ROYAL GOLD INC, 10-Q filed on 1/31/2013
Quarterly Report
Document and Entity Information
6 Months Ended
Dec. 31, 2012
Jan. 23, 2013
Document and Entity Information
 
 
Entity Registrant Name
ROYAL GOLD INC 
 
Entity Central Index Key
0000085535 
 
Document Type
10-Q 
 
Document Period End Date
Dec. 31, 2012 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--06-30 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
64,366,725 
Entity Exchangeable, Shares Outstanding
 
675,346 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q2 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Jun. 30, 2012
ASSETS
 
 
Cash and equivalents
$ 680,731 
$ 375,456 
Royalty receivables
70,754 
53,946 
Income tax receivable
7,204 
11,046 
Prepaid expenses and other current assets
22,361 
4,760 
Total current assets
781,050 
445,208 
Royalty interests in mineral properties, net (Note 3)
2,063,604 
1,890,988 
Available for sale securities (Note 4)
18,489 
15,015 
Other assets
23,904 
21,834 
Total assets
2,887,047 
2,373,045 
LIABILITIES
 
 
Accounts payable
2,255 
2,615 
Dividends payable
13,010 
8,947 
Other current liabilities
3,288 
3,647 
Total current liabilities
18,553 
15,209 
Debt (Note 5)
297,697 
293,248 
Net deferred tax liabilities
175,875 
178,716 
Uncertain tax positions
19,821 
19,469 
Other long-term liabilities
2,353 
2,974 
Total liabilities
514,299 
509,616 
Commitments and contingencies (Note 12)
   
   
EQUITY
 
 
Preferred stock, $.01 par value, 10,000,000 shares authorized; and 1 share issued
   
   
Common stock, $.01 par value, 100,000,000 shares authorized; and 64,162,252 and 58,614,221 shares outstanding, respectively
642 
586 
Exchangeable shares, no par value, 1,806,649 shares issued, less 1,131,303 and 1,007,823 redeemed shares, respectively
29,722 
35,156 
Additional paid-in capital
2,138,153 
1,656,357 
Accumulated other comprehensive (loss) income
(10,289)
(13,763)
Accumulated earnings
190,131 
160,123 
Total Royal Gold stockholders' equity
2,348,359 
1,838,459 
Non-controlling interests
24,389 
24,970 
Total equity
2,372,748 
1,863,429 
Total liabilities and equity
$ 2,887,047 
$ 2,373,045 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2012
Jun. 30, 2012
Consolidated Balance Sheets
 
 
Preferred stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Preferred stock, shares issued
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares outstanding
64,162,252 
58,614,221 
Exchangeable, shares issued
1,806,649 
1,806,649 
Exchangeable, shares redeemed
1,131,303 
1,007,823 
Consolidated Statements of Operations and Comprehensive Income (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Consolidated Statements of Operations and Comprehensive Income
 
 
 
 
Royalty revenues
$ 79,870 
$ 68,842 
$ 157,732 
$ 133,307 
Costs and expenses
 
 
 
 
General and administrative
5,720 
5,057 
11,790 
11,355 
Production taxes
2,197 
2,946 
4,676 
5,097 
Depreciation, depletion and amortization
21,120 
21,419 
42,620 
38,639 
Restructuring on royalty interests in mineral properties
 
 
 
1,328 
Total costs and expenses
29,037 
29,422 
59,086 
56,419 
Operating income
50,833 
39,420 
98,646 
76,888 
Interest and other income
29 
489 
139 
3,322 
Interest and other expense
(6,988)
(1,609)
(13,157)
(3,387)
Income before income taxes
43,874 
38,300 
85,628 
76,823 
Income tax expense
(16,315)
(14,051)
(32,776)
(26,433)
Net income
27,559 
24,249 
52,852 
50,390 
Net income attributable to non-controlling interests
(342)
(838)
(865)
(4,484)
Net income attributable to Royal Gold stockholders
27,217 
23,411 
51,987 
45,906 
Net income
27,559 
24,249 
52,852 
50,390 
Adjustments to comprehensive income, net of tax
 
 
 
 
Unrealized change in market value of available for sale securities
(1,572)
(6,958)
3,474 
(12,262)
Comprehensive income
25,987 
17,291 
56,326 
38,128 
Comprehensive income attributable to non-controlling interests
(342)
(838)
(865)
(4,484)
Comprehensive income attributable to Royal Gold stockholders
$ 25,645 
$ 16,453 
$ 55,461 
$ 33,644 
Net income per share available to Royal Gold common stockholders:
 
 
 
