e424b5
Information in
this prospectus supplement is not complete and may be changed.
This prospectus supplement and the related prospectus are not an
offer to sell these securities, and they are not soliciting an
offer to buy these securities, in any jurisdiction where the
offer or sale is not permitted.
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SUBJECT TO COMPLETION, DATED
APRIL 6, 2009
Registration
No. 333-156376
Filed pursuant to Rule 424(b)(5)
PROSPECTUS
SUPPLEMENT
(To Prospectus dated December 19, 2008)
$
6,500,000 Shares of Common
Stock
We are selling 6,500,000 shares of our common stock. We
have granted the underwriters an option to purchase up to
975,000 additional shares of common stock to cover
over-allotments.
Our common stock is traded on the NASDAQ Global Select Market
under the symbol RGLD. The last reported sale price
of our common stock on the NASDAQ Global Select Market on
April 3, 2009 was $43.42 per share. Our common stock
is also traded on the Toronto Stock Exchange under the symbol
RGL.
Investing in our common stock involves risks. See Risk
Factors beginning on
page S-11.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if the prospectus or this prospectus
supplement is truthful or complete. Any representation to the
contrary is a criminal offense.
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Per Share
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Total
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Public Offering Price
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$
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$
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Underwriting Discount
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$
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$
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Proceeds to Royal Gold, Inc. (before expenses)
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$
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$
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The underwriters expect to deliver the shares to the purchasers
on or
about ,
2009.
Joint Book Runners
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HSBC |
Goldman, Sachs & Co. |
Scotia Capital |
Co-Managers
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Merrill
Lynch & Co. |
NBF Securities (USA) Corp. |
The date of this prospectus supplement is April , 2009
You should rely only on the information contained or
incorporated by reference in this prospectus supplement, the
accompanying prospectus and any free writing prospectus relating
to this offering. We have not authorized anyone to provide you
with different information. We are not making an offer of these
securities in any jurisdiction where the offer is not permitted.
The information in this prospectus supplement, the accompanying
prospectus, the documents incorporated by reference and any
written communication from us specifying the final terms of the
offering is only accurate as of the date of the respective
documents in which the information appears. Our business,
financial condition, results of operations and prospects may
have changed since those dates. Information in this prospectus
supplement updates and modifies the information in the
accompanying prospectus.
Table of
Contents
Prospectus
Supplement
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Page
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iii
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iv
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iv
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S-1
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S-11
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S-22
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S-25
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S-26
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S-27
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S-27
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S-28
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S-31
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S-36
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S-38
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S-43
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S-46
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S-46
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S-47
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S-47
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Prospectus
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1
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i
ABOUT
THIS PROSPECTUS SUPPLEMENT
This prospectus supplement and the accompanying prospectus are
part of a registration statement on
Form S-3
(File
No. 333-156376)
that we filed with the Securities and Exchange Commission (the
SEC) and that became effective on December 22,
2008 utilizing an automatic shelf registration process. Under
this shelf registration process, we may, from time to time,
offer debt securities, preferred stock, common stock, warrants
and depositary shares, of which this offering is a part. We have
also filed this prospectus supplement and the related
prospectus, which we refer to as the Canadian prospectus, with
the securities regulatory authorities in each of the provinces
of Canada, other than Quebec. The securities qualified under the
Canadian prospectus may be offered and sold in each of the
provinces of Canada, other than Quebec, subject to any
applicable securities laws.
This document is in two parts. The first part is this prospectus
supplement, which describes the terms of this offering of common
stock and also adds, updates and changes information contained
in the accompanying prospectus and the documents incorporated
herein by reference. The second part is the prospectus, which
gives more general information, some of which may not apply to
this offering of common stock. To the extent the information
contained in this prospectus supplement differs or varies from
the information contained in the accompanying prospectus or any
document incorporated herein by reference, the information in
this prospectus supplement shall control. You should read both
this prospectus supplement and the accompanying prospectus, as
well as the additional information described under Where
You Can Find More Information on
page S-47
of this prospectus supplement, before investing in our common
stock.
Unless otherwise stated, information in this prospectus
supplement assumes that the underwriters will not exercise their
over-allotment option to purchase additional shares of our
common stock and no other person will exercise any other
outstanding options to purchase shares of our common stock.
This document includes trade names and trademarks of other
companies. All such trade names and trademarks appearing in this
document are the property of their respective holders.
SPECIAL
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This prospectus supplement, the prospectus and the documents
incorporated herein by reference contain certain references to
future expectations and other forward-looking statements and
information relating to us or to properties operated by others
that are based on our beliefs and assumptions or those of
management of the companies who operate properties on which we
have royalties, as well as information currently available to
us. Such forward-looking statements include statements regarding
projected production and reserves received from the operators of
our royalty properties. Additional written or oral
forward-looking statements may be made by us from time to time
in filings with the SEC or otherwise. Words such as
may, could, should,
would, believe, estimate,
expect, anticipate, plan,
forecast, potential, intend,
continue, project and similar
expressions generally indicate forward-looking statements, which
speak only as of the date the statement is made. Such
forward-looking statements are within the meaning of that term
in Section 27A of the Securities Act of 1933 (the
Securities Act) and Section 21E of the
Securities Exchange Act of 1934 (the Exchange Act).
Forward-looking statements inherently involve risks and
uncertainties, some of which cannot be predicted or quantified.
Accordingly, 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:
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changes in the price of gold and other metals on which our
royalties are paid or metals which are the primary deposit mined
at our royalty properties;
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the production at or performance of our producing royalty
properties;
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decisions and activities of the operators of our royalty
properties;
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the ability of the operators to bring projects into production
and operate in accordance with feasibility studies;
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liquidity or other problems our operators may encounter, such as
those recently encountered by High River Gold Mines Ltd.
(High River) with respect to the Taparko project;
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unanticipated grade and geological, metallurgical, processing or
other problems at the properties;
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changes in project parameters as plans of operators are refined;
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changes in estimates of reserves and mineralization by the
operators of our royalty properties;
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economic and market conditions;
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future financial needs;
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federal, state and foreign legislation governing us or the
operators of our royalty properties;
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the availability of royalties for acquisition or other
acquisition opportunities and the availability of debt or equity
financing necessary to complete such acquisitions;
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our ability to make accurate assumptions regarding the
valuation, timing and amount of royalty payments when making
acquisitions;
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risks associated with conducting business in foreign countries,
including the application of foreign laws to contract and other
disputes, environmental laws and enforcement and uncertain
political and economic environments;
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risks associated with issuances of substantial additional common
stock or incurrence of substantial indebtedness in connection
with acquisitions or otherwise;
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satisfaction or waiver of the closing conditions to the proposed
acquisition of an interest in the gold production from the
Andacollo mine described herein and the closing thereof;
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completion of construction and commencement and continuation of
production at the Andacollo mine;
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changes to management and key employees;
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as well as other factors described elsewhere in our Annual
Report on
Form 10-K/A
(filed on November 6, 2008) for the fiscal year ended
June 30, 2008, our Quarterly Reports on
Form 10-Q
for the periods ended September 30, 2008 and
December 31, 2008 and in future filings we make with the
SEC. Most of these factors are beyond our ability to predict or
control. We disclaim any obligation to update any
forward-looking statement made herein, except as required by
law. Readers are cautioned not to put undue reliance on
forward-looking statements.
CERTAIN
DEFINITIONS
Gross Smelter Return (GSR) Royalty: A
defined percentage of the gross revenue from a resource
extraction operation, in certain cases reduced by certain
contract-defined costs paid by or charged to the operator.
g/t: A unit representing grams/tonne.
Net Smelter Return (NSR) Royalty: A
defined percentage of the gross revenue from a resource
extraction operation, less a proportionate share of incidental
transportation, insurance, refining and smelting costs.
Net Value Royalty (NVR): A defined
percentage of the gross revenue from a resource extraction
operation, less certain contract-defined transportation costs,
milling costs and taxes.
Payable Ounces of Gold: Ounces of gold
in concentrate payable to the operator after deduction of a
percentage of gold in concentrate that is paid to a third-party
smelter pursuant to smelting contracts.
Royalty: The right to receive a
percentage or other denomination of mineral production from a
resource extraction operation.
Ton: A unit of weight equal to 2,000
pounds or 907.2 kilograms.
Tonne: A unit of weight equal to
2,204.6 pounds or 1,000 kilograms.
iii
TAX
CONSIDERATIONS
We are not providing any tax advice as to the acquisition,
holding or disposition of the shares of our common stock offered
hereby. In making an investment decision, investors should
consult their own tax advisors to determine the
U.S. federal or state, and any applicable foreign or other
tax consequences related to an investment in our common stock.
See Material United States Federal Income Tax
Considerations for
Non-U.S. Holders
on
page S-43.
NOTICE TO
UNITED KINGDOM AND EUROPEAN UNION INVESTORS
This document is only being distributed to and is only directed
at (i) persons who are outside the United Kingdom or
(ii) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the Order) or
(iii) high net worth companies, and other persons to whom
it may lawfully be communicated, falling within
Article 49(2)(a) to (d) of the Order (all such persons
in (i), (ii) and (iii) above together being referred
to as relevant persons). The shares are only
available to, and any invitation, offer or agreement to
subscribe, purchase or otherwise acquire such securities will be
engaged in only with, relevant persons. Any person who is not a
relevant person should not act or rely on this document or any
of its contents.
In any EEA Member State that has implemented Directive
2003/71/EC (together with any applicable implementing measures
in any Member State, the Prospectus Directive), this
communication is only addressed to and is only directed at
qualified investors in that Member State within the meaning of
the Prospectus Directive.
iv
PROSPECTUS
SUPPLEMENT SUMMARY
This summary highlights selected information about Royal
Gold, Inc. This summary does not contain all of the information
that may be important to you. For a more complete understanding
of Royal Gold you should read carefully this entire prospectus
supplement and the related prospectus, including the Risk
Factors section and the other documents we refer to and
incorporate by reference. Unless otherwise indicated,
Royal Gold, the Company, we,
us and our refer to Royal Gold, Inc. and
its subsidiaries and common stock means our common
stock, par value $0.01 per share, offered by this prospectus
supplement.
Royal
Gold Overview
Royal Gold is engaged in the business of acquiring and managing
precious metals royalties. Royalties are passive (non-operating)
interests in mining projects that provide the right to revenue
or production from the project after deducting specified costs,
if any. The Company owns royalties on 25 producing properties,
10 development stage properties and over 80 exploration stage
properties, of which the Company considers 25 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. Royal Gold does not conduct mining operations and is
not required to contribute to capital costs, exploration costs,
environmental costs or other operating costs on the properties
on which it holds royalty interests. For the six months ended
December 31, 2008, Royal Gold derived 81% of its total
revenue from gold royalties, 3% of its total revenue from silver
royalties and 16% of its total revenue from other royalties.
Company
Strengths
We believe that our core strengths include the following:
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A long history of revenue and royalty reserve growth, as well as
royalties on significant development properties that we expect
will generate strong future revenue;
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A balanced mix of royalties on producing, development and
exploration stage properties, with a focus on producing and
development properties operated by proven, well regarded
operators, including Barrick Gold Corporation
(Barrick), Newmont Mining Corporation
(Newmont), AngloGold Ashanti Limited
(AngloGold) and Goldcorp Inc. (Goldcorp);
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A geographically diverse portfolio of royalties in largely
stable geographic regions;
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No requirements to contribute to capital, exploration,
environmental or other operating costs at mine sites;
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Organic growth when reserves are increased on a property on
which we hold a royalty interest;
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Exposure to commodity price movements, with no historical
practice of metal price hedging;
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Current strong liquidity position;
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An experienced management team with proven skills in acquiring
and managing precious metal royalty interests;
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A strong history of successful precious metal royalty
acquisitions and a pipeline of potential acquisitions in various
stages of review; and
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A $0.32 per share dividend for calendar 2009, representing a 14%
increase in the dividend rate for calendar 2008, and a history
of increasing our dividend for each of the past eight years.
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Royal Golds strengths are further discussed in the section
entitled Royal Gold Business Model and Growth
Strategy on page S-3.
S-1
Recent
Developments Proposed Acquisition of Andacollo
Production Interest
On April 3, 2009, Royal Gold entered into a definitive agreement
with a Chilean subsidiary of Teck Cominco Limited
(Teck), Compañía Minera Carmen de
Andacollo (CDA), to acquire an interest in the gold
produced from the sulfide portion of the Andacollo copper and
gold project in Chile (the Andacollo Production
Interest) for total consideration consisting of
$100 million in cash and 4,454,136 shares of our
common stock, each subject to adjustment (the Teck
Transaction). Pursuant to the definitive agreement with
CDA, if this offering is completed, at the closing of the Teck
Transaction the stock portion of the purchase price
(4,454,136 shares) will be decreased to
1,204,136 shares (or 716,636 shares if the
underwriters over-allotment option is exercised in full
before closing of the Teck Transaction), representing a decrease
in the stock portion of the purchase price by 50% of the number
of shares sold in this offering. The cash portion of the
purchase price will be increased by the amount of the proceeds
from the sale of 50% of the shares sold in this offering (minus
underwriting commissions and discounts), which, at an assumed
offering price of $43.42 (the closing price of our common stock
on the NASDAQ Global Select Market on April 3, 2009), would
result in a total cash payment of $234.8 million (or
$255.0 million if the underwriters
over-allotment
option is exercised in full before closing of the Teck
Transaction). Royal Gold has also entered into a stockholder
agreement with Teck and CDA including customary standstill
provisions, voting provisions requiring CDA, Teck and its
affiliates to vote in accordance with the recommendations of
Royal Golds board of directors, and transfer restrictions
limiting CDAs ability to enter into certain transactions
involving Royal Golds common stock. Royal Gold will also
enter into a registration rights agreement providing CDA with
certain registration rights.
The Andacollo Production Interest will equal 75% of the gold
produced from the sulfide portion of the deposit at the
Andacollo mine until 910,000 payable ounces of gold have been
sold, and 50% of the gold produced in excess of 910,000 payable
gold ounces. Payment to Royal Gold from the Andacollo Production
Interest will be in cash, subject to certain exceptions. The
Andacollo Production Interest will not cover copper production.
The Andacollo mine has operated since 1996 and is currently
operated by CDA, which is 90% owned by Teck and 10% owned by
Empresa Nacional de Minería (ENAMI), a Chilean state-owned
mining and processing company. The mine, located about
34 miles southeast of the city of La Serena, Chile,
produces copper from the oxide portion of the deposit, and Teck
is currently constructing facilities to produce both copper and
gold from the sulfide portion of the deposit. Proven and
probable reserves estimated by the operator for the sulfide
portion are 393.5 million tonnes with a grade of 0.39%
copper and 0.13 g/t gold. This equates to 1.6 million
contained ounces of gold. Reserves were estimated by the
operator using a copper price of $1.50 per pound and a gold
price of $480 per ounce. Gold will be produced as a by-product
of copper production, with a gold recovery rate estimated by the
operator to be approximately 61%. The production interest
agreements for the Andacollo Production Interest will include
certain provisions that limit the concentrate marketing terms
applicable to Royal Gold, including a 90.6% minimum payable gold
factor and a maximum gold refining charge against the production
interest payment to Royal Gold of $6 per ounce of gold. Once the
mine is in full production the operator expects the mill to have
a capacity of 55,000 tonnes per day. The operator estimates
that the mine will produce on average approximately 53,000
ounces of gold and 76,000 tonnes of copper in concentrate
annually for the first 10 years of commercial production,
with an estimated mine life of 20 years. The mine is
estimated by the operator to begin initial production of gold in
the fourth quarter of calendar 2009, with ramp up continuing
into 2010. The operator anticipates commercial production at the
mine to be achieved in the first half of calendar 2010.
Royal Golds obligation to close the Teck Transaction is
subject to CDAs completion of concentrate marketing for a
specified percentage of its concentrate production from the
Andacollo mine, the condition that CDAs material
governmental approvals are not withdrawn or challenged and
satisfactory completion of certain limited due diligence by
Royal Gold, as well as other customary closing conditions.
Either party may terminate the definitive agreement if the
closing conditions are not met by October 30, 2009. There
can be no assurance that the Teck Transaction will close on time
or at all. The closing of the Teck Transaction is not contingent
on this offering and can be financed independently of this
offering. See Risk Factors Risks Related to
the Teck Transaction on page S-21.
S-2
Expected
Benefits of the Teck Transaction
The Teck Transaction, if consummated, is expected to provide a
number of benefits to Royal Gold:
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A new gold production revenue interest in a project that is:
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Located in a favorable mining jurisdiction (Chile);
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Estimated to have a long mine life (20 years);
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Operated by an experienced mining company (Teck); and
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Expected to begin commercial production of gold in the first
half of calendar 2010.
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A substantial potential increase in revenue to the Company.
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An increase in the gold portion of the Companys revenue
distribution.
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An expansion of the Companys royalty presence in Chile and
further diversification of the Companys geographic revenue
distribution.
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See Recent Developments Proposed Acquisition
of Andacollo Production Interest on
page S-22.
Royal
Gold Business Model and Growth Strategy
Royal Gold is engaged in the business of acquiring and managing
precious metals royalties. The Company seeks to acquire existing
royalties and to create new royalties through the financing of
mining, development or exploration projects in exchange for
royalty interests. Royal Gold does not conduct mining
operations. The key elements of the Companys business
model and growth strategy are as follows:
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Focus on Gold and Precious Metals through Royalty
Ownership. Royal Gold has established its
business model based on the premise that an attractive means to
gain exposure to gold and precious metals prices is to acquire
and hold royalty interests in gold and precious metal
properties, rather than to engage directly in mining operations.
By holding royalties, the Company benefits from
(i) increases in commodity prices, (ii) production
increases from properties subject to Royal Golds royalty
interests and (iii) reserve increases on properties subject
to Royal Gold royalty interests, potentially extending Royal
Golds revenue stream from such properties. Royal Gold is
not required to contribute to capital costs, exploration costs,
environmental costs or other operating costs on the properties
on which it holds royalties, and, as a result, Royal Gold has
been able to achieve historically high margins and low overhead.
The Company believes its exposure to operating risks are further
reduced because its portfolio is comprised of royalties on
properties operated by experienced and well regarded operators
throughout the world, including Barrick, Newmont, AngloGold and
Goldcorp.
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Industry Experience and Relationships. Royal
Gold relies on its experienced management team to identify
opportunities and to structure creative approaches to acquire
royalty interests, as well as to manage royalty streams once
acquired. The Companys management team includes senior
executives with many years of industry experience in geology,
mine operations, mining law and mine financing. The management
team maintains personal relationships throughout the industry,
from major mining companies to exploration companies, landowners
and prospectors, giving the Company an excellent platform from
which to identify, target and obtain or create royalty interests.
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Acquisition of Royalties on Producing Mines or Development
Projects. Royal Gold actively seeks to acquire
royalties on both producing mines and development projects and
has successfully executed an acquisition strategy that has more
than doubled the reserves subject to its royalty interests from
fiscal 2006 through fiscal 2008. Producing royalties generate
revenue, while development stage properties represent an
important part of the Companys growth strategy.
Development stage properties not only provide a pipeline of
reserves subject to Royal Golds royalty interests, but
also provide potential future revenue should they begin
production over the next several years as expected by the
operators of our principal development projects. Royal Gold also
considers evaluation and exploration stage properties
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S-3
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to be an important component in maintaining a balanced royalty
portfolio with potential for future growth. Royal Gold has
acquired portfolios of royalties that include royalties on
exploration and evaluation stage properties that Royal Gold
believes have potential.
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Recent key acquisitions of producing and development stage
properties include:
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on October 1, 2008, a portfolio of 72 royalties from
Barrick, including the remaining 70% of a royalty on the Mulatos
gold mine located in Mexico of which we previously owned 30%, as
well as royalties on the Malartic gold project in Canada and the
Siguiri gold mine in the Republic of Guinea;
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in fiscal 2008, royalties on the Marigold gold project located
in Nevada, the El Chanate mine located in Mexico and the Benso
gold concession located in the Republic of Ghana and
13 royalties as part of our acquisition of Battle Mountain
Gold Exploration Corp. (Battle Mountain), including
two royalties on the Dolores mine in Mexico;
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in fiscal 2007, royalties on the Peñasquito mine located in
Mexico and the Pascua-Lama project located in Chile; and
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in fiscal 2006, a royalty on the Robinson mine located in
Nevada, 30% of a royalty on the Mulatos mine (the remaining 70%
of which was acquired in October 2008 as described above) and
four royalties on the Taparko mine located in Burkina Faso
through a financing arrangement with High River.
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Please see Royalty and Reserve Information on
page S-31
for information about these royalty interests and reserves
subject to these royalty interests.
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Utilize Flexible Acquisition Approaches. Royal
Gold has pursued a growth strategy using a variety of
acquisition structures. Royal Gold used the following
acquisition structures to grow its royalty portfolio:
(i) the acquisition of existing royalties or portfolios of
existing royalties, (ii) the creation of new royalties by
providing financing or capital, including for exploration
activities, in exchange for royalties, and (iii) the
acquisition of companies holding royalty assets. Royal
Golds ability to utilize various acquisition structures
allows it to adapt to changing market conditions affecting
mining companies and to capitalize on the changing needs of
mining companies. The Company takes a flexible approach to each
royalty acquisition it examines, with consideration given to
industry conditions as well as the various goals and
capabilities of each operator or potential business partner.
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Royalty Evaluation Criteria. Royal Gold
believes there are substantial benefits to holding royalties on
properties with significant reserves that represent long-lived
assets. The Company utilizes a series of technical, business and
legal criteria by which it evaluates potential royalty
acquisitions. Among the factors considered are: (i) the
quality of the asset, (ii) the reputation of the operator,
(iii) country risks, (iv) environmental risks,
(v) timing of anticipated production, (vi) potential
for reserve growth, (vii) overall size and likely duration
of the project and (viii) strategic, financial and
operating impact of the acquisition on Royal Gold. The Company
relies both on its own management expertise, and on that of
consultants, to evaluate mining properties and reserves in order
to evaluate royalties for acquisition. Royal Gold believes its
systematic evaluation of royalties combined with its experience
provides it a competitive advantage in acquiring royalties.
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Organic Growth through Reserve Replacement. In
addition to acquiring royalties with existing or anticipated
near-term production, Royal Gold seeks to acquire and manage
royalties with substantial potential for further reserve growth.
This provides cost-free upside from the exploration efforts of
the operator because additional reserves, if mined, extend Royal
Golds revenue stream from the property with no additional
cost to Royal Gold. Recent examples of significant reserve
growth on royalties acquired by Royal Gold include an additional
2.4 million ounces of gold reserves announced by Barrick at
the Crossroads deposit at the Cortez Pipeline Mining Complex
(Cortez), which more than doubled the reserves
subject to Royal Golds royalty interest at Cortez, and
reserve increases at Goldcorps Peñasquito mine of 34%
and 21% in gold and silver, respectively, both of which are
subject to Royal Golds royalty interest.
|
S-4
Principal
Royalty Properties
Royal Golds portfolio includes gold royalties on
properties owned by various operating companies across five
continents. While the Company maintains a strong royalty
presence in Nevada, a jurisdiction with a long history of
successful gold mining, the Company believes that it is
important to hold royalties in other parts of the world. Royal
Golds principal producing and development royalty
properties outside of the United States are primarily located in
Canada (Malartic), Mexico (Peñasquito, Mulatos and
Dolores), South America (Pascua-Lama) and West Africa (Taparko
and Siguiri). The Company also holds royalties on properties in
Argentina, Australia, Bolivia, Burkina Faso, Chile, Colombia,
Finland, Honduras, Nicaragua and Russia.
Royal Golds principal producing royalties are as follows:
|
|
|
|
|
four royalty interests on Cortez located in Nevada and operated
by the Cortez Joint Venture, a joint venture between Barrick
Cortez Inc. and Barrick Gold Finance Inc., both affiliates of
Barrick;
|
|
|
|
one royalty interest on the Robinson mine located in eastern
Nevada and operated by a subsidiary of Quadra Mining Ltd.
(Quadra);
|
|
|
|
one royalty interest on the Leeville Mining Complex located in
Nevada and operated by a subsidiary of Newmont;
|
|
|
|
one royalty interest on the Goldstrike mine located in Nevada
and operated by a subsidiary of Barrick;
|
|
|
|
one royalty interest on the Peñasquito mine, covering both
the oxide portion of the deposit (currently in production) and
the sulfide portion of the deposit (currently in development)
located in Zacatecas, Mexico and operated by a subsidiary of
Goldcorp;
|
|
|
|
one royalty interest on the Mulatos mine located in Sonora,
Mexico and operated by a subsidiary of Alamos Gold, Inc.
(Alamos);
|
|
|
|
two royalty interests that are currently in effect, and two
royalty interests that are not yet in effect, on the Taparko
mine located in Burkina Faso and operated by a subsidiary of
High River;
|
|
|
|
one royalty interest on the Siguiri mine located in the Republic
of Guinea and operated by AngloGold; and
|
|
|
|
one royalty interest on the Dolores mine located in Chihuahua,
Mexico and operated by a subsidiary of Minefinders Corporation,
Ltd. (Minefinders).
|
S-5
Royal Golds principal development royalties are as follows:
|
|
|
|
|
the royalty on the Peñasquito mine mentioned above that
includes production from the sulfide portion of the deposit that
is currently in development and is estimated by Goldcorp to
commence production in mid-calendar 2009 and reach commercial
production by the end of calendar 2009;
|
|
|
|
one royalty interest, in addition to the royalty interest
described above, on the Dolores mine that will begin to produce
revenue upon the mine achieving commercial production, estimated
by Minefinders to be achieved during the second quarter of
calendar 2009;
|
|
|
|
two royalty interests on the Pascua-Lama project located in
Chile and operated by a subsidiary of Barrick;
|
|
|
|
one royalty interest, of the four Cortez royalty interests
described above, that also covers the Crossroads deposit of
Cortez; and
|
|
|
|
one royalty interest on the Malartic project located in Quebec,
Canada and operated by Osisko Mining Corporation
(Osisko).
|
Royal Gold considers both historical and future expected
revenues in determining which royalties in its portfolio are
principal to its business. Estimated future expected royalty
revenues from both producing and development properties are
based on a number of factors, including reserves subject to our
royalty, feasibility studies, metal price assumptions, mine life
and other factors and assumptions, any of which could change and
could cause Royal Gold to conclude that such royalties are no
longer principal to its business.
Royalty structure and reserve information for all of Royal
Golds producing and development stage royalty properties
are set forth under Royalty and Reserve Information
on
page S-31.
