SUBJECT TO COMPLETION, DATED APRIL 6, 2009

 

Registration No. 333-156376

Filed pursuant to Rule 424(b)(5)

 

PROSPECTUS SUPPLEMENT

(To Prospectus dated December 19, 2008)

 

$          

 

 

6,500,000 Shares of Common Stock

 

We are selling 6,500,000 shares of our common stock. We have granted the underwriters an option to purchase up to 975,000 additional shares of common stock to cover over-allotments.

 

Our common stock is traded on the NASDAQ Global Select Market under the symbol “RGLD”. The last reported sale price of our common stock on the NASDAQ Global Select Market on April 3, 2009 was $43.42 per share. Our common stock is also traded on the Toronto Stock Exchange under the symbol “RGL”.

 

 

Investing in our common stock involves risks. See “Risk Factors” beginning on page S-11.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if the prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

The underwriters expect to deliver the shares to the purchasers on or about          , 2009.

 

 

Joint Book Runners

 

 

Co-Managers

 

 

 

The date of this prospectus supplement is April  , 2009

You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus and any free writing prospectus relating to this offering. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any jurisdiction where the offer is not permitted. The information in this prospectus supplement, the accompanying prospectus, the documents incorporated by reference and any written communication from us specifying the final terms of the offering is only accurate as of the date of the respective documents in which the information appears. Our business, financial condition, results of operations and prospects may have changed since those dates. Information in this prospectus supplement updates and modifies the information in the accompanying prospectus.

 

Table of Contents

 

Prospectus Supplement

 

 

This prospectus supplement and the accompanying prospectus are part of a registration statement on Form S-3 (File No. 333-156376) that we filed with the Securities and Exchange Commission (the “SEC”) and that became effective on December 22, 2008 utilizing an automatic shelf registration process. Under this shelf registration process, we may, from time to time, offer debt securities, preferred stock, common stock, warrants and depositary shares, of which this offering is a part. We have also filed this prospectus supplement and the related prospectus, which we refer to as the Canadian prospectus, with the securities regulatory authorities in each of the provinces of Canada, other than Quebec. The securities qualified under the Canadian prospectus may be offered and sold in each of the provinces of Canada, other than Quebec, subject to any applicable securities laws.

 

This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of common stock and also adds, updates and changes information contained in the accompanying prospectus and the documents incorporated herein by reference. The second part is the prospectus, which gives more general information, some of which may not apply to this offering of common stock. To the extent the information contained in this prospectus supplement differs or varies from the information contained in the accompanying prospectus or any document incorporated herein by reference, the information in this prospectus supplement shall control. You should read both this prospectus supplement and the accompanying prospectus, as well as the additional information described under “Where You Can Find More Information” on page S-47 of this prospectus supplement, before investing in our common stock.

 

Unless otherwise stated, information in this prospectus supplement assumes that the underwriters will not exercise their over-allotment option to purchase additional shares of our common stock and no other person will exercise any other outstanding options to purchase shares of our common stock.

 

This document includes trade names and trademarks of other companies. All such trade names and trademarks appearing in this document are the property of their respective holders.

 

This prospectus supplement, the prospectus and the documents incorporated herein by reference contain certain references to future expectations and other forward-looking statements and information relating to us or to properties operated by others that are based on our beliefs and assumptions or those of management of the companies who operate properties on which we have royalties, as well as information currently available to us. Such forward-looking statements include statements regarding projected production and reserves received from the operators of our royalty properties. Additional written or oral forward-looking statements may be made by us from time to time in filings with the SEC or otherwise. Words such as “may,” “could,” “should,” “would,” “believe,” “estimate,” “expect,” “anticipate,” “plan,” “forecast,” “potential,” “intend,” “continue,” “project” and similar expressions generally indicate forward-looking statements, which speak only as of the date the statement is made. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements inherently involve risks and uncertainties, some of which cannot be predicted or quantified. Accordingly, actual results may differ materially from those expressed or implied by these forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements include:

 

 

 

as well as other factors described elsewhere in our Annual Report on Form 10-K/A (filed on November 6, 2008) for the fiscal year ended June 30, 2008, our Quarterly Reports on Form 10-Q for the periods ended September 30, 2008 and December 31, 2008 and in future filings we make with the SEC. Most of these factors are beyond our ability to predict or control. We disclaim any obligation to update any forward-looking statement made herein, except as required by law. Readers are cautioned not to put undue reliance on forward-looking statements.

 

Gross Smelter Return (GSR) Royalty:  A defined percentage of the gross revenue from a resource extraction operation, in certain cases reduced by certain contract-defined costs paid by or charged to the operator.

 

g/t:  A unit representing grams/tonne.

 

Net Smelter Return (NSR) Royalty:  A defined percentage of the gross revenue from a resource extraction operation, less a proportionate share of incidental transportation, insurance, refining and smelting costs.

 

Net Value Royalty (NVR):  A defined percentage of the gross revenue from a resource extraction operation, less certain contract-defined transportation costs, milling costs and taxes.

 

Payable Ounces of Gold:  Ounces of gold in concentrate payable to the operator after deduction of a percentage of gold in concentrate that is paid to a third-party smelter pursuant to smelting contracts.

 

Royalty:  The right to receive a percentage or other denomination of mineral production from a resource extraction operation.

 

Ton:  A unit of weight equal to 2,000 pounds or 907.2 kilograms.

 

Tonne:  A unit of weight equal to 2,204.6 pounds or 1,000 kilograms.

 

We are not providing any tax advice as to the acquisition, holding or disposition of the shares of our common stock offered hereby. In making an investment decision, investors should consult their own tax advisors to determine the U.S. federal or state, and any applicable foreign or other tax consequences related to an investment in our common stock. See “Material United States Federal Income Tax Considerations for Non-U.S. Holders” on page S-43.

 

This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons in (i), (ii) and (iii) above together being referred to as “relevant persons”). The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

 

In any EEA Member State that has implemented Directive 2003/71/EC (together with any applicable implementing measures in any Member State, the “Prospectus Directive”), this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Directive.

 

PROSPECTUS SUPPLEMENT SUMMARY

	•	A long history of revenue and royalty reserve growth, as well as royalties on significant development properties that we expect will generate strong future revenue;
	•	A balanced mix of royalties on producing, development and exploration stage properties, with a focus on producing and development properties operated by proven, well regarded operators, including Barrick Gold Corporation (“Barrick”), Newmont Mining Corporation (“Newmont”), AngloGold Ashanti Limited (“AngloGold”) and Goldcorp Inc. (“Goldcorp”);
	•	A geographically diverse portfolio of royalties in largely stable geographic regions;
	•	No requirements to contribute to capital, exploration, environmental or other operating costs at mine sites;
	•	Organic growth when reserves are increased on a property on which we hold a royalty interest;
	•	Exposure to commodity price movements, with no historical practice of metal price hedging;
	•	Current strong liquidity position;
	•	An experienced management team with proven skills in acquiring and managing precious metal royalty interests;
	•	A strong history of successful precious metal royalty acquisitions and a pipeline of potential acquisitions in various stages of review; and
	•	A $0.32 per share dividend for calendar 2009, representing a 14% increase in the dividend rate for calendar 2008, and a history of increasing our dividend for each of the past eight years.

	•	A new gold production revenue interest in a project that is:

	•	Located in a favorable mining jurisdiction (Chile);
	•	Estimated to have a long mine life (20 years);
	•	Operated by an experienced mining company (Teck); and
	•	Expected to begin commercial production of gold in the first half of calendar 2010.

	•	A substantial potential increase in revenue to the Company.
	•	An increase in the gold portion of the Company’s revenue distribution.
	•	An expansion of the Company’s royalty presence in Chile and further diversification of the Company’s geographic revenue distribution.

	•	Focus on Gold and Precious Metals through Royalty Ownership.  Royal Gold has established its business model based on the premise that an attractive means to gain exposure to gold and precious metals prices is to acquire and hold royalty interests in gold and precious metal properties, rather than to engage directly in mining operations. By holding royalties, the Company benefits from (i) increases in commodity prices, (ii) production increases from properties subject to Royal Gold’s royalty interests and (iii) reserve increases on properties subject to Royal Gold royalty interests, potentially extending Royal Gold’s revenue stream from such properties. Royal Gold is not required to contribute to capital costs, exploration costs, environmental costs or other operating costs on the properties on which it holds royalties, and, as a result, Royal Gold has been able to achieve historically high margins and low overhead. The Company believes its exposure to operating risks are further reduced because its portfolio is comprised of royalties on properties operated by experienced and well regarded operators throughout the world, including Barrick, Newmont, AngloGold and Goldcorp.
	•	Industry Experience and Relationships.  Royal Gold relies on its experienced management team to identify opportunities and to structure creative approaches to acquire royalty interests, as well as to manage royalty streams once acquired. The Company’s management team includes senior executives with many years of industry experience in geology, mine operations, mining law and mine financing. The management team maintains personal relationships throughout the industry, from major mining companies to exploration companies, landowners and prospectors, giving the Company an excellent platform from which to identify, target and obtain or create royalty interests.
	•	Acquisition of Royalties on Producing Mines or Development Projects.  Royal Gold actively seeks to acquire royalties on both producing mines and development projects and has successfully executed an acquisition strategy that has more than doubled the reserves subject to its royalty interests from fiscal 2006 through fiscal 2008. Producing royalties generate revenue, while development stage properties represent an important part of the Company’s growth strategy. Development stage properties not only provide a pipeline of reserves subject to Royal Gold’s royalty interests, but also provide potential future revenue should they begin production over the next several years as expected by the operators of our principal development projects. Royal Gold also considers evaluation and exploration stage properties

		to be an important component in maintaining a balanced royalty portfolio with potential for future growth. Royal Gold has acquired portfolios of royalties that include royalties on exploration and evaluation stage properties that Royal Gold believes have potential.

	•	on October 1, 2008, a portfolio of 72 royalties from Barrick, including the remaining 70% of a royalty on the Mulatos gold mine located in Mexico of which we previously owned 30%, as well as royalties on the Malartic gold project in Canada and the Siguiri gold mine in the Republic of Guinea;
	•	in fiscal 2008, royalties on the Marigold gold project located in Nevada, the El Chanate mine located in Mexico and the Benso gold concession located in the Republic of Ghana and 13 royalties as part of our acquisition of Battle Mountain Gold Exploration Corp. (“Battle Mountain”), including two royalties on the Dolores mine in Mexico;
	•	in fiscal 2007, royalties on the Peñasquito mine located in Mexico and the Pascua-Lama project located in Chile; and
	•	in fiscal 2006, a royalty on the Robinson mine located in Nevada, 30% of a royalty on the Mulatos mine (the remaining 70% of which was acquired in October 2008 as described above) and four royalties on the Taparko mine located in Burkina Faso through a financing arrangement with High River.

