million. 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 Royalty and stream interests,
net on our consolidated balance sheets.
3. ROYALTY AND STREAM INTERESTS, NET
The following tables summarize the Company’s principal royalty and stream interests as of September 30, 2014 and June 30, 2014.
7
As of September 30, 2014
(Amounts in thousands):
Cost
Accumulated
Depletion
Net
Production stage royalty interests:
Andacollo
$ 272,998
$ (58,569) $ 214,429
Voisey’s Bay
150,138
(70,012) 80,126
Peñasquito
99,172
(19,377) 79,795
Mulatos
48,092
(29,305) 18,787
Holt 34,612 (11,344) 23,268
Robinson
17,825
(12,119) 5,706
Cortez
10,630
(9,805) 825
Other
489,689
(240,505
)
249,184
Total production stage royalty interests 1,123,156 (451,036) 672,120
Production stage stream interests:
Mt. Milligan
783,046
(13,427
)
769,619
Total production stage royalty and stream interests
1,906,202
(464,463) 1,441,739
Development stage royalty interests:
Pascua-Lama 372,105 — 372,105
Other
69,489
—
69,489
Total development stage royalty interests
441,594
—
441,594
Total development stage stream interests
41,282
—
41,282
Total development stage royalty and stream interests
482,876
—
482,876
Exploration stage royalty interests
166,708
—
166,708
Total royalty and stream interests
$ 2,555,786 $ (464,463) $ 2,091,323
Table of Contents
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
4. AVAILABLE-FOR-SALE SECURITIES
The Company’s available-for-sale securities as of September 30, 2014 and June 30, 2014 consist of the following:
8
As of June 30, 2014 (Amounts in thousands):
Cost
Accumulated
Depletion
Net
Production stage royalty interests:
Andacollo $ 272,998 $ (56,147) $ 216,851
Voisey’s Bay
150,138
(67,377) 82,761
Peñasquito
99,172
(17,801) 81,371
Mulatos
48,092
(28,548) 19,544
Holt
34,612
(10,474) 24,138
Robinson 17,825 (11,887) 5,938
Cortez
10,630
(9,772) 858
Other
488,309
(232,913
)
255,396
Total production stage royalty interests
1,121,776
(434,919) 686,857
Production stage stream interests:
Mt. Milligan
783,046
(7,741
)
775,305
Total production stage royalty and stream interests
1,904,822
(442,660) 1,462,162
Development stage royalty interests:
Pascua-Lama
372,105
—
372,105
Other
69,488 — 69,488
Total development stage royalty interests 441,593 — 441,593
Total development stage stream interests
41,103
—
41,103
Total development stage royalty and stream interests
482,696
—
482,696
Exploration stage royalty interests
164,209 — 164,209
Total royalty and stream interests
$ 2,551,727
$ (442,660) $ 2,109,067
As of September 30, 2014
(Amounts in thousands)
Unrealized
Cost Basis
Gain Loss Fair Value
Non-current:
Seabridge
$ 9,565
—
(1,338) $ 8,227
Other
203
—
(162
)
41
$ 9,768
$ — $ (1,500
)
$ 8,268
As of June 30, 2014
(Amounts in thousands)
Unrealized
Cost Basis
Gain Loss Fair Value
Non-current:
Seabridge
$ 9,565
—
—
$ 9,565
Other
203
—
(160
)
43
$ 9,768
$ — $ (160
)
$ 9,608
Table of Contents
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
The most significant available-for-sale security is the investment in Seabridge Gold, Inc. (“Seabridge”) common stock, acquired in
June 2011 and discussed in greater detail in our Fiscal 2014 10-K. The Company’s policy for determining whether declines in fair
value of available-for-sale securities are other than temporary includes a quarterly analysis of the investments and a review by
management of all investments for which the cost exceeds the fair value. Any temporary declines in fair value are recorded as a
charge to other comprehensive income. 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. Based on the Company’s quarterly analysis of its investments and our ability and intent to
hold these investments for a reasonable period of time, there were no write downs on our available-for-sale securities during the three
months ended September 30, 2014. The Company recognized a loss on available-for-sale securities of $4.5 million during the fourth
quarter of our fiscal year ended June 30, 2014. The Company will continue to evaluate its investment in Seabridge common stock
considering additional facts and circumstances as they arise, including, but not limited to, the progress of development of Seabridge’s
KSM project.
5. DEBT
The Company’s non-current debt as of September 30, 2014 and June 30, 2014 consists of the following:
Convertible Senior Notes Due 2019
In June 2012, the Company completed an offering of $370 million aggregate principal amount of 2.875% convertible senior notes due
2019 (“2019 Notes”). The 2019 Notes bear interest at the rate of 2.875% per annum, and the Company is required to make semi-
annual interest payments on the outstanding principal balance of the 2019 Notes on June 15 and December 15 of each year. The 2019
Notes mature on June 15, 2019. Interest expense recognized on the 2019 Notes for the three months ended September 30, 2014 and
2013, was $5.4 million and $5.3 million, respectively, and included the contractual coupon interest, the accretion of the debt discount
and amortization of the debt issuance costs.
Revolving credit facility
The Company maintains a $450 million revolving credit facility. As of September 30, 2014, the Company had no amounts
outstanding under the revolving credit facility. As discussed in Note 6 to the notes to consolidated financial statements in the
Company’s Fiscal 2014 10-K, the Company has financial covenants associated with its revolving credit facility. At September 30,
2014, the Company was in compliance with each financial covenant.
9
As of
As of
September 30, 2014
June 30, 2014
Non-current
Non-current
(Amounts in thousands)
Convertible notes due 2019, net
$ 314,333 $ 311,860
Total debt
$ 314,333
$ 311,860
Table of Contents
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
6. REVENUE
Revenue is comprised of the following:
7. STOCK-BASED COMPENSATION
The Company recognized stock-based compensation expense as follows:
Stock-based compensation expense is included within general and administrative in the consolidated statements of operations and
comprehensive income.
There were 19,760 and 24,775 stock options granted during the three months ended September 30, 2014 and 2013, respectively. As of
September 30, 2014, there was $0.9 million of unrecognized compensation expense related to non-vested stock options, which is
expected to be recognized over a weighted-average period of 2.3 years.
There were 87,890 and 84,125 stock-settled stock appreciation rights (“SSARs”) granted during the three months ended
September 30, 2014 and 2013, respectively. As of September 30, 2014, there was $3.3 million of unrecognized compensation expense
related to non-vested SSARs, which is expected to be recognized over a weighted-average period of 2.4 years.