S-6
The
Offering
|
|
|
Common stock being offered by us |
|
6,500,000 shares |
|
Common stock to be outstanding immediately after this offering |
|
40,718,666 shares |
|
Use of proceeds |
|
We intend to use the net proceeds of this offering for general
corporate purposes and to fund acquisitions of additional
royalty interests. If the Teck Transaction is completed, then
the net proceeds will be used to fund the cash portion of the
purchase price. Pursuant to the definitive agreement with CDA
for the Teck Transaction, if this offering is completed, at the
closing of the Teck Transaction the stock portion of the
purchase price (4,454,136 shares) will be decreased to
1,204,136 shares (or 716,636 shares if the
underwriters over-allotment option is exercised in full
before closing of the Teck Transaction). The cash portion of the
purchase price will be increased by the amount of the proceeds
from the sale of 50% of the shares sold in this offering (minus
underwriting commissions and discounts), which, at an assumed
offering price of $43.42 (the closing price of our common stock
on the NASDAQ Global Select Market on April 3, 2009), would
result in a total cash payment of $234.8 million (or
$255.0 million if the underwriters over-allotment
option is exercised in full before closing of the Teck
Transaction). See Recent Developments Proposed
Acquisition of the Andacollo Production Interest on
page S-22. |
|
|
|
We intend to invest net proceeds from this offering pending
their use primarily in money market accounts that are invested
in United States treasury bills or United States treasury-backed
securities. See Use of Proceeds on
page S-25
for further information regarding the use of proceeds from this
offering. |
|
Risk factors |
|
An investment in our common stock involves a significant degree
of risk. We urge you to carefully consider all of the
information described in the section entitled Risk
Factors beginning on
page S-11. |
|
NASDAQ Global Select Market symbol |
|
RGLD |
|
Toronto Stock Exchange symbol |
|
RGL |
|
Dividend policy |
|
We have paid a cash dividend on a quarterly basis on our common
stock for each fiscal year beginning in fiscal 2000. For
calendar 2009, we will pay a total dividend of $0.32 per share,
up from $0.28 per share in calendar 2008. We currently plan to
pay a quarterly dividend on a calendar year basis, subject to
the discretion of our board of directors. Our board of
directors, however, may determine not to declare a dividend
based on a number of factors, including the gold price, economic
and market conditions and funding requirements of our operations
and opportunities that might arise in the future. |
The number of shares of common stock that will be outstanding
after the offering is based on 34,218,666 shares
outstanding as of April 3, 2009. This number excludes:
|
|
|
|
|
up to 1,204,136 shares of common stock issuable to CDA
pursuant to the Teck Transaction (assuming 6.5 million shares
are sold in this offering) described further under Recent
Developments Proposed Acquisition of Andacollo
Production Interest on
page S-22;
|
|
|
|
558,690 shares of common stock issuable upon exercise of
outstanding options at a weighted average exercise price of
$22.59 per share, of which 484,857 shares of common stock
are subject to options that are vested and immediately
exercisable;
|
S-7
|
|
|
|
|
101,250 performance shares that vest upon achieving certain
performance goals;
|
|
|
|
50,500 shares of common stock issuable upon exercise of
outstanding stock-settled stock appreciation rights
(SSARs), of which zero shares of common stock are
subject to SSARs that are vested and immediately exercisable;
|
|
|
|
263,150 shares of common stock reserved for future issuance
under our equity compensation plans;
|
|
|
|
up to 46,245 shares of common stock subject to issuance
pursuant to a contingent stock arrangement related to our
acquisition of Battle Mountain in October 2007; and
|
|
|
|
any of the 975,000 additional shares issuable pursuant to
the underwriters over-allotment option.
|
S-8
Summary
of Consolidated Financial Data
The following summary consolidated financial data should be read
together with Managements Discussion and Analysis of
Financial Condition and Results of Operations, our
consolidated financial statements and related notes and other
financial information contained in our Annual Report on
Form 10-K/A
(filed on November 6, 2008) for the fiscal year ended
June 30, 2008 and our Quarterly Reports on
Form 10-Q
for the quarters ended September 30, 2008 and
December 31, 2008 incorporated by reference in this
prospectus supplement and the accompanying prospectus. We
derived the consolidated statement of operations data for the
years ended June 30, 2008, 2007 and 2006 from our audited
consolidated financial statements. The related audit report is
incorporated by reference in this prospectus supplement and the
accompanying prospectus. We derived the unaudited consolidated
financial data for the six months ended December 31, 2008
and 2007 from our unaudited consolidated financial statements,
which include all adjustments, consisting only of normal
recurring adjustments, that management considers necessary for a
fair presentation of the information shown. Historical results
are not necessarily indicative of the results to be expected in
the future. Our consolidated financial statements are prepared
in accordance with generally accepted accounting principles in
the United States, which differ in certain respects from
generally accepted accounting principles in Canada. Therefore
our financial data contained in or incorporated by reference in
this prospectus supplement may not be comparable to the
financial data of Canadian companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
|
|
|
|
For the Fiscal Years
|
|
|
|
Ended December 31,
|
|
|
|
Ended June 30,
|
|
|
|
|
|
|
2007
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
(As Restated)
|
|
|
|
(As Restated)
|
|
|
2007
|
|
|
2006
|
|
|
|
(dollars in thousands, except share and per share data)
|
|
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty revenues
|
|
$
|
30,701
|
|
|
$
|
27,213
|
|
|
|
$
|
66,297
|
|
|
$
|
48,357
|
|
|
$
|
28,380
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of operations
|
|
|
1,460
|
|
|
|
1,742
|
|
|
|
|
3,664
|
|
|
|
3,265
|
|
|
|
2,288
|
|
General and administrative
|
|
|
3,793
|
|
|
|
3,527
|
|
|
|
|
7,208
|
|
|
|
5,824
|
|
|
|
5,022
|
|
Exploration and business development
|
|
|
1,637
|
|
|
|
2,481
|
|
|
|
|
4,079
|
|
|
|
2,493
|
|
|
|
3,397
|
|
Depreciation, depletion and amortization
|
|
|
12,960
|
|
|
|
6,008
|
|
|
|
|
18,364
|
|
|
|
8,269
|
|
|
|
4,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
19,850
|
|
|
|
13,758
|
|
|
|
|
33,315
|
|
|
|
19,851
|
|
|
|
14,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
10,851
|
|
|
|
13,455
|
|
|
|
|
32,982
|
|
|
|
28,506
|
|
|
|
13,412
|
|
Gain on royalty restructuring
|
|
|
31,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
1,123
|
|
|
|
3,952
|
|
|
|
|
6,742
|
|
|
|
4,258
|
|
|
|
3,204
|
|
Interest and other expense
|
|
|
(664
|
)
|
|
|
(1,163
|
)
|
|
|
|
(1,729
|
)
|
|
|
(1,973
|
)
|
|
|
(165
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
42,810
|
|
|
|
16,244
|
|
|
|
|
37,995
|
|
|
|
30,791
|
|
|
|
16,451
|
|
Current tax expense
|
|
|
(17,668
|
)
|
|
|
(5,927
|
)
|
|
|
|
(11,935
|
)
|
|
|
(10,310
|
)
|
|
|
(5,974
|
)
|
Deferred tax benefit (expense)
|
|
|
2,541
|
|
|
|
923
|
|
|
|
|
(115
|
)
|
|
|
761
|
|
|
|
873
|
|
Minority interest in income of consolidated subsidiary
|
|
|
(537
|
)
|
|
|
(542
|
)
|
|
|
|
(1,352
|
)
|
|
|
(1,522
|
)
|
|
|
|
|
Loss from equity investment
|
|
|
|
|
|
|
(550
|
)
|
|
|
|
(550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
27,146
|
|
|
$
|
10,148
|
|
|
|
$
|
24,043
|
|
|
$
|
19,720
|
|
|
$
|
11,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
27,146
|
|
|
$
|
8,944
|
|
|
|
$
|
19,255
|
|
|
$
|
19,720
|
|
|
$
|
11,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.80
|
|
|
$
|
0.30
|
|
|
|
$
|
0.62
|
|
|
$
|
0.79
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.79
|
|
|
$
|
0.30
|
|
|
|
$
|
0.61
|
|
|
$
|
0.79
|
|
|
$
|
0.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding Basic
|
|
|
33,943,851
|
|
|
|
29,253,504
|
|
|
|
|
31,054,725
|
|
|
|
24,827,319
|
|
|
|
22,863,784
|
|
Diluted
|
|
|
34,343,827
|
|
|
|
29,455,599
|
|
|
|
|
31,390,293
|
|
|
|
25,075,086
|
|
|
|
23,134,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-9
The summary unaudited balance sheet data as of December 31,
2008 was derived from our consolidated financial statements. The
unaudited as adjusted balance sheet data below gives effect to
the issuance by us of 6,500,000 shares of our common stock,
after deducting underwriting discounts and commissions and
estimated offering expenses, at a public offering price of
$
per share, and the application of the proceeds therefrom. The
following does not give effect to the Teck Transaction, which is
subject to satisfactory completion of closing conditions.
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2008
|
|
|
|
|
|
|
As
|
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
|
(unaudited)
|
|
|
|
(dollars in thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
55,040
|
|
|
$
|
|
|
Royalty receivables
|
|
|
14,833
|
|
|
|
14,833
|
|
Other current assets
|
|
|
849
|
|
|
|
849
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
70,722
|
|
|
|
|
|
Royalty interests in mineral properties, net
|
|
|
475,724
|
|
|
|
475,724
|
|
Other assets
|
|
|
36,181
|
|
|
|
36,181
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
582,627
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
19,551
|
|
|
|
19,551
|
|
Long-term liabilities
|
|
|
43,371
|
|
|
|
43,371
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
62,922
|
|
|
$
|
62,922
|
|
|
|
|
|
|
|
|
|
|
Minority interest in subsidiary
|
|
|
11,976
|
|
|
|
11,976
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value, authorized
100,000,000 shares; issued 34,007,184 and 40,507,184 as
adjusted
|
|
|
340
|
|
|
|
|
|
Additional paid-in capital
|
|
|
465,862
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
(7)
|
|
|
|
(7)
|
|
Accumulated earnings
|
|
|
41,534
|
|
|
|
41,534
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
507,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
582,627
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The As Adjusted column does not include the impact of the Teck
Transaction. While there can be no assurances that the Teck
Transaction will close, if the public offering closes at the
offering price of $ per
share, the Company would pay $ in
cash and issue 1,204,136 shares to CDA in connection with the
Teck Transaction (not reflecting the exercise of the
underwriters over-allotment option). Accordingly, the As
Adjusted Cash and equivalents would decrease by
$ , with corresponding decrease to
total current assets and the As Adjusted Common stock and
Additional paid-in capital would increase by
$ , with corresponding increase to
total stockholders equity. |
S-10
RISK
FACTORS
An investment in our common stock involves a high degree of
risk. You should carefully consider the risks described below,
as well as the other information included or incorporated by
reference in this prospectus supplement, before making an
investment decision. Our business, financial condition, results
of operations and cash flows could be materially adversely
affected by any of these risks. The market or trading price of
our securities could decline due to any of these risks. In
addition, please read Special Note About Forward-Looking
Statements in this prospectus supplement, where we
describe additional uncertainties associated with our business
and the forward-looking statements included or incorporated by
reference in this prospectus supplement. Please note that
additional risks not presently known to us or that we currently
deem immaterial may also impair our business and operations.
Risks
Related to Our Business
We
received a majority of our revenues in fiscal 2008 from three
properties, and these maturing mines are likely to experience
production declines.
For the six months ended December 31, 2008, approximately
26%, 12% and 11% of our revenues were derived from Cortez, the
Leeville Mining Complex (Leeville) and the Robinson
mine, respectively, compared to approximately 33%, 8% and 24%,
respectively, in fiscal 2008. We expect that revenue from our
royalties at Cortez, Leeville and Robinson will continue to be a
significant, though less dominant, contributor to our revenue in
future periods. Furthermore, as Cortez and other mines on which
we have royalties mature, we can expect overall declines in
production over the years unless operators are able to replace
reserves that are mined by mine expansion or successful new
exploration. There can be no assurance that the operators of
Cortez or the other properties will be able to maintain or
increase production or replace reserves as they are mined.
We own
passive interests in mining properties, and it is difficult or
impossible for us to ensure properties are operated in our best
interest.
All of our current revenue is derived from royalties on
properties operated by third parties. The holder of a royalty
interest typically has no authority regarding development or
operation of a mineral property. Therefore, we are not in
control of decisions regarding development or operation of any
of the properties on which we hold a royalty interest, and we
have limited or no legal rights to influence those decisions.
Our strategy of having others operate properties on which we
retain a royalty or other passive interest puts us generally at
risk to the decisions of others regarding all operating matters,
including permitting, feasibility analysis, mine design and
operation, processing, plant and equipment matters and temporary
or permanent suspension of operations, among others. These
decisions may be motivated by the best interests of the operator
rather than to maximize royalties. Although we attempt to secure
contractual rights that will permit us to protect our interests,
there can be no assurance that such rights will always be
available or sufficient, or that our efforts will be successful
in achieving timely or favorable results or in affecting the
operations of the properties in which we have royalty interests
in ways that would be beneficial to our stockholders.
Volatility
in gold, copper and other metal prices may have an adverse
impact on the value of our royalty interests and reduce our
royalty revenues.
The profitability of our royalty interests is directly related
to the market price of gold, copper and other metal prices. The
market price of each metal may fluctuate widely and is affected
by numerous factors beyond the control of any mining company.
These factors include metal supply, industrial and jewelry
fabrication and investment demand, expectations with respect to
the rate of inflation, the relative strength of the
U.S. dollar and other currencies, interest rates, gold
sales and loans by central banks, forward sales by metal
producers, global or regional political, economic or banking
crises and a number of other factors. If the market price of
gold, copper or certain other metals should drop, then our
royalty revenues would also drop. Our sliding-scale royalties at
Cortez, Taparko and other properties amplifies this effect. When
the gold price falls below the steps in a sliding-scale royalty,
we receive a lower royalty rate on production. Furthermore, if
gold, copper and
S-11
certain other metal prices drop dramatically, we might not be
able to recover our initial investment in royalty interests or
properties. In addition, certain royalty agreements, such as
that in place for an interest at Robinson, provide that royalty
payments to us are subject to subsequent adjustment based on
commodity prices at a later date, three to four months in the
case of Robinson, which can result in adjustments to our royalty
revenue in later periods. Hence, we may experience positive or
negative adjustments to recognized royalty revenues based on
changes in commodity prices. Moreover, the selection of a
royalty investment or of a property for exploration or
development, the determination to construct a mine and place it
into production and the dedication of funds necessary to achieve
such purposes are decisions that must be made long before the
first revenues from production will be received. Price
fluctuations between the time that decisions about exploration,
development and construction are made and the commencement of
production can have a material adverse effect on the economics
of a mine and can eliminate or have a material adverse impact on
the value of royalty interests.
The Andacollo project, on which we will acquire a gold
production interest if the Teck Transaction is completed, is a
copper project, with gold produced as a by-product. The operator
may be negatively affected by depressed copper prices, which
could have an adverse effect on development or operation of the
project, and therefore our future potential revenue from the
project.
The volatility in gold prices is illustrated by the following
table, which sets forth, for the periods indicated (calendar
year), the high and low prices in U.S. dollars per ounce of
gold, based on the London Bullion Market Association P.M. fix.
Gold
Price Per Ounce ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
|
|
|
High
|
|
|
Low
|
|
|
2000
|
|
|
|
|
|
|
312
|
|
|
|
263
|
|
2001
|
|
|
|
|
|
|
293
|
|
|
|
256
|
|
2002
|
|
|
|
|
|
|
349
|
|
|
|
278
|
|
2003
|
|
|
|
|
|
|
416
|
|
|
|
320
|
|
2004
|
|
|
|
|
|
|
454
|
|
|
|
375
|
|
2005
|
|
|
|
|
|
|
537
|
|
|
|
411
|
|
2006
|
|
|
|
|
|
|
725
|
|
|
|
525
|
|
2007
|
|
|
|
|
|
|
841
|
|
|
|
608
|
|
2008
|
|
|
|
|
|
|
1,011
|
|
|
|
713
|
|
2009 (through April 3, 2009)
|
|
|
|
|
|
|
989
|
|
|
|
810
|
|
The volatility in silver prices is illustrated by the following
table, which sets forth, for the periods indicated (calendar
year), the high and low prices in U.S. dollars per ounce of
silver, based on the London Bullion Market Association P.M. fix.
Silver
Price Per Ounce ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
|
|
|
High
|
|
|
Low
|
|
|
2000
|
|
|
|
|
|
|
5.45
|
|
|
|
4.57
|
|
2001
|
|
|
|
|
|
|
4.82
|
|
|
|
4.07
|
|
2002
|
|
|
|
|
|
|
5.10
|
|
|
|
4.24
|
|
2003
|
|
|
|
|
|
|
5.97
|
|
|
|
4.37
|
|
2004
|
|
|
|
|
|
|
8.29
|
|
|
|
5.50
|
|
2005
|
|
|
|
|
|
|
9.23
|
|
|
|
6.39
|
|
2006
|
|
|
|
|
|
|
14.94
|
|
|
|
8.83
|
|
2007
|
|
|
|
|
|
|
15.82
|
|
|
|
11.67
|
|
2008
|
|
|
|
|
|
|
20.92
|
|
|
|
8.88
|
|
2009 (through April 3, 2009)
|
|
|
|
|
|
|
14.39
|
|
|
|
10.51
|
|
S-12
The volatility in copper prices is illustrated by the following
table, which sets forth, for the periods indicated (calendar
year), the high and low prices in U.S. dollars per pound of
copper, based on the London Metal Exchange cash settlement price
for copper Grade A.
Copper
Price Per Pound ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
|
|
|
High
|
|
|
Low
|
|
|
2000
|
|
|
|
|
|
|
0.89
|
|
|
|
0.76
|
|
2001
|
|
|
|
|
|
|
0.81
|
|
|
|
0.62
|
|
2002
|
|
|
|
|
|
|
0.75
|
|
|
|
0.67
|
|
2003
|
|
|
|
|
|
|
1.00
|
|
|
|
0.72
|
|
2004
|
|
|
|
|
|
|
1.43
|
|
|
|
1.10
|
|
2005
|
|
|
|
|
|
|
2.08
|
|
|
|
1.44
|
|
2006
|
|
|
|
|
|
|
3.65
|
|
|
|
2.15
|
|
2007
|
|
|
|
|
|
|
3.77
|
|
|
|
2.37
|
|
2008
|
|
|
|
|
|
|
4.08
|
|
|
|
1.26
|
|
2009 (through April 3, 2009)
|
|
|
|
|
|
|
1.95
|
|
|
|
1.38
|
|
Our
revenues are subject to operational and other risks faced by
operators of our mining properties.
Although we are not required to pay capital costs or operating
costs, our financial results are subject to hazards and risks
normally associated with developing and operating mining
properties, both for the properties where we may conduct
exploration or indirectly for properties operated by others
where we hold royalty interests. These risks include:
|
|
|
|
|
insufficient ore reserves;
|
|
|
|
fluctuations in production costs by the operators or third
parties that may make mining of ore uneconomical or impact the
amount of reserves;
|
|
|
|
declines in the price of gold and other metal prices;
|
|
|
|
economic downturns and operators insufficient financing;
|
|
|
|
significant environmental and other regulatory permitting
requirements and restrictions;
|
|
|
|
labor disputes;
|
|
|
|
geological problems;
|
|
|
|
pit wall or tailings dam failures;
|
|
|
|
natural catastrophes such as floods or earthquakes; and
|
|
|
|
the risk of injury to persons, property or the environment.
|
Operating cost increases can have a negative effect on the value
of and income from our royalty interests by potentially causing
an operator to curtail, delay or close operations at a mine site.
We
depend on our operators for the calculation of royalty payments,
and we may not be able to detect errors, or payment calculations
may call for retroactive adjustments.
Our royalty payments are calculated by the operators of the
properties on which we have royalties based on their reported
production. Each operators calculation of our royalty
payments is subject to and dependent upon the adequacy of its
production and accounting functions, and errors may occur from
time to time in the calculations made by an operator. For
example, the complex nature of mining and ownership of mining
interests can result in errors regarding allocation of
production, such as those that occurred in connection with our
restatement of our consolidated financial statements for fiscal
2008. We are provided with production
S-13
information by the mining operator in certain royalty contracts
that may enable us to detect errors in the royalty payments that
we receive from certain royalty interests given our royalty
monitoring program and its associated internal controls and
procedures. We do not, however, have the contractual right to
receive production information for all of our royalty interests.
As a result, our ability to detect royalty payment errors is
limited and the possibility exists that we will need to make
retroactive royalty revenue adjustments. Furthermore, in some
royalty contracts we have the right to audit the operational
calculations and production data for the associated royalty
payments and, when exercised, such audits may occur many months
following our recognition of the royalty revenue. In addition,
certain royalty agreements, such as our royalty agreement for
the Robinson mine, provide that royalty payments to us are
subject to subsequent adjustment based on commodity prices at a
later date, three to four months in the case of Robinson, which
can result in adjustments to our royalty revenue in later
periods. Hence, these royalty audits may result in the
recognition by us of retroactive changes in previously disclosed
royalty revenues. For example, we had negative revenue from the
Robinson mine of $1.3 million for the three months ended
December 31, 2008, which will be offset against future
royalty revenue from Robinson.
If the
current economic downturn, challenging credit markets and
depressed prices of certain commodities is prolonged, it may
affect the ability of some or all of the operators of the
properties on which we have royalties to meet liquidity needs or
operate profitably, which in turn could have material adverse
effects on the value of and revenue from our royalty interests.
In addition, the current economic downturn may adversely affect
our ability to obtain financing for additional royalty
acquisitions.
The value of and revenue from our royalty interests may be
materially adversely affected if commodity prices for the
various metals on which we have royalties or which are the
primary production at mines on which we have royalties decline
significantly, as occurred with respect to copper during 2008.
For example, the decline in prices for copper negatively
impacted our revenue for the three-month period ended
December 31, 2008 by approximately $3.3 million, in
comparison to our total revenue for such period of approximately
$14.6 million. In addition, our royalty interests and
revenues may be materially adversely affected if operators of
the properties on which we have royalties do not have the
financial strength or sufficient credit or other financing to
cover the costs of operating or developing a mine, causing an
operator to curtail, delay or close operations at a mine site.
Operators financial strength or ability to secure
financing is affected by the regional and global conditions in
which they operate. Many economists believe that the
U.S. economy, and possibly the global economy, has entered
into a recession as a result of the recent deterioration in the
credit markets and the related financial crisis, as well as a
variety of other factors. A continued significant economic
slowdown may negatively affect many commodity prices and our
operators financial strength and, in turn, their ability
to meet the costs of operating or developing the mines on which
we have royalty interests. Further disruption and volatility of
financial markets could also limit operators access to
financing needed for operations. For example, High River, the
operator of the Taparko mine, is in breach of its funding
agreement with Royal Gold, and it has recently announced that
its ability to continue as a going concern depends on, among
other things, its ongoing discussions with its lenders and
obtaining additional financing. If any of the operators of the
properties on which we have royalties suffer these material
adverse effects, enter into bankruptcy or liquidation, or
undergo a change of control, then our royalty interests and the
value of and revenue from our royalty interests may be
materially adversely affected. In addition, a continued economic
downturn or credit crisis could adversely affect our ability to
obtain debt or equity financing for additional royalty
acquisitions.
We may
enter into acquisitions or other material royalty transactions
at any time, including promptly after this
offering.
We are engaged in a continual review of opportunities to acquire
existing royalties, to create new royalties through the
financing of mining projects or to acquire companies that hold
royalty assets. 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, obtaining debt
commitments for acquisition financing, participation in
preliminary discussions, and involvement as a bidder in
competitive
S-14
auctions. Any such acquisition could be material to us and could
significantly increase the size and scope of our business. In
such event, we could issue substantial amounts of common stock
or incur substantial additional indebtedness to fund the
acquisition. In addition, we may consider opportunities to
restructure our royalties where we believe such restructuring
would provide a long-term benefit to the Company, though such
restructuring may reduce near-term revenues. For example, we
restructured our royalties at Cortez in connection with the
Barrick royalty portfolio acquisition, which reduced our royalty
revenue from Cortez during the three-month period ended
December 31, 2008 by $0.8 million, though we believe
such restructuring makes development at the Crossroads deposit,
on which we have a royalty interest, more attractive to the
operator. We could enter into one or more acquisition or
restructuring transactions at any time, including promptly
following this offering.
We may
incur substantial indebtedness that could have adverse effects
on our business.
We may incur substantial indebtedness in the future in
connection with financing acquisitions, strategic transactions
or for other purposes. If we were to incur substantial
additional indebtedness, it may make it difficult for us to
satisfy our debt obligations, increase our vulnerability to
general adverse economic and industry conditions, require us to
dedicate a substantial portion of our cash flow from operations
and proceeds of any equity issuances to payments on our
indebtedness, thereby reducing the availability of cash flow to
fund acquisitions and dividends and other general corporate
purposes, and place us at a competitive disadvantage to our
competitors that have less debt or have other adverse effects on
us.
We may
be unable to successfully acquire additional royalty
interests.
Our future success depends upon our ability to acquire royalty
interests at appropriate valuations, including through corporate
acquisitions, to replace depleting reserves and to diversify our
royalty portfolio. We anticipate that most of our revenues will
be derived from royalty interests that we acquire or finance,
rather than through exploration and development of properties.
There can be no assurance that we will be able to identify and
complete the acquisition of such royalty interests, or
businesses that own desired royalty interests, at reasonable
prices or on favorable terms. In addition, we face competition
in the acquisition of royalty interests. If we are unable to
successfully acquire additional royalties, reserves subject to
our royalties will decline as the producing properties on which
we have royalties are mined. We may also experience negative
reactions from the financial markets or operators of properties
on which we seek royalties if we are unable to successfully
complete acquisitions of royalty interests or businesses that
own desired royalty interests. Each of these factors may
adversely affect the trading price of our common stock or our
financial condition or results of operations.
Acquired
royalty interests, particularly on development stage properties,
are subject to the risk that they may not produce anticipated
royalty revenues.
The royalty interests we acquire may not produce the anticipated
royalty revenues. Royalty interests acquired on development
stage properties particularly face this risk. The success of our
royalty acquisitions is based on our ability to make accurate
assumptions regarding the valuation and timing and amount of
royalty payments, particularly acquisitions of royalties on
development stage properties. If the operator does not bring the
property into production and operate in accordance with
feasibility studies or other plans, then acquired royalty
interests may not yield sufficient royalty revenues to be
profitable. Furthermore, operators of development stage
properties must obtain all necessary environmental permits and
access to water, power and other raw materials needed for
operations in order to begin production, and there can be no
assurance operators will be able to do so. The Taparko project
in Burkina Faso, which began production, the Peñasquito and
Dolores mines in Mexico, both ramping up production, and
Malartic in Quebec, are among our principal development stage
royalty acquisitions to date. In addition, the Andacollo
Production Interest that we propose to acquire from CDA is in
the development stage and will not produce royalty revenue
unless CDA is able to complete construction of mine and mill
facilities to successfully produce copper, as well as gold
by-product, from the sulfide portions of the deposit and to
operate the project at full capacity. See Recent
Developments Proposed Acquisition of Andacollo
Production Interest on
page S-22.
The failure of any of
S-15
these projects to produce anticipated royalty revenues may
materially and adversely affect our financial condition and
results of operations.
Estimates
of reserves and mineralization by the operators of mines in
which we have royalty interests are subject to significant
revision.
There are numerous uncertainties inherent in estimating proven
and probable reserves and mineralization, including many factors
beyond our control or the control of the operators of mineral
properties on which we have a royalty interest. Reserve
estimates on our royalty interests are prepared by the operators
of the mining properties. We do not participate in the
preparation or verification of such reports and have not
independently assessed or verified the accuracy of such
information. The estimation of reserves and of other
mineralization is a subjective process, and the accuracy of any
such estimates is a function of the quality of available data
and of engineering and geological interpretation and judgment.
Results of drilling, metallurgical testing and production, and
the evaluation of mine plans subsequent to the date of any
estimate, may cause a revision of such estimates. The volume and
grade of reserves recovered and rates of production may be less
than anticipated. Assumptions about gold and other precious
metal prices are subject to great uncertainty, and such prices
have fluctuated widely in the past. Declines in the market price
of gold or other precious metals also may render reserves or
mineralization containing relatively lower grades of ore
uneconomical to exploit. Changes in operating and capital costs
and other factors including short-term operating factors, such
as the need for sequential development of ore bodies and the
processing of new or different ore grades, may materially and
adversely affect reserves. Finally, it is important to note that
our royalties give us only small percentage interests in the
production from any reserve, and those percentage interests vary
widely based on the individual royalty documents.
Estimates
of production by the operators of mines in which we have royalty
interests are subject to change, and actual production may vary
materially from such estimates.
Production estimates are prepared by the operators of the mining
properties. There are numerous uncertainties inherent in
estimating anticipated production attributable to our royalty
interests, including many factors beyond our control or the
control of the operators of mineral properties in which we have
royalty interests. We do not participate in the preparation or
verification of production estimates and have not independently
assessed or verified the accuracy of such information. The
estimation of anticipated production is a subjective process and
the accuracy of any such estimates is a function of the quality
of available data, reliability of production history,
variability in grade encountered, mechanical or other problems
encountered, engineering and geological interpretation and
operator judgment. Rates of production may be less than
expected. Results of drilling, metallurgical testing and
production, and the evaluation of mine plans subsequent to the
date of any estimate may cause actual production to vary
materially from such estimates.
If
title to properties is not properly maintained by the operators,
our royalty revenues could decline.
The validity of unpatented mining claims, which constitute a
significant portion of the properties on which we hold royalties
in the United States, is often uncertain and such validity is
always subject to contest. Unpatented mining claims are
generally considered subject to greater title risk than patented
mining claims, or real property interests that are held by
absolute title to the land (fee simple). Because unpatented
mining claims are self-initiated and self-maintained, they
possess some unique vulnerabilities not associated with other
types of property interests. It is impossible to ascertain the
validity of unpatented mining claims from public real property
records, and therefore it can be difficult or impossible to
confirm that all of the requisite steps have been followed for
location and maintenance of an unpatented mining claim. If title
to unpatented mining claims included among our royalty
properties has not been properly established or is not properly
maintained, our royalty revenues could be adversely affected.
Royalty
interests are subject to contest by operators of mining projects
and holders of mining rights.
Our business includes the risk that operators of mining projects
and holders of mining claims, tenements, concessions, mining
licenses or other interests in land and mining rights may
contest the existence or geographic extent of our royalty
interests. While Royal Gold seeks to confirm the existence,
validity and
S-16
enforceability of the royalties it acquires, there can be no
assurance that such disputes will not arise. As a general
matter, royalty interests in mining projects or properties are
subject to uncertainties and complexities arising from the
application of contract and property laws governing private
parties
and/or local
or national governments in the jurisdiction where mining
projects are located.
Anticipated
federal legislation could decrease our royalty
revenues.
In recent years, the United States Congress has considered a
number of proposed major revisions to the General Mining Law of
1872 (the General Mining Law), which governs the
creation, maintenance and possession of mining claims and
related activities on federal public lands in the United States.
Several proposals, such as Bill H.R. 699, introduced in Congress
in January 2009, would, if enacted, impose a royalty payable to
the U.S. Government on existing and future production of
minerals from unpatented mining claims in the United States.
Such legislation could, if enacted, render certain federal lands
unavailable for the location of unpatented mining claims, afford
greater public involvement and regulatory discretion in the mine
permitting process, provide for citizen suits against miners
operating on federal lands, and impose new and stringent
environmental operating standards and mined land reclamation
requirements in addition to those already in effect. If enacted,
such legislation could adversely affect the development of new
mines and the expansion of existing mines, as well as increase
the cost of all mining operations on federal lands, perhaps
materially and adversely affecting mine operators and,
therefore, our royalty revenue.
The effect of any revision of the General Mining Law on our
royalty interests in the United States cannot be determined
conclusively until such revision, if any, is enacted and
challenges to the legislation, if any, have been finally
resolved. In addition, a number of the properties on which we
have royalties are located on U.S. federal lands that are
subject to federal mining and other public land laws. Changes in
such laws or regulations promulgated under such laws could
affect mine development and expansion and significantly increase
regulatory obligations and compliance costs with respect to mine
development and mine operations, which could adversely affect
our royalty revenue from such properties. By way of example, if
a royalty, assessment, production tax or other levy imposed on
and measured by production is charged to the operator at Cortez,
which is largely located on U.S. federal lands, the amount
of that charge would be deducted from gross proceeds for
calculation of our GSR1, GSR2 and GSR3 royalties, which would
reduce our royalty revenues from these royalty interests.