 
Basic earnings per share (in dollars per share)
$ 0.42 
$ 0.42 
$ 0.84 
$ 0.83 
Basic weighted average shares outstanding (in shares)
63,941,686 
55,329,463 
61,688,776 
55,259,009 
Diluted earnings per share (in dollars per share)
$ 0.42 
$ 0.42 
$ 0.84 
$ 0.82 
Diluted weighted average shares outstanding (in shares)
64,137,237 
55,574,814 
61,905,549 
55,533,248 
Cash dividends declared per common share (in dollars per share)
$ 0.20 
$ 0.15 
$ 0.35 
$ 0.26 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Cash flows from operating activities:
 
 
Net income
$ 52,852 
$ 50,390 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation, depletion and amortization
42,620 
38,639 
Gain on distribution to non-controlling interest
(88)
(3,284)
Non-cash stock-based compensation expense
3,900 
4,066 
Tax benefit of stock-based compensation exercises
(1,214)
(3,086)
Restructuring on royalty interests in mineral properties
 
1,328 
Deferred tax benefit
(2,166)
(847)
Amortization of debt discount
4,448 
 
Changes in assets and liabilities:
 
 
Royalty receivables
(16,808)
(15,693)
Prepaid expenses and other assets
(19,659)
1,385 
Accounts payable
(661)
(194)
Income tax receivable
1,827 
1,947 
Other liabilities
(626)
785 
Net cash provided by operating activities
64,425 
75,436 
Cash flows from investing activities:
 
 
Acquisition of royalty interests in mineral properties
(215,032)
(148,182)
Proceeds on sale of Inventory - restricted
118 
4,842 
Other
(38)
(128)
Net cash (used in) investing activities
(214,952)
(143,468)
Cash flows from financing activities:
 
 
Borrowing from credit facility
 
100,000 
Repayment of debt
 
(37,800)
Common stock dividends
(17,915)
(12,209)
Distribution to non-controlling interests
(1,273)
(6,315)
Proceeds from the issuance of common stock
473,776 
2,917 
Tax benefit of stock-based compensation exercises
1,214 
3,086 
Net cash provided by financing activities
455,802 
49,679 
Net increase (decrease) in cash and equivalents
305,275 
(18,353)
Cash and equivalents at beginning of period
375,456 
114,155 
Cash and equivalents at end of period
$ 680,731 
$ 95,802 
OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

1.                                      OPERATIONS, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

Royal Gold, Inc. (“Royal Gold”, the “Company”, “we”, “us”, or “our”), together with its subsidiaries, is engaged in the business of acquiring and managing precious metals royalties, precious metals streams and similar interests.  Royalties are non-operating interests in mining projects that provide the right to revenue or metals produced from the project after deducting specified costs, if any.  We use the term “royalty interest” in these notes to the consolidated financial statements to refer to royalties, gold, silver or other metal stream interests, and other similar interests.

 

Summary of Significant Accounting Policies

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements.  In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for a fair presentation of our interim financial statements have been included in this Form 10-Q.  Operating results for the three and six months ended December 31, 2012, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2013.  These interim unaudited financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012 filed with the Securities and Exchange Commission on August 9, 2012 (“Fiscal 2012 10-K”).

 

Recently Adopted Accounting Standards

 

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”).  ASU 2011-05 addresses the presentation of comprehensive income and provides entities with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  The Company has elected the single continuous statement of comprehensive income.  Pursuant to ASU No. 2011-12, Comprehensive Income (Topic 220) — Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting for Standards Update No. 2011-05, the provisions of ASU 2011-05 became effective for the Company’s fiscal year beginning July 1, 2012.  Since ASU 2011-05 addresses financial presentation only, its adoption did not impact the Company’s consolidated financial position or results of operations.

ACQUISITIONS
ACQUISITIONS

2.             ACQUISITIONS

 

Mt. Milligan III Gold Stream Acquisition

 

On August 8, 2012, Royal Gold entered into an amendment to its purchase and sale agreement with Thompson Creek Metals Company Inc. (“Thompson Creek”) whereby Royal Gold, among other things, agreed to purchase an additional 12.25% of the payable gold from the Mt. Milligan copper-gold project in exchange for a total of $200 million, of which $75 million was paid shortly after closing, and, when production is reached, cash payments for each payable ounce of gold delivered to Royal Gold, as discussed further below (the “Milligan III Acquisition”). Thompson Creek intends to use the proceeds from the Milligan III Acquisition to finance a portion of the construction of the Mt. Milligan project and related costs.  Under the Milligan III Acquisition, Royal Gold increased its aggregate pre-production commitment in the Mt. Milligan project from $581.5 million to $781.5 million and agreed to purchase a total of 52.25% of the payable ounces of gold produced from the Mt. Milligan project at a cash purchase price equal to the lesser of $435, with no inflation adjustment, or the prevailing market price for each payable ounce of gold (regardless of the number of payable ounces delivered to Royal Gold).

