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, 1999.
Commission File No. 0-5664
ROYAL GOLD, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 84-0835164
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1660 Wynkoop Street
Suite 1000
Denver, Colorado 80202-1132
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(Address of Principal (Zip Code)
Executive Offices)
(303) 573-1660
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(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 NASDAQ National Market System
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(Title of Class) Name of Exchange on which registered
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
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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, 1999, the average bid and asked price of the Company's
stock was 4.19. The aggregate market value of voting stock held by non-
affiliates was $53,428,000. As of August 31, 1999, there were 17,351,322
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 November 16, 1999: Part III, Items 11, 12 and 13.
Total Number of Pages: 61 Exhibit Index - Page 57
TABLE OF CONTENTS
Part I PAGE
----
Items 1.
and 2. Business and Properties 1
Item 3. Legal Proceedings 19
Item 4. Submission of Matters to a Vote
of Security Holders 20
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 21
Item 6. Selected Financial Data 22
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 23
Item 8. Financial Statements and Supplementary
Data 30
Part III
Item 10. Directors and Executive Officers of the
Registrant 53
Item 11. Executive Compensation 56
Item 12. Security Ownership of Certain Beneficial
Owners and Management 56
Item 13. Certain Relationships and Related
Transactions 56
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 57
Exhibit A. The Company and Its Subsidiaries 59
Signatures 60
Cautionary "Safe Harbor" Statement Under the Private Securities Litigation
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Reform Act of 1995 With the exception of historical matters, the matters
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discussed in this report are forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
projections or estimates contained herein. Such forward-looking statements
include statements regarding planned levels of exploration and other
expenditures, anticipated mine lives, timing of production and schedules for
development. Factors that could cause actual results to differ materially
from projections or estimates include, among others, decisions and activities
of Cortez regarding the Pipeline Mining Complex, unanticipated grade,
geological, metallurgical, processing or other problems, conclusions of
feasibility studies, changes in project parameters as plans continue to be
refined, the timing of receipt of governmental permits, the failure of plant,
equipment or processes to operate in accordance with specifications or
expectations, results of current exploration activities, accidents, delays in
start-up dates, environmental costs and risks, changes in gold prices, as
well as other factors described elsewhere in this report. Most of these
factors are beyond the Company's ability to predict or control. 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.
See "Business and Properties - Risk Factors".
PART I
Items 1 and 2. BUSINESS AND PROPERTIES
GENERAL
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Royal Gold, Inc. (together with its subsidiaries, "Royal Gold" or the
"Company"), is engaged in the acquisition, exploration and development of
gold properties, and in the acquisition of gold royalties.
The Company explores and develops properties thought to contain precious
metals and seeks to obtain royalty and other carried ownership interests in
these properties through the subsequent transfer of operating interests to
other mining companies. The Company also seeks to acquire existing
royalties or to finance projects that are in production or near production
in exchange for a royalty interest. Substantially all of 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 Company's principal mineral property interests are sliding-scale gross
smelter returns ("GSR") royalties over the mining complex that includes the
Pipeline and South Pipeline gold mines, operated by the Cortez Joint
Venture. The Pipeline Mining Complex is located in Crescent Valley, Nevada.
The GSR royalties were obtained as a result of the conversion of the
Company's 20% net profits interest royalty at South Pipeline; this transaction
occurred April 1, 1999. The Company also has a 1.75% net smelter returns
("NSR") royalty interest covering approximately 81% of the Bald Mountain mine,
operated by Placer Dome U.S. Inc.
In fiscal 1999, the Company generated revenues of $441,000 from its 20% net
profits interest royalty at South Pipeline and $531,000 from its royalty
interest at the Bald Mountain Mine.
The Company also owns royalty interests on two exploration-stage projects in
Nevada. The Company conducted its own development program at the Inyo Gold
Project (formerly Long Valley), in Mono County, California, and is engaged
in exploration at the Milos Gold project, in Greece. The Company has also
evaluated opportunities in Europe, South America and Australia, and exploring
at Alligator Ridge, in Nevada.
Royal Gold is also engaged, through two wholly-owned subsidiaries, Denver
Mining Finance Company ("DMFC") and Environmental Strategies, Inc. ("ESI"),
in the provision of financial, operational, and environmental consulting
services to the mining industry and to companies serving the mining
industry. During fiscal 1999, income generated from consulting services was
not material.
1
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, (303) 573-1660. See Exhibit 21, "The
Company and Its Subsidiaries."
Developments During Fiscal 1999
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The significant developments during fiscal 1999 were:
(1) The Company converted its 20% net profits interest royalty at South
Pipeline into gross smelter returns royalties extending over the mining
complex that includes both the Pipeline and South Pipeline gold projects.
At June 30, 1999, total reserves for the complex covered by the new
royalties was approximately 173 million tons, at an average grade of 0.048
ounces per ton ("opt"), containing approximately 8.3 million ounces of gold,
based on a $350 gold price. The new royalties are effective as of July 1,
1999.
(2) The Company earned $441,102 on its net profits interest at South
Pipeline from heap leach material. This compares with $2,047,143 earned in
fiscal 1998. The Company earned $530,848 on its royalty interest at the
Bald Mountain Mine, which compares with $128,643 earned on its royalty
interest in fiscal 1998.
(3) The Company announced that substantial quantities of gold mineralization
have been discovered at the Milos Gold Project, on the island of Milos,
Greece. Based on a more than 72,500 feet of reverse circulation drilling,
the mineralization estimate for the Milos Gold Project deposit is
approximately 9.5 million tons, at an average grade of 0.071 opt, using a
0.029 opt cut-off.
(4) The Company executed an agreement with Placer Dome U.S. Inc. pursuant to
which Royal Gold will undertake approximately $4 million in exploration
work, over the next six years, at Placer Dome's Alligator Ridge property.
(5) The Company's shares were listed for trading on the Toronto Stock
Exchange, under the symbol "RGL".
(6) At June 30, 1999, gold spot prices fell to $261 per ounce, a twenty
year low. Subsequent to June 30, 1999, the gold price was depressed
further, to $252 per ounce.
(7) Due to the drop in the gold price to $261 per ounce during the fourth
quarter, the Company recorded a full impairment of its investment in the
Inyo Gold Project in California.
2
PROPERTIES
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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.
Pipeline Mining Complex
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The Company converted its 20% net profits interest royalty at South Pipeline
into gross smelter returns royalties extending over the mining complex that
includes the Pipeline and South Pipeline gold projects.
Royalty Conversion
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On April 1, 1999, Royal Gold and The Cortez Joint Venture ("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 operated
by Cortez, which is a joint venture between Placer Cortez Inc. (60%) and
Kennecott Explorations (Australia) Ltd. (40%), a subsidiary of Rio Tinto.
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 would
be 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.
Cortez reports that for the first six months of calendar year 1999, the
Pipeline Mine is operating at $48 per ounce on a cash cost basis and $118
per ounce for a total cost basis.
At present, Cortez anticipates that permits for the commencement of
operations at South Pipeline will be received early in 2000, and that
pre-stripping of the South Pipeline deposit would commence therafter, as
personnel and equipment now employed in the Pipeline operation become
available.
3
New Royalties
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Under the new agreement providing for the GSR royalties, Royal Gold will be
entitled to receive all material information about exploration, planning,
budgeting, development, mining and production for Pipeline and South
Pipeline. In consideration of the agreement, Royal Gold surrendered its 20%
net profits interest at South Pipeline and various contractual rights,
including the contingent right to operate the South Pipeline property under
defined circumstances.
Prior to the conversion, the Company held a fully-carried royalty interest
in the South Pipeline Project. (That is, the Company was never obliged to
advance any of the costs of exploration, development or production at South
Pipeline.) During payback of capital expenditures, the Company would have
received 4% of net profits. After payback of capital expenditures, the
Company, at its annual election, could either have received a 20% net
profits royalty interest or a sliding scale 2.5% to 5.5% net smelter returns
royalty interest in all production from the GAS Mining Claims.
The royalty interests Royal Gold now holds at the Pipeline and South
Pipeline gold mines, and on the GAS Claims, include:
(a) Reserve Claims GSR. A sliding scale GSR for all gold produced
from the "Reserve Claims," or some 52 claims that encompass all of the
Pipeline and South Pipeline deposits. As of July 1, 1999, this royalty
covers proven and probable ore reserves of approximately 8.3 million
contained ounces of gold, based on a $350 gold price. The GSR rate on the
Reserve Claims is tied to the gold price, without indexing for inflation or
deflation, as follows:
Price of Gold Per Ounce ($U.S.) Gross Smelter Returns
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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%
$470 and above 5.00%
4
(b) GAS Claims GSR. A sliding scale GSR for all gold produced from
the remaining GAS Claims. The GAS Claims include some 310 lode mining
claims, but production from 22 of the GAS Claims (those claims that
encompass the South Pipeline reserve) will be subject to the Reserve Claims
GSR. At present, apart from the Reserve Claims, there are no ore reserves
on the GAS claims, but the GAS claims do host gold mineralization associated
with the GAP and Windmill deposits. The GSR on the GAS Claims is tied to
the gold price, without indexing for inflation or deflation, as follows:
Price of Gold Per Ounce ($U.S.) Gross Smelter Returns
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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.
(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 ("NSR") royalty
on all products, other than gold or silver, produced from any of the Reserve
Claims or GAS Claims, commencing July 1, 1999. A NSR royalty is measured by
all of the revenues received by the operator 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., payments not recoupable by Cortez) of
$400,000 per year.
5
The Company's new arrangement with Cortez is governed by a new Royalty
Agreement that supersedes 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.
Crescent Pit Operations
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The Crescent Pit operation, now completed except for some ongoing heap leach
production, encompassed some 320 acres within the 4,000 acre claim block of
the South Pipeline Project. The Company now has a 10% GSR royalty on any
further production from this Crescent Pit heap leach production.
Reserves and Other Mineralization
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The following table shows the reserves that have been defined at the
Pipeline Mining Complex:
6
Pipeline Mining Complex
Proven and Probable Reserves (1)(2)
June 30, 1999
Average
Tons Grade Contained
(millions) (oz Au/ton) Oz Au (3)
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Pipeline Mining Complex 173 0.048 8,300,000
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(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) Amounts shown represent 100% of the reserves. The Company holds a
sliding-scale GSR royalty on this property. See "Pipeline Mining Complex
- New Royalties."
(3) Contained ounces shown are before an allowance for dilution of ore in
the mining process. The assumed processing recovery rates are 88% for mill-
grade ore, and 65% for heap leach material. These reserves, computed by
Cortez, are based on a life-of-mine gold price of $350 per ounce.