Foreign
operations and operation by foreign operators are subject to
many risks.
We derived approximately 33% of our revenues from foreign
sources in the six-month period ended December 31, 2008,
compared to 21% in fiscal 2008. Our foreign activities are
subject to the risks normally associated with conducting
business in foreign countries. These risks include exchange
controls and currency fluctuations, limitations on repatriation
of earnings, foreign taxation, foreign real estate, contract and
environmental laws and enforcement, expropriation or
nationalization of property, labor practices and disputes and
uncertain political and economic environments. There are also
risks of war and civil disturbances, as well as other risks that
could cause exploration or development difficulties or
stoppages, restrict the movement of funds or result in the
deprivation or loss of contract or real property rights or the
taking of property by nationalization or expropriation.
Exploration licenses granted by some foreign countries do not
include the right to mine, and in some jurisdictions the right
to convert an exploration license into mining rights may not be
automatic. Each country has discretion in determining whether to
grant a license to mine. If an operator cannot secure a mining
license following exploration of a property, or were to lose
such a license, then the value of our royalty interest would be
negatively affected or its validity undermined. Foreign
operations also could be adversely impacted by laws and policies
of the United States affecting foreign trade, investment and
taxation. Furthermore, many of our operators are organized
outside of the United States. Our royalty interests may be
subject to the application of foreign laws to our operators, and
their stockholders, including laws relating to corporate
transactions, bankruptcy and liquidation.
We currently have interests in mines and projects outside of the
United States in Argentina, Australia, Bolivia, Burkina Faso,
Canada, Chile, Colombia, Finland, Honduras, Mexico, Nicaragua,
the Republic of Ghana, the Republic of Guinea and Russia. We
also evaluate precious metal royalty acquisitions or
S-17
development opportunities in other parts of the world, including
Central America, Europe, Republics of the former Soviet Union,
Asia, Africa and South America.
We are subject to the risks of owning royalties on mining
properties in Burkina Faso, the Republic of Ghana and the
Republic of Guinea. These countries have historically
experienced periods of political uncertainty, exchange rate
fluctuations, balance of payments and trade difficulties, and
problems associated with extreme poverty and unemployment. Laws
regarding the ownership, operation and taxation of mining
projects in these countries are subject to change. Any of these
economic or political risks could adversely affect the Taparko,
Benso or Siguiri projects.
Our royalties in Mexico are subject to risks associated with
effects of political developments, local unrest and communal
property issues. In the past, Mexico has experienced prolonged
periods of weak economic conditions characterized by exchange
rate instability, high inflation and negative economic growth,
all of which could occur again in the future. Any of these risks
could adversely affect the Peñasquito and Dolores projects,
as well as the Mulatos and El Chanate mines.
Our Martha royalty is subject to risks relating to operating in
Argentina. Argentina has experienced political instability,
currency fluctuations and changes in banking regulations in
recent years. Future instability, currency value fluctuations or
regulation changes could adversely affect our revenues from the
Martha mine.
Our Don Mario royalty is subject to risks relating to operating
in Bolivia. Bolivia has experienced political and social
instability, corruption, regulation and tax law changes and the
potential for nationalization of foreign business interests that
could materially adversely affect the Don Mario mine. In January
2009, a new constitution was passed by general election that
provides, among other things, that all minerals are property of
the state, Bolivian investment will be prioritized ahead of
foreign investment, and the state will assume control over
exploration, exploitation, transportation and marketing of
minerals. The constitution also implicitly requires mining
companies to enter into contracts with the state mining agency
within one year, although the nature, scope and content of such
contracts is not defined.
We hold a royalty interest in an exploration property that is
subject to the risks of operating in Russia. The economy of the
Russian Federation continues to display characteristics of an
emerging market, including extensive currency controls and
potentially high inflation. The prospects for future economic
stability in the Russian Federation are largely dependent upon
the effectiveness of economic measures undertaken by the
government, together with legal, regulatory and political
developments. Russian laws, licenses and permits have been in a
state of change, and new laws may be given a retroactive effect.
The
mining industry is subject to significant environmental
risks.
Mining is subject to potential risks and liabilities associated
with pollution of the environment and the disposal of waste
products occurring as a result of mineral exploration and
production. Laws and regulations in the United States and abroad
intended to ensure the protection of the environment are
constantly changing and generally are becoming more restrictive
and costly. Insurance against environmental risks (including
potential liability for pollution or other hazards as a result
of the disposal of waste products occurring from exploration and
production) is not generally available to companies within the
mining industry, such as the operators of the mines in which we
hold a royalty interest, at a reasonable price. Furthermore,
mining may be subject to significant environmental and other
permitting requirements regarding the use of raw materials,
particularly water, needed for operations. If an operator is
forced to incur significant costs to comply with environmental
regulations or becomes subject to environmental restrictions
that limit its ability to continue or expand operations, or if
an operator were to lose its right to use or access to water or
other raw materials necessary to operate a mine, our royalty
revenues could be reduced or eliminated. To the extent that we
become subject to environmental liabilities for the time period
during which we were operating properties, the satisfaction of
any liabilities would reduce funds otherwise available to us and
could have a material adverse effect on our financial condition,
results of operations and cash flows.
S-18
We
depend on the services of our President and Chief Executive
Officer and other key employees and on the participation of our
Chairman.
We believe that our success depends on the continued service of
our key executive management personnel. Currently, Tony Jensen
is serving as our President and Chief Executive Officer.
Mr. Jensens extensive commercial experience, mine
operations background and industry contacts give us an important
competitive advantage. Furthermore, our Chairman, Stanley
Dempsey, who served as our Executive Chairman until his
retirement in January 2009, remains closely involved with us.
Mr. Dempseys knowledge of the royalty business and
long-standing relationship with the mining industry are
important to our success. The loss of the services of
Mr. Jensen or other key employees could jeopardize our
ability to maintain our competitive position in the industry. We
currently do not have key person life insurance for any of our
officers or directors.
We
identified a material weakness in internal control over our
financial reporting and as a result we were required to restate
our financial results for the fiscal year ended June 30,
2008.
In connection with the restatement and our reassessment of our
internal control over financial reporting pursuant to the rules
promulgated by the SEC, Section 404 of the Sarbanes-Oxley
Act of 2002 and Item 308 of
Regulation S-K,
management has concluded that as of the fiscal year ended
June 30, 2008, our disclosure controls and procedures were
not effective and that we had a material weakness in our
internal control over financial reporting. Please refer to
Item 9A of our
Form 10-K/A,
filed on November 6, 2008 and Item 4 of Part I of
our
Form 10-Q
filed on November 10, 2008, for further discussion of the
ineffectiveness of and material weakness in our controls as of
June 30, 2008 and September 30, 2008. While we believe
we have remedied such material weakness, and management has
concluded that as of the period ended December 31, 2008,
our disclosure controls and procedures were effective, such
controls and procedures may not be adequate to prevent or
identify existing or future internal control weaknesses.
Internal control over financial reporting cannot provide
absolute assurance of achieving financial reporting objectives
because of its known inherent limitations (such limitations are
further discussed in Item 9A of our
Form 10-K/A,
filed on November 6, 2008 and Item 4 of Part I of
our
Form 10-Q
filed on November 10, 2008 and on February 6, 2009).
Because of such inherent limitations, there is a risk that
material misstatements in results of operations and financial
condition may not be prevented or detected on a timely basis by
our internal controls over financial reporting and thus require
us to further restate our financial statements. This effect
could, in turn, adversely affect the trading price of our common
stock and there is a risk that repeated restatements could
result in an investigation by the SEC.
Risks
Related to Our Common Stock
Our
stock price may continue to be volatile and could
decline.
The market price of our common stock has fluctuated and may
decline in the future. The high and low sale prices of our
common stock were $41.66 and $18.74 in the fiscal year ended
June 30, 2006, $37.50 and $23.25 in the fiscal year ended
June 30, 2007, $35.42 and $23.85 in the fiscal year ended
June 30, 2008, and $49.45 and $22.75 in the six-month
period ended December 31, 2008. The fluctuation of the
market price of our common stock has been affected by many
factors that are beyond our control, including:
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the market price of gold and other metals;
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interest rates;
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expectations regarding inflation;
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the ability of operators to produce precious metals and develop
new reserves;
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currency values;
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credit market conditions;
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general stock market conditions; and
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global and regional political and economic conditions.
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S-19
Additional
issuances of equity securities by us would dilute the ownership
of our existing stockholders and could reduce our earnings per
share.
We will issue up to 4,454,136 shares to CDA in connection
with the Teck Transaction if this offering is not completed. We
also may issue additional equity in the future in connection
with acquisitions, strategic transactions or other purposes. To
the extent we issue additional equity securities, the ownership
of our existing stockholders could be diluted and our earnings
per share could be reduced.
If a
large number of shares of our common stock is sold in the public
market, the sales could reduce the trading price of our common
stock and impede our ability to raise future
capital.
We cannot predict what effect, if any, future issuances by us of
our common stock or of other equity will have on the market
price of our common stock. In addition, the shares of common
stock that we issue in connection with an acquisition may not be
subject to resale restrictions. We issued approximately
3.98 million shares in connection with the conversion of
all of our issued and outstanding Preferred Stock on
March 10, 2008. If this offering is completed, assuming
full exercise of the underwriters over-allotment option,
and the Teck Transaction closes, then CDA will hold
716,636 shares of our common stock. We have entered into a
stockholder agreement with Teck and CDA placing certain
limitations on the ability of Teck and its affiliates to sell
our common stock, but the stockholder agreement allows Teck and
its affiliates to complete open market trades of our common
stock, subject to volume limitations, and block trades of our
common stock, among other types of transfers. If Teck or its
affiliates were to complete one or more block trades or an
underwritten offering of our common stock, the market price of
our common stock could decline. See Recent
Developments Proposed Acquisition of Andacollo
Production Interest on
page S-22
for further information about certain restrictions on CDAs
ability to sell our stock after the Teck Transaction. We may
issue substantial additional shares of common stock or other
securities in connection with other acquisition transactions.
The market price of our common stock could decline if certain
large holders of our common stock, or recipients of our common
stock in connection with an acquisition, sell all or a
significant portion of their shares of common stock or are
perceived by the market as intending to sell these shares other
than in an orderly manner. In addition, these sales could also
impair our ability to raise capital through the sale of
additional common stock in the capital markets.
We may
change our practice of paying dividends.
We have paid a cash dividend on our common stock for each fiscal
year beginning in fiscal 2000. Our board of directors has
discretion in determining whether to declare a dividend based on
a number of factors, including prevailing gold prices, economic
market conditions and funding requirements for future
opportunities or operations. If our board of directors declines
to declare dividends in the future or reduces the current
dividend level, then our stock price could fall, and the success
of an investment in our common stock would depend solely upon
any future stock price appreciation. We have increased our
dividends in prior years. There can be no assurance, however,
that we will continue to do so. For example, if we were to
materially increase our borrowings to conduct a material
acquisition, our board of directors could elect to modify our
practice of paying dividends and potentially reduce or eliminate
dividends on common stock.
Certain
anti-takeover provisions could delay or prevent a third party
from acquiring us.
Provisions in our restated certificate of incorporation may make
it more difficult for third parties to acquire control of us or
to remove our management. Some of these provisions:
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permit our board of directors to issue preferred stock that has
rights senior to the common stock without stockholder
approval; and
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provide for three classes of directors serving staggered,
three-year terms.
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S-20
We are also subject to the business combination provisions of
Delaware law that could delay, deter or prevent a change in
control. In addition, we have adopted a stockholders
rights plan that imposes significant penalties upon a person or
group that acquires 15% or more of our outstanding common stock
without the approval of the board of directors. Any of these
measures could prevent a third party from pursuing an
acquisition of Royal Gold, even if stockholders believe the
acquisition is in their best interests.
Risks
Related to the Teck Transaction
The
closing of the Teck Transaction is subject to closing
conditions, and there can be no assurance the closing conditions
will be met.
There is no assurance that the Teck Transaction will be
completed. The closing of the Teck Transaction is subject to
satisfaction or waiver of certain conditions, including the
condition that the operator, CDA, enter into certain concentrate
marketing of its production from the Andacollo project and a
condition in both Royal Golds and CDAs favor that
CDAs material governmental approvals are not withdrawn or
challenged (or such action threatened). CDA will be precluded
from exercising the condition regarding governmental approvals
if Royal Gold waives the condition and waives its rights to
indemnification from CDA with respect to such governmental
approvals. Either party may terminate the definitive agreement
if closing conditions are not satisfied or waived by
October 30, 2009.
Even
if the Teck Transaction is completed, the Andacollo Production
Interest project may not produce the anticipated royalty
revenue.
Even if the Teck Transaction is completed, there can be no
assurance that the production interest we acquire on the
Andacollo project will produce the anticipated royalty revenue.
The success of the Andacollo project depends upon, among other
factors, the ability of the operator to complete the
construction of the mine and mill facilities for the sulfide
portion of the deposit at the project, the ability of the
operator to bring the project into production, the price of
copper, the availability of resources necessary to construct and
operate the project, including adequate water supply and rights
of way, and receipt and maintenance of necessary environmental
and other permits to operate the project. While we understand
that the required air, water and other environmental permits are
currently held by CDA, there are proceedings involving
CDAs permitting matters that CDA expects to be resolved in
its favor. There can be no assurance that developments in the
political or regulatory environment will not require CDA to take
further action to maintain its permits or obtain other permits
in order to complete development or to operate the project. The
failure to maintain or obtain such permits could materially and
adversely affect the anticipated benefits of the Teck
Transaction.
The Andacollo project is a copper mine with gold produced as a
by-product. Our production interest, once acquired, will cover
only the gold produced from the sulfide portion of the Andacollo
project. Consequently, if the price of copper drops, the
operator may curtail or delay construction of the sulfide
portion or may close operations at the mine site. If the Teck
Transaction is completed, the failure of the Andacollo project
to produce anticipated royalty revenues may materially and
adversely affect our financial condition, results of operations,
cash flows and the other benefits we expect to achieve from the
Teck Transaction.
S-21
RECENT
DEVELOPMENTS
Proposed
Acquisition of Andacollo Production Interest
The
Definitive Agreement
On April 3, 2009, Royal Gold entered into a definitive
agreement with Tecks subsidiary, CDA, to acquire a
production interest in gold produced from the sulfide portion of
the Andacollo copper and gold project in Chile for total
consideration consisting of $100 million in cash and
4,454,136 shares of our common stock, which amounts will be
adjusted as described below. Pursuant to the definitive
agreement with CDA, the cash portion of the purchase price will
be increased, and the stock portion of the purchase price will
be decreased, based on the size and net proceeds of this
offering. The initial number of shares to be issued to CDA was
determined by dividing $200 million by the volume weighted
average price of our common stock on the NASDAQ Global Select
Market for the five day trading period that ended four days
prior to the public announcement of the Teck Transaction on
April 6, 2009.
If this offering is completed, pursuant to the definitive
agreement with CDA, at the closing of the Teck Transaction the
stock portion of the purchase price of 4,454,136 shares
will be decreased by 50% of the total number of shares sold in
this offering, resulting in a total of 1,204,136 shares being
issued to CDA at closing, and the cash portion of the purchase
price will be increased by the amount of the proceeds from the
sale of 50% of the shares sold in this offering (minus
underwriting commissions and discounts), which, at an assumed
offering price of $43.42 (the closing price of our common stock
on the NASDAQ Global Select Market on April 3, 2009), would
result in a total cash payment of $234.8 million. The total
number of shares to be issued to CDA will be further decreased
by 50% of the number of shares subject to the underwriters
over-allotment option if the option is exercised before the
closing of the Teck Transaction, resulting in a total of
716,636 shares being issued to CDA if such option is
exercised in full. The total cash payment to CDA will be
increased by the amount of proceeds from the sale of 50% of the
shares subject to the over-allotment option (minus underwriting
commissions and discounts), which, at an assumed offering price
of $43.42 (the closing price of our common stock on the NASDAQ
Global Select Market on April 3, 2009), would result in a
total cash payment of $255.0 million if such option is
exercised in full.
The definitive agreement for the transaction between Royal Gold
and CDA provides for the entry into two production interest
agreements for the Andacollo Production Interest, a stockholder
agreement and a registration rights agreement. The two
production interest agreements will contain certain provisions
that limit the concentrate marketing terms applicable to the
Company, including a 90.6% minimum payable gold factor and a
maximum gold refining charge against the production interest
payment to Royal Gold of $6 per ounce of gold. The definitive
agreement includes certain representations and warranties from
both parties, customary covenants, closing conditions and
indemnification provisions. Closing conditions include the
accuracy of representations and warranties the inaccuracy of
which would not constitute a material adverse
effect, as defined in the definitive agreement, compliance
with covenants, absence of litigation, and similar customary
conditions, and a condition in Royal Golds favor that CDA
complete concentrate marketing for a specified percentage of its
concentrate production from the Andacollo project. In addition,
both CDA and Royal Gold have conditions precedent that no
material governmental approval necessary for the construction
and operation of the project shall have been withdrawn or
challenged (or such action threatened), provided that CDA is
precluded from exercising its condition in the event Royal Gold
waives certain potential rights to indemnification relating to
such approvals. Thus, Royal Gold can either terminate the
agreement or require CDA to close if a necessary governmental
approval is withdrawn or challenged (or such action threatened)
at Royal Golds election. Either party may terminate the
definitive agreement if the closing conditions are not satisfied
or waived by October 30, 2009. There can be no assurance
that the Teck Transaction will close on time or at all. See
Risk Factors Risks Related to the Teck
Transaction on
page S-21.
S-22
The
Andacollo Project
Upon consummation of the Teck Transaction, Royal Gold will be
entitled to receive 75% of the gold produced from the sulfide
portion of the deposit at the Andacollo project until 910,000
payable ounces of gold have been sold, and 50% of the gold
produced in excess of 910,000 payable gold ounces. Payments from
the Andacollo Production Interest will be made to Royal Gold in
cash, although Royal Gold has the right to take physical
delivery of gold in certain circumstances. The Andacollo
Production Interest will not cover copper production.
The Andacollo mine has operated since 1996 and is currently
operated by CDA, which is 90% owned by Teck and 10% owned by
ENAMI, a Chilean state-owned mining and processing company. The
mine is located about 34 miles southeast of the city of
La Serena, Chile, and about 2 miles from the small town of
Andacollo. The mine produces copper from the oxide portion of
the deposit, and Teck is constructing facilities to produce both
copper and gold from the sulfide portion of the deposit. Proven
and probable reserves estimated by the operator for the sulfide
portion are 393.5 million tonnes with a grade of 0.39% copper
and 0.13 g/t gold. This equates to 1.6 million contained ounces
of gold. Reserves were estimated by the operator using a copper
price of $1.50 per pound and a gold price of $480 per ounce.
Gold will be produced as a by-product of copper production, with
gold recovery estimated by the operator to be approximately 61%.
Once the mine is in full production, the operator expects the
mill to have a capacity of 55,000 tonnes per day. The
operator estimates that the mine will produce on average
approximately 53,000 ounces of gold and 76,000 tonnes of
copper in concentrate annually for the first 10 years of
commercial production, with an estimated mine life of
20 years. The mine is estimated by the operator to begin
initial production of gold in the fourth quarter of calendar
2009, with ramp up continuing into 2010. The operator
anticipates commercial production at the mine to be achieved in
the first half of calendar 2010.
Other
Agreements
Royal Gold, CDA and Teck have entered into a stockholder
agreement governing certain matters related to our common stock.
Under the stockholder agreement, until such time that Teck, CDA
and their affiliates beneficially own less than 2% of our issued
and outstanding common stock for 90 consecutive days, Teck, CDA
and their affiliates will be subject to customary standstill
restrictions, and will not be permitted to, among other things,
influence Royal Golds management or board of directors,
form or participate in a group that beneficially owns Royal Gold
common stock, call a stockholders meeting, seek
representation on the board of directors or make any public
statements regarding a business combination or similar
transaction involving Royal Gold. Moreover, Teck, CDA and their
affiliates will be required to vote any shares of common stock
held by them in accordance with the recommendations of Royal
Golds board of directors. The stockholder agreement also
prohibits CDA and Teck from selling shares of common stock and
entering into certain hedging transactions during the same
lock-up
period imposed upon us by the underwriters in this offering.
During the period of time when Teck, CDA and their affiliates
beneficially own 5% or more of our issued and outstanding shares
of common stock, they may sell shares of common stock only
(i) in open market trades on any trading day in an amount
less than or equal to 15% of the average daily trading volume of
our shares of common stock, (ii) in block trades to mutual
funds registered under the Investment Company Act of 1940, as
amended, or to certain other purchasers, (iii) pursuant to
one firm commitment underwritten public offering of at least
$50 million of our common stock completed within
90 days from the closing of the Teck Transaction (subject
to the underwriters lock-up) or (iv) with our
approval.
If this offering is completed and if the Teck Transaction is
completed, then CDA will own approximately 3% of our issued and
outstanding common stock (or approximately 2% if the
underwriters over-allotment option is exercised in full
before closing of the Teck Transaction). Shares issued to CDA at
the closing of the Teck Transaction will be registered under the
Securities Act. If the Teck Transaction is completed, then Royal
Gold and CDA will enter into a registration rights agreement
governing certain matters related to the shares of our common
stock issuable to CDA upon the closing of the Teck Transaction.
Pursuant to the registration rights agreement if CDA, together
with its affiliates, beneficially owns more than 5% of our
issued and outstanding common stock, we will cooperate with CDA
in connection with a firm commitment underwritten
S-23
offering of at least $50 million of our common stock
completed within 90 days of the closing of the transaction
and subject to the underwriters lock-up. In addition, we
will maintain the effectiveness of a shelf registration
statement for resales by CDA for 90 days following the closing,
and, if applicable, until the shares are saleable by CDA without
limitation as to volume or manner of sale (but not holding
period) pursuant to Rule 144 promulgated under the Securities
Act. The registration rights agreement also includes customary
indemnification by, and covenants of, both Royal Gold and CDA.
See Risk Factors Risks Related to the Teck
Transaction on page S-21.
S-24
USE OF
PROCEEDS
The net proceeds from the sale of the shares of our common stock
in this offering are estimated to be approximately
$ million
($ million
if the underwriters over-allotment option is exercised in
full), based on a public offering price of
$
per share and after deducting the underwriting discounts and
commissions and estimated offering expenses.
We intend to use the net proceeds of this offering for general
corporate purposes and to fund acquisitions of additional
royalty interests. If the Teck Transaction is completed, the net
proceeds will be used to fund the cash portion of the purchase
price. If this offering is completed, at the closing of the Teck
Transaction the stock portion of the purchase price (4,454,136
shares) will be decreased to 1,204,136 shares (or 716,636 shares
if the underwriters
over-allotment
option is exercised in full before closing of the Teck
Transaction), representing a decrease in the stock portion of
the purchase price by 50% of the number of shares sold in this
offering. The cash portion of the purchase price will be
increased by the amount of the proceeds from the sale of 50% of
the shares sold in this offering (minus underwriting commissions
and discounts), which, at an assumed offering price of $43.42
(the closing price of our common stock on the NASDAQ Global
Select Market on April 3, 2009), would result in a total
cash payment of $234.8 million (or $255.0 million if
the underwriters over-allotment option is exercised in
full before closing of the Teck Transaction).
If the Teck Transaction is not completed, we intend to use the
net proceeds from this offering for general corporate purposes
and to fund acquisitions of additional royalty interests. We
have pursued an active acquisition strategy as a key element of
our business model and growth strategy and intend to continue
seeking acquisition opportunities. We are engaged in a continual
review of opportunities to acquire existing royalties, to create
new royalties through the financing of mining, development or
exploration projects and to acquire companies that hold
royalties.
We intend to invest the net proceeds from this offering pending
their use primarily in money market accounts that are invested
in United States treasury bills or United States treasury-backed
securities.
S-25
CAPITALIZATION
The following table sets forth the capitalization of Royal Gold
as of December 31, 2008 and as adjusted to reflect the sale
of 6.5 million shares in this offering and the application
of the net proceeds therefrom. The following table does not
reflect the potential payment of the cash purchase price and
issuance of 1,204,136 shares in connection with the Teck
Transaction, shares issuable upon the exercise or vesting of
stock options, performance shares or SSARs, shares reserved for
issuance under our equity compensation plans and any of the
shares subject of the underwriters over-allotment option,
as described more fully below.
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As of December 31, 2008
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Actual
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As Adjusted
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(dollars in thousands,
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unaudited)
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Cash and
equivalents(1)
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$
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55,040
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$
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Long-term debt, including current portion
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Stockholders equity:
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Preferred stock, $.01 par value, 10,000,000 shares
authorized; no shares issued and outstanding
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Common stock, $.01 par value, 100,000,000 shares
authorized; 34,007,184 shares issued and outstanding; as
adjusted
40,507,184 shares(1)
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340
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Additional paid-in capital
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465,862
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Accumulated other comprehensive income
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(7)
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(7)
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Accumulated earnings
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41,534
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41,534
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Total stockholders equity
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507,729
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Total capitalization
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$
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582,627
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$
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(1) |
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The As Adjusted column does not include the impact of the Teck
Transaction. While there can be no assurances that the Teck
transaction will close, if the public offering closes at the
offering price of $ per share
the Company would pay $ in cash
and issue 1,204,136 shares to CDA in connection with the Teck
Transaction (not reflecting the exercise of the
underwriters
over-allotment
option). Accordingly, the As Adjusted Cash and equivalents would
decrease by $ and the As Adjusted
Common stock and Additional paid-in capital would increase by
$ , with corresponding increase to
total stockholders equity and total capitalization. |
The number of shares of common stock outstanding is based on
34,007,184 shares outstanding as of December 31, 2008.
This number excludes:
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up to 1,204,136 shares of common stock issuable to CDA
pursuant to the Teck Transaction (assuming 6.5 million
shares are sold in this offering) described further under
Recent Developments Proposed Acquisition of
Andacollo Production Interest on
page S-22;
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560,357 shares of common stock issuable upon exercise of
outstanding options at a weighted average exercise price of
$22.61 per share, of which 486,524 shares of common stock
are subject to options that are vested and immediately
exercisable;
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101,250 performance shares that vest upon achieving certain
performance goals;
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260,584 shares of restricted stock that vest with continued
service to Royal Gold;
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50,500 shares of common stock issuable upon exercise of
outstanding SSARs, of which zero shares of common stock are
subject to SSARs that are vested and immediately exercisable;
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263,150 shares of common stock reserved for future issuance
under our equity compensation plans;
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up to 46,245 shares of common stock subject to issuance
pursuant to a contingent stock arrangement related to our
acquisition of Battle Mountain in October 2007; and
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any of the 975,000 additional shares issuable pursuant to the
underwriters over-allotment option.
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S-26
MARKET
PRICE OF OUR COMMON STOCK
Our common stock is quoted on the NASDAQ Global Select Market
under the symbol RGLD and on the Toronto Stock
Exchange under the symbol RGL. The following table
sets forth for each of the quarterly periods indicated the range
of high and low sales prices in U.S. dollars of our common
stock on the NASDAQ Global Select Market.
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High
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Low
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Year Ended June 30, 2006
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First Quarter
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$
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30.20
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$
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18.74
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Second Quarter
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35.69
|
|
|
|
20.95
|
|
Third Quarter
|
|
|
41.66
|
|
|
|
27.01
|
|
Fourth Quarter
|
|
|
37.50
|
|
|
|
23.00
|
|
Year Ended June 30, 2007
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
31.82
|
|
|
$
|
25.67
|
|
Second Quarter
|
|
|
37.50
|
|
|
|
24.12
|
|
Third Quarter
|
|
|
36.50
|
|
|
|
29.31
|
|
Fourth Quarter
|
|
|
30.87
|
|
|
|
23.25
|
|
Year Ended June 30, 2008
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
34.36
|
|
|
$
|
23.85
|
|
Second Quarter
|
|
|
35.39
|
|
|
|
26.54
|
|
Third Quarter
|
|
|
35.42
|
|
|
|
27.51
|
|
Fourth Quarter
|
|
|
32.93
|
|
|
|
26.87
|
|
Year Ending June 30, 2009
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
39.50
|
|
|
|
26.88
|
|
Second Quarter
|
|
|
49.45
|
|
|
|
22.75
|
|
Third Quarter
|
|
|
49.81
|
|
|
|
35.76
|
|
Fourth Quarter (through April 3, 2009)
|
|
|
48.69
|
|
|
|
42.56
|
|
On April 3, 2009, the closing sale price of our common
stock as reported on the NASDAQ Global Select Market was $43.42
per share. On April 3, 2009, the number of our common
stockholders of record was 1,071.
DIVIDEND
HISTORY
We have paid a cash dividend on our common stock for each fiscal
year beginning in fiscal 2000, which we have increased each
fiscal year beginning in 2001. We currently plan to pay a
dividend on a calendar year basis, subject to the discretion of
our board of directors. Our board of directors may determine not
to declare a dividend based on a number of factors, including
the gold price, economic and market conditions, funding
requirements of our operations and opportunities that might
arise in the future.
For calendar 2009, we announced an annual dividend of $0.32 per
share of common stock, payable in four quarterly payments of
$0.08 each. We paid the first payment of $0.08 per share on
January 16, 2009 to stockholders of record at the close of
business on January 2, 2009. We will pay the second payment
of $0.08 per share on April 17, 2009 to stockholders of
record at the close of business on April 3, 2009.