 

As of December 31, 2012, the Company has paid $669.6 million of the aggregate pre-production commitment of $781.5 million.  The remaining scheduled quarterly payments include $62 million due March 1, 2013, $37 million due June 1, 2013 and $12.9 million due September 1, 2013.  Royal Gold’s obligation to make these quarterly payments is subject to the satisfaction of certain conditions included in the Milligan III Acquisition (including that the aggregate amount of historical payments made by Royal Gold plus the applicable quarterly payment is less than the aggregate costs of developing the Mt. Milligan project incurred or accrued by Thompson Creek as of the date of the applicable quarterly payment).  In the event that a quarterly payment is postponed as a result of the failure by Thompson Creek to satisfy a condition precedent, all subsequent quarterly payments will be adjusted forward one full calendar quarter until such time as all conditions precedent have been satisfied for the next scheduled quarterly payment.

 

The Milligan III Acquisition has been accounted for as an asset acquisition.  The $75 million paid on August 15, 2012, and the scheduled payments of $45 million and $95 million paid on September 3, 2012, and December 3, 2012, respectively, plus direct transaction costs, have been recorded as a development stage royalty interest within Royalty interests in mineral properties, net on our consolidated balance sheets.

 

Acquisition of an Additional Royalty Option on the Kerr-Sulphurets-Mitchell Project

 

On December 13, 2012, Royal Gold purchased 1,004,491 common shares (the “Additional Seabridge Shares”) of Seabridge Gold Inc. (“Seabridge”) at a 15% premium to the volume weighted-average trading price of Seabridge common shares on the Toronto Stock Exchange for a five day trading period that ended December 11, 2012, for $18.3 million (C$18.0 million).  Effective December 13, 2012, Royal Gold entered into an amendment (the “Seabridge Amendment”) to its option agreement with Seabridge (the “Seabridge Option Agreement”) to, among other things, remove the 270 day minimum holding period applicable to the Additional Seabridge Shares.

 

Upon Royal Gold’s purchase of the Additional Seabridge Shares, Royal Gold obtained the right, under the Seabridge Option Agreement, as amended by the Seabridge Amendment, to increase the net smelter return (“NSR”) royalty it may acquire on all of the gold and silver production from Seabridge’s Kerr-Sulphurets-Mitchell project (“KSM project”) in British Columbia by 0.75%.  Royal Gold now holds the right to purchase either a 1.25% NSR royalty on such production for C$100 million, or a 2.0% NSR royalty for C$160 million.  If Royal Gold exercises its purchase right, the purchase price will be payable in three equal installments over the 540-day period following exercise.  Royal Gold sold the Additional Seabridge Shares in a private transaction to an unrelated party for $14.6 million (C$14.4 million) on December 13, 2012.

 

The 15% premium on the Additional Seabridge Shares, which represents the value of the option to acquire the additional 0.75% NSR royalty on the KSM project, plus direct acquisition costs, was approximately $2.4 million and has been recorded within Other assets on our consolidated balance sheets.  The purchase and same day sale of the Additional Seabridge Shares resulted in a realized loss on trading securities of approximately $1.3 million, which is recorded within Interest and other expense on our consolidated statements of operations and comprehensive income.

ROYALTY INTERESTS IN MINERAL PROPERTIES
ROYALTY INTERESTS IN MINERAL PROPERTIES

3.             ROYALTY INTERESTS IN MINERAL PROPERTIES

 

The following summarizes the Company’s royalty interests in mineral properties as of December 31, 2012 and June 30, 2012.