There were 55,589 and 66,150 shares of restricted stock granted during the three months ended September 30, 2014 and 2013,
respectively. As of September 30, 2014, there was $7.9 million of unrecognized compensation expense related to non-vested
restricted stock, which is expected to be recognized over a weighted-average vesting period of 3.6 years.
There were 46,800 and 71,700 shares of performance stock granted during the three months ended September 30, 2014 and 2013,
respectively. As of September 30, 2014, there was $4.0 million of unrecognized compensation expense related to non-vested
performance stock, which is expected to be
10
For The Three Months Ended
September 30,
September 30,
2014 2013
(Amounts in thousands)
Royalty interests
$ 49,369
$ 56,487
Stream interests
19,657 —
Total revenue
$ 69,026
$ 56,487
For The Three Months Ended
September 30,
September 30,
2014 2013
(Amounts in thousands)
Stock options
$ 112
$ 129
Stock appreciation rights
355
306
Restricted stock
1,170
1,267
Performance stock
812
(89
)
Total stock-based compensation expense
$ 2,449
$ 1,613
Table of Contents
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
recognized over a weighted-average vesting period of 2.0 years based on management’s current estimate of the performance award
criteria being achieved.
8. EARNINGS PER SHARE (“EPS”)
Basic earnings per common share were computed using the weighted-average number of shares of common stock outstanding during
the period, considering the effect of participating securities. Unvested stock-based compensation awards that contain non-forfeitable
rights to dividends or dividend equivalents are considered participating securities and are included in the computation of earnings per
share pursuant to the two-class method. The Company’s unvested restricted stock awards contain non-forfeitable dividend rights and
participate equally with common stock with respect to dividends issued or declared. The Company’s unexercised stock options,
unexercised SSARs and unvested performance stock do not contain rights to dividends. Under the two-class method, the earnings
used to determine basic earnings per common share are reduced by an amount allocated to participating securities. Use of the two-
class method has an immaterial impact on the calculation of basic and diluted earnings per common share.
The following tables summarize the effects of dilutive securities on diluted EPS for the period:
The calculation of weighted-average shares includes all of our outstanding stock: common stock and exchangeable shares.
Exchangeable shares are the equivalent of common shares in that they have the same dividend rights and share equitably in
undistributed earnings and are exchangeable on a one-for-one basis for shares of our common stock. 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
For The Three Months Ended
September 30, September 30,
2014 2013
(in thousands, except per share data)
Net income available to Royal Gold common stockholders
$ 18,680
$ 15,195
Weighted-average shares for basic EPS
64,962,883
64,858,354
Effect of other dilutive securities
144,598
122,245
Weighted-average shares for diluted EPS
65,107,481
64,980,599
Basic earnings per share
$ 0.29
$ 0.23
Diluted earnings per share
$ 0.29
$ 0.23
Table of Contents
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
9. INCOME TAXES
The decrease in the effective tax rate for the quarter ended September 30, 2014 is primarily related to (i) a favorable tax rate associated
with certain operations in lower-tax jurisdictions, and (ii) a decrease in tax expense due to the Chilean tax legislation enacted in the
quarter and the re-measurement of the Chilean long term deferred tax asset to the higher corporate income tax rate. The decrease in
tax expense was partially offset by an increase in current year tax expense due to accrual for uncertain tax positions.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign
jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal, state and local, and non-U.S. income tax
examinations by tax authorities for fiscal years before 2009. As a result of (i) statute of limitations that will begin to expire within the
next 12 months in various jurisdictions, (ii) possible settlements of audit-related issues with taxing authorities in various jurisdictions
with respect to which none of the issues are individually significant, and (iii) 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.
As of September 30, 2014 and June 30, 2014, the Company had $14.2 million and $13.7 million of total gross unrecognized tax
benefits, respectively. If recognized, these unrecognized tax benefits would positively impact the Company’s effective income tax
rate.
The Company’s continuing practice is to recognize potential interest and/or penalties related to unrecognized tax benefits as part of its
income tax expense. At September 30, 2014 and June 30, 2014, the amount of accrued income-tax-related interest and penalties was
$5.9 million and $5.4 million, respectively.
12
For The Three Months Ended
September 30, September 30,
2014 2013
(Amounts in thousands, except rate)
Income tax expense
$ 3,959
$ 4,842
Effective tax rate
17.3% 24.1%
Table of Contents
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
10. SEGMENT INFORMATION
The Company manages its business under a single operating segment, consisting of the acquisition and management of royalty and
stream interests. Royal Gold’s royalty revenue and long-lived assets (royalty and stream interests, net) are geographically distributed
as shown in the following table.
11. FAIR VALUE MEASUREMENTS
FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (“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.
13
Revenue
Royalty and Stream Interests, net
Three Months Ended
September 30,
As of
As of
2014
2013
September 30, 2014
June 30, 2014
Canada
45%
26%
53%
53%
Chile
16%
31%
32%
31%
United States
16%
13%
3%
3%
Mexico
14%
18% 7% 7%
Australia
3%
4%
3%
3%
Africa
2%
3% 1% 1%
Other
4%
5%
1%
2%
Table of Contents
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Included in Cash and equivalents in the Company’s consolidated balance sheets.
Included in Available for sale securities in the Company’s consolidated balance sheets.
Included in the carrying amount is the equity component of our 2019 Notes in the amount of $77 million, which is included within
Additional paid-in capital in the Company’s consolidated balance sheets.
The Company invests primarily in United States treasury bills with maturities of 90 days or less, which are classified within Level 1 of
the fair value hierarchy. The Company’s marketable equity securities classified within Level 1 of the fair value hierarchy are valued
using quoted market prices in active markets. The fair value of the Level 1 marketable equity securities is calculated as the quoted
market price of the marketable equity security multiplied by the quantity of shares held by the Company. The Company’s debt
classified within Level 1 of the fair value hierarchy is valued using quoted prices in an active market.
As of September 30, 2014, the Company also had assets that, under certain conditions, are subject to measurement at fair value on a
non-recurring basis like those associated with royalty interests in mineral properties, intangible assets and other long-lived assets. For
these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if any of these assets are
determined to be impaired. As discussed in Note 1, two of these assets were written down to fair value (or $0) during the three
months ended September 30, 2014. If recognition of these assets at their fair value becomes necessary, such measurements will be
determined utilizing Level 3 inputs.
12. COMMITMENTS AND CONTINGENCIES
Phoenix Gold Project Stream Acquisition
As of September 30, 2014, the Company has a remaining commitment of $45 million as part of its Phoenix Gold Project stream
acquisition in February 2014. The Company made a $17 million payment as part of this commitment on October 3, 2014.
