<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For The Fiscal Year Ended June 30, 1995.
Commission File No. 0-5664
ROYAL GOLD, INC.
-----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 84-0835164
- ------------------------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1660 Wynkoop Street
Suite 1000
Denver, Colorado 80202-1132
- --------------------- ----------
(Address of Principal (Zip Code)
Executive Offices)
(303) 573-1660
----------------------------------------------------
(Registrant's Telephone Number, including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock $0.01 Par Value
--------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past ninety (90) days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ X ]
As of August 31, 1995, the average bid and asked price of the
Company's stock was $8.3125. The aggregate market value of voting
stock held by non-affiliates was $79,400,000.
As of August 31, 1995, there were 14,476,976 shares of Common
Stock, $0.01 par value, outstanding.
Documents Incorporated By Reference
Portions of the Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on December 5, 1995: Part III,
Items 11, 12 and 13.
Total Number of Pages: 54 Exhibit Index - Page 48
<PAGE>
TABLE OF CONTENTS
PAGE
Part I
Items 1.
and 2. Business and Properties 1
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of
Security Holders 13
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14
Item 8. Financial Statements and Supplementary Data 20
Part III
Item 10. Directors and Executive Officers of the
Registrant 46
Item 11. Executive Compensation 48
Item 12. Security Ownership of Certain Beneficial
Owners and Management 48
Item 13. Certain Relationships and Related
Transactions 48
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 48
Exhibit A. The Company and Its Subsidiaries 52
Signatures 53
<PAGE>
PART I
Items 1 and 2. BUSINESS AND PROPERTIES
General
- -------
Royal Gold, Inc. (together with its subsidiaries, "Royal" or the
"Company") is engaged in the acquisition, exploration,
development, and sale of gold properties and in the acquisition
of gold royalty interests.
The Company's primary business strategy is to create and acquire
royalty and other carried ownership interests in gold mining
properties through exploration and development activity (and
subsequent transfer of the operating interest in the subject
properties to other firms), and through the direct acquisition of
such interests. Substantially all the Company's revenues are and
can be expected to be derived from royalty interests, rather than
from mining operations conducted by the Company.
The current status of the Company's mineral property interests is
as follows: The Company holds a carried 20% net profits royalty
interest in the South Pipeline Project, operated by Cortez Gold
Mines. South Pipeline is located in Crescent Valley, Nevada, and
gold production commenced at that property in September 1994 (see
"South Pipeline Project" below). In fiscal 1995, the Company
generated revenues of $330,000 from its royalty interest at South
Pipeline. The Company has farmed-out its interest in the Bob
Creek project, in Eureka County, Nevada, and the Company is
conducting its own exploration programs at Long Valley, in Mono
County, California; at Buckhorn South, in Eureka County, Nevada;
at Ferber, in Elko County, Nevada; and at several recently-
acquired prospects in Nevada and Utah. The South Pipeline
Project is the only property in which the Company holds an
interest that is currently producing gold.
The Company is also engaged, through two wholly-owned
subsidiaries, Denver Mining Finance Company ("DMFC") and
Environmental Strategies, Inc. ("ESI"), in providing financial,
operational, and environmental consulting services to the mining
industry and to companies serving the mining industry. During
fiscal 1995, income generated from consulting services was not
material.
The Company was incorporated under the laws of the State of
Delaware on January 5, 1981. Its executive offices are located
at 1660 Wynkoop Street, Suite 1000, Denver, Colorado 80202. See
Exhibit 22, "The Company and Its Subsidiaries."
1
<PAGE>
Significant Developments During Fiscal 1995
- -------------------------------------------
The most significant developments of fiscal 1995 were:
(1) The first receipt of royalty payments derived from production
at the "Crescent Pit" on the South Pipeline property. As of
June 30, 1995, the Company has received 479.78 ounces of gold,
valued at $183,073, related to its net profits interest in the
Crescent Pit. As of June 30, 1995, the Crescent Pit has produced
40,423 ounces of gold from mill production. The net profits from
the Crescent Pit (that is, revenues less direct operating costs)
have already paid back to Cortez all preproduction costs, and
from the first quarter of fiscal 1996, the Company will receive
its full 20% net profits interest from the Crescent Pit.
(2) A private placement involving the sale of a total of 500,000
shares of the Company's common stock for aggregate net proceeds
of $3.8 million.
(3) The expansion of the arrangement pursuant to which the
Company may, through December 31, 1995, explore the entirety of
Union Pacific Corporation's mineral estate in Colorado, Wyoming
and Utah (approximately 7.5 million acres), and secure the
exclusive right to develop and/or farm out gold and other
precious mineral deposits on 50,000 acres of such ground, as may
be designated by Royal Gold.
(4) The purchase of a 0.75% net smelter returns ("NSR" *) royalty
interest, capped at $375,000, at the South Pipeline Project.
The completion of the private placement transaction, and the
commencement of royalty receipts from the Crescent Pit ensures
the Company's ability to continue an aggressive exploration
program, both on the Union Pacific lands and at those projects
that the Company has initiated in Nevada and elsewhere.
Also during fiscal 1995, the Company conducted drilling programs
and geophysical work at each of its Long Valley, Buckhorn South
and Ferber properties and, as of the date of this report, the
Company has acquired several additional exploration properties in
Nevada and Utah. During fiscal 1995, the Company also farmed-out
its Bob Creek property to Santa Fe Pacific Gold Corporation, and
received in exchange a property payment of $20,000 and a
commitment to perform exploration work.
__________________________
* "Net smelter returns" or "NSR royalty" interest means that
the royalty holder receives a defined percentage of the gross
revenue, less a proportionate share of incidental
transportation and processing costs.
2
<PAGE>
Properties
- ----------
Recent activities at each of the significant properties in which
the Company has an interest are described below. Reference is
made to footnotes in the financial statements for more
information on property histories.
In all instances, the Company has estimated gold-bearing material
by the use of drilling, mapping, sampling, geological
interpretation, assaying and other standard evaluation methods
generally applied by the mining industry. The Company has relied
on its joint venture partners and previous owners of certain of
its properties for the preparation of certain data and other
information. Any information prepared by others has been
reviewed by the Company and its consultants.
South Pipeline Project
- ----------------------
The South Pipeline Project royalty interest is the Company's most
significant gold property interest. The South Pipeline Project
is operated by Cortez Gold Mines ("Cortez"), a joint venture of
Placer Domes U.S. Inc. ("PDUS") and Kennecott Exploration
(Australia) Ltd. The South Pipeline Project is located in Lander
County, Nevada, approximately 60 miles southwest of Elko. The
project involves over 4,000 acres of unpatented mining claims
(the "GAS Mining Claims"), which Cortez leases from ECM, Inc.
("ECM").
The Company currently holds a fully-carried royalty interest in
the South Pipeline Project. (That is, the Company is never
obliged to advance any of the costs of exploration, development
or production at South Pipeline.) The Company, at its annual
election, can either receive a 20% net profits royalty interest
or a sliding scale 2.5% to 5.5% NSR royalty interest in all
production from the GAS Mining Claims. Under either royalty
interest, the Company may elect to take its share of production
in kind.
Background
- ----------
As has been described extensively in prior years, the Company has
been involved with this property since 1987. The Company, as the
original operator of a joint venture with Cortez, conducted the
initial exploration work at South Pipeline, which was then
referred to as "Crescent Valley".
Reverse circulation drilling programs conducted by the Company in
calendar 1988, 1989 and 1990 resulted in identification of one
sediment-hosted, "Carlin-type", disseminated gold deposit, and
identification of other gold anomalies.
3
<PAGE>
In 1991, due to liquidity problems then being experienced, the
Company determined to sell its interest in the property. By the
end of 1991, the Company held only a nominal interest in the
South Pipeline property. However, as described extensively in
prior years and in Note 2.A. to the Consolidated Financial
Statements that are included in Item 8 ("Note 2.A."), in
September 1992, the Company recovered a 20% net profits interest
in South Pipeline following settlement of litigation brought by
the Company against Cortez and PDUS. Under the South Pipeline
Project agreement, the Company also receives $150,000 per year in
advance minimum royalties. All such royalties, together with
allocable capital, are recoupable by Cortez out of production
royalties otherwise payable to the Company.
Development
- -----------
Since November 1992, Cortez has conducted an aggressive program
of exploration and development drilling at South Pipeline, and
has spent well over $14 million through June 30, 1995.
The mineral deposit at South Pipeline is now estimated to contain
91.8 million tons, with an average grade of 0.048 ounces per ton
of gold or 4.4 million contained ounces Limited exploration
drilling is scheduled to continue at South Pipeline for the
remainder of calendar year 1995.
In June 1994, Cortez began to mine the Crescent Pit, a near-
surface portion of the South Pipeline deposit, and on September
20, 1994, Cortez noticed that it had commenced the production of
gold from the Crescent Pit. Cortez combines the Crescent Pit ore
with ore from another mine (in which the Company has no
interest), and processes all such ore at the Cortez mill, a 2,000
ton per day facility. At June 30, 1995, production from the
Crescent Pit was utilizing approximately 50% of the capacity of
the Cortez mill.
Cortez is presently evaluating feasibility of proceeding with
production of the larger South Pipeline deposit. Such evaluation
involves numerous geologic, engineering, environmental, and
economic considerations, and the results of such evaluation are
expected to be announced by the end of calendar year 1995.
In addition to the South Pipeline gold deposits that have been
defined to date, other important gold intercepts have been made
on South Pipeline property, which suggests that additional
deposits may exist on the property. These developments, together
with the start of production from the Crescent Pit, indicate that
the Company's royalty interest in the South Pipeline Project may
generate revenue for a number of years to come.
The Crescent Pit operation, which is projected to encompass some
320 acres within the 4,000 acre claim block of the South Pipeline
4
<PAGE>
Project, was planned to recover some 217,000 ounces of mill-grade
gold over a four-year period. In July 1995, production commenced
at the Crescent Pit heap leach facility. It is anticipated that
34,000 ounces of gold will be recovered from the heap leach over
a five year period.
Set forth below are charts showing the reserves and gold deposits
that have been defined at South Pipeline:
Proven and Probable Reserves (1)
June 30, 1995
Average
Tons Grade Recoverable
(millions) (oz Au/ton) Oz Au (2)
---------- ----------- -----------
South Pipeline
Crescent Pit:
Mill Grade Ore (3) 1.69 0.125 186,000
Heap Leach Ore (3) 2.20 0.029 34,000
- ------------------------------
(1) "Reserve" is that part of a mineral deposit which could be
economically and legally extracted or produced at the time of the
reserve determination.
"Proven (Measured) Reserves" are reserves for which (a)
quantity is computed from dimensions revealed in outcrops,
trenches, workings or drill holes and the grade is computed from
the results of detailed sampling, and (b) the sites for
inspection, sampling and measurement are spaced so closely and
the geologic character is so well defined that the size, shape,
depth and mineral content of the reserves are well-established.
"Probable (Indicated) Reserves" are reserves for which
the quantity and grade are computed from information similar to
that used for proven (measured) reserves, but the sites for
inspection, sampling, and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance of
probable (indicated) reserves, although lower than that for
proven (measured) reserves, is high enough to assume geological
continuity between points of observation.
(2) Recoverable ounces shown are after an allowance for dilution
of ore in the mining process and reflect assumed recovery rates
of 88% for mill-grade ore and 50% for heap leach material.
(3) Amounts shown represent 100% of the reserves. The Company
holds a 20% net profits interest in this property.
5
<PAGE>
Gold Deposits/Mineralization (1)
June 30, 1995
Average
Tons Grade
(millions) (oz Au/ton)
---------- -----------
South Pipeline
(includes Crescent
Pit reserves (2)) 76.21 0.048
Gaslight 15.60 0.050
- ----------------------
(1) Gold mineralization has not been included in the proven and
probable ore reserve estimates because even though drilling,
trenching and/or underground work indicate a sufficient quantity
and grade to warrant further exploration or development
expenditures, these deposits do not qualify as commercially
minable ore bodies until further drilling and metallurgical work
are completed, and until other economic and technical feasibility
factors based upon such work are resolved.
(2) Amounts shown represent 100% of the deposits. The Company
holds a 20% net profits interest in this property.
Union Pacific Exploration Project
- ---------------------------------
Under its agreement with Union Pacific, originally executed in
May 1994, the Company may explore 7.5 million acres of Union
Pacific land in Utah, Wyoming and Colorado, including the State
Line Districts of Wyoming and Colorado. The Company is now
conducting preliminary exploration throughout Union Pacific's
holdings until December 31, 1995, when Royal Gold must designate
50,000 acres for more extensive exploration.
The Company has already identified ten large prospect areas where
it is conducting geochemical sampling surveys, with a view to
more intensive exploration if the sampling proves favorable. The
Company has committed to a work program of $500,000 to be spent
by December 31, 1995; through June 30, 1995, the Company has
spent approximately $300,000, and $200,000 in work has been
planned for the remainder of calendar year 1995. If the Company
wishes to extend the term of exploration through December 31,
1997, it must make an additional commitment of $600,000, and
thereafter, if it wishes to extend the term of the agreement
through December 31, 1998, it must make a further commitment of
$1,000,000. For the full 55-month term of the agreement, the
Company's exploration and development obligation would be $2.1
million.
6
<PAGE>
If the Company identifies attractive deposits on the Union
Pacific lands, it has the opportunity, under the terms of
agreements that have already been negotiated with Union Pacific,
to assign further exploration and development rights to third
parties; to develop such deposits in collaboration with Union
Pacific; or to develop such deposits for Royal's own account. In
all circumstances, Union Pacific will retain a royalty interest,
and will retain various rights to participate on a working
interest basis in the development, and operation of any mineral
deposit.
The extent of any such Union Pacific royalty will depend on
market factors, including, among others, the desirability to a
third party of the particular deposit that may be discovered on
the Union Pacific property.
Long Valley
- -----------
The Long Valley project consists of 105 unpatented mining claims
located 45 miles north of Bishop, California, in Mono County.
The Company has been involved with this property since 1989, when
it entered into a joint venture with Standard Industrial
Minerals, Inc. ("Standard"). Standard owns the claims that
comprise the Long Valley project, and operates a kaolin mine that
is adjacent to the property.
Under the joint venture agreement, the Company has an option,
exercisable through December 31, 1997, to acquire the entirety of
Standard's interest in Long Valley for $1,000,000. During the
term of the option, the Company is obliged to make annual
payments to Standard, totalling $125,000 over four years, with
$100,000 of such payments being creditable against the option
exercise payment. The Company has no specific work commitment.
During 1994, the Company completed 18 reverse circulation holes,
aggregating some 16,000 feet. Based on the results of such
drilling, and data generated by predecessors in interest, Royal
Gold determined the existence of two new areas of gold
mineralization (the "Hilton Creek Zone" and the "Southeast
Zone"), separated by about 2,000 feet, and estimated that such
zones contain a total of 49,640,000 tons of gold mineralization,
with an average grade of 0.018 ounces of gold per ton.
