Edgar Filing: ROYAL GOLD INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2013

o 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		84-0835164
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation)		Identification No.)

1660 Wynkoop Street, Suite 1000
Denver, Colorado		80202
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code (303) 573-1660

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 x No o

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 x No o

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x		Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

There were 64,374,956 shares of the Company’s common stock, par value $0.01 per share, outstanding as of April 24, 2013. In addition, as of such date, there were 667,288 exchangeable shares of RG Exchangeco Inc. outstanding which are exchangeable at any time into shares of the Company’s common stock on a one-for-one basis and entitle their holders to voting, dividend and other rights economically equivalent to those of the Company’s common stock.

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INDEX

		PAGE

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets	3
	Consolidated Statements of Operations and Comprehensive Income	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30

Item 4.	Controls and Procedures	31

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Mine Safety Disclosure	33

Item 5.	Other Information	33

Item 6.	Exhibits	33

SIGNATURES		33

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ITEM 1. FINANCIAL STATEMENTS

ROYAL GOLD, INC.

Consolidated Balance Sheets

(Unaudited, in thousands except share data)

	March 31,			June 30,
	2013			2012
ASSETS
Cash and equivalents	$	673,103		$	375,456
Royalty receivables	59,019			53,946
Income tax receivable	10,379			11,046
Prepaid expenses and other current assets	6,484			4,760
Total current assets	748,985			445,208

Royalty interests in mineral properties, net (Note 3)	2,104,043			1,890,988
Available-for-sale securities (Note 4)	14,154			15,015
Other assets	26,678			21,834
Total assets	$	2,893,860		$	2,373,045

LIABILITIES
Accounts payable	$	2,446		$	2,615
Dividends payable	13,009			8,947
Other current liabilities	6,188			3,647
Total current liabilities	21,643			15,209

Debt (Note 5)	299,961			293,248
Net deferred tax liabilities	172,209			178,716
Uncertain tax positions	20,172			19,469
Other long-term liabilities	2,016			2,974
Total liabilities	516,001			509,616

Commitments and contingencies (Note 12)

EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; and 1 share issued	—			—
Common stock, $.01 par value, 100,000,000 shares authorized; and 64,170,310 and 58,614,221 shares outstanding, respectively	642			586
Exchangeable shares, no par value, 1,806,649 shares issued, less 1,139,361 and 1,007,823 redeemed shares, respectively	29,367			35,156
Additional paid-in capital	2,140,410			1,656,357
Accumulated other comprehensive (loss) income	(113		)	(13,763		)
Accumulated earnings	183,586			160,123
Total Royal Gold stockholders’ equity	2,353,892			1,838,459
Non-controlling interests	23,967			24,970
Total equity	2,377,859			1,863,429
Total liabilities and equity	$	2,893,860		$	2,373,045

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL GOLD, INC.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited, in thousands except share data)

	Three Months Ended						Nine Months Ended
	March 31,			March 31,			March 31,			March 31,
	2013			2012			2013			2012
Royalty revenues	$	74,166		$	69,638		$	231,898		$	202,944

Costs and expenses
General and administrative	7,163			4,431			18,953			15,786
Production taxes	2,422			2,593			7,098			7,690
Depreciation, depletion and amortization	21,649			19,721			64,269			58,360
Restructuring on royalty interests in mineral properties	—			—			—			1,328
Total costs and expenses	31,234			26,745			90,320			83,164

Operating income	42,932			42,893			141,578			119,780

Loss on available-for-sale securities	(12,121		)	—			(12,121		)	—
Interest and other income	129			476			268			3,798
Interest and other expense	(5,757		)	(1,552		)	(18,914		)	(4,939		)
Income before income taxes	25,183			41,817			110,811			118,639

Income tax expense	(18,286		)	(14,864		)	(51,062		)	(41,297		)
Net income	6,897			26,953			59,749			77,342
Net income attributable to non-controlling interests	(433		)	(954		)	(1,299		)	(5,438		)
Net income attributable to Royal Gold stockholders	$	6,464		$	25,999		$	58,450		$	71,904

Net income	$	6,897		$	26,953		$	59,749		$	77,342
Adjustments to comprehensive income, net of tax
Unrealized change in market value of available for sale securities	(71		)	3,904			(67		)	(8,357		)
Realized loss on available-for-sale securities	10,246			—			13,716			—
Comprehensive income	17,072			30,857			73,398			68,985
Comprehensive income attributable to non-controlling interests	(433		)	(954		)	(1,299		)	(5,438		)
Comprehensive income attributable to Royal Gold stockholders	$	16,639		$	29,903		$	72,099		$	63,547

Net income per share available to Royal Gold common stockholders:

Basic earnings per share	$	0.10		$	0.44		$	0.93		$	1.27
Basic weighted average shares outstanding	64,837,598			58,953,216			62,723,061			56,486,455
Diluted earnings per share	$	0.10		$	0.44		$	0.93		$	1.26
Diluted weighted average shares outstanding	64,994,517			59,169,314			62,917,454			56,738,805
Cash dividends declared per common share	$	0.20		$	0.15		$	0.55		$	0.41

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL GOLD, INC.

Consolidated Statements of Cash Flows

(Unaudited, in thousands)

	Nine Months Ended
	March 31,			March 31,
	2013			2012
Cash flows from operating activities:
Net income	$	59,749		$	77,342
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization	64,269			58,360
Loss on available-for-sale securities	12,121			—
Amortization of debt discount	6,713			—
Non-cash stock-based compensation expense	5,808			5,560
Restructuring on royalty interests in mineral properties	—			1,328
Gain on distribution to non-controlling interest	(162		)	(3,725		)
Tax benefit of stock-based compensation exercises	(1,214		)	(3,317		)
Deferred tax benefit	(5,832		)	(714		)
Changes in assets and liabilities:
Royalty receivables	(5,073		)	(13,258		)
Prepaid expenses and other assets	(4,223		)	128
Accounts payable	(581		)	(316		)
Income tax payable (receivable)	(1,349		)	3,161
Other liabilities	2,287			(1,647		)
Net cash provided by operating activities	$	132,513		$	122,902

Cash flows from investing activities:
Acquisition of royalty interests in mineral properties	(277,081		)	(193,662		)
Proceeds on sale of Inventory — restricted	237			5,514
Other	(55		)	(157		)
Net cash (used in) investing activities	$	(276,899	)	$	(188,305	)

Cash flows from financing activities:
Proceeds from the issuance of common stock	473,771			271,440
Borrowing from credit facility	—			100,000
Repayment of debt	—			(211,700		)
Common stock dividends	(30,925		)	(20,554		)
Distribution to non-controlling interests	(2,027		)	(7,917		)
Tax benefit of stock-based compensation exercises	1,214			3,317
Net cash provided by financing activities	$	442,033		$	134,586
Net increase in cash and equivalents	297,647			69,183
Cash and equivalents at beginning of period	375,456			114,155
Cash and equivalents at end of period	$	673,103		$	183,338

The accompanying notes are an integral part of these consolidated financial statements.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Royal Gold, Inc. (“Royal Gold”, the “Company”, “we”, “us”, or “our”), together with its subsidiaries, is engaged in the business of acquiring and managing precious metals royalties, precious metals streams and similar interests. Royalties are non-operating interests in mining projects that provide the right to revenue or metals produced from the project after deducting specified costs, if any. We use the term “royalty interest” in 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. Operating results for the three and nine months ended March 31, 2013, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2013. 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, 2012 filed with the Securities and Exchange Commission on August 9, 2012 (“Fiscal 2012 10-K”).