7
Set forth below is a table showing the additional gold deposit that has been
defined at the Pipeline Mining Complex:
Pipeline Mining Complex
Gold Deposits/Mineralization (1)(2)
June 30, 1999
Average
Tons Grade
(millions) (oz Au/ton)
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Pipeline Mining Complex 36.1 0.039
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(1) Gold mineralization has not been included in the proven and probable ore
reserve estimates because even though drilling, trenching and/or underground
work indicates a sufficient quantity and grade to warrant further
exploration or development expenditures, these deposits do not qualify as
commercially mineable 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) The amounts shown are computed by Cortez and represent 100% of the
deposits. The Company holds a sliding-scale GSR royalty on this property.
8
Bald Mountain Royalty
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Effective January 1, 1998, the Company purchased, for $2,250,000 in cash and
the assumption of $218,312 in debt, a 50% undivided interest in a sliding-
scale NSR royalty that burdens approximately 81% of the Bald Mountain Mine,
White Pine County, Nevada. Bald Mountain is an open pit, heap leach mine
operated by Placer Dome U.S. Inc ("PDUS").
At December 31, 1998, Placer Dome informed the Company that the portion of
the mine covered by this royalty contained proven and probable reserves of
10,802,000 tons of ore, at an average grade of 0.075 ounces per ton ("opt"),
containing approximately 811,000 ounces of gold, based on a $350 gold price.
In addition the property covered by this royalty contains an additional
10,942,000 tons of mineralized material at an average grade of 0.037 opt of
gold.
Inyo Gold Project (formerly Long Valley)
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The Inyo Gold Project consists of 197 unpatented mining claims located 45
miles north of Bishop, in Mono County, California. 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 105 of
the claims that comprise the Inyo Gold project, and operates a kaolin mine
that is adjacent to the property. The Company located the additional 92
claims.
Under the original joint venture agreement, the Company had an option,
exercisable through December 31, 1998, to acquire the entirety of Standard's
interest in Long Valley for $900,000. During the term of the option, the
Company has no specific work commitment. The option has been extended
twice. In December 1997, Royal Gold secured a one-year extension upon
payment of $100,000. In November 1998, the Company secured a five-year
extension of its option to acquire all of the interest of Standard
Industrial Minerals in the Inyo Gold Project. Under the terms of the most
recent extension agreement, the Company may acquire all of Standard
Industrial's interest in the property, at any time prior to December 31,
2003, upon payment of $900,000 plus accrued interest at 6% per year, with
$100,000 per annum minimum payments, which are credited against the purchase
amount.
Due to the drop in the gold price to $261 per ounce at the end of the end of
fiscal 1999, the Company recorded a full impairment of its investment in the
Inyo Gold Project, but still retains its contingent interest in the
property.
9
At June 30, 1999, the Inyo Gold Project contains 47.8 million tons of
mineralized material at an average grade of 0.018 opt of gold. This
mineralization is unattractive at a $261 gold price.
Buckhorn South
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The Buckhorn South project is located in Eureka County, Nevada,
approximately 50 miles southwest of Elko, Nevada. The property consists of
265 unpatented mining claims.
Of the 265 claims that comprise Buckhorn South, the Company leased 131 such
claims from Ronald and Arlene Damele, et al., and the Company staked the
balance of the project area. 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 of
mineralization with an average grade of 0.056 opt.
During the period 1994-1997, the Company conducted geophysical surveys and
several drilling programs. 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. Holes drilled by the Company identified viable
targets with gold exceeding 0.01 opt, and five such holes contained
intervals exceeding 0.045 opt of gold.
During 1998, the Company optioned its Buckhorn South project to Independence
Mining Company, Inc.("IMC"), now called Anglo Gold North America. Under the
agreement, Anglo Gold was to explore Buckhorn South and, depending upon the
results, take an assignment of Royal Gold's interest in the property,
subject to assumption of all existing burdens and with Royal Gold retaining
a 14% NPI royalty.
After the close of the fiscal year, Anglo Gold exercised its option at
Buckhorn South, and Royal Gold assigned its working interest in the property
to Anglo Gold, in exchange for various net profits and NSR royalties as
follows:
a) A 14% net profits interest in any mineral production for Buckhorn
South;
b) Conveyance by Anglo Gold to Royal Gold of a 2% NSR royalty on
production from Lone Mountain, a 49-claim parcel that is near Anglo
Gold's Jerritt Canyon operation, in Elko County, Nevada; and
10
c) Conveyance by Anglo Gold to Royal Gold of a 15% net profits interest
royalty on production from 24 claims that comprise a portion of Anglo
Gold's Carico Lake property, in Lander County, Nevada, and conveyance of
a 2% net smelter returns royalty on production for the other 381 claims
that make up the Carico Lake property.
Milos Gold Project
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Athens-based Silver & Baryte Ore Mining Company S.A. ("Silver & Baryte"),
through its Greek subsidiary Midas S.A., holds a Greek lease to prospect,
explore, and mine gold from public mining sites on the Greek island of Milos
and on other islands in the Cyclades chain, in the south Aegean Sea.
In March 1998, the Company signed agreements with Silver & Baryte and with
an Australian investor group (Rakov Pty Ltd.) to explore for and mine gold
and other minerals on the lease.
Prior exploration at Milos by Silver & Baryte and by Renison Goldfields, a
major Australian gold producer, has confirmed that the island has the
potential to host epithermal gold deposits.
Under the agreements, Royal Gold and Rakov will jointly fund not less than
$5.0 million ($2.5 million each) in exploration and development expenses on
the Milos project, over a period of three years, at a rate of at least $1.7
million per year. Royal Gold is the operator of the project.
Upon completion of expending $5.0 million, Royal Gold and Rakov will have
together earned a 50% interest in Midas S.A., and the three parties will
thereafter participate jointly in further exploration and development.
Silver & Baryte may elect to maintain a 50% interest in Midas S.A., or
convert to a 20% net profits interest or a 5% NSR interest, in any mining
project on Milos.
During fiscal 1999, the Company drilled 72,500 feet of reverse circulation
drilling and discovered significant mineralization in three of the prospect
areas. Based on this drilling, the mineralization estimate for the Milos
Gold Project deposit is approximately 9.5 million tons, at an average grade
of 0.071 opt, using a 0.029 opt cut-off. Programs are being planned and
implemented for fiscal 2000 to develop the data necessary to determine the
minability of the mineralization that has been identified.
Alligator Ridge
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Alligator Ridge is located about 100 miles south-southeast of Elko, Nevada,
in White Pine County, Nevada, and about 30 miles directly south of Placer
Dome's Bald Mountain operations.
11
In August 1998, the Company entered into an agreement with Placer Dome U.S.,
Inc. pursuant to which Royal Gold will undertake approximately $4 million in
exploration work over the next six years. Depending on the results of Royal
Gold's exploration program, and at the option of Placer Dome, either Royal
Gold will acquire ownership of up to 1,638 unpatented claims that are now
included within the Alligator Ridge claim block (such conveyance would be
subject to a reservation by Placer Dome of a 5% net proceeds royalty
interest), or else Placer Dome will reimburse Royal Gold for 200% of its
cumulative investment in Alligator Ridge, and will also grant to Royal Gold
a 22% net proceeds royalty interest in any future production.
Under the terms of the agreement, Royal Gold had a firm commitment to spend
at least $300,000 in defined work during the first year. In years two
through six, Royal Gold must spend successively greater amounts to keep the
agreement in force, but the Company may also unilaterally terminate the
agreement at any time after the first full year. Maximum required
expenditures by Royal Gold over the six year term of the agreement are $4
million. Claims maintenance fees and other land holding costs are included
in the work commitments.
During fiscal 1999, exploration at Alligator Ridge focused on a review of
the extensive data base to identify targets that may contain significant
gold potential, initiation of field work to access target areas, and
drilling seven holes totaling 4,970 feet. Three of the drill holes
encountered anomalous gold and additional drilling is planned in the area.
Manhattan Project
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The Manhattan project is located in Nye County, Nevada, approximately 60
miles north of Tonopah. Through two transactions, Royal Gold consolidated a
sizable land position in this historic mining district, and conducted one
season of exploration and drilling at the property.
The first transaction, executed in December 1997, gave Royal Gold the right
to explore for gold on four separate parcels that had been assembled by New
Concept Mining, Inc. The second transaction was executed in August 1998, in
which Royal Gold entered into a joint venture with Battle Mountain Gold to
explore and develop a parcel of land contiguous with two of the four New
Concept parcels.
Commencing in August 1998, the Company embarked upon a reverse circulation
drilling program that tested the lands without material success. Royal Gold
relinquished all rights to both parcels comprising the Manhattan project
during fiscal 1999.
12
Other Foreign Exploration
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The Company owns a 50% interest in Greek American Exploration Ltd.
("GRAMEX"), a Bulgarian private limited company 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 was for an initial term of two years, requiring
expenditures of $100,000 per year by GRAMEX. The agreement was extended for
an additional two year period, expiring at the end of 1999. The Company is
obligated to fund 50% of GRAMEX's expenditures.
GRAMEX and Phelps Dodge Exploration Corporation ("PDX") joined together to
form a Bulgarian company named Sofia Minerals Ltd. ("SOMIN"). SOMIN is a
joint venture company held equally by GRAMEX and PDX. SOMIN will explore,
evaluate and develop properties in Bulgaria. SOMIN has signed a concession
agreement with the Bulgarian Committee of Geology and Mineral Resources to
conduct geological research in Bulgaria.
The Company has also formed an entity that will seek to acquire existing
gold royalties in Australia as well as to create royalty interests by
investing in junior Australian resource companies with emerging or advanced
exploration projects. The company, Royal Australia Pty Ltd, is based in
Perth, Western Australia, and the Company has a 67% interest in the entity.
The remainder of the equity in the new entity is held by affiliates of
Resource Finance Corporation ("RFC"). RFC is an investment and merchant
banking firm that caters to natural resource firms.
Sales Contracts
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The Company sold 935 ounces of gold bullion in fiscal 1999, utilizing one
metal trader during the period, at an average realized price of $290.52/oz.
The Company maintains trading relationships with a number of metal traders.
The Company is currently receiving its royalty from the Pipeline Mining
Complex in-kind.
Competition
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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.
13
Company Personnel
- -----------------
At August 31, 1999, the Company had twelve full-time employees located in
Denver, Colorado. 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
contractors.
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, and 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. There can be no assurances that all the
required permits and governmental approvals can be obtained on a timely
basis and maintained as required. 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 properties and operations in which it retains interests
are currently in material compliance with all applicable laws and
regulations.