Royal Gold has continued to drill at Long Valley throughout the
spring and summer of 1995, and as of September 15, 1995 has
completed an additional 32 reverse circulation holes, totalling
more than 13,600 feet. The more recent drilling has established
continuity of mineralization between the Hilton Creek and
Southeast Zones, and has demonstrated the existence, in the
Hilton Creek Zone, of a higher-grade area of mineralization, with
numerous drill intercepts exceeding 0.04 ounces of gold per ton.
7
<PAGE>
Drilling continues at Long Valley as of the date of this report,
and the Company will revise its prior estimate of the mineral
deposit at Long Valley after the conclusion of the current
drilling season. The Company has budgeted $700,000 for
exploration at Long Valley through calendar year 1995.
Substantial additional work is required at both the Hilton Creek
Zone and the Southeast Zone before either such deposit could be
classified as either proven or probable reserves.
Buckhorn South
- --------------
The Buckhorn South project is located in Eureka County, Nevada,
approximately 50 miles southwest of Elko. The property consists
of 265 unpatented mining claims.
Of the 265 claims that comprise Buckhorn South, the Company
leases 131 such claims from Ronald and Arlene Damele, et al.,
and the Company staked the balance of the project area. Over the
next three years, the Company is obliged to pay the lessor
$460,000 in advance minimum royalties. The leased claims are
burdened by cumulative royalties equal to a 4% NSR; the remaining
claims are subject to a 1% NSR.
A predecessor in interest at the property completed some 10,400
feet of drilling, and on the basis of such work and other
exploration had, by 1984, estimated that the "Zeke" deposit
contains two million tons grading 0.056 ounces of gold per ton.
During 1994, the Company conducted geophysical surveys and
drilled nine holes aggregating 6,800 feet. Through its work, the
Company identified new areas of gold mineralization about one
mile south of the Zeke deposit, and also identified structurally
complex areas that may contain significant alteration and
sulfides.
A 23-hole drilling program, designed to test the new areas of
mineralization and the previously-identified anomalies, commenced
in September 1995, with a planned cost of $280,000.
Ferber
- ------
The Ferber project is located in Elko County, Nevada,
approximately 80 miles southeast of Elko, and consists of 98
unpatented mining claims. Royal leases 51 of the claims from
Donald Jennings, and it independently located the other 47. The
Jennings lease involves advance minimum royalties of $10,000 per
year, expiring in February 1998, and a royalty burden of 2% NSR.
The Company also has work commitments of $100,000 per year in
1999 and 2000 and $150,000 per year through 2003. In April 1995,
five reverse circulation holes were completed totalling
8
<PAGE>
3,020 feet. These holes were drilled to test for mineralization
along the southwestern margin of an intrusive where copper and
gold are known to occur in skarns. Three of the holes
encountered strongly anomalous gold and copper in both the skarn
and the intrusive. The presence of such anomalous intervals in
the intrusive opens large areas of the district for further
exploration, and the Company will be conducting additional
drilling at Ferber commencing in October 1995, budgeted at
$85,000.
Bob Creek Project
- -----------------
The Bob Creek project consists of 103 unpatented mining claims in
Eureka County, Nevada, near the town of Beowawe. The claims are
held by the Company under two separate mining leases.
In December 1994, the Company entered into a farm-out agreement
with Santa Fe Pacific Gold Corporation. Under the terms of the
agreement, Santa Fe will (1) assume all of Royal Gold's
obligations under the two underlying mining leases; (2) spend a
minimum of $150,000 in exploration during the first year of the
agreement; and (3) spend progressively greater amounts on
exploration over the succeeding three years if Santa Fe decides
to continue the program. The Company has also reserved a 2% NSR
production royalty.
Exploration Properties
- ----------------------
In August 1995, the Company acquired control of five additional
properties in Nevada and Utah, and it intends to initiate
exploration on each such property during fiscal 1996, at a total
planned cost of $400,000. The Company will continue to acquire
and explore other properties, to the extent that the Company
believes they have the potential to host major gold deposits. It
can be anticipated, because of the nature of the business, that
exploration on many of these properties will prove unsuccessful
and that the Company will terminate its interest in such
properties. As significant results are generated at any such
property, the Company will reevaluate the property, and may
substantially increase or decrease the level of expenditures on
the particular property.
Goldstripe
- ----------
The Goldstripe Mine was located in Plumas County, California. As
described in previous filings, the Company's mining operations
ceased at Goldstripe after the 1989 operating season, and most of
the reclamation required of the Company has now been completed,
but revegetation and ground water monitoring activities continue.
9
<PAGE>
In 1992, the Company surrendered a $341,000 reclamation bond to
fund reclamation, which was conducted by the U.S. Forest Service.
The Company believes that only approximately $250,000 of the
$341,000 has been spent to date, and that future costs are likely
to be immaterial. The Company wrote off its interest in
Goldstripe during fiscal 1994.
See Item 3, "LEGAL PROCEEDINGS," below for further information
relating to actions initiated by the Forest Service at
Goldstripe.
Other Matters
- -------------
Sales Contracts
- ---------------
The Company had no sales of gold bullion in fiscal 1995, and
therefore there were no material relationships with metal traders
during the period.
Risks Inherent in the Mining Industry
- -------------------------------------
Mineral exploration and development is highly speculative and
capital intensive. Most exploration programs do not result in
the discovery of mineralization of sufficient quantity or quality
to be profitably mined. The operations of the Company will be
subject to all of the hazards and risks normally incident to
developing and operating mining properties.
Regulation
- ----------
The Company's activities in the United States are subject to
various federal, state and local laws and regulations governing
prospecting, development, production, labor standards,
occupational health, mine safety, control of toxic substances,
other matters involving environmental protection, and taxation.
The environmental protection laws address, among other things,
the maintenance of air and water quality standards, the
preservation of threatened and endangered species of wildlife and
vegetation, the preservation of certain archaeological sites,
reclamation, and limitations on the generation, transportation,
storage and disposal of solid and hazardous wastes. In 1992, the
Company received notice of a response action initiated by the
U.S. Forest Service with respect to Goldstripe, but based on
information currently available believes that no further action
by the Company is likely to be required. Therefore, the Company
believes that the response action will not result in any material
adverse effect on the Company. See "LEGAL PROCEEDINGS." The
Company believes that the operations in which it retains
interests are currently in material compliance with all
applicable laws and regulations.
10
<PAGE>
Fluctuations in the Market Price of Minerals
- --------------------------------------------
The profitability of gold mining operations is directly related
to the market price of gold. The market price of gold fluctuates
widely and is affected by numerous factors beyond the control of
the Company, including expectations with respect to the rate of
inflation, the exchange rates of the dollar and other currencies,
interest rates, global or regional political, economic or banking
crises, and a number of other factors. If the market price of
gold should drop dramatically, the value of the Company's
properties which are being explored or developed could also drop
dramatically, and the Company might not be able to recover its
investment in those properties. The selection of a property for
exploration or development, the decision to place a mine into
production, and the commitment of funds necessary for all such
purposes, must be made long before the first revenues from
production will be received. Price fluctuations between the time
that such decisions are made and the commencement of production
can drastically affect the economics of a mine.
The volatility of gold prices represents a substantial risk to
the mining industry, generally, which no amount of planning or
technical expertise can eliminate. The volatility in gold prices
is illustrated by the following table, which sets forth, for the
periods indicated, the high and low prices per ounce.
Year Gold Price Per Ounce
---- --------------------
High Low
---- ---
1990 424 346
1991 403 350
1992 359 331
1993 406 327
1994 396 370
January-June, 1995 393 372
At August 30, 1995, the gold price was $381.40 per ounce. At
present, the Company has no hedging programs in place. The
Company would consider hedging programs in the event certain
production levels are obtained and maintained, and market
conditions justify the economic use of hedging programs.
Competition
- -----------
There is aggressive competition within the minerals industry to
discover and acquire properties considered to have commercial
potential. The Company competes for the opportunity to
participate in promising exploration projects with other
entities, many of which have greater resources than the Company.
In addition, the Company competes with others in efforts to
obtain financing to explore and develop mineral properties, and
it also competes with others in efforts to purchase gold royalty
interests.
11
<PAGE>
Company Personnel
- -----------------
At August 31, 1995, the Company had nine full-time employees
located in Denver, Colorado, and one full-time employee located
in Elko, Nevada. The Company's employees are not subject to a
union labor contract or collective bargaining agreement.
Consulting services, relating primarily to geologic and
geophysical interpretations, and advice with respect to
metallurgical, engineering, legal and such other technical
matters as may be deemed useful in the operation of the Company's
business, are provided by independent consultants and
contractors.
Foreign Operations
- ------------------
The Company owns a 50% interest in Greek American Exploration
Ltd. ("GRAMEX"), a Bulgarian corporation that has entered into an
agreement with the Bulgarian Committee of Geology and Mineral
Resources to conduct geological research and exploration over 700
square kilometers in the Krumovgrad and Ivaylovgrad areas of
Bulgaria.
This cancelable agreement is for an initial term of two years,
requiring expenditures of $100,000 per year by GRAMEX. The
agreement may be extended for an additional two year period,
expiring 1998. The Company is obligated to fund 50% of these
expenditures.
Item 3. LEGAL PROCEEDINGS
Goldstripe Project
- ------------------
Following cessation of the Company's operations at Goldstripe,
and in connection with efforts to obtain funding for reclamation,
on August 5, 1992, the U.S. Forest Service notified the Company
that it had determined to initiate a response action at the
Goldstripe site, under the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), in order to assess
the threat of a possible release of cyanide from a processed
material residue pile. To date, the only action undertaken by the
Forest Service in connection with the response action has been to
establish four monitoring wells at the site, at an estimated cost
of $27,000. Although not formally related to the response action
notice, on October 5, 1992, the Company released $341,000 in cash
security for a reclamation bond to fund reclamation to be
performed at Goldstripe by the Forest Service. The Company
believes, based on oral communications with the Forest Service,
that approximately $250,000 of the $341,000 has been spent to
date. The Company also believes, based on such communications,
and the current status of reclamation at the site, that no
12
<PAGE>
additional "response action" or other remediation is likely to be
undertaken by the Forest Service under CERCLA or otherwise. See
"BUSINESS AND PROPERTIES - GOLDSTRIPE."
In August 1993, in May 1994, and again in May 1995, the Forest
Service advised the Company that its reclamation activities were
substantially completed (except for revegetation) and that the
Forest Service believed that such activities should satisfy all
outstanding permit requirements for reclamation, except for
ongoing post-reclamation monitoring of water quality. However,
it is possible that additional reclamation or water quality
monitoring could be required, and that any such requirement could
result in additional cost to the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the quarter ended June 30, 1995. Annual meeting results will be
described in Item 4 to the Company's report filed on Form 10-Q,
for the quarter ended December 31, 1995.
PART II
-------
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock of the Company is traded in the over the counter
market by the National Association of Securities Dealers under
the symbol "RGLD." The following table shows the high and low
closing sales prices for the Common Stock for each quarter since
June 30, 1993.
Sales Prices
------------------
High Low
Fiscal Year Closing Closing
------- -------
1994:
First Quarter (July, Aug., Sept. - 1993) $ 4 1/2 $ 3 5/8
Second Quarter (Oct., Nov., Dec. - 1993) $ 8 5/8 $ 3 5/8
Third Quarter (Jan., Feb., March - 1994) $ 9 1/8 $ 7 5/8
Fourth Quarter (April, May, June - 1994) $ 9 1/8 $ 7 5/8
Sales Prices
------------------
High Low
------- -------
1995:
First Quarter (July, Aug., Sept. - 1994) $ 9 1/8 $ 7 1/4
Second Quarter (Oct., Nov., Dec. - 1994) $ 8 1/4 $ 7 1/2
Third Quarter (Jan., Feb., March - 1995) $ 8 1/4 $ 5 5/8
Fourth Quarter (April, May, June - 1995) $ 8 1/4 $ 6 1/2
As of August 31, 1995 there were approximately 3,000 shareholders
of record of the Company's common stock.
13
<PAGE>
Dividends
- ---------
The Company has never paid any cash dividends on its Common Stock
and does not have any current plans to pay such dividends.
Item 6. SELECTED FINANCIAL DATA
For the Year Ended June 30,
----------------------------------------------
Selected Statement of 1995 1994 1993 1992 1991
------ ------ ------ ------ -----
Operations Data (Amounts in thousands, except per share data)
- --------------- ---------------------------------------------
Bullion sales $ - $ - $ - $ - $ 213
Royalty income 470 153 150 - -
Exploration expense 1,485 686 151 111 36
General and administrative
expense 1,015 753 582 682 941
Net loss (2,025) (1,452) (618) (638) (8,940)
Net income (loss)
per share $ (.14) $ (.11) $ (.06) $ (.07) $ (1.00)
As of June 30,
----------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Selected Balance Sheet Data (Amounts in thousands)
- --------------------------- ----------------------------------------------
Total assets $ 10,273 $ 8,183 $ 2,727 $ 1,877 $2,609
Working capital (deficit) 8,723 6,884 1,229 (272) (236)
Long-term obligations 117 131 193 453 406
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
On June 30, 1995, the Company had current assets of $8,941,000
compared to current liabilities of $218,000 for a current ratio
of 41 to 1. This compares to current assets of $7,122,000 and
current liabilities of $238,000, at June 30, 1994, resulting in a
current ratio of 30 to 1. The Company's current assets include
approximately $5,012,000 of marketable securities that consist of
U.S. treasury securities with maturities of 15 months or less.
The Company's initial cost of these marketable securities was
$4,983,125.
During fiscal 1995, liquidity needs were met from: (i) a private
placement of the Company's common stock which raised net proceeds
of $3.8 million, (ii) revenue from the commencement of production
at the Crescent Pit, (iii) the Company's available cash resources
and interest income of $369,961, (iv) cash payments of $175,000
received from advance royalties and property payments, and (v)
14
<PAGE>
earnings of $55,000 from financial and environmental consulting
services. The Company's operating activities utilized
approximately $2,300,000 of cash during the fiscal year ended
June 30, 1995.
The only material commitments of the Company that cannot be
terminated at the sole discretion of the Company are (i) the
Union Pacific Agreement which requires approximately $200,000 to
be spent on exploration during the period July 1, 1995 through
December 31, 1995; (ii) employment agreements with four officers,
calling for minimum payments of approximately $268,000 for
through January 1996; and (iii) office lease payments of $549,535
through the lease period ending October 1999. The Union Pacific
Agreement provides that the Company can extend the agreement for
two additional terms of 24 and 12 months upon making additional
exploration commitments of $600,000 and $1,000,000, respectively.