Tulsequah Chief Gold and Silver Stream Acquisition
As of September 30, 2014, the Company has a remaining commitment of $45 million as part of its Tulsequah Chief gold and silver
stream acquisition in December 2011, as amended in July 2014, payment of which is subject to satisfaction of certain conditions
precedent.
14
At September 30, 2014
Carrying
Fair Value
Amount
Total
Level 1
Level 2
Level 3
Assets (In thousands):
United States treasury bills
$ 499,991
$ 499,991
$ 499,991
$ —
$ —
Marketable equity securities
$ 8,268
$ 8,268
$ 8,268
$ —
$ —
Total assets
$ 508,259
$ 508,259
$ —
$ —
Liabilities (In thousands):
Debt
$ 391,333
$ 387,575
$ 387,575
$ —
$ —
Total liabilities
$ 387,575 $ 387,575
$ — $ —
(1)
(2)
(3)
(1)
(2)
(3)
Table of Contents
ROYAL GOLD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
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, Canadian Minerals Partnership, is the general partner and 89.99% owner. The
remaining interests in LNRLP are owned by Altius Investments Ltd. (10%), a company unrelated to Royal Gold, and the Company’s
wholly-owned indirect subsidiary, Voisey’s Bay Holding Corporation (0.01%).
On October 16, 2009, LNRLP filed a claim in the Supreme Court of Newfoundland and Labrador Trial Division against Vale Inco
Limited, now known as Vale Canada Limited (“Vale Canada”) and its wholly-owned subsidiaries, Vale Inco Atlantic Sales Limited
and VNL, related to the calculation of the NSR on the sale of concentrates, including nickel concentrates, from the Voisey’s Bay mine
to Vale Canada. The claim asserts that Vale Canada is incorrectly calculating the NSR and requests an order in respect of the correct
calculation of future payments. The claim also requests specific damages for underpayment of past royalties to the date of the claim in
an amount not less than $29 million, together with additional damages until the date of trial, interest, costs and other damages. The
litigation is in the discovery phase.
13. SUBSEQUENT EVENT
Acquisition of Gold Stream on Euromax’s Ilovitza Project
On October 20, 2014, RGLD Gold AG (“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 Ilovitza gold-copper project located in southeast
Macedonia, approximately nine miles west of the Bulgarian border. RGLD Gold will make two advance deposit payments to
Euromax totaling $15.0 million, which will 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 is conditioned upon Euromax raising an additional $5 million in equity. Royal Gold’s decision to
proceed with the second $7.5 million deposit and the construction payments is conditioned upon, among other things, its satisfaction
with the definitive feasibility study and environmental evaluations, demonstrated project viability, and 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 Ilovitza 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 time of delivery.
15
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide
information to assist you in better understanding and evaluating our financial condition and results of operations. Royal Gold, Inc.
(“Royal Gold”, the “Company”, “we”, “us”, or “our”), recommends that you read this MD&A in conjunction with our consolidated
financial statements included in Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the
fiscal year ended June 30, 2014 filed with the Securities and Exchange Commission (the “SEC”) on August 7, 2014 (the “Fiscal 2014
10-K”).
This MD&A contains forward-looking information. You should review our important note about forward-looking statements
following this MD&A.
We refer to “GSR,” “NSR,” “metal stream” and other types of royalty or similar interests throughout this MD&A. These terms are
defined in our Fiscal 2014 10-K.
Overview
Royal Gold, Inc., together with its subsidiaries, is engaged in the business of acquiring and managing precious metals royalties, metal
streams, and similar interests. Royalties are non-operating interests in mining projects that provide the right to revenue or metals
produced from the project after deducting specified costs, if any. A metal stream is a purchase agreement that provides, in exchange
for an upfront deposit payment, the right to purchase all or a portion of one or more metals produced from a mine, at a price
determined for the life of the transaction by the purchase agreement. We may use the term “royalty interest” in this Quarterly Report
on Form 10-Q to refer to royalties, gold, silver or other metal stream interests, and other similar interests. We seek to acquire existing
royalty interests or to finance projects that are in production or in the development stage in exchange for royalty interests. In the
ordinary course of business, we engage in a continual review of opportunities to acquire existing royalty interests, to create new
royalty interests through the financing of mine development or exploration, or to acquire companies that hold royalty interests. We
currently, and generally at any time, have acquisition opportunities in various stages of active review, including, for example, our
engagement of consultants and advisors to analyze particular opportunities, analysis of technical, financial and other confidential
information, submission of indications of interest, participation in preliminary discussions and negotiations and involvement as a
bidder in competitive processes.
As of September 30, 2014, the Company owned royalty interests on 37 producing properties, 23 development stage properties and 138
exploration stage properties, of which the Company considers 47 to be evaluation stage projects. The Company uses “evaluation
stage” to describe exploration stage properties that contain mineralized material and on which operators are engaged in the search for
reserves. As the holder of a portfolio of royalty interests, we do not conduct mining operations nor are we required to contribute to
capital costs, exploration costs, environmental costs or other mining, processing or other operating costs on the properties in which we
hold royalty interests. During the three months ended September 30, 2014, we focused on the management of our existing royalty
interests and the acquisition of royalty interests.
Our financial results are primarily tied to the price of gold and, to a lesser extent, the price of silver, copper and nickel, together with
the amounts of production from our producing stage royalty interests. The price of gold, silver, copper, nickel and other metals have
fluctuated widely in recent years and most recently have experienced declines from highs experienced in the first half of our fiscal
year 2013. The marketability and the price of metals are influenced by numerous factors beyond the control of the
16
Table of Contents
Company and significant declines in the price of gold, silver, copper or nickel could have a material and adverse effect on the
Company’s results of operations and financial condition.
For the three months ended September 30, 2014 and 2013, gold, silver, copper and nickel price averages and percentage of revenue by
metal were as follows:
Recent Business Developments
Tetlin Master Agreement and Royalty Acquisitions
On September 29, 2014, Royal Gold and Contango ORE, Inc. (“Contango”) entered into a Master Agreement pursuant to which
Contango will, upon consummation of a joint venture transaction contemplated in the Master Agreement, transfer all of its assets
relating to the Tetlin gold-copper-silver project located near Tok, Alaska, into a newly formed joint venture with Royal Gold. The
Company has the ability to obtain up to a 40% membership interest in the joint venture in exchange for aggregate contributions of up
to $30.0 million. The project is situated partly on lands leased from the Native Village of Tetlin, a federally recognized Indian tribe
(“Tetlin”). By action of the Tetlin Tribal Council and Tetlin membership, Tetlin ratified the lease and agreed to stabilize the terms of
the lease for its duration in the event Tetlin seeks federal trust oversight of tribal lands subject to the lease. Consummation of the joint
venture transaction is subject to various conditions, including, among others, (i) approval by Contango’s shareholders of the joint
venture transaction, and (ii) the payment by Royal Gold of $5.0 million to the joint venture and an additional $750,000 to Contango
pursuant to the Master Agreement.