RISK FACTORS
- ------------
Risks of Passive Ownership
- --------------------------
At present, the Company's principal assets are its royalty interests at the
Pipeline Mining Complex. The Company's success is dependent on the extent
to which the complex proves to be successful, and on the extent to which Royal
Gold is able to acquire or create other lucrative royalty interests.
14
The holder of a royalty interest typically has no executive authority
regarding development or operation of a mineral property. Therefore, unless
the Company is able to secure and enforce certain extraordinary rights, it
can be expected that the Company will not be in control of basic decisions
regarding development and operation of Pipeline, South Pipeline, or any of
the other properties in which the Company may have an interest.
Thus, the Company's strategy of having others operate properties in which it
retains a royalty or other passive interest puts the Company generally at
risk to the decisions of others regarding all basic operating matters,
including permitting, feasibility analysis, mine design and operation, and
processing, plant and equipment matters, among others. Although the Company
attempts to secure contractual rights that will permit the Company to
protect its interests, there can be no assurance that such rights will be
sufficient or that the Company's efforts will be successful in achieving
timely or favorable results.
Fluctuations in the Market Price of Minerals
- --------------------------------------------
The profitability of gold mining operations (and thus the value of the
Company's royalty interests and exploration properties) 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 any mining company.
These factors include industrial and jewelry fabrication demand,
expectations with respect to the rate of inflation, the relative strength of
the U.S. dollar and other currencies, interest rates, gold sales by central
banks, forward sales by gold producers, 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 royalty
interests and exploration properties could also drop dramatically, and the
Company might not be able to recover its investment in those interests or
properties. The selection of a property for exploration or development, the
determination to construct a mine and place it into production, and the
dedication of funds necessary to achieve such purposes are decisions that
must be made long before the first revenues from production will be
received. Price fluctuations between the time that such decisions are made
and the commencement of production can drastically affect the economics of a
mine.
The volatility in gold prices is illustrated by the following table, which
sets forth, for the periods indicated, the high and low prices in U.S.
dollars per ounce of gold based on the London PM fix.
15
Year Gold Price Per Ounce($)
---- -----------------------
High Low
---- ----
1993 406 327
1994 396 370
1995 393 372
1996 416 368
1997 367 283
1998 313 273
January - June 1999 294 258
At August 25, 1999, the gold price was $252.20 per ounce, the lowest price
in more than twenty years. At present, the Company has no hedging program
in place. At June 30, 1999, the Company held 327 ounces of gold bullion in
inventory. Additionally, at June 30, 1999, the Company had a royalty
receivable of 235 ounces. The Company would consider a hedging program in
the event certain production levels are obtained and maintained, and market
conditions justify the economic use of a hedging program.
Risks Inherent in the Mining Industry
- -------------------------------------
Mineral exploration and development is highly speculative and capital
intensive. Most exploration efforts are not successful, in that they do not
result in the discovery of mineralization of sufficient quantity or quality
to be profitably mined. The operations of the Company are also indirectly
subject to all of the hazards and risks normally incident to developing and
operating mining properties. These risks include insufficient ore reserves,
fluctuations in production costs that may make mining of ore uneconomic;
significant environmental and other regulatory restrictions; labor disputes;
geological problems; pit-walls or tailings dam failures; force majeure
events; and the risk of injury to persons, property or the environment.
Uncertainty of Reserves and Mineralization Estimates
- ----------------------------------------------------
There are numerous uncertainties inherent in estimating proven and probable
reserves and mineralization, including many factors beyond the control of
the Company. The estimation of reserves and mineralization is a subjective
process and the accuracy of any such estimates is a function of the quality
of available data and of engineering and geological interpretation and
judgment. Results of drilling, metallurgical testing and production, and
the evaluation of mine plans subsequent to the date of any estimate may
justify revision of such estimates. No assurances can be given that the
volume and grade of reserves recovered and rates of production will not be
less than anticipated. Assumptions about prices are subject to great
uncertainty and gold prices have fluctuated widely in the past. Declines in
the market price of gold or other precious metals also may render reserves
or mineralization containing relatively lower grades of ore uneconomic to
exploit. Changes in operating and capital costs and other factors
including, but not limited to, short term operating factors such as the need
16
for sequential development of ore bodies and the processing of new or
different ore grades, may materially and adversely affect reserves.
Proposed Federal Legislation
- ----------------------------
In recent years, the U.S. Congress has considered a proposed major revision
of the General Mining Law, which governs the creation and possession of
mining claims, and related activities on federal public lands in the United
States. It is anticipated that another bill may be introduced in the
Congress during the current session, or during 2000, and it is possible that
a new law could be enacted. The Company expects that if and when a new
mining law is enacted, it will impose a royalty upon production of minerals
from federal lands and will contain new requirements for mined land
reclamation, and similar environmental control and reclamation measures. It
remains unclear to what extent any such new legislation may affect existing
mining claims or operations. The effect of any such revision of the General
Mining Law on the Company's operations in the United States cannot be
determined conclusively until such revision is enacted; however, such
legislation could materially increase costs at a number of the Company's
exploration properties in the United States, which are located on federal
lands, and such revision could also impair the Company's ability to develop
any mineral prospects that are located on unpatented mining claims in the
future.
Environmental Risks
- -------------------
Mining is subject to potential risks and liabilities associated with
pollution of the environment and the disposal of waste products occurring as
a result of mineral exploration and production. Insurance against
environmental risks (including potential liability for pollution or other
hazards as a result of the disposal of waste products occurring from
exploration and production) is not generally available to the Company (or to
other companies within the gold industry) at a reasonable price. To the
extent that the Company becomes subject to environmental liabilities, the
satisfaction of any such liabilities would reduce funds otherwise available
to the Company and could have a material adverse effect on the Company.
Laws and regulations intended to ensure the protection of the environment
are constantly changing, and are generally becoming more restrictive.
Title to Properties
- -------------------
The validity of unpatented mining claims, which constitute a significant
portion of the Company's property holdings in the United States, is often
uncertain, and such validity is always subject to contest. Unpatented mining
claims are unique property interests and are generally considered subject to
greater title risk than patented mining claims, or real property interests
that are owned in fee simple. The Company has not yet filed a patent
application for any of its properties that are located on federal public
17
lands in the United States and, in light of recently proposed legislation to
change the General Mining Law, it would be reasonable to assume that, in the
future, patents will be more difficult to obtain. Although the Company has
attempted to acquire satisfactory title to its undeveloped properties, the
Company does not generally obtain title opinions until financing is sought
to develop a property, with the attendant risk that title to some
properties, particularly title to undeveloped properties, may be defective.
Foreign Operations
- ------------------
The Company's foreign activities are subject to the risks normally
associated with conducting business in foreign countries, including exchange
controls and currency fluctuations, limitations on repatriation of earnings,
foreign taxation, laws or policies of particular countries, labor practices
and disputes, and uncertain political and economic environments, as well as
risks of war and civil disturbances, or other risks that could cause
exploration or development difficulties or stoppages, restrict the movement
of funds or result in the deprivation or loss of contract rights or the
taking of property by nationalization or expropriation without fair
compensation. Foreign operations could also be adversely impacted by laws
and policies of the United States affecting foreign trade, investment and
taxation. The Company currently has exploration projects in Greece, Romania
and Bulgaria, and is actively seeking other gold exploration and gold
royalty acquisition or development opportunities in several countries,
including Australia, Europe, Russia and other republics of the former Soviet
Union.
Year 2000 Impact
- ----------------
The Year 2000 issue relates to equipment which contains hardware and/or
software programmed to read the year based on its last two digits. This
equipment will not be able to differentiate between years at the turn of the
century, and if this problem is left uncorrected, may result in malfunctions
of the equipment.
Throughout the Company, the use of computers is limited to Windows operating
systems on personal computers linked to Local Area Networks. Software
consists of standardized packages from major developers. The Year 2000
issue also relates to other office equipment, such as telephones, voice mail
and the office security system.
The Company has contacted all affected vendors and manufacturers to
determine whether any updates or replacements are be required. The Company
has received confirmations from many of the vendors and has updated some of
the systems affected. The Company has a plan in place to update the rest of
the systems by the end of the third quarter of 1999. The cost of the
project to date has not been material and the Company does not expect future
costs of the project to be material. Many components have been certified as
18
Year 2000 compliant. An entire system replacement of all computers and
software would total approximately $75,000. Those companies that provide
banking, insurance and other administrative services have also been
contacted for Year 2000 compliance. The Company is also monitoring the
progress of Year 2000 compliance by Cortez and by PDUS, the operators of the
two producing mines from which the Company derives its royalties. However,
the Company cannot be assured that all of its suppliers, service providers
and the operators of the properties where the Company holds its royalty
interests will be compliant.
Item 3. LEGAL PROCEEDINGS
Goldstripe Project
- ------------------
On August 5, 1992, following cessation of the Company's operations at
Goldstripe, Plumas County, California, 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 $325,000 of the
$341,000 has been spent to date. The Company also believes, based on such
communications over several years, and the current status of reclamation at
the site, that no additional "response action" or other remediation is
likely to be undertaken by the Forest Service under CERCLA or under any
other governmental regulation.
In August 1998, the U.S. Forest Service reconfirmed to the Company that its
reclamation activities were substantially completed at the Goldstripe
property, 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.
19
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, 1999. Annual meeting results will be described in Item 4 to
the Company's report that will be filed on Form 10-Q, for the quarter ended
December 31, 1999.
20
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock of the Company is traded on the NASDAQ National Market,
under the symbol "RGLD" and on the Toronto Stock Exchange under the symbol
"RGL." The following table shows the high and low closing sales prices, in
U.S. dollars, for the Common Stock for each quarter since June 30, 1997.
Sales Prices
------------------
High Low
Fiscal Year Closing Closing
- ----------- ------- -------
1998:
First Quarter (July, Aug., Sept. - 1997) $9 3/8 $7 1/4
Second Quarter (Oct., Nov., Dec. - 1997) $8 3/4 $4
Third Quarter (Jan., Feb., March - 1998) $6 $4 1/4
Fourth Quarter (April, May, June - 1998) $7 $4 1/2
1999:
First Quarter (July, Aug., Sept. - 1998) $5 $3 3/8
Second Quarter (Oct., Nov., Dec. - 1998) $5 $3 1/4
Third Quarter (Jan., Feb., March - 1999) $5 1/8 $3 31/64
Fourth Quarter (April, May, June - 1999) $5 $3 3/4
As of August 31, 1999, there were approximately 3,000 shareholders of record
of the Company's Common Stock.
Dividends
- ---------
The Company has never paid any cash dividends on its Common Stock and does
not have any current plans to pay such dividends.