(If the Company exercises its rights to extend, total exploration
expenditures under the agreement are estimated to be $2,100,000
over the full 55-month term.)
The Company anticipates total expenditures for fiscal 1996 for
general and administrative expenses to be approximately
$1,000,000 and expenditures for exploration and property holding
costs to be approximately $1,650,000 (including amounts spent
under the Union Pacific Agreement). Exploration and holding cost
expenditures include $700,000 for Long Valley, $280,000 for
Buckhorn South, $200,000 for the Union Pacific project, and
$400,000 for generative exploration. On a prospective basis,
these amounts could increase or decrease significantly, based on
exploration results and decisions about releasing or acquiring
additional properties, among other factors.
Gold production commenced at the Crescent Pit in September 1994.
Payback of Cortez's pre-production costs occurred in June 1995.
During the first quarter of fiscal 1996, the Company will receive
its full 20% net profits interest for the remainder of production
at the Crescent Pit.
The Company will continue to explore its remaining properties and
intends to acquire new projects, all with a view to enhancing the
value of such properties prior to possible farm out to major
mining company partners.
It is anticipated that the Company will receive proceeds of
$2,867,000 from the exercise of outstanding warrants that
otherwise would expire in fiscal 1996. The exercise prices on
these warrants range from $2.00 to $5.75. In September 1995, the
Company received $1,150,000 of this amount relating to 200,000
shares at an exercise price of $5.75.
The Company's current financial resources and sources of income
should be adequate to cover the Company's general and
15
<PAGE>
administrative costs for at least the next fiscal year. The
Company is greatly encouraged by the development work currently
being carried out at South Pipeline, and by the commencement of
gold production at the Crescent Pit. These events could lead to
sustained gold production over the next several years, with the
consequence that the Company's long-term liquidity needs would be
supported by cash flow from the South Pipeline Project.
Meanwhile, if increased general and administrative costs arise
from new business in the financial and environmental consulting
sectors, additional revenues would also be expected.
RESULTS OF OPERATIONS
- ---------------------
Fiscal Year Ended June 30, 1995 Compared with Fiscal Year Ended
- ---------------------------------------------------------------
June 30, 1994
- -------------
For the year ended June 30, 1995, the Company recorded a net loss
of $2,025,000, or $.14 per share, as compared to a net loss of
$1,452,000, or $.11 per share, for the year ended June 30, 1994.
The net loss for the current period resulted mainly from
exploration and ongoing administrative expense after receipt of
$470,000 in royalty and other property payments.
Royalty income received from the Crescent Pit for the year
included $183,000 in gold from the Company's net profits
interest royalty, and $111,000 from the capped NSR royalty.
During the current fiscal year, Cortez has also recouped $363,000
of the advance minimum royalties ("AMR") previously paid to the
Company. At June 30, 1995, the current outstanding balance of
minimum royalties to be recouped is $87,000.
Production at the Crescent Pit:
Crescent Pit (100%)
Tons Grade Recovery
(000) oz/tn Percent Ounces
----- ----- ------- -------
For the quarters ended:
12/31/94 94.4 .124 78.4 9,105
3/31/95 88.0 .156 84.4 11,591
6/30/95 95.1 .240 86.3 19,727
For the year ended:
6/30/95 277.5 .174 83.5 40,423
16
<PAGE>
Royal Gold's Net Profits Interest Royalty at the Crescent Pit:
Net Royal's AMR Net received
Profit Net Profits Payback by Royal
------ ----------- ------- ------------
For the quarters ended:
12/31/94 $582,270 $33,073 - $3,073
3/31/95 $2,281,823 $121,165 - $121,165
6/30/95 $5,693,916 $391,361 $362,527 $28,834(1)
For the year ended:
6/30/95 $8,558,009 $545,599 $362,527(2) $183,072(1)
(1) During the quarter ended June 30, 1995, Cortez received
payback of its preproduction expenditures. The Company will
receive its 20% full net profits interest for the remainder of
the Crescent Pit production.
(2) $87,473 of advance minimum royalties remain to be recouped by
Cortez.
Costs of operations increased over the prior year primarily due
to the addition of an operations manager who is located at the
Company's field office at the Cortez Gold Mines in Nevada, and
increased engineering analysis of the resource identified at the
South Pipeline Project.
Consulting revenues and costs of consulting revenues increased
over the prior year primarily from one consulting arrangement.
General and administrative expenses of $1,015,000, for the year
ended June 30, 1995, increased from those of $753,000, for the
year ended June 30, 1994, as a result of increased employee
compensation. General and administrative expenses consist
primarily of employee compensation and benefits, office lease
expense, office equipment expenses, travel and communication
costs.
Exploration costs increased from $686,000 in fiscal 1994 to
$1,485,000 in fiscal 1995 due to increased drilling related
expenditures at the Long Valley and Buckhorn South properties,
expenditures related to the exploration on Union Pacific grounds,
and increased compensation for employees allocated to
exploration.
17
<PAGE>
Abandonments and impairments decreased to zero in fiscal 1995
versus $749,350 in fiscal 1994 because no capitalized properties
were abandoned during the year.
Interest and other income was $386,000 in fiscal 1995, up from
$143,000 in fiscal 1994, due primarily to increased funds
available for investing from private placements of common stock.
At June 30, 1995, the Company had a gain of $76,000 in its U.S.
Treasury securities portfolio due to the decrease in short term
interest rates.
Depreciation and amortization increased from $26,000 for fiscal
1994 to $102,000 for fiscal 1995, primarily due to the depletion
associated with the Company's capped royalty at South Pipeline.
Fiscal Year Ended June 30, 1994 Compared with Fiscal Year Ended
- ---------------------------------------------------------------
June 30, 1993
- -------------
For the year ended June 30, 1994, the Company recorded a net loss
of $1,452,000, or $.11 per share, as compared to a net loss of
$618,000, or $.06 per share, for the year ended June 30, 1993.
The net loss for the year ended June 30, 1994 resulted mainly
from ongoing administrative expense after receipt of $155,000 in
advance minimum royalty and other property payments. General and
administrative costs of $753,000 for the fiscal year ended June
30, 1994.
Other costs and expenses included $164,000 in lease maintenance
and holding costs in 1994 relating to 12,520 acres, up from
$17,000 in 1993. Exploration costs increased from $151,000 for
the year ended June 30, 1993, to $686,000 for the year ended June
30, 1994, due to the Company's renewed emphasis on exploration
projects.
General and administrative expenses of $753,000 for the year
ended June 30, 1994, increased from those of $582,000 for the
year ended June 30, 1993, as a result of increased staffing and
increased compensation. General and administrative expenses
consist primarily of employee compensation and benefits, office
lease expense, office equipment expenses, travel and
communication costs.
Interest and other income was $143,000 in fiscal 1994, up from
$34,000 in fiscal 1993, due primarily to increased funds
available for investing from stock placements. In fiscal 1993,
$48,000 was recognized for the gain on sale of investments in
restricted common stock. At June 30, 1994, the Company had an
unrealized loss of $47,000 in its U.S. Treasury securities
portfolio.
18
<PAGE>
Depreciation and amortization declined from $37,000 for fiscal
1993 to $26,000 for fiscal 1994, due to assets which became fully
depreciated during fiscal 1993, and because of assets that were
sold during fiscal 1993, which did not have a full year of
depreciation expense associated with them.
During fiscal 1994 mining assets were written down by $749,350,
primarily related to the abandonment of Goldstripe and other
properties, versus none in fiscal 1993.
During fiscal 1994 the Company recognized a deferred tax asset of
$750,000 associated with the proven reserve at Crescent Pit
versus none in fiscal 1992.
Impact of Inflation
- -------------------
The Company's operations have been subject to general
inflationary pressures, which have not had a significant impact
on its operating costs.
19
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ROYAL GOLD, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
REPORT OF INDEPENDENT AUDITORS 21
FINANCIAL STATEMENTS
Consolidated Balance Sheets 22
Consolidated Statements of Operations 24
Consolidated Statements of Stockholders' Equity 25
Consolidated Statements of Cash Flows 27
Notes to Consolidated Financial Statements 29
20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
------------------------------
To the Board of Directors
Royal Gold, Inc.
We have audited the accompanying consolidated balance sheets of Royal
Gold, Inc. and Subsidiaries as of June 30, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity,
and cash flows for the years ended June 30, 1995, 1994 and 1993.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Royal Gold, Inc. and Subsidiaries as of June 30,
1995 and 1994, and the consolidated results of their operations and
their cash flows for the years ended June 30, 1995, 1994 and 1993, in
conformity with generally accepted accounting principles.
/s/ Williams, Richey & Co.
Denver, Colorado
August 28, 1995
21
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of June 30, 1995 and 1994
ASSETS
1995 1994
-------- -------
Current Assets
Cash and equivalents (including $2,234,000
and $905,000, respectively, subject
to repurchase agreements) $ 3,424,094 $ 1,942,912
Marketable securities 5,011,570 4,897,626
Receivables
Trade and other 171,994 113,666
Related party 35,690 77,038
Gold inventory 183,073 0
Prepaid expenses and other 89,907 65,849
Deferred income tax benefit 25,000 25,000
--------- ---------
Total current assets 8,941,328 7,122,091
Property and equipment, at cost
Mineral properties 554,588 279,588
Furniture, equipment and improvements 732,666 761,633
--------- ---------
1,287,254 1,041,221
Less accumulated depreciation
and depletion (703,061) (717,914)
--------- ---------
Net property and equipment 584,193 323,307
Other Assets
Restricted investments and other 22,767 12,767
Deferred income tax benefit 725,000 725,000
Total other assets 747,767 737,767
---------- ---------
Total Assets $10,273,288 $ 8,183,165
========== =========
(continued)
The accompanying notes are an integral
part of these consolidated financial statements.
22
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, Continued
as of June 30, 1995 and 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
1995 1994
---------- ----------
Current Liabilities
Accounts payable $ 145,050 $ 122,147
Current portion of note payable 27,866 55,733
Accrued liabilities
Post retirement benefits 26,400 26,400
Other 19,161 33,866
---------- ---------
Total current liabilities 218,477 238,146
Note payable, net of current portion 0 27,867
Post-retirement benefit liabilities 116,949 103,349
Commitments and contingencies
(Notes 2, 6 & 7)
Stockholders' equity
Common stock, $.01 par value, authorized
30,000,000 shares; issued 14,492,962 and
13,835,712 shares, respectively 144,930 138,357
Additional paid-in capital 44,314,602 40,176,895
Accumulated deficit (34,441,697) (32,416,476)
---------- ---------
10,017,835 7,898,776
Less treasury stock, at cost
(15,986 and 16,986 shares, respectively) (79,973) (84,973)
--------- ---------
Total stockholders' equity 9,937,862 7,813,803
---------- ---------
Total liabilities and stockholders' equity $10,273,288 $ 8,183,165
========== =========
The accompanying notes are an integral
part of these consolidated financial statements.
23
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended June 30, 1995, 1994 and 1993
1995 1994 1993
-------- -------- --------
Royalty income $ 470,421 152,501 150,000
Consulting revenue 163,681 30,401 27,871
Costs and expenses
Costs of operations 217,109 78,351 65,797
Direct costs of consulting 108,216 19,175 23,749
General and administrative 1,014,761 752,989 582,262
Exploration, net 1,484,599 685,556 150,667
Abandonments and impairments 0 749,350 0
Lease maintenance and
holding costs 189,921 163,613 16,665
Depreciation and depletion 102,398 25,518 37,132
--------- --------- --------
Total costs and expenses 3,117,004 2,474,552 876,272
Operating loss (2,482,902) (2,291,650) (698,401)
Interest and other income 386,035 142,819 34,080
Gain (loss)on marketable securities 75,721 (47,276) 47,565
Interest and other expense (4,075) (5,431) (1,190)
---------- ---------- --------
Income (loss) before
income taxes (2,025,221) (2,201,538) (617,946)
Income tax benefit 0 750,000 0
---------- --------- --------
Net income (loss) $(2,025,221)$(1,451,538) $ (617,946)
========== ========== ========
Net loss per share $ (0.14) $ (0.11) $ (0.06)
Weighted average shares
outstanding 14,265,462 12,952,062 11,157,126
The accompanying notes are an integral
part of these consolidated financial statements.
24
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended June 30, 1995, 1994 and 1993
Additional
Common Stock Paid-In
Shares Amount Capital
--------- ------- ----------
Balance, June 30, 1992 9,191,712 $91,917 $31,318,114
Issuance of common stock for:
Exercise of options 210,220 2,102 30,113
Exercise of warrants 1,766,000 17,660 115,715
Private placement 1,008,000 10,080 1,789,120
Net loss for the year
ended June 30, 1993
---------- ------- ----------
Balance, June 30, 1993 12,175,932 121,759 33,253,062
---------- ------- ----------
Issuance of common stock for:
Exercise of options 133,780 1,338 302,728
Exercise of warrants 101,000 1,010 5,855
Private placement 1,425,000 14,250 6,610,750
Issuance of treasury shares
for lease bonus payment 4,500
Net loss for the year
ended June 30, 1994
---------- ------- ----------
Balance, June 30, 1994 13,835,712 138,357 40,176,895
---------- ------- ----------
Issuance of common stock for:
Exercise of options 139,750 1,398 314,977
Exercise of warrants 17,500 175 23,855
Private placement 500,000 5,000 3,795,000
Issuance of treasury shares
for lease bonus payment 3,875
Net loss for the year
ended June 30, 1995
---------- ------- ----------
Balance, June 30, 1995 14,492,962 $144,930 $44,314,602
========== ======= ==========
(continued)
The accompanying notes are an integral
part of these consolidated financial statements.
25
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, Continued
for the years ended June 30, 1995, 1994 and 1993
Total
Stock-
Accumulated Treasury Stock holders'
Deficit Shares Amount Equity
---------- ------ ------- -------
Balance, June 30, 1992 ($30,346,992) 24,186 ($120,973) $ 942,066
Issuance of common stock for:
Exercise of options 32,215
Exercise of warrants 133,375
Private placement 1,799,200
Net loss for the year
ended June 30, 1993 (617,946) (617,946)
---------- ------ ------- ---------
Balance, June 30, 1993 (30,964,938) 24,186 (120,973) 2,288,910
---------- ------ ------- ---------
Issuance of common stock for:
Exercise of options 304,066
Exercise of warrants 6,865
Private placement (6,000) 30,000 6,655,000
Issuance of treasury shares
for lease bonus payment (1,200) 6,000 10,500
Net loss for the year
ended June 30, 1994 (1,451,538) (1,451,538)
---------- ------ ------ ---------
Balance, June 30, 1994 (32,416,476) 16,986 (84,973) 7,813,803
---------- ------ ------ ---------
Issuance of common stock for:
Exercise of options 316,375
Exercise of warrants 24,030
Private placement 3,800,000
Issuance of treasury shares
for lease bonus payment (1,000) 5,000 8,875
Net loss for the year
ended June 30, 1995 (2,025,221) (2,025,221)
---------- ------ ------ ---------
Balance, June 30, 1995 ($34,441,697) 15,986 ($79,973) $9,937,862
========== ====== ====== =========
The accompanying notes are an integral
part of these consolidated financial statements.