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 project for total consideration of $6.0 million.
Acquisition of Gold Stream on Euromax’s Ilovitza Project
On October 20, 2014, RGLD Gold AG (“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 Ilovitza gold-copper project located in southeast
Macedonia, approximately nine miles west of the Bulgarian border. RGLD Gold will make two advance deposit payments to
Euromax totaling $15.0 million, which will 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 is conditioned upon Euromax raising an additional $5 million in equity. Royal Gold’s decision to proceed
with the second $7.5 million deposit and the construction payments is conditioned upon, among other things, its satisfaction with the
definitive feasibility study and environmental evaluations, demonstrated project viability, and sufficient project financing and permits
to construct and operate the mine. The construction payments would be paid pro-rata with the balance of the project funding. In
exchange, Euromax will
17
Three Months Ended
September 30, 2014
September 30, 2013
Metal
Average
Price
Percentage of
Revenue
Average
Price
Percentage of
Revenue
Gold ($/ounce
$ 1,282
76% $ 1,326 70%
Silver ($/ounce)
$ 19.76
4%
$ 21.32
7%
Copper ($/pound)
$ 3.17
10% $ 3.21 11%
Nickel ($/pound)
$ 8.43
4%
$ 6.31
8%
Other
N/A
6%
N/A
4%
Table of Contents
deliver physical gold equal to 25% of gold produced from the Ilovitza 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 time of
delivery.
The Ilovitza project is located in south east Macedonia, approximately nine miles west of the Bulgarian border. Euromax has
completed a prefeasibility study for the project which estimates reserves of 2.45 million ounces of gold and 905 million pounds of
copper, average annual production of 35 million pounds of copper and 95,000 ounces of gold over a 23 year mine life and a
production startup in calendar 2018.
Principal Royalty and Stream Interests
Our principal producing and development royalty and stream interests are listed alphabetically in the following tables. The Company
considers both historical and future potential revenues in determining which royalty interests in our portfolio are principal to our
business. Estimated future potential revenues from both producing and development properties are based on a number of factors,
including reserves subject to our royalty or stream interests, production estimates, feasibility studies, metal price assumptions, mine
life, legal status and other factors and assumptions, any of which could change and could cause Royal Gold to conclude that one or
more of such royalty or stream interests are no longer principal to our business.
Please refer to our Fiscal 2014 10-K for further discussion of our principal producing and development royalty and stream interests.
Principal Producing Properties
There have been approximately 228,000 cumulative payable ounces produced as of September 30, 2014.
The Mulatos royalty is capped at 2.0 million gold ounces of production. Approximately 1.30 million cumulative ounces of gold
have been produced as of September 30, 2014.
18
Royalty or stream interests
Mine
Location
Operator (Gold unless otherwise stated)
Andacollo
Region IV, Chile
Compañía Minera Teck Carmen de
Andacollo (“Teck”)
75% of gold produced (until 910,000 payable
ounces; 50% thereafter)
Cortez
Nevada, USA
Barrick Gold Corporation (“Barrick”)
GSR1: 0.40% to 5.0% sliding-scale GSR
GSR2: 0.40% to 5.0% sliding-scale GSR
GSR3: 0.71% GSR
NVR1: 1.014% NVR; 0.618% NVR
(Crossroads)
Holt
Ontario, Canada
St Andrew Goldfields Ltd. (“St
Andrew”)
0.00013 x quarterly average gold price NSR
Mt. Milligan
British Columbia,
Canada
Thompson Creek Metals Company
Inc. (“Thompson Creek”)
Gold stream - 52.25% of payable gold
Mulatos
Sonora, Mexico
Alamos Gold, Inc. (“Alamos”) 1.0% to 5.0% sliding-scale NSR
Peñasquito
Zacatecas, Mexico
Goldcorp
2.0% NSR (gold, silver, lead, zinc)
Robinson
Nevada, USA
KGHM International Ltd. (“KGHM”)
3.0% NSR (copper, gold, silver,
molybdenum)
Voisey’s Bay
Newfoundland and
Labrador, Canada
Vale Newfoundland & Labrador
Limited (“Vale”)
2.7% NSR (nickel, copper, cobalt)
(1)
(2)
(1)
(2)
Table of Contents
Principal Development Property
Operators’ Production Estimates by Royalty Interest for Calendar 2014
We received annual production estimates from many of the operators of our producing mines during the first calendar quarter of
2014. The following table shows such production estimates for our principal producing properties for calendar 2014 as well as the
actual production reported to us by the various operators through September 30, 2014. The estimates and production reports are
prepared by the operators of the mining properties. We do not participate in the preparation or calculation of the operators’ estimates
or production reports and have not independently assessed or verified the accuracy of such information. Please refer to “Property
Developments” below within this MD&A for further discussion on any updates at our principal producing or development properties.
Operators’ Production Estimate by Royalty and Stream Interest for Calendar 2014 and Reported Production
Principal Producing Properties
For the period January 1, 2014 through September 30, 2014
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
our Fiscal 2014 10-K for information regarding factors that could affect actual results.
Reported production relates to the amount of metal sales, subject to our royalty interests, for the period January 1, 2014 through
September 30, 2014, as reported to us by the operators of the mines. For our streaming interest at Mt. Milligan, reported
production represents payable gold shipped, subject to our stream interest, during the January 1, 2014 through September 30,
2014 period.
Payable metal and deliveries are subject to shipping and settlement schedules.
The operator did not release public production guidance for calendar 2014.
19
Royalty or stream interests
Mine
Location
Operator
(Gold unless otherwise stated)
Pascua-Lama
Region III, Chile
Barrick
0.78% to 5.23% sliding-scale NSR
1.05% fixed rate royalty (copper)
Calendar 2014 Operator’s Production
Estimate
Reported Production through
September 30, 2014
Royalty/Stream
Gold
(oz.)
Silver
(oz.)
Base Metals
(lbs.)
Gold
(oz.)
Silver
(oz.)
Base Metals
(lbs.)