Recently Adopted Accounting Standards

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 addresses the presentation of comprehensive income and provides entities with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The Company has elected the single continuous statement of comprehensive income. Pursuant to ASU No. 2011-12, Comprehensive Income (Topic 220) — Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting for Standards Update No. 2011-05, the provisions of ASU 2011-05 became effective for the Company’s fiscal year beginning July 1, 2012. Since ASU 2011-05 addresses financial presentation only, its adoption did not impact the Company’s consolidated financial position or results of operations.

Recently Issued Accounting Standards

In February 2013, the FASB issued ASU No. 2013-2, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which amends the Comprehensive Income Topic of the Accounting Standards Codification. The updated standard requires the presentation of information out of accumulated other comprehensive income. ASU No. 2013-2 is effective for the Company’s fiscal year beginning July 1, 2013. The Company does not expect that the adoption of ASU No. 2013-2 will have a significant impact on our consolidated financial position or results of operations.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

2. ACQUISITIONS

Mt. Milligan III Gold Stream Acquisition

On August 8, 2012, Royal Gold entered into an amendment to its purchase and sale agreement with Thompson Creek Metals Company Inc. (“Thompson Creek”) whereby Royal Gold, among other things, agreed to purchase an additional 12.25% of the payable gold from the Mt. Milligan copper-gold project in exchange for a total of $200 million, of which $75 million was paid shortly after closing, and, when production is reached, cash payments for each payable ounce of gold delivered to Royal Gold, as discussed further below (the “Milligan III Acquisition”). Thompson Creek intends to use the proceeds from the Milligan III Acquisition to finance a portion of the construction of the Mt. Milligan project and related costs. Under the Milligan III Acquisition, Royal Gold increased its aggregate pre-production commitment in the Mt. Milligan project from $581.5 million to $781.5 million and agreed to purchase a total of 52.25% of the payable ounces of gold produced from the Mt. Milligan project at a cash purchase price equal to the lesser of $435, with no inflation adjustment, or the prevailing market price for each payable ounce of gold (regardless of the number of payable ounces delivered to Royal Gold).

As of March 31, 2013, the Company has paid $731.6 million of the aggregate pre-production commitment of $781.5 million. The remaining scheduled quarterly payments include $37 million due June 1, 2013 and $12.9 million due September 1, 2013. Royal Gold’s obligation to make these quarterly payments is subject to the satisfaction of certain conditions included in the Milligan III Acquisition (including that the aggregate amount of historical payments made by Royal Gold plus the applicable quarterly payment is less than the aggregate costs of developing the Mt. Milligan project incurred or accrued by Thompson Creek as of the date of the applicable quarterly payment). In the event that a quarterly payment is postponed as a result of the failure by Thompson Creek to satisfy a condition precedent, all subsequent quarterly payments will be adjusted forward one full calendar quarter until such time as all conditions precedent have been satisfied for the next scheduled quarterly payment.

The Milligan III Acquisition has been accounted for as an asset acquisition. The $75 million paid on August 15, 2012, and the scheduled payments of $45 million, $95 million and $62 million paid on September 3, 2012, December 3, 2012, and March 1, 2013, respectively, plus direct transaction costs, have been recorded as a development stage royalty interest within Royalty interests in mineral properties, net on our consolidated balance sheets.

Acquisition of an Additional Royalty Option on the Kerr-Sulphurets-Mitchell Project

On December 13, 2012, Royal Gold purchased 1,004,491 common shares (the “Additional Seabridge Shares”) of Seabridge Gold Inc. (“Seabridge”) at a 15% premium to the volume weighted-average trading price of Seabridge common shares on the Toronto Stock Exchange for a five day trading period that ended December 11, 2012, for $18.3 million (C$18.0 million). Effective December 13, 2012, Royal Gold entered into an amendment (the “Seabridge Amendment”) to its option agreement with Seabridge (the “Seabridge Option Agreement”) to, among other things, remove the 270 day minimum holding period applicable to the Additional Seabridge Shares. Royal Gold sold the Additional Seabridge Shares in a private transaction to an unrelated party for $14.6 million (C$14.4 million) on December 13, 2012.

Upon Royal Gold’s purchase of the Additional Seabridge Shares, Royal Gold obtained the right, under the Seabridge Option Agreement, as amended by the Seabridge Amendment, to increase the net smelter return (“NSR”) royalty it may acquire on all of the gold and silver production from Seabridge’s Kerr-Sulphurets-Mitchell project (“KSM project”) in British Columbia by 0.75%. Royal Gold now holds the right to purchase either a 1.25% NSR royalty on such production for C$100 million, or a 2.0% NSR

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

royalty for C$160 million. If Royal Gold exercises its purchase right, the purchase price will be payable in three equal installments over the 540-day period following exercise.

The 15% premium on the Additional Seabridge Shares, which represents the value of the option to acquire the additional 0.75% NSR royalty on the KSM project, plus direct acquisition costs, was approximately $2.4 million and has been recorded within Other assets on our consolidated balance sheets. The purchase and same day sale of the Additional Seabridge Shares resulted in a realized loss on trading securities of approximately $1.3 million, which is recorded within Interest and other expense on our consolidated statements of operations and comprehensive income.

3. ROYALTY INTERESTS IN MINERAL PROPERTIES

The following summarizes the Company’s royalty interests in mineral properties as of March 31, 2013 and June 30, 2012.