26
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended June 30, 1995, 1994 and 1993
1995 1994 1993
--------- --------- ---------
Cash flows from operating activities
Net income (loss) ($2,025,221)($1,451,538) ($617,946)
--------- --------- -------
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and depletion 102,398 25,518 37,132
Unrealized (gain) loss on
marketable securities (75,721) 47,276 (47,565)
Abandonments and impairments 0 749,350 0
Increase in deferred tax assets 0 (750,000) 0
Issuance of common stock
for services 0 30,000 0
Non cash exploration expense 8,875 10,500 0
(Increase) decrease in:
Trade and other receivables (16,980) (170,128) 15,372
Marketable securities (38,224) (4,927,547) 0
Gold inventory (183,073) 0 0
Prepaid expenses and other (24,058) 12,083 (18,373)
Restricted investments (10,000) 0 341,145
Deposits and other 0 0 (3,948)
Increase (decrease) in:
Accounts payable and
accrued liabilities 8,198 69,004 (180,022)
Deferred reclamation liability 0 0 (337,101)
Post retirement and other
long-term liabilities (42,134) (6,248) 20,152
-------- --------- -------
Total adjustments (270,719) (4,927,547) (173,208)
Net cash provided by (used in)
operating activities (2,295,940) (6,361,730) (791,154)
--------- --------- -------
(continued)
The accompanying notes are an integral
part of these consolidated financial statements.
27
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS CASH FLOWS, Continued
for the years ended June 30, 1995, 1994 and 1993
1995 1994 1993
-------- ------- ---------
Cash flows from investing activities
Proceeds from disposition of:
Property and equipment 0 0 97,224
Mineral properties 0 2,499 0
Capital expenditures for
property and equipment (363,283) (35,361) (5,734)
(Increase) decrease in other
assets 0 0 (3,539)
Net cash provided by (used in) ------- ------ ------
investing activities (363,283) (32,862) 87,951
------- ------ ------
Cash flows from financing activities
Proceeds from issuance of
common stock 4,140,405 6,935,931 1,964,790
Net cash provided by --------- --------- ---------
financing activities 4,140,405 6,935,931 1,964,790
--------- --------- ---------
Net increase (decrease) in cash
and equivalents 1,481,182 523,984 1,261,587
--------- -------- ---------
Cash and equivalents at beginning
of year 1,942,912 1,418,928 157,341
--------- --------- ---------
Cash and equivalents at end of year $3,424,094 $1,942,912 $1,418,928
========= ========= =========
Supplemental disclosure of cash flow information:
Interest paid in fiscal 1995, 1994 and 1993 was $10,685, $0, and $1,190,
respectively.
Supplemental disclosure of non-cash activities:
In 1994, 6,000 shares of treasury stock valued at $30,000 were used as
partial payment for commission on a stock placement.
In 1993, the Company tendered its note, in the principal amount of
$83,650, to a former officer and director. This note reduced the current
portion of post retirement benefits by a like amount. (See Note 4.)
The accompanying notes are an integral
part of these consolidated financial statements.
28
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Operations and Summary of Significant Accounting Policies
---------------------------------------------------------
Operations:
Royal Gold, Inc. (the "Company" or "Royal"), was incorporated
under the laws of the state of Delaware on January 5, 1981,
and is engaged in the gold and other precious metals
business, primarily through passive and joint ownership
arrangements, and is also engaged in the acquisition,
exploration, development, and sale of gold properties, and in
the acquisition of gold royalty interests. The Company also
provides financial, operational, and environmental consulting
services to companies serving the mining industry.
Substantially all the Company's revenues are and can be
expected to be derived from royalty interests rather than
mining activity conducted by the Company.
Summary of Significant Accounting Policies:
Basis of Consolidation:
The consolidated financial statements include the accounts
of the Company, its wholly-owned subsidiaries and its
proportionate share of the accounts of unincorporated joint
ventures. All significant intercompany transactions and
account balances have been eliminated in consolidation.
Cash Equivalents:
For purposes of the statements of cash flows, the Company
considers all highly liquid investments purchased with an
original maturity of three months or less to be cash
equivalents. At June 30, 1995 the Company held $2,348,000
of U.S. government securities under an agreement to resell
in July 1995. Due to the short term nature of the
agreement, the Company did not take possession of the
securities which were instead held in the Company's
safekeeping account by FBS Investments Services, Inc. At
June 30, 1995, cash equivalents included approximately
$1,060,000 of temporary cash investments in an uninsured
government securities money market fund.
Marketable securities:
Marketable securities are classified as trading and
recorded at market value. At June 30, 1995 the Company
held U.S. treasury securities in a principal amount of
$5,000,000. The Company acquired these securities, with
29
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
maturities ranging from September 1995 to August 1996, at a
cost of $4,983,125. At June 30, 1995, the market value of
these securities was $5,011,570. Included in the statement
of operations is the net change in unrealized gains and
(losses) for the trading securities of $75,721 and
$(47,246) for the years ended June 30, 1995 and 1994,
respectively.
Gold Inventory:
The Company has elected to receive a portion of its royalty
interests in the South Pipeline project on an "in-kind"
basis. Gold inventory on the balance sheet consists of
this refined gold bullion stored in safekeeping by the
Company's refiner in Utah. The inventory is carried at
market value with unrealized gains or losses included in
the results of operations for the period.
Mineral Properties:
Acquisition costs relating to mineral properties with a
known resource are deferred until the properties are put
into commercial production, sold or abandoned. Acquisition
costs relating to properties without a known resource are
charged to operations when incurred. Exploration costs,
including an allocation of employee salaries and related
costs, are charged to operations when incurred. Mine
development costs incurred to develop new ore bodies, to
expand or rehabilitate the capacity of operating mines, or
to develop areas substantially in advance of production are
deferred. For properties placed in production, the related
deferred costs are depleted using the units-of-production
method. Deferred costs applicable to sold or abandoned
properties are charged against operations at the time of
sale or abandonment of the property. On a quarterly basis,
the Company evaluates the carrying value of deferred costs
associated with all mineral properties to determine if the
costs are in excess of their net realizable value and if an
impairment provision needs to be recorded. Upon
disposition of a portion of a mineral property, including
equipment sales, any proceeds are treated as a reduction of
the carrying value of the portion of the property retained.
Office Furniture, Equipment and Improvements:
The Company depreciates its office furniture, equipment and
improvements over estimated useful lives of 3 to 15 years
30
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
using the straight-line method. The cost of normal
maintenance and repairs is charged to expense as incurred.
Significant expenditures which increase the life of the
asset are capitalized and depreciated over the estimated
remaining useful life of the asset. Upon retirement or
disposition of office furniture, equipment, or
improvements, related gains or losses are recorded in
operations.
Reclamation Costs:
The Company records a liability for the estimated cost to
reclaim mined land based upon burdening estimated
production over the life of the mine with a proportional
share of such cost. The accrued reclamation liability is
reduced as reclamation expenditures are incurred. The
majority of reclamation expenditures will be incurred upon
permanent cessation of mining operations at the property
involved.
Income Taxes:
Effective July 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Deferred income taxes reflect the expected
future tax consequences of temporary differences between
the tax basis amounts and financial statement carrying
amounts of assets and liabilities at each year end and the
expected future benefits of net operating loss
carryforwards, tax credits and other carryforwards.
General business credits are accounted for by the flow-
through method.
Reclassifications:
Certain accounts in the prior period financial statements
have been reclassified for comparative purposes to conform
with the presentation in the current period financial
statements.
Net Loss Per Share:
Net loss per share is computed by dividing the net loss by
the weighted average number of common shares outstanding
during each year. Common stock equivalents have been
excluded from the computation since the effect is
antidilutive.
31
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Property and Equipment
----------------------
The net carrying value of the Company's property and equipment
consists of the following components at June 30, 1995 and 1994:
1995 1994
-------- --------
Mineral Properties:
South Pipeline-
Net Profits Interest $ - $ -
South Pipeline-
Capped NSR Royalty 193,350 -
Long Valley 159,478 159,478
Camp Bird 120,110 120,110
------- -------
472,938 279,588
Office furniture, equipment
and improvements 111,255 43,719
------- -------
Net property and equipment $ 584,193 $ 323,307
======= =======
As discussed in the following paragraphs, most of the Company's
properties are subject to various activities which to date have
not resulted in conclusions that the carrying value of these
properties will or will not be recoverable by charges against
income from future mining operations or a subsequent sale of
the properties. Realization of these costs is dependent upon
the success of exploration programs resulting in the discovery
of economically minable deposits and the subsequent development
or sale of those deposits or properties or the production of
gold from existing resources. The outcome of these matters is
contingent upon future events which cannot be determined at
this time.
The Company's mining operations and exploration activities are
subject to various federal, state, and local laws and
regulations governing protection of the environment. These
laws are continually changing and, as a general matter, are
becoming more restrictive. Management believes that the
Company is in material compliance with all applicable laws and
regulations.
Presented below is a discussion of the status of each of the
Company's currently significant mineral properties.
A. South Pipeline Project
----------------------
The South Pipeline Project relates to a sediment-hosted gold
deposit located in Lander County, Nevada, and covers over 4,000
acres of unpatented mining claims. The Company initially
32
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
formed the Crescent Valley Joint Venture ("CVJV") with Golden
Bounty Resources N.L. ("GBR"), of Australia, in May 1987, and
CVJV leased some 200 claims from ECM, Inc. ("ECM"). In turn,
CVJV entered into an agreement (the "Crescent/Cortez JV") with
Cortez Gold Mines ("Cortez") pursuant to which CVJV could
secure a 20% carried interest in the project, provided that
CVJV made a $1 million expenditure for exploration by September
1991.
Effective February 1990, the Company purchased the interest of
GBR in CVJV. As purchase consideration, the Company issued
176,165 shares of its common stock held in treasury to GBR,
which was valued at $1.50 per share. As a result, the Company
owned all of the 20% carried interest of CVJV subject to
completion of the required exploration program.
Effective April 15, 1991, the Crescent/Cortez JV agreement was
terminated; the CVJV lease was terminated; and the Company,
Cortez, and ECM entered into a new set of agreements pursuant
to which the Company sold its interest in the Crescent Valley
property to Placer Dome U.S. Inc. ("PDUS"), manager and 60%
owner of Cortez, for a cash payment of $100,000, the assignment
to Royal of a 1.5% net smelter return ("NSR") royalty (with a
capped payout of $750,000), a 1.25% net proceeds royalty in the
project, and a release of any further exploration obligations.
The 1.5% NSR royalty interest covers the GAS Mining Claims and
a block of additional mining claims leased by Cortez from ECM.
On December 2, 1991, the Company assigned one-half of its 1.5%
NSR royalty to satisfy a debt of $209,000. On December 30,
1991, the Company, through an affiliated limited partnership,
commenced a private offering to raise $400,000. In exchange
for the $400,000, the limited partnership ("Crescent Valley
Partners, L.P.") acquired the remaining one-half of the 1.5%
NSR royalty, and the 1.25% net proceeds royalty, resulting in a
gain on sale of $193,000. A subsidiary of the Company is the
general partner of the limited partnership and has a 2%
interest in the limited partnership. The limited partners also
received warrants to purchase an aggregate of 2,000,000 shares
of the Company's common stock, exercisable at a price of
$0.0625 per share until February 28, 1997. The exercise price
of the warrants exceeded the market value of the Company's
common stock at the date of grant. At June 30, 1995, 1,850,000
of the warrants had been exercised. Certain partners in the
limited partnership are also officers and directors of the
Company.
33
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 1992, believing that PDUS had withheld material
information in connection with the transaction of April
15,1991, the Company commenced litigation against PDUS in
federal court in Colorado. The litigation was settled on
September 18, 1992, in an agreement pursuant to which the
Company re-acquired a significant new royalty interest in the
South Pipeline Project, under terms calling for:
1) The creation of the "South Pipeline Project," involving a
4,000 acre claim block in Crescent Valley, Lander County,
Nevada (consisting of substantially the same lands as were
the subject of the CVJV/ECM lease). The South Pipeline
Project is approximately one-half mile south of the
Pipeline gold discovery that was announced by PDUS in early
1992.
Under the South Pipeline agreement, Cortez will remain the
manager and operator and has committed to an exploration and
development work program. After payback, as defined in the
agreement, the Company will receive a 20% net profits royalty
or, at its election beginning with production and annually
thereafter, an NSR royalty according to a schedule tied to
indexed gold prices. The NSR royalty ranges from 2.5% for an
indexed price of $350 per ounce to 5.5% for an indexed price
in excess of $500 per ounce. Under either royalty
arrangement, the Company may elect to take its royalty "in-
kind."
During each of the years ended June 30, 1995, 1994 and 1993,
the Company received advance royalty payments of $150,000,
which are shown as royalty income in the accompanying income
statements. The Company will receive additional advance
royalty payments of $150,000 per year, and all such payments
are to be recouped by Cortez from production royalty
payments.
2) As part of the agreement, Cortez purchased 1,000 units of
Royal Gold securities at $800 per unit. The 1,000 units
consist of (1) 500,000 shares of the Company's common
stock, (2) the right to purchase, before March 31, 1996,
300,000 additional shares of the Company's common stock at
$2.00 per share, and (3) the right to purchase, before
March 31, 1996, an additional 300,000 shares of the
Company's common stock at $3.00 per share, if either Cortez
or the Company has first elected to put the South Pipeline
Project into production. At June 30, 1995, none of the
Cortez warrants had been exercised.
34
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3) If Cortez does not elect to put the Project into production
by early 1996, then the Company may elect to put the
Project into production, thereby securing 100% of the
working interest therein, subject to granting a 20%
production royalty to Cortez identical to the one described
above. Royal would then be entitled to use, under a normal
tolling arrangement and as available, the Cortez milling
facilities in the vicinity, including any to be built for
the Pipeline project.
4) For a period of five years following the September 18,
1992, date of the settlement agreement, without prior
approval of the Company's Board of Directors, Cortez, for
itself and its affiliates, agreed not to, directly or
indirectly: (i) acquire any further shares of the Company
except with respect to the warrants; (ii) join with any
person or group in any effort to acquire any such
additional shares; (iii) propose, initiate or enter into
any tender offer, business combination or change of control
transaction involving the Company or its assets; (iv)
solicit proxies; or (v) vote on matters relating to South
Pipeline or other matters involving Cortez or its
affiliates, among other matters. Cortez will not sell any
of the acquired shares publicly except in accordance with
Rule 144, any underwritten public offering, in a tender
offer, or privately except subject to these standstill
limitations by a person unaffiliated with Cortez or its
affiliates.