21
Item 6. SELECTED FINANCIAL DATA
For the Year Ended June 30,
----------------------------------------------
Selected Statement of 1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Operations Data (Amounts in thousands, except per share data)
Royalty income $ 972 $ 2,176 $ 8,890 $ 3,680 $ 470
Exploration expense 2,831 2,001 1,738 1,434 1,485
General and
administrative
expense 1,713 1,704 1,706 1,204 1,015
Impairment of mining
assets 4,616 0 0 0 0
Earnings (loss) (8,808) (3,543) 4,054 589 (2,025)
Basic earnings
(loss) per share $ (0.51) $ (0.21) $ 0.26 $ 0.04 $ (0.14)
Diluted earnings
(loss) per share $ (0.51) $ (0.21) $ 0.24 $ 0.04 $ (0.14)
As of June 30,
------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Selected Balance (Amounts in thousands)
Sheet Data
Total assets $11,815 $20,927 $18,981 $14,063 $10,273
Working capital 8,582 11,437 13,942 11,130 8,723
Long-term obligations 81 108 134 111 117
22
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
At June 30, 1999, the Company had current assets of $9,447,000 compared to
current liabilities of $865,000 for a current ratio of 11 to 1. This
compares to current assets of $12,208,000 and current liabilities of
$771,000, at June 30, 1998, resulting in a current ratio of 16 to 1. The
Company's current assets include $4,014,000 of marketable securities that
consist of U.S. Treasury securities with maturities of 12 months or less.
The Company's initial cost of these marketable securities was $4,032,000.
During fiscal 1999, liquidity needs were met from: (i) $972,000 in revenues
from production at the Crescent Pit and at Bald Mountain, (ii) the Company's
available cash resources, and interest and other income of $654,000, and
(iii) cash receipts from the exercise of options and warrants of $51,000.
During the fiscal year, the Company spent $327,000 on development at the
Inyo Gold Project (formerly Long Valley), which was subsequently impaired
during fiscal 1999; $176,000 on the purchase of a royalty interest on a
portion of Mule Canyon; $202,000 to finance a royalty at the High Claims,
British Columbia, which was subsequently impaired during fiscal 1999; and
$36,000 in other capital expenditures.
The only material commitments of the Company that cannot be terminated at
the sole discretion of the Company are (i) employment agreements with four
officers, calling for minimum payments of approximately $385,000 through
January 2000; and (ii) office lease payments of $953,000 through the lease
period ending October 2005.
On April 1, 1999, the Company and Cortez agreed to convert the Company's
existing 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 operated by Cortez, which is a
joint venture between Placer Cortez Inc. (60%) and Kennecott Explorations
(Australia) Ltd. (40%), a subsidiary of Rio Tinto.
A gross smelter returns ("GSR") 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.
The royalty interests Royal Gold now holds at the Pipeline and South
Pipeline gold mines and on the GAS Claims, include:
23
(a) Reserve Claims GSR. A sliding scale GSR royalty for all gold
produced from the "Reserve Claims," or some 52 claims that encompass
all of the Pipeline and South Pipeline deposits. The royalty rate on
the Reserve Claims ranges from 0.4% at a gold price below $210 per
ounce to 5.0% at a gold price at $470 per ounce or above.
(b) GAS Claims GSR. A sliding scale GSR royalty 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. The royalty rate on the GAS
Claims ranges from 0.72% at a gold price below $210 per ounce to
9.0% at a gold price at $470 per ounce or above.
(c) The Saddle Area GSR. A 10% GSR royalty 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.
(d) The Silver GSR. A 7% GSR royalty on all silver produced from
any of the Reserve Claims or the GAS Claims commencing July 1, 1999.
(e) The Other Products Net Smelter Returns ("NSR") Royalty. A 3%
NSR royalty on all products, other than gold or silver, produced
from any of the Reserve Claims or GAS Claims, commencing July 1,
1999. An NSR royalty is measured by all of the revenues received by
the operator 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., payments not recoupable by Cortez) of $400,000
per year.
The Company's new arrangement with Cortez is governed by a new Royalty
Agreement that supersedes 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 previously held its 20% net profits
interest in South Pipeline.
Prior to the conversion, the Company held a fully-carried royalty interest
in the South Pipeline Project. (That is, the Company was never obliged to
advance any of the costs of exploration, development or production at South
Pipeline.) During payback of capital expenditures, the Company would have
received 4% of net profits. After payback of capital expenditures, the
Company, at its annual election, could either have received a 20% net
24
profits royalty interest or, at gold prices above $300 per ounce, a sliding
scale 2.5% to 5.5% net smelter returns royalty interest in all production
from the GAS Mining Claims.
For fiscal 2000, the Company anticipates royalty revenues of $5.0 million at
a $260 gold price, general and administrative expenses of approximately $1.7
million and exploration and property holding costs to be approximately $1.7
million. Costs at the Inyo Gold Project are anticipated to be $130,000
which includes a discretionary $100,000 payment to Standard Industrial
Minerals in December 1999, if the Company continues to hold the property.
Exploration and holding cost expenditures include $400,000 for Alligator
Ridge and $550,000 for the Milos Gold project. These amounts could increase
or decrease significantly, at any time during the fiscal year, based on
exploration results and decisions about releasing or acquiring additional
properties, among other factors.
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.
Recently, spot gold prices have hit twenty year lows and gold prices could
continue at these depressed prices. The Company's royalty revenues from
both Pipeline and Bald Mountain are directly affected by the gold price.
The Company's current financial resources and sources of income should be
adequate to cover the Company's anticipated expenditures for general and
administrative costs, exploration and leasehold expenses, and capital
expenditures for at least the next fiscal year.
Subsequent to Year End
- ----------------------
On September 2, 1999, the Company purchased for $8 million approximately
one-half of a group of overriding royalty interests on mineral production
from some 6,000 acres of contiguous lands in Lander County, Nevada, that, in
the aggregate, covers the Pipeline gold mine and the South Pipeline gold
deposit. The overriding royalty interests may be summarized as follows: (i)
1% of the gross value of all mineral production from lands encompassed by 50
designated and unpatented mining claims situated in Lander County, until a
total of 3.7 million troy ounces of gold has been produced from such lands,
and, thereafter, 1.5% of the gross value of any subsequent mineral
production from such lands; and (ii) 1.5% of the gross value of all mineral
production from any lands encompassed by designated patented and unpatented
mining claims situated within a 600-square-mile Area of Interest that
includes portions of Lander and Eureka Counties. Based on current
production levels and information from Cortez, the Company currently
estimates that it will receive approximately $1.1 million dollars in royalty
revenue from this royalty interest during fiscal 2000, at a $260 gold price.
25
The Company has issued 427,500 shares of common stock in a private placement
which generated proceeds of $1,710,000. The Company has also entered into a
$2,000,000 term loan agreement with Republic National Bank that is scheduled
to close in October. The Company has received a $2,000,000 demand loan from
Republic National Bank secured by $2,000,000 in U.S. Treasury obligations
that will be paid off from the proceeds of the term loan.
Year 2000 Impact
- ----------------
The Year 2000 issue relates to equipment which contains hardware and/or
software programmed to read the year based on its last two digits. This
equipment will not be able to differentiate between years at the turn of the
century, and if this problem is left uncorrected, may result in malfunctions
of the equipment.
Throughout the Company, the use of computers is limited to Windows operating
systems on personal computers linked to Local Area Networks. Software
consists of standardized packages from major developers. The Year 2000
issue also relates to other office equipment, such as telephones, voice mail
and the office security system.
The Company has contacted all affected vendors and manufacturers to
determine whether any updates or replacements are required. The Company
has received confirmations from many of the vendors and has updated some of
the systems affected. The Company has a plan in place to update the rest of
the systems by the end of the third quarter of 1999. The cost of the
project to date has not been material and the Company does not expect future
costs of the project to be material. An entire system replacement of all
computers and software would total approximately $75,000. Many components
have been certified as Year 2000 compliant. Those companies that provide
banking, insurance and other administrative services have also been
contacted for Year 2000 compliance. The Company is also monitoring the
progress of Year 2000 compliance by Cortez and by PDUS, the operators of the
two producing mines from which the Company derives its royalties. However,
the Company cannot be assured that all of its suppliers, service providers
and the operators of the properties where the Company holds its royalty
interests will be compliant.
RESULTS OF OPERATIONS
- ---------------------
Fiscal Year Ended June 30, 1999 Compared with Fiscal Year Ended
- ---------------------------------------------------------------
June 30, 1998
- -------------
For the year ended June 30, 1999, the Company recorded a net loss of
$8,808,000, or $0.51 per diluted share, as compared to a net loss of
$3,543,000, or $0.21 per diluted share, for the year ended June 30, 1998.
26
The net loss for the current fiscal year reflects the $4.6 million
impairment of mining assets, primarily at the Inyo Gold project, and reduced
revenues from royalties from the Crescent Pit.
The Company received royalty revenue from Crescent Pit heap leach material
of $441,000 and $531,000 from the royalty at Bald Mountain in fiscal 1999.
During the year ended June 30, 1998, the Company received $2,047,000 from
its 20% NPI royalty at the Crescent Pit and $129,000 for its interest at
Bald Mountain. In fiscal 1999 the Company incurred a loss on gold held in
inventory of $13,000 compared to a loss of $832,000 in fiscal 1998. As of
June 30, 1998, all of the Crescent Pit mill-grade material had been
processed. It is anticipated that heap leach production at the Crescent Pit
will continue in fiscal 2000 at a comparable level to heap leach production
in fiscal 1999. The Company's sliding scale GSR royalty on the Pipeline
deposit commenced July 1, 1999, and the Company is estimating approximately
950,000 ounces of production during fiscal 2000. At a $260 per ounce gold
price, the Company would receive a 1.3% royalty based on the sliding scale.
Costs of operations decreased compared to the prior year, which related to
the payment of Nevada Net Proceeds Tax associated with the decreased
production at the Crescent Pit, offset by increased costs of monitoring the
Company's interest at South Pipeline.
General and administrative expenses remained flat at $1,713,000 for the year
ended June 30, 1999, compared to $1,704,000 for the year ended June 30,
1998. General and administrative expenses consist primarily of employee
compensation and benefits, office lease expense, investor relations
expenses, office equipment expenses, travel and communication costs.
Exploration costs increased from $2,001,000 in fiscal 1998 to $2,831,000 in
fiscal 1999, primarily due to expenditures at the Milos Gold project and the
Manhattan project, offset by decreased expenditures related to three
properties that have been dropped. Lease maintenance and holding costs
decreased from $736,000 in fiscal 1998 to $410,000 in fiscal 1999, primarily
due to decreased holding costs at Buckhorn South and at the Manhattan
project, offset by holding costs associated with the Alligator Ridge
property.
