SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 12, 1999
ROYAL GOLD, INC.
(exact name of registrant as specified in its charter)
Delaware 0-5664 84-0835164
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
1660 Wynkoop Street, Suite 1000, Denver, CO 80202-1132
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-573-1660
Item 5. OTHER EVENTS
Royalty Conversion
- ------------------
On April 1, 1999, Royal Gold, Inc. ("the Company")and Cortez Gold
Mines ("Cortez") agreed to convert the Company's 20% net profits
interest in the South Pipeline project into several gross smelter
return royalties extending over a mining complex that includes the
Pipeline and South Pipeline gold mines, in Lander County, Nevada.
Each of the Pipeline and South Pipeline mines is owned by Cortez,
which is a joint venture between Placer Dome U.S. Inc. (60%) and
Kennecott Explorations (Australia) Ltd. (40%), a subsidiary of Rio
Tinto. Cortez has advised Royal Gold that it expects Pipeline to
produce 1.1 million ounces of gold in calendar 1999, and that the
annual output from Pipeline in both 2000 and 2001 is expected to be
approximately 850,000 ounces. The transaction will therefore bring
significant cash flow to the Company commencing July 1, 1999, and
is expected to provide the Company with net earnings in its fiscal
year ending June 30, 2000.
The transaction has no balance sheet effect on the Company, as the
book value of the South Pipeline project has previously been
written down completely.
At present, Cortez anticipates that permits for the commencement of
operations at South Pipeline will be received during the third
quarter of 1999, and that pre-stripping of the South Pipeline
deposit would commence in 2001, as personnel and equipment now
employed in the Pipeline operation become available. Production
from South Pipeline is not expected until 2002.
The transaction was negotiated by the Company due to the lengthy
period before South Pipeline would go into production under Cortez'
business plan. The conversion was negotiated based on comparing
the net present value of the expected cash flows that would come to
Royal Gold under its 20% net profits interest, as and when South
Pipeline was fully developed and all capital related to that
project had been recouped by Cortez, to the net present value of
the expected cash flows that Royal Gold would receive if it held
gross royalty interests over both of Pipeline and South Pipeline,
commencing July 1, 1999. These estimates were performed at various
gold prices, and the parties' negotiations resulted in the sliding
scale royalties that are detailed below.
1
Creating two separate gross royalty interests for the properties
with reserves and for the properties not yet fully explored was
intended to preserve an important aspect of the Company's original
agreement, by providing for the Company's participation in any
further exploration success on the 288 claims comprising the GAS
Claims. The GAS Claims are on South Pipeline ground outside the
planned operation of the South Pipeline deposit. See "New
Royalties" below.
As a result of the transaction, Royal Gold will have easier to
calculate interests in a much bigger complex, and will not have to
wait until 2002 for receipt of significant cash flows. By exchang
ing the net profits royalty in the South Pipeline property, the
Company avoids the risks of increased operating costs, increased
capital requirements and any delays related to bringing South
Pipeline into production.
A "Gross Smelter Returns" royalty is measured by all of the
revenues attributed to material that is mined and processed, with
no deduction for any costs paid by or charged to Cortez. The only
possible deduction is for any amounts that might be paid for any
future royalty assessment that might be imposed by the United
States government following any reform of the 1872 Mining Law.
Reserves and Resources
- ----------------------
Set forth below are the reserves reported by Placer Dome Inc. for
the Pipeline and South Pipeline properties. Under the Cortez plan
for development, South Pipeline is not expected to reach commercial
production until 2002, and Pipeline has been in full production for
several years. The Company previously held a 20% net profits
interest in South Pipeline and now holds gross smelter return
royalties on both properties. The new royalties provide revenue to
Royal Gold based generally on revenue generated, rather than net
profits after costs of development and production.
2
CORTEZ - PROVEN AND PROBABLE RESERVES (1) AS OF JUNE 30, 1999 (2)
(SUBJECT TO ROYAL'S RESERVE CLAIMS GROSS SMELTER RETURNS ROYALTY) (3)
---------------------------------------------------------------------
Average Contained
Tons (mm) Grade (opt) Ounces Au
----------------------------------------
Pipeline 52.1 0.071 3.70 mm
South Pipeline 122.3 0.037 4.59 mm
- ---------------
(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. Reserves have been estimated by Cortez at
a gold price of $300 per ounce
"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) As estimated by Cortez at March 24, 1999, to reflect antici
pated production through June 30, 1999. Figures shown reflect no
adjustments for recovery rates of contained ounces or for mining
and processing losses.
(3) Reserve Claims GSR applies to these properties. At gold
prices from $270 to $310, the Company receives 2.25% of revenues
from these properties. Also subject to Royal's Silver GSR and
Other Products NSR royalties. See "New Royalties."
3
CORTEZ - OTHER MINERALIZATION (1) AS OF JUNE 30, 1999 (2)
(SUBJECT TO ROYAL'S GAS CLAIMS GSR ROYALTY) (3)
---------------------------------------------------------
Average Contained
Tons (mm) Grade (opt) Ounces Au
---------------------------------------
Pipeline/South
Pipeline 36.1 0.039 1.42 mm
(1) "Other Mineralization" is in addition to "Proven and Probable
Reserves." Other 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 expendi
tures, these deposits cannot qualify as commercially mineable ore
bodies without further drilling and metallurgical work are
completed, and until other economic and technical feasibility
factors based upon such work are resolved.
(2) As estimated by Cortez at March 24, 1999, through June 30,
1999. Figures shown reflect no adjustments for recovery rates of
contained ounces or for mining or processing losses.
(3) These properties are not in production but are subject to the
GAS Claims GSR, the Saddle Area GSR and the Other Products NSR
royalties. See "New Royalties" below.
Cortez Production Information
- -----------------------------
As noted above, Cortez has advised the Company that it currently
projects that production from the Pipeline mine, for each of
calendar years 1999, 2000 and 2001, will be at the levels of 1.1
million ounces, 850,000 ounces and 850,000 ounces. These amounts
for 2000 and 2001 are higher than production estimates previously
announced by Placer Dome, but have been provided to Royal Gold by
Placer Dome for purposes of this Form 8-K. As a result, Royal Gold
is dependent on Cortez for information regarding Pipeline,
including without limitation, estimates of future production at
Pipeline. In addition, estimates of future production are subject
to numerous risks and uncertainties, including mining and produc
tion problems, environmental hazards, slope failures, accidents,
4
labor disputes, processing or mechanical problems and acts of God.
Therefore, Royal Gold cannot provide any assurance that the
estimates provided by Cortez will be realized.
The Company's fiscal year ends June 30, and, assuming that
production from Pipeline occurs evenly over each of the three
stated calendar years, the Company's revenues from the Reserve
Claims GSR attributable to Pipeline would be expected to be as
follows over each of the next two fiscal years of the Company, at
various assumed gold prices:
Estimated Estimated Payments to Royal Under
Pipeline Reserve Claims GSR Royalty
Production $250/oz $300/oz $350/oz
-------------------------------------------------
GSR% 1.3% 2.25% 3.4%
- ----
FYE 6/30
- --------
2000 975,000 oz. $3.2 mm $6.6 mm $11.6 mm
2001 850,000 oz. $2.8 mm $5.7 mm $10.1 mm
The Company's GSR royalities have been structured to provide the
Company with an increased return in the event gold prices improve
from current levels, and a reduced return if gold prices decline.
Royal cannot provide any assurance regarding future gold prices.
New Royalties
- -------------
Under the new agreement providing for the GSR royalties, Royal Gold
will have access to all mining claim areas and processing facili
ties at Pipeline and South Pipeline. The Company will also be
entitled to receive all material information about exploration,
mining, production, development, planning and budgeting for
Pipeline and South Pipeline. Royal Gold has surrendered its 20%
net profits interest and various contractual rights, including the
contingent right to operate the South Pipeline property under
defined circumstances.