For calendar 2008, we paid an annual dividend of $0.28 per share
of common stock, payable in four quarterly payments of $0.07
each. We paid the first payment of $0.07 per share on
January 18, 2008 to stockholders of record at the close of
business on January 4, 2008. We paid the second payment of
$0.07 per share on April 18, 2008 to stockholders of record
at the close of business on April 4, 2008. We paid the
third payment of $0.07 per share on July 18, 2008 to
stockholders of record at the close of business on July 3,
2008. We paid the fourth payment of $0.07 per share on
October 17, 2008 to stockholders of record at the close of
business on October 3, 2008.
S-27
For calendar 2007, we paid an annual dividend of $0.26 per share
of common stock, payable in four quarterly payments of $0.065
each. We paid the first payment of $0.065 per share on
January 19, 2007 to stockholders of record at the close of
business on January 5, 2007. We paid the second payment of
$0.065 per share on April 20, 2007 to stockholders of
record at the close of business on April 5, 2007. We paid
the third payment of $0.065 per share on July 20, 2007 to
stockholders of record at the close of business on July 6,
2007. We paid the fourth payment of $0.065 per share on
October 19, 2007 to stockholders of record at the close of
business on October 5, 2007.
MANAGEMENT
Shown below are the names, ages and positions of our directors
and executive officers as of April 3, 2009.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position
|
|
Stanley Dempsey
|
|
|
69
|
|
|
Chairman of the Board of Directors
|
Tony Jensen
|
|
|
47
|
|
|
Director, President and Chief Executive Officer
|
John W. Goth
|
|
|
81
|
|
|
Director
|
M. Craig Haase
|
|
|
65
|
|
|
Director
|
William Hayes
|
|
|
63
|
|
|
Director
|
S. Oden Howell, Jr.
|
|
|
68
|
|
|
Director
|
Merritt E. Marcus
|
|
|
74
|
|
|
Director
|
James W. Stuckert
|
|
|
70
|
|
|
Director
|
Donald Worth
|
|
|
76
|
|
|
Director
|
Karen Gross
|
|
|
54
|
|
|
Vice President and Corporate Secretary
|
William Heissenbuttel
|
|
|
43
|
|
|
Vice President of Corporate Development
|
Bruce C. Kirchhoff
|
|
|
49
|
|
|
Vice President and General Counsel
|
Stefan Wenger
|
|
|
36
|
|
|
Chief Financial Officer and Treasurer
|
William M. Zisch
|
|
|
51
|
|
|
Vice President of Operations
|
Stanley Dempsey has served as Chairman of our board of
directors since January 2009 and served as our Executive
Chairman from July 2006 to January 2009. He was our Chairman and
Chief Executive Officer from August 1988 until June 2006.
Mr. Dempsey also served as our President from May 2002
until August 2003 and our President and Chief Operating Officer
from July 1987 to July 1988. From 1983 through June 1986,
Mr. Dempsey was a partner in the law firm of
Arnold & Porter. During the same period, he was a
principal in Denver Mining Finance Company, a firm that provides
financial, management and advisory services to the mining
industry. From 1970 through 1983, Mr. Dempsey was employed
by AMAX, Inc., a major international mining firm, serving in
various managerial and executive capacities. Mr. Dempsey is
a member of the board of directors of Taranis Resources. He is
involved in various mining-related associations.
Tony Jensen has served on our board of directors since
August 2004 and as our President and Chief Executive Officer
since July 2006. Mr. Jensen served as our President and
Chief Operating Officer from August 2003 until June 2006.
Mr. Jensen has over 25 years of mining industry
experience, including 18 years with Placer Dome Inc. His
corporate and operations experience were developed both in the
United States and in Chile where he occupied several senior
management positions in mine production, corporate development
and finance. Before joining the Company, he was the Mine General
Manager of the Cortez Joint Venture from August 1999 to June
2003, a mining joint venture between Barrick (formerly Placer
Dome Inc.) and Kennecott Explorations (Australia) Ltd., a
subsidiary of Rio Tinto. Mr. Jensen is a director of the
Industrial Advisory Board of the South Dakota School of Mines
and Technology and is a member of the board of directors of the
National Mining Association, the Nevada Mining Association and
the Colorado Mining Association.
John W. Goth has served on our board of directors since
August 1988. Mr. Goth has been a consultant to the mining
industry since 1985. Mr. Goth held several senior positions
at AMAX, Inc., a major international mining firm from April 1954
to November 1985. Mr. Goth has been director of Behre
Dolbear since 1998. He
S-28
is past chairman of the Mineral Information Institute and the
Mining and Metallurgical Society of America, a former
non-executive director and director of the Denver Gold Group, a
mining-related association. He is a former director of
U.S. Gold, Magma Copper Corporation, U.S. Zeolites and
Dome Mines Corporation.
M. Craig Haase has served on our board of directors
since July 2007. Mr. Haase is a retired mining executive.
Mr. Haase served as Director, Executive Vice President and
Chief Legal Officer of Franco-Nevada Mining Corporation, a
publicly-traded precious metals royalty company, for more than
15 years prior to its acquisition by Newmont Mining
Corporation in 2002. He served as a director of Newmont from
March 2002 until he retired in May 2003. He served in a similar
capacity at Euro-Nevada Mining Corporation from 1987 to 1999,
when Euro-Nevada merged with Franco-Nevada. Mr. Haase was
also Chairman and CEO for Gold Marketing Corporation of America,
Inc., a physical gold export company from 1994 to 2002. He
received his J.D. from the University of Illinois and was
engaged in private practice from 1971 to 1990.
William Hayes has served on our board of directors since
January 2008. Mr. Hayes is a retired mining executive.
Mr. Hayes served in various management positions with
Placer Dome Inc. from 1988 to 2006. He was Executive Vice
President for Project Development and Corporate Affairs for
Placer Dome Inc. from 2004 to 2006. From 2000 to 2004, he served
as Executive Vice President Placer Dome Inc. for the USA and
Latin America, and from 1994 to 1999 as Executive Vice President
Placer Dome Inc. for Latin America. From 1991 to 1994, he served
as Chief Executive Officer of Mantos de Ore, Chile, at the
La Coipa mine and was Chief Financial Officer there from
1988 to 1991. Mr. Hayes served as Vice President and
Treasurer of Placer Dome from 1991 to 1994 and Vice President
and Chief Financial Officer of La Coipa mine from 1988 to
1991. From 1972 to 1987, Mr. Hayes served in various
financial positions with Exxon Corporation. Mr. Hayes is an
advisor to the Calista Native Corporation in Alaska, and a
director of Tethyan Copper Company, a copper mining and
exploration business focused in the South Asian region, as well
as of Antofogasta Minerals and Antofogasta PLC, copper mining
companies focused on operations in Chile.
S. Oden Howell, Jr. has served on our board of
directors since December 1993. Mr. Howell has been the
President of Howell & Howell Contractors, Inc., a
renovation contractor, and industrial and commercial painting
contractor, since 1988. He is also the owner of Kessinger
Service Industries, LLC, an industrial coatings contractor firm,
Secretary/Treasurer of LCM Constructors, Inc., a general
construction company located in Charleston, S.C. and
Secretary/Treasurer of SemperFi Constructors, LLC, a
service-disabled, veteran-owned small business located in
Charleston, S.C. From 1972 until 1988, Mr. Howell was
Secretary/Treasurer of Howell & Howell, Inc., an
industrial and commercial painting contractor firm.
Mr. Howell is a director of Keller Manufacturing Company
and Paragon Door Designs, Inc.
Merritt E. Marcus has served on our board of directors
since December 1992. Mr. Marcus was the President and Chief
Executive Officer of Marcus Paint Company, a manufacturer of
industrial liquid coatings, and Performance Powders, LLC, a
manufacturer of industrial powder coatings, from 1983 until
2004. Mr. Marcus served several terms as a director of the
National Paint and Coatings Association.
James W. Stuckert has served on our board of directors
since September 1989. Mr. Stuckert has been a Senior
Executive of Hilliard, Lyons, Inc., a full service financial
asset management firm, since 2004. Mr. Stuckert joined
Hilliard, Lyons in 1962 and served in several capacities,
including Chief Executive Officer, prior to being named Chairman
in December 1995. He served as Chairman of the firm from
December 1995 to December 2003.
Donald Worth has served on our board of directors since
April 1999. Mr. Worth is a director of Sentry Select
Capital Corporation, Cornerstone Capital Resources, Inc. and
Tiomin Resources Inc. He is also a trustee of Labrador Iron Ore
Royalty Income Fund. Mr. Worth has been involved in the
mining industry since 1949. He formerly was a mining specialist
and a vice president of Canadian Imperial Bank of Commerce
(Canada) from July 1984 to August 1997, when he retired. He is
involved with several professional associations in both Canada
and the United States.
Karen Gross has served as our Vice President since June
1994 and Corporate Secretary since 1989. From 1987 until 1989,
Ms. Gross was our Assistant Secretary. Ms. Gross is in
charge of investor relations, public relations and ensuring our
compliance with various corporate governance standards.
Ms. Gross is involved
S-29
with the National Investor Relations Institute, the Society of
Corporate Secretaries and Governance Professionals and is a
director of the Denver Gold Group, a mining-related association.
Ms. Gross received her Bachelor of Arts degree in business
administration from the University of Colorado-Denver.
William Heissenbuttel has served as our Vice President of
Corporate Development since February 2007 and was our Manager of
Corporate Development from April 2006 through January 2007.
Mr. Heissenbuttel brings more than 20 years of
corporate finance experience, with 13 of those years in project
and corporate finance in the metals and mining industry.
Mr. Heissenbuttel served as Senior Vice President from
February 2000 to April 2006 and Vice President from 1999 to 2000
at N M Rothschild & Sons (Denver) Inc. From 1994 to
1999, he served as Vice President and Group Vice President at
ABN AMRO Bank N.V. From 1987 to 1994, he was a Senior Credit
Analyst and an Associate at Chemical Bank Manufacturers Hanover.
Mr. Heissenbuttel holds a Master of Business Administration
degree with a specialization in finance from the University of
Chicago.
Bruce C. Kirchhoff has served as our Vice President and
General Counsel since February 2007. Mr. Kirchhoff has over
20 years of experience representing hardrock and industrial
minerals mining companies, as well as mineral exploration and
development clients. From January 2004 through January 2007,
Mr. Kirchhoff was a partner with the law firm Carver
Kirchhoff Schwarz McNab & Bailey, LLC. From January
2003 to December 2003, Mr. Kirchhoff was a partner with the
law firm Carver & Kirchhoff, LLC, and from April 1996
through December 2002, Mr. Kirchhoff was a partner in the
law firm Alfers & Carver, LLC. Prior to private
practice, Mr. Kirchhoff was a senior attorney with Cyprus
Amax Minerals Company from June 1986 through March 1996.
Mr. Kirchhoff holds a J.D. from the University of Denver, a
Masters of Science in Mineral Economics from the Colorado School
of Mines, and a B.A. from Colorado College.
Stefan Wenger has served has our Chief Financial Officer
since July 2006 and Treasurer since August 2007. Mr. Wenger
was with PricewaterhouseCoopers LLP as a manager from June 2002
until March 2003. From September 2000 until June 2002, he was a
manager with Arthur Andersen LLP. Mr. Wenger has over
13 years of experience in the mining and natural resources
industry working in various financial roles. Mr. Wenger is
a certified public accountant, is a graduate of Colorado State
University with a Bachelors of Science degree in business
administration and has completed the General Management Program
at the Harvard Business School. He is a member of the Colorado
Society of Certified Public Accountants and the American
Institute of Certified Public Accountants.
William M. Zisch joined our team in March 2009 as our
Vice President of Operations. Mr. Zisch has over
25 years of experience in the mining industry. Prior to
joining Royal Gold, Mr. Zisch spent 12 years working
for Newmont on both domestic and international assignments in
technical, operating and executive positions. Most recently,
Mr. Zisch served as Vice President of Planning for Newmont
from March 2007 to March 2009, Vice President African
Operations from March 2005 to March 2007 and Group Executive and
Managing Director of West African Operations from October 2003
through September 2005. Prior to his tenure at Newmont,
Mr. Zisch spent 16 years with FMC Company, starting in
coal and then gold operations and advancing to operating and
strategic sourcing roles in the chemical group. Mr. Zisch
holds a Master of Business Administration degree from the
Wharton School at the University of Pennsylvania and a bachelors
degree in Mining Engineering from the Colorado School of Mines
in Golden, Colorado.
S-30
ROYALTY
AND RESERVE INFORMATION
The following table shows the property name, location, royalty
rate, operator and proven and probable reserves for each of the
Companys producing and development stage royalties.
Reserves shown have been reported to us by the operators of our
royalty interests or have been obtained through publicly
available information as of the date indicated. Reserve
information for our royalty interests is prepared by the
operators of the mining properties. We do not participate in the
preparation or verification of the operators reserve
information and have not independently assessed or verified the
accuracy of such information. See the section entitled
Risk Factors Risks Relating to our
Business Estimates of reserves and mineralization
by the operators of mines in which we have royalty interests are
subject to significant revision on page S-16. Our
royalty interests represent only a small percentage interest in
the production from any reserve, and those percentage interests
vary widely according to the terms of the individual royalty.
Note: This table does not include information about the
Andacollo Production Interest, which will not be acquired until
the Teck Transaction is completed.
Production
Stage Royalties
Summary of Proven and Probable Gold
Reserves(1,2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Gold
|
|
Gold Contained
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons of Ore
|
|
Grade
|
|
Ounces
|
|
Date Reserves
|
Royalty
|
|
Location
|
|
Royalty Rate
|
|
Operator
|
|
Category
|
|
(millions)
|
|
(ounces per ton)
|
|
(millions)(3)
|
|
Reported(4)
|
|
Cortez
GSR1(5)
|
|
U.S.-Nevada
|
|
0.40%-5.0%
sliding-scale GSR
|
|
Barrick
|
|
Proven
Probable
|
|
|
3.80
24.14
|
|
|
|
0.095
0.051
|
|
|
|
0.360
1.227
|
|
|
|
12/31/2008
|
|
Cortez
GSR2(5)
|
|
U.S.-Nevada
|
|
0.40%-5.0%
sliding-scale GSR
|
|
Barrick
|
|
Proven
Probable
|
|
|
8.29
74.65
|
|
|
|
0.038
0.032
|
|
|
|
0.312
2.362
|
|
|
|
12/31/2008
|
|
Cortez
GSR3(5)
|
|
U.S.-Nevada
|
|
0.71% GSR
|
|
Barrick
|
|
Proven
Probable
|
|
|
5.48
41.32
|
|
|
|
0.076
0.037
|
|
|
|
0.414
1.419
|
|
|
|
12/31/2008
|
|
Cortez
NVR1(5)
|
|
U.S.-Nevada
|
|
0.39% NVR
|
|
Barrick
|
|
Proven
Probable
|
|
|
3.69
38.46
|
|
|
|
0.047
0.037
|
|
|
|
0.173
1.419
|
|
|
|
12/31/2008
|
|
Robinson
|
|
U.S.-Nevada
|
|
3.0% NSR
|
|
Quadra
|
|
Proven
Probable
|
|
|
130.04
4.10
|
|
|
|
0.007
0.006
|
|
|
|
0.884
0.021
|
|
|
|
12/31/2008
|
|
Taparko
TB-GSR1(6)
|
|
Burkina Faso
|
|
15% GSR
|
|
High River
|
|
Reserve
|
|
|
3.70
|
|
|
|
0.082
|
|
|
|
0.303
|
(7,8)
|
|
|
12/31/2007
|
|
Taparko
TB-GSR2(6)
|
|
Burkina Faso
|
|
0%-10%
sliding-scale GSR
|
|
High River
|
|
Reserve
|
|
|
3.70
|
|
|
|
0.082
|
|
|
|
0.303
|
(7,8)
|
|
|
|
|
Leeville Mining
Complex(9)
|
|
U.S.-Nevada
|
|
1.8% NSR
|
|
Newmont
|
|
Reserve
|
|
|
7.68
|
|
|
|
0.328
|
|
|
|
2.518
|
|
|
|
12/31/2008
|
|
Goldstrike SJ
Claims(9)
|
|
U.S.-Nevada
|
|
0.9% NSR
|
|
Barrick
|
|
Reserve
|
|
|
47.82
|
|
|
|
0.121
|
|
|
|
5.768
|
|
|
|
12/31/2008
|
|
Mulatos(10)
|
|
Mexico
|
|
1.0%-5.0%
sliding-scale NSR
|
|
Alamos
|
|
Proven
Probable
|
|
|
13.01
39.52
|
|
|
|
0.050
0.035
|
|
|
|
0.649
1.397
|
|
|
|
12/31/2008
|
|
Bald
Mountain(9)
|
|
U.S.-Nevada
|
|
1.75%-3.5%
sliding-scale NSR
|
|
Barrick
|
|
Reserve
|
|
|
27.45
|
|
|
|
0.026
|
|
|
|
0.720
|
|
|
|
12/31/2008
|
|
El
Chanate(11)
|
|
Mexico
|
|
2.0%-4.0%
sliding-scale NSR
|
|
Capital Gold
|
|
Reserve
|
|
|
36.80
|
|
|
|
0.018
|
|
|
|
0.666
|
|
|
|
1/31/2009
|
|
Don
Mario(12)
(LMZ)
|
|
Bolivia
|
|
3.0% NSR
|
|
Orvana
|
|
Reserve
|
|
|
0.207
|
|
|
|
0.290
|
|
|
|
0.060
|
|
|
|
9/30/2008
|
|
Williams
|
|
Canada
|
|
0.72% NSR
|
|
Barrick
|
|
Proven
Probable
|
|
|
7.24
2.69
|
|
|
|
0.073
0.119
|
|
|
|
0.528
0.319
|
|
|
|
12/31/2007
|
|
Peñasquito
(oxide)(13)
|
|
Mexico
|
|
2.0% NSR
|
|
Goldcorp
|
|
Proven
Probable
|
|
|
63.71
137.40
|
|
|
|
0.006
0.003
|
|
|
|
0.360
0.430
|
|
|
|
12/31/2008
|
|
El Limon
|
|
Nicaragua
|
|
3.0% NSR
|
|
Central Sun
|
|
Proven
Probable
|
|
|
0.08
1.20
|
|
|
|
0.157
0.135
|
|
|
|
0.012
0.162
|
|
|
|
12/31/2008
|
|
Benso
|
|
Ghana
|
|
1.5% NSR
|
|
Golden Star
|
|
Probable
|
|
|
2.54
|
|
|
|
0.099
|
|
|
|
0.252
|
|
|
|
12/31/2007
|
|
Siguiri(14)
|
|
Guinea
|
|
0.0%-1.875%
sliding-scale NSR
|
|
AngloGold
Ashanti
|
|
Proven
Probable
|
|
|
61.87
73.98
|
|
|
|
0.016
0.030
|
|
|
|
1.010
2.240
|
|
|
|
12/31/2008
|
|
Balcooma
|
|
Australia
|
|
1.5% NSR
|
|
Kagara
|
|
Reserve
|
|
|
1.12
|
|
|
|
0.016
|
|
|
|
0.018
|
|
|
|
6/30/2008
|
|
El Toqui
|
|
Chile
|
|
1.0%-3.0%
sliding-scale NSR
|
|
Breakwater
|
|
Reserve
|
|
|
3.68
|
|
|
|
0.077
|
|
|
|
0.283
|
|
|
|
12/31/2008
|
|
Wharf
|
|
U.S.-
South Dakota
|
|
0.0%-2.0%
sliding-scale NSR
|
|
Goldcorp
|
|
Proven
Probable
|
|
|
11.61
1.39
|
|
|
|
0.023
0.022
|
|
|
|
0.270
0.030
|
|
|
|
12/31/2008
|
|
Dolores
|
|
Mexico
|
|
1.25% NSR
|
|
Minefinders
|
|
Proven
Probable
|
|
|
62.42
47.04
|
|
|
|
0.023
0.021
|
|
|
|
1.454
0.990
|
|
|
|
3/25/2008
|
|
S-31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Gold
|
|
Gold Contained
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons of Ore
|
|
Grade
|
|
Ounces
|
|
Date Reserves
|
Royalty
|
|
Location
|
|
Royalty Rate
|
|
Operator
|
|
Category
|
|
(millions)
|
|
(ounces per ton)
|
|
(millions)(3)
|
|
Reported(4)
|
|
Twin Creeks
|
|
U.S.-Nevada
|
|
2% GPR
|
|
Newmont
|
|
Reserve
|
|
|
|
|
|
|
|
|
|
|
0.145
|
|
|
|
12/31/2008
|
|
Development
Stage Royalties
Summary of Proven and Probable Gold
Reserves(1,2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Gold
|
|
|
Gold Contained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons
|
|
|
Grade
|
|
|
Ounces
|
|
|
Date Reserves
|
|
Royalty
|
|
Location
|
|
Royalty Rate
|
|
Operator
|
|
Category
|
|
(millions)
|
|
|
(ounces per ton)
|
|
|
(millions)(3)
|
|
|
Reported(4)
|
|
|
Peñasquito
(sulfide)(13)
|
|
Mexico
|
|
2.0% NSR
|
|
Goldcorp
|
|
Proven
Probable
|
|
|
618.62
493.53
|
|
|
|
0.018
0.011
|
|
|
|
11.390
5.250
|
|
|
|
12/31/2008
|
|
Dolores(16)
|
|
Mexico
|
|
2.0% NSR
|
|
Minefinders
|
|
Proven
Probable
|
|
|
62.42
47.04
|
|
|
|
0.023
0.021
|
|
|
|
1.454
0.990
|
|
|
|
3/25/2008
|
|
Pascua-Lama(17)
|
|
Chile
|
|
0.16%-1.08%
sliding-scale NSR
|
|
Barrick
|
|
Proven
Probable
|
|
|
35.71
288.80
|
|
|
|
0.053
0.044
|
|
|
|
1.900
12.700
|
|
|
|
12/31/2007
|
|
Taparko
TB-GSR3(6,8)
|
|
Burkina Faso
|
|
2.0% GSR
|
|
High River
|
|
Reserve
|
|
|
6.06
|
|
|
|
0.082
|
|
|
|
0.497
|
|
|
|
12/31/2007
|
|
Gold
Hill(9)
|
|
U.S.-Nevada
|
|
1.0%-2.0%
sliding-scale NSR
|
|
Kinross
|
|
Reserve
|
|
|
|
|
|
|
|
|
|
|
0.750
|
(15)
|
|
|
12/31/2007
|
|
Marigold(9)
|
|
U.S.-Nevada
|
|
2.0% NSR
|
|
Goldcorp
|
|
Reserve
|
|
|
44.59
|
|
|
|
0.019
|
|
|
|
0.867
|
|
|
|
12/31/2007
|
|
Holloway-Holt(18)
|
|
Canada
|
|
0.00013 x quarterly
average gold price
|
|
St. Andrews
Goldfields
|
|
Reserve
|
|
|
2.95
|
|
|
|
0.165
|
|
|
|
0.487
|
|
|
|
07/09/2008
|
|
Meekatharra (Paddys Flat)
|
|
Western Australia
|
|
A$10.00 per gold
ounce produced
|
|
Mercator Gold
|
|
Reserve
|
|
|
2.19
|
|
|
|
0.140
|
|
|
|
0.308
|
|
|
|
09/19/2007
|
|
Malartic(19)
|
|
Canada
|
|
2.0%-3.0%
sliding-scale NSR
|
|
Osisko Mining
|
|
Reserve
|
|
|
|
|
|
|
|
|
|
|
4.700
|
|
|
|
12/12/2008
|
|
Pine Cove
|
|
Canada
|
|
7.5% NPI
|
|
New Island
Resources(70%)
Anaconda Mining(30%)
|
|
Proven
Probable
|
|
|
2.57
|
|
|
|
0.080
|
|
|
|
0.207
|
|
|
|
3/18/2005
|
|
West Westonia
|
|
Australia
|
|
0.50% NSR
|
|
Catalpa Resources Ltd.