The Company recorded a full impairment of its investment in the Inyo Gold
Project during the fourth quarter of fiscal 1999 because spot gold prices
fell to $261 per ounce at June 30, 1999.
Interest and other income was $655,000 in fiscal 1999, a decrease from
$786,000 in fiscal 1998, due primarily to decreased funds available for
investing.
27
Depreciation and depletion increased from $155,000 for fiscal 1998 to
$464,000 for fiscal 1999, primarily due to the depletion associated with the
Company's Bald Mountain royalty.
Fiscal Year Ended June 30, 1998 Compared with Fiscal Year Ended
- ---------------------------------------------------------------
June 30, 1997
- -------------
For the year ended June 30, 1998, the Company recorded a net loss of
$3,543,000, or $0.21 per diluted share, as compared to net income of
$4,055,000, or $0.24 per diluted share, for the year ended June 30, 1997.
The net loss for the fiscal year 1998 reflects the decrease in revenues due
to completion of mining at the Crescent Pit in fiscal 1997.
The Company received net profits interest royalty revenue from the Crescent
Pit of $1,605,000 relating to mill-grade material and $442,000 relating to
heap leach material. This was reduced by a realized loss on gold held in
inventory of $832,000 compared to a loss of $697,000 in fiscal 1997. As of
June 30, 1998, all of the Crescent Pit mill-grade material had been
processed. It is anticipated that ongoing heap leach production will
continue in fiscal 1999 at a comparable level to heap leach production in
fiscal 1998.
Costs of operations decreased compared to the prior year, which related to
the payment of Nevada Net Proceeds Tax associated with the decreased
production at the Crescent Pit, somewhat offset by increased costs of
monitoring the Company's 20% NPI at South Pipeline.
General and administrative expenses remained flat at $1,704,000, for the
year ended June 30, 1998, compared to $1,706,000 for the year ended June 30,
1997. General and administrative expenses consist primarily of employee
compensation and benefits, office lease expense, investor relations
expenses, office equipment expenses, travel and communication costs.
Exploration costs increased from $1,737,000 in fiscal 1997 to $2,001,000 in
fiscal 1998, due to expenditures at the Milos Gold project. Lease
maintenance and holding costs increased from $266,000 in fiscal 1997 to
$736,000 in fiscal 1998, primarily due to increased holding costs at
Buckhorn South and costs associated with the Manhattan project.
Interest and other income was $786,000 in fiscal 1998, up from $413,000 in
fiscal 1997, due primarily to increased funds available for investing.
Depreciation and depletion increased from $51,000 for fiscal 1997 to
$155,000 for fiscal 1998, primarily due to the depletion associated with the
Company's recently acquired Bald Mountain royalty.
28
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.
29
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ROYAL GOLD, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
----
REPORT OF INDEPENDENT ACCOUNTANTS 31
FINANCIAL STATEMENTS
Consolidated Balance Sheets 32
Consolidated Statements of Operations 34
Consolidated Statements of Stockholders' Equity 35
Consolidated Statements of Cash Flows 37
Notes to Consolidated Financial Statements 39
30
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors
Royal Gold, Inc.:
In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the consolidated financial
position of Royal Gold, Inc. and Subsidiaries at June 30, 1999 and 1998, and
the consolidated results of their operations and their cash flows for each
of the three years in the period ended June 30, 1999, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally
accepted auditing standards, which require that we plan and perform the
audit 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Denver, Colorado
August 18, 1999
31
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of June 30, 1999 and 1998
ASSETS
1999 1998
----------- -----------
Current Assets
Cash and cash equivalents $ 4,670,476 $ 8,462,083
Marketable securities 4,014,418 3,007,505
Receivables
Trade and other 570,212 516,186
Royalties receivable in gold 64,218 83,194
Inventory 92,440 69,101
Prepaid expenses and other 34,946 70,065
Deferred income tax benefit,
net 0 0
----------- -----------
Total current assets $ 9,446,710 $ 12,208,134
----------- -----------
Property and equipment, at cost
Mineral properties 3,044,135 6,949,655
Furniture, equipment
and improvements 711,558 681,073
----------- -----------
3,755,693 7,630,728
Less accumulated depreciation
and depletion (1,445,358) (981,625)
----------- -----------
Net property and equipment 2,310,335 6,649,103
----------- -----------
Other Assets
Noncurrent marketable securities 0 2,012,500
Other 57,767 57,567
----------- -----------
Total other assets 57,767 2,070,067
----------- -----------
Total Assets $ 11,814,812 $ 20,927,304
=========== ===========
32
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, Continued
as of June 30, 1999 and 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
----------- -----------
Current Liabilities
Accounts payable $ 631,565 $ 548,904
Taxes payable 0 45,280
Accrued liabilities
Retirement benefits 26,400 26,400
Accrued compensation 190,000 140,000
Other 16,496 10,190
----------- -----------
Total current liabilities $ 864,461 $ 770,774
----------- -----------
Retirement benefit liabilities 81,098 107,497
Commitments and contingencies
(Notes 2, 6 & 10)
Stockholders' equity
Common stock, $.01 par value, authorized
40,000,000 shares; and issued
17,321,322 and 17,069,602 shares,
respectively 173,213 170,696
Additional paid-in capital 54,027,150 53,978,827
Accumulated deficit (42,148,880) (33,340,707)
----------- -----------
12,051,483 20,808,816
Less treasury stock, at cost
(238,726 and 143,726 shares,
respectively) (1,182,230) (759,783)
----------- -----------
Total stockholders' equity 10,869,253 20,049,033
----------- -----------
Total liabilities and stockholders'
equity $ 11,814,812 $ 20,927,304
=========== ===========
The accompanying notes are an integral
part of these consolidated financial statements.
33
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended June 30, 1999, 1998 and 1997
1999 1998 1997
---------- ---------- ----------
Royalty income $ 971,950 $ 2,175,786 $8,899,537
Loss on gold inventory (12,936) (831,510) (697,488)
Consulting revenue 15,575 31,691 18,585
Costs and expenses
Costs of operations 361,055 367,010 645,627
Direct costs of consulting 7,231 6,786 5,796
General and administrative 1,712,670 1,704,108 1,705,649
Exploration 2,831,095 2,001,118 1,737,798
Lease maintenance and
holding costs 410,249 736,457 266,245
Impairment of mining assets 4,615,731 0 0
Depreciation and depletion 463,733 155,296 50,953
---------- ---------- ----------
Total costs and expenses 10,401,764 4,970,775 4,412,068
---------- ---------- ----------
Operating income (loss) (9,427,175) (3,594,808) 3,808,566
Interest and other income 654,448 786,090 412,523
Loss on marketable securities (35,446) (53,731) (23,895)
Interest and other expense 0 0 (27,670)
---------- ---------- ----------
Income (loss) before income taxes (8,808,173) (2,862,449) 4,169,524
Income tax expense 0 (680,280) (115,000)
---------- ---------- ----------
Net earnings (loss) $(8,808,173) $(3,542,729) $4,054,524
========== ========== ==========
Basic earnings (loss) per share $ (0.51) $ (0.21) $ 0.26
========== ========== ==========
Basic weighted average shares
outstanding 17,160,228 16,617,133 15,615,729
Diluted earnings (loss) per share $ (0.51) $ (0.21) $ 0.24
========== ========== ==========
Diluted weighted average
shares outstanding 17,160,228 16,617,133 15,568,360
The accompanying notes are an integral
part of these consolidated financial statements.
34
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended June 30, 1999, 1998 and 1997
Common Stock Additional
---------------------- Paid-In
Shares Amount Capital
---------- ---------- -----------
Balance, June 30, 1996 15,478,152 $ 154,782 $47,200,643
---------- ---------- -----------
Issuance of common stock for:
Exercise of options 168,550 1,685 110,414
Exercise of warrants 230,500 2,305 127,820
Issuance of treasury shares
for lease bonus payment 8,520
---------- ---------- -----------
Balance, June 30, 1997 15,877,202 $ 158,772 $47,447,397
---------- ---------- -----------
Issuance of common stock for:
Exercise of options 189,400 1,894 39,187
Exercise of warrants 203,000 2,030 302,470
Private placement 800,000 8,000 6,189,773
---------- ---------- -----------
Balance, June 30, 1998 17,069,602 $ 170,696 $53,978,827
---------- ---------- -----------
Issuance of common stock for:
Exercise of options 251,720 2,517 48,323
---------- ---------- -----------
Balance, June 30, 1999 17,321,322 $ 173,213 $54,027,150
========== ========== ===========
35
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, Continued
for the years ended June 30, 1999, 1998 and 1997
Total
Treasury Stock Stock-
Accumulated ------------------ holders'
Deficit Shares Amount Equity
----------- ------- --------- ----------
Balance, June 30, 1996 $(33,852,502) 15,986 $ (79,973) $13,422,950
----------- ------- --------- ----------
Issuance of common stock for:
Exercise of options - - - 112,099
Exercise of warrants - - - 130,125
Issuance of treasury shares
for lease bonus payment - (960) 4,800 13,320
Net income and comprehensive
income for the year ended
June 30, 1997 $ 4,054,524 - - $ 4,054,524
----------- ------- --------- ----------
Balance, June 30, 1997 $(29,797,978) 15,026 $ (75,173) $17,733,018
----------- ------- --------- ----------
Issuance of common stock for:
Exercise of options - - - 41,081
Exercise of warrants - - - 304,500
Private placement - - - 6,197,773
Purchases of common stock - 128,700 (684,610) (684,610)
Net loss and comprehensive
loss for the year ended
June 30, 1998 (3,542,729) - - (3,542,729)
----------- ------- --------- ----------
Balance, June 30, 1998 $(33,340,707) 143,726 $(759,783) $20,049,033
----------- ------- --------- ----------
Issuance of common stock for:
Exercise of options - - - 50,840
Purchases of common stock - 95,000 (422,447) (422,447)
Net loss and comprehensive
loss for the year ended
June 30, 1999 $ (8,808,173) - - (8,808,173)
----------- ------- --------- ----------
Balance, June 30, 1999 $(42,148,880) 238,726 $(1,182,230) $10,869,253
=========== ======= ========= ==========
The accompanying notes are an integral
part of these consolidated financial statements.