As of March 31, 2013 (Amounts in thousands):	Cost		Accumulated Depletion			Net
Production stage royalty interests:
Andacollo	$	272,998	$	(40,571	)	$	232,427
Voisey’s Bay	150,138		(47,761		)	102,377
Peñasquito	99,172		(11,599		)	87,573
Las Cruces	57,230		(10,710		)	46,520
Mulatos	48,092		(23,080		)	25,012
Wolverine	45,158		(6,346		)	38,812
Dolores	44,878		(7,505		)	37,373
Canadian Malartic	38,800		(5,688		)	33,112
Holt	34,612		(5,679		)	28,933
Gwalia Deeps	31,070		(6,219		)	24,851
Inata	24,871		(8,636		)	16,235
Leeville	18,322		(15,397		)	2,925
Robinson	17,825		(10,806		)	7,019
Cortez	10,630		(9,705		)	925
Other	211,246		(121,015		)	90,231
	1,105,042		(330,717		)	774,325

Development stage royalty interests:
Mt. Milligan	733,044		—			733,044
Pascua-Lama	372,105		—			372,105
Other	47,145		—			47,145
	1,152,294		—			1,152,294

Exploration stage royalty interests	177,424		—			177,424
Total royalty interests in mineral properties	$	2,434,760	$	(330,717	)	$	2,104,043

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

As of June 30, 2012 (Amounts in thousands):	Cost		Restructuring			Accumulated Depletion			Net
Production stage royalty interests:
Andacollo	$	272,998	$	—		$	(27,345	)	$	245,653
Voisey’s Bay	150,138		—			(33,192		)	116,946
Peñasquito	99,172		—			(9,075		)	90,097
Las Cruces	57,230		—			(6,499		)	50,731
Mulatos	48,092		—			(18,721		)	29,371
Wolverine	45,158		—			(1,625		)	43,533
Dolores	44,878		—			(6,021		)	38,857
Canadian Malartic	38,800		—			(3,292		)	35,508
Gwalia Deeps	28,119		—			(4,398		)	23,721
Holt	25,428		—			(2,980		)	22,448
Inata	24,871		—			(7,320		)	17,551
Leeville	18,322		—			(14,436		)	3,886
Robinson	17,825		—			(9,872		)	7,953
Cortez	10,630		—			(9,673		)	957
Other	208,463		—			(112,105		)	96,358
	1,090,124		—			(266,554		)	823,570

Development stage royalty interests:
Mt. Milligan	455,943		—			—			455,943
Pascua-Lama	372,105		—			—			372,105
Other	40,022		(1,328		)	—			38,694
	868,070		(1,328		)	—			866,742

Exploration stage royalty interests	200,676		—			—			200,676
Total royalty interests in mineral properties	$	2,158,870	$	(1,328	)	$	(266,554	)	$	1,890,988

4. AVAILABLE FOR SALE SECURITIES

The Company’s available for sale securities as of March 31, 2013 and June 30, 2012 consists of the following (amounts in thousands):

	As of March 31, 2013
			Unrealized
	Cost Basis		Gain		Loss			Fair Value
Non-current:
Seabridge Gold, Inc.	$	14,064	—		—			$	14,064
Other	203		—		(113		)	90
	$	14,267	$	—	$	(113	)	$	14,154

	As of June 30, 2012
			Unrealized
	Cost Basis		Gain		Loss			Fair Value
Non-current:
Seabridge Gold, Inc.	$	28,574	—		(13,716		)	$	14,858
Other	203		—		(46		)	$	157
	$	28,777	$	—	$	(13,762	)	$	15,015

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

The Company’s policy for determining whether declines in fair value of available-for-sale securities are other than temporary includes a quarterly analysis of the investments and a review by management of all investments for which the cost exceeds the fair value. Any temporary declines in fair value are recorded as a charge to other comprehensive income. This evaluation considers a number of factors including, but not limited to, the length of time and extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, and management’s ability and intent to hold the securities until fair value recovers. If such impairment is determined by the Company to be other-than-temporary, the investment’s cost basis is written down to fair value and recorded in net income during the period the Company determines such impairment to be other-than-temporary. The new cost basis is not changed for subsequent recoveries in fair value.

The most significant available-for-sale security is the investment in Seabridge common stock, acquired in June 2011 and discussed in greater detail within our Fiscal 2012 10-K. During quarter ended March 31, 2013, the Company corrected the original cost basis of the shares, which was overstated by $2.4 million. Based on the Company’s quarterly analysis, including the severity of the market decline in Seabridge common stock during the quarter ended March 31, 2013, the Company determined that the impairment of its investment in Seabridge common stock is other-than-temporary as of March 31, 2013. As a result of the impairment, the Company recognized a loss on available-for-sale securities of $12.1 million during the three months ended March 31, 2013. There were no impairments recognized on our available-for-sale securities during our fiscal year ended June 30, 2012. The Company will continue to evaluate its investment in Seabridge common stock considering additional facts and circumstances as they arise, including, but not limited to, the progress of development of Seabridge’s KSM project.

5. DEBT

The Company’s non-current debt as of March 31, 2013 and June 30, 2012 consists of the following:

	As of		As of
	March 31, 2013		June 30, 2012
	Non-current		Non-current
	(Amounts in thousands)
Convertible notes due 2019, net	$	299,961	$	293,248
Total debt	$	299,961	$	293,248

Convertible Senior Notes Due 2019

In June 2012, the Company completed an offering of $370 million aggregate principal amount of 2.875% convertible senior notes due 2019 (“2019 Notes”). The 2019 Notes bear interest at the rate of 2.875% per annum, and the Company is required to make semi-annual interest payments on the outstanding principal balance of the 2019 Notes on June 15 and December 15 of each year, beginning December 15, 2012. The 2019 Notes mature on June 15, 2019. Interest expense recognized on the 2019 Notes for the three and nine months ended March 31, 2013, was $5.2 million and $15.5 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 $350 million revolving credit facility. As of March 31, 2013, the Company had no amounts outstanding under the revolving credit facility.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

On January 21, 2013, Royal Gold entered into Amendment No. 2 to Fifth Amended and Restated Revolving Credit Agreement (the “Amendment”), which amends the Company’s existing Fifth Amended and Restated Revolving Credit Agreement, dated May 30, 2012 (as amended from time to time, the “Revolving Credit Agreement”), among Royal Gold, as the borrower, certain subsidiaries of Royal Gold, as guarantors, HSBC Bank USA, National Association, as administrative agent and a lender, The Bank of Nova Scotia, as a lender, Goldman Sachs Bank USA, as a lender, and the other lenders from time to time party thereto, HSBC Securities (USA) Inc., as the sole lead arranger and joint bookrunner, and ScotiaBank, as syndication agent and joint bookrunner.