	•	Utilize Flexible Acquisition Approaches.  Royal Gold has pursued a growth strategy using a variety of acquisition structures. Royal Gold used the following acquisition structures to grow its royalty portfolio: (i) the acquisition of existing royalties or portfolios of existing royalties, (ii) the creation of new royalties by providing financing or capital, including for exploration activities, in exchange for royalties, and (iii) the acquisition of companies holding royalty assets. Royal Gold’s ability to utilize various acquisition structures allows it to adapt to changing market conditions affecting mining companies and to capitalize on the changing needs of mining companies. The Company takes a flexible approach to each royalty acquisition it examines, with consideration given to industry conditions as well as the various goals and capabilities of each operator or potential business partner.
	•	Royalty Evaluation Criteria.  Royal Gold believes there are substantial benefits to holding royalties on properties with significant reserves that represent long-lived assets. The Company utilizes a series of technical, business and legal criteria by which it evaluates potential royalty acquisitions. Among the factors considered are: (i) the quality of the asset, (ii) the reputation of the operator, (iii) country risks, (iv) environmental risks, (v) timing of anticipated production, (vi) potential for reserve growth, (vii) overall size and likely duration of the project and (viii) strategic, financial and operating impact of the acquisition on Royal Gold. The Company relies both on its own management expertise, and on that of consultants, to evaluate mining properties and reserves in order to evaluate royalties for acquisition. Royal Gold believes its systematic evaluation of royalties combined with its experience provides it a competitive advantage in acquiring royalties.
	•	Organic Growth through Reserve Replacement.  In addition to acquiring royalties with existing or anticipated near-term production, Royal Gold seeks to acquire and manage royalties with substantial potential for further reserve growth. This provides cost-free upside from the exploration efforts of the operator because additional reserves, if mined, extend Royal Gold’s revenue stream from the property with no additional cost to Royal Gold. Recent examples of significant reserve growth on royalties acquired by Royal Gold include an additional 2.4 million ounces of gold reserves announced by Barrick at the Crossroads deposit at the Cortez Pipeline Mining Complex (“Cortez”), which more than doubled the reserves subject to Royal Gold’s royalty interest at Cortez, and reserve increases at Goldcorp’s Peñasquito mine of 34% and 21% in gold and silver, respectively, both of which are subject to Royal Gold’s royalty interest.

	•	four royalty interests on Cortez located in Nevada and operated by the Cortez Joint Venture, a joint venture between Barrick Cortez Inc. and Barrick Gold Finance Inc., both affiliates of Barrick;
	•	one royalty interest on the Robinson mine located in eastern Nevada and operated by a subsidiary of Quadra Mining Ltd. (“Quadra”);
	•	one royalty interest on the Leeville Mining Complex located in Nevada and operated by a subsidiary of Newmont;
	•	one royalty interest on the Goldstrike mine located in Nevada and operated by a subsidiary of Barrick;
	•	one royalty interest on the Peñasquito mine, covering both the oxide portion of the deposit (currently in production) and the sulfide portion of the deposit (currently in development) located in Zacatecas, Mexico and operated by a subsidiary of Goldcorp;
	•	one royalty interest on the Mulatos mine located in Sonora, Mexico and operated by a subsidiary of Alamos Gold, Inc. (“Alamos”);
	•	two royalty interests that are currently in effect, and two royalty interests that are not yet in effect, on the Taparko mine located in Burkina Faso and operated by a subsidiary of High River;
	•	one royalty interest on the Siguiri mine located in the Republic of Guinea and operated by AngloGold; and
	•	one royalty interest on the Dolores mine located in Chihuahua, Mexico and operated by a subsidiary of Minefinders Corporation, Ltd. (“Minefinders”).

	•	the royalty on the Peñasquito mine mentioned above that includes production from the sulfide portion of the deposit that is currently in development and is estimated by Goldcorp to commence production in mid-calendar 2009 and reach commercial production by the end of calendar 2009;
	•	one royalty interest, in addition to the royalty interest described above, on the Dolores mine that will begin to produce revenue upon the mine achieving commercial production, estimated by Minefinders to be achieved during the second quarter of calendar 2009;
	•	two royalty interests on the Pascua-Lama project located in Chile and operated by a subsidiary of Barrick;
	•	one royalty interest, of the four Cortez royalty interests described above, that also covers the Crossroads deposit of Cortez; and
	•	one royalty interest on the Malartic project located in Quebec, Canada and operated by Osisko Mining Corporation (“Osisko”).

Common stock being offered by us		6,500,000 shares
Common stock to be outstanding immediately after this offering		40,718,666 shares
Use of proceeds		We intend to use the net proceeds of this offering for general corporate purposes and to fund acquisitions of additional royalty interests. If the Teck Transaction is completed, then the net proceeds will be used to fund the cash portion of the purchase price. Pursuant to the definitive agreement with CDA for the Teck Transaction, if this offering is completed, at the closing of the Teck Transaction the stock portion of the purchase price (4,454,136 shares) will be decreased to 1,204,136 shares (or 716,636 shares if the underwriters’ over-allotment option is exercised in full before closing of the Teck Transaction). The cash portion of the purchase price will be increased by the amount of the proceeds from the sale of 50% of the shares sold in this offering (minus underwriting commissions and discounts), which, at an assumed offering price of $43.42 (the closing price of our common stock on the NASDAQ Global Select Market on April 3, 2009), would result in a total cash payment of $234.8 million (or $255.0 million if the underwriters’ over-allotment option is exercised in full before closing of the Teck Transaction). See “Recent Developments — Proposed Acquisition of the Andacollo Production Interest” on page S-22.
		We intend to invest net proceeds from this offering pending their use primarily in money market accounts that are invested in United States treasury bills or United States treasury-backed securities. See “Use of Proceeds” on page S-25 for further information regarding the use of proceeds from this offering.
Risk factors		An investment in our common stock involves a significant degree of risk. We urge you to carefully consider all of the information described in the section entitled “Risk Factors” beginning on page S-11.
NASDAQ Global Select Market symbol		RGLD
Toronto Stock Exchange symbol		RGL
Dividend policy		We have paid a cash dividend on a quarterly basis on our common stock for each fiscal year beginning in fiscal 2000. For calendar 2009, we will pay a total dividend of $0.32 per share, up from $0.28 per share in calendar 2008. We currently plan to pay a quarterly dividend on a calendar year basis, subject to the discretion of our board of directors. Our board of directors, however, may determine not to declare a dividend based on a number of factors, including the gold price, economic and market conditions and funding requirements of our operations and opportunities that might arise in the future.

	•	up to 1,204,136 shares of common stock issuable to CDA pursuant to the Teck Transaction (assuming 6.5 million shares are sold in this offering) described further under “Recent Developments — Proposed Acquisition of Andacollo Production Interest” on page S-22;
	•	558,690 shares of common stock issuable upon exercise of outstanding options at a weighted average exercise price of $22.59 per share, of which 484,857 shares of common stock are subject to options that are vested and immediately exercisable;

	•	101,250 performance shares that vest upon achieving certain performance goals;
	•	50,500 shares of common stock issuable upon exercise of outstanding stock-settled stock appreciation rights (“SSARs”), of which zero shares of common stock are subject to SSARs that are vested and immediately exercisable;
	•	263,150 shares of common stock reserved for future issuance under our equity compensation plans;
	•	up to 46,245 shares of common stock subject to issuance pursuant to a contingent stock arrangement related to our acquisition of Battle Mountain in October 2007; and
	•	any of the 975,000 additional shares issuable pursuant to the underwriters’ over-allotment option.

		For the Six Months									For the Fiscal Years
		Ended December 31,									Ended June 30,
						2007					2008
		2008				(As Restated)					(As Restated)				2007				2006
		(dollars in thousands, except share and per share data)
Statements of Operations Data:
Royalty revenues		$	30,701			$	27,213				$	66,297			$	48,357			$	28,380
Costs and expenses
Costs of operations			1,460				1,742					3,664				3,265				2,288
General and administrative			3,793				3,527					7,208				5,824				5,022
Exploration and business development			1,637				2,481					4,079				2,493				3,397
Depreciation, depletion and amortization			12,960				6,008					18,364				8,269				4,261
Total costs and expenses			19,850				13,758					33,315				19,851				14,968
Operating income			10,851				13,455					32,982				28,506				13,412
Gain on royalty restructuring			31,500				—					—				—				—
Interest and other income			1,123				3,952					6,742				4,258				3,204
Interest and other expense			(664	)			(1,163	)				(1,729	)			(1,973	)			(165	)
Income before income taxes			42,810				16,244					37,995				30,791				16,451
Current tax expense			(17,668	)			(5,927	)				(11,935	)			(10,310	)			(5,974	)
Deferred tax benefit (expense)			2,541				923					(115	)			761				873
Minority interest in income of consolidated subsidiary			(537	)			(542	)				(1,352	)			(1,522	)			—
Loss from equity investment			—				(550	)				(550	)			—				—
Net income		$	27,146			$	10,148				$	24,043			$	19,720			$	11,350
Net income available to common stockholders		$	27,146			$	8,944				$	19,255			$	19,720			$	11,350
Earnings per share
Basic		$	0.80			$	0.30				$	0.62			$	0.79			$	0.50
Diluted		$	0.79			$	0.30				$	0.61			$	0.79			$	0.49
Weighted average number of common shares outstanding Basic			33,943,851				29,253,504					31,054,725				24,827,319				22,863,784
Diluted			34,343,827				29,455,599					31,390,293				25,075,086				23,134,034

		As of December 31,
		2008
						As
		Actual				Adjusted(1)
		(unaudited)
		(dollars in thousands)
Balance Sheet Data:
Current assets:
Cash and equivalents		$	55,040			$
Royalty receivables			14,833				14,833
Other current assets			849				849
Total current assets			70,722
Royalty interests in mineral properties, net			475,724				475,724
Other assets			36,181				36,181
Total assets		$	582,627			$
Current liabilities			19,551				19,551
Long-term liabilities			43,371				43,371
Total liabilities		$	62,922			$	62,922
Minority interest in subsidiary			11,976				11,976
Stockholders’ equity
Common stock, $.01 par value, authorized 100,000,000 shares; issued 34,007,184 and 40,507,184 as adjusted			340
Additional paid-in capital			465,862
Accumulated other comprehensive loss			(7)				(7)
Accumulated earnings			41,534				41,534
Total stockholders’ equity			507,729
Total liabilities and stockholders’ equity		$	582,627			$

(1)		The As Adjusted column does not include the impact of the Teck Transaction. While there can be no assurances that the Teck Transaction will close, if the public offering closes at the offering price of $      per share, the Company would pay $      in cash and issue 1,204,136 shares to CDA in connection with the Teck Transaction (not reflecting the exercise of the underwriters’ over-allotment option). Accordingly, the As Adjusted Cash and equivalents would decrease by $     , with corresponding decrease to total current assets and the As Adjusted Common stock and Additional paid-in capital would increase by $     , with corresponding increase to total stockholders’ equity.

 

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information included or incorporated by reference in this prospectus supplement, before making an investment decision. Our business, financial condition, results of operations and cash flows could be materially adversely affected by any of these risks. The market or trading price of our securities could decline due to any of these risks. In addition, please read “Special Note About Forward-Looking Statements” in this prospectus supplement, where we describe additional uncertainties associated with our business and the forward-looking statements included or incorporated by reference in this prospectus supplement. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.

 

Risks Related to Our Business

 

We received a majority of our revenues in fiscal 2008 from three properties, and these maturing mines are likely to experience production declines.