5
The royalty interests Royal Gold now holds at the Pipeline and
South Pipeline gold mines and on the GAS Claims (the 310 claims
that are the subject of Cortez' mining lease with ECM, Inc., by
which Cortez holds the South Pipeline property), include:
(a) Reserve Claims GSR. A sliding scale gross smelter returns
royalty ("GSR") for all gold produced from the "Reserve Claims," or
some 52 claims that encompass all of the Pipeline and South
Pipeline deposits. This royalty will cover, from July 1, 1999,
proven and probable ore reserves containing approximately 8.3
million contained ounces of gold. The GSR on the Reserve Claims is
tied to the gold price, without indexing for inflation or defla
tion, as follows:
Price of Gold Per Ounce ($U.S.) Gross Smelter Returns
----------------------------------------------------------
Below $210 0.40%
$210-$229.99 0.50%
$230-$249.99 0.75%
$250-$269.99 1.30%
$270-$309.99 2.25%
$310-$329.99 2.60%
$330-$349.99 3.00%
$350-$369.99 3.40%
$370-$389.99 3.75%
$390-$409.99 4.00%
$410-$429.99 4.25%
$430-$449.99 4.50%
$450-$469.99 4.75%
$470 and above 5.00%
(b) GAS Claims GSR. A sliding scale GSR for all gold produced
from the remaining GAS Claims. The GAS Claims include some 310
lode mining claims, but production from 22 of the GAS Claims (those
claims that encompass the South Pipeline reserve) will be subject
to the Reserve Claims GSR. At present, apart from the Reserve
Claims, there are no ore reserves on the GAS claims, but the GAS
claims do host gold mineralization associated with the GAP and
Windmill deposits. The GSR on the GAS Claims is tied to the gold
price, without indexing for inflation or deflation, as follows:
6
Price of Gold Per Ounce ($U.S.) Gross Smelter Returns
- -------------------------------------------------------------
Below $210 0.72%
$210-$229.99 0.90%
$230-$249.99 1.35%
$250-$269.99 2.34%
$270-$309.99 4.05%
$310-$329.99 4.68%
$330-$349.99 5.40%
$350-$369.99 6.12%
$370-$389.99 6.75%
$390-$409.99 7.20%
$410-$429.99 7.65%
$430-$449.99 8.10%
$450-$469.99 8.55%
$470 and above 9.00%
(c) The Saddle Area GSR. A 10% GSR on all gold and silver
produced from any of the GAS Claims from January 1, 1999 until the
commencement of commercial production from the South Pipeline
deposit (this interest relates primarily to stockpiled material
from the Crescent Pit and from the "saddle area," at South
Pipeline).
(d) The Silver GSR. A 7% GSR on all silver produced from any
of the Reserve Claims or the GAS Claims commencing July 1, 1999.
(e) The Other Products NSR. A 3% net smelter returns royalty
on all products, other than gold or silver, produced from any of
the Reserve Claims or GAS Claims, commencing July 1, 1999. A "Net
Smelter Returns" royalty is measured by all of the revenues
received by Cortez following the sale or final disposition of a
given product, less the proportionate costs of refining such
product for sale, transportation of the product to a market, and
applicable insurance.
The several GSR royalties (except for the Silver GSR)are
payable in-kind and, under certain circumstances, the Company would
be entitled to delayed production payments (i.e., non-recoupable
payments) of $400,000 per year.
7
The Company's new arrangement with Cortez is governed by a new
Royalty Agreement that will supersede the Agreement for Resolution
of Disputes and Litigation and for the Formation of the South
Pipeline Project, dated September 18, 1992, by which Royal Gold
held its 20% net profits interest in South Pipeline.
__________________
Cautionary "Safe Harbor" Statement Under the Private Securities
Litigation Reform Act of 1995: With the exception of historical
matters, the matters discussed in this Report on Form 8-K are
forward-looking statements that involve risks and uncertainties
that could cause actual events to differ materially from projec
tions contained herein. Such forward-looking statements include
statements regarding future cash flow and earnings, timing and
amount of future production, and mineralization and reserves.
Factors that could cause actual results to differ materially
include, among others, various decisions and activities of Cortez,
unanticipated grade, geological, metallurgical, processing or other
problems at Cortez's Pipeline or South Pipeline properties, changes
in project parameters as plans are refined by Cortez with respect
to Pipeline and South Pipeline, the timing of the receipt of
federal, state and local government permits for South Pipeline,
results of current or planned exploration activities, environmental
assessments, costs and risks, and changes in the gold price, as
well as other factors described in the Report Form 8-K. Most of
these factors are entirely beyond the Company's ability to predict,
influence or control. These and other described risks are also
discussed in greater detail in the Company's 10-K and 10-Q reports
that have been filed with the SEC. The Company disclaims any
obligation to update any forward-looking statement made herein.
Readers are cautioned not to put undue reliance on forward-looking
statements.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable
(b) Not applicable
(c) Exhibits
(1)Royalty Agreement, dated April 1, 1999, between
Royal Gold Inc. and the Cortez Joint Venture
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ROYAL GOLD, INC.
(Registrant)
Date: April 12, 1999 By: /s/
-------------------
Stanley Dempsey
Chairman
9
ROYALTY AGREEMENT
This Royalty Agreement (the "Agreement") is entered into as of April
1, 1999, by and among THE CORTEZ JOINT VENTURE,a joint venture formed
under and governed by the laws of Nevada and comprised of Placer
Cortez Inc., a Delaware corporation, and Kennecott Explorations
(Australia) Ltd., a Delaware corporation (collectively, "Cortez"),
PLACER DOME U.S. INC., a California corporation and the Manager of
Cortez ("PDUS"), ROYAL GOLD, INC., a Delaware corporation ("Royal
Gold") and ROYAL CRESCENT VALLEY INC.,a Nevada corporation ("Royal
Crescent Valley").
RECITALS
A. Cortez, PDUS, Royal Gold and Royal Crescent Valley are parties to
that certain "Agreement for Resolution of Disputes and Litigation
and for the Formation of the South Pipeline Project" dated as of
September 18, 1992 (the "1992 Agreement"), pursuant to which, among
other things, Royal Gold was granted a royalty on production from the
GAS mining claims, as defined therein (the "1992 Royalty").
B. A dispute has arisen among the parties as to the interpretation of
certain terms and conditions relating to the 1992 Royalty.
C. The parties now wish to resolve all outstanding disputes concerning
the 1992 Royalty by converting the 1992 Royalty into certain different
royalties on production from the GAS mining claims and certain other
properties owned and operated by Cortez in Crescent Valley, Nevada.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the receipt and sufficiency of which are hereby confirmed
by all parties, the parties hereto agree as follows:
1. Definitions. The following terms shall have the meanings ascribed to
them in this Section for all purposes of this Agreement:
1.1 "Annual Strategic Business Plan" means the annual strategic
business plan prepared by Cortez along with any updates, as and when any of
the same have been finalized and approved by the Cortez Management Committee.
1
1.2 "Commencement of Production" means the point in time when Cortez
has completed all development activities for a particular mineral deposit
including, without limitation, the construction of facilities, pre-stripping
and the receipt of all permits required for operations, and Cortez has
milled or otherwise processed ore mined and removed from such deposit for a
start-up period of not less than sixty (60) consecutive days at a rate for
that period of not less than seventy-five percent (75%) of the designed
capacity of a particular mine. Where ore is mined from a particular mineral
deposit and is processed in any Cortez facilities, Commencement of Production
shall be the date when ore is first taken to that facility for processing on
a commercial basis. Cortez shall notify Royal Gold of the date or dates of
Commencement of Production for each particular deposit.
1.3 "Cortez Management Committee" means the Cortez Joint Venture
Management Committee.
1.4 "Delayed Production Payments" means the payments, if any, to be
paid by Cortez to Royal Gold as provided in Section 4 of this Agreement.
1.5 "ECM Lease" means that certain Mining Lease between Cortez and
ECM, Inc. made effective April 15, 1991, as amended.
1.6 "GAS Claims" means all of those certain unpatented lode mining
claims located in Lander County, Nevada and more specifically described in
Exhibit A attached hereto and incorporated herein by reference, and all
amendments and relocations thereof.
1.7 "Gross Smelter Returns" means the revenues attributed to Products
mined and removed from the Reserve Claims or the GAS Claims, as the case may
be, with no deduction for any costs paid by or charged to Cortez, except for
deductions of Mining Law Reform Costs. The revenues attributed to Cortez
shall be determined on a deemed market value basis, being the gross value of
the Products determined as the total quantity of Products outturned to
Cortez's account at the refiner and in the case of Products other than gold
and silver not outturned to Cortez's account at the refiner, the total
quantity of such products delivered to any customer, for any calendar
quarter multiplied by (1) for gold, the average daily P.M. price fixing for
gold by the London Bullion Association as reported in the Wall Street Journal
or any other agreed upon successor publication for the applicable calendar
2
quarter, (2) for silver, the daily price fixing for silver by the London
Bullion Association as reported in the Wall Street Journal, or any other
agreed upon successor publication for the applicable calendar quarter,
and (3) for all other Products, the deemed price shall be the Net Smelter
Returns.
1.8 "Mining Law Reform Costs" means all amounts paid by or charged to
Cortez for any royalty, assessment, production tax or other levy imposed on
and measured by production, to the extent that any such levy is hereafter
imposed by the United States on the production of Products from the public
lands of the United States, in connection with reform of the Mining Law of
1872 or otherwise.