The Amendment revised the Revolving Credit Agreement to, among other things, (i) remove the current ratio, interest coverage ratio and debt service coverage ratio financial covenants, (ii) add a financial covenant requiring the Company to maintain a secured debt ratio below a certain level, (iii) increase the amount of unsecured indebtedness the Company is permitted to incur subject to its pro forma compliance with a leverage ratio test and to allow certain prepayments, refinancing and replacement of such unsecured indebtedness, (iv) increase the interest rate for borrowings under the Revolving Credit Agreement when the leverage ratio exceeds 3.0 to 1.0, and (v) take certain acquisitions into account in determining compliance with financial covenants. Except as set forth in the Amendment, all other terms and conditions of the Revolving Credit Agreement remain in full force and effect. At March 31, 2013, the Company was in compliance with each financial covenant.

6. STOCKHOLDERS’ EQUITY

Common Stock Offering

On October 15, 2012, we sold 5,250,000 shares of our common stock, at a price of $90.00 per share, resulting in proceeds of $472.5 million before expenses. The Company has invested the proceeds from this offering in United States treasury bills or cash bank accounts and intends to use the net proceeds from the offering for the acquisition of additional royalty interests and for general corporate purposes.

7. STOCK-BASED COMPENSATION

The Company recognized stock-based compensation expense as follows:

	Three Months Ended				Nine Months Ended
	March 31,		March 31,		March 31,		March 31,
	2013		2012		2013		2012
	(Amounts in thousands)				(Amounts in thousands)
Stock options	$	113	$	111	$	370	$	349
Stock appreciation rights	378		297		1,196		921
Restricted stock	613		572		2,392		2,223
Performance stock	805		514		1,850		2,067
Total stock-based compensation expense	$	1,909	$	1,494	$	5,808	$	5,560

Stock-based compensation expense is included within general and administrative in the consolidated statements of operations and comprehensive income.

As of March 31, 2013, there was $0.6 million of unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted-average period of 1.8 years.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

As of March 31, 2013, there was $1.7 million of unrecognized compensation expense related to non-vested stock-settled stock appreciation rights, which is expected to be recognized over a weighted-average period of 1.7 years.

The restricted stock awards granted to officers and certain employees during the nine months ended March 31, 2013, vest over a three year period beginning after a two-year holding period from the date of grant, with one-third of the shares vesting after years three, four and five, respectively. As of March 31, 2013, there was $5.8 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average vesting period of 3.4 years.

As of March 31, 2013, there was $3.5 million of unrecognized compensation expense related to non-vested performance stock, which is expected to be recognized over a weighted-average vesting period of 1.5 years.

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:

	Three Months Ended				Nine Months Ended
	March 31,		March 31,		March 31,		March 31,
	2013		2012		2013		2012
	(in thousands, except share data)				(in thousands, except share data)
Net income available to Royal Gold common stockholders	$	6,464	$	25,999	$	58,450	$	71,904
Weighted-average shares for basic EPS	64,837,598		58,953,216		62,723,061		56,486,455
Effect of other dilutive securities	156,919		216,098		194,393		252,350
Weighted-average shares for diluted EPS	64,994,517		59,169,314		62,917,454		56,738,805

Basic earnings per share	$	0.10	$	0.44	$	0.93	$	1.27

Diluted earnings per share	$	0.10	$	0.44	$	0.93	$	1.26

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.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

9. INCOME TAXES

	Three Months Ended						Nine Months Ended
	March 31,			March 31,			March 31,			March 31,
	2013			2012			2013			2012
	(Amounts in thousands, except rate)						(Amounts in thousands, except rate)
Income tax expense	$	18,286		$	14,864		$	51,062		$	41,297
Effective tax rate	72.6		%	35.6		%	46.1		%	34.8		%

The increase in the effective tax rate for the three months ended March 31, 2013, is primarily related to (i) the recognized loss on available-for-sale securities (Note 4), (ii) an increase in tax expense relating to an increase in foreign currency exchange gains, and (iii) a reduction in foreign tax credits claimed. The increase in tax expense for the three months ended March 31, 2013, is partially offset by a decrease in tax expense related to changes in estimates for uncertain tax positions as well as a decrease in tax expense related to earnings from non-U.S. subsidiaries. The recognized loss on available-for-sale securities resulted in an increase in our effective tax rate of 20.3% and 3.6% for the three and nine months ended, March 31, 2013, respectively, due to the recording of a valuation allowance on a deferred tax asset. The increase in the effective tax rate for the nine months ended March 31, 2013, is primarily related to (i) the recognized loss on available-for-sale securities, (ii) an increase in tax expense related to changes in estimates for uncertain tax positions, and (iii) a reduction in foreign tax credits claimed.

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 2008.

As a result of the filing of our U.S. consolidated tax return during the quarter ended March 31, 2013, we recorded $3.1 million of income tax expense resulting from an error identified as part of the annual provision-to-return true-up process. In accordance with applicable U.S. GAAP, management quantitatively and qualitatively evaluated the materiality of the error and determined the error to be immaterial to our Fiscal 2012 10-K.

As of March 31, 2013 and June 30, 2012, the Company had $20.2 million and $19.5 million of total gross unrecognized tax benefits, respectively. The increase in gross unrecognized tax benefits was primarily related to tax positions of International Royalty Corporation entities taken prior to or upon the acquisition by the Company during fiscal year 2010. If recognized, these unrecognized tax benefits would have a positive 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 March 31, 2013 and June 30, 2012, the amount of accrued income-tax-related interest and penalties was $3.8 million and $2.8 million, respectively.

During the quarter ended December 31, 2012, the Company made a foreign withholding tax payment of approximately $17.2 million. During the quarter ended March 31, 2013, the Company recovered approximately $8.5 million of the foreign withholding tax payment, and we expect to recover the remaining payment within the next twelve months. As of March 31, 2013, $8.7 million is recorded within Income tax receivable on our consolidated balance sheets.

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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 interests. Royal Gold’s royalty revenue and long-lived assets (royalty interests in mineral properties, net) are geographically distributed as shown in the following table.

					Royalty Interests in
	Royalty Revenue				Mineral Property, net
	Three Months Ended March 31,		Nine Months Ended March 31,		As of March 31,	As of June 30,
	2013	2012	2013	2012	2013	2012
Chile	32%	25%	29%	25%	31%	35%
Canada	26%	25%	24%	24%	51%	43%
Mexico	17%	23%	19%	20%	8%	9%
United States	15%	15%	17%	18%	4%	5%
Australia	3%	5%	3%	5%	3%	3%
Africa	3%	4%	3%	4%	1%	1%
Other	4%	3%	5%	4%	2%	4%

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.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

	At March 31, 2013
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
Assets (In thousands):
United States treasury bills(1)	$	500,000	$	500,000	$	500,000	$	—	$	—
Money market investments(1)	$	183	$	183	$	183	$	—	$	—
Marketable equity securities(2)	$	14,154	$	14,154	$	14,154	$	—	$	—
Total assets			$	514,337	$	514,337	$	—	$	—

Liabilities (In thousands):
Debt(3)	$	370,000	$	391,738	$	391,738	$	—	$	—
Total liabilities			$	391,738	$	391,738	$	—	$	—

(1) Included in Cash and equivalents in the Company’s consolidated balance sheets.