 

For the six months ended December 31, 2008, approximately 26%, 12% and 11% of our revenues were derived from Cortez, the Leeville Mining Complex (“Leeville”) and the Robinson mine, respectively, compared to approximately 33%, 8% and 24%, respectively, in fiscal 2008. We expect that revenue from our royalties at Cortez, Leeville and Robinson will continue to be a significant, though less dominant, contributor to our revenue in future periods. Furthermore, as Cortez and other mines on which we have royalties mature, we can expect overall declines in production over the years unless operators are able to replace reserves that are mined by mine expansion or successful new exploration. There can be no assurance that the operators of Cortez or the other properties will be able to maintain or increase production or replace reserves as they are mined.

 

We own passive interests in mining properties, and it is difficult or impossible for us to ensure properties are operated in our best interest.

 

All of our current revenue is derived from royalties on properties operated by third parties. The holder of a royalty interest typically has no authority regarding development or operation of a mineral property. Therefore, we are not in control of decisions regarding development or operation of any of the properties on which we hold a royalty interest, and we have limited or no legal rights to influence those decisions.

 

Our strategy of having others operate properties on which we retain a royalty or other passive interest puts us generally at risk to the decisions of others regarding all operating matters, including permitting, feasibility analysis, mine design and operation, processing, plant and equipment matters and temporary or permanent suspension of operations, among others. These decisions may be motivated by the best interests of the operator rather than to maximize royalties. Although we attempt to secure contractual rights that will permit us to protect our interests, there can be no assurance that such rights will always be available or sufficient, or that our efforts will be successful in achieving timely or favorable results or in affecting the operations of the properties in which we have royalty interests in ways that would be beneficial to our stockholders.

 

Volatility in gold, copper and other metal prices may have an adverse impact on the value of our royalty interests and reduce our royalty revenues.

 

The profitability of our royalty interests is directly related to the market price of gold, copper and other metal prices. The market price of each metal may fluctuate widely and is affected by numerous factors beyond the control of any mining company. These factors include metal supply, industrial and jewelry fabrication and investment demand, expectations with respect to the rate of inflation, the relative strength of the U.S. dollar and other currencies, interest rates, gold sales and loans by central banks, forward sales by metal producers, global or regional political, economic or banking crises and a number of other factors. If the market price of gold, copper or certain other metals should drop, then our royalty revenues would also drop. Our sliding-scale royalties at Cortez, Taparko and other properties amplifies this effect. When the gold price falls below the steps in a sliding-scale royalty, we receive a lower royalty rate on production. Furthermore, if gold, copper and

certain other metal prices drop dramatically, we might not be able to recover our initial investment in royalty interests or properties. In addition, certain royalty agreements, such as that in place for an interest at Robinson, provide that royalty payments to us are subject to subsequent adjustment based on commodity prices at a later date, three to four months in the case of Robinson, which can result in adjustments to our royalty revenue in later periods. Hence, we may experience positive or negative adjustments to recognized royalty revenues based on changes in commodity prices. Moreover, the selection of a royalty investment or of a property for exploration or development, the determination to construct a mine and place it into production and the dedication of funds necessary to achieve such purposes are decisions that must be made long before the first revenues from production will be received. Price fluctuations between the time that decisions about exploration, development and construction are made and the commencement of production can have a material adverse effect on the economics of a mine and can eliminate or have a material adverse impact on the value of royalty interests.

 

The Andacollo project, on which we will acquire a gold production interest if the Teck Transaction is completed, is a copper project, with gold produced as a by-product. The operator may be negatively affected by depressed copper prices, which could have an adverse effect on development or operation of the project, and therefore our future potential revenue from the project.

 

The volatility in gold prices is illustrated by the following table, which sets forth, for the periods indicated (calendar year), the high and low prices in U.S. dollars per ounce of gold, based on the London Bullion Market Association P.M. fix.

 

Gold Price Per Ounce ($)

 

 

The volatility in silver prices is illustrated by the following table, which sets forth, for the periods indicated (calendar year), the high and low prices in U.S. dollars per ounce of silver, based on the London Bullion Market Association P.M. fix.

 

Silver Price Per Ounce ($)

 

The volatility in copper prices is illustrated by the following table, which sets forth, for the periods indicated (calendar year), the high and low prices in U.S. dollars per pound of copper, based on the London Metal Exchange cash settlement price for copper Grade A.

 

Copper Price Per Pound ($)

 

 

Our revenues are subject to operational and other risks faced by operators of our mining properties.

 

Although we are not required to pay capital costs or operating costs, our financial results are subject to hazards and risks normally associated with developing and operating mining properties, both for the properties where we may conduct exploration or indirectly for properties operated by others where we hold royalty interests. These risks include:

 

 

Operating cost increases can have a negative effect on the value of and income from our royalty interests by potentially causing an operator to curtail, delay or close operations at a mine site.

 

We depend on our operators for the calculation of royalty payments, and we may not be able to detect errors, or payment calculations may call for retroactive adjustments.

 

Our royalty payments are calculated by the operators of the properties on which we have royalties based on their reported production. Each operator’s calculation of our royalty payments is subject to and dependent upon the adequacy of its production and accounting functions, and errors may occur from time to time in the calculations made by an operator. For example, the complex nature of mining and ownership of mining interests can result in errors regarding allocation of production, such as those that occurred in connection with our restatement of our consolidated financial statements for fiscal 2008. We are provided with production

information by the mining operator in certain royalty contracts that may enable us to detect errors in the royalty payments that we receive from certain royalty interests given our royalty monitoring program and its associated internal controls and procedures. We do not, however, have the contractual right to receive production information for all of our royalty interests. As a result, our ability to detect royalty payment errors is limited and the possibility exists that we will need to make retroactive royalty revenue adjustments. Furthermore, in some royalty contracts we have the right to audit the operational calculations and production data for the associated royalty payments and, when exercised, such audits may occur many months following our recognition of the royalty revenue. In addition, certain royalty agreements, such as our royalty agreement for the Robinson mine, provide that royalty payments to us are subject to subsequent adjustment based on commodity prices at a later date, three to four months in the case of Robinson, which can result in adjustments to our royalty revenue in later periods. Hence, these royalty audits may result in the recognition by us of retroactive changes in previously disclosed royalty revenues. For example, we had negative revenue from the Robinson mine of $1.3 million for the three months ended December 31, 2008, which will be offset against future royalty revenue from Robinson.

 

If the current economic downturn, challenging credit markets and depressed prices of certain commodities is prolonged, it may affect the ability of some or all of the operators of the properties on which we have royalties to meet liquidity needs or operate profitably, which in turn could have material adverse effects on the value of and revenue from our royalty interests. In addition, the current economic downturn may adversely affect our ability to obtain financing for additional royalty acquisitions.

 

The value of and revenue from our royalty interests may be materially adversely affected if commodity prices for the various metals on which we have royalties or which are the primary production at mines on which we have royalties decline significantly, as occurred with respect to copper during 2008. For example, the decline in prices for copper negatively impacted our revenue for the three-month period ended December 31, 2008 by approximately $3.3 million, in comparison to our total revenue for such period of approximately $14.6 million. In addition, our royalty interests and revenues may be materially adversely affected if operators of the properties on which we have royalties do not have the financial strength or sufficient credit or other financing to cover the costs of operating or developing a mine, causing an operator to curtail, delay or close operations at a mine site. Operators’ financial strength or ability to secure financing is affected by the regional and global conditions in which they operate. Many economists believe that the U.S. economy, and possibly the global economy, has entered into a recession as a result of the recent deterioration in the credit markets and the related financial crisis, as well as a variety of other factors. A continued significant economic slowdown may negatively affect many commodity prices and our operators’ financial strength and, in turn, their ability to meet the costs of operating or developing the mines on which we have royalty interests. Further disruption and volatility of financial markets could also limit operators’ access to financing needed for operations. For example, High River, the operator of the Taparko mine, is in breach of its funding agreement with Royal Gold, and it has recently announced that its ability to continue as a going concern depends on, among other things, its ongoing discussions with its lenders and obtaining additional financing. If any of the operators of the properties on which we have royalties suffer these material adverse effects, enter into bankruptcy or liquidation, or undergo a change of control, then our royalty interests and the value of and revenue from our royalty interests may be materially adversely affected. In addition, a continued economic downturn or credit crisis could adversely affect our ability to obtain debt or equity financing for additional royalty acquisitions.

 

We may enter into acquisitions or other material royalty transactions at any time, including promptly after this offering.

 

We are engaged in a continual review of opportunities to acquire existing royalties, to create new royalties through the financing of mining projects or to acquire companies that hold royalty assets. We currently, and generally at any time, have acquisition opportunities in various stages of active review, including, for example, our engagement of consultants and advisors to analyze particular opportunities, analysis of technical, financial and other confidential information, submission of indications of interest, obtaining debt commitments for acquisition financing, participation in preliminary discussions, and involvement as a bidder in competitive

auctions. Any such acquisition could be material to us and could significantly increase the size and scope of our business. In such event, we could issue substantial amounts of common stock or incur substantial additional indebtedness to fund the acquisition. In addition, we may consider opportunities to restructure our royalties where we believe such restructuring would provide a long-term benefit to the Company, though such restructuring may reduce near-term revenues. For example, we restructured our royalties at Cortez in connection with the Barrick royalty portfolio acquisition, which reduced our royalty revenue from Cortez during the three-month period ended December 31, 2008 by $0.8 million, though we believe such restructuring makes development at the Crossroads deposit, on which we have a royalty interest, more attractive to the operator. We could enter into one or more acquisition or restructuring transactions at any time, including promptly following this offering.

 

We may incur substantial indebtedness that could have adverse effects on our business.

 

We may incur substantial indebtedness in the future in connection with financing acquisitions, strategic transactions or for other purposes. If we were to incur substantial additional indebtedness, it may make it difficult for us to satisfy our debt obligations, increase our vulnerability to general adverse economic and industry conditions, require us to dedicate a substantial portion of our cash flow from operations and proceeds of any equity issuances to payments on our indebtedness, thereby reducing the availability of cash flow to fund acquisitions and dividends and other general corporate purposes, and place us at a competitive disadvantage to our competitors that have less debt or have other adverse effects on us.

 

We may be unable to successfully acquire additional royalty interests.

 

Our future success depends upon our ability to acquire royalty interests at appropriate valuations, including through corporate acquisitions, to replace depleting reserves and to diversify our royalty portfolio. We anticipate that most of our revenues will be derived from royalty interests that we acquire or finance, rather than through exploration and development of properties. There can be no assurance that we will be able to identify and complete the acquisition of such royalty interests, or businesses that own desired royalty interests, at reasonable prices or on favorable terms. In addition, we face competition in the acquisition of royalty interests. If we are unable to successfully acquire additional royalties, reserves subject to our royalties will decline as the producing properties on which we have royalties are mined. We may also experience negative reactions from the financial markets or operators of properties on which we seek royalties if we are unable to successfully complete acquisitions of royalty interests or businesses that own desired royalty interests. Each of these factors may adversely affect the trading price of our common stock or our financial condition or results of operations.

 

Acquired royalty interests, particularly on development stage properties, are subject to the risk that they may not produce anticipated royalty revenues.