|
|
Proven
Probable
|
|
|
13.56
7.50
|
|
|
|
0.035
0.036
|
|
|
|
0.471
0.267
|
|
|
|
12/31/2008
|
|
Production
Stage Royalties
Summary of Proven and Probable Silver
Reserves(1,20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Silver
|
|
|
Silver Contained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons
|
|
|
Grade
|
|
|
Ounces
|
|
|
Date Reserves
|
|
Royalty
|
|
Location
|
|
Royalty Rate
|
|
Operator
|
|
Category
|
|
(millions)
|
|
|
(ounces per ton)
|
|
|
(millions)(3)
|
|
|
Reported(4)
|
|
|
Peñasquito
(oxide)(13)
|
|
Mexico
|
|
2.0% NSR
|
|
Goldcorp
|
|
Proven
Probable
|
|
|
63.71
137.40
|
|
|
|
0.54
0.28
|
|
|
|
34.300
37.800
|
|
|
|
12/31/2008
|
|
Martha
|
|
Argentina
|
|
2.0% NSR
|
|
Coeur dAlene
|
|
Proven
Probable
|
|
|
0.02
0.06
|
|
|
|
55.86
31.22
|
|
|
|
0.992
1.817
|
|
|
|
12/31/2008
|
|
Troy(6,21)
|
|
U.S.-Montana
|
|
7.0% GSR
|
|
Revett
|
|
Reserve
|
|
|
2.01
|
|
|
|
1.18
|
|
|
|
2.379
|
(22)
|
|
|
12/31/2007
|
|
|
|
|
|
6.1% GSR
|
|
|
|
Reserve
|
|
|
1.73
|
|
|
|
1.18
|
|
|
|
2.046
|
|
|
|
|
|
|
|
|
|
2.0% GSR
|
|
|
|
Reserve
|
|
|
2.61
|
|
|
|
1.18
|
|
|
|
3.085
|
|
|
|
|
|
Balcooma
|
|
Australia
|
|
1.5% NSR
|
|
Kagara
|
|
Reserve
|
|
|
1.21
|
|
|
|
1.64
|
|
|
|
1.842
|
|
|
|
6/30/2008
|
|
Development
Stage Royalties
Summary of Proven and Probable Silver
Reserves(1,20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Silver
|
|
|
Silver Contained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons
|
|
|
Grade
|
|
|
Ounces
|
|
|
Date Reserves
|
|
Royalty
|
|
Location
|
|
Royalty Rate
|
|
Operator
|
|
Category
|
|
(millions)
|
|
|
(ounces per ton)
|
|
|
(millions)(3)
|
|
|
Reported(4)
|
|
|
Peñasquito
(sulfide)(13)
|
|
Mexico
|
|
2.0% NSR
|
|
Goldcorp
|
|
Proven
Probable
|
|
|
618.62
493.53
|
|
|
|
0.99
0.73
|
|
|
|
611.500
362.100
|
|
|
|
12/31/2008
|
|
Dolores
|
|
Mexico
|
|
2.0%
NSR(16)
|
|
Minefinders
|
|
Proven
Probable
|
|
|
62.42
47.041
|
|
|
|
1.18
1.13
|
|
|
|
73.415
53.230
|
|
|
|
3/25/2008
|
|
S-32
Production
Stage Royalties
Summary of Proven and Probable Copper
Reserves(1,23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Copper
|
|
|
Copper Contained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons
|
|
|
Grade
|
|
|
Pounds
|
|
|
Date Reserves
|
|
Royalty
|
|
Location
|
|
Royalty Rate
|
|
Operator
|
|
Category
|
|
(millions)
|
|
|
(% Cu)
|
|
|
(millions)(3)
|
|
|
Reported(4)
|
|
|
Robinson
|
|
U.S.-Nevada
|
|
|
3.0
|
% NSR
|
|
Quadra
|
|
Proven
|
|
|
130.04
|
|
|
|
0.55
|
|
|
|
1,420
|
|
|
|
12/31/2008
|
|
|
|
|
|
|
|
|
|
|
|
Probable
|
|
|
4.10
|
|
|
|
0.42
|
|
|
|
35
|
|
|
|
|
|
Troy(6,21)
|
|
U.S.-Montana
|
|
|
7.0
|
% GSR
|
|
Revett
|
|
Reserve
|
|
|
1.94
|
|
|
|
0.54
|
|
|
|
21
|
(22)
|
|
|
12/31/2007
|
|
|
|
|
|
|
6.1
|
% GSR
|
|
|
|
Reserve
|
|
|
1.58
|
|
|
|
0.54
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
2.0
|
% GSR
|
|
|
|
Reserve
|
|
|
3.70
|
|
|
|
0.54
|
|
|
|
40
|
|
|
|
|
|
Balcooma
|
|
Australia
|
|
|
1.50
|
% NSR
|
|
Kagara
|
|
Reserve
|
|
|
2.18
|
|
|
|
3.10
|
|
|
|
135
|
|
|
|
6/30/2008
|
|
Production
and Development Stage Royalties
Summary of Proven and Probable Zinc
Reserves(1,24)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Zinc
|
|
|
Zinc Contained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons
|
|
|
Grade
|
|
|
Pounds
|
|
|
Date Reserves
|
|
Royalty
|
|
Location
|
|
Royalty Rate
|
|
Operator
|
|
Category
|
|
(millions)
|
|
|
(% Zn)
|
|
|
(millions)(3)
|
|
|
Reported(4)
|
|
|
Peñasquito
(sulfide)(13)
|
|
Mexico
|
|
2.0% NSR
|
|
Goldcorp
|
|
Proven
Probable
|
|
|
618.62
493.53
|
|
|
|
0.77
0.59
|
|
|
|
9,587
5,776
|
|
|
|
12/31/2008
|
|
El Toqui
|
|
Chile
|
|
1.0%-3.0%
sliding-scale NSR
|
|
Breakwater
|
|
Reserve
|
|
|
3.68
|
|
|
|
7.1
|
|
|
|
526
|
|
|
|
12/31/2008
|
|
Balcooma
|
|
Australia
|
|
1.5% NSR
|
|
Kagara
|
|
Reserve
|
|
|
1.12
|
|
|
|
8.3
|
|
|
|
185
|
|
|
|
6/30/2008
|
|
Production
and Development Stage Royalties
Summary of Proven and Probable Lead
Reserves(1,25)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Lead
|
|
|
Lead Contained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons
|
|
|
Grade
|
|
|
Pounds
|
|
|
Date Reserves
|
|
Royalty
|
|
Location
|
|
Royalty Rate
|
|
Operator
|
|
Category
|
|
(millions)
|
|
|
(% Pb)
|
|
|
(millions)(3)
|
|
|
Reported(4)
|
|
|
Peñasquito
(sulfide)(13)
|
|
Mexico
|
|
2.0% NSR
|
|
Goldcorp
|
|
Proven
Probable
|
|
|
618.62
493.53
|
|
|
|
0.36
0.27
|
|
|
|
4,437
2,633
|
|
|
|
12/31/2008
|
|
Balcooma
|
|
Australia
|
|
1.5% NSR
|
|
Kagara
|
|
Reserve
|
|
|
1.12
|
|
|
|
3.3
|
|
|
|
73
|
|
|
|
6/30/2008
|
|
Production
Stage Royalties
Summary of Proven and Probable Nickel
Reserves(1,26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Nickel
|
|
|
Nickel Contained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons
|
|
|
Grade
|
|
|
Pounds
|
|
|
Date Reserves
|
|
Royalty
|
|
Location
|
|
Royalty Rate
|
|
Operator
|
|
Category
|
|
(millions)
|
|
|
(% Pb)
|
|
|
(millions)(3)
|
|
|
Reported(4)
|
|
|
Mt. Goode (Cosmos South)
|
|
Australia
|
|
1.50% NSR
|
|
Xstrata
|
|
Reserve
|
|
|
1.31
|
|
|
|
4.45
|
|
|
|
116
|
|
|
|
12/31/2007
|
|
Production
Stage Royalties
Summary of Proven and Probable Potash
Reserves(1,27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons
|
|
Average Grade
|
|
Contained Tons
|
|
Date Reserves
|
Royalty
|
|
Location
|
|
Royalty Rate
|
|
Operator
|
|
Category
|
|
(millions)
|
|
(%)
|
|
(millions)(3)
|
|
Reported(4)
|
|
Allan
|
|
Canada
|
|
$0.36-$1.44
sliding-scale
per ton and
$0.25 per ton
|
|
Potash Corporation
of Saskatchewan
|
|
Reserve
|
|
|
348.33
|
|
|
|
25.9
|
|
|
|
90
|
|
|
|
12/31/2007
|
|
|
|
|
(1) |
|
Set forth below are the definitions of proven and probable
reserves used by the SEC (SEC Industry Guide 7). |
|
|
|
Reserve is that part of a mineral deposit which
could be economically and legally extracted or produced at the
time of the reserve determination. |
|
|
|
Proven (Measured) Reserves are reserves for which
(a) quantity is computed from dimensions revealed in
outcrops, trenches, workings or drill holes, and the grade is
computed from the results of detailed sampling, and (b) the
sites for inspection, sampling and measurement are spaced so
closely and the geologic |
S-33
|
|
|
|
|
character is so well defined that the size, shape, depth and
mineral content of the reserves are well established. |
|
|
|
Probable (Indicated) Reserves are reserves for which
the quantity and grade are computed from information similar to
that used for proven (measured) reserves, but the sites for
inspection, sampling and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance of
probable (indicated) reserves, although lower than that for
proven (measured) reserves, is high enough to assume geological
continuity between points of observation. |
|
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In this prospectus supplement, Royal Gold has disclosed a number
of reserve estimates that are provided by royalty operators that
are foreign issuers and are not based on the SECs
definitions for proven and probable reserves. For Canadian
issuers, definitions of mineral reserve,
proven mineral reserve and probable mineral
reserve conform to the Canadian Institute of Mining,
Metallurgy and Petroleum definitions of these terms as of the
effective date of estimation as required by National Instrument
43-101 of
the Canadian Securities Administrators. For Australian issuers,
definitions of mineral reserve, proven mineral
reserve and probable mineral reserve conform
with the Australasian Code for Reporting of Mineral Resources
and Ore Reserves prepared by the Joint Ore Reserves Committee of
the Australasian Institute of Mining and Metallurgy, Australian
Institute of Geoscientists and Minerals Council of Australia, as
amended (JORC Code). In each case, the reserves
reported hereunder are estimates previously disclosed by the
relevant operator, without reference to the underlying data used
to calculate the estimates. Accordingly, Royal Gold is not able
to reconcile the reserve estimates prepared in reliance on
National Instrument
43-101 or
JORC Code with definitions of the SEC. |
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(2) |
|
Gold reserves were calculated by the operators at the following
per ounce prices: $800 Taparko;
$775 Holt-Holloway; $750 Don Mario;
$725 Cortez, Goldstrike, Bald Mountain, Leeville,
Peñasquito and Wharf; $720 Siguiri;
$600 Dolores, and El Toqui; $575
Williams and Pascua-Lama; $550 El Chanate, El
Limon and Marigold; $700 Mulatos; $480
Benso; $425 Pine Cove. Quadra does not use a gold
price figure to define reserves as gold is produced as a
by-product of copper. No gold price is reported for Balcooma,
Gold Hill or Meekatharra. For Gold Hill, see footnote 15. |
|
(3) |
|
Contained ounces or contained pounds do
not take into account losses in processing the ore. The amounts
shown are 100% of the reserves subject to our royalty interests. |
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(4) |
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Reserves have been calculated and/or reported by the operators
as of the date shown. |
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(5) |
|
NVR1 and GSR3 reserves are a subset of the reserves covered by
GSR1 and GSR2 reserves. |
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(6) |
|
Due to the royalty structure at the Taparko and Troy mines,
reserves cannot be broken down into proven and probable. |
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(7) |
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TB-GSR1 and TB-GSR2 royalties are subject to the same reserve. |
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(8) |
|
TB-GSR1 will remain in effect until cumulative production of
804,420 ounces of gold is achieved or until cumulative payments
of $35 million have been made to Royal Gold, whichever
occurs first. TB-GSR2 will remain in effect until the
termination of TB-GSR1. As of December 31, 2008, we have
recognized approximately $5.6 million in royalty revenue
associated with TB-GSR1, which is attributable to cumulative
production of 43,700 ounces of gold. The reserves at Taparko
have been adjusted, based on the operators gold price
assumption of $800 per ounce, to reflect the $35 million
cap on the TB-GSR1 royalty. Upon meeting the royalty cap, both
the TB-GSR1 and TB-GSR2 royalties cease and the TB-GSR3 royalty
becomes effective. The TB-GSR3 reserves represent the remaining
reserves after subtracting the reserves associated with
TB-GSR1 and
TB-GSR2. |
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(9) |
|
The operators at Goldstrike-SJ Claims, Leeville, Bald Mountain,
Gold Hill and Marigold did not provide a breakdown of proven and
probable reserves to Royal Gold. |
|
|
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(10) |
|
The Mulatos royalty is capped at 2.0 million gold ounces of
production. Approximately 328,000 cumulative ounces of gold have
been produced as of December 31, 2008. |
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(11) |
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The El Chanate sliding-scale NSR royalty is capped once payments
of approximately $17.0 million have been received. As of
December 31, 2008, we have received $1.3 million in
royalty payments on the NSR royalty. |
S-34
|
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(12) |
|
Don Mario reserves consist of a lower mineralized zone
(LMZ) and an upper mineralized zone. A breakdown of
proven and probable reserves on the LMZ was not provided by the
operator to Royal Gold. |
|
(13) |
|
Operator reported reserve estimates by deposit types. A sulfide
deposit is one in which the sulfide minerals predominate. An
oxide deposit is one in which the oxide minerals predominate. |
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(14) |
|
The Siguiri royalty is subject to a dollar cap. As of
December 31, 2008, approximately $10.8 million remains
unrecognized under the cap. |
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(15) |
|
Round Mountain Gold Corporations Gold Hill reserves are
not separately detailed in their publicly available financial
reports. However, Barrick stated in its September 2006 Nevada
Mine Tour presentation titled Barrick in Nevada,
posted on its web site, that as of December 31, 2005, there
were 375,000 contained ounces in reserves that represent their
50% share of the project. |
|
(16) |
|
The Dolores royalty becomes effective once the facility reaches
commercial production, which the operator expects to be reached
during the second half of calendar 2009. |
|
(17) |
|
Reserves from Pascua-Lama shown represent the area of interest
in Chile to which the royalty applies. |
|
(18) |
|
In November 2008, the operator made application to a court in
Ontario, Canada for a declaration that it is not obligated to
the pay the entire royalty payable under the royalty agreement.
The operator claims that its predecessor in interest is
responsible for payment of some or all of the royalty. |
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(19) |
|
The Malartic royalty is subject to a buy down right of Osisko,
which, if exercised, would lower the sliding scale NCR royalty
rate to 1.0% 1.5%. |
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(20) |
|
Silver prices were calculated by the operators at the following
prices per ounce: $12.00 Peñasquito;
$11.00 Martha; $10.00 Troy and Dolores.
No silver price is quoted for Balcooma. |
|
(21) |
|
The Troy 7.0% royalty will extend until either
(a) cumulative production of approximately 9.9 million
ounces of silver and 84.7 million pounds of copper or
(b) we receive $10.5 million in cumulative payments,
whichever occurs first. As of December 31, 2008, we have
recognized royalty revenue associated with this GSR royalty
totaling $9.5 million, which is attributable to cumulative
production of approximately 3.8 million ounces of silver
and approximately 33.5 million pounds of copper. |
|
(22) |
|
The Troy reserves subject to the 7.0% GSR royalty have been
adjusted downward by Royal Gold due to the expectation of
meeting the monetary cap of $10.5 million in cumulative
payments. Royal Gold used the operators December 31,
2007 silver and copper reserve prices of $10.00 per ounce and
$2.25 per pound, respectively, to calculate this adjustment. |
|
(23) |
|
Copper reserves were calculated by the operators at $2.50 per
pound for Robinson and $2.25 per pound for Troy. No copper price
is available for Balcooma. |
|
(24) |
|
Zinc reserves were calculated by the operator at the following
prices per pound: $1.00 El Toqui; and
$0.80 Peñasquito. No zinc price is available
for Balcooma. |
|
(25) |
|
Lead reserves were calculated by the operator at the following
prices per pound: $0.50 Peñasquito. No lead
price is available for Balcooma. |
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(26) |
|
Nickel reserves were calculated by the operator at $5.00 per
pound. |
|
(27) |
|
Potash price for Allan was not available. |
Gold reserve information is not available for our royalties at
Lluvia de Oro (4% NSR) located in Mexico and operated by NWM
Mining, Relief Canyon (4% NSR) located in Nevada and operated by
Firstgold and Reedys Burnakura (1.5%-2.5% sliding scale
NSR) located in Australia and operated by ATW GoldCorp. Copper
reserve information is not available for our royalty at Pascua
Lama (0.22% NSR) located in Chile and operated by Barrick. Iron
ore tonnage is not available for our royalty at Koolanooka
(AUD$0.25/tonne) located in Australia and operated by Midwest.
S-35
UNDERWRITING
HSBC Securities (USA) Inc., Goldman, Sachs & Co. and
Scotia Capital (USA) Inc. are acting as the representatives of
the underwriters named below. Subject to the terms and
conditions stated in the underwriting agreement dated the date
of this prospectus supplement, each underwriter named below has
severally agreed to purchase, and we have agreed to sell to that
underwriter, the number of shares set forth opposite that
underwriters name.
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Number of
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Underwriter
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Shares
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HSBC Securities (USA) Inc.
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Goldman, Sachs & Co.
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Scotia Capital (USA) Inc.
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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NBF Securities (USA) Corp.
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Total
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The underwriting agreement provides that the obligations of the
underwriters to purchase the shares included in this offering
are subject to approval of legal matters by counsel and to other
conditions. The underwriters are obligated to purchase all the
shares (other than those covered by the over-allotment option
described below) if they purchase any of the shares.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to
make because of any of those liabilities.
The underwriters propose to offer some of the shares directly to
the public at the public offering price set forth on the cover
page of this prospectus supplement and some of the shares to
dealers at the public offering price less a concession not to
exceed $ per share. The
underwriters may allow, and dealers may reallow, a concession
not to exceed $ per share on sales
to other dealers. If all of the shares are not sold at the
initial offering price, the representatives may change the
public offering price and the other selling terms. The offering
of the shares by the underwriters is subject to receipt and
acceptance and subject to the underwriters right to reject
any order in whole or in part.
We have granted to the underwriters an option, exercisable at
any time on or before the thirtieth day after the date of this
prospectus supplement, to purchase up to 975,000 additional
shares of common stock at the public offering price less the
underwriting discount. The underwriters may exercise the option
solely for the purpose of covering over-allotments, if any, in
connection with this offering. To the extent the option is
exercised, each underwriter must purchase a number of additional
shares approximately proportionate to that underwriters
initial purchase commitment.
We and our executive officers and directors have agreed that,
for a period of 90 days from the date of the underwriting
agreement, we and they will not, without the prior written
consent of HSBC Securities (USA) Inc., Goldman,
Sachs & Co. and Scotia Capital (USA) Inc., dispose of
or hedge any shares of our common stock or any securities
convertible into or exercisable or exchangeable for our common
stock, except that our executive officers and directors may sell
up to an aggregate of 50,000 shares of common stock during
the lock-up
period. In addition, one of our directors and his spouse are
permitted to sell up to an aggregate of 16,800 shares of
our common stock per month during the
lock-up
period under a written plan outstanding on the date hereof, or
to be entered into, for trading securities adopted pursuant to
Rule 10b5-1
under the Exchange Act. Our officers and directors are also
permitted to transfer shares of common stock as bona fide gifts,
provided that the donee or donees agree to be bound by the
restrictions set forth in the
lock-up
agreements. In addition, CDA has agreed with the underwriters
that, for a period (the CDA
Lock-Up
Period) beginning on the date of the underwriting
agreement and ending the earliest of (1) the date that is
120 days after the date of the stockholder agreement that
we entered into with CDA and Teck as part of the Teck
Transaction, (2) the date that is 90 days after the
date of the underwriting agreement or (3) the date that we
are fully released from the
lock-up
pursuant to the underwriting agreement, CDA will not, without
the prior written consent of HSBC Securities (USA) Inc.,
Goldman, Sachs & Co. and Scotia Capital (USA) Inc.,
dispose
S-36
of or hedge any shares of our common stock or any securities
convertible into or exercisable or exchangeable for our common
stock, other than capital stock that, when aggregated with all
other shares of capital stock disposed of by CDA, Teck and any
affiliate of CDA during the CDA
Lock-Up
Period, does not exceed 50,000 shares of capital stock, nor
shall CDA publicly announce an intention to effect any such
transaction; except that (i) CDA may execute and deliver a
registration rights agreement with us in respect of the common
stock to be issued by us to CDA pursuant to the Teck
Transaction, (ii) we may prepare and file as part of our
automatic shelf registration statement, as amended, a prospectus
supplement providing for the resale from time to time of all of
the common stock issued to CDA in the Teck Transaction and CDA
may be named as a selling security-holder in such prospectus
supplement, and (iii) CDA and Teck may publicly announce
the intention to effect a disposition of the common stock issued
to CDA, subject to such announcement indicating that CDA will
comply with the restrictions on the disposition of the common
stock subject to this lock-up with the underwriters and the
stockholder agreement. Further, if any director, officer or
affiliate of Royal Gold is released from his, her or its
lock-up
agreement pursuant to the underwriting agreement and, as a
result of such release, is allowed to sell shares of common
stock during the CDA
Lock-Up
Period, then CDA, Teck and any affiliate of CDA will be
permitted to collectively sell an equal number of shares of
common stock. HSBC Securities (USA) Inc., Goldman,
Sachs & Co. and Scotia Capital (USA) Inc., in their
sole discretion, may release any of the securities subject to
these
lock-up
agreements at any time without notice.
The common stock is listed on the NASDAQ Global Select Market
under the symbol RGLD and is also traded on The
Toronto Stock Exchange under the symbol RGL.
The following table shows the underwriting discounts and
commissions that we are to pay to the underwriters in connection
with this offering. These amounts are shown assuming both no
exercise and full exercise of the underwriters option to
purchase additional shares of common stock.
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Paid by Royal Gold, Inc.
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No Exercise
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Full Exercise
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Per share of common stock
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Total
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In connection with this offering, HSBC Securities (USA) Inc., on
behalf of the underwriters, may purchase and sell shares of
common stock in the open market. These transactions may include
short sales, syndicate covering transactions and stabilizing
transactions. Short sales involve syndicate sales of common
stock in excess of the number of shares to be purchased by the
underwriters in the offering, which creates a syndicate short
position. Covered short sales are sales of shares
made in an amount up to the number of shares represented by the
underwriters over-allotment option. In determining the
source of shares to close out the covered syndicate short
position, HSBC Securities (USA) Inc. will consider, among other
things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase
shares through the over-allotment option. Transactions to close
out the covered syndicate short involve either purchases of the
common stock in the open market after the distribution has been
completed or the exercise of the over-allotment option. HSBC
Securities (USA) Inc. may also make naked short
sales of shares in excess of the over-allotment option. HSBC
Securities (USA) Inc. must close out any naked short position by
purchasing shares of common stock in the open market. A naked
short position is more likely to be created if HSBC Securities
(USA) Inc. is concerned that there may be downward pressure on
the price of the shares in the open market after pricing that
could adversely affect investors who purchase in the offering.
Stabilizing transactions consist of bids for or purchases of
shares in the open market while the offering is in progress.
HSBC Securities (USA) Inc. also may impose a penalty bid.
Penalty bids permit HSBC Securities (USA) Inc. to reclaim a
selling concession from a syndicate member when HSBC Securities
(USA) Inc. repurchases shares originally sold by that syndicate
member in order to cover syndicate short positions or make
stabilizing purchases.
Any of these activities may have the effect of preventing or
retarding a decline in the market price of the common stock.
They may also cause the price of the common stock to be higher
than the price that would otherwise exist in the open market in
the absence of these transactions. HSBC Securities (USA) Inc.
may conduct these transactions on the NASDAQ Global Select
Market or in the over-the-counter market, or
S-37
otherwise. If HSBC Securities (USA) Inc. commences any of these
transactions, it may discontinue them at any time.
In addition, in connection with this offering, some of the
underwriters (and selling group members) may engage in passive
market making transactions in the common stock on the NASDAQ
Global Select Market prior to the pricing and completion of the
offering. Passive market making consists of displaying bids on
the NASDAQ Global Select Market no higher than the bid prices of
independent market makers and making purchases at prices no
higher than those independent bids and effected in response to
order flow. Net purchases by a passive market maker on each day
are limited to a specified percentage of the passive market
makers average daily trading volume in the common stock
during a specified period and must be discontinued when that
limit is reached. Passive market making may cause the price of
the common stock to be higher than the price that otherwise
would exist in the open market in the absence of those
transactions. If the underwriters commence passive market making
transactions, they may discontinue them at any time.
We estimate that the total expenses of this offering will be
$ .
Some of the underwriters have performed investment banking and
advisory services for us from time to time for which they have
received customary fees and expenses. The underwriters may, from
time to time, engage in transactions with and perform services
for us in the ordinary course of their businesses. HSBC Bank USA
National Association (HSBC Bank), an affiliate of
HSBC Securities (USA) Inc., and Scotiabanc Inc., an affiliate of
Scotia Capital (USA) Inc., have provided us with a line of
credit in the amount of $125 million that has been and may
be used to acquire producing royalties. HSBC Bank is also our
lender under the a Term Loan Agreement with our subsidiary Royal
Gold Chile Limitada pursuant to which Royal Gold must maintain a
restricted interest-bearing securities account at HSBC
Securities (USA) Inc., one of the underwriters, with a balance
equal to or in excess of the aggregate outstanding principal
amount of the loan of $19.25 million as of
December 31, 2008. The monies in this account are invested
in securities that have been approved by HSBC Securities (USA)
Inc.
This prospectus supplement and the accompanying prospectus in
electronic format may be made available on the websites
maintained by one or more of the underwriters. The
representatives may agree to allocate a number of shares to
underwriters for sale to their online brokerage account holders.
The representatives will allocate shares to underwriters that
may make Internet distributions on the same basis as other
allocations. In addition, shares may be sold by the underwriters
to securities dealers who resell shares to online brokerage
account holders.
SELLING
RESTRICTIONS
This offering is being made concurrently in the United States
and in all of the provinces of Canada, except Quebec (the
Canadian Jurisdictions), pursuant to the
multijurisdictional disclosure system implemented by the
securities regulatory authorities in the United States and
Canada (the MJDS Rule). The shares will be offered
in the United States and the Canadian Jurisdictions through the
underwriters, either directly or through their respective
U.S. or Canadian registered broker-dealer affiliates. As
described below, subject to applicable law, the underwriters may
offer the shares outside the United States and Canada.
European
Economic Area
Each of the underwriters has represented and agreed that, in
relation to each member state of the European Economic Area
which has implemented the Prospectus Directive (each a
Relevant Member State), it has not made and will not
make an offer to the public of any shares which are the subject
of the offering contemplated by this prospectus supplement (the
Securities) in that Relevant Member State, except
that it is permitted to have made and may make an offer to the
public in that Relevant Member State of any Securities under the
following exemptions under the Prospective Directive, if they
have been implemented in that Relevant Member State:
(a) to legal entities which are authorized or regulated to
operate in the financial markets or, if not so authorized or
regulated, whose corporate purpose is solely to invest in
securities;
S-38
(b) to any legal entity which has two or more of
(1) an average of at least 250 employees during the
last financial year, (2) a total balance sheet of more than
43,000,000 and (3) an annual net turnover of more
than 50,000,000, as shown in its last annual or
consolidated accounts;
(c) by the underwriters to fewer than 100 natural or legal
persons (other than qualified investors as defined in the
Prospectus Directive) subject to obtaining the prior consent of
HSBC Securities (USA) Inc. for any such offer; or
(d) in any other circumstances falling within
Article 3(2) of the Prospectus Directive, provided that no
such offer of Securities shall result in a requirement for the
publication by Royal Gold or any underwriter of a prospectus
pursuant to Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an
offer to the public in relation to any Securities in
any Relevant Member State means the communication in any form
and by any means of sufficient information on the terms of the
offer and any Securities to be offered so as to enable an
investor to decide to purchase any Securities, as the same may
be varied in that member state by any measure implementing the
Prospectus Directive in that member state, and the expression
Prospectus Directive means Directive 2003/71/EC and
includes any relevant implementing measure in each Relevant
Member State.
United
Kingdom
Each of the underwriters has further represented and agreed that:
(a) it has only communicated or caused to be communicated
and will only communicate or cause to be communicated an
invitation or inducement to engage in investment activity
(within the meaning of section 21 of Financial Services and
Markets Act 2000, as amended (FSMA)) received by it
in connection with the issue or sale of any shares which are the
subject of the offering contemplated by this prospectus
supplement in circumstances in which section 21(1) of FSMA
does not apply to Royal Gold; and
(b) it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in
relation to the shares in, from or otherwise involving the
United Kingdom.
France
Each of the underwriters has further represented and agreed that:
(a) no prospectus (including any amendment, supplement or
replacement thereto) has been prepared in connection with the
offering of the Securities that has been approved by the
Autorité des marchés financiers or by the
competent authority of another state that is a contracting party
to the Agreement on the European Economic Area and notified to
the Autorité des marchés financiers;
(b) no Securities have been offered or sold nor will be
offered or sold, directly or indirectly, to the public in France;
(c) the prospectus or any other offering material relating
to the Securities have not been distributed or caused to be
distributed and will not be distributed or caused to be
distributed to the public in France;
(d) such offers, sales and distributions have been and
shall only be made in France to persons licensed to provide the
investment service of portfolio management for the account of
third parties, qualified investors (investisseurs
qualifiés)
and/or a
restricted circle of investors (cercle restreint
dinvestisseurs), in each case investing for their own
account, all as defined in
Articles L. 411-2,
D. 411-1,
D. 411-2,
D. 411-4,
D. 734-1,
D. 744-1,
D. 754-1
and
D. 764-1
of the Code monétaire et financier; and
(e) the direct or indirect distribution to the public in
France of any so acquired Securities may be made only as
provided by
Articles L. 411-1,
L. 411-2,
L. 412-1
and
L. 621-8
to
L. 621-8-3
of the Code monétaire et financier and applicable
regulations thereunder.
S-39
Australia
This document has not been lodged with the Australian
Securities & Investments Commission and is only
directed to certain categories of exempt persons. Accordingly,
if you receive this document in Australia:
(a) You confirm and warrant that you are either:
(i) A sophisticated investor under
section 708(8)(a) or (b) of the Corporations Act 2001
(Cth) of Australia (Corporations Act);
(ii) A sophisticated investor under
section 708(8)(c) or (d) of the Corporations Act and
that you have provided an accountants certificate to the
company which complies with the requirements of section
708(8)(c)(i) or (ii) of the Corporations Act and related
regulations before the offer has been made;
(iii) A person associated with the company under
section 708(12) of the Corporations Act; or
(iv) A professional investor within the meaning
of section 708(11)(a) or (b) of the Corporations
Act, and
to the extent that you are unable to confirm or warrant that you
are an exempt sophisticated investor, associated person or
professional investor under the Corporations Act any offer made
to you under this document is void and incapable of acceptance.
(b) You warrant and agree that you will not offer any of
the shares issued to you pursuant to this document for resale in
Australia within 12 months of those shares being issued
unless any such resale offer is exempt from the requirement to
issue a disclosure document under section 708 of the
Corporations Act.
Brazil
For purposes of Brazilian law, this offer of the shares is
addressed to you personally, upon your request and for your sole
benefit, and is not to be transmitted to anyone else, to be
relied upon by anyone else or for any other purpose either
quoted or referred to in any other public or private document or
to be filed with anyone without our prior, express and written
consent.
China
The shares may not be offered or sold directly or indirectly to
the public in the Peoples Republic of China
(China) and neither this document, which has not
been submitted to the Chinese Securities and Regulatory
Commission, nor any other offering material or information
contained herein relating to the shares may be supplied to the
public in China or used in connection with any offer for the
subscription or sale of shares to the public in China. The
shares may only be offered or sold to China-related
organizations that are authorized to engage in foreign exchange
business and offshore investment from outside of China. Such
China-related investors may be subject to foreign exchange
control approval and filings requirements under the relevant
Chinese foreign exchange regulations.
Germany
The shares have not been and will not be registered or
authorized for distribution in Germany under the German
Investment Act (Investmentgesetz) and accordingly, the
shares, this document and any related material may not be, and
are not being, distributed in Germany by way of a public offer,
public advertising or in any similar manner under the German
Investment Act. Therefore, an offer to purchase any shares is
only being made to recipients to whom this document is
personally addressed and may only be made in accordance with the
German Investment Act and all other applicable laws in Germany
governing the issue, offering and sale of the shares.
S-40
Hong
Kong
The shares have not been offered or sold and will not be offered
or sold in Hong Kong, by means of any document, other than
(a) to professional investors as defined in the
Securities and Futures Ordinance (Cap. 571) of Hong Kong
and any rules made under that Ordinance; or (b) in other
circumstances which do not result in the document being a
prospectus as defined in the Companies Ordinance
(Cap. 32) of Hong Kong or which do not constitute an offer
to the public within the meaning of that Ordinance. No
advertisement, invitation or document, whether in Hong Kong or
elsewhere, which is directed at, or the contents of which are
likely to be accessed or read by, the public of Hong Kong
(except if permitted to do so under the securities laws of Hong
Kong) has been issued or will be issued in Hong Kong or
elsewhere other than with respect to the shares which are or are
intended to be disposed of only to persons outside Hong Kong or
only to professional investors within the meaning of
the Securities and Futures Ordinance (Cap. 571) of Hong
Kong and any rules made under that Ordinance.
WARNING: The contents of this document have not been reviewed by
any regulatory authority in Hong Kong. You are advised to
exercise caution in relation to the offer. If you are in any
doubt about any of the contents of this document, you should
obtain independent professional advice.
Netherlands
The shares may not, directly or indirectly, be offered or
acquired in the Netherlands and this document may not be
circulated in the Netherlands, as part of an initial
distribution or any time thereafter, other than to individuals
or (legal) entities who or which qualify as qualified investors
within the meaning of Article 1:1 of the Financial
Supervision Act (Wet op het financieel toezicht) as
amended from time to time.
Qatar
The offering of shares does not constitute a public offer in the
State of Qatar under Law No. 5 of 2002 (the
Commercial Companies Law). The shares are only being
offered to a limited number of investors who are willing and
able to conduct an independent investigation of the risks
involved in an investment in such shares, or have sufficient
knowledge of the risks involved in an investment in such shares
or are benefiting from preferential terms under a directed share
program for directors, officers and employees. No transaction
will be concluded in the jurisdiction of the State of Qatar.
Singapore
The offer or invitation which is the subject of this document is
only allowed to be made to the persons set out herein. Moreover,
this document is not a prospectus as defined in the Securities
and Futures Act, Chapter 289 Singapore (the
SFA) and accordingly, statutory liability under the
SFA in relation to the content of the document will not apply.