(2) Included in Available for sale securities in the Company’s consolidated balance sheets.

(3) 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 also invests in money market funds, which are traded by dealers or brokers in active over-the-counter markets. The Company’s money market funds, which are invested in United States treasury bills or United States treasury backed securities, are also 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 March 31, 2013, the Company also had assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis like those associated with royalty interests in mineral properties, intangible assets and other long-lived assets. For these assets, measurement at fair value in periods subsequent to their initial recognition are applicable if any of these assets are determined to be impaired; however, no triggering events have occurred relative to any of these assets during the nine months ended March 31, 2013. If recognition of these assets at their fair value becomes necessary, such measurements will be determined utilizing Level 3 inputs.

12. COMMITMENTS AND CONTINGENCIES

Mt. Milligan Gold Stream Acquisition

Refer to Note 2 for discussion on the Company’s commitment to Thompson Creek as part of the Mt. Milligan gold stream acquisitions.

Tulsequah Chief Gold and Silver Stream Acquisition

As of March 31, 2013, the Company has a remaining commitment of $50 million as part of its Tulsequah Chief gold and silver stream acquisition in December 2011.

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ROYAL GOLD, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Voisey’s Bay

The Company owns a royalty on the Voisey’s Bay mine in Newfoundland and Labrador owned by Vale Newfoundland & Labrador Limited (“VNL”). The royalty is owned by the Labrador Nickel Royalty Limited Partnership (“LNRLP”), in which the Company’s wholly-owned indirect subsidiary, Canadian Minerals Partnership, is the general partner and 89.99% owner. The remaining interests in LNRLP are owned by Altius Investments Ltd. (10%), a company unrelated to Royal Gold, and the Company’s wholly-owned indirect subsidiary, Voisey’s Bay Holding Corporation (0.01%).

On October 16, 2009, LNRLP filed a claim in the Supreme Court of Newfoundland and Labrador Trial Division against Vale Inco Limited, now known as Vale Canada Limited (“Vale Canada”) and its wholly-owned subsidiaries, Vale Inco Atlantic Sales Limited and VNL, related to the calculation of the 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. RELATED PARTY

Crescent Valley Partners, L.P. (“CVP”) was formed as a limited partnership in April 1992. It owns a 1.25% net value royalty on production of minerals from a portion of Cortez. Denver Mining Finance Company, our wholly-owned subsidiary, is the general partner and holds a 2.0% interest in CVP. In addition, Royal Gold holds a 29.6% limited partner interest in the partnership, while our Chairman of the Board of Directors, the Chairman of our Audit Committee and one other member of our board of directors hold an aggregate 35.56% limited partner interest. The general partner performs administrative services for CVP in receiving and processing the royalty payments from the operator, including the disbursement of royalty payments and record keeping for in-kind distributions to the limited partners.

CVP receives its royalty from the Cortez Joint Venture in-kind. The Company, as well as certain other limited partners, sell their pro-rata shares of such gold immediately and receive distributions in cash, while CVP holds gold for certain other limited partners. Such gold inventories, which totaled 12,864 and 12,581 ounces of gold as of March 31, 2013 and June 30, 2012, respectively, are held by a third party refinery in Utah for the account of the limited partners of CVP. The inventories are carried at historical cost and are classified within Other assets on the Company’s consolidated balance sheets. The carrying value of the gold in inventory was approximately $8.0 million and $7.4 million as of March 31, 2013 and June 30, 2012, respectively, while the fair value of such ounces was approximately $20.6 million and $20.1 million as of March 31, 2013 and June 30, 2012, respectively. None of the gold currently held in inventory as of March 31, 2013 and June 30, 2012, is attributed to Royal Gold, as the gold allocated to Royal Gold’s CVP partnership interest is typically sold within five days of receipt.

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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, 2012 filed with the Securities and Exchange Commission (the “SEC”) on August 9, 2012 (the “Fiscal 2012 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,” “stream” and other types of royalty interests throughout this MD&A. These terms are defined in our Fiscal 2012 10-K.

Overview

Royal Gold, together with its subsidiaries, is engaged in the business of acquiring and managing precious metals royalties, precious metals streams and similar interests. Royalties are non-operating interests in mining projects that provide the right to revenue or metals produced from the project after deducting specified costs, if any. We use the term “royalty interest” in this 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 development stage in exchange for royalty interests. We are engaged 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 March 31, 2013, the Company owned royalty interests on 36 producing properties, 23 development stage properties and 146 exploration stage properties, of which the Company considers 48 to be evaluation stage projects. The Company uses “evaluation stage” to describe exploration stage properties that contain mineralized material and on which operators are engaged in the search for reserves. We do not conduct mining operations nor are we required to contribute to capital costs, exploration costs, environmental costs or mining, processing or other operating costs on the properties in which we hold royalty interests. During the three months ended March 31, 2013, we focused on the management of our existing royalty interests and the acquisition of royalty interests.

Our financial results are primarily tied to the price of gold and, to a lesser extent, the price of silver, copper and nickel, together with the amounts of production from our producing stage royalty interests. The prices of gold, silver, copper, nickel and other metals have fluctuated widely in recent years. The marketability and the price of metals are influenced by numerous factors beyond the control of the Company and declines in the price of gold, silver, copper or nickel could have a material and adverse effect on the Company’s results of operations and financial condition.

For the three and nine months ended March 31, 2013 and 2012, gold, silver, copper and nickel price averages and percentage of royalty revenues by metal were as follows:

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	Three months ended								Nine months ended
	March 31, 2013				March 31, 2012				March 31, 2013				March 31, 2012
Metal	Average Price		Percentage of Royalty Revenue		Average Price		Percentage of Royalty Revenue		Average Price		Percentage of Royalty Revenue		Average Price		Percentage of Royalty Revenue
Gold ($/ounce)	$	1,632	73	%	$	1,691	64	%	$	1,668	71	%	$	1,694	67	%
Silver ($/ounce)	$	30.11	6	%	$	32.63	8	%	$	30.87	7	%	$	34.47	7	%
Copper ($/pound)	$	3.60	8	%	$	3.77	8	%	$	3.56	11	%	$	3.75	11	%
Nickel ($/pound)	$	7.85	10	%	$	8.91	14	%	$	7.65	8	%	$	9.08	11	%
Other	N/A		3	%	N/A		6	%	N/A		3	%	N/A		4	%

Principal Royalty Interests

Our principal producing and development royalty 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 interests, production estimates, feasibility studies, metal price assumptions, mine life, legal status and other factors and assumptions, any of which could change and could cause Royal Gold to conclude that one or more of such royalty interests are no longer principal to our business.