Andacollo
38,500
–– –– 31,500
— —
Cortez GSR1
125,000
––
––
48,400
—
—
Cortez GSR2
151,000
––
––
92,500
—
—
Cortez GSR3
276,000
––
––
140,900
—
—
Cortez NVR1
228,000
––
––
112,600
—
—
Holt
66,000
–– –– 48,000
— —
Mt. Milligan
185,000-195,000
136,700
Mulatos
150,000-170,000
–– –– 96,400
— —
Peñasquito
530,000-560,000
22-25 million
––
430,000
21.4 million
—
Lead
135-145 million
129.9 million
Zinc
315-325 million
252.5 million
Robinson
N/A
N/A
16,300
—
—
Copper
N/A
55.9 million
Voisey’s Bay
Copper
N/A
41.3 million
Nickel
N/A
83.9 million
(1) (2)
(3)
(3)
(3)
(3)
(3),(4)
(3),(4)
(1)
(2)
(3)
(4)
Table of Contents
Vale is commissioning its new Long Harbour Processing Plant and intends to begin introducing nickel concentrates from Voisey’s
Bay in coming quarters. In anticipation of the transition from processing Voisey’s Bay nickel concentrates at Vale’s Sudbury and
Thompson smelters to processing at the Long Harbour hydrometallurgical plant, the Company has engaged in discussions with
Vale concerning calculation of the royalty once Voisey’s Bay nickel concentrates are processed at Long Harbour. Vale proposed
a calculation of the royalty that the Company estimates could result in the substantial reduction of royalty payable to LNRLP on
Voisey’s Bay nickel concentrates processed at Long Harbour.
Property Developments
The following information is provided by the operators of the property, either to Royal Gold or in various documents made publicly
available. Reported production, as used below, relates to the amount of metal sales subject to our royalty interests, as reported to us
by the operators of the mines. For our streaming interest at Mt. Milligan, reported production represents payable gold shipped, subject
to our stream interest.
Andacollo
Andacollo reported production decreased 37% over the prior year quarter primarily due to lower grades that were anticipated by the
mine plan throughout calendar 2014. Teck has returned to mining close to reserve grade, and we expect that trend to continue.
Cortez
Reported production at Cortez increased almost ten-fold over the prior year quarter as surface mining activity occurred at the Pipeline
and Gap pits, where our royalty applies, while no significant mining activity occurred in these areas during the prior year quarter.
Additionally, roaster ore from refractory material stockpiled at Cortez was transported to Goldstrike for processing during the current
quarter, while limited roaster ore shipments occurred during the prior year quarter.
Holt
Reported production at Holt decreased 13% over the prior year quarter as the tonnage milled and the grade processed were both
slightly down during the current quarter.
Mt. Milligan
Thompson Creek reported production of 60,400 ounces of payable gold in the current quarter, an increase of 63% over the previous
quarter, primarily due to higher gold grades and recovery. Mill throughput averaged 40,445 tonnes per day during the current quarter,
up 5% compared to the previous quarter. Throughput was impacted by downtime to make various adjustments to the grinding and
flotation circuits, as well as to remediate some minor electrical issues. Thompson Creek expects these modifications will provide
improved performance in the December quarter as they target 80% (48,000 tonnes per day) of design capacity by the end of calendar
2014.
During the quarter ended September 30, 2014, RGLD Gold purchased approximately 13,600 ounces of physical gold, consisting of
approximately 7,000 ounces from the final settlement of Thompson Creek’s third, fourth and fifth shipments from the Mt. Milligan
mine and approximately 6,600 ounces upon provisional payment relating to Thompson Creek’s eighth and ninth shipments. RGLD
Gold sold approximately 15,300 ounces of gold during the period at an average price of $1,281 per ounce, and had approximately
6,100 ounces of gold in inventory as of September 30, 2014.
Deliveries of gold to RGLD Gold are a product of the gold ounces contained in concentrates from Mt. Milligan, a 97% payable factor,
and our 52.25% stream interest; and, for the first 12 concentrate shipments from Mt. Milligan, are based on Thompson Creek’s receipt
of first provisional payments under
20
(5)
Table of Contents
each of its concentrate sales agreements. For shipments 1-4, 75% of the gold was delivered based upon Thompson Creek’s receipt of
the first provisional payment under each concentrate sales agreement and 25% of the gold ounces was delivered based upon final
settlement under each agreement. For shipments 5-8, those percentages are 50% and 50%, respectively, and for shipments 9-12, the
percentages are 25% and 75%, respectively. Thereafter, all deliveries to RGLD Gold will be based solely on final settlement timing
and volumes under Thompson Creek’s concentrate sales agreements.
Deliveries to RGLD Gold can be affected by several factors that make it difficult to calculate our quarterly Mt. Milligan revenue based
solely on Thompson Creek’s reported quarterly production, including the timing of Thompson Creek’s concentrate shipments and the
provisional and final settlement terms applicable to each shipment, neither of which are known to RGLD Gold prior to the shipment
date. RGLD Gold receives physical metal within two days after Thompson Creek records a sale, which in turn can take between five
days and several weeks post-shipment. RGLD Gold currently sells most of the delivered gold within three weeks of receipt, and
recognizes revenue on its streaming transactions when the metal received is sold.
Mulatos
Reported production decreased 32% over the prior year quarter. Alamos has stated that the Mulatos mine is transitioning from open
pit to both open pit and underground mining in order to access higher grade mineral reserves. In addition, mill improvements were
underway and are expected to be completed by the end of the December 2014 quarter. In spite of the deferral of high grade mill
production from San Carlos and the September quarter rainy season in Mexico, Alamos continues to maintain the lower end of their
calendar year production guidance for 2014.
Peñasquito
Reported gold, lead and zinc production increased 41%, 4% and 16%, respectively, while reported silver production decreased
slightly, over the prior year quarter. Goldcorp reported that it is mining in the higher grade portion of the pit, which it expects will
continue through calendar 2014 at a projected throughput of 110,000 tonnes per day.
Robinson
Reported gold production decreased 28% and reported copper production increased 47% over the prior year quarter. Gold production
declined due to lower gold grades and recovery. Gold recovery was adversely impacted by high pyrite ores that carry gold and are
rejected in flotation. Copper production increased due to higher quality ore encountered at Ruth West. KGHM expected to complete
mining in the Kimbley pit during the September 2014 quarter, while continuing to develop the Ruth East pit so that it can be the
primary ore supplier in the December 2014 quarter and in calendar 2015.
Voisey’s Bay
Reported nickel and copper production decreased 40% and 37%, respectively, over the prior year quarter due to lower ore grades.
Concentrate production was also impacted due to a ten day planned maintenance shutdown on the Voisey’s Bay mill. In July, Long
Harbour achieved a major milestone with the production of the first finished nickel from the facility. Initially, Long Harbour will
process primarily nickel matte from PT Vale Indonesia, and transitioning to processing solely concentrate from Voisey´s Bay at a later
stage.