As this document has not been and will not be lodged with or
registered as a document by the Monetary Authority of Singapore,
this document and any other document or material in connection
with the offer or sale, or invitation for subscription or
purchase, of the shares may not be circulated or distributed,
nor may the shares be offered or sold, or be made the subject of
an invitation for subscription or purchase, whether directly or
indirectly, to persons in Singapore other than: (i) to an
institutional investor under Section 274 of the SFA;
(ii) to a relevant person, or any person pursuant to
Section 275(1A) of the SFA, and in accordance with the
conditions, specified in Section 275 of the SFA; or
(iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under
Section 275 of the SFA by a relevant person who is:
(a) a corporation (which is not an accredited investor) the
sole business of which is to hold investments and the entire
share capital of which is owned by one or more individuals, each
of whom is an accredited investor; or
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(b) a trust (where the trustee is not an accredited
investor) whose sole purpose is to hold investments and each
beneficiary is an accredited investor, shares, debentures and
units of shares and debentures of that corporation or the
beneficiaries rights and interest in that trust shall not
be transferable for six months after that corporation or that
trust has acquired the shares under Section 275 of the SFA
except:
(i) to an institutional investor under Section 274 of
the SFA or to a relevant person defined in Section 275(2)
of the SFA, or to any person pursuant to an offer that is made
on terms that such shares, debentures and units of shares and
debentures of that corporation or such rights and interest in
that trust are acquired at a consideration of not less than
S$200,000 (or its equivalent foreign currency) for each
transaction, whether such amount is to be paid for in cash or by
exchange of securities or other assets;
(ii) where no consideration is given for the transfer; or
(iii) by operation of law.
By accepting this document, the recipient hereof represents and
warrants that he is entitled to receive such report in
accordance with the restrictions set forth above and agrees to
be bound by the limitations contained herein. Any failure to
comply with these limitations may constitute a violation of law.
Spain
The shares have not been registered with the Spanish National
Commission for the Securities Market and, therefore, no share
may be publicly offered, sold or delivered, nor any public offer
in respect of the shares made, nor may any prospectus or any
other offering or publicity material relating to the shares be
distributed in Spain by the international agents of any person
acting on their behalf, except in compliance with Spanish laws
and regulations.
South
Africa
This document is strictly private and confidential and does not
constitute an offer to the public in terms of South African law.
The document is being issued to a limited number of
sophisticated investors, may not be reproduced or used for any
other purpose, nor provided to any person other than the
original recipient thereof, and is subject to restrictions on
transferability.
United
Arab Emirates
This document has not been reviewed, approved or licensed by the
Central Bank of the United Arab Emirates (the UAE),
Emirates Securities and Commodities Authority or any other
relevant licensing authority in the UAE including any licensing
authority incorporated under the laws and regulations of any of
the free zones established and operating in the territory of the
UAE, in particular the Dubai International Financial Services
Authority (the DFSA), a regulatory authority of the
Dubai International Financial Centre (the DIFC). The
issue of the shares does not constitute a public offer of
securities in the UAE, DIFC
and/or any
other free zone in accordance with the Commercial Companies Law,
Federal Law No. 8 of 1984 (as amended), DFSA Offered
Securities Rules and the Dubai International Financial Exchange
Listing Rules, accordingly, or otherwise.
The shares may not be offered to the public in the UAE
and/or any
of the free zones including, in particular, the DIFC. The shares
may be offered, and this document may be issued, only to a
limited number of investors in the UAE or any of its free zones
(including, in particular, the DIFC) who qualify as
sophisticated investors under the relevant laws and regulations
of the UAE or the free zone concerned. Management of the
company, and the underwriters represent and warrant that the
shares will not be offered, sold, transferred or delivered to
the public in the UAE or any of its free zones including, in
particular, the DIFC.
S-42
MATERIAL
UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS FOR
NON-U.S.
HOLDERS
The following is a summary of the material United States federal
income tax consequences to
non-U.S. holders
(defined below) of the ownership and disposition of the shares
of common stock purchased in the offering.
As used herein,
non-U.S. holders
are beneficial owners of the shares of our common stock
purchased in the offering, other than partnerships, that are not
U.S. holders. U.S. holders are beneficial
owners of the shares of our common stock purchased in the
offering that are, for United States federal income tax
purposes, (1) individual citizens or residents of the
United States, (2) corporations created or organized in, or
under the laws of, the United States, any state thereof or the
District of Columbia, (3) estates, the income of which is
subject to United States federal income taxation regardless of
its source, or (4) trusts if (A) a court within the
United States is able to exercise primary supervision over the
administration of the trust and (B) one or more United
States persons have the authority to control all substantial
decisions of the trust. In addition, certain trusts in existence
on August 20, 1996 and treated as United States persons
prior to such date may also be treated as U.S. holders.
If a partnership (including for this purpose any entity treated
as a partnership for United States federal income tax purposes)
is a beneficial owner of the shares of our common stock
purchased in the offering, the treatment of a partner in the
partnership will generally depend upon the status of the partner
and upon the activities of the partnership. Partnerships and
partners in such partnerships should consult their tax advisors
about the United States federal income tax consequences of
owning and disposing of our common stock.
This summary does not describe all of the tax consequences that
may be relevant to a holder in light of its particular
circumstances. For example, it does not deal with special
classes of holders, such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance
companies, dealers in securities or currencies or tax-exempt
investors. It also does not discuss the shares of our common
stock purchased in the offering held as part of a hedge,
straddle, conversion, synthetic security or other
integrated transaction. This summary also does not address the
tax consequences to (i) persons that have a functional
currency other than the U.S. dollar, (ii) certain
U.S. expatriates or (iii) stockholders or
beneficiaries of a holder of such shares of common stock.
Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable
to such shares of common stock. This summary is based on the
Internal Revenue Code of 1986, as amended (the
Code), and the Treasury regulations promulgated
thereunder, and administrative and judicial decisions, all as in
effect on the date hereof, all of which are subject to change or
differing interpretations, possibly on a retroactive basis.
There can be no assurance that the Internal Revenue Service will
not challenge one or more of the tax consequences described
herein, and we have not obtained, nor do we intend to obtain, a
ruling from the Internal Revenue Service with respect to the
United States federal income tax consequences of the ownership
and disposition of such shares of common stock.
YOU SHOULD CONSULT WITH YOUR TAX ADVISOR REGARDING THE FEDERAL,
STATE, LOCAL AND FOREIGN INCOME, FRANCHISE, PERSONAL PROPERTY,
ESTATE, GIFT, TRANSFER AND ANY OTHER TAX CONSEQUENCES (INCLUDING
ANY ASSOCIATED REPORTING REQUIREMENTS) OF THE ACQUISITION,
OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK, INCLUDING THE
EFFECT OF ANY TREATIES ON THE FOREGOING OR OTHERWISE.
Our
Common Stock
The rules governing United States federal income taxation of the
acquisition, ownership and disposition, by a
non-U.S. holder
of our common stock are complex and no attempt is made herein to
provide more than a summary of such rules.
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Dividends
If distributions are paid on shares of our common stock, the
distributions will constitute dividends for U.S. federal
income tax purposes to the extent paid from our current or
accumulated earnings and profits, as determined under
U.S. federal income tax principles. To the extent a
distribution exceeds our current or accumulated earnings and
profits, it will constitute a return of capital that is applied
against and reduces, but not below zero, the adjusted tax basis
of your shares in our common stock. Any remainder will
constitute gain on the common stock, the treatment of which is
described below under Sale or Exchange of
Common Stock. Dividends paid to a
non-U.S. holder
generally will be subject to withholding of U.S. federal
income tax at the rate of 30% or such lower rate as may be
specified by an applicable income tax treaty, the benefits of
which may be available to a
non-U.S. holder.
If the dividend is effectively connected with the
non-U.S. holders
conduct of a trade or business in the United States, and, if an
applicable tax treaty requires, is also attributable to a
U.S. permanent establishment maintained by such
non-U.S. holder,
the dividend will not be subject to any withholding tax,
provided certain certification requirements are satisfied (as
described below), but will be subject to U.S. federal
income tax imposed on net income on the same basis that applies
to U.S. persons generally. A corporate
non-U.S. holder
under certain circumstances also may be subject to an additional
branch profits tax equal to 30%, or such lower rate as may be
specified by an applicable income tax treaty, the benefits of
which may be available to a
non-U.S. holder,
on a portion of its effectively connected earnings and profits
for the taxable year.
Non-U.S. holders
should consult their own tax advisors regarding the potential
applicability of any income tax treaty in their particular
circumstances.
To claim the benefit of a tax treaty or to claim exemption from
withholding because the income is effectively connected with the
conduct of a trade or business in the United States, a
non-U.S. holder
must provide a properly executed Internal Revenue Service
Form W-8BEN
for treaty benefits or
Form W-8ECI
for effectively connected income, or such successor forms as the
Internal Revenue Service designates, prior to the payment of
dividends. These forms must be periodically updated.
Non-U.S. holders
generally may obtain a refund of any excess amounts withheld by
timely filing an appropriate claim for refund.
Sale
or Exchange of Common Stock
A
non-U.S. holder
generally will not be subject to United States federal income
tax and, in certain cases, withholding tax on the sale, exchange
or other disposition of our common stock received in the
offering unless (1) the gain is effectively connected with
a United States trade or business of the
non-U.S. holder
and, if an applicable tax treaty requires, is also attributable
to a U.S. permanent establishment maintained by such
non-U.S. holder,
(2) in the case of a
non-U.S. holder
who is an individual, such holder is present in the United
States for a period or periods aggregating 183 days or more
during the taxable year of the disposition, and either
(A) such holder has a tax home in the United
States or (B) income from such disposition is attributable
to an office or other fixed place of business maintained by such
holder in the United States, or (3) Royal Gold is or has
been a U.S. real property holding corporation,
or USRPHC, as defined for United States federal
income tax purposes. Generally, a U.S. corporation is a
USRPHC if at least 50% of the value of the real property and
certain other assets consists of U.S. real property
interests. Because of our ownership of substantial royalty
interests in gold assets in the United States, it is possible
that we are, or may become, a USRPHC. Notwithstanding the
foregoing, so long as our common stock is regularly traded on an
established securities market, under applicable Treasury
regulations,
non-U.S. holders
who have never beneficially owned more than 5% of our common
stock generally will not be subject to U.S. federal income
tax on any gain realized on the sale, exchange or redemption of
common stock solely because we are or have been a USRPHC.
If a
non-U.S. holder
falls under clause (1) or (3) above, such holder
generally will be taxed on the net gain derived from a sale in
the same manner as a U.S. holder (see above) and, in the
case of (3) above, generally will be subject to a 10%
withholding tax applied to the gross proceeds received. Any
amount withheld as discussed above may be applied as a credit
against the
non-U.S. holders
substantive United States federal income tax liability. If an
individual-non-U.S. holder falls under clause (2)
above, such individual
S-44
generally will be subject to a flat 30% tax on the gain derived
from a sale, which may be offset by certain United States
capital losses (notwithstanding the fact that such individual is
not considered a resident of the United States). Individual
non-U.S. holders
who have spent (or expect to spend) 183 days or more in the
United States in the taxable year in which they contemplate a
sale of common stock are urged to consult their tax advisors as
to the tax consequences of such sale. In addition, if a
corporate
non-U.S. holder
falls under clause (1) above, it may be subject to an
additional branch profits tax on such effectively connected
income at a 30% rate (or such lower rate as may be specified by
an applicable income tax treaty).
Non-U.S. holders
should consult their own tax advisors regarding the potential
applicability of any income tax treaty in their particular
circumstances.
Information
Reporting and Backup Withholding Tax
Information reporting and backup withholding (currently at a 28%
rate) may apply to dividends paid with respect to our common
stock and to proceeds from the sale or other disposition of our
common stock. In certain circumstances,
non-U.S. holders
may avoid information reporting and backup withholding if they
certify under penalties of perjury as to their status as
non-U.S. holders
or otherwise establish an exemption and certain other
requirements are met.
Non-U.S. holders
should consult their own tax advisors regarding the application
of the information reporting and backup withholding rules to
them.
Backup withholding is not an additional tax. Amounts withheld
under the backup withholding rules from a payment to a
non-U.S. holder
generally may be refunded or credited against the
non-U.S. holders
U.S. federal income tax liability, if any, provided that an
appropriate claim is timely filed with the Internal Revenue
Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE
IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE
APPLICABLE DEPENDING UPON A HOLDERS PARTICULAR SITUATION.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO ALL
TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF OUR
COMMON STOCK, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS, AND THE POSSIBLE EFFECTS OF ANY
CHANGES THEREIN.
S-45
LEGAL
MATTERS
The validity of the common stock being offered hereby is being
passed upon for us by Hogan & Hartson L.L.P., Denver,
Colorado. Cleary Gottlieb Steen & Hamilton LLP, New
York, New York, will pass upon certain legal matters for the
underwriters.
EXPERTS
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting (which is included in Managements
Report on Internal Control over Financial Reporting)
incorporated in this prospectus supplement by reference to the
Annual Report on
Form 10-K/A
(filed on November 6, 2008) for the year ended
June 30, 2008 have been so incorporated in reliance on the
report (which contains an explanatory paragraph relating to the
Companys restatement of its consolidated financial
statements as described in Note 20A to the financial
statements and also contains an adverse opinion on the
effectiveness of internal control over financial reporting) of
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
S-46
WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the SEC a shelf registration
statement on
Form S-3
relating to the securities that are offered by this prospectus
supplement. This prospectus supplement together with the related
prospectus do not contain all of the information contained in
the registration statement and the exhibits to the registration
statement. We strongly encourage you to read carefully the
registration statement and the exhibits to the registration
statement.
Any statement made in this prospectus supplement or the related
prospectus concerning the contents of any contract, agreement or
other document is only a summary of the actual contract,
agreement or other document. If we have filed any contract,
agreement or other document as an exhibit to the registration
statement, then you should read the exhibit for a more complete
understanding of the document or matter involved.
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy the
registration statement and any other document we file at the
following SEC public reference room:
Judiciary
Plaza
100 F Street, NE, Room 1580,
Washington D.C. 20549
You may obtain information on the operation of the public
reference room in Washington, D.C. by calling the SEC at
1-800-SEC-0330.
We file information electronically with the SEC. Our SEC filings
are available from the SECs Internet site at
http://www.sec.gov,
which contains reports, proxy and information statements and
other information regarding issuers that file electronically.
You may read and copy our SEC filings and other information at
the NASDAQ Global Select Market at 1735 K Street, NW,
Washington, D.C. 20006.
INCORPORATION
OF DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the
documents we file with the SEC, which means that we can disclose
important information to you by referring you to those
documents. The information incorporated by reference is
considered to be part of this prospectus supplement, and
information in documents that we file later with the SEC will
automatically update and supersede information in this
prospectus supplement and the related prospectus. We incorporate
by reference the documents listed below and any future filings
we will make with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act, other than any portions of the
respective filings that were furnished, rather than filed,
pursuant to Item 2.02 or Item 7.01 of Current Reports
on
Form 8-K
(including exhibits related thereto) or other applicable SEC
rules, until the offering of our securities under this
registration statement is completed or withdrawn:
1. our Annual Report on
Form 10-K/A
filed on November 6, 2008;
2. our Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2008, filed
November 10, 2008 and for the quarter ended
December 31, 2008, filed February 6, 2009;
3. our Current Reports on
Form 8-K
as filed August 5, 2008, September 2, 2008,
September 17, 2008, September 19, 2008,
September 25, 2008, October 7, 2008, October 31,
2008, November 4, 2008, November 6, 2008,
November 7, 2008, January 5, 2009, February 24,
2009, March 4, 2009, March 27, 2009, and April 6,
2009; and
4. our definitive Proxy Statement in connection with our
2008 Annual Meeting of Stockholders filed on September 23,
2008.
We will provide a copy of the documents we incorporate by
reference, at no cost, to any person who receives this
prospectus supplement. To request a copy of any or all of these
documents, you should write or telephone us at: Investor
Relations, Royal Gold, Inc., 1660 Wynkoop Street,
Suite 1000, Denver, CO 80202,
(303) 573-1660.
S-47
PROSPECTUS
Debt Securities
Preferred Stock
Common Stock
Warrants
Depositary Shares
Royal Gold, Inc. may, in one or more offerings, offer and sell
from time to time:
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debt securities consisting of senior or subordinated notes and
debentures and which may include terms by which they may be
converted or exchanged for common stock, preferred stock or
other securities;
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shares of common stock, par value $0.01 per share;
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shares of preferred stock, par value $0.01, in one or more
series, which may include terms by which they may be converted
into or exchanged for debt securities or common stock;
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warrants to purchase debt securities, preferred stock, common
stock or other securities; or
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depositary shares.
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In addition, this prospectus may be used by selling
securityholders to offer these securities. This prospectus
describes only the general terms of these securities and the
general manner in which we will offer the securities. We, or the
selling securityholders, will provide you with the specific
terms of the particular securities being offered in supplements
to this prospectus. Any prospectus supplement may also add,
update, or change information contained in this prospectus. You
should read this prospectus and each related prospectus
supplement carefully before you make an investment decision.
This prospectus may not be used to sell securities unless
accompanied by a prospectus supplement.
The securities may be offered and sold by us or the selling
securityholders through one or more underwriters, dealers or
agents or directly to purchasers on a continuous or delayed
basis. See Plan of Distribution beginning on page 24
of this prospectus.
Royal Golds common stock is traded on the NASDAQ Global
Select Market under the symbol RGLD and on the
Toronto Stock Exchange under the symbol RGL. The
mailing address of our principal executive offices is 1660
Wynkoop Street, Suite 1000, Denver, Colorado 80202 and our
telephone number is
(303) 573-1660.
Investing in our securities involves risks. See Risk
Factors beginning on page 5 of this prospectus and in
documents Royal Gold files with the Securities and Exchange
Commission that are incorporated in this prospectus by reference
for certain risks and uncertainties relating to an investment in
our securities.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
This prospectus is dated December 19, 2008.
TABLE OF
CONTENTS
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ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement that we have
filed with the Securities and Exchange Commission, or SEC,
utilizing a shelf registration process. Under this
shelf process, we may sell different types of securities
described in this prospectus in one or more offerings. This
prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will
provide a prospectus supplement that will contain specific
information about the terms of that offering and the securities
offered by us in that offering. The prospectus supplement may
also add, update or change information in this prospectus. You
should read both this prospectus and any prospectus supplement
together with additional information described under the
headings Where You Can Find More Information and
Incorporation by Reference.
This prospectus contains summaries of certain provisions
contained in some of the documents described herein, but
reference is made to the actual documents for complete
information. All of the summaries are qualified in their
entirety by reference to the actual documents. Copies of some of
the documents referred to herein have been filed or will be
filed or incorporated by reference as exhibits to the
registration statement of which this prospectus is a part, and
you may obtain copies of those documents as described below in
the section entitled Where You Can Find More
Information.
Unless we otherwise indicate or unless the context requires, all
references in this prospectus to:
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Royal Gold, the Company, we,
us and our refer to Royal Gold, Inc.,
except where the context otherwise requires or as otherwise
indicated in this prospectus;
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common stock means our common stock, par value $0.01
per share; and
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securities means the debt securities, common stock,
preferred stock, warrants and depositary shares described in
this prospectus.
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The information contained in this prospectus is not complete and
may be changed. You should rely only on the information provided
in or incorporated by reference in this prospectus, any
prospectus supplement, or documents to which we otherwise refer
you. We have not authorized anyone else to provide you with
different information. We are not making an offer of any
securities in any jurisdiction where the offer is not permitted.
You should not assume that the information in this prospectus,
any prospectus supplement or any document incorporated by
reference is accurate as of any date other than the date of the
document in which such information is contained or such other
date referred to in such document, regardless of the time of any
sale or issuance of a security.
WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the SEC a shelf registration
statement on
Form S-3
relating to the securities that may be offered by this
prospectus. This prospectus is part of the registration
statement and does not contain all the information in the
registration statement. You will find additional information
about us in the registration statement. In addition, we file
annual, quarterly and current reports, proxy statements and
other information with the SEC. You may inspect without charge
any documents filed by us at the SECs Public Reference
Room at 100 F Street, N.E., Washington, D.C.
20549. You may obtain copies of all or any part of these
materials from the SEC upon the payment of certain fees
prescribed by the SEC. Please call the SEC at
1-800-732-0330
for further information on the Public Reference Room. The SEC
also maintains an Internet site that contains reports, proxy and
information statements and other information regarding issuers
that file electronically with the SEC. Our filings with the SEC
are available to the public through the SECs website at
http://www.sec.gov
and through our website at
http://www.royalgold.com.
You may also read and copy our SEC filings and other information
at the offices of the NASDAQ Global Select Market,
1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference
information into this document. This means that we can disclose
important information to you by referring you to another
document filed separately with the SEC. The information
incorporated by reference is considered to be part of this
prospectus, and information that we file later
1
with the SEC will automatically update and supersede the
previously filed information and the information contained in
this prospectus. We incorporate by reference the documents
listed below and any future filings made by us with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act of 1934, as amended (the Exchange Act),
other than any portions of the respective filings that were
furnished, rather than filed, pursuant to Item 2.02 or
Item 7.01 of Current Reports on
Form 8-K
(including exhibits related thereto) or other applicable SEC
rules, prior to the termination or completion of the offerings
under this prospectus:
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The Registrants Annual Report on
Form 10-K/A
filed on November 6, 2008;
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The Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2008, filed
November 10, 2008;
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The Registrants Current Reports on
Form 8-K
as filed August 5, 2008, September 2, 2008,
September 17, 2008, September 19, 2008,
September 25, 2008, October 7, 2008, October 31,
2008, November 4, 2008, November 6, 2008 and
November 7, 2008;
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The description of the Registrants Preferred Stock
Purchase Rights contained in the Registrants Registration
Statement on
Form 8-A
under the Exchanged Act filed on September 12, 1997, as
amended by the Registrants Registration Statement on
Form 8-A/A
filed September 10, 2007, together with any amendment or
report filed with the Commission for the purpose of updating
such description.
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We make available free of charge through our Internet website at
http://www.royalgold.com
our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendment to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the SEC. Information contained
on our Internet website is not a part of this prospectus or any
prospectus supplement. We will provide a copy of the documents
we incorporate by reference, at no cost, to any person who
receives this prospectus. You may request a copy of these
filings by writing or telephoning us at:
Royal Gold, Inc.
1660 Wynkoop Street, Suite 1000
Denver, CO 80202
Attn: Stockholder Relations
Telephone:
(303) 573-1660
SPECIAL
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This prospectus, any prospectus supplement and the documents
incorporated herein by reference contain or will contain certain
references to future expectations, projections of production,
reserve estimates and other forward-looking statements and
information relating to us or to properties operated by others
that are based on our beliefs and assumptions or those of
management of the companies who operate properties on which we
have royalties, as well as information currently available to
management. Additional written or oral forward-looking
statements may be made by the Company from time to time in
filings with the SEC or otherwise. 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. Forward-looking statements
inherently involve risks and uncertainties. Accordingly, 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:
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changes in gold and other metals prices;
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the production at or performance of our producing royalty
properties;
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decisions and activities of the operators of our royalty
properties;
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2
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the ability of operators to bring projects into production and
operate in accordance with feasibility studies;
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unanticipated grade and geological, metallurgical, processing or
other problems at the properties;
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changes in project parameters as plans of the operators are
refined;
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changes in estimates of reserves and mineralization by the
operators of our royalty properties;
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economic and market conditions;
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future financial needs;
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federal, state and foreign legislation governing us or the
operators;
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the availability of royalties for acquisition or other
acquisition opportunities and the availability of debt or equity
financing necessary to complete such acquisitions;
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our ability to make accurate assumptions regarding the valuation
and timing and amount of royalty payments when making
acquisitions;
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risks associated with conducting business in foreign countries,
including application of foreign laws to contract and other
disputes, environmental laws and enforcement and uncertain
political and economic environments;
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liquidity or other problems our operators may encounter, such as
those that recently occurred at High River Gold Mines Ltd.
(High River) with respect to the Taparko project;
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risks associated with issuances of substantial additional common
stock in connection with acquisitions or otherwise; and
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risks associated with the incurrence of substantial additional
indebtedness if we take such actions in connection with
acquisitions or otherwise;
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as well as other factors described elsewhere in our Annual
Report on
Form 10-K/A
(filed on November 6, 2008) for the fiscal year ended
June 30, 2008, our Quarterly Report on
Form 10-Q
for the period ended September 30, 2008 and in future
filings we make 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 statement made herein. Readers are cautioned not
to put undue reliance on forward-looking statements.
3
THE
COMPANY
We, together with our subsidiaries, are engaged in the business
of acquiring and managing precious metals royalties. Royalties
are passive (non-operating) interests in mining projects that
provide the right to revenue or production from the project
after deducting specified costs, if any.
We seek to acquire existing royalties or to finance projects
that are in production or near production in exchange for
royalty interests. We also fund exploration on properties
thought to contain precious metals and seek to obtain royalties
and other carried ownership interests in such properties through
the subsequent transfer of operating interests to other mining
companies. Substantially all of our revenues are and will be
expected to be derived from royalty interests. We do not conduct
mining operations at this time. We focused on the management of
our existing royalty interests, the acquisition of royalty
interests through asset and corporate transactions, and the
creation of royalty interests through financing and strategic
exploration alliances.
Our principal producing royalty interests are as follows:
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four royalty interests at the Cortez Pipeline Mining Complex
(Cortez) located in Nevada and operated by the
Cortez Joint Venture, a joint venture between Barrick Cortez
Inc. and Barrick Gold Finance Inc., both affiliates of Barrick
Gold Corporation (Barrick);
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one royalty interest on the Robinson mine, located in eastern
Nevada and operated by a subsidiary of Quadra Mining Ltd.;
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one royalty interest on the Leeville Mining Complex, located in
Nevada and operated by a subsidiary of Newmont Mining
Corporation;
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one royalty interest on the SJ Claims, covering portions of the
Betze-Post mine located in Nevada and operated by a subsidiary
of Barrick;
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one royalty on the Peñasquito mine located in Zacatecas,
Mexico and operated by a subsidiary of Goldcorp;
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one royalty interest on the Mulatos mine, located in Sonora,
Mexico and operated by a subsidiary of Alamos Gold, Inc.;
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two royalty interests on the Taparko mine, located in Burkina
Faso and operated by a subsidiary of High River;
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one royalty interest on the Siguiri mine located in the Republic
of Guinea and operated by Anglogold Ashanti;
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two royalty interests on the Dolores mine located in Chihuahua,
Mexico and operated by a subsidiary of Minefinders Corporation,
Ltd.;
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one royalty interest on the Mt. Goode Cosmos South mine located
in Western Australia and operated by Xtrata.
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We were incorporated under the laws of the State of Delaware on
January 5, 1981. Our executive offices are located at 1660
Wynkoop Street, Suite 1000, Denver, Colorado 80202, and our
telephone number is
(303) 573-1660.
We maintain a website at
http://www.royalgold.com
where general information about us is available, although we are
not incorporating the contents of our website into this
prospectus.
4
RISK
FACTORS
Our business, financial condition, results of operations and
cash flows could be materially adversely affected by any of the
following risks. The market or trading price of our securities
could decline due to any of these risks. In addition, please
read Special Note About Forward-Looking Statements
in this prospectus, where we describe additional uncertainties
associated with our business and the forward-looking statements
included or incorporated by reference in this prospectus. Please
note that additional risks not presently known to us or that we
currently deem immaterial may also impair our business and
operations. Additional risks, including those that relate to any
particular securities that we offer, will be included in the
applicable prospectus supplement.
Risks
Related to Our Business
We
received a majority of our revenues in fiscal year 2008 from two
properties and maturing mines are likely to experience
production declines.
In fiscal year 2008, approximately 33% and 24% of our revenues
were derived from our royalties at Cortez and the Robinson mine,
respectively, compared to approximately 44% and 26% in fiscal
year 2007, respectively. We expect that revenue from our
royalties at Cortez and Robinson will continue to be a
significant, though less dominant, contributor to our revenue in
future periods. Furthermore, as Cortez and other mines on which
we have royalties mature we can expect overall declines in
production over the years unless operators are able to replace
reserves that are mined by mine expansion or successful new
exploration. There can be no assurance that the operators of
Cortez or the other properties will be able to maintain or
increase production or replace reserves as they are mined.
We own
passive interests in mining properties, and it is difficult or
impossible for us to ensure properties are operated in our best
interest.
All of our current revenue is derived from royalties on
properties operated by third parties. The holder of a royalty
interest typically has no authority regarding development or
operation of a mineral property. Therefore, we are not in
control of basic decisions regarding development or operation of
any of the properties in which we hold a royalty interest, and
we have limited or no legal rights to influence those decisions.
Our strategy of having others operate properties in which we
retain a royalty or other passive interest puts us generally at
risk to the decisions of others regarding all basic operating
matters, including permitting, feasibility analysis, mine design
and operation, processing, plant and equipment matters and
temporary or permanent suspension of operations, among others.
These decisions may be motivated by the best interests of the
operator rather than to maximize royalties. Although we attempt
to secure contractual rights that will permit us to protect our
interests, there can be no assurance that such rights will
always be available or sufficient, or that our efforts will be
successful in achieving timely or favorable results or in
affecting the operations of the properties in which we have
royalty interests in ways that would be beneficial to our
stockholders.
Volatility
in gold, copper and other metal prices may have an adverse
impact on the value of our royalty interests and reduce our
royalty revenues.