 

The royalty interests we acquire may not produce the anticipated royalty revenues. Royalty interests acquired on development stage properties particularly face this risk. The success of our royalty acquisitions is based on our ability to make accurate assumptions regarding the valuation and timing and amount of royalty payments, particularly acquisitions of royalties on development stage properties. If the operator does not bring the property into production and operate in accordance with feasibility studies or other plans, then acquired royalty interests may not yield sufficient royalty revenues to be profitable. Furthermore, operators of development stage properties must obtain all necessary environmental permits and access to water, power and other raw materials needed for operations in order to begin production, and there can be no assurance operators will be able to do so. The Taparko project in Burkina Faso, which began production, the Peñasquito and Dolores mines in Mexico, both ramping up production, and Malartic in Quebec, are among our principal development stage royalty acquisitions to date. In addition, the Andacollo Production Interest that we propose to acquire from CDA is in the development stage and will not produce royalty revenue unless CDA is able to complete construction of mine and mill facilities to successfully produce copper, as well as gold by-product, from the sulfide portions of the deposit and to operate the project at full capacity. See “Recent Developments — Proposed Acquisition of Andacollo Production Interest” on page S-22. The failure of any of

these projects to produce anticipated royalty revenues may materially and adversely affect our financial condition and results of operations.

 

Estimates of reserves and mineralization by the operators of mines in which we have royalty interests are subject to significant revision.

 

There are numerous uncertainties inherent in estimating proven and probable reserves and mineralization, including many factors beyond our control or the control of the operators of mineral properties on which we have a royalty interest. Reserve estimates on our royalty interests are prepared by the operators of the mining properties. We do not participate in the preparation or verification of such reports and have not independently assessed or verified the accuracy of such information. The estimation of reserves and of other mineralization is a subjective process, and the accuracy of any such estimates is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, metallurgical testing and production, and the evaluation of mine plans subsequent to the date of any estimate, may cause a revision of such estimates. The volume and grade of reserves recovered and rates of production may be less than anticipated. Assumptions about gold and other precious metal prices are subject to great uncertainty, and such prices have fluctuated widely in the past. Declines in the market price of gold or other precious metals also may render reserves or mineralization containing relatively lower grades of ore uneconomical to exploit. Changes in operating and capital costs and other factors including short-term operating factors, such as the need for sequential development of ore bodies and the processing of new or different ore grades, may materially and adversely affect reserves. Finally, it is important to note that our royalties give us only small percentage interests in the production from any reserve, and those percentage interests vary widely based on the individual royalty documents.

 

Estimates of production by the operators of mines in which we have royalty interests are subject to change, and actual production may vary materially from such estimates.

 

Production estimates are prepared by the operators of the mining properties. There are numerous uncertainties inherent in estimating anticipated production attributable to our royalty interests, including many factors beyond our control or the control of the operators of mineral properties in which we have royalty interests. We do not participate in the preparation or verification of production estimates and have not independently assessed or verified the accuracy of such information. The estimation of anticipated production is a subjective process and the accuracy of any such estimates is a function of the quality of available data, reliability of production history, variability in grade encountered, mechanical or other problems encountered, engineering and geological interpretation and operator judgment. Rates of production may be less than expected. Results of drilling, metallurgical testing and production, and the evaluation of mine plans subsequent to the date of any estimate may cause actual production to vary materially from such estimates.

 

If title to properties is not properly maintained by the operators, our royalty revenues could decline.

 

The validity of unpatented mining claims, which constitute a significant portion of the properties on which we hold royalties in the United States, is often uncertain and such validity is always subject to contest. Unpatented mining claims are generally considered subject to greater title risk than patented mining claims, or real property interests that are held by absolute title to the land (fee simple). Because unpatented mining claims are self-initiated and self-maintained, they possess some unique vulnerabilities not associated with other types of property interests. It is impossible to ascertain the validity of unpatented mining claims from public real property records, and therefore it can be difficult or impossible to confirm that all of the requisite steps have been followed for location and maintenance of an unpatented mining claim. If title to unpatented mining claims included among our royalty properties has not been properly established or is not properly maintained, our royalty revenues could be adversely affected.

 

Royalty interests are subject to contest by operators of mining projects and holders of mining rights.

 

Our business includes the risk that operators of mining projects and holders of mining claims, tenements, concessions, mining licenses or other interests in land and mining rights may contest the existence or geographic extent of our royalty interests. While Royal Gold seeks to confirm the existence, validity and

enforceability of the royalties it acquires, there can be no assurance that such disputes will not arise. As a general matter, royalty interests in mining projects or properties are subject to uncertainties and complexities arising from the application of contract and property laws governing private parties and/or local or national governments in the jurisdiction where mining projects are located.

 

Anticipated federal legislation could decrease our royalty revenues.

 

In recent years, the United States Congress has considered a number of proposed major revisions to the General Mining Law of 1872 (the “General Mining Law”), which governs the creation, maintenance and possession of mining claims and related activities on federal public lands in the United States. Several proposals, such as Bill H.R. 699, introduced in Congress in January 2009, would, if enacted, impose a royalty payable to the U.S. Government on existing and future production of minerals from unpatented mining claims in the United States. Such legislation could, if enacted, render certain federal lands unavailable for the location of unpatented mining claims, afford greater public involvement and regulatory discretion in the mine permitting process, provide for citizen suits against miners operating on federal lands, and impose new and stringent environmental operating standards and mined land reclamation requirements in addition to those already in effect. If enacted, such legislation could adversely affect the development of new mines and the expansion of existing mines, as well as increase the cost of all mining operations on federal lands, perhaps materially and adversely affecting mine operators and, therefore, our royalty revenue.

 

The effect of any revision of the General Mining Law on our royalty interests in the United States cannot be determined conclusively until such revision, if any, is enacted and challenges to the legislation, if any, have been finally resolved. In addition, a number of the properties on which we have royalties are located on U.S. federal lands that are subject to federal mining and other public land laws. Changes in such laws or regulations promulgated under such laws could affect mine development and expansion and significantly increase regulatory obligations and compliance costs with respect to mine development and mine operations, which could adversely affect our royalty revenue from such properties. By way of example, if a royalty, assessment, production tax or other levy imposed on and measured by production is charged to the operator at Cortez, which is largely located on U.S. federal lands, the amount of that charge would be deducted from gross proceeds for calculation of our GSR1, GSR2 and GSR3 royalties, which would reduce our royalty revenues from these royalty interests.

 

Foreign operations and operation by foreign operators are subject to many risks.

 

We derived approximately 33% of our revenues from foreign sources in the six-month period ended December 31, 2008, compared to 21% in fiscal 2008. Our foreign activities are subject to the risks normally associated with conducting business in foreign countries. These risks include exchange controls and currency fluctuations, limitations on repatriation of earnings, foreign taxation, foreign real estate, contract and environmental laws and enforcement, expropriation or nationalization of property, labor practices and disputes and uncertain political and economic environments. There are also risks of war and civil disturbances, as well as other risks that could cause exploration or development difficulties or stoppages, restrict the movement of funds or result in the deprivation or loss of contract or real property rights or the taking of property by nationalization or expropriation. Exploration licenses granted by some foreign countries do not include the right to mine, and in some jurisdictions the right to convert an exploration license into mining rights may not be automatic. Each country has discretion in determining whether to grant a license to mine. If an operator cannot secure a mining license following exploration of a property, or were to lose such a license, then the value of our royalty interest would be negatively affected or its validity undermined. Foreign operations also could be adversely impacted by laws and policies of the United States affecting foreign trade, investment and taxation. Furthermore, many of our operators are organized outside of the United States. Our royalty interests may be subject to the application of foreign laws to our operators, and their stockholders, including laws relating to corporate transactions, bankruptcy and liquidation.

 

We currently have interests in mines and projects outside of the United States in Argentina, Australia, Bolivia, Burkina Faso, Canada, Chile, Colombia, Finland, Honduras, Mexico, Nicaragua, the Republic of Ghana, the Republic of Guinea and Russia. We also evaluate precious metal royalty acquisitions or

development opportunities in other parts of the world, including Central America, Europe, Republics of the former Soviet Union, Asia, Africa and South America.

 

We are subject to the risks of owning royalties on mining properties in Burkina Faso, the Republic of Ghana and the Republic of Guinea. These countries have historically experienced periods of political uncertainty, exchange rate fluctuations, balance of payments and trade difficulties, and problems associated with extreme poverty and unemployment. Laws regarding the ownership, operation and taxation of mining projects in these countries are subject to change. Any of these economic or political risks could adversely affect the Taparko, Benso or Siguiri projects.

 

Our royalties in Mexico are subject to risks associated with effects of political developments, local unrest and communal property issues. In the past, Mexico has experienced prolonged periods of weak economic conditions characterized by exchange rate instability, high inflation and negative economic growth, all of which could occur again in the future. Any of these risks could adversely affect the Peñasquito and Dolores projects, as well as the Mulatos and El Chanate mines.

 

Our Martha royalty is subject to risks relating to operating in Argentina. Argentina has experienced political instability, currency fluctuations and changes in banking regulations in recent years. Future instability, currency value fluctuations or regulation changes could adversely affect our revenues from the Martha mine.

 

Our Don Mario royalty is subject to risks relating to operating in Bolivia. Bolivia has experienced political and social instability, corruption, regulation and tax law changes and the potential for nationalization of foreign business interests that could materially adversely affect the Don Mario mine. In January 2009, a new constitution was passed by general election that provides, among other things, that all minerals are property of the state, Bolivian investment will be prioritized ahead of foreign investment, and the state will assume control over exploration, exploitation, transportation and marketing of minerals. The constitution also implicitly requires mining companies to enter into contracts with the state mining agency within one year, although the nature, scope and content of such contracts is not defined.

 

We hold a royalty interest in an exploration property that is subject to the risks of operating in Russia. The economy of the Russian Federation continues to display characteristics of an emerging market, including extensive currency controls and potentially high inflation. The prospects for future economic stability in the Russian Federation are largely dependent upon the effectiveness of economic measures undertaken by the government, together with legal, regulatory and political developments. Russian laws, licenses and permits have been in a state of change, and new laws may be given a retroactive effect.

 

The mining industry is subject to significant environmental risks.

 

Mining is subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production. Laws and regulations in the United States and abroad intended to ensure the protection of the environment are constantly changing and generally are becoming more restrictive and costly. Insurance against environmental risks (including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from exploration and production) is not generally available to companies within the mining industry, such as the operators of the mines in which we hold a royalty interest, at a reasonable price. Furthermore, mining may be subject to significant environmental and other permitting requirements regarding the use of raw materials, particularly water, needed for operations. If an operator is forced to incur significant costs to comply with environmental regulations or becomes subject to environmental restrictions that limit its ability to continue or expand operations, or if an operator were to lose its right to use or access to water or other raw materials necessary to operate a mine, our royalty revenues could be reduced or eliminated. To the extent that we become subject to environmental liabilities for the time period during which we were operating properties, the satisfaction of any liabilities would reduce funds otherwise available to us and could have a material adverse effect on our financial condition, results of operations and cash flows.

We depend on the services of our President and Chief Executive Officer and other key employees and on the participation of our Chairman.