As of September 1, 1994, the date of the most recent announced
estimate, the cumulative resource estimate of the South
Pipeline Project is 4.4 million contained ounces. As of June
30, 1995, 220,000 ounces of such estimated resource is
considered a proven ore reserve, within the Crescent Pit, where
production began in fiscal 1995.
B. Union Pacific Exploration Project
---------------------------------
The Company and Union Pacific Minerals ("Union Pacific"), Inc.
have entered into an Option Agreement and Grant of Exploration
Rights, dated effective May 1, 1994 (the "Agreement"), pursuant
to which the Company has the right to evaluate all of the Union
Pacific lands in Colorado and Wyoming (approximately six
million acres) for gold, silver and platinum metal deposits.
Under the Agreement, the Company also had the right to select
up to 50,000 acres of the Union Pacific lands as to which the
Company may have exclusive exploration and development rights,
35
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and the right to negotiate farm-out arrangements with respect
to such properties.
At August 31, 1994, the Company had given notice of "selection"
of approximately 49,850 acres, and had initiated geochemical
sampling surveys on the ten prospects represented by such
acreage position.
Under the Agreement, the Company was obliged to expend a
minimum of $400,000 on exploration of the selected lands, such
exploration to be completed on or before August 1, 1995. In
addition, the Company could extend its exclusive rights for two
additional twelve-month terms, upon making additional
exploration commitments of $600,000 and $1,000,000,
respectively. Over the possible thirty-nine-month term of the
Agreement, then, projected exploration expenditures will
totaled $2,000,000.
If the Company identifies attractive deposits on the Union
Pacific lands, it has the opportunity, under the terms of
agreements that have already been negotiated with Union
Pacific, to assign further exploration and development rights
to third parties; to develop such deposits in collaboration
with Union Pacific; or to develop such deposits for Royal
Gold's own account. In all circumstances, Union Pacific will
retain a royalty interest, and will retain various rights to
participate on a working interest basis in the development, and
operation of any mineral deposit.
By an amendment to the Agreement dated November 30, 1994, the
Company secured the rights (1) to explore Union Pacific lands
in Utah and in the State Line District of Colorado and Wyoming,
(2) to continue to select and substitute exploration prospects,
subject to the 50,000-acre "cap", until December 31, 1995, (3)
to extend, until December 31, 1995, the original exploration
commitment, which was revised to $500,000 (As of June 30, 1995,
$300,000 of this commitment has been spent.), and (4) to
extend, until December 31, 1997 and December 31, 1998,
respectively, each of the additional terms of the arrangement.
The Agreement now entails total projected expenditures of
$2,100,000 over a 55-month term.
C. Goldstripe
----------
The Goldstripe Mine was an open pit, heap leach facility
located in Plumas County, California. A subsidiary of the
Company operated Goldstripe, but discontinued mining operations
after the 1989 season. The Company completed required
36
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
reclamation work on the mine pits and at the plant facility
site, and disposed of all major mining and crushing equipment.
By letter dated August 5, 1992, the U.S. Forest Service
notified the Company that it had determined to initiate a
response action, under the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"), in order
to assess the possible threat of a release of cyanide solution
contained within the 900,000 ton, processed ore residue pile.
The Company disputed the propriety of the Forest Service's
determination, and requested that the Forest Service explain
the basis for its determination.
To date, the only action undertaken by the Forest Service in
connection with the CERCLA notice has been to establish, in
September 1992, four monitoring wells at the site of the
residue pile. The Company understands that, to date, the
monitoring wells have either been dry, or have yielded water
that contains cyanide in concentrations that do not pose a
threat to aquatic organisms.
If it is determined that the Forest Service has properly
proceeded under CERCLA, the Company could be a "potentially
responsible party" ("PRP") for all costs associated with the
"response action" and any other remediation at the site. In
addition, because the Forest Service is a co-permittee for the
Goldstripe site, the Forest Service would presumably also be a
PRP under CERCLA. The Company believes that no additional
"response action" or other remediation will be undertaken by
the Forest Service under CERCLA, or otherwise.
In response to a Forest Service request made in October 1992,
approximately $341,000 in cash security that the Company had
posted pursuant to the terms of the Goldstripe project
reclamation bond was released to the Forest Service. The
Forest Service advised the Company that it would use these
funds to finance certain reclamation activities at the project
site (including ground contouring, solution pond reclamation,
and contouring and revegetation of the residue pile) during
1992 and 1993.
In August 1993, the Forest Service advised the Company that its
reclamation activities at the project site were substantially
completed (except for revegetation), and that the Forest
Service believed that such activities should satisfy all
outstanding permit requirements for reclamation, except for
post-reclamation monitoring of water quality. As a result of
the Forest Service's actions, approximately $341,000 in
37
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
restricted investments and $337,000 in reclamation liabilities,
were eliminated from the balance sheet. In May 1994 and in May
1995, the Forest Service again advised the Company that all
outstanding requirements, except for post-reclamation
groundwater monitoring, had been satisfied.
At this time, the Company believes that it will have no further
reclamation liability related to the Goldstripe property,
unless post-reclamation groundwater monitoring indicates
unanticipated migration of residual cyanide into ground or
surface waters.
During the fourth quarter of fiscal 1994, the Company
determined to abandon the mill site claims and to write-off its
interest in Goldstripe. This resulted in a charge of $607,295,
which was offset by $131,138 write-off of royalties payable
associated with the residual pile resource.
D. Long Valley
-----------
In April 1989, the Company entered into a joint venture agree
ment with Standard Industrial Minerals, Inc. ("Standard") to
explore and develop a property located in Mono County, Califor
nia (the "Long Valley Project"). The agreement provided that
the Company would earn a 60% interest in the property upon
expending 100% of the funds for completion of exploration,
development and construction of production facilities by Decem
ber 1991 (subsequently extended to May 1995). During 1989 and
1990, the Company delineated a resource (the "South Zone")
estimated to host some 2.2 million tons of ore with an average
grade of 0.023 ounces of gold per ton. Metallurgical testing
and engineering analysis for a heap leach project was
completed, and applications for operating permits were filed,
but the Company subsequently determined to farm out its inter
est in Long Valley.
In December 1990, the Company and its co-venturer, Standard,
entered into an agreement with Battle Mountain Exploration
Company ("Battle Mountain"). The agreement provided for a
mining joint venture to be formed between the Company, Standard
and Battle Mountain should Battle Mountain's exploration result
in discovery of significant additional gold mineralization.
In March 1992, Battle Mountain indicated that it had discovered
significant amounts of low grade gold mineralization, but that
it proposed to restructure the agreement to bring in a fourth
partner to conduct further exploration. In November 1992,
Battle Mountain notified the Company that, not having been
38
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
successful in its efforts to bring in a fourth party as a new
operator, it elected to terminate its interest effective as of
January 1, 1993.
In November 1993, the Company and Standard amended the joint
venture agreement to provide for the Company's option,
exercisable through December 31, 1997, to acquire the entirety
of Standard's interest at Long Valley upon payment of
$1,000,000. Option consideration payments aggregating $125,000
are payable each November of 1993, 1994, 1995 and 1996, with
$25,000 of such sum having been paid. Up to $100,000 of such
payments (the total of the payments due in 1995 and 1996) are
creditable against the option exercise amount.
The Company has conducted substantial exploratory drilling
programs at Long Valley in fiscal 1995 and has discovered
additional deposits of gold mineralization.
E. Camp Bird Mine
--------------
The Camp Bird Venture (the "Venture") was formed in August
1986, primarily for the purpose of re-opening the Camp Bird
Mine as a gold and silver mine. The Company's partner was
Chipeta Mining Corporation ("Chipeta"). Through 1989, the
Venture was primarily engaged in exploration activities and
there was no significant production from the mine.
During fiscal 1990, the Company reached an agreement with
Chipeta to terminate the Camp Bird Venture, and thereafter
terminated its mining lease and reduced the carrying value at
Camp Bird to the estimated net realizable value of the
equipment and certain patented mining claims.
At June 30, 1995, capitalized costs of $120,110 reflect the
Company's ownership of patented mining claims. Management
believes these claims are valuable both for their mineral and
real estate potential.
F. Other
-----
During fiscal 1994, the Company determined to abandon several
other properties which resulted in the write-off of $273,193.
3. Related Party Transactions
--------------------------
In October 1993, the Company granted a $75,000 loan to an
officer of the Company. This note is secured by 23,348 shares
of Company stock, had a term of one year, and carried a market
39
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
interest rate of four percent. During each of fiscal 1994 and
fiscal 1995, a portion of the note was charged to salary
expense and the remaining balance was extended. The outstanding
balance is currently due December 31, 1995.
During fiscal 1995, the Company paid $100,000 to Behre Dolbear
and Company, Inc. for technical consulting services. Mr.
Dempsey is a member of the board of directors of Behre Dolbear.
4. Post-Retirement Benefits
------------------------
In 1987, the Company's Board of Directors agreed to provide
post-retirement benefits for the remaining lifetime of a former
executive officer. The present value (discounted at 10%) of
the estimated future payments of $2,200 per month was recorded
in 1987 based on the life expectancy of the former officer.
During fiscal 1993, the Company recognized an additional charge
to operations of approximately $20,000 due to the increased
life expectancy of the former officer and accretion of the
discount.
In April 1993, the Company and the former officer amended the
post-retirement benefits agreement. The Company recommenced
paying the former officer $2,200 per month in May 1993, and
issued the former officer an unsecured promissory note in the
principal amount of all previously unpaid deferrals, totalling
$83,600. The note accrues interest at 6.5% per annum.
The remaining principal maturity of the note of $27,866 is due
during the year ending June 30, 1996.
During fiscal 1994 and fiscal 1995, the Company recognized an
additional charge to operations of approximately $20,000 and
$40,000, respectively, due to the then-increased life expectancy
of the former officer, decrease in the discount rate used
to compute the net present value of the liability, and accretion
of the discount.
5. Income Taxes
------------
The tax effects of significant temporary differences and
carryforwards which give rise to the Company's deferred tax
assets and liabilities at June 30, 1995 and 1994, are as follows:
40
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1995 1994
--------- ---------
Net operating loss carryforwards $ 8,025,000 $ 7,117,700
Mineral property basis 58,000 216,800
Capital loss carryforwards 63,000 62,600
Post retirement benefit obligation 60,000 74,700
Other 80,000 110,200
--------- ---------
Total gross deferred tax assets 8,286,000 7,582,000
Valuation allowance (7,310,000) (6,625,000)
--------- ---------
Net deferred tax assets 976,000 957,000
--------- ---------
Mineral properties (41,000) (67,500)
Deferred taxable income (98,000) (135,900)
Other (87,000) (3,600)
-------- --------
Total deferred tax liabilities (226,000) (207,000)
-------- --------
Total net deferred taxes $ 750,000 $ 750,000
======== ========
At June 30, 1995, the Company has approximately $22.9 million
of net operating loss carryforwards which, if unused, will
expire during the years 2001 through 2010. The Company's
ability to generate future taxable income to realize the
benefit of its tax assets will depend primarily on the timing
and amount of income from its South Pipeline interest. Based
upon the determination, as of June 30, 1995, of proven gold
reserves at the Crescent Pit of the South Pipeline Project (see
Note 2.A.), management has estimated that it is more likely
than not that the Company will have some net future taxable
income within the net operating loss carryforward period.
Accordingly, a valuation allowance against the deferred tax
asset has been established such that operating loss
carryforwards will be utilized only to the extent of estimated
future taxable income and reversals of existing deferred tax
liabilities.
The components of income tax expense (benefit) for the years
ended June 30, 1995, 1994 and 1993, are as follows:
1995 1994 1993
------- ------- --------
Current tax expense $ - $ - $ -
Deferred tax (benefit) (685,000) (766,800) (212,700)
Increase in deferred tax
asset valuation allowance 685,000 16,800 212,700
-------- -------- --------
$ - $ (750,000) $ -
======== ======= =======
The provision for income taxes for the years ended June 30, 1995, 1994
and 1993, differs from the amount of income tax determined by applying
41
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the applicable U.S. statutory federal income tax rate to pre-tax loss
from operations as a result of the following differences:
1995 1994 1993
-------- -------- --------
Total (benefit) computed by
applying statutory rate $(689,000) $(749,000) $(210,100)
Adjustments of valuation
allowance 685,000 16,800 212,700
Other 4,000 (17,800) (2,600)
-------- ------- -------
$ - $(750,000) $ -
======== ======= =======
6. Commitments
-----------
Operating Lease
---------------
The Company leases office space under a lease agreement
which expires October 31, 1999. Future minimum cash rental
payments are as follows:
Years ending June 30,
---------------------
1996 $ 122,300
1997 122,300
1998 128,823
1999 132,084
2000 44,028
-------
$ 549,535
=======
The lease may be terminated at any time after October 31,
1997, upon proper notice and payment of a termination fee
equal to the next nine months ensuing rent.
Rent expense charged to operations for the years ended June
30, 1995, 1994, and 1993, amounted to $122,052, $135,936,
and $122,795, respectively. The Company subleases a portion
of its premises on a month-to-month basis. The Company
received sublease rental income of $35,831, $67,280 and
$60,667, for the years ended June 30, 1995, 1994 and 1993,
respectively.
Employment Agreements
---------------------
The Company has one-year employment agreements with four of
its officers which require total minimum future
compensation, at June 30, 1995, of $268,000 through January
1996. The terms of each of these agreements automatically
extend, every February, for one additional year, unless
42
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
terminated by the Company or the officer, according to the
terms of the agreements.
7. Stockholders' Equity
--------------------
Preferred Stock:
The Company has 10,000,000 authorized and unissued shares of
$.01 par value Preferred Stock.
Private Placements:
During fiscal 1993, the Company completed three private
placements for net proceeds of $1,799,000: (i) In July 1992,
308,000 shares of common stock were sold for $1.00 per
share. In connection with the private placement, the
Company also issued warrants to purchase 308,000 shares of
common stock, exercisable at $1.50 per share through July
31, 1997. Certain officers and directors of the Company
participated in this placement. (ii) In September 1992,
500,000 shares of common stock were sold for $1.60 per
share. In connection with the private placement, two
warrants were also issued, one for 300,000 shares of common
stock, exercisable at $2.00 per share through March 31,
1996, and the other for 300,000 shares of common stock,
exercisable at $3.00 per share through March 31, 1996.
(iii) In June 1993, 200,000 shares of common stock were sold
for $3.60 per share. In connection with the private
placement, the Company also issued warrants to purchase
200,000 shares of common stock, exercisable at $5.75 per
share through September 30, 1995.
During fiscal 1994, the Company completed two private
placements for net proceeds of $6,655,000 from the sales of
1.425.00 shares at prices of $4 and $6 per share.