The profitability of our royalty interests is directly related
to the market price of gold and, to a lesser degree, copper and
other metal prices. The market price of each metal fluctuates
widely and is affected by numerous factors beyond the control of
any mining company. These factors include metal supply,
industrial and jewelry fabrication and investment demand,
expectations with respect to the rate of inflation, the relative
strength of the U.S. dollar and other currencies, interest
rates, gold sales and loans by central banks, forward sales by
metal producers, global or regional political, economic or
banking crises, and a number of other factors. If the market
price of gold, copper or certain other metals should drop, our
royalty revenues would also drop. Our sliding-scale royalties at
Cortez, Taparko and other properties amplifies this. When the
gold price falls below the steps in a sliding-scale royalty, we
receive a lower royalty rate on production. In addition, if
gold, copper and certain other metal prices drop dramatically,
we might not be able to recover our initial investment in
royalty interests or properties. The selection of a royalty
investment or of a property for exploration or development, the
determination to construct a mine and place it into production,
and the dedication of funds necessary to achieve such purposes
are decisions that must be
5
made long before the first revenues from production will be
received. Price fluctuations between the time that decisions
about exploration, development and construction are made and the
commencement of production can have a material adverse effect on
the economics of a mine, and can eliminate or have a material
adverse impact on the value of royalty interests.
The volatility in gold prices is illustrated by the following
table, which sets forth, for the periods indicated (calendar
year), the high and low prices in U.S. dollars per ounce of
gold, based on the London Bullion Market Association P.M. fix.
Gold
Price Per Ounce ($)
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Year
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High
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Low
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1999
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326
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253
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2000
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312
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263
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2001
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293
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256
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2002
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349
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278
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2003
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416
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320
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2004
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454
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375
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2005
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537
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411
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2006
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725
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525
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2007
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841
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608
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2008 (through December 11, 2008)
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1,011
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713
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The volatility in silver prices is illustrated by the following
table which sets forth, for the periods indicated (calendar
year), the high and low prices in U.S. dollars per ounce of
silver, based on the London Bullion Market Association P.M. fix.
Silver
Price Per Ounce ($)
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Year
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High
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Low
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1999
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5.75
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4.88
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2000
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5.45
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4.57
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2001
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4.82
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4.07
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2002
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5.10
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4.24
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2003
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5.97
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4.37
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2004
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8.29
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5.50
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2005
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9.23
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6.39
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2006
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14.94
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8.83
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2007
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15.82
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11.67
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2008 (through December 11, 2008)
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20.92
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8.88
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The volatility in copper prices is illustrated by the following
table, which sets forth, for the periods indicated (calendar
year), the high and low prices in U.S. dollars per pound of
copper, based on the London Metal Exchange cash settlement price
for copper Grade A.
Copper
Price Per Pound ($)
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Year
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High
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Low
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1999
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0.80
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0.63
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2000
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0.89
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0.76
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2001
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0.81
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0.62
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2002
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0.75
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0.67
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2003
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1.00
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0.72
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2004
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1.43
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1.10
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2005
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2.08
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1.44
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2006
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3.65
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2.15
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2007
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3.77
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2.37
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2008 (through December 11, 2008)
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4.08
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1.38
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We
depend on the services of our President and Chief Executive
Officer, our Executive Chairman and other key
employees.
We believe that our success depends on the continued service of
our key executive management personnel. Currently, Tony Jensen
is serving as President and Chief Executive Officer and Stanley
Dempsey is serving as our Executive Chairman.
Mr. Jensens extensive commercial experience, mine
operations background and industry contacts give us an important
competitive advantage. Mr. Dempseys knowledge of the
royalty business and long- term standing relationship with the
mining industry are important to the Companys success.
Loss of the services of Mr. Jensen, Mr. Dempsey or
other key employees could jeopardize our ability to maintain our
competitive position in the industry. We currently do not have
key person life insurance for any of our officers or directors.
Our
revenues are subject to operational and other risks faced by
operators of our mining properties.
Although we are not required to pay capital costs or most
operating costs, our financial results are subject to hazards
and risks normally associated with developing and operating
mining properties, both for the properties where we may conduct
exploration or indirectly for properties operated by others
where we hold royalty interests. These risks include:
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insufficient ore reserves;
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fluctuations in production costs by the operators or third
parties that may make mining of ore uneconomical or impact the
amount of reserves;
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declines in the price of gold and other metal prices;
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economic downturns and operators insufficient financing;
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significant environmental and other regulatory restrictions;
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labor disputes;
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geological problems;
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pit wall or tailings dam failures;
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natural catastrophes such as floods or earthquakes; and
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the risk of injury to persons, property or the environment.
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7
Operating cost increases can have a negative effect on the value
of and income from our royalty interests, by potentially causing
an operator to curtail, delay or close operations at a mine site.
In addition, the mining operators calculation of our
royalty payments is subject to and dependent upon the adequacy
of their production and accounting functions, and errors may
occur from time to time in the calculations of the operator. For
example, the complex nature of mining and ownership of mining
interests can result in errors regarding allocation of
production, such as those that occurred in connection with our
restatement of our consolidated financial statements for fiscal
year 2008. We are provided with production information by the
mining operator in certain royalty contracts that may enable us
to detect errors in the royalty payments that we receive from
certain royalty interests given our royalty monitoring program
and its associated internal controls and procedures. We do not,
however, receive production information for all royalty
interests. As a result, our ability to detect royalty payment
errors is limited and the possibility exists that we will need
to make retroactive royalty revenue adjustments. Further, in
some royalty contracts we have the right to audit the
operational calculations and production data for the associated
royalty payments and, when exercised, such audits may occur many
months following our recognition of the royalty revenue. In
addition, certain royalty agreements, such as Robinson, provide
that royalty payments to us are subject to subsequent adjustment
based on commodity prices at a later date, three to four months
in the case of Robinson, which can result in adjustments to our
royalty revenue in later periods. Hence, these royalty audits
may result in the recognition by us of retroactive changes in
previously disclosed royalty revenues.
A
significant or prolonged economic downturn may affect the
ability of our operators to meet operating costs and could have
material adverse effects on the value of and revenue from our
royalty interests.
The value of and revenue from our royalty interests may be
materially negatively affected if commodity prices for metals on
which we have royalties or which are the primary production at
mines on which we have royalties decline significantly, as has
occurred with respect to copper during 2008. In addition, our
royalty interests and revenues may be materially negatively
affected if our operators do not have the financial strength or
sufficient financing to cover the costs of operating or
developing a mine, causing an operator to curtail, delay or
close operations at a mine site. Our operators financial
strength or ability to secure financing is affected by the
regional and global conditions in which they operate. Many
economists claim that the U.S. economy, and possibly the
global economy, has entered into a recession as a result of the
recent deterioration in the credit markets and the related
financial crisis, as well as a variety of other factors. A
significant economic slowdown may negatively affect many
commodity prices and our operators financial strength, and
in turn, their ability to meet the costs of operating or
developing the mines on which we have royalty interests.
Furthermore, disruption and volatility of financial markets
could also limit our operators access to financing needed
for operations. If any of our operators enter into bankruptcy or
liquidation, or undergo a change of control, our royalty
interests and the value of and income from our royalty interests
may be materially negatively affected.
Estimates
of reserves and mineralization by the operators of mines in
which we have royalty interests are subject to significant
revision.
There are numerous uncertainties inherent in estimating proven
and probable reserves and mineralization, including many factors
beyond our control or the control of the operators of mineral
properties in which we have a royalty interest. Reserve
estimates on our royalty interests are prepared by the operators
of the mining properties. We do not participate in the
preparation or verification of such reports and have not
independently assessed or verified the accuracy of such
information. The estimation of reserves and of other
mineralization is a subjective process and the accuracy of any
such estimates is a function of the quality of available data
and of engineering and geological interpretation and judgment.
Results of drilling, metallurgical testing and production, and
the evaluation of mine plans subsequent to the date of any
estimate, may cause revision of such estimates. The volume and
grade of reserves recovered and rates of production may be less
than anticipated. Assumptions about gold and other precious
metal prices are subject to great uncertainty and such prices
have fluctuated widely in the past. Declines in the market price
of gold or other precious metals also may render reserves or
mineralization containing relatively lower grades of ore
uneconomical to exploit. Changes in operating and capital costs
and other factors including short-term
8
operating factors, such as the need for sequential development
of ore bodies and the processing of new or different ore grades,
may materially and adversely affect reserves.
Estimates
of production by the operators of mines in which we have royalty
interests are subject to change and actual production may vary
materially from such estimates.
Production estimates are prepared by the operators of the mining
properties. There are numerous uncertainties inherent in
estimating anticipated production attributable to our royalty
interests, including many factors beyond our control or the
control of the operators of mineral properties in which we have
royalty interests. We do not participate in the preparation or
verification of production estimates and have not independently
assessed or verified the accuracy of such information. The
estimation of anticipated production is a subjective process and
the accuracy of any such estimates is a function of the quality
of available data, reliability of production history,
variability in grade encountered, mechanical or other problems
encountered, engineering and geological interpretation and
operator judgment. Rates of production may be less than
anticipated. Results of drilling, metallurgical testing and
production, and the evaluation of mine plans subsequent to the
date of any estimate may cause actual production to vary
materially from such estimates.
We may
incur substantial indebtedness that could have adverse effects
on our business.
We may incur substantial indebtedness in the future in
connection with financing acquisitions, strategic transactions
or for other purposes. Any such acquisition could be material to
us and could significantly increase the size and scope of our
business. If we were to incur substantial additional
indebtedness, it may make it difficult for us to satisfy our
debt obligations, increase our vulnerability to general adverse
economic and industry conditions, require us to dedicate a
substantial portion of our cash flow from operations and
proceeds of any equity issuances to payments on our
indebtedness, thereby reducing the availability of cash flow to
fund acquisitions and other general corporate purposes and place
us at a competitive disadvantage to our competitors that have
less debt or have other adverse effects on us. Furthermore, if
future debt financing is not available to us when required or is
not available on acceptable terms, we may be unable to grow our
business, take advantage of opportunities to acquire additional
royalties, or respond to competitive pressures or refinance
maturing debt, any of which could have a material adverse effect
on our operating results and financial condition.
We may
be unable to successfully acquire additional royalty
interests.
Our future success depends upon our ability to acquire royalty
interests at appropriate valuations, including through corporate
acquisitions, to replace depleting reserves and to diversify our
royalty portfolio. We anticipate that most of our revenues will
be derived from royalty interests that we acquire or finance,
rather than through exploration and development of properties.
There can be no assurance that we will be able to identify and
complete the acquisition of such royalty interests, or
businesses that own desired royalty interests, at reasonable
prices or on favorable terms. In addition, we face competition
in the acquisition of royalty interests. If we are unable to
successfully acquire additional royalties, the reserves on
properties currently covered by our royalties will decline as
existing reserves are mined. Furthermore, we may experience
negative reactions from the financial markets, our collaborative
partners and employees if we are unable to successfully complete
acquisitions of royalty interests or businesses that own desired
royalty interests. Each of these factors may adversely affect
the trading price of our common stock or financial results and
operations.
Acquired
royalty interests may not produce anticipated royalty
revenues.
The royalty interests we acquire may not produce the anticipated
royalty revenues. The success of our royalty acquisitions is
based on our ability to make accurate assumptions regarding the
valuation and timing and amount of royalty payments,
particularly acquisitions of royalties on development stage
properties. If the operator does not bring the property into
production and operate in accordance with feasibility studies or
other plans, acquired royalty interests may not yield sufficient
royalty revenues to be profitable. The Taparko project, which
recently began production in Burkina Faso, and the
Peñasquito project and Dolores project, both in initial
production in Mexico, are among our largest development stage
royalty acquisitions to date. In addition, our Pascua-Lama
royalty acquisition in Chile and the Malartic royalty in Canada
are in pre-production stage. The failure of these projects to
9
produce anticipated royalty revenues may materially and
adversely affect our financial condition, results of operations
and cash flows.
We may
experience operational and other difficulties if we complete one
or more significant acquisitions.
As part of our business model and growth strategy, we are
engaged in a continual review of opportunities to acquire
existing royalties, including acquiring companies that hold
royalties. When we acquire a company, we may experience the need
to hire additional personnel, difficulties in integrating the
acquired company, increases in our general and administrative
expenses and other related problems. Furthermore, as part of the
acquisition of a company or a group of royalties, we may acquire
operating or working interests and other assets outside of our
core focus of precious metal royalties. In the event we
experience these difficulties in connection with one or more
acquisitions, our business or financial results may be adversely
affected.
Anticipated
federal legislation could decrease our royalty
revenues.
In recent years, the United States Congress has considered a
number of proposed major revisions to the General Mining Law of
1872 (the General Mining Law), which governs the
creation and possession of mining claims and related activities
on federal public lands in the United States. Several proposals
introduced in the past, such as Bill H.R. 2262, introduced in
the Congress in May 2007, if enacted, would have imposed a
royalty payable to the U.S. Government on existing and
future production of minerals from unpatented mining claims in
the United States. If enacted, such legislation could,
among other provisions, render certain federal lands unavailable
for the location of unpatented mining claims, afford greater
public involvement in the mine permitting process, provide for
citizen suits against miners operating on federal lands, and
impose new and stringent environmental operating standards as
well as new mined land reclamation requirements. If enacted,
such legislation could adversely affect the development of new
mines and the expansion of existing mines, as well as increase
the cost of all mining operations on federal lands, perhaps
materially and adversely affecting mine operators and therefore
our royalty revenue.
The effect of any revision of the General Mining Law on our
royalty interests in the United States cannot be determined
conclusively until such revision, if any, is enacted and
challenges to the legislation, if any, have been finally
resolved. In addition, a number of the properties on which we
have royalties are located on U.S. federal lands that are
subject to federal mining and other public land laws. Changes in
such laws or regulations promulgated under such laws could
affect mine development and expansion and significantly increase
regulatory obligations and compliance costs with respect to mine
development and mine operations, which could adversely affect
our royalty revenue from such properties. By way of example, if
a royalty, assessment, production tax, or other levy imposed on
and measured by production is charged to the operator at Cortez,
which is largely located on U.S. federal lands, the amount
of that charge would be deducted from gross proceeds for
calculation of our GSR1, GSR2 and GSR3 royalties, which would
reduce our royalty revenues from these royalties.
The
mining industry is subject to significant environmental
risks.
Mining is subject to potential risks and liabilities associated
with pollution of the environment and the disposal of waste
products occurring as a result of mineral exploration and
production. Laws and regulations in the United States and
abroad intended to ensure the protection of the environment are
constantly changing and generally are becoming more restrictive
and costly. Insurance against environmental risks (including
potential liability for pollution or other hazards as a result
of the disposal of waste products occurring from exploration and
production) is not generally available to the companies within
the mining industry, such as the operators of the mines in which
we hold a royalty interest, at a reasonable price. If an
operator is forced to incur significant costs to comply with
environmental regulations or becomes subject to environmental
restrictions that limit its ability to continue or expand
operations, it could reduce our royalty revenues. To the extent
that we become subject to environmental liabilities for the time
period during which we were operating properties, the
satisfaction of any liabilities would reduce funds otherwise
available to us and could have a material adverse effect on our
financial condition, results of operations and cash flows.
10
If
title to properties are not properly maintained by the
operators, our royalty revenues may be decreased.
The validity of unpatented mining claims, which constitute a
significant portion of the properties on which we hold royalties
in the United States, is often uncertain and such validity is
always subject to contest. Unpatented mining claims are
generally considered subject to greater title risk than patented
mining claims, or real property interests that are owned in fee
simple. Because unpatented mining claims are self-initiated and
self-maintained, they possess some unique vulnerabilities not
associated with other types of property interests. It is
impossible to ascertain the validity of unpatented mining claims
from public real property records, and therefore it can be
difficult or impossible to confirm that all of the requisite
steps have been followed for location and maintenance of an
unpatented mining claim. If title to unpatented mining claims
included among our royalty properties has not been properly
established or is not properly maintained, our royalty revenues
could be adversely affected.
Royalty
interests are subject to contest by operators of mining projects
and holders of mining rights.
Our business includes the risk that operators of mining projects
and holders of mining claims, tenements, concessions, mining
licenses or other interests in land and mining rights may
contest the existence or geographic extent of our royalty
interests. While Royal Gold seeks to confirm the existence,
validity and enforceability of the royalties it acquires, there
can be no assurance that such disputes will not arise. As a
general matter, royalty interests in mining projects or
properties are subject to uncertainties and complexities arising
from the application of contract and property laws governing
private parties
and/or local
or national governments in the jurisdiction where mining
projects are located.
Foreign
operations and operation by foreign operators are subject to
many risks.
We derived approximately 21% of our revenues from foreign
sources in fiscal year 2008. Our foreign activities are subject
to the risks normally associated with conducting business in
foreign countries. This includes exchange controls and currency
fluctuations, limitations on repatriation of earnings, foreign
taxation, foreign real estate, contract and environmental laws
and enforcement, expropriation or nationalization of property,
labor practices and disputes, and uncertain political and
economic environments. There are also risks of war and civil
disturbances, as well as other risks that could cause
exploration or development difficulties or stoppages, restrict
the movement of funds or result in the deprivation or loss of
contract or real property rights or the taking of property by
nationalization or expropriation, without fair compensation.
Exploration licenses granted by some foreign countries do not
include the right to mine, and in some jurisdictions the right
to convert an exploration license into mining rights may not be
automatic. Each country has discretion in determining whether to
grant a license to mine. If an operator cannot secure a mining
license following exploration of a property, or were to lose
such a license, the value of our royalty interest would be
negatively affected or its validity undermined. Foreign
operations also could be adversely impacted by laws and policies
of the United States affecting foreign trade, investment, and
taxation. Furthermore, many of our operators are organized
outside of the United States. Our royalty interests may be
subject to the application of foreign laws to our operators, and
their stockholders, including laws relating to corporate
transactions, bankruptcy and liquidation.
We currently have interests in projects in Australia, Argentina,
Bolivia, Burkina Faso, Canada, Chile, Colombia, Finland, Ghana,
Honduras, Mexico, Nicaragua, the Republic of Guinea and Russia.
We also evaluate precious metal royalty acquisitions or
development opportunities in other parts of the world,
including, Central America, Europe, Republics of the former
Soviet Union, Asia, Africa and South America.
We are also subject to the risks of operating in Burkina Faso,
Ghana and the Republic of Guinea. Countries in the region have
historically experienced periods of political uncertainty,
exchange rate fluctuations, balance of payments and trade
difficulties and problems associated with extreme poverty and
unemployment, and laws regarding the ownership, operation and
taxation of mining projects in these countries are subject to
change. Any of these economic or political risks could adversely
affect the Taparko, Siguiri or Benso projects.
Our operations in Mexico are subject to risks such as the
effects of political developments and local unrest, and communal
property issues. In the past, Mexico has experienced prolonged
periods of weak economic conditions characterized by exchange
rate instability, increased inflation and negative economic
growth, all of which could
11
occur again in the future. Any of these risks could adversely
affect the Peñasquito and Dolores projects, as well as the
Mulatos and El Chanate mines.
Our Martha royalty is subject to risks relating to operating in
Argentina. Argentina, while currently economically and
politically stable, has experienced political instability,
currency fluctuations and changes in banking regulations in
recent years. Future instability, currency value fluctuations or
regulation changes could adversely affect our revenues from the
Martha mine.
Our Don Mario royalty is subject to risks relating to operating
in Bolivia. Bolivia has experienced political and social
instability, corruption, regulation and tax law changes, an
abundance of administrative procedures and the potential for
nationalization of foreign business interests that could
materially adversely affect the Don Mario mine.
We hold a royalty interest in an exploration property that is
subject to the risks of operating in Russia. The economy of the
Russian Federation continues to display characteristics of an
emerging market, including extensive currency controls and
potentially high inflation. The prospects for future economic
stability in the Russian Federation are largely dependent upon
the effectiveness of economic measures undertaken by the
government, together with legal, regulatory and political
developments. Russian laws, licenses and permits have been in a
state of change and new laws may be given a retroactive effect.
Risks
Related to Our Common Stock
Our
stock price may continue to be volatile and could
decline.
The market price of our common stock has fluctuated and may
decline in the future. The high and low sale prices of our
common stock were $41.66 and $18.74 in the fiscal year ended
June 30, 2006, $37.50 and $23.25 for the fiscal year ended
June 30, 2007, $35.42 and $23.85 for the fiscal year ended
June 30, 2008, and $46.68 and $22.75 for the period from
July 1, 2008 through December 18, 2008. The
fluctuation of the market price of our common stock has been
affected by many factors that are beyond our control, including:
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market prices of gold and other metals;
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interest rates;
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expectations regarding inflation;
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ability of operators to produce precious metals and develop new
reserves;
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currency values;
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general stock market conditions; and
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global and regional political and economic conditions.
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Additional
issuances of equity securities by us would dilute the ownership
of our existing stockholders and could reduce our earnings per
share.
We may issue equity in the future in connection with
acquisitions, strategic transactions or for other purposes. Any
such acquisition could be material to us and could significantly
increase the size and scope of our business. To the extent we
issue additional equity securities, the ownership of our
existing stockholders could be diluted and our earnings per
share could be reduced.
If a
large number of shares of our common stock is sold in the public
market, the sales could reduce the trading price of our common
stock and impede our ability to raise future
capital.
We cannot predict what effect, if any, future issuances by us of
our common stock or other equity will have on the market price
of our common stock. In addition, our shares of common stock
that we issue in connection with an acquisition may not be
subject to resale restrictions. We issued approximately
1.14 million shares of our common stock in connection with
the acquisition of Battle Mountain, which closed on
October 24, 2007 and 3.98 million shares in connection
with the conversion of all of our issued and outstanding
Preferred Stock on March 10, 2008. We may issue substantial
additional shares of common stock or other securities in
connection with other acquisition
12
transactions. The market price of our common stock could decline
if certain large holders of our common stock, or recipients of
our common stock in connection with an acquisition, sell all or
a significant portion of their shares of common stock or are
perceived by the market as intending to sell these shares other
than in an orderly manner. In addition, these sales could also
impair our ability to raise capital through the sale of
additional common stock in the capital markets.
We may
change our practice of paying dividends.
We have paid a cash dividend on our common stock for each fiscal
year beginning in fiscal year 2000. Our board of directors has
discretion in determining whether to declare a dividend based on
a number of factors, including prevailing gold prices, economic
market conditions, and funding requirements for future
opportunities or operations. If our board of directors declines
to declare dividends in the future, or reduces the current
dividend level, our stock price could fall, and the success of
an investment in our common stock would depend solely upon any
future stock price appreciation. We have increased our dividends
in prior years. There can be no assurance that we will continue
to do so. For example, if we were to materially increase our
borrowings to conduct a material acquisition, our board of
directors could elect to modify our practice of paying dividends
and potentially reduce or eliminate dividends on common stock.
Certain
anti-takeover provisions could delay or prevent a third party
from acquiring us.
Provisions in our restated certificate of incorporation may make
it more difficult for third parties to acquire control of us or
to remove our management. Some of these provisions:
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permit our board of directors to issue preferred stock that has
rights senior to the common stock without stockholder
approval; and
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provide for three classes of directors serving staggered,
three-year terms.
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We are also subject to the business combination provisions of
Delaware law that could delay, deter, or prevent a change in
control. In addition, we have adopted a stockholders
rights plan that imposes significant penalties upon a person or
group that acquires 15% or more of our outstanding common stock
without the approval of the board of directors. Any of these
measures could prevent a third party from pursuing an
acquisition of Royal Gold, even if stockholders believe the
acquisition is in their best interests.
We
have identified a material weakness in internal control over our
financial reporting and as a result we were required to restate
our financial results for the fiscal year ended June 30,
2008.
In connection with the restatement and our reassessment of our
internal control over financial reporting pursuant to the rules
promulgated by the SEC Section 404 of the Sarbanes-Oxley
Act of 2002 and Item 308 of
Regulation S-K,
management has concluded that as of fiscal year ended
June 30, 2008, our disclosure controls and procedures were
not effective and that we had a material weakness in our
internal control over financial reporting. Please refer to
Item 9A of our
Form 10-K/A,
filed on November 6, 2008 and Item 4 of Part I of
our
Form 10-Q
filed on November 10, 2008, for further discussion of the
ineffectiveness of and material weakness in our controls as of
June 30, 2008 and September 30, 2008. While we have
made efforts to remediate such material weakness promptly and
effectively, any additional material weaknesses or significant
deficiencies could have a material adverse effect on our results
of operations and financial condition, as well as impair our
ability to meet our quarterly, annual, and other reporting
requirements under the Securities Exchange Act of 1934, as
amended, in a timely manner. These effects could in turn
adversely affect the trading price of our common stock and could
result in a material misstatement in consolidated financial
statements and require a further restatement of our financial
statements. Therefore, even if we are successful in
strengthening our internal controls and procedures, such
controls and procedures may not be adequate to prevent or
identify existing or future internal control weaknesses.
Internal control over financial reporting cannot provide
absolute assurance of achieving financial reporting objectives
because of its known inherent limitations (such limitations are
further discussed in Item 9A of our
Form 10-K/A,
filed on November 6, 2008 and Item 4 of Part I of
our
Form 10-Q
filed on November 10, 2008). Because of such inherent
limitations, there is a risk that material misstatements in
results of operations and financial condition may not be
prevented or detected on a timely basis by our internal controls
over financial reporting.
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We may
face risks related to an SEC investigation and securities
litigation in connection with the restatement of our financial
statements.
We are not aware that the SEC has begun any formal or informal
investigation in connection with accounting errors requiring
restatement of the fiscal year ended June 30, 2008. If the
SEC makes a determination, however, that in its view the Company
has violated Federal securities laws, then the Company may face
sanctions, including, but not limited to, monetary penalties and
injunctive relief, which could adversely affect our business. In
addition, the Company may in the future be subject to class
action suits, other litigation, or regulatory proceedings or
actions arising in relation to the restatement of our
consolidated financial statements for the fiscal year ended
June 30, 3008. We are unable to estimate what our liability
might be in connection with such potential litigation or
regulatory proceeding or action and any expenses not covered by
available insurance or any adverse resolution of this potential
litigation or regulatory proceeding or action, which could have
a material adverse effect on our business, results of
operations, cash flows, or financial condition. Further, any
litigation, regulatory proceeding or action may be time
consuming, and it may distract our management from the conduct
of our business.
USE OF
PROCEEDS
Unless we specify otherwise in a prospectus supplement, the net
proceeds from the sale of securities offered from time to time
using this prospectus will be used for our general corporate
purposes, which may include repayment or refinancing of debt,
acquisitions, working capital, capital expenditures and
repurchases and redemptions of securities. We will not receive
proceeds from sales of selling securityholders except as
otherwise specified in an applicable prospectus supplement.
RATIO OF
EARNINGS TO FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
The following table sets forth the ratio of earnings to fixed
charges and preferred stock dividends of Royal Gold for the
periods indicated.
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Three Months
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Ended
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September 30,
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Fiscal Year Ended June 30
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2008
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2008
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2007
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2006
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2005
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2004
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Ratio of earnings to fixed charges (unaudited)
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26.72
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41.10
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23.28
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77.89
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112.64
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80.91
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Ratio of earnings to fixed charges and preferred stock dividends
(unaudited)
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26.72
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11.13
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23.28
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77.89
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112.64
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80.91
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For the purpose of computing the ratio of earnings to fixed
charges, earnings consist of income from continuing operations
before income taxes, minority interest and losses or earnings
from equity investments plus fixed charges. Fixed charges
consist of interest expensed and capitalized, amortization of
debt issuance costs and that portion of rental expense we
believe to be representative of interest. We issued
1,150,000 shares of 7.25% Mandatory Convertible Preferred
Stock on November 9, 2007. On March 10, 2008, all of
the shares of the 7.25% Mandatory Convertible Preferred Stock
were converted into shares of common stock. For the purpose of
computing the ratio of earnings to fixed charges and preferred
stock dividends, earnings consist of income from continuing
operations before income taxes, minority interests and losses or
earnings from equity investments plus fixed charges and
preferred stock dividends. Preferred stock dividends consist of
dividends paid as part of the 7.25% Mandatory Convertible
Preferred Stock issuance. As of the date of this prospectus, we
no longer have any shares of preferred stock outstanding.
DESCRIPTION
OF THE DEBT SECURITIES
The debt securities will rank either as senior debt or
subordinated debt, and may be issued as convertible debt
securities. The senior debt securities will be issued under an
indenture between us and a trustee chosen by us. The
subordinated debt securities will be issued under an indenture
between us and a trustee chosen by us. In this prospectus, we
may refer to the senior debt indenture and the subordinated debt
indenture as the indentures and the senior debt
trustee and the subordinated debt trustee as the
trustees. The following description summarizes the
14
expected terms and provisions of the indentures and the debt
securities, and is not complete. For more information, you
should read the indentures, copies of which will be filed as
exhibits to amendments to the registration statement which
contains this prospectus or exhibits to a report filed pursuant
to Section 13(a) or 15(d) of the Exchange Act that is
incorporated into this prospectus. Further terms of the debt
securities will be set forth in one or more prospectus
supplements.