36
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended June 30, 1999, 1998 and 1997
1999 1998 1997
---------- ---------- ---------
Cash flows from operating activities
Net income (loss) $(8,808,173) $(3,542,729) $4,054,524
---------- ---------- ---------
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Depreciation, depletion and
amortization 463,733 155,296 50,953
Loss on marketable
securities 35,446 53,731 23,895
Non-cash exploration expense 0 0 13,320
Impairment of mining assets 4,615,731 0 0
Deferred taxes 0 635,000 115,000
(Increase) decrease in:
Marketable securities 25,275 (78,366) (4,265)
Trade and other receivables (54,026) (438,640) 258,616
Royalties receivable in gold 18,976 2,459,781 (905,402)
Inventory (23,339) 2,803,265 (1,666,960)
Prepaid expenses and other (327) 529,026 (467,373)
Increase (decrease) in:
Accounts payable and
accrued liabilities 93,687 (343,140) 584,385
Retirement benefit liabilities (26,399) (26,400) 23,348
---------- ---------- ---------
Total adjustments 5,148,757 5,749,553 (1,974,483)
---------- ---------- ---------
Net cash provided by (used in)
operating activities $(3,659,416) $ 2,206,824 $ 2,080,041
---------- ---------- ---------
37
ROYAL GOLD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS CASH FLOWS, Continued
for the years ended June 30, 1999, 1998 and 1997
1999 1998 1997
---------- ---------- ---------
Cash flows from investing activities
Capital expenditures for
property and equipment $ (740,696) $(2,901,983) $(2,297,259)
Maturity (purchase) of held-to-
maturity securities, net 980,312 0 0
Increase in other assets (200) (34,800) 0
---------- ---------- ---------
Net cash provided by (used in)
investing activities $ 239,416 $(2,936,783) $(2,297,259)
---------- ---------- ---------
Cash flows from financing activities
Purchase of common stock (422,447) (684,610) 0
Proceeds from issuance of
common stock 50,840 6,543,354 242,224
---------- ---------- ---------
Net cash provided by (used in)
financing activities (371,607) 5,858,744 242,224
---------- ---------- ---------
Net increase (decrease) in cash
and equivalents (3,791,607) 5,128,785 25,006
---------- ---------- ---------
Cash and equivalents at beginning
of period 8,462,083 3,333,298 3,308,292
---------- ---------- ---------
Cash and equivalents at
end of period $ 4,670,476 $ 8,462,083 $ 3,333,298
========== ========== =========
Supplemental Information:
The Company paid federal income taxes of $57,500 in fiscal 1998.
In fiscal 1997, 960 shares of treasury stock were issued for lease bonus
payments.
The accompanying notes are an integral
part of these consolidated financial statements.
38
ROYAL GOLD, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Operations and Summary of Significant Accounting Policies
---------------------------------------------------------
Operations:
Royal Gold, Inc. (the "Company" or "Royal Gold"), was incorporated under
the laws of the State of Delaware on January 5, 1981, and is 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 in 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:
Use of Estimates:
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
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, 1999, the Company
held $250,000 of U.S. government securities under an agreement to resell
in July 1999. 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, 1999, cash equivalents included approximately $3,995,000 of temporary
cash investments in an uninsured government securities money market fund.
39
Marketable securities:
Effective July 1, 1998, the Company has reclassified marketable
securities to held-to-maturity. Market value approximated the amortized
cost basis. The unrealized gains in fiscal 1998 and fiscal 1997 for
these marketable securities was not material At June 30, 1999, the
Company held U.S. treasury securities in a principal amount of
$4,000,000. The Company acquired these securities, with maturities
ranging from August 1999 to May 2000, at a cost of $4,032,188. Any
premium or discount is amortized over the remaining life of the security.
Market value of these securities in fiscal 1997, fiscal 1998 and fiscal
1999 approximated cost.
Royalties Receivable in Gold:
Royalties receivable consists of gold held by the Cortez Joint Venture
("Cortez"), the operator of the South Pipeline Project, prior to making
in-kind royalty payments. These quarterly, in-kind royalty payments are
received one month and one day after the relevant production quarter. At
June 30, 1999, there was 235 ounces of gold related to the June 30
quarterly production recorded as a receivable valued at current market
value. This gold was received on July 22, 1999. Royal Gold has exposure
for any changes in gold price on this receivable between the end of the
quarter and the time of receipt.
Gold Inventory:
Gold inventory on the balance sheet consists of refined gold bullion held
in uninsured accounts plus gold coins in inventory. The gold bullion is
stored by the Company's refiner in Utah and the gold coins are stored by
the Company's mint in Utah. The inventory is carried at market value
with unrealized gains or losses included in the results of operations for
the period. At June 30, 1999, the Company held 327 ounces of gold
bullion in inventory and 38 one-ounce gold coins.
Mineral Properties:
Acquisition costs relating to mineral properties with a known
mineralization are deferred until the properties are put into commercial
production, sold or abandoned. 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 over the life of the
reserves. Deferred costs applicable to sold or abandoned properties are
40
charged against operations at the time of sale or abandonment of the
property. 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. The recoverability of the
carrying value of development projects is evaluated based upon estimated
future net cash flows from each property using estimates of proven and
probable reserves. Reductions in the carrying value of each property are
recorded to the extent that the Company's carrying value in each property
exceeds its estimated future discounted cash flows.
Management's estimate of the gold prices, recoverable proven and probable
reserves, operating, capital and reclamation costs are subject to certain
risks and uncertainties which may affect the recoverability of the
Company's investment in property, plant and equipment. Although
management has made its best estimate of these factors based on current
conditions, it is possible that changes could occur in the near term
which could adversely affect management's estimate of the net cash flows
expected to be generated from properties in operation.
Office Furniture, Equipment and Improvements:
The Company depreciates its office furniture, equipment and improvements
over estimated useful lives of 15 years for office furniture, 3 years for
computer equipment, and 5 years for other office equipment, using the
straight-line method. The cost of normal maintenance and repairs is
charged to expenses 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.
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.
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.
41
Earnings (Loss) Per Share:
Basic earnings (loss) per share is computed by dividing the net income or
loss by the weighted average number of common shares outstanding during
each year. Diluted earnings per share reflects the effect of dilutive
options and warrants.
2. Property and Equipment
----------------------
The net carrying value of the Company's property and equipment consists of
the following components at June 30, 1999 and 1998:
1999 1998
--------- ---------
Mineral Properties:
Pipeline/South
Pipeline Royalties $ - $ -
Inyo Gold Project - 4,086,233
Bald Mountain Royalty 1,956,825 2,369,353
Mule Canyon Royalty 180,713 -
Camp Bird 120,110 120,110
--------- ---------
2,257,648 6,575,696
Office furniture, equipment
and improvements 52,687 73,407
--------- ---------
Net property and equipment $2,310,335 $6,649,103
========= =========
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. Pipeline Mining Complex
-----------------------
On April 1, 1999, the Company and Cortez agreed to convert the Company's
existing 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 operated by
Cortez, which is a joint venture between Placer Cortez Inc. (60%) and
Kennecott Explorations (Australia) Ltd. (40%), a subsidiary of Rio Tinto.
42
B. Bald Mountain Royalty
---------------------
The Company purchased a 50% undivided interest in a sliding-scale net
smelter returns royalty that burdens approximately 81% of the Bald Mountain
Mine, White Pine County, Nevada. Bald Mountain is an open pit, heap leach
mine operated by Placer Dome U.S. Inc.
The Company purchased the royalty, effective January 1, 1998, for $2,250,000
of cash and the assumption of $218,312 in debt, which was paid in total
during fiscal year 1999.
C. Inyo Gold Project (formerly Long Valley)
----------------------------------------
The Inyo Gold Project consists of 197 unpatented mining claims located 45
miles north of Bishop, in Mono County, California. 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 105 of
the claims that comprise the Inyo Gold project, and operates a kaolin mine
that is adjacent to the property. The Company located the additional 92
claims.
Under the original joint venture agreement, the Company had an option,
exercisable through December 31, 1998, to acquire the entirety of Standard's
interest in the Inyo Gold Project for $900,000. During the term of the
option, the Company had no specific work commitment. The option was
extended twice. In December 1997, Royal Gold secured a one-year extension
for the payment of $100,000. In November 1998, the Company secured a five-
year extension of its option to acquire all of the interest of Standard
Industrial Minerals in the Inyo Gold Project. Under the terms of the
extension agreement, the Company may acquire all of Standard Industrial's
interest in the property, at any time prior to December 31, 2003, upon
payment of $900,000 plus accrued interest at 6% per year, with $100,000
per annum minimum payments, which are credited against the purchase amount.
Due to the continued decline in the gold price during the fourth quarter of
fiscal 1999, the Company recorded a full impairment of its investment in the
Inyo Gold Project, but still retains its contingent interest in the
property. The recoverability of the carrying value of the Inyo Gold Project
was evaluated based upon estimated future net cash flows from the property
using estimates of proven and probable reserves and resulted in an
impairment of the property.
43
3. Earnings per share ("EPS") computation
--------------------------------------
For the twelve months ended June 30, 1999
Income(Loss) Shares Per-Share
(Numerator) (Denominator) Amount
--------- ----------- ---------
Basic EPS
Income available to
common stockholders $(8,808,173) 17,160,228 $ (0.51)
Effect of
dilutive securities 0
---------- ---------- -------
Diluted EPS $(8,808,173) 17,160,228 $ (0.51)
========== ========== =======
Options to purchase 341,800 shares of common stock at an average purchase
price of $0.28 per share and 892,498 shares at an average price of $5.96
per share were not included in the computation of diluted EPS because the
Company experienced a net loss in the twelve month period and these
options were antidilutive.
For the twelve months ended June 30, 1998
Income(Loss) Shares Per-Share
(Numerator) (Denominator) Amount
---------- ---------- -------
Basic EPS
Income available to
common stockholders $(3,542,729) 16,617,133 $ (0.21)
Effect of
dilutive securities 0
---------- ---------- -------
Diluted EPS $(3,542,729) 16,617,133 $ (0.21)
========== ========== =======
Options to purchase 609,520 shares of common stock at an average
purchase price of $0.35 per share and 703,498 shares at an average
price of $6.39 were not included in the computation of diluted EPS
because the Company experienced a net loss in the twelve month period
and these options were antidilutive.
44
For the twelve months ended June 30, 1997
Income(Loss) Shares Per-Share
(Numerator) (Denominator) Amount
---------- ---------- -------
Basic EPS
Income available to
common stockholders $4,054,524 15,615,729 $ 0.26
Effect of
dilutive securities
Options 785,455
Warrants 167,176
---------- ---------- -------
Diluted EPS $4,054,524 16,568,360 $ 0.24
---------- ---------- -------
Options to purchase 214,000 shares of common stock, at an average
price of $13.89 per share, were outstanding at June 30, 1997, but were
not included in the computation of diluted EPS because the exercise
price of these options were greater than the average market price of
the common shares.