1.9 "Net Smelter Returns" means the actual price received by Cortez
for the sale of Products other than gold and silver prior to delivery to any
customer, refinery or upgrading facility and after deductions for any Mining
Law Reform Costs, the costs of insuring, marketing, freight or transportation
and, if applicable, refining and treatment costs, for such Products.
1.10 "New Deposit" shall have the meaning ascribed by Section 4.2
herein.
1.11 "Products" means all ores, minerals or materials of whatever kind
and nature mined and removed from the Properties (excluding any commodities
mined from the Properties and used by Cortez in the production of any
Products), including any ores, minerals or materials which may be recovered
as a result of reprocessing of tailings, dumps or other materials wherever
located, if such materials were originally mined and removed from the
Properties. If Cortez acquires any interest in oil, gas, geothermal resources
or other minerals in the lands encompassed within the Properties, all oil,
gas, geothermal resources and other minerals produced from such lands shall
be Products.
1.12 "Properties" means the Reserve Claims and the GAS Claims.
1.13 "Reserve Claims" means those unpatented lode mining claims which
encompass all of the known proven and probable reserves within the Pipeline
and South Pipeline deposits as of the date of this Agreement, being those
particular mining claims located in Lander County, Nevada and more specifically
described in Exhibit B attached hereto and incorporated herein by reference,
and all amendments and relocations thereof.
3
1.14 "Royalty" means the Gross Smelter Return royalties on gold and
silver Products and Net Smelter Returns royalties on all other Products granted
to Royal Gold on production from the Properties as provided in Section 3 of
this Agreement.
1.15 "1998 Strategic Business Plan" means the 1998 strategic business
plan prepared by Cortez, a copy of which was delivered to Royal Gold in July
1998, as amended by the parties' concurrence for the purpose of resolving the
dispute referred to in Recital B above, to include year-end 1998 reserves and
a new production plan incorporating such new reserves.
2. Termination of 1992 Royalty; Release of Claims.
2.1 Termination of 1992 Royalty. The parties hereby agree that the
1992 Royalty as created by the 1992 Agreement is hereby fully and finally
terminated effective as of January 1, 1999, and except as specifically
provided in this Agreement, Royal Gold shall have no further right, title or
interest in and to the GAS mining claims as defined in the 1992 Agreement or
the production of ores, minerals and materials therefrom.
2.2 Mutual Release of Claims. Each of Royal Gold and Royal Crescent
Valley, on the one hand, and PDUS and Cortez, on the other hand, for themselves
and for each of their affiliates, co-venturers and any of their respective
successors, predecessors, and assigns, do hereby completely release and
forever discharge each of the other parties, together with each of their
affiliates, co-venturers and any of their respective successors, parents,
subsidiaries, predecessors, assigns, officers, directors, agents and employees,
from and against any and all rights, interests, claims, causes of action,
damages, losses, liabilities, demands, costs and expenses of whatever kind or
character, whether known or unknown, legal or equitable, which arise in any
manner whatsoever from any actual or alleged acts, omissions, obligations,
arrangements, relationships or circumstances occurring or existing in
connection with the 1992 Royalty or those portions of the 1992 Agreement
relating to the 1992 Royalty; provided, however, that nothing contained
herein shall constitute any termination, release or waiver of rights with
respect to those portions of the 1992 Agreement not relating to the 1992
Royalty.
3. Grant of Royalty. Cortez hereby grants to Royal Gold certain royalties
on the production of Products from the Properties on the terms and conditions
hereinafter contained.
4
3.1 Current GAS Claims Production. For all gold and silver Products
produced from the GAS Claims from and after January 1, 1999 until the
Commencement of Production from the South Pipeline deposit on the GAS Claims,
Cortez shall pay to Royal Gold a royalty in the amount of ten percent (10%)
of the Gross Smelter Returns.
3.2 Reserve Claims Gold Production. For all gold Products produced
from the Reserve Claims from and after July 1, 1999, Cortez shall pay to Royal
Gold a royalty equal to a percentage of Gross Smelter Returns determined in
accordance with the following schedule:
Price of Gold per Ounce ($U.S.) Gross Smelter Returns
---------------------------------------------------------
Below $210 0.40%
$210 - $229.99 0.50%
$230 - $249.99 0.75%
$250 - $269.99 1.30%
$270 - $309.99 2.25%
$310 - $329.99 2.60%
$330 - $349.99 3.00%
$350 - $369.99 3.40%
$370 - $389.99 3.75%
$390 - $409.99 4.00%
$410 - $429.99 4.25%
$430 - $449.99 4.50%
$450 - $469.99 4.75%
$470 and above 5.00%
3.3 Reserve Claims Silver Production. For all silver Products
produced from the Reserve Claims from and after July 1, 1999, Cortez shall
pay to Royal Gold a royalty in the amount of seven percent (7%) of the
Gross Smelter Returns.
3.4 Reserve Claims Production (Excluding Gold and Silver). For all
Products other than gold and silver produced from the Reserve Claims from
and after July 1, 1999, Cortez shall pay to Royal Gold a royalty in the amount
of three percent (3%) of the Net Smelter Returns.
3.5 GAS Claims Gold Production. For all gold Products produced from
the GAS Claims (excluding any production subject to the royalty provided in
Section 3.1 above), Cortez shall pay to Royal Gold a royalty equal to a
percentage of Gross Smelter Returns determined in accordance with the
following schedule:
5
Price of Gold per Ounce ($U.S.) Gross Smelter Returns
---------------------------------------------------------
Below $210 0.72%
$210 - $229.99 0.90%
$230 - $249.99 1.35%
$250 - $269.99 2.34%
$270 - $309.99 4.05%
$310 - $329.99 4.68%
$330 - $349.99 5.40%
$350 - $369.99 6.12%
$370 - $389.99 6.75%
$390 - $409.99 7.20%
$410 - $429.99 7.65%
$430 - $449.99 8.10%
$450 - $469.99 8.55%
$470 and above 9.00%
3.6 GAS Claims Silver Production. For all silver Products produced
from the GAS Claims (excluding any production subject to the royalty provided
in Section 3.1 above) Cortez shall pay to Royal Gold a royalty equal to seven
percent (7%) of Gross Smelter Returns.
3.7 GAS Claims Production (Excluding Gold and Silver). For all
Products other than gold and silver produced from the GAS Claims, Cortez
shall pay to Royal Gold a royalty in the amount of three percent (3%) of the
Net Smelter Returns.
3.8 Price of Gold. As used in the tables in Sections 3.2 and 3.5
above, the "Price of Gold" to be used to determine the applicable Gross
Smelter Return for each quarterly Royalty payment shall be determined as set
forth in Section 1.7.
4. Delayed Production Payments. Cortez shall be the sole judge of the
rate, manner and timing of all operations on the Properties, exercisable in
its sole discretion, and may reduce, modify, suspend or terminate any and all
operations on the Properties at any time as Cortez, in its sole discretion,
may eem appropriate. However, Cortez shall pay Delayed Production Payments
to Royal Gold as follows:
4.1 Reserve Claims. In the event that the Royalty required to be
paid to Royal Gold for production from the Reserve Claims during any calendar
year is less than Four Hundred Thousand Dollars ($400,000), Cortez shall pay
to Royal Gold a non-recoupable cash payment in an amount equal to the
6
difference between the Royalty owing to Royal Gold for production during such
calendar year and Four Hundred Thousand Dollars ($400,000) (a "Delayed
Production Payment"), such that Royal Gold shall receive no less than Four
Hundred Thousand Dollars ($400,000) in total Royalty payments and Delayed
Production Payments in respect of the Reserve Claims for each calendar year;
provided, however, that (a) no Delayed Production Payment shall be due for any
calendar year in which operations are suspended or terminated due to an event
of force majeure as provided in Section 16, and (b) the operation of this
Section 4.1 and Cortez's obligation to pay Delayed Production Payments
hereunder shall fully and finally terminate at such time as Cortez has mined
and processed at least seventy-five percent (75%) of the total reserves on the
Reserve Claims as determined by Cortez as of January 1, 1999 (being total
reserves of 8.90 million contained ounces).