During fiscal 1995 the Company completed a private placement
for net proceeds of $3,800,000 from the sale of 500,000
shares at $8.00 per share.
Stock Options and Warrants:
During fiscal 1990, the Directors Stock Option Plan
("Directors Plan") was adopted and the Company reserved
200,000 shares of common stock for issuance under this Plan.
Only non-employee directors are eligible to participate.
Options granted under the Directors Plan are exercisable at
prices equal to the market value of the Company's common
43
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
stock at the date of grant. The options are exercisable for
a period of five years and terminate three months after the
director resigns or is removed from office. During fiscal
1995, options were exercised for 18,750 shares for a total
of $29,063. Additionally, options for an additional 30,000
shares were issued during the year. One half of these
options granted are subject to stockholder approval. As of
June 30, 1995, options are outstanding for 60,000 shares at
an average exercise price of $5.48 per share.
At February 5, 1993, the Board of Directors granted to a
director, who is a former president of the Company and
currently a consultant to the Company, a non-incentive
option to acquire up to 150,000 shares of the Company's
common stock, at a price of $3.75 per share. During each of
fiscal years 1995 and 1994, such director exercised options
for 75,000 shares, generating proceeds to the Company, in
each year, of $281,250.
During fiscal 1989, an Employee Stock Option Plan ("Employee
Plan") was adopted. In December, 1993 and 1994,
shareholders approved an amendment, increasing the aggregate
number of shares available for issuance under the Employee
Plan to 2,150,000. Provisions of the Employee Plan provide
for the issuance of stock options and stock appreciation
rights. The options are exercisable at prices equal to the
market value of the Company's common stock as of the date of
grant, and expire ten years after the date of grant. There
have been no stock appreciation rights granted under the
Employee Plan. During fiscal 1995, options were exercised
for 46,000 shares for a total of $5,750.
At June 30, 1995, under the Directors and Employee Plans and
otherwise, the following options are outstanding:
Number of Exercise Expiration
Shares Price Total Date
-------- ------ -------- -------------
15,000 2.1875 $ 32,812 December 1997
35,000 4.00 140,000 December 1998
10,000 9.125 91,250 April 1999
45,000 7.875 354,375 December 1999
907,720 .125 113,465 December 2001
15,000 4.00 60,000 December 2003
184,250 7.875 1,450,969 December 2004
--------- ---------
1,211,970 $2,242,871
========= =========
44
<PAGE>
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additionally, warrants to purchase the Company's common
shares are outstanding, as follows:
Number of Exercise Expiration
Shares Price Total Date
------- ---- --------- --------------
200,000 $5.75 $1,150,000 September 1995
170,000 1.278 217,260 January 1996
300,000 2.00 600,000 March 1996
300,000 3.00 900,000 March 1996
150,000 .0625 9,375 February 1997
287,500 1.50 431,250 July 1997
--------- ---------
1,407,500 $3,307,885
========= =========
The shares and exercise prices listed above are generally
subject to adjustment in accordance with anti-dilution
provisions of each of the warrant agreements.
8. Major Customers
---------------
During fiscal 1995, $444,411 of the Company's royalty income
was received from one source. In each of fiscal years 1994
and 1993, $150,000 of the Company's royalty income was also
received from the same source. (See Note 2.A.)
9. Simplified Employee Pension ("SEP") Plan
----------------------------------------
The Company maintains a SEP plan which is available to all
employees. The Company contributes a minimum of 3% of an
employee's compensation to an account set up for the benefit
of the employee. If an employee chooses to contribute to
the plan, the Company will match the contribution to a
maximum of 7% of the employee's salary. During fiscal 1995
the Company contributed $50,271 to the plan.
45
<PAGE>
PART III
Item 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Stanley Dempsey
- ---------------
Age 56; Director Since August 1984; Term Expires 1997
Chairman of the Board and Chief Executive Officer of the Company
since April 4, 1988. President and Chief Operating Officer of
the Company from July 1, 1987 to April 4, 1988. Consultant to
the Company from 1986 to 1987. Member of the Board of Directors
of Dakota Mining Corporation, Hazen Research, Inc. and Behre
Dolbear and Company, Inc. Prior to 1986, was a Vice President of
AMAX, Inc., Greenwich, Connecticut and Sydney and Perth,
Australia, and an attorney at law in private practice. (1)
Edwin W. Peiker, Jr.
- --------------------
Age 64; Director Since May 1987; Term Expires 1996
Director. President and Chief Operating Officer of the Company
from April 4, 1988, until retirement on February 1, 1992. Vice
President of Engineering of the Company from May 1987 to April 4,
1988. From 1983 to 1986, Mr. Peiker was engaged in mineral
consulting activities. Mr. Peiker was also a principal in Denver
Mining Finance Company from 1984 until 1986. During the period
1966-1983, Mr. Peiker was with the Climax Molybdenum division of
AMAX involved in exploration activities worldwide. (1) (2)
John W. Goth
- ------------
Age 68; Director Since August 1988; Term Expires 1997
Director. Director of Development of the Minerals Information
Institute and a consultant to the mining industry. Mr. Goth was
formerly a senior executive of AMAX, Inc., and is a Director of
Magma Copper Company and U.S. Gold Corporation (2) (3)
James W. Stuckert
- -----------------
Age 57; Director Since September 1989; Term Expires 1995
Director. President and Vice Chairman of Hilliard Lyons, Inc.
He had been Executive Vice President of Hilliard Lyons since
1963. Mr. Stuckert is also a Director of Hilliard, Lyons, Inc.,
DataBeam Corporation, McBar Medical Industries, and Lawson United
Corporation. (2) (3)
Pierre Gousseland
- -----------------
Age 73; Director Since June 1992; Term Expires 1995
Director. Financial Consultant. From 1977 until January 1986,
Mr. Gousseland was Chairman and Chief Executive Officer of AMAX,
Inc. Formerly, Director of the French American Banking Group of
New York, the American International Group, Inc., Union Miniere
(Belgium), Degussa AG (Germany) and IBM World Trade Europe/Middle
46
<PAGE>
East Africa Corporation. Mr. Gousseland has served on the Chase
Manhattan and Creditanstaldt (Vienna, Austria) International
Advisory Boards and is Past President of the French American
Chamber of Commerce in the United States. (3)
S. Oden Howell, Jr.
- -------------------
Age 55; Director Since December 1992; Term Expires 1996
Director. Secretary and Treasurer of H&N Constructors, Inc., a
contractor specializing in remodeling and rehabilitation of
government facilities. From 1972 until 1988, Mr. Howell was
Secretary/Treasurer of Howell & Howell, Inc. He is currently
Director of Florafax International, Inc.
Merritt Marcus
- --------------
Age 61; Director Since December 1992; Term Expires 1995
Director. President and Chief Executive Officer of Marcus Paint
Company, a manufacturer of industrial coatings. Director of
National Paint and Coatings Association.
Thomas A. Loucks: Age 46
- ----------------
Executive Vice President and Treasurer of the Company. From
August 1985 until August 1988, Mr. Loucks was a Business
Development Analyst with Newmont Mining Company.
Peter B. Babin: Age 41
- --------------
Executive Vice President of the Company since July 1, 1995,
formerly Senior Vice President from July 1993 through June 30,
1995. From 1989 until 1993, Mr. Babin was a consultant to the
Company. From 1986 through 1989, Mr. Babin was Senior Vice
President and General Counsel of Medserv Corporation.
Karen P. Gross: Age 41
- --------------
Vice President of the Company since June of 1994. Corporate
Secretary of the Company since 1989. From 1987 until 1989, Ms.
Gross was the Assistant Secretary to the Company and Executive
Assistant.
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
47
<PAGE>
ITEMS 11, 12, and 13
The information called for by Item 11, "Executive Compensation,"
Item 12, "Security Ownership of Certain Beneficial Owners and
Management," and Item 13, "Certain Relationships and Related
Transactions," is incorporated by reference to the Company's
definitive proxy statement to be filed with respect to the
upcoming Annual Meeting of Stockholders to be held December 5,
1995, in Denver, Colorado.
PART IV
-------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following is a list of documents filed as part of this
report and are included herewith (*) or have been filed
previously:
(1) Financial Statements included in Item 8.
(2) Financial Statement schedules:
All Schedules are omitted because the information
called for is not applicable or is not required or
because the required information is set forth in the
financial statements or notes thereto.
(3) The following exhibits are filed with this annual
report on Form 10-K. The exhibit numbers correspond
to the numbers assigned in Item 601 of Regulation
S-K. Those exhibits that have been marked with an
asterisk are filed herewith; all other exhibits have
been previously filed with the Commission pursuant to
the Company's various reports on Forms 10-K, 10-Q, 8-
K, S-1 and S-8, and are incorporated herein by
reference.
48
<PAGE>
Exhibit
Number
------
3 (a) Certificate of Incorporation - Exhibit (b)
to the Company's Form 10-K for the fiscal
year ended December 31, 1980.
(b) Amendment to Certificate of Incorporation
Exhibit (c) to the Company's Form 10-K for
the fiscal year ended December 31, 1980.
(c) By-Laws - Exhibit (d) to the Company's Form
10-K, for the fiscal year ended December
31, 1980.
(d) Amendment to Certificate of Incorporation
dated February 2, 1983 - Exhibit 3 (c) of
Registration Statement on Form S-1,
Registration No. 2-84642.
(e) Amendments to Articles of Incorporation
dated May 7, 1987. Exhibit (xiv) to the
Company's Form 10-K for the year ended
June 30, 1987.
(f) Amendment to Articles of Incorporation
dated February 2, 1988. Exhibit 3(f) to
the Company's Form 10-K for the year ended
June 30, 1990.
10 (a) Employee Stock Option Plan. Exhibit 4(a) to
the Company's Form S-8 dated February 6,
1990.
(b) Directors' Stock Option Plan. Exhibit 4(b)
to the Company's Form S-8 dated February 6,
1990.
(c) Lease of premises at 1660 Wynkoop Street,
Denver, Colorado, dated November 1, 1989.
Exhibit 10 (c) to the Company's Form 10-K
for the year ended June 30, 1990.
(d) Termination Agreement, among Royal Gold,
Inc., Royal Crescent Valley, Inc., Cortez
Gold Mines, Placer Dome U.S. Inc. and ECM,
Inc., dated effective as of April 15, 1991.
49
<PAGE>
Exhibit 10(k) to the Company's Form 10-K
for the year ended June 30, 1991.
(e) Royalty Deed and Agreement, dated effective
as of April 15, 1991, pursuant to which
ECM, Inc. conveyed to Royal Crescent
Valley, Inc. a 2% Net Smelter Return
royalty on mineral production from the
lands that had been subject to the
Royal/Cortez Joint Venture. Exhibit 10(l)
to the Company's Form 10-K for the year
ended June 30, 1991.
(f) Agreement for Resolution of Disputes and
Litigation and for the Formation of the
South Pipeline Project, dated September 18,
1992, between Royal Crescent Valley, Inc.,
and Placer Dome U.S. Inc. Exhibit 10(l) to
the Company's Form 10-K for the year ended
June 30, 1992.
(g) Memorandum of Royalty Interest executed
September 18, 1992, by Royal Gold, Inc. and
Cortez Gold Mines. Exhibit 10(m) to the
Company's Form 10-K for the year ended June
30, 1992.
(h) Mining Lease and Purchase Option, dated
effective August 23, 1993, between Royal
Gold, Inc. and Donald K. Jennings, relating
to the "Ferb" claims, in Elko County,
Nevada. Exhibit 10(o) to the Company's
Form 10-K for the year ended June 30, 1993.
(i) Mining Claim and Purchase Option Agreement,
dated effective November 30, 1993, between
Standard Industrial Minerals, Inc. and
Royal Long Valley, Inc. Exhibit 10(p) to
the Company's Form 10-K for the year ended
June 30, 1994.
(j) Option Agreement and Grant of Exploration
Rights, dated effective May 1, 1994,
between Union Pacific Minerals, Inc. and
Royal Gold, Inc. Exhibit 10(q) to the
Company's Form 10-K for the year ended June
30, 1994.
50
<PAGE>
*(k) Amendment to Option Agreement and Grant of
Exploration Rights, dated effective
November 30, 1994, between Union Pacific
Minerals, Inc. and Royal Gold, Inc.
*(l) Assignment Agreement dated effective
December 1, 1994, between Royal Gold, Inc.
and Santa Fe Pacific Gold Corporation,
relating to the Bob Creek Project.
22 *(a) The Company and Its Subsidiaries.
(b) Reports on Form 8-K:
1. None.
* - Filed herewith.
51
<PAGE>
EXHIBIT 22
THE COMPANY
AND ITS SUBSIDIARIES
---------------------
| ROYAL GOLD, INC. |
---------------------
--------------------------------------------------
------- -------- -------- ------- ----- -------- -------
| ROYAL | | DENVER | | CALGOM | | ROYAL | |ROYAL| | ROYAL | | ROYAL|
|TRADING| | MINING | | MINING | | LONG | |CAMP | |CRESCENT| |KANAKA|
| CO. | |FINANCE | | INC. | |VALLEY,| |BIRD,| |VALLEY, | |CREEK |
| (1) | |COMPANY,| | (1) (2)| | INC. | |INC. | | INC. | |CORP. |
------- | INC. | -------- | (1) | | (1) | | (1) | | (1) |
| (1) | ------- ----- -------- ------
--------
----------------
| ENVIRONMENTAL |
|STRATEGIES, INC.|
| (3) |
----------------
(1) 100% owned by Royal Gold, Inc.
(2) Owns a 100% interest in the Goldstripe Project.
(3) 100% owned by Denver Mining Finance Company, Inc.
52
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ROYAL GOLD, INC.
Date: September 26, 1995 By:/S/Stanley Dempsey
------------------
Stanley Dempsey, Chairman,
Chief Executive Officer,
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Date: September 26, 1995 By: /S/Stanley Dempsey
------------------
Stanley Dempsey, Chairman,
Chief Executive Officer,
and Director
Date: September 26, 1995 By: /S/Thomas A. Loucks
-------------------
Thomas A. Loucks
Treasurer and chief
accounting officer
Date: September 26, 1995 By: /S/Edwin W. Peiker, Jr.
-----------------------
Edwin W. Peiker, Jr.
Director
Date: September 26, 1995 By: /S/John W. Goth
---------------
John W. Goth
Director
Date: September 26, 1995 By: /S/James W. Stuckert
--------------------
James W. Stuckert
Director
Date: September 26, 1995 By: /S/Pierre Gousseland
--------------------
Pierre Gousseland
Director
53
<PAGE>
Date: September 26, 1995 By: /S/Merritt Marcus
-----------------
Merritt Marcus
Director
Date: September 26, 1995 By: /S/S. Oden Howell, Jr.