In anticipation of the transition from processing Voisey’s Bay nickel concentrates at Vale’s Sudbury and Thompson smelters to
processing at the Long Harbour hydrometallurgical plant, the Company has engaged in discussions with Vale concerning calculation
of the royalty once Voisey’s Bay nickel
21
Table of Contents
concentrates are processed at Long Harbour. Vale proposed a calculation of the royalty that the Company estimates could result in the
substantial reduction of royalty payable to the Company on Voisey’s Bay nickel concentrates processed at Long Harbour. While the
Company may continue to engage in discussions concerning calculation of the royalty on nickel concentrates processed at Long
Harbour, there is no guaranty that the Company and Vale will reach agreement on the proper calculation under the terms of the royalty
agreement. If no agreement is reached, the Company intends to vigorously pursue all legal remedies to ensure the appropriate
calculation of the royalty and to enforce our royalty interests at Voisey’s Bay.
Results of Operations
Quarter Ended September 30, 2014, Compared to Quarter Ended September 30, 2013
For the quarter ended September 30, 2014, we recorded net income attributable to Royal Gold stockholders of $18.7 million, or $0.29
per basic and diluted share, as compared to net income attributable to Royal Gold stockholders of $15.2 million, or $0.23 per basic
share and diluted share, for the quarter ended September 30, 2013. The increase in our earnings per share was primarily attributable to
an increase in revenue, as discussed further below.
For the quarter ended September 30, 2014, we recognized total revenue of $69.0 million, at an average gold price of $1,282 per ounce,
an average silver price of $19.76 per ounce, an average copper price of $3.17 per pound and an average nickel price of $8.43 per
pound, compared to revenue of $56.5 million, at an average gold price of $1,326 per ounce, an average silver price of $21.32 per
ounce, an average copper price of $3.21 per pound and an average nickel price of $6.31 per pound for the quarter ended September 30,
2013. Revenue and the corresponding production attributable to our royalty interests for the quarter ended September 30, 2014
compared to the quarter ended September 30, 2013 is as follows:
22
Table of Contents
Revenue and Production Subject to Our Royalty and Stream Interests
Quarter Ended September 30, 2014 and 2013
(In thousands, except reported production ozs. and lbs.)
Reported production relates to the amount of metal sales, subject to our royalty interests, for the three months ended
September 30, 2014 and 2013, as reported to us by the operators of the mines, and may differ from the operators public reporting.
For our streaming interest at Mt. Milligan, our revenue is a product of the reported production, our 52.25% stream interest, an
applicable provisional percentage (for the first 12 shipments only) and an average gold sale price of $1,281 per ounce for the three
months ended September 30, 2014. During the three months ended September 30, 2014, Thompson Creek reported production of
60,400 ounces of gold at Mt. Milligan, and the Company sold approximately 15,300 ounces and had approximately 6,100 ounces
of gold in inventory as of September 30, 2014. Production began at Mt. Milligan during the fourth quarter of calendar 2013.
Individually, no royalty included within the “Other” category contributed greater than 5% of our total revenue for either period.
The increase in revenue for the quarter ended September 30, 2014, compared with the quarter ended September 30, 2013, resulted
primarily from new production at Mt. Milligan and production increases at Cortez and Peñasquito. These increases were partially
offset by a decrease in the average gold, silver and copper prices and decreases in production primarily at Andacollo, Voisey’s Bay
and Mulatos. Please refer to “Property Developments” earlier within this MD&A for further discussion on any recent developments
regarding properties covered by certain of our royalty interests.
Cost of sales were approximately $6.7 million for the three months ended September 30, 2014, compared to zero for the three months
ended September 30, 2013. Cost of sales is specific to our streaming agreement for Mt. Milligan, which began production during the
fourth quarter of calendar 2013, and is the
23
Three Months Ended
Three Months Ended
September 30, 2014
September 30, 2013
Reported
Reported
Royalty/Stream
Metal(s)
Revenue
Production
Revenue
Production
Stream:
Mt. Milligan
Gold
$ 19,657
35,200
oz.
$ —
N/A
Royalty:
Andacollo
Gold
$ 10,499 11,000 oz. $ 17,156
17,500 oz.
Peñasquito
$ 7,111
$ 6,558
Gold
143,100
oz.
101,500
oz.
Silver
6.5
Moz.
6.5
Moz.
Lead
41.3
Mlbs.
39.8
Mlbs.
Zinc
85.4
Mlbs.
73.5
Mlbs.
Voisey’s Bay
$ 5,609
$ 7,034
Nickel
17.1 Mlbs.
28.4 Mlbs.
Copper
22.0
Mlbs.
34.7
Mlbs.
Cortez
Gold
$ 4,734
59,500
oz.
$ 441
5,700
oz.
Holt
Gold
$ 3,159
14,800
oz.
$ 3,887
17,000
oz.
Robinson
$ 2,270
$ 1,599
Gold
6,600
oz.
9,200
oz.
Copper
26.1
Mlbs.
17.8
Mlbs.
Mulatos
Gold
$ 1,762 28,400 oz. $ 2,701
41,600 oz.
Other
Various
$ 14,225
N/A
$ 17,111
N/A
Total Revenue
$ 69,026
$ 56,487
(1) (1)
(2)
(3)
(1)
(2)
(3)
Table of Contents
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 $7.1 million for the three months ended September 30, 2014, from $6.6 million for
the three months ended September 30, 2013. The increase was primarily due to an increase in non-cash stock-based compensation as
a result of management’s change in estimate for the number of performance shares that are expected to vest in future period. Refer to
Note 7 of our notes to consolidated financial statements for further discussion on the Company’s stock-based compensation.
During the quarter ended September 30, 2014, we recognized income tax expense totaling $4.0 million compared with $4.8 million
during the quarter ended September 30, 2013. This resulted in an effective tax rate of 17.3% in the current period, compared with
24.1% in the quarter ended September 30, 2013. The decrease in the effective tax rate for the quarter ended September 30, 2014 is
primarily related to (i) a favorable tax rate associated with certain operations in lower-tax jurisdictions and (ii) a decrease in tax
expense due to the Chilean tax legislation enacted in the quarter and the re-measurement of the Chilean long term deferred tax asset to
the higher corporate income tax rate. The decrease in tax expense was partially offset by an increase in current year tax expense due to
accrual for uncertain tax positions. Excluding the enactment of the Chilean tax legislation, the effective tax rate for the three months
ended September 30, 2014, would have been 28.2% For a complete discussion of the factors that influence our effective tax rate, refer
to Note 12 to the notes to consolidated financial statements in the Company’s Fiscal 2014 10-K.