4.2 GAS Claims. In the event that any deposit is discovered on the
GAS Claims that contains more than five hundred thousand (500,000) contained
ounces of gold in reserves (a "New Deposit" for purposes of this Section 4.2),
Cortez shall, consistent with the orderly development of the Properties,
commence and diligently pursue all requisite permits(s) including, without
limitation, an approved plan of operations allowing it to mine and process
such deposit. When Cortez has received all such requisite permit(s) and a
sufficient period of time has passed, as determined by Cortez, to allow
construction of all facilities and completion of pre-stripping necessary to
allow production and processing of minerals to commence, Cortez shall pay to
Royal Gold a Delayed Production Payment for any calendar year in which the
Royalty required to be paid to Royal Gold for production from the New Deposit
is less than Four Hundred Thousand Dollars ($400,000); provided, however, that
(a) no Delayed Production Payment shall be due for any calendar year in which
operations at a New Deposit are suspended or terminated due to an event of
force majeure as provided in Section 16, and (b) the operation of this Section
4.2 and Cortez's obligation to pay Delayed Production Payments in respect of
any New Deposit shall fully and finally terminate at such time as Cortez has
mined and processed at least seventy-five percent (75%) of the reserves in the
New Deposit as determined by Cortez as of the date of the Commencement of
Production of the New Deposit.
5. Calculation and Delivery of Royalty Payments. Royalty payments shall
be due and payable by the 27th day following the end of each calendar quarter
during which Cortez mines and sells Products from the Reserve Claims or the
GAS Claims, as the case may be. Royalty payments shall be accompanied by a
7
statement sufficient to allow Royal Gold to determine the method of
computation of each Royalty payment and the accuracy thereof. Each statement
furnished to Royal Gold shall be deemed to be correct and binding on Royal
Gold unless, within eighteen (18) months of its receipt, Royal Gold notifies
Cortez in writing that it disputes the correctness of such statement and
specifies its objections in detail. Cortez shall maintain true and correct
records of all Products mined, processed and sold from the Reserve Claims
and the GAS Claims (or deemed to be sold) and Royal Gold shall have the right
to audit such records at Cortez's offices during normal business hours upon
reasonable prior notice, provided such audit is conducted by Royal Gold or
by an accounting firm of recognized standing, at least one of whose members
is a member of the American Institute of Certified Public Accountants. Cortez
shall make available all books and records, refinery statements, and other
invoices, receipts and records necessary for purposes of such audit, and shall
make available work space and copying facilities, or permit Royal Gold and its
representatives to install copying facilities for use in connection with its
audit activities.
6. Method of Making Payments. All payments of money required to be made
by Cortez to Royal Gold hereunder shall be made by check to Royal Gold on or
before the due date at the office of Royal Gold, Suite 1000, 1660 Wynkoop,
Denver, Colorado 80202, or such other address as may be designated in writing
from time to time by Royal Gold. Upon written request from Royal Gold to
Cortez prior to the due date of any payment of money, Royal Gold may direct
that the payment be made by way of wire transfer to an account designated by
Royal Gold. Upon making payment as provided herein, Cortez shall be relieved
of any responsibility for the distribution of such payment among Royal Gold
and any of its successors or assigns.
7. In Kind Payment. Royal Gold shall have the right to elect annually to
receive its Royalty payment on gold Products (but not any other Products) in
kind at the refinery. If Royal Gold desires to receive its royalty in kind,
it shall provide notice to Cortez within thirty (30) days following execution
of this Agreement, with respect to the Reserve Claims, and within thirty (30)
days following receipt of notice from Cortez of Commencement of Production,
with respect to any deposit on the GAS Claims, and within thirty (30) days
prior to the commencement of each calendar year thereafter. Once Royal Gold
makes an election, the election shall remain in effect for the remainder of
the relevant calendar year. In the event that Royal Gold fails to provide
notice to Cortez of its election, it shall be deemed to have elected not to
receive its royalty in kind. In all cases where Royal Gold properly elects
8
to receive its royalty in kind, the parties shall cooperate as necessary to
establish a separate account for Royal Gold at the refinery for the delivery
to Royal Gold of its proportionate share of refined metals, and Royal Gold
shall be solely responsible for all handling, transportation, insurance,
marketing and sales costs and expenses attributable to its share of Products
following delivery to its account at the refinery. If Cortez utilizes a
bullion refinery that it owns or controls, it shall provide Royal Gold with
the same services it would receive at a commercial refinery, at costs
no greater than would be charged by such refinery. Such services will
include storage, security and transfer to buyers. For purposes of determining
the gold equivalent of the royalty due Royal Gold, gold shall be priced at
the average daily P.M. price fixing of the London Bullion Association, as
reported in the Wall Street Journal or any agreed-upon successor publication,
for the calendar quarter for which the production royalty is payable.
8. Commingling. Cortez shall have the right to commingle Products with
ores, minerals or materials produced from lands other than the Reserve Claims
and the GAS Claims after such Products have been weighed or measured, sampled
and analyzed in accordance with sound mining and metallurgical practices
such that Royal Gold's Royalty can be reasonably and accurately determined.
Upon request to Cortez, and at Royal Gold's expense, Royal Gold shall have
the right to have a representative present at the time all such samples and
measurements are taken. Royal Gold's representative shall have the right to
secure sample splits for the purpose of confirming the accuracy of all measure
ments. If Royal Gold's assay results differ from Cortez's, Cortez shall
perform a check assay. Any remaining disputes concerning assays, or other
disputes concerning commingling procedures or results, shall be subject to
arbitration as provided in Section 17 hereof .
9. Stockpiling. Cortez may stockpile any ores, minerals or materials, or
other Products from the Reserve Claims and the GAS Claims at such place or
places as Cortez may elect. If Cortez stockpiles or holds in inventory any
dore or other Products that have been processed and are in a form that is
saleable without sale for more than one hundred twenty (120) days, such dore
and other Products shall be deemed to have been sold on the last day of the one
hundred twenty (120) day period and Cortez shall pay to Royal Gold the Royalty
due to Royal Gold on such deemed sale calculated as provided in Section 3
hereof.
9
10. Royal Gold Access and Information. Royal Gold shall have access to the
Properties and the right to receive information concerning the Properties as
provided in this section.
10.1 Access to Properties. Royal Gold, at its sole risk and expense,
shall have access to the Properties and to Cortez's facilities being used in
connection with mining and processing operations on the Properties to inspect
the same upon three (3) days' prior notice to Cortez and in such a manner as
shall not hinder or interrupt unreasonably the operations of Cortez, provided,
that Cortez recognizes there may be occasions when it is convenient or
necessary for Royal Gold representatives to schedule visits on less than three
(3) days' notice and Cortez shall consider waiving the advance notice request
if, in its sole discretion, it determines such waiver will not constitute an
unreasonable burden.
10.2 Delivery of Information and Data. From the date of execution of
this Agreement and for the duration of the term of this Agreement, as provided
n Section 14, Cortez shall deliver to Royal Gold not less than quarterly or
otherwise shall make available the following data and information relating to
operations on the Properties.
(a) All material data relating to exploration results on the
Properties, including without limitation all drill logs,
assay reports, drill hole location maps, drill hole surveys
and all results of geochemical, geophysical and geological
surveys.
(b) The monthly operations report prepared by the Cortez Mine
General Manager for the Cortez Management Committee.
(c) The Annual Strategic Business Plan.
(d) The annual reserve report prepared by Cortez, along with
any updates, as and when any of the same have been
finalized and approved by the Cortez Management Committee.
(e) The annual Plan and Budget prepared by Cortez relating to
the Properties and any amendments thereto, as and when any
of the same have been finalized and approved by the Cortez
Management Committee.
10
(f) Any additional material engineering or economic studies
or analyses prepared by Cortez and relating to the Properties,
as and when any of the same have been finalized, provided
to and approved by the Cortez Management Committee.
10.3 Proprietary Information. Notwithstanding any of the foregoing
to the contrary, Royal Gold acknowledges that Cortez will not provide specific
information relating to or which might reveal the nature of certain proprietary
methodologies or technologies developed by Cortez, although Cortez will
disclose to Royal Gold the location of any exploration targets on the
Properties generated by such proprietary methodologies or technologies. In
addition, in the event that Cortez develops in the future any proprietary
methodologies, technologies or processes which are maintained by Cortez as
confidential and which Cortez reasonably believes does or may constitute a
competitive business advantage, the methodologies, technologies and processes,
but not the results generated thereby, shall be withheld from Royal Gold
pursuant to this Agreement.
10.4 Confidentiality. Royal Gold shall not, without the prior
written consent of Cortez, disclose to any third party (excluding, however,
any representative, affiliate, agent, consultant or contractor of Royal Gold
who has a bona fide need to be informed, subject to the execution by such
third party of a confidentiality agreement in conformance with the provisions
of this section) any information or data concerning operations, including
exploration, on the Properties which is not generally available to the public;
provided, however, that upon not less than five (5) days' prior written notice
to Cortez setting forth the nature and content of a proposed disclosure, Royal
Gold may disclose information or data pertaining to the Properties: (a) to
any third party to whom Royal Gold in good faith anticipates selling or
assigning all or a part of Royal Gold's interest hereunder or (b) to any
lender from whom Royal Gold is borrowing funds based upon or secured by its
interest in the Properties, provided that Royal Gold shall have been provided
with a confidentiality agreement executed by such third party in conformance
with the provisions of this section. If a disclosure is required for
compliance with applicable laws, rules, regulations or orders of any
governmental agency or stock exchange having jurisdiction, Royal Gold shall
provide as much prior notice to Cortez of the nature and contents of the
proposed disclosure, for the review and comment of Cortez, as is reasonably
possible in the circumstances.