Please refer to our Fiscal 2012 10-K for further discussion of our principal producing and development royalty interests.

Principal Producing Properties

			Royalty
Mine	Location	Operator	(Gold unless otherwise stated)
Andacollo(1)	Region IV, Chile	Compañía Minera Teck Carmen de Andacollo (“Teck”)	75% of gold produced (until 910,000 payable ounces; 50% thereafter)
Canadian Malartic	Quebec, Canada	Osisko Mining Corporation (“Osisko”)	1.0% to 1.5% sliding-scale NSR
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: 0.39% NVR
Dolores	Chihuahua, Mexico	Pan American Silver Corp. (“Pan American”)	3.25% NSR; 2.0% NSR (silver)
Holt	Ontario, Canada	St Andrew Goldfields Ltd. (“St Andrew”)	0.00013 x quarterly average gold price NSR
Las Cruces	Andalucía, Spain	Inmet Mining Corporation (“Inmet”)	1.5% NSR (copper)
Leeville	Nevada, USA	Newmont Mining Corporation (“Newmont”)	1.8% NSR
Mulatos(2)	Sonora, Mexico	Alamos Gold, Inc. (“Alamos”)	1.0% to 5.0% sliding-scale NSR
Peñasquito	Zacatecas, Mexico	Goldcorp Inc. (“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)
Wolverine	Yukon Territory, Canada	Yukon Zinc Corporation (“Yukon Zinc”)	0.00% to 9.45% sliding-scale NSR (gold and silver)

(1) There have been approximately 151,000 cumulative payable ounces produced as of March 31, 2013.

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(2) The Mulatos royalty is capped at 2.0 million gold ounces of production. Approximately 1.1 million cumulative ounces of gold have been produced as of March 31, 2013.

Principal Development Properties

			Royalty or similar interests
Mine	Location	Operator	(Gold unless otherwise stated)
Mt. Milligan	British Columbia, Canada	Thompson Creek Metals Inc. (“Thompson Creek”)	52.25% of the payable gold
Pascua-Lama	Region III, Chile	Barrick	0.78% to 5.23% sliding-scale NSR
			1.05% fixed rate royalty (copper)

Operators’ Production Estimates by Royalty Interest for Calendar 2012

We received annual production estimates from many of the operators of our producing mines during the first calendar quarter of 2013. The following table shows such production estimates for our principal producing properties for calendar 2013 as well as the actual production reported to us by the various operators through March 31, 2013. The estimates and production reports are prepared by the operators of the mining properties. We do not participate in the preparation or calculation of the operators’ estimates or production reports and have not independently assessed or verified the accuracy of such information. Please refer to “Recent Developments, 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 Interest for Calendar 2013 and Reported Production

Principal Producing Properties

For the period January 1, 2013 through March 31, 2013

	Calendar 2013 Operator’s Production Estimate(1)			Reported Production through March 31, 2013(2)
	Gold	Silver	Base Metals	Gold	Silver	Base Metals
Royalty	(oz.)	(oz.)	(lbs.)	(oz.)	(oz.)	(lbs.)
Andacollo	63,000	—	—	18,966	—	—
Canadian Malartic	485,000-510,000	—	—	88,053	—	—
Cortez GSR1	48,000	—	—	16,041	—	—
Cortez GSR2	16,000	—	—	—	—	—
Cortez GSR3	64,000	—	—	16,041	—	—
Cortez NVR1	53,000	—	—	11,236	—	—
Dolores	63,500-68,000	3.3-3.5 million	—	12,304	0.7 million	—
Holt	52,000-58,000	—	—	14,950	—	—
Las Cruces
Copper	—	—	151-159 million	—	—	38.3 million
Leeville	228,000	—	—	56,697	—	—
Mulatos	180,000-200,000	—	—	59,489	—	—
Peñasquito	360,000-400,000	20-21 million		68,214	3.9 million
Lead			145-160 million			24.2 million
Zinc			285-305 million			50.4 million
Robinson(3)	N/A	—		10,036	—
Copper			N/A			24.8 million
Voisey’s Bay(3)
Copper			N/A			15.6 million
Nickel			N/A			44.7 million
Wolverine(3)	N/A	N/A		4,063	0.9 million

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(1) There can be no assurance that production estimates received from our operators will be achieved. Please refer to our cautionary language regarding forward-looking statements following this MD&A, as well as the Risk Factors identified in Part I, Item 1A, of our Fiscal 2012 10-K for information regarding factors that could affect actual results.

(2) Reported production relates to the amount of metal sales, subject to our royalty interests, for the period January 1, 2013 through March 31, 2013, as reported to us by the operators of the mines.

(3) The Company did not receive calendar 2013 production guidance from the operator.

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.

Andacollo

Reported production at Andacollo increased approximately 44% during the quarter ended March 31, 2013, when compared to the quarter ended March 31, 2012, primarily due to increased mill throughput as a result of the recently installed crushing circuit and the planned mining of higher grade ore. Over the last few quarters, Andacollo has established steady state operations.

Cortez

Reported production at Cortez decreased approximately 31% during the quarter ended March 31, 2013, when compared to the quarter ended March 31, 2012, as Barrick continues to prioritize production from their higher grade Cortez Hills operation that is not covered by our royalty interest. The Company expects production to remain at these lower levels until Barrick returns to steady state mining at the Pipeline Complex.

Holt

Reported production at Holt increased approximately 69% during the quarter ended March 31, 2013, when compared to the quarter ended March 31, 2012. St Andrews reported that construction of the new ore pass was completed early in the first quarter of calendar 2013 and has resulted in operational improvements and increased production activity at Holt.

Mt. Milligan

Thompson Creek reported that as of December 31, 2012, overall construction progress on the Mt. Milligan project was estimated at 81%. Thompson Creek also reported that the overall project remains on schedule, with initial production to commence in the third quarter of calendar 2013, followed by commercial production expected in the fourth calendar quarter of 2013.