Liquidity and Capital Resources
Overview
At September 30, 2014, we had current assets of $757.4 million compared to current liabilities of $20.8 million for a current ratio of
36 to 1. This compares to current assets of $736.0 million and current liabilities of $22.5 million at June 30, 2014, resulting in a
current ratio of approximately 33 to 1. The increase in our current ratio was primarily attributable to an increase in our cash and
equivalents during the period. Please refer to “Summary of Cash Flows” below for further discussion on changes to our cash and
equivalents during the period.
During the quarter ended September 30, 2014, liquidity needs were met from $69.0 million in revenue and our available cash
resources. As of September 30, 2014, the Company had $450 million available and no amounts outstanding under its revolving credit
facility. The Company was in compliance with each financial covenant under its revolving credit facility as of September 30, 2014.
Refer to Note 5 of our notes to consolidated financial statements for further discussion on our debt.
We believe that our current financial resources and funds generated from operations will be adequate to cover anticipated expenditures
for debt service, general and administrative expense costs and capital expenditures for the foreseeable future. Our current financial
resources are also available to fund dividends and for acquisitions of royalty and stream interests, including the remaining
commitments incurred in connection with the Phoenix Gold, Ilovitza and Tulsequah Chief stream acquisitions. Our long-term capital
requirements are primarily affected by our ongoing acquisition activities. The Company currently, and generally at any time, has
acquisition opportunities in various stages of active review. In the event of one or more substantial royalty interest or other
acquisitions, we may seek additional debt or equity financing as necessary.
Please refer to our risk factors included in Part 1, Item 1A of our Fiscal 2014 10-K for a discussion of certain risks that may impact the
Company’s liquidity and capital resources.
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Summary of Cash Flows
Operating Activities
Net cash provided by operating activities totaled $52.5 million for the three months ended September 30, 2014, compared to $35.5
million for the three months ended September 30, 2013. The increase was primarily due to an increase in proceeds received from our
royalty interests, net of production taxes, of approximately $9.7 million.
Investing Activities
Net cash used in investing activities totaled $6.3 million for the three months ended September 30, 2014, compared to cash used in
investing activities of $48.1 million for the three months ended September 30, 2013. The decrease in cash used in investing activities
is primarily due to a decrease in funding for royalty or stream acquisitions. The Company made its final commitment payment to
Thompson Creek ($12.9 million) as part of the Mt. Milligan gold stream acquisition during the quarter ended September 30, 2013.
The Company also acquired a royalty on the El Morro copper-gold project for $35 million during the prior year quarter.
Financing Activities
Net cash used in financing activities totaled $14.2 million for the three months ended September 30, 2014, compared to cash used in
financing activities of $13.6 million for the three months ended September 30, 2013. The increase in cash used in financing activities
is primarily attributable to an increase in the common stock dividend payment, which was the result of an increase in the dividend rate
when compared to the same period of the prior year.
Recently Adopted Accounting Standards
There were no new accounting standards adopted during the quarter ended September 30, 2014.
Critical Accounting Policies
Asset Impairment
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts
of an asset or group of assets may not be recoverable. The recoverability of the carrying value of royalty interests in production and
development stage mineral properties is evaluated based upon estimated future undiscounted net cash flows from each royalty interest
property using estimates of proven and probable reserves and other relevant information received from the operators. We evaluate the
recoverability of the carrying value of royalty interests in exploration stage mineral properties in the event of significant decreases in
the price of gold, silver, copper, nickel and other metals, and whenever new information regarding the mineral properties is obtained
from the operator indicating that production will not likely occur or may be reduced in the future, thus affecting the future
recoverability of our royalty interests. Impairments in the carrying value of each property are measured and recorded to the extent that
the carrying value in each property exceeds its estimated fair value, which is generally calculated using estimated future discounted
cash flows.
Our estimates of gold, silver, copper, nickel and other metal prices, operator’s estimates of proven and probable reserves related to our
royalty or streaming properties, and operator’s estimates of operating, capital and reclamation costs are subject to certain risks and
uncertainties which may affect the recoverability of our investment in these royalty interests in mineral properties. Although we have
made our best assessment of these factors based on current market conditions, it is possible that changes could occur, which could
adversely affect the net cash flows expected to be generated from these royalty
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interests. As part of the Company’s regular asset impairment analysis, 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 of
September 30, 2014.
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 Quarterly Report on Form 10-Q are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from projections or estimates contained herein. Such forward-looking
statements include, without limitation, statements regarding projected production estimates and estimates pertaining to timing and
commencement of production from the operators of properties where we hold royalty and stream interests; effective tax rate estimates;
the adequacy of financial resources and funds to cover anticipated expenditures for general and administrative expenses as well as
costs associated with exploration and business development and capital expenditures, and our expectation that substantially all our
revenues will be derived from royalty interests. Words such as “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,”
“anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project” and variations of these words, comparable words and
similar expressions generally indicate forward-looking statements, which speak only as of the date the statement is made. Do not
unduly rely on forward-looking statements. Actual results may differ materially from those expressed or implied by these forward-
looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include, among
others:
• changes in gold and other metals prices on which our royalty interests are paid or changes in prices of the primary metals
mined at properties where we hold royalty interests;
• the production at or performance of properties where we hold royalty interests;
• the ability of operators to bring projects, particularly development stage properties, into production on schedule or
operate in accordance with feasibility studies;
• challenges to mining, processing and related permits and licenses, or to applications for permits and licenses, by or on
behalf of indigenous populations, non-governmental organizations or other third parties;
• decisions and activities of the operators of properties where we hold royalty interests;
• liquidity or other problems our operators may encounter;
• hazards and risks at the properties where we hold royalty interests that are normally associated with developing and
mining properties, including unanticipated grade and geological, metallurgical, processing or other problems, mine
operating and ore processing facility problems, pit wall or tailings dam failures, industrial accidents, environmental
hazards and natural catastrophes such as floods or earthquakes and access to raw materials, water and power;
• changes in operators’ mining, processing and treatment techniques may change the production of minerals subject to our
royalty interests;
• changes in the methodology employed by our operators to calculate our royalty interests in accordance with the
agreements that govern them;
• changes in project parameters as plans of the operators of properties where we hold royalty interests are refined;
• changes in estimates of reserves and mineralization by the operators of properties where we hold royalty interests;
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• contests to our royalty interests and title and other defects to the properties where we hold royalty interests;
• economic and market conditions;
• future financial needs;
• federal, state and foreign legislation governing us or the operators of properties where we hold royalty interests;
• the availability of royalty interests for acquisition or other acquisition opportunities and the availability of debt or equity