10.5 Release of Forecasts. Royal Gold acknowledges that much of the
information to be provided by Cortez pursuant to Section 10.2 constitute
estimates and forecasts that are interpretive and/or speculative in nature.
11
Such information is in no manner warranted by Cortez. Royal Gold shall under
no circumstance publicly release such information. Instead, Royal Gold agrees
that it will rely only on its own forecasts and estimates for its business
planning purposes and that it may release such forecasts and estimates so long
as they are clearly identified as having been prepared by Royal Gold and not
by Cortez. Royal Gold agrees to indemnify and hold Cortez harmless from any
claim, demand, expense or liability associated with any use or reliance on any
such information by Royal Gold or any third party.
11. Representations and Reliance. Cortez acknowledges that Royal Gold has
relied in part on the accuracy of the 1998 Strategic Business Plan in deciding
to enter into this Agreement. Royal Gold acknowledges that the 1998 Strategic
Business Plan is merely Cortez's best estimate of future operations at Cortez,
that, with the concurrence of Royal Gold, the 1998 year-end reserves were
incorporated in the 1998 Strategic Business Plan in a summary fashion and
without the degree of planning and scheduling that would normally occur in an
Annual Strategic Business Plan, and that actual results of operations can differ
materially from those anticipated in the 1998 Strategic Business Plan due to
numerous factors both within and beyond the control of Cortez. Cortez
represents and warrants to Royal Gold that as of the date of execution of this
Agreement, (a) the 1998 Strategic Business Plan constitutes Cortez's most up
to date and accurate estimate of future operations on the Properties, (b) Cortez
is aware of no material errors or omissions in the 1998 Strategic Business Plan
that have not been disclosed to Royal Gold and (c) there exist no additional
or different estimate(s) of future operations on the Properties that have not
been previously provided to Royal Gold.
Royal Gold acknowledges that it has been provided or has been afforded
the opportunity to review all data and information regarding the Properties
and the operations thereon that it has deemed relevant in deciding to enter
into this Agreement. Royal Gold acknowledges and agrees that it has relied
entirely on its own estimates, assumptions, interpretations, calculations,
conclusions and opinions of value of both the 1992 Royalty and the royalties
granted hereunder and that, except with respect to the 1998 Strategic
Business Plan as described above, it has not relied on any representations,
warranties, statements, estimates, assumptions, interpretations, calculations,
conclusions or opinions of Cortez or PDUS in deciding to enter this Agreement.
12
12. No Development Covenants. Cortez shall be the sole judge of the timing,
rate, manner and method of production from the Properties and may delay,
suspend, curtail, cease and modify any and all operations as it in its sole
discretion may deem appropriate. Royal Gold's interest in the Properties
shall be solely that of a non participating royalty holder and it shall have
no rights to participate or influence management or decision-making regarding
operations on the Properties. The parties hereto expressly disclaim any
implied covenants of diligence with respect to operations on the Properties,
including without limitation all exploration, development, mining and
processing operations, and Royal Gold hereby acknowledges that it has received
express consideration in this Agreement in lieu of any such implied covenants.
13. Nature of Relationship. Nothing in this Agreement shall be deemed to
constitute either party the partner of the other, nor to constitute either
party the agent or legal representative of the other, nor to create any
fiduciary relationship between them. It is not the intention of the parties
to create, nor shall this agreement be construed to create, any mining,
commercial or other partnership. Neither party shall have any authority to
act for or to assume any obligation or responsibility on behalf of the
other party, except as otherwise expressly provided herein. The rights,
duties, obligations and liabilities of the parties shall be several and not
joint or collective. It is the express purpose and intention of the parties
that Royal Gold shall receive only the production royalty interests in the
Properties and the contractual rights provided in this Agreement and that
Royal Gold shall have no other right, title or interest in and to the
Properties.
14. Term of Agreement. The royalty interests in the Properties granted
to Royal Gold by this Agreement shall be in the nature of interests in real
property which are perpetual and run with the land. The term of the contractual
provisions of this Agreement shall continue for so long as Cortez retains any
interest in the Properties, and shall be binding upon and inure to the benefit
of the respective successors and assigns of the parties hereto.
15. Abandonment of Properties.
15.1 Prior Rights. The parties acknowledge and agree that Cortez
has prior obligations to its co-venturers and other third parties to offer
its properties upon a decision to abandon. Royal Gold agrees that its
rights in this Section 15 shall be subject to the prior satisfaction by
Cortez of all of its contractual obligations existing prior to the date of
this Agreement. Subject to the satisfaction of such prior obligations,
13
Cortez shall take no action with respect to possible abandonment or
disposition of the Properties that causes any prejudice to the rights of
Royal Gold provided in this Section 15.
15.2 Mining Claims. Subject to section 15.1, Cortez may terminate
or abandon its interest in any or all of the Properties at any time as it
may in its sole discretion deem appropriate, subject only to the provisions
of this section. In the event Cortez wishes to abandon any or all of the
unpatented mining claims comprising a portion of the Properties which it owns,
it shall provide Royal Gold with not less than thirty (30) days prior notice
of its intention to do so and offer to transfer such mining claims to Royal
Gold. At any time during the thirty (30) day period, Royal Gold may notify
Cortez that it elects to accept transfer of such mining claims. In that event
Cortez shall transfer the mining claims to Royal Gold (a) by quitclaim and
without warranty whatsoever, (b) upon the express agreement of Royal Gold to
accept any and all liabilities whatsoever associated with such mining claims,
whether accrued or unaccrued, actual or contingent, past, present or future,
and (c) upon the express agreement of Royal Gold to hold harmless and indemnify
Cortez for any and all claims, damages, costs and expenses associated with any
such liabilities.
15.3 Leased Properties. In the event that Cortez wishes to terminate
any or all of its interest in that certain Mining Lease with ECM, Inc., or any
successor lease or contractual arrangement between Cortez and ECM, Inc. by
which Cortez controls a portion of the Properties (the "Lease"), it shall
provide Royal Gold with not less than thirty (30) days prior notice of its
intention to do so and offer to assign the Lease to Royal Gold. At any time
during the thirty (30) day period, Royal Gold may notify Cortez that it elects
to accept assignment of the Lease. In that event and assuming it has the
contractual right to do so under the terms of the Lease, Cortez shall assign
the Lease to Royal Gold (a) without warranty whatsoever, (b) upon the express
agreement of Royal Gold to accept any and all liabilities whatsoever associated
with the Lease and the properties subject thereto, whether accrued or
unaccrued, actual or contingent, past, present or future, and (c) upon the
express agreement of Royal Gold to hold harmless and indemnify Cortez for any
and all claims, damages, costs and expenses associated with any such
liabilities.
16. Force Majeure. The obligations of Cortez hereunder shall be suspended
to the extent and for the period that performance is prevented by any cause,
whether foreseeable or unforeseeable, beyond its reasonable control, including,
14
without limitation, labor disputes (however arising and whether or not employee
demands are reasonable or within the power of Cortez to grant); acts of God;
laws, regulations, orders, instructions or requests of any government or
governmental entity; judgments or orders of any court; inability to obtain on
reasonably acceptable terms and within such periods of time as are customary or
reasonable in the applicable jurisdictions any public or private license,
permit or other authorization; curtailment or suspension of activities to
remedy or avoid an actual or alleged, present or prospective violation of law
including, without limitation, federal, state or local environmental or
safety standards; acts of war, whether declared or undeclared; riot or civil
strife; fire, explosion, earthquake, storm, flood or other adverse weather
condition; inability to obtain labor, transportation, materials, machinery,
equipment, supplies, utilities or services; accidents; breakdown of equipment,
machinery or facilities; or any other cause whether similar or dissimilar to
the foregoing. In addition to the foregoing, an event of force majeure shall
exist if Cortez decides, acting in good faith, to suspend develop ment, mining
or processing operations at the Properties due to safety concerns, or
economic circumstances, including without limitation low prevailing prices for
Products or materially increased costs of operation, which lead Cortez to
conclude that continuing operations would be contrary to its financial best
interests. Cortez shall promptly give notice to Royal Gold of the suspension
of performance, stating the nature of the suspension, the reasons therefor,
and the expected duration thereof. Cortez shall resume performance as soon as
reasonably possible.
