Royal Gold, Inc

Royal Gold’s fixed costs, diversified portfolio, and well-capitalized approach to precious metal investments are designed to provide shareholder value. The key elements of our business strategy include:

1. Focus on Gold. Royal Gold is a precious metals investment vehicle focused on gold.
2. Business Model. Royal Gold’s lower risk business model is based on acquiring royalty interests in precious metals properties or entering into precious metals stream transactions rather than engaging in costly and more complex mining operations.
3. Growth and Diversification. Royal Gold is determined to add to its broad-based and geopolitically stable portfolio of precious metals interests through accretive transactions.
4. Margin Enhancement. Royal Gold’s unique business model allows us to efficiently grow revenue without adding significant overhead costs.
5. Financial Flexibility. Royal Gold’s liquidity allows the Company to compete for royalty acquisitions or metal streams by means of a purchase, a corporate transaction, providing financing, or entering into a strategic exploration alliance.

Description

Our principal activity is the acquisition and management of precious metal royalties and similar interests, including precious metal streams. By partnering with capable operators, we focus on building and managing a diversified, cash-flowing portfolio of precious metal assets.

Royalties and streams can be acquired outright from either a resource company or a private party.  New royalties are created by providing capital to an operator or explorer in exchange for a royalty. Precious metal streams are obtained by providing financing to operators, allowing them to monetize a portion or all their precious metal production. In either case, the capital provided by Royal Gold is typically used for the development and construction of a mine, mine expansion, or funding exploration work.

Benefits to Investors

There are several ways to invest in precious metals. Options and associated risks range from the direct purchase of gold and silver bullion or ETF funds to investments in mining and exploration equities.

We have designed Royal Gold to be a unique and lower risk investment opportunity while retaining upside value. Five key advantages to our business model include: portfolio diversification, no-cost exploration upside, geopolitical stability, fixed-cost investments, and inherent growth.

• Portfolio Diversification: Royal Gold owns a large portfolio of interests in high-quality, long-life mines, development projects, and evaluation and exploration properties. Our portfolio of revenue generating assets consists of nearly 40 producing properties, with the majority of our revenue generated from mines owned by some of the largest mining companies in the world. In comparison, most mid-tier mining companies have five to ten mines in their operating portfolio at any given time. Royal Gold’s large portfolio provides a level of financial and production stability.
• No-Cost Exploration Upside: We enjoy the benefit of reserve growth, as operators seek to extend mine lives by exploring for additional reserves at their existing mine sites. Royal Gold is not required to participate in the exploration expense or pay any additional compensation when operators discover or add additional reserves at existing mines. 
• Geopolitical Stability: Many mining companies have assumed increased political risk as they turn to less stable countries in their quest to replace depleted reserves. As of June 30, 2014, over 92% of our net gold equivalent ounces of production were located in the host countries of the United States, Canada, Mexico and Chile.
• Fixed-Cost Investments: We do not have to contribute to capital or operating costs at the mining operation in which we have an interest. Therefore, Royal Gold is not exposed to inflationary pressures that can erode the rate of return expectations and profit margins of operating mining companies. Our business model is also inherently scaleable and efficient. Over the five-year period beginning June 30, 2009 through June 30, 2014, the total number of properties in Royal Gold’s portfolio grew from 119 to 201, while our employee count increased from 18 to 20 over the same period of time.
• Inherent Growth: In addition to our large portfolio of producing assets, we own interests in 23 additional properties where reserves have been identified and efforts are being made to develop the properties. We hold a significant development interest at Barrick’s Pascua Lama project located on the Chilean/Argentine border.   Thompson Creek’s Mt. Milligan project in British Columbia, Canada, commenced production in September 2013 and is expected to contribute significantly to Royal Gold's growth profile once full production is achieved.

The combination of a strong balance sheet, solid cash flow and freedom from managing mine operations allows us to focus on identifying additional accretive business opportunities.