4. Retirement Benefits
-------------------
In 1987, the Company's Board of Directors agreed to provide retirement
benefits for the remaining lifetime of a former executive officer. At
June 30, 1999, the liability of $107,498 represents the net present
value of estimated future payments to this former officer, adjusted
for payments made to date.
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, 1999 and 1998, are as follows:
45
1999 1998
---------- ----------
Net operating loss carryforwards $ 8,661,069 $ 7,969,998
Mineral property basis 2,610,368 966,038
AMT credit carryforward 99,172 99,172
Loss on sale of gold 295,367 291,029
Other 192,019 232,946
---------- ----------
Total gross deferred tax assets 11,857,995 9,559,183
Valuation allowance (11,528,157) (8,063,920)
---------- ----------
Net deferred tax assets 329,838 1,495,263
---------- ----------
Gold inventory (58,641) (213,026)
Mineral property basis - (1,097,872)
Other (271,197) (184,366)
---------- ----------
Total deferred tax liabilities (329,878) (1,495,263)
---------- ----------
Total net deferred taxes $ - $ -
========== ==========
At June 30, 1999, the Company has approximately $24.7 million of net
operating loss carryforwards which, if unused, will expire during the
years 2001 through 2016. The Company's ability to generate future
taxable income to realize the benefit of its tax assets will depend
primarily on the spot price of gold. Due to the currently depressed
gold price, a full valuation allowance has been established for the
deferred tax assets at June 30, 1999.
The components of income tax expense (benefit) for the years ended
June 30, 1999, 1998 and 1997, are as follows:
1999 1998 1997
--------- -------- --------
Current federal tax expense $ - $ 680,280 $ -
Deferred tax expense(benefit) (3,464,237) - 935,000
Increase (decrease) in
deferred tax asset
valuation allowance 3,464,237 - (820,000)
--------- -------- --------
$ - $ 680,280 $ 115,000
========= ======== ========
The provision for income taxes for the years ended June 30, 1999, 1998
and 1997, differs from the amount of income tax determined by applying
the applicable U.S. statutory federal income tax rate to pre-tax loss
from operations as a result of the following differences:
46
1999 1998 1997
--------- -------- --------
Total expense(benefit)
computed by applying
statutory rate $(3,082,861) $(1,001,857) $1,418,000
Adjustments of valuation
allowance 3,464,237 1,853,461 (1,310,000)
Excess depletion (381,376) (156,865) -
Other - (14,459) 7,000
--------- -------- --------
$ - $ 680,280 $ 115,000
--------- -------- --------
The change in the valuation allowance in fiscal 1999 is due to the
loss for the year.
The change in the valuation allowance in fiscal 1998 is related to
establishing a valuation allowance for the current year net operating
losses.
Included in the fiscal 1997 adjustments of valuation allowance is
$820,000 related to fiscal 1997 and $490,000 related to fiscal 1996
caused by changes in fiscal 1996 taxable temporary differences.
6. Commitments
-----------
Operating Lease
---------------
The Company leases office space under a lease agreement which expires
October 31, 2005. Future minimum cash rental payments are as follows:
Years ending June 30,
---------------------
2000 $ 158,473
2001 171,741
2002 178,629
2003 185,812
2004 193,290
2005 65,272
--------
$ 953,217
========
Rent expense charged to operations for the years ended June 30, 1999,
1998, and 1997, amounted to $145,731, $135,838 and $122,300,
respectively.
In order for the Company to maintain its current exploration
properties through fiscal 2000, the Company would incur lease
maintenance and holding costs of $520,000, which includes the $100,000
payment for the Inyo Gold Project. It can be anticipated, because of
47
the nature of the business, that exploration on many of these
properties will prove unsuccessful and that the Company will terminate
its interest in these properties rather than continue to pay holding
costs.
Employment Agreements
---------------------
The Company has one-year employment agreements with four of its
officers which require total minimum future compensation, at June 30,
1999, of $385,000 through January 2000. The terms of each of these
agreements automatically extend, every February, for one additional
year, unless 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 1998, the Company sold 800,000 shares of common stock,
to an institutional investor in Canada, resulting in a net proceeds of
$6,200,000. The proceeds of this offering will be used to advance the
Company's royalty acquisition program, exploration activities, and for
general corporate purposes.
During fiscal 1997, warrants to purchase a total of 230,500 shares
were exercised, providing proceeds to the Company of $130,125.
On May 2, 1997, the Company announced a stock repurchase program, in
which the Board of Directors authorized the repurchase of up to $5
million of the Company's common stock, from time-to-time, in the open
market or in privately negotiated transactions. In accordance with
this program, the Company has repurchased 223,700 shares of common
stock at an average cost of $4.95 per share.
On September 10, 1997, the Company's board of directors adopted a
stockholders' rights plan in which preferred stock purchase rights
("Rights") were distributed as a dividend at the rate of one Right for
each share of common stock held as of close of business on September
11, 1997. The terms of the Rights plan provide that if any person or
group were to announce an intention to acquire or were to acquire 15
percent or more of the Company's outstanding common stock, then the
owners of each share of common stock (other than the acquiring person
48
or group) would become entitled to exercise a right to buy one one-
hundredth of a newly issued share of Series A Junior Participating
Preferred Stock of the Company at an exercise price of $50 per Right.
Stock Options and Warrants:
The following schedules detail activity related to options and
warrants for the years ended June 30, 1997, 1998 and 1999:
Weighted
Optioned Average
Shares Option Prices
--------- -------------
Options Outstanding, June 30, 1996 1,389,970 $ 2.75
---------
Granted 204,000 $14.13
Exercised (168,550) $ 0.67
---------
Options Outstanding, June 30, 1997 1,425,420 $ 4.63
---------
Granted 804,998 $ 6.38
Exercised (189,400) $ 0.22
Surrendered or expired (728,000) $ 9.59
---------
Options Outstanding, June 30, 1998 1,313,018 $ 3.59
---------
Granted 199,000 $ 4.59
Exercised (251,720) $ 0.20
Surrendered or expired (26,000) $ 4.00
---------
Options Outstanding, June 30, 1999 1,234,298 $ 4.43
=========
All options outstanding at each year end, except for current year
grants, are exercisable at a weighted average exercise price of $4.35.
Options outstanding at June 30, 1999, consist of: 327,800 options at a
strike price of $0.125 and a remaining contractual life of 2.4 years;
765,498 options at an average strike price of $5.16 (a range of $4.00
to $5.625), and a weighted average remaining contractual life of 6.6
years; and 141,000 options at an average strike price of $10.12 (a
range of $7.88 to $14.13), and a weighted average remaining
contractual life of 3.0 years.
During fiscal 1999, options were exercised for 251,720 shares for a
total of $50,840 in proceeds to the Company.
The following schedules detail activity related to options and
warrants for the years ended June 30, 1997, 1998 and 1999:
49
Warrant Average
Shares Warrant Prices
--------- --------------
Warrants Outstanding, June 30, 1996 433,500 $ 1.00
---------
Exercised (230,500) $ 0.56
---------
Warrants Outstanding, June 30, 1997 203,000 $ 1.50
---------
Exercised (203,000) $ 1.50
---------
Warrants Outstanding, June 30, 1998 0 $ 0.00
---------
Warrants Outstanding, June 30, 1999 0 $ 0.00
=========
The shares and exercise prices listed above are generally subject to
adjustment in accordance with antidilution provisions of each of the
warrant agreements.
On May 29, 1998, the Board of Directors approved the implementation of
a Stock Option Exchange Program for current employees of Royal Gold.
In effect, the Exchange Program gave employees a period of time to
exchange their options for a lesser number of new options with an
exercise price based on the closing price of the stock on May 29, 1998
($5.375/share). Under this Exchange Program, 715,750 options were
canceled and 522,498 new options were issued. The new options could
not be exercised for six months from the date of grant. The vesting
of the new options is the same as for the old options.
The new number of options which were offered to each employee were
computed in reliance on the Black-Scholes Option Pricing Model. The
net result of applying this model is that the exercise price for the
options will be lower, and the number of shares subject to each such
option was reduced.
The Company measures compensation cost as prescribed by APB Opinion
No. 25 ("APB 25"), Accounting for Stock Issued to Employees. No
compensation cost has been recognized in the financial statements as
the exercise price of all options grants is equal to the market price
of the Company's common stock at the date of grant. In October 1995,
the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"). SFAS defines a
"fair value" based method of accounting for employee options or
similar equity instruments. Had compensation cost been determined
under the provisions of SFAS 123, the following pro forma net income
(loss) and per share amounts would have been recorded.
50
1999 1998 1997
---------- ---------- ---------
Net income (loss)
As reported $(8,808,173) $(3,542,729) $4,054,503
Pro Forma $(9,154,224) $(4,232,401) $3,187,290
Net income (loss) per
basic share
As reported $ (0.51) $ (0.21) $ 0.26
Pro Forma $ (0.53) $ (0.25) $ 0.20
Net income (loss) per
diluted share
As reported $ (0.51) $ (0.21) $ 0.24
Pro Forma $ (0.53) $ (0.25) $ 0.19
The pro forma amounts were determined using the Black-Scholes model
with the following assumptions:
1999 1998 1997
---------- ---------- ---------
Weighted average
expected volatility 58.9% 64.4% 53.2%
Weighted average
expected option term 5.5 years 3.8 years 4.8 years
Weighted average
risk free interest rate 4.6% 5.5% 6.2%
Forfeiture rate 5% 5% 5%
Weighted average grant
fair value $2.62 $2.28 $4.25
8. Major Customers
---------------
In each of fiscal years 1999, 1998, and 1997, $441,102, $2,047,142 and
$8,202,049, respectively, of the Company's royalty income was received
from the same source. (See Note 2.A.)
51
9. Simplified Employee Pension ("SEP") Plan
----------------------------------------
The Company maintains a SEP Plan in which all employees are eligible
to participate. 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 also chooses to contribute to the SEP Plan
through salary reduction contributions, the Company will match such
contributions to a maximum of 7% of the employee's salary. The
Company contributed $79,543, $75,510 and $67,041, in fiscal years
1999, 1998, and 1997, respectively.
10. Contingencies
-------------
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 reclamation work on the mine pits and
at the plant facility site, and disposed of all major mining and
crushing equipment.
The Forest Service has advised the Company that all outstanding
requirements, except for post-reclamation groundwater monitoring, have
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.