17. Technical Dispute Resolution. The parties hereto acknowledge that
technical issues relating to accounting, commingling and stockpiling may
arise in the future based upon changes of circumstances which the parties
are not able to anticipate at the time of the execution of this Agreement.
Cortez and Royal Gold each agree to negotiate in good faith to attempt to
resolve any disputes which arise with respect to such technical issues.
In the event that the parties are not able to resolve any dispute of a
technical nature which involves a claim for payment or the assertion of a
cost or liability by either party of an amount not more than Five Million
Dollars ($5,000,000), the resolution of which will not otherwise result in
this Agreement being declared void, rescinded or otherwise unenforce able by
either party, such a dispute shall be resolved by binding arbitration. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except (a) the parties agree that they shall each
choose one arbitrator experienced in the technical area involved in the
15
dispute and that the two arbitrators so named shall choose a third arbitrator
to complete the panel of three (3) arbitrators; (b) the parties shall be
entitled to reasonable discovery prior to the arbitration hearing, as
etermined by the arbitrators, (c) the arbitrators shall be entitled, in their
reasonable discretion, to make equitable decisions to govern the parties'
future conduct with respect to such technical matters, and (d) the arbitrators
shall be entitled, in their reasonable discretion, to award costs of
arbitration and attorneys' fees to the prevailing party. It is the intent of
the parties hereto that such technical decisions be rendered in a manner which
is economically neutral between the parties, but which recognize the
relationship between the parties as one of operator and royalty holder with the
operator being solely entitled to make operational decisions in its discretion
as otherwise provided in this Agreement.
18. Instruments for Recording. The parties shall execute deed(s) in the
form of Exhibit C attached hereto and by this reference made a part hereof.
Cortez shall record the deed(s) in the office of the Lander County Recorder
to provide public notice of the termination of the 1992 Royalty and of the
royalties granted to Royal Gold hereunder.
19. Miscellaneous Provisions.
19.1 Notices. All notices given in connection herewith shall
be in writing, and all such notices and deliveries to be made pursuant
hereto shall be given or made in person, by certified or registered mail,
by reputable overnight courier, or by facsimile acknowledged upon receipt.
Such notices and deliveries shall be deemed to have been duly given and
received when actually delivered in person or sent by facsimile (during normal
business hours), on the next business day following the date they are sent by
courier, or three business days after registered or certified mailing when
deposited in a receptacle for United States or Canadian mail, postage prepaid,
and addressed as follows:
For PDUS and Cortez:
Placer Dome U.S. Inc.
Attention: Corporate Secretary
Suite 600-1055 Dunsmuir Street
Vancouver, B.C., Canada V7X 1L3
16
with a copy to:
Cortez Joint Venture
Attention: Mine General Manager
Box HC66-50
Beowawe, Nevada 89821-9708
and a copy to:
Kennecott Exploration (Australia), Ltd.
Attention: President and Chief Executive Officer
Kennecott Minerals Company
224 North 2200 West
Salt Lake City, Utah 84116
For Royal Gold:
Royal Gold, Inc.
Attention: President
1660 Wynkoop Street, Suite 1000
Denver, Colorado 80202-1132
19.2 Assignments. No assignment of this Agreement or any interest
created hereunder shall be effective until receipt by the non-assigning party
of notice of the assignment and the written agreement of the assignee to
assume and be bound by all of the obligations of the assigning party pursuant
to this Agreement. No assignment by either party of its rights to receive
payments hereunder shall require the non-assigning party to deliver payments to
more than one (1) party or to more than one (1) address or account. In the
event either party makes assignments such that more than one (1) party
is otherwise entitled to payment hereunder, the assigning party shall designate
a single party and place for receipt of payment.
19.3 Attorneys' Fees and Costs. In the event litigation is commenced
by any party against any other party hereto in connection with the negotiation,
execution, interpretation or enforcement of this Agreement or for the breach of
any representation or warranty, expressed or implied, in this Agreement, then
the Court shall award reasonable attorneys' fees and costs to the prevailing
party(ies), including all such fees and costs associated with any appeal(s).
17
19.4 No Waiver. No waiver of any breach of any one or more of
the conditions or covenants of this Agreement by any party shall be deemed to
imply or constitute a waiver of a breach of any other condition or covenant in
this Agreement or of a breach of the same condition or covenant in the future.
19.5 Entire Agreement. This Agreement is the complete expression of all
agreements, contracts, covenants, and promises between the Parties, and all
negotiations, understandings, and agreements between the Parties are set
forth in this agreement, which solely and completely expresses their
understanding, and shall be construed without reference to any such
negotiations, understandings and agreements.
19.6 Amendments. This Agreement may not be amended, modified or
changed, nor shall any waiver of any provision hereof be effective, except
by an instrument in writing and signed by the party or parties to be
bound thereby.
19.7 Governing Law. This Agreement is made under and shall be
interpreted and enforced in accordance with the laws of the State of Nevada,
without giving effect to those principles of conflicts of laws which might
otherwise require the application of the laws of another jurisdiction.
19.8 Authority. By their signatures below, each respective
signatory represents that he or she has the express authority of the party
for which he or she executes this Agreement and further has the express
authority to bind his or her principal to the terms hereof.
19.9 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same document only upon execution of this Agreement, in
counterparts or otherwise, by all parties.
18
PLACER DOME U.S. INC., a
California corporation
By: /s/
----------------------
Print Name: Jay K. Taylor
Title: President and CEO
Date: March 31, 1999
CORTEZ JOINT VENTURE, a Nevada
joint venture
By: /s/
----------------------
Print Name: Jay K. Taylor
Title: Chairman, Management Committee
Date: March 31, 1999
ROYAL GOLD, INC., a Delaware