financing necessary to complete such acquisitions;
• our ability to make accurate assumptions regarding the valuation, timing and amount of revenue to be derived from our
royalty interests when evaluating acquisitions;
• risks associated with conducting business in foreign countries, including application of foreign laws to contract and other
disputes, environmental, real estate, contract and permitting laws, currency fluctuations, expropriation of property,
repatriation of earnings, taxation, price controls, inflation, import and export regulations, community unrest and labor
disputes, endemic health issues, corruption, enforcement and uncertain political and economic environments;
• changes in laws governing us, the properties where we hold royalty interests or the operators of such properties;
• risks associated with issuances of additional common stock or incurrence of indebtedness in connection with acquisitions
or otherwise including risks associated with the issuance and conversion of convertible notes;
• acquisition and maintenance of permits and authorizations, completion of construction and commencement and
continuation of production at the properties where we hold royalty interests;
• changes in management and key employees; and
• failure to complete future acquisitions;
as well as other factors described elsewhere in this report and our other reports filed with the SEC. Most of these factors are beyond
our ability to predict or control. Future events and actual results could differ materially from those set forth in, contemplated by or
underlying the forward-looking statements. Forward-looking statements speak only as of the date on which they are made. We
disclaim any obligation to update any forward-looking statements made herein, except as required by law. Readers are cautioned not
to put undue reliance on forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our earnings and cash flows are significantly impacted by changes in the market price of gold and other metals. Gold, silver, copper,
nickel and other metal prices can fluctuate significantly and are affected by numerous factors, such as demand, production levels,
economic policies of central banks, producer hedging, world political and economic events and the strength of the U.S. dollar relative
to other currencies. Please see “Volatility in gold, silver, copper, nickel and other metal prices may have an adverse impact on the
value of our royalty interests and reduce our revenues. Certain contracts governing our royalty interests have features that may
amplify the negative effects of a drop in metal prices,” under Part I, Item 1A of our Fiscal 2014 10-K, for more information about
factors that can affect
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gold, silver, copper, nickel and other metal prices as well as historical gold, silver, copper and nickel prices.
During the three month period ended September 30, 2014, we reported revenue of $69.0 million, with an average gold price for the
period of $1,282 per ounce, an average silver price of $19.76 per ounce, an average copper price of $3.17 per pound and an average
nickel price of $8.43 per pound. Approximately 76% of our total recognized revenues for the three months ended September 30, 2014
were attributable to gold sales from our gold producing interests, as shown within the MD&A. For the three months ended September
30, 2014, if the price of gold had averaged 10% higher or lower per ounce, we would have recorded an increase or decrease in revenue
of approximately $5.7 million.
Approximately 10% of our total recognized revenues for the three months ended September 30, 2014 were attributable to copper sales
from our copper producing interests. For the three months ended September 30, 2014, if the price of copper had averaged 10% higher
or lower per pound, we would have recorded an increase or decrease in revenue of approximately $0.7 million.
Approximately 4% of our total recognized revenues for the three months ended September 30, 2014 were attributable to silver sales
from our silver producing interests. For the three months ended September 30, 2014, if the price of silver had averaged 10% higher or
lower per ounce, we would have recorded an increase or decrease in revenue of approximately $0.4 million.
Approximately 4% of our total recognized revenues for the three months ended September 30, 2014 were attributable to nickel sales
from our nickel producing interests. For the three months ended September 30, 2014, if the price of nickel had averaged 10% higher
or lower per pound, we would have recorded an increase or decrease in revenue of approximately $0.4 million.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of September 30, 2014, the Company’s management, with the participation of the President and Chief Executive Officer (the
principal executive officer) and Chief Financial Officer and Treasurer (the principal financial and accounting officer) of the Company,
carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on such
evaluation, the Company’s President and Chief Executive Officer and its Chief Financial Officer and Treasurer have concluded that,
as of September 30, 2014, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that
information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the required time periods and that such information is accumulated and communicated to the
Company’s management, including the President and Chief Executive Officer and its Chief Financial Officer and Treasurer, as
appropriate to allow timely decisions regarding required disclosure.
Disclosure controls and procedures involve human diligence and compliance and are subject to lapses in judgment and breakdowns
resulting from human failures. As a result, a control system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact
that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.
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Changes in Internal Controls
There has been no change in the Company’s internal control over financial reporting during the three months ended September 30,
2014, that has materially affected, or that is reasonably likely to materially affect, the Company’s internal control over financial
reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Voisey’s Bay
Refer to Note 12 of our notes to consolidated financial statements for a discussion on litigation associated with our Voisey’s Bay
royalty. There was no material development to this litigation during the three months ended September 30, 2014.
ITEM 1A. RISK FACTORS
Information regarding risk factors appears in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and
Results of Operations — Forward-Looking Statements,” and various risks faced by us are also discussed elsewhere in Part I, Item 2
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q.
In addition, risk factors are included in Part I, Item 1A of our Fiscal 2014 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
The exhibits to this Quarterly Report on Form 10-Q are listed in the Exhibit Index.
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SIGNATURES
Pursuant to the requirements 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.
30
ROYAL GOLD, INC.
Date: October 30, 2014 By: /s/ Tony Jensen
Tony Jensen
President and Chief Executive Officer
(Principal Executive Officer)
Date: October 30, 2014 By:/s/ Stefan Wenger
Stefan Wenger
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
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ROYAL GOLD, INC.
EXHIBIT INDEX
31
Exhibit
Number
Description
3.1
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).
10.1*
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).
31.1
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2**
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted 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.
* Identifies a management contract or compensation plan or arrangement.
** Furnished herewith.
EXHIBIT 31.1
CERTIFICATION
I, Tony Jensen, certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q of Royal Gold, Inc.;
(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.
October 30, 2014
/s/Tony Jensen
Tony Jensen
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION
I, Stefan Wenger, certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q of Royal Gold, Inc.;
(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.
October 30, 2014
/s/Stefan Wenger
Stefan Wenger
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Royal Gold, Inc. (the “Company”), for the period ended September 30,
2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tony Jensen, President and Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 that, to my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
October 30, 2014
/s/Tony Jensen
Tony Jensen
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Royal Gold, Inc. (the “Company”), for the period ended September 30,
2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stefan Wenger, Chief Financial
Officer and Treasurer 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.
October 30, 2014
/s/ Stefan Wenger
Stefan Wenger
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
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