 

We believe that our success depends on the continued service of our key executive management personnel. Currently, Tony Jensen is serving as our President and Chief Executive Officer. Mr. Jensen’s extensive commercial experience, mine operations background and industry contacts give us an important competitive advantage. Furthermore, our Chairman, Stanley Dempsey, who served as our Executive Chairman until his retirement in January 2009, remains closely involved with us. Mr. Dempsey’s knowledge of the royalty business and long-standing relationship with the mining industry are important to our success. The loss of the services of Mr. Jensen or other key employees could jeopardize our ability to maintain our competitive position in the industry. We currently do not have key person life insurance for any of our officers or directors.

 

We identified a material weakness in internal control over our financial reporting and as a result we were required to restate our financial results for the fiscal year ended June 30, 2008.

 

In connection with the restatement and our reassessment of our internal control over financial reporting pursuant to the rules promulgated by the SEC, Section 404 of the Sarbanes-Oxley Act of 2002 and Item 308 of Regulation S-K, management has concluded that as of the fiscal year ended June 30, 2008, our disclosure controls and procedures were not effective and that we had a material weakness in our internal control over financial reporting. Please refer to Item 9A of our Form 10-K/A, filed on November 6, 2008 and Item 4 of Part I of our Form 10-Q filed on November 10, 2008, for further discussion of the ineffectiveness of and material weakness in our controls as of June 30, 2008 and September 30, 2008. While we believe we have remedied such material weakness, and management has concluded that as of the period ended December 31, 2008, our disclosure controls and procedures were effective, such controls and procedures may not be adequate to prevent or identify existing or future internal control weaknesses. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its known inherent limitations (such limitations are further discussed in Item 9A of our Form 10-K/A, filed on November 6, 2008 and Item 4 of Part I of our Form 10-Q filed on November 10, 2008 and on February 6, 2009). Because of such inherent limitations, there is a risk that material misstatements in results of operations and financial condition may not be prevented or detected on a timely basis by our internal controls over financial reporting and thus require us to further restate our financial statements. This effect could, in turn, adversely affect the trading price of our common stock and there is a risk that repeated restatements could result in an investigation by the SEC.

 

Risks Related to Our Common Stock

 

Our stock price may continue to be volatile and could decline.

 

The market price of our common stock has fluctuated and may decline in the future. The high and low sale prices of our common stock were $41.66 and $18.74 in the fiscal year ended June 30, 2006, $37.50 and $23.25 in the fiscal year ended June 30, 2007, $35.42 and $23.85 in the fiscal year ended June 30, 2008, and $49.45 and $22.75 in the six-month period ended December 31, 2008. The fluctuation of the market price of our common stock has been affected by many factors that are beyond our control, including:

 

 

Additional issuances of equity securities by us would dilute the ownership of our existing stockholders and could reduce our earnings per share.

 

We will issue up to 4,454,136 shares to CDA in connection with the Teck Transaction if this offering is not completed. We also may issue additional equity in the future in connection with acquisitions, strategic transactions or other purposes. To the extent we issue additional equity securities, the ownership of our existing stockholders could be diluted and our earnings per share could be reduced.

 

If a large number of shares of our common stock is sold in the public market, the sales could reduce the trading price of our common stock and impede our ability to raise future capital.

 

We cannot predict what effect, if any, future issuances by us of our common stock or of other equity will have on the market price of our common stock. In addition, the shares of common stock that we issue in connection with an acquisition may not be subject to resale restrictions. We issued approximately 3.98 million shares in connection with the conversion of all of our issued and outstanding Preferred Stock on March 10, 2008. If this offering is completed, assuming full exercise of the underwriters’ over-allotment option, and the Teck Transaction closes, then CDA will hold 716,636 shares of our common stock. We have entered into a stockholder agreement with Teck and CDA placing certain limitations on the ability of Teck and its affiliates to sell our common stock, but the stockholder agreement allows Teck and its affiliates to complete open market trades of our common stock, subject to volume limitations, and block trades of our common stock, among other types of transfers. If Teck or its affiliates were to complete one or more block trades or an underwritten offering of our common stock, the market price of our common stock could decline. See “Recent Developments — Proposed Acquisition of Andacollo Production Interest” on page S-22 for further information about certain restrictions on CDA’s ability to sell our stock after the Teck Transaction. We may issue substantial additional shares of common stock or other securities in connection with other acquisition transactions. The market price of our common stock could decline if certain large holders of our common stock, or recipients of our common stock in connection with an acquisition, sell all or a significant portion of their shares of common stock or are perceived by the market as intending to sell these shares other than in an orderly manner. In addition, these sales could also impair our ability to raise capital through the sale of additional common stock in the capital markets.

 

We may change our practice of paying dividends.

 

We have paid a cash dividend on our common stock for each fiscal year beginning in fiscal 2000. Our board of directors has discretion in determining whether to declare a dividend based on a number of factors, including prevailing gold prices, economic market conditions and funding requirements for future opportunities or operations. If our board of directors declines to declare dividends in the future or reduces the current dividend level, then our stock price could fall, and the success of an investment in our common stock would depend solely upon any future stock price appreciation. We have increased our dividends in prior years. There can be no assurance, however, that we will continue to do so. For example, if we were to materially increase our borrowings to conduct a material acquisition, our board of directors could elect to modify our practice of paying dividends and potentially reduce or eliminate dividends on common stock.

 

Certain anti-takeover provisions could delay or prevent a third party from acquiring us.

 

Provisions in our restated certificate of incorporation may make it more difficult for third parties to acquire control of us or to remove our management. Some of these provisions:

 

 

We are also subject to the business combination provisions of Delaware law that could delay, deter or prevent a change in control. In addition, we have adopted a stockholder’s rights plan that imposes significant penalties upon a person or group that acquires 15% or more of our outstanding common stock without the approval of the board of directors. Any of these measures could prevent a third party from pursuing an acquisition of Royal Gold, even if stockholders believe the acquisition is in their best interests.

 

Risks Related to the Teck Transaction

 

The closing of the Teck Transaction is subject to closing conditions, and there can be no assurance the closing conditions will be met.

 

There is no assurance that the Teck Transaction will be completed. The closing of the Teck Transaction is subject to satisfaction or waiver of certain conditions, including the condition that the operator, CDA, enter into certain concentrate marketing of its production from the Andacollo project and a condition in both Royal Gold’s and CDA’s favor that CDA’s material governmental approvals are not withdrawn or challenged (or such action threatened). CDA will be precluded from exercising the condition regarding governmental approvals if Royal Gold waives the condition and waives its rights to indemnification from CDA with respect to such governmental approvals. Either party may terminate the definitive agreement if closing conditions are not satisfied or waived by October 30, 2009.

 

Even if the Teck Transaction is completed, the Andacollo Production Interest project may not produce the anticipated royalty revenue.

 

Even if the Teck Transaction is completed, there can be no assurance that the production interest we acquire on the Andacollo project will produce the anticipated royalty revenue. The success of the Andacollo project depends upon, among other factors, the ability of the operator to complete the construction of the mine and mill facilities for the sulfide portion of the deposit at the project, the ability of the operator to bring the project into production, the price of copper, the availability of resources necessary to construct and operate the project, including adequate water supply and rights of way, and receipt and maintenance of necessary environmental and other permits to operate the project. While we understand that the required air, water and other environmental permits are currently held by CDA, there are proceedings involving CDA’s permitting matters that CDA expects to be resolved in its favor. There can be no assurance that developments in the political or regulatory environment will not require CDA to take further action to maintain its permits or obtain other permits in order to complete development or to operate the project. The failure to maintain or obtain such permits could materially and adversely affect the anticipated benefits of the Teck Transaction.

 

The Andacollo project is a copper mine with gold produced as a by-product. Our production interest, once acquired, will cover only the gold produced from the sulfide portion of the Andacollo project. Consequently, if the price of copper drops, the operator may curtail or delay construction of the sulfide portion or may close operations at the mine site. If the Teck Transaction is completed, the failure of the Andacollo project to produce anticipated royalty revenues may materially and adversely affect our financial condition, results of operations, cash flows and the other benefits we expect to achieve from the Teck Transaction.

 

Proposed Acquisition of Andacollo Production Interest

 

The Definitive Agreement

 

On April 3, 2009, Royal Gold entered into a definitive agreement with Teck’s subsidiary, CDA, to acquire a production interest in gold produced from the sulfide portion of the Andacollo copper and gold project in Chile for total consideration consisting of $100 million in cash and 4,454,136 shares of our common stock, which amounts will be adjusted as described below. Pursuant to the definitive agreement with CDA, the cash portion of the purchase price will be increased, and the stock portion of the purchase price will be decreased, based on the size and net proceeds of this offering. The initial number of shares to be issued to CDA was determined by dividing $200 million by the volume weighted average price of our common stock on the NASDAQ Global Select Market for the five day trading period that ended four days prior to the public announcement of the Teck Transaction on April 6, 2009.

 

If this offering is completed, pursuant to the definitive agreement with CDA, at the closing of the Teck Transaction the stock portion of the purchase price of 4,454,136 shares will be decreased by 50% of the total number of shares sold in this offering, resulting in a total of 1,204,136 shares being issued to CDA at closing, and the cash portion of the purchase price will be increased by the amount of the proceeds from the sale of 50% of the shares sold in this offering (minus underwriting commissions and discounts), which, at an assumed offering price of $43.42 (the closing price of our common stock on the NASDAQ Global Select Market on April 3, 2009), would result in a total cash payment of $234.8 million. The total number of shares to be issued to CDA will be further decreased by 50% of the number of shares subject to the underwriters’ over-allotment option if the option is exercised before the closing of the Teck Transaction, resulting in a total of 716,636 shares being issued to CDA if such option is exercised in full. The total cash payment to CDA will be increased by the amount of proceeds from the sale of 50% of the shares subject to the over-allotment option (minus underwriting commissions and discounts), which, at an assumed offering price of $43.42 (the closing price of our common stock on the NASDAQ Global Select Market on April 3, 2009), would result in a total cash payment of $255.0 million if such option is exercised in full.

 

The definitive agreement for the transaction between Royal Gold and CDA provides for the entry into two production interest agreements for the Andacollo Production Interest, a stockholder agreement and a registration rights agreement. The two production interest agreements will contain certain provisions that limit the concentrate marketing terms applicable to the Company, including a 90.6% minimum payable gold factor and a maximum gold refining charge against the production interest payment to Royal Gold of $6 per ounce of gold. The definitive agreement includes certain representations and warranties from both parties, customary covenants, closing conditions and indemnification provisions. Closing conditions include the accuracy of representations and warranties the inaccuracy of which would not constitute a “material adverse effect,” as defined in the definitive agreement, compliance with covenants, absence of litigation, and similar customary conditions, and a condition in Royal Gold’s favor that CDA complete concentrate marketing for a specified percentage of its concentrate production from the Andacollo project. In addition, both CDA and Royal Gold have conditions precedent that no material governmental approval necessary for the construction and operation of the project shall have been withdrawn or challenged (or such action threatened), provided that CDA is precluded from exercising its condition in the event Royal Gold waives certain potential rights to indemnification relating to such approvals. Thus, Royal Gold can either terminate the agreement or require CDA to close if a necessary governmental approval is withdrawn or challenged (or such action threatened) at Royal Gold’s election. Either party may terminate the definitive agreement if the closing conditions are not satisfied or waived by October 30, 2009. There can be no assurance that the Teck Transaction will close on time or at all. See “Risk Factors — Risks Related to the Teck Transaction” on page S-21.