corporation
By: /s/
-----------------------
Print Name: Stanley Dempsey
Title: Chairman and CEO
Date: April 1, 1999
ROYAL CRESCENT VALLEY INC., a
Nevada corporation
By: /s/
---------------------
Print Name: Peter B.Babin
Title: Vice President
Date: April 1, 1999
19
EXHIBIT A
Claim Name Recording Information BLM Serial No.
Gas # 25A Book 390 Page 084 NMC 671367
Gas # 26 Book 287 Page 242 NMC 403033
Gas # 27 Book 287 Page 243 NMC 403034
Gas # 28 Book 287 Page 244 NMC 403035
Gas # 29 Book 287 Page 245 NMC 403036
Gas # 30 Book 287 Page 246 NMC 403037
Gas # 41A Book 390 Page 085 NMC 671368
Gas # 42 Book 287 Page 258 NMC 403049
Gas # 43 Book 287 Page 259 NMC 403050
Gas # 44 Book 287 Page 260 NMC 403051
Gas # 55A Book 390 Page 086 NMC 671369
Gas # 56 Book 287 Page 272 NMC 403063
Gas # 57 Book 287 Page 273 NMC 403064
Gas # 58 Book 287 Page 274 NMC 403065
Gas # 69A Book 390 Page 087 NMC 671370
Gas # 70 Book 287 Page 286 NMC 403077
Gas # 72A Book 390 Page 088 NMC 671371
Gas # 74A Book 390 Page 089 NMC 671372
Gas # 77A Book 390 Page 090 NMC 671373
Gas # 79A Book 390 Page 091 NMC 671374
Gas # 81A Book 390 Page 092 NMC 671375
Gas # 82 Book 287 Page 298 NMC 403089
Gas # 83 Book 287 Page 299 NMC 403090
Gas # 84 Book 287 Page 300 NMC 403091
Gas # 85 Book 287 Page 301 NMC 403092
Gas # 86 Book 287 Page 302 NMC 403093
Gas # 87 Book 287 Page 303 NMC 403094
Gas # 88 Book 287 Page 304 NMC 403095
Gas # 89 Book 287 Page 305 NMC 403096
Gas # 90 Book 287 Page 306 NMC 403097
Gas # 91 Book 287 Page 307 NMC 403098
Gas # 92 Book 287 Page 308 NMC 403099
Gas # 93 Book 287 Page 309 NMC 403100
Gas # 94 Book 287 Page 310 NMC 403101
Gas # 95 Book 287 Page 311 NMC 403102
Gas # 96 Book 287 Page 312 NMC 403103
Gas # 97 Book 287 Page 313 NMC 403104
Gas # 98 Book 287 Page 314 NMC 403105
Gas # 99 Book 287 Page 315 NMC 403106
Gas #100 Book 287 Page 316 NMC 403107
Gas #101 Book 287 Page 317 NMC 403108
Gas #102 Book 289 Page 297 NMC 410529
Gas #103 Book 289 Page 298 NMC 410530
Gas #104 Book 289 Page 299 NMC 410531
Gas #105 Book 289 Page 300 NMC 410532
Gas #106 Book 289 Page 301 NMC 410533
Gas #107 Book 289 Page 302 NMC 410534
Gas #108 Book 289 Page 303 NMC 410535
Gas #109 Book 289 Page 304 NMC 410536
Gas #110 Book 289 Page 305 NMC 410537
Gas #111 Book 289 Page 306 NMC 410538
Gas #112 Book 289 Page 307 NMC 410539
Gas #113A Book 390 Page 093 NMC 671376
Gas #114 Book 289 Page 309 NMC 410541
Gas #115 Book 289 Page 310 NMC 410542
Gas #116 Book 289 Page 311 NMC 410543
Gas #117 Book 289 Page 312 NMC 410544
Gas #118 Book 289 Page 313 NMC 410545
Gas #119 Book 289 Page 314 NMC 410546
Gas #120 Book 289 Page 315 NMC 410547
Gas #121 Book 289 Page 316 NMC 410548
Gas #122 Book 289 Page 317 NMC 410549
Gas #123 Book 289 Page 318 NMC 410550
Gas #124 Book 289 Page 319 NMC 410551
Gas #125 Book 289 Page 320 NMC 410552
Gas #126 Book 289 Page 321 NMC 410553
Gas #127 Book 289 Page 322 NMC 410554
Gas #128 Book 289 Page 323 NMC 410555
Gas #129 Book 289 Page 324 NMC 410556
Gas #130 Book 289 Page 325 NMC 410557
Gas #131 Book 297 Page 002 NMC 429207
Gas #132 Book 297 Page 003 NMC 429208
Gas #133 Book 297 Page 004 NMC 429209
Gas #134 Book 297 Page 005 NMC 429210
Gas #135 Book 297 Page 006 NMC 429211
Gas #136 Book 297 Page 007 NMC 429212
Gas #137 Book 297 Page 008 NMC 429213
Gas #138 Book 297 Page 009 NMC 429214
Gas #139 Book 297 Page 010 NMC 429215
Gas #140 Book 297 Page 011 NMC 429216
Gas #141 Book 297 Page 012 NMC 429217
Gas #142 Book 297 Page 013 NMC 429218
Gas #143 Book 297 Page 014 NMC 429219
Gas #144 Book 297 Page 015 NMC 429220
Gas #145 Book 297 Page 016 NMC 429221
Gas #146 Book 297 Page 017 NMC 429222
Gas #147 Book 297 Page 018 NMC 429223
Gas #148 Book 297 Page 019 NMC 429224
Gas #149 Book 297 Page 020 NMC 429225
Gas #150 Book 297 Page 021 NMC 429226
Gas #151 Book 297 Page 022 NMC 429227
Gas #152 Book 297 Page 023 NMC 429228
Gas #153 Book 297 Page 024 NMC 429229
Gas #154 Book 297 Page 025 NMC 429230
Gas #155 Book 297 Page 026 NMC 429231
Gas #156 Book 297 Page 027 NMC 429232
Gas #157 Book 297 Page 028 NMC 429233
Gas #158 Book 297 Page 029 NMC 429234
Gas #159 Book 297 Page 030 NMC 429235
Gas #160 Book 297 Page 031 NMC 429236
Gas #161 Book 297 Page 032 NMC 429237
Gas #162 Book 297 Page 033 NMC 429238
Gas #163 Book 297 Page 034 NMC 429239
Gas #164 Book 297 Page 035 NMC 429240
Gas #165 Book 297 Page 036 NMC 429241
Gas #166 Book 297 Page 037 NMC 429242
Gas #167 Book 297 Page 038 NMC 429243
Gas #168 Book 297 Page 039 NMC 429244
Gas #169 Book 297 Page 040 NMC 429245
Gas #170 Book 297 Page 041 NMC 429246
Gas #171 Book 297 Page 042 NMC 429247
Gas #172 Book 297 Page 043 NMC 429248
Gas #173 Book 297 Page 044 NMC 429249
Gas #174 Book 297 Page 045 NMC 429250
Gas #175 Book 297 Page 046 NMC 429251
Gas #176 Book 297 Page 047 NMC 429252
Gas #177 Book 297 Page 048 NMC 429253
Gas #178 Book 297 Page 049 NMC 429254
Gas #179 Book 297 Page 050 NMC 429255
Gas #180 Book 297 Page 051 NMC 429256
Gas #181 Book 297 Page 052 NMC 429257
Gas #182 Book 297 Page 053 NMC 429258
Gas #183 Book 297 Page 054 NMC 429259
Gas #184 Book 297 Page 055 NMC 429260
Gas #185 Book 297 Page 056 NMC 429261
Gas #186 Book 297 Page 057 NMC 429262
Gas #187 Book 297 Page 058 NMC 429263
Gas #188 Book 297 Page 059 NMC 429264
Gas #189 Book 297 Page 060 NMC 429265
Gas #190 Book 297 Page 061 NMC 429266
Gas #191 Book 297 Page 062 NMC 429267
Gas #192 Book 297 Page 063 NMC 429268
Gas #193 Book 297 Page 064 NMC 429269
Gas #194 Book 297 Page 065 NMC 429270
Gas #195 Book 297 Page 066 NMC 429271
Gas #196 Book 297 Page 067 NMC 429272
Gas #197 Book 297 Page 068 NMC 429273
Gas #198 Book 297 Page 069 NMC 429274
Gas #199 Book 297 Page 070 NMC 429275
Gas #200 Book 297 Page 071 NMC 429276
Gas #201 Book 297 Page 072 NMC 429277
Gas #202 Book 297 Page 073 NMC 429278
Gas #203 Book 297 Page 074 NMC 429279
Gas #204 Book 297 Page 075 NMC 429280
Gas #205 Book 297 Page 076 NMC 429281
Gas #206 Book 297 Page 077 NMC 429282
Gas #207 Book 297 Page 078 NMC 429283
Gas #208 Book 297 Page 079 NMC 429284
Gas #209 Book 297 Page 080 NMC 429285
Gas #210 Book 297 Page 081 NMC 429286
Gas #211 Book 297 Page 082 NMC 429287
Gas #212 Book 309 Page 230 NMC 471254
Gas #213 Book 309 Page 231 NMC 471255
Gas #214 Book 309 Page 232 NMC 471256
Gas #215 Book 309 Page 233 NMC 471257
Gas #216 Book 309 Page 234 NMC 471258
Gas #217 Book 309 Page 235 NMC 471259
Gas #218 Book 309 Page 236 NMC 471260
Gas #219 Book 309 Page 237 NMC 471261
Gas #220 Book 309 Page 238 NMC 471262
Gas #221 Book 309 Page 239 NMC 471263
Gas #222 Book 309 Page 240 NMC 471264
Gas #223 Book 309 Page 241 NMC 471265
Gas #224 Book 309 Page 242 NMC 471266
Gas #225 Book 309 Page 243 NMC 471267
Gas #226 Book 309 Page 244 NMC 471268
Gas #227 Book 309 Page 245 NMC 471269
Gas #228 Book 309 Page 246 NMC 471270
Gas #229 Book 309 Page 247 NMC 471271