Mulatos

Reported production at Mulatos increased approximately 18% during the quarter ended March 31, 2013, when compared to the quarter ended March 31, 2012. Alamos reported that the increase in reported production was primarily attributable to higher crusher throughput. Crusher throughput in the first quarter of calendar 2013 averaged 17,900 tonnes per day, 29% higher than the first quarter of calendar 2012. In addition, Alamos reported that first quarter of calendar 2013 production benefited from a full quarter of production from the Escondida high-grade zone that was not in production in the prior year.

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Pascua-Lama

As of March 31, 2013, Barrick reported it had spent approximately $4.8 billion on the construction of the Pascua-Lama project. About 70% of the structural steel was erected for the process plant facility, 65% of concrete has been poured, 55% of earthworks was completed, and the ore conveyance tunnel was approximately 80% complete.

During the fourth quarter of calendar 2012, Barrick reported that pre-stripping activities in Chile were halted to address increased dust in the open pit area and that the project has since strengthened dust mitigation and control measures. In addition, regulatory restrictions have also been placed on the project due to the need to repair and improve certain aspects of the water management system in Chile. Completion of measures to address these aspects is targeted for the first quarter of calendar 2014.

Subsequently, Barrick suspended construction work on the Chilean side of the project in April in response to a preliminary injunction issued by a Chilean court. The action alleges non-compliance with the environmental requirements of the project’s Chilean environmental approval. Construction activities in Argentina, where the majority of the project’s critical infrastructure is located, including the process plant and tailings storage facility, were not affected.

Given these pending regulatory and legal issues, Barrick stated on April 24, 2013, that they were unable to fully assess the impact on the capital budget, operating costs and schedule of the project.

Peñasquito

Reported production for all metals at Peñasquito decreased during the quarter ended March 31, 2013, when compared to the quarter ended March 31, 2012. Goldcorp’s annual guidance for Peñasquito anticipated lower production in the first half of calendar 2012 as the mine moves from a lower grade portion of the pit to higher grade ore. Goldcorp also reported that ongoing studies to develop a long-term water strategy continues to progress and that they have identified a new water source within their current permitted basin that has the potential to supply sufficient water to continue the plant ramp-up to full design capacity. Goldcorp noted that current water availability is expected to be sufficient to achieve calendar 2013 production guidance of 360,000 to 400,000 ounces of gold.

Voisey’s Bay

Vale reported that production decreased during the quarter due primarily to feed availability as a result of a crusher failure and a severe snow storm that delayed haulage from the mine. In late March 2013, the Government of Newfoundland and Labrador, announced amendments to their Voisey’s Bay Development Agreement including a commitment from Vale to pursue underground mining to extend the mine life. The agreement also allows Vale to continue processing concentrate outside of the province while construction is being finalized at the Long Harbour processing plant.

Wolverine

Reported production at Wolverine increased significantly during the quarter ended March 31, 2013, when compared to the quarter ended March 31, 2012. Yukon Zinc reported that process circuit modifications and the integration of new equipment have enabled production improvements.

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Results of Operations

Quarter Ended March 31, 2013, Compared to Quarter Ended March 31, 2012

For the quarter ended March 31, 2013, we recorded net income attributable to Royal Gold stockholders of $6.5 million, or $0.10 per basic and diluted share, as compared to net income attributable to Royal Gold stockholders of $26.0 million, or $0.44 per basic and diluted share, for the quarter ended March 31, 2012. The decrease in our net income attributable to Royal Gold stockholders was principally attributable to an other-than-temporary impairment loss recognized on our available-for-sale securities, as discussed further below. The decrease in our earnings per share was also attributable to an increase in interest expense associated with our 2.875% convertible senior notes due 2019 (“2019 Notes”), as discussed below. This decrease was partially offset by an increase in royalty revenue, which is also discussed further below.

For the quarter ended March 31, 2013, we recognized total royalty revenue of $74.2 million, at an average gold price of $1,632 per ounce, an average silver price of $30.11 per ounce, an average nickel price of $7.85 per pound and an average copper price of $3.60 per pound, compared to royalty revenue of $69.6 million, at an average gold price of $1,691 per ounce, an average silver price of $32.63 per ounce, an average nickel price of $8.91 per pound and an average copper price of $3.77 per pound for the quarter ended March 31, 2012. Royalty revenue and the corresponding production, attributable to our royalty interests, for the quarter ended March 31, 2013 compared to the quarter ended March 31, 2012 is as follows:

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Royalty Revenue and Production Subject to Our Royalty Interests

Quarter Ended March 31, 2013 and 2012

(In thousands, except reported production ozs. and lbs.)

		Three Months Ended March 31, 2013				Three Months Ended March 31, 2012
Royalty	Metal(s)	Royalty Revenue		Reported Production(1)		Royalty Revenue		Reported Production(1)
Andacollo	Gold	$	23,112	18,966	oz.	$	16,782	13,174	oz.
Voisey’s Bay		$	9,204			$	10,726
	Nickel			44.7 million	lbs.			50.9 million	lbs.
	Copper			15.6 million	lbs.			9.7 million	lbs.
Peñasquito		$	5,366			$	9,156
	Gold			68,214	oz.			87,517	oz.
	Silver			3.9 million	oz.			6.6 million	oz.
	Lead			24.2 million	lbs.			52.4 million	lbs.
	Zinc			50.4 million	lbs.			75.9 million	lbs.
Holt	Gold	$	5,167	14,950	oz.	$	3,281	8,839	oz.
Mulatos	Gold	$	4,790	59,489	oz.	$	4,230	50,493	oz.
Robinson		$	2,739			$	2,607
	Gold			10,036	oz.			5,673	oz.
	Copper			24.8 million	lbs.			23.8 million	lbs.
Wolverine		$	2,279			$	847
	Gold			4,063	oz.			393	oz.
	Silver			0.9 million	oz.			0.3 million	oz.
Cortez	Gold	$	2,110	16,041	oz.	$	2,595	23,362	oz.
Las Cruces	Copper	$	2,067	38.3 million	lbs.	$	1,706	29.9 million	lbs.
Canadian Malartic	Gold	$	2,000	88,053	oz.	$	2,352	90,845	oz.
Leeville	Gold	$	1,719	56,697	oz.	$	1,956	64,291	oz.
Dolores		$	1,050			$	1,352
	Gold			12,304	oz.			14,510	oz.
	Silver			0.7 million	oz.			0.9 million	oz.
Other(2)	Various	$	12,563	N/A		$	12,048	N/A
Total Royalty Revenue		$	74,166			$	69,638

(1) Reported production relates to the amount of metal sales, subject to our royalty interests, for the three months ended March 31, 2013 and 2012, as reported to us by the operators of the mines.