 

The Andacollo Project

 

Upon consummation of the Teck Transaction, Royal Gold will be entitled to receive 75% of the gold produced from the sulfide portion of the deposit at the Andacollo project until 910,000 payable ounces of gold have been sold, and 50% of the gold produced in excess of 910,000 payable gold ounces. Payments from the Andacollo Production Interest will be made to Royal Gold in cash, although Royal Gold has the right to take physical delivery of gold in certain circumstances. The Andacollo Production Interest will not cover copper production.

 

The Andacollo mine has operated since 1996 and is currently operated by CDA, which is 90% owned by Teck and 10% owned by ENAMI, a Chilean state-owned mining and processing company. The mine is located about 34 miles southeast of the city of La Serena, Chile, and about 2 miles from the small town of Andacollo. The mine produces copper from the oxide portion of the deposit, and Teck is constructing facilities to produce both copper and gold from the sulfide portion of the deposit. Proven and probable reserves estimated by the operator for the sulfide portion are 393.5 million tonnes with a grade of 0.39% copper and 0.13 g/t gold. This equates to 1.6 million contained ounces of gold. Reserves were estimated by the operator using a copper price of $1.50 per pound and a gold price of $480 per ounce. Gold will be produced as a by-product of copper production, with gold recovery estimated by the operator to be approximately 61%. Once the mine is in full production, the operator expects the mill to have a capacity of 55,000 tonnes per day. The operator estimates that the mine will produce on average approximately 53,000 ounces of gold and 76,000 tonnes of copper in concentrate annually for the first 10 years of commercial production, with an estimated mine life of 20 years. The mine is estimated by the operator to begin initial production of gold in the fourth quarter of calendar 2009, with ramp up continuing into 2010. The operator anticipates commercial production at the mine to be achieved in the first half of calendar 2010.

 

Other Agreements

 

Royal Gold, CDA and Teck have entered into a stockholder agreement governing certain matters related to our common stock. Under the stockholder agreement, until such time that Teck, CDA and their affiliates beneficially own less than 2% of our issued and outstanding common stock for 90 consecutive days, Teck, CDA and their affiliates will be subject to customary standstill restrictions, and will not be permitted to, among other things, influence Royal Gold’s management or board of directors, form or participate in a group that beneficially owns Royal Gold common stock, call a stockholders’ meeting, seek representation on the board of directors or make any public statements regarding a business combination or similar transaction involving Royal Gold. Moreover, Teck, CDA and their affiliates will be required to vote any shares of common stock held by them in accordance with the recommendations of Royal Gold’s board of directors. The stockholder agreement also prohibits CDA and Teck from selling shares of common stock and entering into certain hedging transactions during the same lock-up period imposed upon us by the underwriters in this offering. During the period of time when Teck, CDA and their affiliates beneficially own 5% or more of our issued and outstanding shares of common stock, they may sell shares of common stock only (i) in open market trades on any trading day in an amount less than or equal to 15% of the average daily trading volume of our shares of common stock, (ii) in block trades to mutual funds registered under the Investment Company Act of 1940, as amended, or to certain other purchasers, (iii) pursuant to one firm commitment underwritten public offering of at least $50 million of our common stock completed within 90 days from the closing of the Teck Transaction (subject to the underwriters’ lock-up) or (iv) with our approval.

 

If this offering is completed and if the Teck Transaction is completed, then CDA will own approximately 3% of our issued and outstanding common stock (or approximately 2% if the underwriters’ over-allotment option is exercised in full before closing of the Teck Transaction). Shares issued to CDA at the closing of the Teck Transaction will be registered under the Securities Act. If the Teck Transaction is completed, then Royal Gold and CDA will enter into a registration rights agreement governing certain matters related to the shares of our common stock issuable to CDA upon the closing of the Teck Transaction. Pursuant to the registration rights agreement if CDA, together with its affiliates, beneficially owns more than 5% of our issued and outstanding common stock, we will cooperate with CDA in connection with a firm commitment underwritten

offering of at least $50 million of our common stock completed within 90 days of the closing of the transaction and subject to the underwriters’ lock-up. In addition, we will maintain the effectiveness of a shelf registration statement for resales by CDA for 90 days following the closing, and, if applicable, until the shares are saleable by CDA without limitation as to volume or manner of sale (but not holding period) pursuant to Rule 144 promulgated under the Securities Act. The registration rights agreement also includes customary indemnification by, and covenants of, both Royal Gold and CDA.

 

See “Risk Factors — Risks Related to the Teck Transaction” on page S-21.

 

 

The net proceeds from the sale of the shares of our common stock in this offering are estimated to be approximately $           million ($           million if the underwriters’ over-allotment option is exercised in full), based on a public offering price of $           per share and after deducting the underwriting discounts and commissions and estimated offering expenses.

 

We intend to use the net proceeds of this offering for general corporate purposes and to fund acquisitions of additional royalty interests. If the Teck Transaction is completed, the net proceeds will be used to fund the cash portion of the purchase price. If this offering is completed, at the closing of the Teck Transaction the stock portion of the purchase price (4,454,136 shares) will be decreased to 1,204,136 shares (or 716,636 shares if the underwriters’ over-allotment option is exercised in full before closing of the Teck Transaction), representing a decrease in the stock portion of the purchase price by 50% of the number of shares sold in this offering. The cash portion of the purchase price will be increased by the amount of the proceeds from the sale of 50% of the shares sold in this offering (minus underwriting commissions and discounts), which, at an assumed offering price of $43.42 (the closing price of our common stock on the NASDAQ Global Select Market on April 3, 2009), would result in a total cash payment of $234.8 million (or $255.0 million if the underwriters’ over-allotment option is exercised in full before closing of the Teck Transaction).

 

If the Teck Transaction is not completed, we intend to use the net proceeds from this offering for general corporate purposes and to fund acquisitions of additional royalty interests. We have pursued an active acquisition strategy as a key element of our business model and growth strategy and intend to continue seeking acquisition opportunities. We are engaged in a continual review of opportunities to acquire existing royalties, to create new royalties through the financing of mining, development or exploration projects and to acquire companies that hold royalties.

 

We intend to invest the net proceeds from this offering pending their use primarily in money market accounts that are invested in United States treasury bills or United States treasury-backed securities.

 

The following table sets forth the capitalization of Royal Gold as of December 31, 2008 and as adjusted to reflect the sale of 6.5 million shares in this offering and the application of the net proceeds therefrom. The following table does not reflect the potential payment of the cash purchase price and issuance of 1,204,136 shares in connection with the Teck Transaction, shares issuable upon the exercise or vesting of stock options, performance shares or SSARs, shares reserved for issuance under our equity compensation plans and any of the shares subject of the underwriters’ over-allotment option, as described more fully below.

 

 

 

 

The number of shares of common stock outstanding is based on 34,007,184 shares outstanding as of December 31, 2008. This number excludes:

 

 

Our common stock is quoted on the NASDAQ Global Select Market under the symbol “RGLD” and on the Toronto Stock Exchange under the symbol “RGL”. The following table sets forth for each of the quarterly periods indicated the range of high and low sales prices in U.S. dollars of our common stock on the NASDAQ Global Select Market.

 

 

On April 3, 2009, the closing sale price of our common stock as reported on the NASDAQ Global Select Market was $43.42 per share. On April 3, 2009, the number of our common stockholders of record was 1,071.

 

We have paid a cash dividend on our common stock for each fiscal year beginning in fiscal 2000, which we have increased each fiscal year beginning in 2001. We currently plan to pay a dividend on a calendar year basis, subject to the discretion of our board of directors. Our board of directors may determine not to declare a dividend based on a number of factors, including the gold price, economic and market conditions, funding requirements of our operations and opportunities that might arise in the future.

 

For calendar 2009, we announced an annual dividend of $0.32 per share of common stock, payable in four quarterly payments of $0.08 each. We paid the first payment of $0.08 per share on January 16, 2009 to stockholders of record at the close of business on January 2, 2009. We will pay the second payment of $0.08 per share on April 17, 2009 to stockholders of record at the close of business on April 3, 2009.

 

For calendar 2008, we paid an annual dividend of $0.28 per share of common stock, payable in four quarterly payments of $0.07 each. We paid the first payment of $0.07 per share on January 18, 2008 to stockholders of record at the close of business on January 4, 2008. We paid the second payment of $0.07 per share on April 18, 2008 to stockholders of record at the close of business on April 4, 2008. We paid the third payment of $0.07 per share on July 18, 2008 to stockholders of record at the close of business on July 3, 2008. We paid the fourth payment of $0.07 per share on October 17, 2008 to stockholders of record at the close of business on October 3, 2008.

For calendar 2007, we paid an annual dividend of $0.26 per share of common stock, payable in four quarterly payments of $0.065 each. We paid the first payment of $0.065 per share on January 19, 2007 to stockholders of record at the close of business on January 5, 2007. We paid the second payment of $0.065 per share on April 20, 2007 to stockholders of record at the close of business on April 5, 2007. We paid the third payment of $0.065 per share on July 20, 2007 to stockholders of record at the close of business on July 6, 2007. We paid the fourth payment of $0.065 per share on October 19, 2007 to stockholders of record at the close of business on October 5, 2007.

 

Shown below are the names, ages and positions of our directors and executive officers as of April 3, 2009.

 

 

Stanley Dempsey has served as Chairman of our board of directors since January 2009 and served as our Executive Chairman from July 2006 to January 2009. He was our Chairman and Chief Executive Officer from August 1988 until June 2006. Mr. Dempsey also served as our President from May 2002 until August 2003 and our President and Chief Operating Officer from July 1987 to July 1988. From 1983 through June 1986, Mr. Dempsey was a partner in the law firm of Arnold & Porter. During the same period, he was a principal in Denver Mining Finance Company, a firm that provides financial, management and advisory services to the mining industry. From 1970 through 1983, Mr. Dempsey was employed by AMAX, Inc., a major international mining firm, serving in various managerial and executive capacities. Mr. Dempsey is a member of the board of directors of Taranis Resources. He is involved in various mining-related associations.

 

Tony Jensen has served on our board of directors since August 2004 and as our President and Chief Executive Officer since July 2006. Mr. Jensen served as our President and Chief Operating Officer from August 2003 until June 2006. Mr. Jensen has over 25 years of mining industry experience, including 18 years with Placer Dome Inc. His corporate and operations experience were developed both in the United States and in Chile where he occupied several senior management positions in mine production, corporate development and finance. Before joining the Company, he was the Mine General Manager of the Cortez Joint Venture from August 1999 to June 2003, a mining joint venture between Barrick (formerly Placer Dome Inc.) and Kennecott Explorations (Australia) Ltd., a subsidiary of Rio Tinto. Mr. Jensen is a director of the Industrial Advisory Board of the South Dakota School of Mines and Technology and is a member of the board of directors of the National Mining Association, the Nevada Mining Association and the Colorado Mining Association.

 

John W. Goth has served on our board of directors since August 1988. Mr. Goth has been a consultant to the mining industry since 1985. Mr. Goth held several senior positions at AMAX, Inc., a major international mining firm from April 1954 to November 1985. Mr. Goth has been director of Behre Dolbear since 1998. He

is past chairman of the Mineral Information Institute and the Mining and Metallurgical Society of America, a former non-executive director and director of the Denver Gold Group, a mining-related association. He is a former director of U.S. Gold, Magma Copper Corporation, U.S. Zeolites and Dome Mines Corporation.