11. Subsequent Events
-----------------
In September 1999, the Company purchased approximately one-half of a
group of overriding royalty interests on mineral production from some
6,000 acres of contiguous lands in Lander County, Nevada that are
presently encompassed by a total of 348 unpatented mining claims. The
royalty purchase price was $8,075,000.
The Company has issued 427,500 shares of common stock in a private
placement which generated proceeds of $1,710,000. The Company has
also entered into a $2,000,000 term loan agreement with Republic
National Bank that is scheduled to close in October. The Company has
received a $2,000,000 loan from Republic National Bank collateralized
by $2,000,000 in U.S. Treasury obligations that will be paid off from
the proceeds of the term loan.
52
PART III
Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Stanley Dempsey
- ---------------
Age 60, Director Since August 1984; Term Expires 2000
- -----------------------------------------------------
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. From 1984 through June 1986, Mr. Dempsey was a
partner in the law firm of Arnold & Porter. During the same period, he was
a principal in Denver Mining Finance Company. From 1960 through 1987, Mr.
Dempsey was employed by AMAX, Inc. serving in various managerial and
executive capacities. Mr. Dempsey currently serves as a director of Behre
Dolbear and Company, Inc., and Hazen Research, Inc., and is also a member of
the board of directors of various mining-related associations. (1)
Edwin W. Peiker, Jr.
- --------------------
Age 68; Director Since May 1987; Term Expires 1999
- --------------------------------------------------
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. Principal in
Denver Mining Finance Company from 1984 until 1986. From 1983 to 1986, Mr.
Peiker was engaged in mineral consulting activities. 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 72; Director Since August 1988; Term Expires 2000
- -----------------------------------------------------
Director. Executive Director of the Denver Gold Group and Chairman of the
Minerals Information Institute. A consultant to the mining industry since
1985. Mr. Goth was formerly a senior executive of AMAX, Inc. and a Director
of Magma Copper Company. Mr. Goth is currently a Director of U.S. Gold
Corporation, Qualchem, Inc. and Behre Dolbear. (2) (3)
James W. Stuckert
- -----------------
Age 61; Director Since September 1989; Term Expires 2001
- --------------------------------------------------------
Director. Chairman and CEO of Hilliard, Lyons, Inc., Louisville, Kentucky.
Mr. Stuckert is also a Director of Hilliard, Lyons, Inc. and Thomas
Transportation. He joined Hilliard, Lyons in 1962 and served in several
capacities prior to being named Chairman in December 1995. Mr. Stuckert is
a Board of Governor Member of the Security Industries Association. (2) (3)
Pierre Gousseland
- -----------------
Age 77; Director Since June 1992; Term Expires 2000
- ---------------------------------------------------
Director. Financial Consultant. From 1977 until January 1986, Mr.
Gousseland was Chairman and Chief Executive Officer of AMAX, Inc. He is
presently a Director of Guyanor Ressources S.A. Formerly, Director of the
French American Banking Corp. of New York, the American International Group,
Inc., Union Miniere, S.A. (Belgium), Degussa AG (Germany), IBM World Trade
Europe/Middle East Africa Corporation, Pancontinental Mining Europe GmbH
(Germany) and Sauer Group Investmetns Ltd. Mr. Gousseland has served on the
50
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 59; Director Since December 1992; Term Expires 1999
- -------------------------------------------------------
Director. Consultant to H&N Constructors, Inc., a contractor specializing
in remodeling and rehabilitation of government facilities. Mr. Howell is
Secretary/Treasurer of Howell & Howell Painting Contractors, Inc. and
owner of Kessinger Service Industries, LLC. From 1972 until 1988, Mr.
Howell was Secretary/Treasurer of Howell & Howell, Inc.
Merritt Marcus
- --------------
Age 65; Director Since December 1992; Term Expires 2001
- -------------------------------------------------------
Director. President and Chief Executive Officer of Marcus Paint Company, a
manufacturer of industrial coatings and Performance Powders, L.L.C., a
manufacturer of industrial powder coatings. Mr. Marcus has served several
terms as a Director of the National Paint and Coatings Association.
Peter B. Babin
- --------------
Age 45; Director Since December 1997; Term Expires 2000
- -------------------------------------------------------
Director. President of the Company since December 10, 1996. Executive Vice
President from January 1, 1995 to December 10, 1996. Senior Vice President
from July 1, 1993 to January 1, 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, a provider of
ancillary health care services.
Donald Worth
- ------------
Age 67, Director Since April 1999; Term Expires 1999
- ----------------------------------------------------
Director. Mr. Worth has been involved in the mining industry since 1949.
He formerly was a mining specialist and a vice president of Canadian
Imperial Bank of Commerce (Canada). Mr. Worth is a director of Canarc
Resource Corporation, Cominco Ltd., Founders Capital Corporation, and Tiomin
Resources Inc. He is also a trustee of Labrador Iron Ore Royalty Income
Fund, and is involved with several professional associations both in Canada
and the United States.
Thomas A. Loucks: Age 50
- ------------------------
Executive Vice President and Treasurer of the Company since 1991. From
August 1985 until 1991, Mr. Loucks was Vice President, Corporate Development
of the Company. From August 1985 until August 1988, Mr. Loucks was a
Business Development Analyst with Newmont Mining Company. Mr. Loucks is a
Director of the Society of Economic Geologists, Inc., the Society of
Economic Geologists Foundation, and the Economic Geology Publishing Company.
Karen P. Gross: Age 45
- ----------------------
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.
54
Donald J. Baker: Age 50
- -----------------------
Vice President of the Company since November 1998. From January 1997 until
November 1998, Mr. Baker was Manager of Corporate Development. From 1994
until 1997, he was a consultant to the Company. Mr. Baker was previously
employed with Climax Molybdenum Company and Homestake Mining Company.
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
Four officers of the Company have one-year employment agreements that renew
for an additional year in February each year.
55
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 November
16, 1999 in Denver, Colorado.
56
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, 8-A, S-1 and S-8, and are
incorporated herein by reference.
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) Amendment to Certificate of Incorporation dated February 2, 1983
- Exhibit 3 (c) of Registration Statement on Form S-1,
Registration No. 2-84642.
(d) 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.
(e) 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.
(f) By-Laws - Exhibit (d) to the Company's Form 10-K, for the fiscal
year ended December 31, 1980.
4 (a) Shareholders' Rights Agreement Exhibit B to the Company's Form 8-
A dated September 11, 1997.
57
Exhibit
Number
-------
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) 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.
(e) 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.
(f) 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.
(g) Private Agreement between Rakov Pty. Ltd., Silver and Baryte Ores
Mining Co. S.A., and Royal Gold, Inc., dated effective March 30,
1998 - Exhibit 10(s) to the Company's Form 10-K for the year
ended June 30, 1998.
(h) Private Agreement between Rakov Pty. Ltd. And Royal Gold, Inc.
dated effective March 28, 1998 - Exhibit 10(t) to the Company's
Form 10-K for the year ended June 30, 1998.
(i) Exploration and Development Option Agreement between Placer Dome
U.S., Inc. and Royal Gold, Inc. dated effective July 1, 1998 -
Exhibit 10(v) to the Company's Form 10-K for the year ended June
30, 1998.
21*(a) The Company and Its Subsidiaries.
* - Filed herewith.
(b) Reports on Form 8-K:
1. April 12, 1999. Item 5 Other Events - Royalty Conversion.
2. September 2, 1999. Item 5 Other Events - Royalty Purchase.
58
EXHIBIT 21
ROYAL GOLD, INC. AND SUBSIDIARIES
Denver Mining Finance Company (1)
Royal Trading Company (1)
Calgom Mining, Inc. (1)(4)
Mono County Mining Company (1)
Royal Camp Bird, Inc. (1)
Royal Crescent Valley, Inc. (1)
Royal Kanaka Creek Corporation (1)
Environmental Strategies, Inc. (2)
GRAMEX LTD (3)
SOMIN LTD (5)
Royal Gold Australia (6)
(1) Owned 100% by Royal Gold, Inc.
(2) Owned 100% by Denver Mining Finance Company
(3) Owned 50% by Royal Gold, Inc.
(4) Owns a 100% interest in the Goldstripe Project.
(5) Owned 25% by Royal Gold, Inc.
(6) Owned 67% by Royal Gold, Inc.
59
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 27, 1999 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 27, 1999 By: /s/Stanley Dempsey
-------------------------------
Stanley Dempsey, Chairman,
Chief Executive Officer, and Director
Date: September 27, 1999 By: /s/Thomas A. Loucks
-------------------------------
Thomas A. Loucks,
Treasurer
Date: September 27, 1999 By: /s/John Skadow
-------------------------------
John Skadow
Controller
Date: September 27, 1999 By: /s/Edwin W. Peiker, Jr.
-------------------------------
Edwin W. Peiker, Jr.,
Director
Date: September 27, 1999 By: /s/John W. Goth
-------------------------------
John W. Goth,
Director
Date: September 27, 1999 By: /s/James W. Stuckert
-------------------------------
James W. Stuckert,
Director
Date: September 27, 1999 By: /s/Pierre Gousseland
-------------------------------
Pierre Gousseland,
Director
60
Date: September 27, 1999 By: /s/Merritt E. Marcus
-------------------------------
Merritt E. Marcus
Director
Date: September 27, 1999 By: /s/S. Oden Howell, Jr.
-------------------------------
S. Oden Howell, Jr.
Director
Date: September 27, 1999 By: /s/Peter B. Babin
-------------------------------
Peter B. Babin
Director
Date: September 27, 1999 By: /s/Donald Worth
-------------------------------
Donald Worth
Director
61
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<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1999
<PERIOD-END> JUN-30-1999 JUN-30-1999
<CASH> 4,670,476 4,670,476
<SECURITIES> 4,014,418 4,014,418
<RECEIVABLES> 634,430 634,430
<ALLOWANCES> 0 0
<INVENTORY> 92,440 92,440
<CURRENT-ASSETS> 9,446,710 9,446,710
<PP&E> 3,755,693 3,755,693
<DEPRECIATION> 1,445,358 1,445,358
<TOTAL-ASSETS> 11,814,812 11,814,812
<CURRENT-LIABILITIES> 864,461 864,461
<BONDS> 0 0
54,200,363 54,200,363
0 0
<COMMON> 0 0
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<TOTAL-LIABILITY-AND-EQUITY> 11,814,812 11,814,812
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<TOTAL-REVENUES> 200,532 987,525
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<TOTAL-COSTS> 5,951,011 10,401,764
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (4,615,731) (4,615,731)
<INCOME-PRETAX> (5,657,194) (8,808,173)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (5,657,194) (8,808,173)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,657,194) (8,808,173)
<EPS-BASIC> (0.33) (0.51)
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