General
The debt securities are expected to be our direct unsecured
obligations. The indentures are not expected to limit the
aggregate principal amount of debt securities that may be
issued. The debt securities may be issued from time to time in
one or more series as authorized from time to time by our board
of directors or by any of our authorized officers. The
particular terms of the debt securities and any changes or
additions to the general terms of the debt securities will be
described in the prospectus supplement relating to the debt
securities. The prospectus supplement will include the following:
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the title of the debt securities;
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the aggregate principal amount of the debt securities;
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the price of the debt securities;
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the date or dates on which the debt securities will mature and
the right, if any, to extend such date or dates;
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the rate or rates at which the debt securities will bear
interest, if any, or the method by which such rate or rates
shall be determined;
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the date or dates from which interest shall accrue or the method
by which such date or dates shall be determined, the interest
payment dates on which interest shall be payable, the record
dates for the determination of holders to whom interest is
payable and, in the case of floating rate debt securities, the
notice, if any, to holders regarding the determination of
interest and the manner of giving such notice;
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the place or places (other than the corporate trust office of
the applicable trustee) where principal, premium or interest on
the debt securities shall be payable, and the manner in which
any such principal, premium or interest will be paid;
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any mandatory or optional sinking fund or purchase fund or
similar provisions;
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the terms and conditions upon which, including when and at what
price, the debt securities may be redeemed pursuant to any
optional or mandatory redemption provisions;
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any terms pursuant to which the debt securities may be
convertible into equity or other securities;
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whether the debt securities are to be issued in whole or in part
in the form of one or more global securities and, if so, the
depositary or any common depositary for such global securities;
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the terms and conditions, if any, upon which any global
securities may be exchanged in whole or in part for definitive
debt securities;
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any index used to determine the amount of payment of principal
or any premium or interest on the debt securities;
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the application of any defeasance provisions to the debt
securities;
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whether the debt securities of a series are to be issued as
original issue discount securities and the amount of discount at
which they may be issued, and the portion of the principal
amount of the debt securities which shall be payable upon
declaration of acceleration of the maturity upon an event of
default (if different than the principal amount);
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if other than U.S. dollars, the currency or currency units
in which the debt securities shall be denominated or in which
payment of principal, premium and interest on the debt
securities may be made;
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any applicable U.S. federal income tax considerations;
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the date of any series of debt securities; and
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any other relevant terms of the debt securities.
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The indentures relating to the senior debt securities and the
subordinated debt securities are expected to contain certain
usual and customary restrictive covenants pertaining to, among
other things, incurrence of additional debt, creation of liens
and limitations on certain transactions. It also is expected
that the indentures will contain provisions relating to the
modification and waiver of the indentures, discharge of
obligations, legal defeasance and covenant defeasance.
All of the debt securities of a series need not be issued at the
same time, and may vary as to interest rate, maturity and other
provisions. Unless otherwise provided, a series may be reopened
for issuance of additional debt securities of such series.
The indentures are not expected to contain provisions to afford
you protection if there is a highly leveraged transaction or a
change of control of Royal Gold, except as may be otherwise
described in this prospectus or in any applicable prospectus
supplement.
Senior
Debt Securities
Senior debt securities will rank equally with all of our other
unsecured debt other than subordinated debt securities or other
indebtedness which by its terms is subordinated to our senior
debt securities.
Subordinated
Debt Securities
Subordinated debt securities will be subordinate and junior in
the right of payment to all of our present or future senior
indebtedness. Senior indebtedness is:
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indebtedness for borrowed money, including senior debt
securities, and
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renewals, extensions, and modifications of such borrowed money,
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unless it is specifically provided that such borrowed money or
renewal, extension or modification is not senior indebtedness.
If we or our selling securityholders are offering subordinated
debt securities, the accompanying prospectus supplement or the
information incorporated therein by reference will set forth the
approximate amount of senior indebtedness outstanding as of a
recent date.
Upon any distribution of our assets upon our dissolution,
winding up, liquidation or reorganization, the payment of
principal, premium and interest on our subordinated debt
securities will be subordinated in right of payment to the prior
payment in full of all of our senior indebtedness. By reason of
such subordination, in the event of a distribution of assets
upon insolvency, our general creditors may recover ratably more
than holders of our subordinated debt securities. However,
subordination shall not apply to money and securities held in
trust to satisfy and discharge any subordinated debt securities
by legal defeasance.
Convertible
Debt Securities
Debt securities issued under either of the indentures may
provide for a right of conversion into equity securities. The
terms and conditions governing any such conversion will be set
forth in the prospectus supplement relating to the convertible
debt securities, including:
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the designation of the equity securities into which such debt
securities are convertible;
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the conversion price;
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the conversion period;
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whether conversion will be at our option or at the option of the
holder of the convertible debt securities;
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the events requiring an adjustment of the conversion
price; and
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the provisions affecting conversion in the event of the
redemption of such debt securities.
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Form,
Exchange, Payment and Transfer
Unless otherwise specified in a prospectus supplement, we expect
to issue the debt securities in fully registered form without
coupons and in denominations of $1,000 (or multiples of $1,000).
We will not impose a service charge for any transfer or exchange
of the debt securities, but we or the trustee may require you to
make a payment to cover any associated tax or other government
charge.
If we issue debt securities in bearer form, the applicable
prospectus supplement will describe the special restrictions and
considerations, including special offering restrictions and
special U.S. federal income tax considerations, applicable
to those debt securities and to payment on and transfer and
exchange of those debt securities. Bearer debt securities will
be transferable by delivery.
Unless otherwise provided in a prospectus supplement, we expect
to pay principal, premium or interest, and you may surrender for
payment or transfer the debt securities, at the offices of the
trustee. Alternatively, we may pay interest by check mailed to
you at your address as it appears in the security register. We
will make payment on debt securities in bearer form at such
non-U.S. paying
agencies as we may choose.
Book-Entry
We may issue the debt securities of a series in whole or in part
in the form of one or more global securities that will be
deposited with, or on behalf of, a global depositary, or its
nominee, identified in the prospectus supplement. In this case,
we will issue global securities in a denomination equal to the
portion of the aggregate principal amount of outstanding debt
securities of the series to be represented by such global
security or securities. Unless and until it is exchanged in
whole or in part for debt securities in definitive registered
form, a global security may not be registered for transfer or
exchange except by the global depositary to a nominee for that
global depositary and except in the circumstances described in
the prospectus supplement.
A prospectus supplement will provide the specific terms of the
depositary arrangement concerning any portion of a series of
debt securities to be represented by a global security and a
description of a global depositary.
Consolidation,
Merger and Sale
Nothing contained in either indenture or any of the debt
securities is expected to prevent our consolidation or merger
with or into any other corporation or any sale or conveyance of
all or substantially all of our property to any other
corporation; provided that upon any such transaction,
other than a consolidation or merger in which we are the
continuing corporation, the payment of principal, premium and
interest on all of the debt securities, and the performance and
observance of all of the covenants and conditions of the
indenture to be performed by us, is expressly assumed by the
corporation formed by such consolidation or into which we shall
have been merged, or by the corporation which shall have
acquired such property.
Events of
Default
The following are expected events of default under each
indenture with respect to debt securities of any series issued
thereunder:
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a failure to pay principal or premium on any debt security of
that series when due;
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a failure to pay for a specified period, any interest on any
debt security of that series when due;
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certain events of bankruptcy, insolvency or
reorganization; and
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any other event of default provided with respect to debt
securities of a series.
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In general, if an event of default with respect to debt
securities of any series occurs and is continuing, either the
trustee or the holders of a specified percentage in aggregate
principal amount outstanding of the debt securities of that
series may declare the principal amount of all the debt
securities of that series to be due and payable immediately. At
any time after such a declaration of acceleration has been made,
but before a judgment or decree based on acceleration has been
obtained, the holders of a majority in aggregate principal
amount of outstanding debt securities of that series may rescind
and annul such acceleration.
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Each indenture is expected to provide that, subject to the duty
of the applicable trustee during a default to act with the
required standard of care, the trustee will be under no
obligation to exercise any of its rights or powers under the
indenture at the request or direction of any holder unless such
holder shall have offered the trustee reasonable indemnity.
Subject to such indemnification provisions, the holders of a
majority in aggregate principal amount of outstanding debt
securities of any series will have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the trustee, or to exercise any trust or power
conferred on the trustee, with respect to the debt securities of
that series.
Each indenture is expected to require us to furnish to the
applicable trustee annually a statement as to the performance by
us of our obligations under each indenture and as to any default
in such performance.
Regarding
the Trustees
We may maintain deposit accounts and conduct other banking
transactions with one or more of the trustees, including
borrowing in the ordinary course of business.
DESCRIPTION
OF CAPITAL STOCK
General
The following description of our capital stock, together with
the additional information in any applicable prospectus
supplement, summarizes the material terms and provisions of our
capital stock and various provisions of our restated certificate
of incorporation, which we also refer to as our certificate of
incorporation, and amended and restated bylaws, which we also
refer to as our bylaws. For additional information about the
terms of our capital stock, please refer to our restated
certificate of incorporation, amended and restated bylaws, and
amended and restated stockholder rights agreement that are
incorporated by reference into the registration statement of
which this prospectus is a part. The terms of these securities
may also be affected by the general corporation law of the state
of Delaware. The summary below is not intended to be complete
and is qualified by reference to the provisions of applicable
law and our restated certificate of incorporation, amended and
restated bylaws and amended and restated stockholder rights
agreement.
Our authorized capital stock consists of 100,000,000 shares
of common stock, par value $0.01 per share and
10,000,000 shares of preferred stock, par value $0.01 per
share. As of December 19, 2008, there were approximately
34,007,184 issued and outstanding shares of common stock and no
shares of preferred stock issued or outstanding. Rights to
purchase Series A Junior Participating Preferred Stock,
$0.01 par value per share (the Series A
Preferred Stock) have been distributed to holders of our
common stock under our amended and restated rights agreement. A
maximum of 500,000 shares of Series A Preferred Stock
is currently authorized for issuance upon exercise of these
rights.
Common
Stock
Holders of common stock are entitled to one vote for each share
held in the election of directors and on all other matters
submitted to a vote of stockholders and do not have any
cumulative voting rights. Holders of common stock are entitled
to receive ratably such dividends, if any, when, as and if
declared by the board of directors, out of funds legally
available therefor, subject to any preferential dividend rights
of any outstanding preferred stock.
Upon the liquidation, dissolution, or winding up of our company,
the holders of common stock are entitled to receive ratably the
net assets of the company available after payment of all debts
and other liabilities, subject to the prior rights of any
outstanding preferred stock. Holders of common stock have no
preemptive, subscription, redemption, or conversion rights other
than the right, when exercisable, to purchase one one-thousandth
of a share of our Series A Junior Participating Preferred
Stock as described further below. The outstanding shares of
common stock are, and the shares offered by us by any prospectus
supplement accompanying this prospectus will be, when issued and
paid for, fully paid and non-assessable.
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Preferred
Stock
As of the date of this prospectus, we had no outstanding shares
of preferred stock. Rights to purchase Series A Preferred
Stock have been distributed to holders of our common stock under
a rights agreement, and a maximum of 500,000 shares of
Series A Preferred Stock are authorized for issuance on
exercise of rights. Our preferred stock may be issued from time
to time in one or more series, without stockholder approval.
Subject to limitations prescribed by law, the board of directors
is authorized to determine the voting powers (if any),
designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or
restrictions thereof, for each series of preferred stock that
may be issued, and to fix the number of shares of each such
series. Thus, the board of directors, without stockholder
approval, could authorize the issuance of preferred stock with
voting, conversion and other rights that could adversely affect
the voting power and other rights of holders of common stock or
other series of preferred stock or that could have the effect of
delaying, deferring or preventing a change in control of our
company.
Preferred stock will be issued under a certificate of
designations relating to each series of preferred stock, subject
to our certificate of incorporation. When a particular series of
preferred stock is offered, the prospectus supplement will
describe the specific terms of the securities, including:
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the title and stated value of the preferred stock;
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the number of shares of the preferred stock offered, the
dividend and liquidation preference per share and the offering
price of the preferred stock;
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the dividend rate(s), period(s)
and/or
payment date(s) or method(s) of calculation of such rates,
periods or dates applicable to the preferred stock;
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whether the preferred stock will have preemptive rights;
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the procedures for auction and remarketing, if any, of the
preferred stock;
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the sinking fund provisions, if applicable, for the preferred
stock;
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the redemption provisions, if applicable, for the preferred
stock;
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whether the preferred stock will be convertible into or
exchangeable for other securities and, if so, the terms and
conditions of conversion or exchange, including the conversion
price or exchange ratio and the conversion or exchange period
(or the method of determining the same);
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whether the preferred stock will have voting rights and the
terms of the voting rights, if any;
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whether the preferred stock will be listed on any securities
exchange;
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the transfer agent for the preferred stock;
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whether the preferred stock will be issued with any other
securities and, if so, the amount and terms of such
securities; and
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any other specific terms, preferences or rights of, or
limitations or restrictions on, the preferred stock.
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Anti-Takeover
Effects of Certain Provisions of Delaware Law and Our Restated
Certificate of Incorporation and Amended and Restated
Bylaws
Effect of Delaware Anti-takeover Statute. We
are subject to Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general,
Section 203 prohibits a Delaware corporation from engaging
in any business combination with any interested stockholder for
a period of three years following the date that the stockholder
became an interested stockholder, unless:
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prior to that date, the board of directors of the corporation
approved either the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder;
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upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time
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the transaction commenced, excluding for purposes of determining
the number of shares of voting stock outstanding (but not the
voting stock owned by the interested stockholder) those shares
owned by persons who are directors and also officers and
excluding employee stock plans in which employee participants do
not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or
exchange offer; or
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on or subsequent to that date, the business combination is
approved by the board of directors of the corporation and
authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least
662/3%
of the outstanding voting stock that is not owned by the
interested stockholder.
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Section 203 defines business combination to
include the following:
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any merger or consolidation involving the corporation and the
interested stockholder;
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any sale, transfer, pledge or other disposition of 10% or more
of the assets of the corporation involving the interested
stockholder;
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subject to certain exceptions, any transaction that results in
the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder;
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any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested
stockholder; or
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the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
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In general, Section 203 defines an interested stockholder
as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation, or who beneficially
owns 15% or more of the outstanding voting stock of the
corporation at any time within a three year period immediately
prior to the date of determining whether such person is an
interested stockholder, and any entity or person affiliated
with, controlling, or controlled by any of these entities or
persons.
Restated Certificate of Incorporation and Amended and
Restated Bylaws Provisions. Our restated
certificate of incorporation and amended and restated bylaws
include provisions that may have the effect of discouraging,
delaying or preventing a change in control or an unsolicited
acquisition proposal that a stockholder might consider
favorable, including a proposal that might result in the payment
of a premium over the market price for the shares held by
stockholders. These provisions are summarized in the following
paragraphs.
Classified Board of Directors. Our restated
certificate of incorporation provides for our board to be
divided into three classes of directors serving staggered three
year terms. The classification of the board has the effect of
requiring at least two annual stockholder meetings, instead of
one, to replace a majority of the members of the board of
directors.
Authorized but Unissued or Undesignated Capital
Stock. Our authorized capital stock consists of
100,000,000 shares of common stock and
10,000,000 shares of preferred stock. The authorized but
unissued (and in the case of preferred stock, undesignated)
stock may be issued by the board of directors in one or more
transactions. In this regard, our restated certificate of
incorporation grants the board of directors broad power to
establish the rights and preferences of authorized and unissued
preferred stock. The issuance of shares of preferred stock
pursuant to the board of directors authority described
above could decrease the amount of earnings and assets available
for distribution to holders of common stock and adversely affect
the rights and powers, including voting rights, of such holders
and may have the effect of delaying, deferring or preventing a
change in control. The board of directors does not currently
intend to seek stockholder approval prior to any issuance of
preferred stock, unless otherwise required by law.
Special Meetings of Stockholders. Our amended
and restated bylaws provide that special meetings of our
stockholders may be called only by our chairman, chief executive
officer, president or board of directors. Stockholders do not
have the right to call special meetings or to bring business
before special meetings.
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Stockholder Action by Written Consent. Under
Delaware law, unless otherwise provided in a corporations
certificate of incorporation, any action that may be taken at a
meeting of stockholders may be taken without a meeting and
without prior notice if a written consent is signed by the
holders of the minimum number of votes necessary to authorize
the action at a meeting at which all shares entitled to vote
were present and voted. Our amended and restated bylaws provide
the same standard for written consent.
Notice Procedures. Our amended and restated
bylaws establish advance notice procedures with regard to all
stockholder proposals to be brought before meetings of our
stockholders, including proposals relating to the nomination of
candidates for election as directors, the removal of directors
and amendments to our amended and restated certificate of
incorporation or amended and restated bylaws. These procedures
provide that notice of such stockholder proposals must be timely
given in writing to our secretary prior to the meeting.
Generally, to be timely, a stockholder who intends to bring
matters before an annual meeting must provide advance notice of
such intended action not less than 90 days nor more than
120 days prior to the meeting; except if less than
100 days notice was given or public disclosure was made for
the meeting, advance notice of the matter is required to be
given not less than 10 days after notice or public
disclosure of the meeting, and notice as required by the
Exchange Act. The notice of the matter generally must contain a
brief description of the business desired to be brought before
the annual meeting and if regarding the nomination of a
director, all information required to be disclosed in
solicitation of proxies for election of directors under
Schedule 14A of the Exchange Act, the reasons for
conducting the business at the annual meeting, the name and
record address of such stockholder, the class and number of
shares of Royal Gold stock owned by such stockholder, a
description of any material interest of the stockholder in such
business and whether such stockholder intends to solicit proxies
from Royal Gold stockholders.
Stockholder
Rights Plan
Rights to purchase Series A Junior Participating Preferred
Stock, $0.01 par value per share (the Series A
Preferred Stock) have been distributed to holders of our
common stock under our amended and restated rights agreement. A
maximum of 500,000 shares of Series A Preferred Stock
is currently authorized for issuance upon exercise of these
rights. The rights agreement provides that attached to each
share of our common stock is one right that, when exercisable,
entitles the holder to purchase one one-thousandth of a share of
Series A Preferred Stock at a purchase price of $175,
subject to adjustment. In certain events, including when a
person or group becomes the owner of 15% or more of our
outstanding common stock (except by reason of share acquisitions
by the Company) or when a person or group commences a tender
offer or exchange offer for 15% of more of our outstanding
common stock, the rights become exercisable. Exercise of the
rights would entitle the holders of the rights (other than the
acquiring person or group) to receive that number of
one-thousandths of a share of Series A Preferred Stock with
a market value equal to two times the exercise price of the
rights. At any time after the rights become exercisable, but
before the acquiring person or group has obtained 50% or more of
our outstanding common stock, our board of directors, under
certain circumstances, may exchange each of the rights for a
share of common stock or one one-thousandth of a Series A
Preferred Share or the preferred stock equivalent. Accordingly,
exercise or exchange of the rights may cause substantial
dilution to a person or group that attempts to acquire our
company. The rights, which expire on September 10, 2017,
may be redeemed at a price of $.001 per right at any time until
the tenth day following an announcement that an individual,
corporation or other entity has acquired 15% or more of our
outstanding common stock, except as otherwise provided in the
rights agreement. The rights agreement makes the takeover of our
company much more difficult.
Limitation
of Director Liability
As permitted by provisions of the Delaware General Corporation
Law, our restated certificate of incorporation limits, in
certain circumstances, the monetary liability of our directors
for breaches of their fiduciary duties as directors. These
provisions do not eliminate the liability of a director:
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for a breach of the directors duty of loyalty to our
company or its stockholders;
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for acts or omissions by a director not in good faith or which
involve intentional misconduct or a knowing violation of law;
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arising under Section 174 of the Delaware General
Corporation Law (relating to the declaration of dividends and
purchase or redemption of shares in violation of the Delaware
General Corporation Law); or
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for any transaction from which the director derived an improper
personal benefit.
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In addition, these provisions do not limit our rights or the
rights of our stockholders, in appropriate circumstances, to
seek equitable remedies such as injunctive or other forms of
non monetary relief. Such remedies may not be
effective in all cases.
Indemnification
Arrangements
Our amended and restated bylaws provide that our company shall
indemnify our directors and officers to the full extent
permitted by Delaware law. Under such provisions any director or
officer, who, in his or her capacity as such, is made or
threatened to be made a party to any suit or proceeding, may be
indemnified if the board determines such director or officer
acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interest of the
company. The amended and restated bylaws and the Delaware
General Corporation Law further provide that such
indemnification is not exclusive of any other rights to which
such individuals may be entitled under the bylaws, any
agreement, any vote of stockholders or disinterested directors,
or otherwise.
We have entered into indemnification agreements with all of our
current directors and officers to assure them that they will be
indemnified to the extent permitted by our amended and restated
bylaws and the Delaware General Corporation Law. The
indemnification agreements provide our directors and officers
indemnification against, among other things, any and all
expenses, judgments, fines, penalties, and amounts paid in
settlement by the director or officer, provide for the
advancement of expenses incurred by the director or officer in
connection with any proceeding and obligate the director or
officer to reimburse Royal Gold for all amounts so advanced if
it is subsequently determined, as provided in the
indemnification agreements, that the director or officer is not
entitled to indemnification. The indemnification agreements also
provide certain methods and presumptions for determining whether
the director or officer is entitled to indemnification, among
other matters, as set forth in such agreement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers or persons controlling Royal Gold pursuant to Royal
Golds restated certificate of incorporation, amended and
restated bylaws or any indemnification agreement, Royal Gold has
been informed that in the opinion of the SEC such
indemnification is against public policy as expressed under the
Securities Act of 1933 and is therefore unenforceable.
Transfer
Agent
The transfer agent for our common stock is Computershare
Trust Company, Golden, Colorado; and Computershare
Trust Company of Canada, Toronto, Ontario.
DESCRIPTION
OF DEPOSITARY SHARES
We may, at our option, elect to issue fractional shares of
preferred stock rather than full shares of preferred stock. If
we exercise this option, we will issue to the public receipts
for depositary shares, and each of these depositary shares will
represent a fraction (to be set forth in the applicable
prospectus supplement) of a share of a particular series of
preferred stock.
The shares of any series of preferred stock underlying the
depositary shares will be deposited under a deposit agreement
between us and a bank or trust company selected by us. The
depositary will have its principal office in the United States
and a combined capital and surplus of at least $50,000,000.
Subject to the terms of the deposit agreement, each owner of a
depositary share will be entitled, in proportion to the
applicable fraction of a share of preferred stock underlying the
depositary share, to all of the rights and preferences of the
preferred stock underlying that depositary share. Those rights
may include dividend, voting, redemption, conversion and
liquidation rights.
The depositary shares will be evidenced by depositary receipts
issued under a deposit agreement. Depositary receipts will be
distributed to those persons purchasing the fractional shares of
preferred stock underlying the depositary shares, in accordance
with the terms of the offering. The material terms of the
deposit agreement, the
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depositary shares and the depositary receipts will be described
in a prospectus supplement relating to the depositary shares.
You should also refer to the forms of the deposit agreement and
depositary receipts that will be filed with the SEC in
connection with the offering of the specific depositary shares.
DESCRIPTION
OF WARRANTS
We may issue warrants, including warrants to purchase debt
securities, preferred stock or common stock. Warrants may be
issued independently or together with any equity or debt
securities and may be attached to or separate from such equity
or debt securities. Each series of warrants will be issued under
a separate warrant agreement to be entered into between Royal
Gold and a warrant agent. The warrant agent will act solely as
our agent in connection with the warrants of such series and
will not assume any obligation or relationship of agency or
trust for or with any holders or beneficial owners of warrants.
Terms of the warrants and the applicable warrant agreement will
be set forth in the applicable prospectus supplement, including:
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the title of the warrants;
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the aggregate principal amount of the warrants and the issue
price of the warrants;
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the number of securities for, and the price at, which the
warrants are exercisable and the period during which the
warrants may be exercised;
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the currency or currencies, including composite currencies, in
which the price of the warrants may be payable;
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in the case of warrants to purchase preferred stock, the
designation, number of shares, stated value and terms, such as
liquidation, dividend, conversion and voting rights, of the
series of preferred stock purchasable upon exercise of the
warrants, and the price at which you may purchase such number of
shares of preferred stock of such series upon such exercise;
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in the case of warrants to purchase debt securities, the
designation, aggregate principal amount, currencies,
denominations and terms of the series of debt securities
purchasable upon exercise of the warrants and the price at which
you may purchase the debt securities upon exercise;
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if applicable, the date on and after which the warrants and the
related securities will be separately transferable;
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any provision adjusting the securities that may be purchased on
exercise of the warrants, and the exercise price of the
warrants, to prevent dilution or otherwise; and
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any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the
warrants.
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SELLING
SECURITYHOLDERS
Selling securityholders may use this prospectus in connection
with the resale of securities from time to time. The applicable
prospectus supplement will identify the selling securityholders,
the terms of the securities and other information regarding the
transaction, such as the price of the securities, the names of
any underwriter or broker-dealer, if used, and the commissions
paid or discounts or concessions allowed to such underwriter or
broker-dealer, where applicable. The selling securityholders may
be deemed to be underwriters in connection with the securities
they resell and any profits on the sales may be deemed to be
underwriting discounts and commissions under the Securities Act.
The selling securityholders will receive all the proceeds from
their sale of securities. We will not receive any proceeds from
sales by selling securityholders except as otherwise specified
in an applicable prospectus supplement.
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PLAN OF
DISTRIBUTION
The Company or the selling securityholders may sell securities
offered by means of this prospectus to one or more underwriters
for public offering and sale by them or may sell such securities
to investors directly or through agents. Any such underwriter or
agent involved in the offer and sale of such securities will be
named in the prospectus supplement relating to the securities.
The Company will bear all costs, fees and expenses incurred in
connection with the registration of the offering of securities
under this prospectus.
Underwriters may offer and sell securities offered by means of
this prospectus at a fixed price or prices, which may be
changed, at prices related to the prevailing market prices at
the time of sale or at negotiated prices. The Company or the
selling securityholders also may, from time to time, authorize
underwriters acting as the Companys agents to offer and
sell securities by means of this prospectus upon the terms and
conditions as are set forth in the prospectus supplement
relating to such securities. In connection with a sale of
securities offered by means of this prospectus, underwriters may
be deemed to have received compensation from the Company or the
selling securityholders in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of
securities for whom they may act as agent. Underwriters may sell
securities offered by means of this prospectus to or through
dealers, and such dealers may receive compensation in the form
of discounts, concessions or commissions from the underwriters
and/or
commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company or the selling
securityholders to underwriters or agents in connection with the
offering of securities offered by means of this prospectus, and
any discounts, concessions or commissions allowed by
underwriters to participating dealers, will be set forth in the
applicable prospectus supplement. Underwriters, dealers and
agents participating in the distribution of the offered
securities may be deemed to be underwriters, and any discounts
or commissions received by them and any profit realized by them
upon the resale of the offered securities may be deemed to be
underwriting discounts and commissions, under the Securities
Act. Underwriters, dealers and agents may be entitled, under
agreements entered into with the Company or the selling
securityholders, to indemnification against and contribution
toward certain civil liabilities, including liabilities under
the Securities Act.
The Company or the selling securityholders may directly solicit
offers to purchase our securities, and may directly sell the
securities to institutional or other investors. The Company or
the selling securityholders will describe the terms of direct
sales in the prospectus supplement. The Company or the selling
securityholders may authorize their respective agents and
underwriters to solicit offers by certain institutions to
purchase the securities at the public offering price under
delayed delivery contracts. If the Company or the selling
securityholders use delayed delivery contracts, the Company or
the selling securityholders will disclose that they are using
them in the prospectus supplement and will tell you when they
will demand payment and delivery of the securities under the
delayed delivery contracts. These delayed delivery contracts
will be subject only to the conditions that the Company or the
selling securityholders set forth in the prospectus supplement.
The Company or the selling securityholders may agree to sell
securities to an underwriter for a delayed public offering and
may further agree to adjustments before the public offering to
the underwriters purchase price for the securities based
on changes in the market value of the securities. The prospectus
supplement relating to any such public offering will contain
information on the number of securities to be sold, the manner
of sale or other distribution, and other material facts relating
to the public offering.
The selling securityholders may also sell our securities in one
or more privately negotiated transactions exempt from the
registration requirements of the Securities Act pursuant to
Rule 144 under the Securities Act, Section 4(1) of the
Securities Act or other applicable exemptions, regardless of
whether the securities are covered by the registration statement
of which this prospectus forms a part. Such sales, if any, will
not form part of the plan of distribution described in this
prospectus. The selling securityholders will act independently
of us in making decisions with respect to the timing, manner and
size of each such sale.
Other than the common stock, all securities offered by this
prospectus will be a new issue of securities with no established
trading market. Any underwriter to whom securities are sold by
us or the selling securityholders for public offering and sale
may make a market in such securities, but such underwriters may
not be obligated to do so
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and may discontinue any market making at any time without
notice. The securities may or may not be listed on a national
securities exchange or a foreign securities exchange, except for
the common stock which is currently listed and traded on the
NASDAQ Global Select Market and Toronto Stock Exchange. Any
common stock sold by this prospectus will be listed for trading
on the NASDAQ Global Select Market subject to official notice of
issuance. The Company cannot give you any assurance as to the
liquidity of the trading markets for any securities.
LEGAL
MATTERS
The validity of the securities being offered by this prospectus
will be passed upon for us by Hogan & Hartson LLP,
Denver, Colorado.
EXPERTS
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting (which is included in Managements
Report on Internal Control over Financial Reporting)
incorporated in this prospectus by reference to the Annual
Report on
Form 10-K/A
(filed on November 6, 2008) for the year ended
June 30, 2008 have been so incorporated in reliance on the
report (which contains an explanatory paragraph relating to the
Companys restatement of its consolidated financial
statements as described in Note 20A to the financial
statements and also contains an adverse opinion on the
effectiveness of internal control over financial reporting) of
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
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PROSPECTUS SUPPLEMENT
Joint Book Runners
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HSBC |
Goldman, Sachs & Co. |
Scotia Capital |
Co-Managers
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Merrill
Lynch & Co. |
NBF Securities (USA) Corp. |