----------------------
S. Oden Howell, Jr.
Director
54
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 3,424,094 3,424,094
<SECURITIES> 5,011,570 5,011,570
<RECEIVABLES> 207,684 207,684
<ALLOWANCES> 0 0
<INVENTORY> 183,073 183,073
<CURRENT-ASSETS> 8,941,328 8,941,328
<PP&E> 1,287,254 1,287,254
<DEPRECIATION> (703,061) (703,061)
<TOTAL-ASSETS> 10,273,288 10,273,288
<CURRENT-LIABILITIES> 218,477 218,477
<BONDS> 0 0
<COMMON> 144,930 144,930
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 10,273,288 10,273,288
<SALES> 0 0
<TOTAL-REVENUES> 91,929 634,102
<CGS> 0 0
<TOTAL-COSTS> 619,655 3,117,004
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,716 4,075
<INCOME-PRETAX> (378,996) (2,025,221)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (378,996) (2,025,221)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (378,996) (2,025,221)
<EPS-PRIMARY> (0.03) (0.14)
<EPS-DILUTED> (0.03) (0.14)
</TABLE>
<PAGE>
AMENDMENT TO OPTION AGREEMENT
AND GRANT OF EXPLORATION RIGHTS
THIS AGREEMENT, made and entered into effective as of
November 30, 1994, by and between UNION PACIFIC MINERALS, INC.,
a Utah corporation (hereinafter called "Union Pacific") and
ROYAL GOLD, INC., a Delaware corporation (hereinafter called
"Royal").
WITNESSETH:
WHEREAS, Union Pacific and Royal entered into an Option
Agreement and Grant of Exploration Rights dated effective as of
May 1, 1994 (hereinafter called the "Option Agreement")
granting Royal certain exploration and option rights in lands
administered by Union Pacific, and
WHEREAS, Union Pacific and Royal desire to amend the
Option Agreement effective as of the effective date hereof,
NOW, THEREFORE, in consideration of the premises, Union
Pacific and Royal, intending to be legally bound, hereby agree
as follows:
1. Section 2B of the Option Agreement is hereby amended
to provide as follows:
"B. The lands and interests from which Royal shall
make the selection provided for in Section 2A shall include
all of the mineral estates and mineral rights owned, held or
administered by Union Pacific Land Resources Corporation in
the States of Wyoming, Colorado and Utah except the
following: (a) the rights and interests described in
Exhibit C hereto, and (b) the rights and interests within
the exterior boundaries of the Known Sodium Leasing Area
(KSLA) described in Exhibit D attached hereto. All lands
and interests held or administered by Union Pacific Railroad
Company are expressly excluded from the coverage of this
Agreement."
2. Section 2E of the Option Agreement is hereby amended
to provide as follows:
"E. Union Pacific hereby grants to Royal the
further, non-exclusive right, to be exercised during the
period September 1, 1994 through December 31, 1995, to
substitute other lands and interests described in Section 2B
for the lands and interests theretofore selected and made
part of the Subject Property during the selection period
ended August 31, 1994. Substitution of lands and interests
1
<PAGE>
under this Section 2E shall be on an acre-for-acre basis.
Royal may provide Union Pacific with one or more written
notices of substitution during the sixteen-month period
contemplated by this provision. Each such notice of
substitution shall describe the lands and interests to be
selected and added to the Subject Property in detail by
government subdivision and shall describe the lands and
interests to be "dropped" from the Subject Property (and
from the coverage of this Agreement) in similar detail. The
total amount of lands, rights and interests included in the
Subject Property and subject to the coverage of this
Agreement at the conclusion of the period described in this
Section 2E shall not exceed 50,000 acres and such lands and
interests shall consist of not more than twenty reasonably
compact units."
3. Section 4 of the Option Agreement is hereby amended to
provide as follows:
"4. Initial Term. The initial term of this
Agreement ("Initial Term") shall have a duration of twenty
(20) months, commencing May 1, 1994 and ending December 31,
1995."
4. The first paragraph of Section 5 of the Option
Agreement is hereby amended to provide as follows:
"Royal agrees, as a firm commitment, to expend,
during the Initial Term of this Agreement, a minimum total
of Five Hundred Thousand Dollars ($500,000.00) in qualified
work expenditures on or for the direct benefit of the
Subject Property."
5. The fifth paragraph of Section 5 of the Option
Agreement is hereby amended to provide as follows:
"If Royal fails to expend a minimum total of
$500,000.00 in qualified work expenditures during the
Initial Term, Royal shall, promptly following the end of the
Initial Term, pay to Union Pacific in cash, as liquidated
and agreed damages, an amount equal to $500,000.00 less the
amount of qualified work expenditures made during the
Initial Term."
6. Section 6 of the Option Agreement is hereby amended to
provide as follows:
"6. Extensions of this Agreement. Royal shall have
the right to extend the term of this Agreement for two (2)
2
<PAGE>
additional periods following the end of the Initial Term,
provided that Royal's minimum expenditure obligation set
forth in Section 5 has been fulfilled. (Each of said
additional periods is herein called an "Extension Period".)
The first Extension Period shall have a duration of twenty-
four (24) months commencing January 1, 1996 and ending
December 31, 1997. The second Extension Period shall have a
duration of twelve (12) months commencing January 1, 1998
and ending December 31, 1998.
Royal shall provide Union Pacific written notice of
its election to extend the term hereof for the first
Extension Period on or before December 1, 1995. Royal shall
provide Union Pacific written notice of its election to
extend the term hereof for the second Extension Period on or
before November 1, 1997.
If Royal is eligible to and elects to extend the term
hereof for an Extension Period Royal agrees that, having
made either of such elections to extend, it shall thereupon
become obligated, as a firm commitment, to make the
following minimum expenditures (subject to credits as
hereinafter provided) during the applicable Extension
Periods:
(i) Royal shall expend a minimum of Six Hundred Thousand
Dollars ($600,000) in qualified work expenditures
during the first Extension Period.
(ii) Royal shall expend a minimum of One Million Dollars
($1,000,000.00) in qualified work expenditures during
the second Extension Period.
Any excess work expenditure during the first Extension
Period shall be credited against Royal's minimum expenditure
obligation for the second Extension Period. Any excess work
expenditures during the Initial Term shall be credited
against Royal's minimum expenditure obligations for the
first and, if sufficient, for the second Extension Period.
Royal shall have no right to extend for a second
Extension Period unless it fulfills its minimum expenditure
obligation for the first Extension Period.
In the event that Royal fulfills its minimum
expenditure obligation for the Initial Term, elects to
extend the term hereof for the first Extension Period, and
3
<PAGE>
thereafter fails to expend a minimum of $600,000.00 in
qualified work expenditures during such first Extension
Period (subject to credits as above provided), Royal shall,
promptly following the end of the first Extension Period,
pay to Union Pacific in cash, as liquidated and agreed
damages, an amount equal to $600,000.00 less (i) credits
available due to excess expenditures during the Initial
Term, as above provided in this Section 6, and (ii) the
amount of qualified work expenditures made during the first
Extension Period. Similarly, in the event that Royal
fulfills its minimum expenditure obligation for the first
Extension Period, elects to extend the term hereof for a
second Extension Period, and thereafter fails to expend a
minimum of $1,000,000.00 in qualified work expenditures
during such second Extension Period (subject to credits as
above provided), Royal shall, promptly following the end of
the second Extension Period, pay to Union Pacific in cash,
as liquidated and agreed damages, an amount equal to
$1,000,000.00 less (i) credits available due to excess
expenditures in prior periods, as above provided in this
Section 6, and (ii) the amount of qualified work
expenditures made during the second Extension Period.
If Royal is eligible to and elects to extend the term
hereof for the first Extension Period and if Royal shall
have selected pursuant to Section 2E hereof any lands and
interests within the exterior boundaries of the State Line
Diamond Area described in Exhibit B attached hereto, Royal
shall become obligated, as a firm commitment, to expend a
minimum of One Hundred Thousand Dollars ($100,000.00) in
qualified work expenditures on or for the direct benefit of
the selected lands and interests within the State Line
Diamond Area prior to the end of the first Extension Period.
Any qualified work expenditures made on or for the benefit
of the selected lands and interests within the State Line
Diamond Area during the Initial Term shall be credited
against such $100,000.00 minimum expenditure obligation.
The $100,000.00 minimum expenditure obligation, if it
arises, shall not enlarge the minimum expenditure
obligations for the Initial Term or the first Extension
Period provided for above, and amounts spent in satisfaction
of said $100,000.00 minimum expenditure obligation shall
constitute credits against such minimum expenditure
obligations for the time periods in which they are expended.
In the event that Royal fulfills its minimum expenditure
obligation for the Initial Term, elects to extend the term
hereof for the first Extension Period, selects lands and
interests within the State Line Diamond Area pursuant to
Section 2E, and thereafter fails to expend a minimum of
4
<PAGE>
$100,000.00 in qualified work expenditures on or for the
benefit of such selected lands and interests prior to the
end of such first Extension Period (subject to credits as
above provided in this paragraph), Royal shall, promptly
following the end of the first Extension Period,
irrespective of the amount of any other qualified work
expenditures made by Royal during the Initial Term or the
first Extension Period, pay to Union Pacific in cash, as
liquidated and agreed damages, an amount equal to
$100,000.00 less the amount of qualified work expenditures
madeon or for the direct benefit of the selected lands and
interests within the State Line Diamond Area during the
Initial Term and the first Extension Period."
7. The concluding sentence of Section 7B of the Option
Agreement is hereby amended to provide as follows:
"For purposes of this Section 7B only, there shall be added
to and included in "qualified work expenditures" the actual
costs of travel, meals and entertainment incurred by Royal
in attracting or "promoting" the approved assignee, not to
exceed Ten Thousand Dollars ($10,000.00) per year."
8. This instrument constitutes an amendment to the Option
Agreement and Grant of Exploration Rights. As herein amended,
the Option Agreement and Grant of Exploration Rights shall
continue in full force and effect according to its terms.
5
<PAGE>
IN WITNESS WHEREOF, Union Pacific and Royal have executed
this Amendment to Option Agreement and Grant of Exploration
Rights to be effective as of the day and year first above
written.
EXECUTED: March 16, 1995.
UNION PACIFIC:
Attest: UNION PACIFIC MINERALS, INC.
/s/ R. A. See By: /s/ U. Richard Eales
Assistant Secretary President
ROYAL:
Attest: ROYAL GOLD, INC.
/s/ Karen P. Gross By: /s/ Stanley Dempsey
Secretary Stanley Dempsey
Chairman of the Board
STATE OF TEXAS )
) ss.
COUNTY OF TARRANT )
The foregoing instrument was acknowledged before me by U.
Richard Eales as President of UNION PACIFIC MINERALS, INC., a
Utah corporation, this 16th day of March, 1995.
WITNESS my hand and official seal.
/s/ Sylvia Hill
Notary Public
My commission expires: 4/20/96 (Texas)
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
The foregoing instrument was acknowledged before me by
Stanley Dempsey as Chairman of ROYAL GOLD, INC., a Delaware
corporation, this 14th day of March, 1995.
WITNESS my hand and official seal.
/s/ Karen Passavanti Gross
Notary Public
My commission expires: July 2, 1995 (Colorado)
6
<PAGE>
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this "Agreement") has been made
and entered into on November 11, 1994, effective as of December
1, 1994, by and between ROYAL GOLD, INC., a Delaware corporation
with principal address of Suite 1000, 1660 Wynkoop Street,
Denver, Colorado 80202-1132 ("Assignor"), and SANTA FE PACIFIC
GOLD CORPORATION, a Delaware corporation with principal address
of Suite 400, 6200 Uptown Boulevard NE, Albuquerque, New Mexico
87110 ("Assignee").
Whereas, Assignor holds certain rights, as Lessee, under
each of two Mining Leases (with each such Mining Lease being
hereinafter referred to, respectively, as the "Steninger Lease"
and the "Aquarian Lease"), and in and to the lands and unpatented
mining claims that are now or may hereafter be subject to such
Mining Leases, with each of such Mining Leases and all such lands
and mining claims (with such lands and mining claims being
collectively referred to herein as the "Properties") being
described in more particular detail in Exhibit C attached hereto
and made a part hereof;
Whereas, Assignee has reviewed each of the Mining Leases,
and other pertinent information that Assignor has provided to
Assignee with respect to the Properties;
Whereas, Assignor desires to assign and transfer all of its
right, title and interest in and to the Mining Leases and in and
to the Properties to Assignee, subject to the terms and
conditions of this Agreement;
Whereas, Assignee desires to accept such an assignment from
Assignor, and to assume Assignor's rights and obligations under
each of the Mining Leases, and with respect to the Properties,
subject to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the
other agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Assignment. Assignor hereby assigns to Assignee,
effective as of December 1, 1994, all of Assignor's right,
title and interest in and to all of the Properties, as more
particularly described in Exhibit C attached hereto and made
a part hereof.
<PAGE>
2. Assignor's Representations. Assignor represents, to the
best of its knowledge, information, and belief, as follows:
a. It has full power and authority to enter into this
Agreement and to perform all of the transactions herein
contemplated. This Agreement and the provisions hereof
constitute legal and binding obligations of Assignor that
are enforceable in accordance with their terms. Neither the
execution and delivery of this Agreement, nor compliance by
Assignor with its provisions, will conflict with or result
in a breach of, or a default under, any of the terms,
conditions or provisions of any agreement or instrument to
which Assignor is a party, or of any law or regulation
applicable to Assignor.
b. There are no actions, suits, claims, proceedings, or
investigations pending or threatened against Assignor that
could interfere with its ability to perform under this
Agreement.
c. Assignor has not previously transferred or encumbered
any of its interest in either of the Mining Leases (or in
any of the Properties), and has no knowledge that any other
person (excluding the respective Lessors) is claiming any
interest therein.
d. Assignor has not committed or suffered any act or
omission which could, whether by notice or lapse of time,
result in the breach, termination, abandonment, forfeiture,
relinquishment, or other premature termination of any of the
rights of Assignor in either of the Mining Leases, or in any
of the Properties.
e. Except as is explicitly set forth in the Mining Leases,
there are no royalties, fees, or monies payable or required
to be paid to any persons having any interest in any of the
Properties, and all sums required to be paid, as of the date
of this Agreement, to the Bureau of Land Management, to
Eureka County, or to either Lessor, have been timely paid,
and no default exists under the Mining Leases of the
Properties.
f. Assignor and other parties performing activities on the
Properties prior and up to the effective date of this
Agreement have complied with all applicable laws and
regulations, whether federal, state or local.