(2) “Other” includes all of the Company’s non-principal producing royalty interests. Individually, no royalty interest included within the “Other” category contributed greater than 5% of our total royalty revenue for either period.

The increase in royalty revenue for the quarter ended March 31, 2013, compared with the quarter ended March 31, 2012, resulted primarily from production increases at Andacollo and Holt, and the continued ramp-up at Wolverine. These increases were partially offset by production decreases at Peñasquito and Voisey’s Bay (nickel), and a decrease in the average gold, silver, copper and nickel prices. 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.

General and administrative expenses increased to $7.2 million for the quarter ended March 31, 2013, from $4.4 million for the quarter ended March 31, 2012. The increase was primarily due to an increase in legal fees, tax consulting and general consulting fees associated with business development activities during the period.

Depreciation, depletion and amortization increased to $21.6 million for the three months ended March 31, 2013, from $19.7 million for the three months ended March 31, 2012. The increase was

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primarily attributable to production increases at Andacollo and Holt, which resulted in additional depletion expense of approximately $1.7 million during the period. The increase was also attributable to the continued ramp-up at Wolverine, which resulted in additional depletion expense of approximately $1.7 million during the period. These increases were partially offset by production decreases at Peñasquito and Voisey’s Bay (nickel), which resulted in a decrease in depletion expense of $0.8 million during the period.

During the quarter ended March 31, 2013, the Company recognized a $12.1 million loss on available-for-sale securities related to an other-than-temporary impairment on its investment in Seabridge Gold Inc. (“Seabridge”) common stock. The effect of the recognized loss, net of tax, during the quarter ended March 31, 2013, was $0.17 per basic share. Refer to Note 4 of the notes to consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion on the other-than-temporary impairment loss.

Interest and other expense increased to $5.8 million for the quarter ended March 31, 2013, from $1.6 million for the quarter ended March 31, 2012. The increase was primarily attributable to interest expense associated with our 2019 Notes issued in June 2012. Interest expense recognized on the 2019 Notes for the three months ended March 31, 2013, was $5.2 million and included the contractual coupon interest ($2.6 million), the accretion of the debt discount ($2.3 million) and amortization of the debt issuance costs ($0.3 million). There were no interest payments made on our 2019 Notes during the three months ended March 31, 2013. The Company is required to make semi-annual interest payments on the outstanding principal balance of the 2019 Notes on June 15 and December 15 of each year.

During the quarter ended March 31, 2013, we recognized income tax expense totaling $18.3 million compared with $14.9 million during the quarter ended March 31, 2012. This resulted in an effective tax rate of 72.6% in the current period, compared with 35.6% in the quarter ended March 31, 2012. The increase in the effective rate for the three months ended March 31, 2013, is primarily related to (i) the recording of a valuation allowance on the deferred tax asset that was generated as a result of the recognized loss on available-for-sale securities, (ii) an increase in tax expense relating to an increase in foreign currency exchange gains, and (iii) a reduction in foreign tax credits claimed. The increase in the effective tax rate for the three months ended March 31, 2013, was partially offset by a decrease in income tax expense related to changes in estimates for uncertain tax positions as well as a decrease in income tax expense related to earnings from non-U.S. subsidiaries. Excluding the recognized loss on available-for-sale securities, the effective tax rate for the three months ended March 31, 2013, would have been 52.3%. For a complete discussion of the factors that influence our effective tax rate, refer to Note 13 to the notes to consolidated financial statements in the Company’s Fiscal 2012 10-K.

Nine Months Ended March 31, 2013, Compared to Nine Months Ended March 31, 2012

For the nine months ended March 31, 2013, we recorded net income attributable to Royal Gold stockholders of $58.5 million, or $0.93 per basic and diluted share, as compared to net income attributable to Royal Gold stockholders of $71.9 million, or $1.27 per basic share and $1.26 per diluted share, for the nine months ended March 31, 2012. The decrease in our earnings per share was principally attributable to an other-than-temporary impairment loss recognized on our available-for-sale securities, which is discussed below. The decrease in our earnings per share was also attributable to an increase in interest expense associated with our 2019 Notes and the issuance of of 5.25 million shares of common stock in October 2012 as part of a registered offering. The decrease in our earnings per share was partially offset by an increase in royalty revenue during the period, which is discussed below.

For the nine months ended March 31, 2013, we recognized total royalty revenue of $231.9 million, at an average gold price of $1,668 per ounce, an average silver price of $30.87 per ounce, an average nickel price of $7.65 per pound and an average copper price of $3.56 per pound, compared to royalty revenue of $202.9 million, at an average gold price of $1,694 per ounce, an average silver price of $34.47 per ounce, an average nickel price of $9.08 per pound and an average copper price of $3.75 per pound for the nine

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months ended March 31, 2012. Royalty revenue and the corresponding production, attributable to our royalty interests, for the nine months ended March 31, 2013 compared to the nine months ended March 31, 2012 is as follows:

Royalty Revenue and Production Subject to Our Royalty Interests

Nine Months Ended March 31, 2013 and 2012

(In thousands, except reported production ozs. and lbs.)

		Nine Months Ended March 31, 2013				Nine Months Ended March 31, 2012
Royalty	Metal(s)	Royalty Revenue		Reported Production(1)		Royalty Revenue		Reported Production(1)
Andacollo	Gold	$	65,942	52,919	oz.	$	49,800	39,530	oz.
Voisey’s Bay		$	25,813			$	29,999
	Nickel			107.4 million	lbs.			101.0 million	lbs.
	Copper			90.5 million	lbs.			104.3 million	lbs.
Peñasquito		$	23,129			$	21,289
	Gold			290,470	oz.			203,964	oz.
	Silver			15.9 million	oz.			15.5 million	oz.
	Lead			89.5 million	lbs.			121.8 million	lbs.
	Zinc			220.6 million	lbs.			221.8 million	lbs.
Holt	Gold	$	15,535	42,896	oz.	$	11,108	29,697	oz.
Mulatos	Gold	$	13,536	163,110	oz.	$	10,199	123,192	oz.
Robinson		$	11,161			$	8,240
	Gold			30,711	oz.			21,838	oz.
	Copper			102.8 million	lbs.			72.8 million	lbs.
Cortez	Gold	$	6,950	60,024	oz.	$	10,358	89,827	oz.
Canadian Malartic	Gold	$	6,652	276,067	oz.	$	5,196	205,812	oz.
Las Cruces	Copper	$	6,560	122.8 million	lbs.	$	4,494	81.8 million	lbs.
Leeville	Gold	$	5,939	194,476	oz.	$	8,127	268,477	oz.
Wolverine		$	5,547