 

M. Craig Haase has served on our board of directors since July 2007. Mr. Haase is a retired mining executive. Mr. Haase served as Director, Executive Vice President and Chief Legal Officer of Franco-Nevada Mining Corporation, a publicly-traded precious metals royalty company, for more than 15 years prior to its acquisition by Newmont Mining Corporation in 2002. He served as a director of Newmont from March 2002 until he retired in May 2003. He served in a similar capacity at Euro-Nevada Mining Corporation from 1987 to 1999, when Euro-Nevada merged with Franco-Nevada. Mr. Haase was also Chairman and CEO for Gold Marketing Corporation of America, Inc., a physical gold export company from 1994 to 2002. He received his J.D. from the University of Illinois and was engaged in private practice from 1971 to 1990.

 

William Hayes has served on our board of directors since January 2008. Mr. Hayes is a retired mining executive. Mr. Hayes served in various management positions with Placer Dome Inc. from 1988 to 2006. He was Executive Vice President for Project Development and Corporate Affairs for Placer Dome Inc. from 2004 to 2006. From 2000 to 2004, he served as Executive Vice President Placer Dome Inc. for the USA and Latin America, and from 1994 to 1999 as Executive Vice President Placer Dome Inc. for Latin America. From 1991 to 1994, he served as Chief Executive Officer of Mantos de Ore, Chile, at the La Coipa mine and was Chief Financial Officer there from 1988 to 1991. Mr. Hayes served as Vice President and Treasurer of Placer Dome from 1991 to 1994 and Vice President and Chief Financial Officer of La Coipa mine from 1988 to 1991. From 1972 to 1987, Mr. Hayes served in various financial positions with Exxon Corporation. Mr. Hayes is an advisor to the Calista Native Corporation in Alaska, and a director of Tethyan Copper Company, a copper mining and exploration business focused in the South Asian region, as well as of Antofogasta Minerals and Antofogasta PLC, copper mining companies focused on operations in Chile.

 

S. Oden Howell, Jr. has served on our board of directors since December 1993. Mr. Howell has been the President of Howell & Howell Contractors, Inc., a renovation contractor, and industrial and commercial painting contractor, since 1988. He is also the owner of Kessinger Service Industries, LLC, an industrial coatings contractor firm, Secretary/Treasurer of LCM Constructors, Inc., a general construction company located in Charleston, S.C. and Secretary/Treasurer of SemperFi Constructors, LLC, a service-disabled, veteran-owned small business located in Charleston, S.C. From 1972 until 1988, Mr. Howell was Secretary/Treasurer of Howell & Howell, Inc., an industrial and commercial painting contractor firm. Mr. Howell is a director of Keller Manufacturing Company and Paragon Door Designs, Inc.

 

Merritt E. Marcus has served on our board of directors since December 1992. Mr. Marcus was the President and Chief Executive Officer of Marcus Paint Company, a manufacturer of industrial liquid coatings, and Performance Powders, LLC, a manufacturer of industrial powder coatings, from 1983 until 2004. Mr. Marcus served several terms as a director of the National Paint and Coatings Association.

 

James W. Stuckert has served on our board of directors since September 1989. Mr. Stuckert has been a Senior Executive of Hilliard, Lyons, Inc., a full service financial asset management firm, since 2004. Mr. Stuckert joined Hilliard, Lyons in 1962 and served in several capacities, including Chief Executive Officer, prior to being named Chairman in December 1995. He served as Chairman of the firm from December 1995 to December 2003.

 

Donald Worth has served on our board of directors since April 1999. Mr. Worth is a director of Sentry Select Capital Corporation, Cornerstone Capital Resources, Inc. and Tiomin Resources Inc. He is also a trustee of Labrador Iron Ore Royalty Income Fund. Mr. Worth has been involved in the mining industry since 1949. He formerly was a mining specialist and a vice president of Canadian Imperial Bank of Commerce (Canada) from July 1984 to August 1997, when he retired. He is involved with several professional associations in both Canada and the United States.

 

Karen Gross has served as our Vice President since June 1994 and Corporate Secretary since 1989. From 1987 until 1989, Ms. Gross was our Assistant Secretary. Ms. Gross is in charge of investor relations, public relations and ensuring our compliance with various corporate governance standards. Ms. Gross is involved

with the National Investor Relations Institute, the Society of Corporate Secretaries and Governance Professionals and is a director of the Denver Gold Group, a mining-related association. Ms. Gross received her Bachelor of Arts degree in business administration from the University of Colorado-Denver.

 

William Heissenbuttel has served as our Vice President of Corporate Development since February 2007 and was our Manager of Corporate Development from April 2006 through January 2007. Mr. Heissenbuttel brings more than 20 years of corporate finance experience, with 13 of those years in project and corporate finance in the metals and mining industry. Mr. Heissenbuttel served as Senior Vice President from February 2000 to April 2006 and Vice President from 1999 to 2000 at N M Rothschild & Sons (Denver) Inc. From 1994 to 1999, he served as Vice President and Group Vice President at ABN AMRO Bank N.V. From 1987 to 1994, he was a Senior Credit Analyst and an Associate at Chemical Bank Manufacturers Hanover. Mr. Heissenbuttel holds a Master of Business Administration degree with a specialization in finance from the University of Chicago.

 

Bruce C. Kirchhoff has served as our Vice President and General Counsel since February 2007. Mr. Kirchhoff has over 20 years of experience representing hardrock and industrial minerals mining companies, as well as mineral exploration and development clients. From January 2004 through January 2007, Mr. Kirchhoff was a partner with the law firm Carver Kirchhoff Schwarz McNab & Bailey, LLC. From January 2003 to December 2003, Mr. Kirchhoff was a partner with the law firm Carver & Kirchhoff, LLC, and from April 1996 through December 2002, Mr. Kirchhoff was a partner in the law firm Alfers & Carver, LLC. Prior to private practice, Mr. Kirchhoff was a senior attorney with Cyprus Amax Minerals Company from June 1986 through March 1996. Mr. Kirchhoff holds a J.D. from the University of Denver, a Masters of Science in Mineral Economics from the Colorado School of Mines, and a B.A. from Colorado College.

 

Stefan Wenger has served has our Chief Financial Officer since July 2006 and Treasurer since August 2007. Mr. Wenger was with PricewaterhouseCoopers LLP as a manager from June 2002 until March 2003. From September 2000 until June 2002, he was a manager with Arthur Andersen LLP. Mr. Wenger has over 13 years of experience in the mining and natural resources industry working in various financial roles. Mr. Wenger is a certified public accountant, is a graduate of Colorado State University with a Bachelors of Science degree in business administration and has completed the General Management Program at the Harvard Business School. He is a member of the Colorado Society of Certified Public Accountants and the American Institute of Certified Public Accountants.

 

William M. Zisch joined our team in March 2009 as our Vice President of Operations. Mr. Zisch has over 25 years of experience in the mining industry. Prior to joining Royal Gold, Mr. Zisch spent 12 years working for Newmont on both domestic and international assignments in technical, operating and executive positions. Most recently, Mr. Zisch served as Vice President of Planning for Newmont from March 2007 to March 2009, Vice President – African Operations from March 2005 to March 2007 and Group Executive and Managing Director of West African Operations from October 2003 through September 2005. Prior to his tenure at Newmont, Mr. Zisch spent 16 years with FMC Company, starting in coal and then gold operations and advancing to operating and strategic sourcing roles in the chemical group. Mr. Zisch holds a Master of Business Administration degree from the Wharton School at the University of Pennsylvania and a bachelors degree in Mining Engineering from the Colorado School of Mines in Golden, Colorado.

 

The following table shows the property name, location, royalty rate, operator and proven and probable reserves for each of the Company’s producing and development stage royalties. Reserves shown have been reported to us by the operators of our royalty interests or have been obtained through publicly available information as of the date indicated. Reserve information for our royalty interests is prepared by the operators of the mining properties. We do not participate in the preparation or verification of the operators’ reserve information and have not independently assessed or verified the accuracy of such information. See the section entitled “Risk Factors — Risks Relating to our Business — Estimates of reserves and mineralization by the operators of mines in which we have royalty interests are subject to significant revision” on page S-16. Our royalty interests represent only a small percentage interest in the production from any reserve, and those percentage interests vary widely according to the terms of the individual royalty. Note: This table does not include information about the Andacollo Production Interest, which will not be acquired until the Teck Transaction is completed.

 

Production Stage Royalties
Summary of Proven and Probable Gold Reserves^(1,2)

 

 

Development Stage Royalties
Summary of Proven and Probable Gold Reserves^(1,2)

 

 

Production Stage Royalties
Summary of Proven and Probable Silver Reserves^(1,20)

 

 

Development Stage Royalties
Summary of Proven and Probable Silver Reserves^(1,20)

 

Production Stage Royalties
Summary of Proven and Probable Copper Reserves^(1,23)

 

 

Production and Development Stage Royalties
Summary of Proven and Probable Zinc Reserves^(1,24)

 

 

Production and Development Stage Royalties
Summary of Proven and Probable Lead Reserves^(1,25)

 

 

Production Stage Royalties
Summary of Proven and Probable Nickel Reserves^(1,26)

 

 

Production Stage Royalties
Summary of Proven and Probable Potash Reserves^(1,27)

 

 

 

 

 

 

Gold reserve information is not available for our royalties at Lluvia de Oro (4% NSR) located in Mexico and operated by NWM Mining, Relief Canyon (4% NSR) located in Nevada and operated by Firstgold and Reedy’s Burnakura (1.5%-2.5% sliding scale NSR) located in Australia and operated by ATW GoldCorp. Copper reserve information is not available for our royalty at Pascua Lama (0.22% NSR) located in Chile and operated by Barrick. Iron ore tonnage is not available for our royalty at Koolanooka (AUD$0.25/tonne) located in Australia and operated by Midwest.

 

HSBC Securities (USA) Inc., Goldman, Sachs & Co. and Scotia Capital (USA) Inc. are acting as the representatives of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus supplement, each underwriter named below has severally agreed to purchase, and we have agreed to sell to that underwriter, the number of shares set forth opposite that underwriter’s name.

 

 

The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all the shares (other than those covered by the over-allotment option described below) if they purchase any of the shares.

 

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities.

 

The underwriters propose to offer some of the shares directly to the public at the public offering price set forth on the cover page of this prospectus supplement and some of the shares to dealers at the public offering price less a concession not to exceed $      per share. The underwriters may allow, and dealers may reallow, a concession not to exceed $      per share on sales to other dealers. If all of the shares are not sold at the initial offering price, the representatives may change the public offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.

 

We have granted to the underwriters an option, exercisable at any time on or before the thirtieth day after the date of this prospectus supplement, to purchase up to 975,000 additional shares of common stock at the public offering price less the underwriting discount. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with this offering. To the extent the option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment.