2
<PAGE>
3. Assignee's Acceptance of Assignment. Assignee
acknowledges receipt of a complete copy of each of the
Mining Leases, and Assignee accepts the assignment,
effective as of December 1, 1994, of the entirety of
Assignor's right, title and interest under each of the
Mining Leases, and of Assignor's right, title and interest
in and to the Properties, excluding, however, the
obligations of Assignor which are set forth in Paragraph 4.1
of the Aquarian Lease (and excluding also the obligations
set forth in Exhibit B attached to the Aquarian Lease)
(namely, the recurring obligations of Assignor to tender
shares of its common stock to the Lessor under the Aquarian
Lease), which obligations Assignor shall continue to honor,
subject to Paragraph 6.b. below. With the exception of the
obligations of Assignor that are set forth in Paragraph 4.1
of the Aquarian Lease (and in Exhibit B attached thereto),
Assignee shall assume and discharge all obligations of
Assignor that arise pursuant to either of the Mining Leases,
to the extent that any such obligations arise from and after
the effective date of the assignment.
4. Assignee's Representations and Covenants.
a. Assignee represents, to the best of its knowledge,
information, and belief, as follows:
i. It has full power and authority to enter into this
Agreement and to perform all of the transactions herein
contemplated. This Agreement and the provisions hereof
constitute legal and binding obligations of Assignee that
are enforceable in accordance with their terms. Neither the
execution and delivery of this Agreement, nor compliance by
Assignee with its provisions, will conflict with or result
in a breach of, or a default under, any of the terms,
conditions or provisions of any agreement or instrument to
which Assignee is a party, or of any law or regulation
applicable to Assignee.
ii. There are no actions, suits, claims, proceedings, or
investigations pending or threatened against Assignee that
could interfere with Assignee's ability to perform under
this Agreement.
iii. Assignee shall conduct all activities with respect to
the Mining Leases and with respect to any of the Properties
in a good, workmanlike and efficient manner, in accordance
with sound mining and other applicable industry standards
and practices, and in accordance with all of the terms and
conditions of any applicable lease, license, permit,
contract or other agreement pertaining to any such Mining
Lease or to any such Property.
3
<PAGE>
b. Assignee covenants that it shall, in accordance with
the requirements of each of the Mining Leases, either
maintain in good standing all of the mining claims that are
now subject to, or that may hereafter become subject to,
either of the Mining Leases; or that it will otherwise
provide advance written notice to Assignor, such notice to
be provided not less than 30 days prior to Assignee taking
any action or omitting to take any action with respect to a
decision to abandon, forfeit, or relocate any such mining
claim; and Assignee also covenants that as and when it
communicates with either Lessor, it shall simultaneously
provide Assignor a true and accurate written copy of any
such communication.
5. Reciprocal Indemnification.
a. Assignor shall indemnify Assignee against, and hold it
harmless from, any loss, claim, demand or liability
whatsoever (including any attorney's fees or other costs of
legal defense for Assignee) that may arise or accrue with
respect to any activity of Assignor that occurred on any of
the Properties, to the extent that any such activity
occurred prior to the effective date of this Agreement.
This indemnity shall include, but not be limited to,
reclamation or other liabilities under applicable local,
state and federal laws and regulations.
b. Assignee shall indemnify Assignor against, and hold it
harmless from, any loss, claim, demand or liability
whatsoever (including any attorney's fees or other costs of
legal defense for Assignor) that may arise or accrue with
respect to any activity of Assignee on any of the
Properties, as such Properties may be hereafter augmented,
amended, patented, or relocated, to the extent that any such
activity occurs after the effective date of this Agreement.
This indemnity shall include, but not be limited to,
reclamation or other liabilities under applicable local,
state and federal laws and regulations.
6. Royalties and Reimbursement Payments. Until such time as
this Agreement is terminated, Assignee shall be responsible
for the following payment obligations to Assignor:
a. On or before the effective date of the assignment
described in Paragraph 1 of this Agreement, Assignee shall
pay Assignor $20,000.
4
<PAGE>
b. On a prospective basis, from and after August 31, 1996,
to the extent that Assignee has continued to maintain the
Aquarian Lease, and to the extent that Assignor has,
pursuant to Paragraph 4.1(a) of the Aquarian Lease, made
tender of its treasury shares to the Lessor under the
Aquarian Lease, Assignee shall, upon receipt of reasonable
documentation from Assignor that any such tender of shares
(or that any substitute performance acceptable to such
Lessor) has been made, pay to Assignor:
(i) As to biennial tenders of shares (i.e., tenders that
are scheduled to occur on August 31, 1996, August 31, 1998,
August 31, 2000, etc.), the lesser of the cumulative fair
market value of 1,000 shares of Royal Gold common stock on
the date of each such tender, or $15,000; and
(ii) As to the tender that is to be made following the
commencement of production in commercial quantities, the
lesser of the cumulative fair market value of 10,000 shares
of Royal Gold common stock on the date of such tender, or
$100,000.
c. Assignee shall pay to Assignor a production royalty
equivalent to two percent (2.0%) of the net smelter returns
of all production from any portion of any of the Properties
that are now, or may hereafter be, subject to either of the
Mining Leases. "Net smelter returns", for the purposes of
this provision, shall be defined in the same manner as is
set forth in Paragraph 4.2(a) of the Aquarian Lease, and the
timing of any such payment of production royalty shall occur
on the same schedule as is set forth in Paragraph 4.2(b) of
the Aquarian Lease. The production royalty payable to
Assignor hereunder shall not be subject to escalation, as
set forth in Paragraph 4.2(c) of the Aquarian Lease, and the
only sums creditable against payment of such production
royalty shall be the sums described in Paragraph 6.a. and
6.b. above, and, to the extent applicable, any payment made
to Assignor in lieu of Work, as described in Paragraph 7
below. Assignor shall have the same inspection and audit
rights, and Assignee shall be entitled to tender payment of
production royalty in the same manner, as are set forth in
the Aquarian Lease. In addition, Assignor shall be entitled
to elect, on an annual basis, whether to take its production
royalty payments hereunder "in kind", with delivery of any
such "in kind" production royalty to occur at the smelter or
refiner selected by Assignee, and with any additional cost
or expense attributable to such "in kind" production royalty
election to be borne by Assignor.
5
<PAGE>
7. Work Commitments.
a. For so long as Assignee continues to maintain any
interest under this Agreement, or under either of the Mining
Leases, Assignee covenants that it shall, on an annual
basis, commencing with the effective date of this Agreement,
complete on such portion or portions of the Properties as it
may, in its complete discretion, select, the following
minimum quantities of geological, geophysical, geochemical,
mapping, sampling, assaying, reclamation or physical
exploration and development work (collectively, "Work"):
Work Period Dollar Value of Work
December 1, 1994 - November 30, 1995 $ 150,000
December 1, 1995 - November 30, 1996 $ 250,000
December 1, 1996 - November 30, 1997 $ 400,000
December 1, 1997 - November 30, 1998 $ 500,000
b. In the event that Assignee fails to accomplish Work on
the Properties in the minimum amount of $ 150,000 by
November 30, 1995, Assignee covenants that it shall pay to
Assignor, on or before December 15, 1995, the difference
between such amount of Work as Assignee can document was
completed on the Properties prior to November 30, 1995, and
$ 150,000. This covenant shall survive termination of this
Agreement.
c. In the event that Assignee fails, at any time following
November 30, 1995, to complete such minimum amount of Work
as is required within any relevant Work Period that
commences after November 30, 1995, such failure shall
constitute a default under Paragraph 11, and Assignor's sole
remedy shall be its right to terminate under Paragraph 10.
Assignee may avoid termination of this Agreement at the
election of Assignor by tendering to Assignor, within 15
days following the expiration of the relevant Work Period,
one-half of the difference between such amount of Work as
was required to be performed on the Properties during such
Work Period, and the amount of Work that Assignee can
document was completed on the Properties during such Work
Period.
d. Any sum expended on Work during any Work Period that
exceeds the minimum amount required to be spent on the
Properties during such Work Period may be applied by
6
<PAGE>
Assignee, on a cumulative basis, against the obligation(s)
in subsequent Work Period(s).
8. Force Majeure. Assignee shall not be liable for failure to
perform any of its obligations hereunder during periods in
which performance is prevented by any cause reasonably
beyond Assignee's control, which causes hereinafter are
called "force majeure." For purposes of this Agreement, the
term "force majeure" shall include acts of God, fire, flood,
undue shortage of power, strikes, insurrection or mob
violence, inability after reasonable diligence to obtain
permits, or imposition of governmental statutes,
requirements or regulations making it impractical to carry
out such operations, and other causes of a similar nature
which are beyond the control of Assignee. Assignee shall
notify Assignor of the date of commencement, and the cause
of, any such period of force majeure, and shall also notify
Assignor of the time of removal of such force majeure.
During any period of force majeure, Assignee shall
nevertheless (i) comply with all requirements of this
Agreement relative to maintaining the status and title of
the Properties (and the Mining Leases) in good standing; and
(ii) continue to make all payments to Assignor as are
required under Paragraph 6 above.
9. Information and Data.
a. During the term of this Agreement, Assignor is entitled
to have access to the Properties, at Assignor's sole risk
and expense, and upon reasonable prior notice, to permit
Assignor to observe Assignee's activities thereon or for any
other lawful purpose, provided that Assignor's presence on
the Properties shall not unreasonably interfere with, or
delay, the conduct of Assignee's activities on any such
Property.
b. During the term of this Agreement, Assignee shall
deliver to Assignor, on a calendar quarterly basis, a
written report that describes in reasonable detail all
operations of Assignee that were conducted on or for the
benefit of any of the Properties during the most-recently
concluded calendar quarter. Such report shall, at a
minimum, include all material non-interpretive exploration
and operations information, and/or all factual data
resulting from Work. In the event that Assignee generates
any significant exploration or operations information or
data that would be material to Assignor's understanding of
the Properties, Assignee shall deliver such information to
Assignor on an ad hoc basis, rather than waiting for the
next quarterly reporting period. Assignee may also deliver
7
<PAGE>
interpretive data to Assignor, at any time, at the
discretion of Assignee; provided, however, that Assignor
covenants to maintain the confidential nature of all such
interpretive data as may be so delivered by Assignee.
10. Termination.
a. Assignee may terminate this Agreement at any time, by
providing not less than 60 days' prior written notice to
Assignor, at the address set forth on the initial page of
this Agreement. In the event that any such notice of
termination is delivered to Assignor's offices on or after
July 1, however, Assignee covenants that it shall also
simultaneously tender to Assignee such sum as may then be
required to maintain in good standing (at the federal, state
and local levels) all of the mining claims then constituting
the Properties that are subject to the Mining Leases, or
shall otherwise simultaneously produce to Assignor
reasonably acceptable documentary evidence that all such
sums have been paid, and that all necessary actions have
been taken, to maintain all such claims in good standing at
least through the balance of the "assessment year" beginning
on the September 1 next following Assignor's receipt of any
such termination notice.
b. In the event that Assignee determines to terminate the
entirety of its interest under either or both of the
Aquarian Lease and the Steninger Lease, Assignee covenants
that it shall provide Assignee not less than 30 days'
written notice of such determination prior to providing any
such notice of termination to the relevant Lessor; and that
it shall simultaneously tender to Assignor, for its
consideration and possible acceptance (such acceptance to
occur within such 30-day time period), a recordable re-
assignment to Assignor of Assignee's interest in such Mining
Lease(s); provided that, in such event, Assignee shall not
reserve any residual interest in any of the Properties that
are the subject of the Mining Lease(s) as to which Assignee
shall have made such termination determination, and Assignee
shall be relieved of all unincurred obligations under such
re-assigned Mining Lease(s).
c. Upon termination of this Agreement by Assignee, all
payments theretofore made to Assignor by Assignee shall be
retained by Assignor without further liability to Assignee,
and all liabilities and obligations of Assignee hereunder
not then due or accrued shall cease and terminate, except
for any liabilities arising out of Paragraphs 3, 4, 5.b.,
7.b. or 9.b.
8
<PAGE>
d. Assignor may terminate this Agreement at any time, in
the event of Assignee's failure to perform as required
hereunder, provided that if Assignor seeks to terminate
because of any such alleged default by Assignee, Assignor
must proceed in accordance with the provisions of Paragraph
11 below.
11. Default. Should either party default in its performance of
any obligation hereunder, the non-defaulting party shall
give notice in writing to the defaulting party, specifying
the alleged default. The defaulting party shall have such
reasonable period as may be specified in the notice (or if
no such period is specified, a period of not more than 30
days, except in the event of default in payment of a sum due
and owing, in which event the period shall be not more than
5 days) in which to cure the default, or in which to
commence such action as is intended to lead to a diligent
cure of the default. In the event that the defaulting party
fails to cure (or fails promptly to undertake, and continue
with diligence its efforts to achieve, a cure) the noticed
default within the relevant cure period, then the non-
defaulting party, may, at its election, upon written notice
to the defaulting party, terminate this Agreement, and
proceed with all appropriate action, including, as may be
applicable, demand of re-assignment to Assignor of
Assignee's interest(s) in the Mining Leases and in the
Properties.
12. Memorandum Recording. This Agreement shall not be
recorded for, by, or on behalf of either party. The parties
agree that they shall execute a Memorandum of this Agreement
that shall be in a form suitable for recording in Eureka
County, Nevada, and such Memorandum shall simply state that
Assignee's interest in the Mining Leases, and in the several
Properties, is subject to the terms and conditions of this
Agreement.
13. Governing Law. This Agreement shall be subject to, and shall
be construed in accordance with, the law of the state of
Nevada.
14. Notices and Payments. Any notice or payment required or
permitted hereunder shall be made to the office of the
respective party at the appropriate address noted on the
first page hereof, or at such other address as either such
party may hereafter notice in writing. Notices are
9
<PAGE>
effective upon confirmed receipt only. Subject to
confirmation of receipt, notices may be provided by
facsimile transmission.
15. Construction; Complete Agreement. As used herein, the
singular includes the plural, as may be required by context.
The titles of the several paragraphs of this Agreement are
for reference or convenience only, and shall not in any way
affect the meaning or construction of the substantive
provisions hereof. This Agreement constitutes the complete
understanding and agreement of the parties with respect to
the matters set forth herein, and it shall not be modified
or amended except by a subsequently-dated instrument that
has been executed by both parties.
16. Assignment. Either party hereunder may assign its
interest in this Agreement, such assignment to be effective
upon 10 days' prior written notice to the other party.
17. Notice to Lessors. Assignor covenants that it shall give
notice of the assignment to be effected by this Agreement to
each of the Lessors under the Mining Leases, such that the
effective date of Assignor's assignment of its interests
under the Mining Leases shall be on or before December 1,
1994, the effective date of this Agreement, as referenced in
Paragraph 1 above.
IN WITNESS WHEREOF, the parties have executed this Agreement on
November 11, 1994, effective as of December 1, 1994.
ROYAL GOLD, INC.
By: /s/ Stanley Dempsey
Stanley Dempsey, Chairman and
Chief Executive Officer
SANTA FE PACIFIC GOLD CORPORATION
By: /s/ K. Sageser
K. Sageser, Vice President
10