Gas #230 Book 309 Page 248 NMC 471272
Gas #231 Book 309 Page 249 NMC 471273
Gas #232 Book 309 Page 250 NMC 471274
Gas #233 Book 309 Page 251 NMC 471275
Gas #234 Book 309 Page 252 NMC 471276
Gas #235 Book 309 Page 253 NMC 471277
Gas #236 Book 309 Page 254 NMC 471278
Gas #237 Book 309 Page 255 NMC 471279
Gas #238 Book 309 Page 256 NMC 471280
Gas #239 Book 309 Page 257 NMC 471281
Gas #240 Book 309 Page 258 NMC 471282
Gas #241 Book 309 Page 259 NMC 471283
Gas #242 Book 309 Page 260 NMC 471284
Gas #243 Book 309 Page 261 NMC 471285
Gas #244 Book 309 Page 262 NMC 471286
Gas #245 Book 309 Page 263 NMC 471287
Gas #246 Book 309 Page 264 NMC 471288
Gas #247 Book 309 Page 265 NMC 471289
Gas #248 Book 309 Page 266 NMC 471290
Gas #249 Book 309 Page 267 NMC 471291
Gas #250 Book 309 Page 268 NMC 471292
Gas #251 Book 309 Page 269 NMC 471293
Gas #254 Book 309 Page 270 NMC 471294
Gas #255 Book 309 Page 271 NMC 471295
Gas #256 Book 309 Page 272 NMC 471296
Gas #257 Book 309 Page 273 NMC 471297
Gas #258 Book 309 Page 274 NMC 471298
Gas #259 Book 309 Page 275 NMC 471299
Gas #260 Book 309 Page 276 NMC 471300
Gas #261 Book 309 Page 277 NMC 471301
Gas #262 Book 309 Page 278 NMC 471302
Gas #263 Book 309 Page 279 NMC 471303
Gas #264 Book 309 Page 280 NMC 471304
Gas #265 Book 309 Page 281 NMC 471305
Gas #266 Book 309 Page 282 NMC 471306
Gas #267 Book 309 Page 283 NMC 471307
Gas #268 Book 309 Page 284 NMC 471308
Gas #269 Book 309 Page 285 NMC 471309
Gas #270 Book 309 Page 286 NMC 471310
Gas #271 Book 309 Page 287 NMC 471311
Gas #272 Book 309 Page 288 NMC 471312
Gas #273 Book 309 Page 289 NMC 471313
Gas #274 Book 309 Page 290 NMC 471314
Gas #275 Book 309 Page 291 NMC 471315
Gas #276 Book 309 Page 292 NMC 471316
Gas #277 Book 309 Page 293 NMC 471317
Gas #278 Book 309 Page 294 NMC 471318
Gas #279 Book 309 Page 295 NMC 471319
Gas #280 Book 309 Page 296 NMC 471320
Gas #281 Book 309 Page 297 NMC 471321
Gas #282 Book 309 Page 298 NMC 471322
Gas #283 Book 309 Page 299 NMC 471323
Gas #284 Book 309 Page 300 NMC 471324
Gas #285 Book 309 Page 301 NMC 471325
Gas #286 Book 309 Page 302 NMC 471326
Gas #287 Book 309 Page 303 NMC 471327
Gas #288 Book 309 Page 304 NMC 471328
Gas #289 Book 309 Page 305 NMC 471329
Gas #290 Book 309 Page 306 NMC 471330
Gas #291 Book 309 Page 307 NMC 471331
Gas #292 Book 309 Page 308 NMC 471332
Gas #293 Book 309 Page 309 NMC 471333
Gas #294 Book 309 Page 310 NMC 471334
Gas #295 Book 309 Page 311 NMC 471335
Gas #296 Book 309 Page 312 NMC 471336
Gas #297 Book 309 Page 313 NMC 471337
Gas #298 Book 309 Page 314 NMC 471338
Gas #299 Book 309 Page 315 NMC 471339
Gas #300 Book 309 Page 316 NMC 471340
Gas #301 Book 309 Page 317 NMC 471341
Gas #302 Book 309 Page 319 NMC 471342
Gas #303 Book 309 Page 320 NMC 471343
Gas #304 Book 309 Page 321 NMC 471344
Gas #305 Book 309 Page 322 NMC 471345
Gas #306 Book 309 Page 323 NMC 471346
Gas #307 Book 309 Page 324 NMC 471347
Gas #308 Book 309 Page 325 NMC 471348
Gas #309 Book 309 Page 326 NMC 471349
Gas #310 Book 309 Page 327 NMC 471350
Gas #311 Book 309 Page 328 NMC 471351
Gas #312 Book 309 Page 329 NMC 471352
Gas #313 Book 309 Page 330 NMC 471353
Gas #314 Book 309 Page 331 NMC 471354
Gas #315 Book 309 Page 332 NMC 471355
Gas #316 Book 309 Page 333 NMC 471356
Gas #317 Book 309 Page 334 NMC 471357
Gas #318 Book 309 Page 335 NMC 471358
Gas #319 Book 309 Page 336 NMC 471359
Gas #320 Book 309 Page 337 NMC 471360
Gas #321 Book 309 Page 338 NMC 471361
Gas R12 Book 390 Page 025 NMC 671308
Gas R13 Book 390 Page 026 NMC 671309
Gas R14 Book 390 Page 027 NMC 671310
Gas R15 Book 390 Page 028 NMC 671311
Gas R31 Book 390 Page 039 NMC 671322
Gas R32 Book 390 Page 40 NMC 671323
Gas R33 Book 390 Page 41 NMC 671324
Gas R41 Book 390 Page 49 NMC 671332
Gas R45 Book 390 Page 050 NMC 671333
Gas R46 Book 390 Page 051 NMC 671334
Gas R47 Book 390 Page 052 NMC 671335
Gas R48 Book 390 Page 53 NMC 671336
Gas R49 Book 390 Page 54 NMC 671337
Gas R53 Book 390 Page 58 NMC 671341
Gas R54 Book 390 Page 059 NMC 671342
Gas R55 Book 390 Page 060 NMC 671343
Gas R59 Book 390 Page 061 NMC 671344
Gas R60 Book 390 Page 062 NMC 671345
Gas R61 Book 390 Page 063 NMC 671346
Gas R62 Book 390 Page 064 NMC 671347
Gas R63 Book 390 Page 065 NMC 671348
Gas R64 Book 390 Page 66 NMC 671349
Gas R67 Book 390 Page 69 NMC 671352
Gas R68 Book 390 Page 070 NMC 671353
Gas R69 Book 390 Page 071 NMC 671354
Gas R71 Book 390 Page 072 NMC 671355
Gas R72 Book 390 Page 073 NMC 671356
Gas R73 Book 390 Page 074 NMC 671357
Gas R74 Book 390 Page 075 NMC 671358
Gas R75 Book 390 Page 076 NMC 671359
Gas R76 Book 390 Page 077 NMC 671360
Gas R77 Book 390 Page 078 NMC 671361
Gas R78 Book 390 Page 079 NMC 671362
Gas R79 Book 390 Page 080 NMC 671363
Gas R80 Book 390 Page 081 NMC 671364
Gas R81 Book 390 Page 082 NMC 671365
Gas R113 Book 390 Page 083 NMC 671366
EXHIBIT B
Claim Name Recording Information BLM Serial Number
GAC # 24 Book 390 Page 96 NMC 635005
GAC # 26 Book 387 Page 533 NMC 635006
GAC # 28 Book 387 Page 535 NMC 432087
GAC # 30 Book 387 Page 537 NMC 432089
GAC # 35 Book 390 Page 98 NMC 432094
GAC # 35A Book 387 Page 556 NMC 667092
GAC # 36 Book 387 Page 542 NMC 432095
GAC # 37 Book 387 Page 543 NMC 432096
GAC # 37A Book 387 Page 552 NMC 667093
GAC # 38 Book 387 Page 544 NMC 432097
GAC # 39 Book 387 Page 545 NMC 432098
GAC # 40 Book 387 Page 546 NMC 432099
GAC # 42 Book 387 Page 548 NMC 432101
GAC # 42A Book 387 Page 553 NMC 667094
GAC # 42B Book 387 Page 554 NMC 667095
GAC # 43 Book 387 Page 549 NMC 432102
GAC # 44 Book 387 Page 550 NMC 432103
Gas R16 Book 390 Page 29 NMC 671312
Gas R17 Book 390 Page 30 NMC 671313
Gas R18 Book 390 Page 31 NMC 671314
Gas R19 Book 390 Page 32 NMC 671315
Gas R20 Book 390 Page 33 NMC 671316
Gas R21 Book 390 Page 34 NMC 671317
Gas R22 Book 390 Page 35 NMC 671318
Gas R23 Book 390 Page 36 NMC 671319
Gas R24 Book 390 Page 37 NMC 671320
Gas R25 Book 390 Page 38 NMC 671321
Gas R34 Book 390 Page 42 NMC 671325
Gas R35 Book 390 Page 43 NMC 671326
Gas R36 Book 390 Page 44 NMC 671327
Gas R37 Book 390 Page 45 NMC 671328
Gas R38 Book 390 Page 46 NMC 671329
Gas R39 Book 390 Page 47 NMC 671330
Gas R40 Book 390 Page 48 NMC 671331
Gas R50 Book 390 Page 55 NMC 671338
Gas R51 Book 390 Page 56 NMC 671339
Gas R52 Book 390 Page 57 NMC 671340
Gas R65 Book 390 Page 67 NMC 671350
Gas R66 Book 390 Page 68 NMC 671351
GRM 755 Book 397 Page 465 NMC 398292
GRM 757 Book 397 Page 468 NMC 398294
GRM 759 Book 397 Page 471 NMC 398296
GRM 761 Book 397 Page 474 NMC 398298
GRM 763 Book 397 Page 477 NMC 398300
GRM 764 Book 284 Page 277 NMC 398301
GRM 776 Book 397 Page 480 NMC 398311
GRM 777 Book 397 Page 483 NMC 398312
GRM 778 Book 397 Page 486 NMC 398313
GRM 779 Book 397 Page 489 NMC 398314
GRM 780 Book 397 Page 492 NMC 398315
GRM 781 Book 397 Page 495 NMC 398316
GRM 850 Book 397 Page 498 NMC 398353