 

We and our executive officers and directors have agreed that, for a period of 90 days from the date of the underwriting agreement, we and they will not, without the prior written consent of HSBC Securities (USA) Inc., Goldman, Sachs & Co. and Scotia Capital (USA) Inc., dispose of or hedge any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock, except that our executive officers and directors may sell up to an aggregate of 50,000 shares of common stock during the lock-up period. In addition, one of our directors and his spouse are permitted to sell up to an aggregate of 16,800 shares of our common stock per month during the lock-up period under a written plan outstanding on the date hereof, or to be entered into, for trading securities adopted pursuant to Rule 10b5-1 under the Exchange Act. Our officers and directors are also permitted to transfer shares of common stock as bona fide gifts, provided that the donee or donees agree to be bound by the restrictions set forth in the lock-up agreements. In addition, CDA has agreed with the underwriters that, for a period (the “CDA Lock-Up Period”) beginning on the date of the underwriting agreement and ending the earliest of (1) the date that is 120 days after the date of the stockholder agreement that we entered into with CDA and Teck as part of the Teck Transaction, (2) the date that is 90 days after the date of the underwriting agreement or (3) the date that we are fully released from the lock-up pursuant to the underwriting agreement, CDA will not, without the prior written consent of HSBC Securities (USA) Inc., Goldman, Sachs & Co. and Scotia Capital (USA) Inc., dispose

of or hedge any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock, other than capital stock that, when aggregated with all other shares of capital stock disposed of by CDA, Teck and any affiliate of CDA during the CDA Lock-Up Period, does not exceed 50,000 shares of capital stock, nor shall CDA publicly announce an intention to effect any such transaction; except that (i) CDA may execute and deliver a registration rights agreement with us in respect of the common stock to be issued by us to CDA pursuant to the Teck Transaction, (ii) we may prepare and file as part of our automatic shelf registration statement, as amended, a prospectus supplement providing for the resale from time to time of all of the common stock issued to CDA in the Teck Transaction and CDA may be named as a selling security-holder in such prospectus supplement, and (iii) CDA and Teck may publicly announce the intention to effect a disposition of the common stock issued to CDA, subject to such announcement indicating that CDA will comply with the restrictions on the disposition of the common stock subject to this lock-up with the underwriters and the stockholder agreement. Further, if any director, officer or affiliate of Royal Gold is released from his, her or its lock-up agreement pursuant to the underwriting agreement and, as a result of such release, is allowed to sell shares of common stock during the CDA Lock-Up Period, then CDA, Teck and any affiliate of CDA will be permitted to collectively sell an equal number of shares of common stock. HSBC Securities (USA) Inc., Goldman, Sachs & Co. and Scotia Capital (USA) Inc., in their sole discretion, may release any of the securities subject to these lock-up agreements at any time without notice.

 

The common stock is listed on the NASDAQ Global Select Market under the symbol “RGLD” and is also traded on The Toronto Stock Exchange under the symbol “RGL”.

 

The following table shows the underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares of common stock.

 

 

In connection with this offering, HSBC Securities (USA) Inc., on behalf of the underwriters, may purchase and sell shares of common stock in the open market. These transactions may include short sales, syndicate covering transactions and stabilizing transactions. Short sales involve syndicate sales of common stock in excess of the number of shares to be purchased by the underwriters in the offering, which creates a syndicate short position. “Covered” short sales are sales of shares made in an amount up to the number of shares represented by the underwriters’ over-allotment option. In determining the source of shares to close out the covered syndicate short position, HSBC Securities (USA) Inc. will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. Transactions to close out the covered syndicate short involve either purchases of the common stock in the open market after the distribution has been completed or the exercise of the over-allotment option. HSBC Securities (USA) Inc. may also make “naked” short sales of shares in excess of the over-allotment option. HSBC Securities (USA) Inc. must close out any naked short position by purchasing shares of common stock in the open market. A naked short position is more likely to be created if HSBC Securities (USA) Inc. is concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of bids for or purchases of shares in the open market while the offering is in progress.

 

HSBC Securities (USA) Inc. also may impose a penalty bid. Penalty bids permit HSBC Securities (USA) Inc. to reclaim a selling concession from a syndicate member when HSBC Securities (USA) Inc. repurchases shares originally sold by that syndicate member in order to cover syndicate short positions or make stabilizing purchases.

 

Any of these activities may have the effect of preventing or retarding a decline in the market price of the common stock. They may also cause the price of the common stock to be higher than the price that would otherwise exist in the open market in the absence of these transactions. HSBC Securities (USA) Inc. may conduct these transactions on the NASDAQ Global Select Market or in the over-the-counter market, or

otherwise. If HSBC Securities (USA) Inc. commences any of these transactions, it may discontinue them at any time.

 

In addition, in connection with this offering, some of the underwriters (and selling group members) may engage in passive market making transactions in the common stock on the NASDAQ Global Select Market prior to the pricing and completion of the offering. Passive market making consists of displaying bids on the NASDAQ Global Select Market no higher than the bid prices of independent market makers and making purchases at prices no higher than those independent bids and effected in response to order flow. Net purchases by a passive market maker on each day are limited to a specified percentage of the passive market maker’s average daily trading volume in the common stock during a specified period and must be discontinued when that limit is reached. Passive market making may cause the price of the common stock to be higher than the price that otherwise would exist in the open market in the absence of those transactions. If the underwriters commence passive market making transactions, they may discontinue them at any time.

 

We estimate that the total expenses of this offering will be $          .

 

Some of the underwriters have performed investment banking and advisory services for us from time to time for which they have received customary fees and expenses. The underwriters may, from time to time, engage in transactions with and perform services for us in the ordinary course of their businesses. HSBC Bank USA National Association (“HSBC Bank”), an affiliate of HSBC Securities (USA) Inc., and Scotiabanc Inc., an affiliate of Scotia Capital (USA) Inc., have provided us with a line of credit in the amount of $125 million that has been and may be used to acquire producing royalties. HSBC Bank is also our lender under the a Term Loan Agreement with our subsidiary Royal Gold Chile Limitada pursuant to which Royal Gold must maintain a restricted interest-bearing securities account at HSBC Securities (USA) Inc., one of the underwriters, with a balance equal to or in excess of the aggregate outstanding principal amount of the loan of $19.25 million as of December 31, 2008. The monies in this account are invested in securities that have been approved by HSBC Securities (USA) Inc.

 

This prospectus supplement and the accompanying prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. The representatives will allocate shares to underwriters that may make Internet distributions on the same basis as other allocations. In addition, shares may be sold by the underwriters to securities dealers who resell shares to online brokerage account holders.

 

 

This offering is being made concurrently in the United States and in all of the provinces of Canada, except Quebec (the “Canadian Jurisdictions”), pursuant to the multijurisdictional disclosure system implemented by the securities regulatory authorities in the United States and Canada (the “MJDS Rule”). The shares will be offered in the United States and the Canadian Jurisdictions through the underwriters, either directly or through their respective U.S. or Canadian registered broker-dealer affiliates. As described below, subject to applicable law, the underwriters may offer the shares outside the United States and Canada.

 

European Economic Area

 

Each of the underwriters has represented and agreed that, in relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each a “Relevant Member State”), it has not made and will not make an offer to the public of any shares which are the subject of the offering contemplated by this prospectus supplement (the “Securities”) in that Relevant Member State, except that it is permitted to have made and may make an offer to the public in that Relevant Member State of any Securities under the following exemptions under the Prospective Directive, if they have been implemented in that Relevant Member State:

 

(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year, (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

 

(c) by the underwriters to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of HSBC Securities (USA) Inc. for any such offer; or

 

(d) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Securities shall result in a requirement for the publication by Royal Gold or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

 

For the purposes of this provision, the expression an “offer to the public” in relation to any Securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any Securities to be offered so as to enable an investor to decide to purchase any Securities, as the same may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

 

United Kingdom

 

Each of the underwriters has further represented and agreed that:

 

(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of Financial Services and Markets Act 2000, as amended (“FSMA”)) received by it in connection with the issue or sale of any shares which are the subject of the offering contemplated by this prospectus supplement in circumstances in which section 21(1) of FSMA does not apply to Royal Gold; and

 

(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

 

France

 

Each of the underwriters has further represented and agreed that:

 

(a) no prospectus (including any amendment, supplement or replacement thereto) has been prepared in connection with the offering of the Securities that has been approved by the Autorité des marchés financiers or by the competent authority of another state that is a contracting party to the Agreement on the European Economic Area and notified to the Autorité des marchés financiers;

 

(b) no Securities have been offered or sold nor will be offered or sold, directly or indirectly, to the public in France;

 

(c) the prospectus or any other offering material relating to the Securities have not been distributed or caused to be distributed and will not be distributed or caused to be distributed to the public in France;

 

(d) such offers, sales and distributions have been and shall only be made in France to persons licensed to provide the investment service of portfolio management for the account of third parties, qualified investors (investisseurs qualifiés) and/or a restricted circle of investors (cercle restreint d’investisseurs), in each case investing for their own account, all as defined in Articles L. 411-2, D. 411-1, D. 411-2, D. 411-4, D. 734-1, D. 744-1, D. 754-1 and D. 764-1 of the Code monétaire et financier; and

 

(e) the direct or indirect distribution to the public in France of any so acquired Securities may be made only as provided by Articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the Code monétaire et financier and applicable regulations thereunder.

Australia

 

This document has not been lodged with the Australian Securities & Investments Commission and is only directed to certain categories of exempt persons. Accordingly, if you receive this document in Australia:

 

(a) You confirm and warrant that you are either:

 

(i) A “sophisticated investor” under section 708(8)(a) or (b) of the Corporations Act 2001 (Cth) of Australia (“Corporations Act”);

 

(ii) A “sophisticated investor” under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountant’s certificate to the company which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made;

 

(iii) A person associated with the company under section 708(12) of the Corporations Act; or

 

(iv) A “professional investor” within the meaning of section 708(11)(a) or (b) of the Corporations Act, and

 

to the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Corporations Act any offer made to you under this document is void and incapable of acceptance.

 

(b) You warrant and agree that you will not offer any of the shares issued to you pursuant to this document for resale in Australia within 12 months of those shares being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.

 

Brazil

 

For purposes of Brazilian law, this offer of the shares is addressed to you personally, upon your request and for your sole benefit, and is not to be transmitted to anyone else, to be relied upon by anyone else or for any other purpose either quoted or referred to in any other public or private document or to be filed with anyone without our prior, express and written consent.

 

China

 

The shares may not be offered or sold directly or indirectly to the public in the People’s Republic of China (“China”) and neither this document, which has not been submitted to the Chinese Securities and Regulatory Commission, nor any other offering material or information contained herein relating to the shares may be supplied to the public in China or used in connection with any offer for the subscription or sale of shares to the public in China. The shares may only be offered or sold to China-related organizations that are authorized to engage in foreign exchange business and offshore investment from outside of China. Such China-related investors may be subject to foreign exchange control approval and filings requirements under the relevant Chinese foreign exchange regulations.

 

Germany

 

The shares have not been and will not be registered or authorized for distribution in Germany under the German Investment Act (Investmentgesetz) and accordingly, the shares, this document and any related material may not be, and are not being, distributed in Germany by way of a public offer, public advertising or in any similar manner under the German Investment Act. Therefore, an offer to purchase any shares is only being made to recipients to whom this document is personally addressed and may only be made in accordance with the German Investment Act and all other applicable laws in Germany governing the issue, offering and sale of the shares.