 

As of December 31, 2012

 

 

 

Accumulated

 

 

 

(Amounts in thousands):

 

Cost

 

Depletion

 

Net

 

Production stage royalty interests:

 

 

 

 

 

 

 

Andacollo

 

$

272,998

 

$

(35,950

)

$

237,048

 

Voisey’s Bay

 

150,138

 

(42,669

)

107,469

 

Peñasquito

 

99,172

 

(10,975

)

88,197

 

Las Cruces

 

57,230

 

(9,453

)

47,777

 

Mulatos

 

48,092

 

(21,490

)

26,602

 

Wolverine

 

45,158

 

(4,335

)

40,823

 

Dolores

 

44,878

 

(7,003

)

37,875

 

Canadian Malartic

 

38,800

 

(4,905

)

33,895

 

Gwalia Deeps

 

31,070

 

(5,628

)

25,442

 

Holt

 

25,428

 

(4,699

)

20,729

 

Inata

 

24,871

 

(8,015

)

16,856

 

Leeville

 

18,322

 

(15,262

)

3,060

 

Robinson

 

17,825

 

(10,570

)

7,255

 

Cortez

 

10,630

 

(9,697

)

933

 

Other

 

210,242

 

(118,447

)

91,795

 

 

 

1,094,854

 

(309,098

)

785,756

 

 

 

 

 

 

 

 

 

Development stage royalty interests:

 

 

 

 

 

 

 

Mt. Milligan

 

671,090

 

 

671,090

 

Pascua-Lama

 

372,105

 

 

372,105

 

Other

 

38,694

 

 

38,694

 

 

 

1,081,889

 

 

1,081,889

 

 

 

 

 

 

 

 

 

Exploration stage royalty interests

 

195,959

 

 

195,959

 

Total royalty interests in mineral properties

 

$

2,372,702

 

$

(309,098

)

$

2,063,604

 

 

As of June 30, 2012

 

 

 

 

 

Accumulated

 

 

 

(Amounts in thousands):

 

Cost

 

Restructuring

 

Depletion

 

Net

 

Production stage royalty interests:

 

 

 

 

 

 

 

 

 

Andacollo

 

$

272,998

 

$

 

$

(27,345

)

$

245,653

 

Voisey’s Bay

 

150,138

 

 

(33,192

)

116,946

 

Peñasquito

 

99,172

 

 

(9,075

)

90,097

 

Las Cruces

 

57,230

 

 

(6,499

)

50,731

 

Mulatos

 

48,092

 

 

(18,721

)

29,371

 

Wolverine

 

45,158

 

 

(1,625

)

43,533

 

Dolores

 

44,878

 

 

(6,021

)

38,857

 

Canadian Malartic

 

38,800

 

 

(3,292

)

35,508

 

Gwalia Deeps

 

28,119

 

 

(4,398

)

23,721

 

Holt

 

25,428

 

 

(2,980

)

22,448

 

Inata

 

24,871

 

 

(7,320

)

17,551

 

Leeville

 

18,322

 

 

(14,436

)

3,886

 

Robinson

 

17,825

 

 

(9,872

)

7,953

 

Cortez

 

10,630

 

 

(9,673

)

957

 

Other

 

208,463

 

 

(112,105

)

96,358

 

 

 

1,090,124

 

 

(266,554

)

823,570

 

 

 

 

 

 

 

 

 

 

 

Development stage royalty interests:

 

 

 

 

 

 

 

 

 

Mt. Milligan

 

455,943

 

 

 

455,943

 

Pascua-Lama

 

372,105

 

 

 

372,105

 

Other

 

40,022

 

(1,328

)

 

38,694

 

 

 

868,070

 

(1,328

)

 

866,742

 

 

 

 

 

 

 

 

 

 

 

Exploration stage royalty interests

 

200,676

 

 

 

200,676

 

Total royalty interests in mineral properties

 

$

2,158,870

 

$

(1,328

)

$

(266,554

)

$

1,890,988

 

AVAILABLE FOR SALE SECURITIES
AVAILABLE FOR SALE SECURITIES

4.             AVAILABLE FOR SALE SECURITIES

 

The Company’s available for sale securities as of December 31, 2012 and June 30, 2012 consists of the following (amounts in thousands):

 

 

 

As of December 31, 2012

 

 

 

 

 

Unrealized

 

 

 

 

 

Cost Basis

 

Gain

 

Loss

 

Fair Value

 

Non-current:

 

 

 

 

 

 

 

 

 

Seabridge Gold, Inc.

 

$

28,574

 

 

(10,245

)

$

18,329

 

Other

 

203

 

 

(43

)

160

 

 

 

$

28,777

 

$

 

$

(10,288

)

$

18,489

 

 

 

 

As of June 30, 2012

 

 

 

 

 

Unrealized

 

 

 

 

 

Cost Basis

 

Gain

 

Loss

 

Fair Value

 

Non-current:

 

 

 

 

 

 

 

 

 

Seabridge Gold, Inc.

 

$

28,574

 

 

(13,716

)

$

14,858

 

Other

 

203

 

 

(46

)

$

157

 

 

 

$

28,777

 

$

 

$

(13,762

)

$

15,015

 

 

The Company’s policy for determining whether declines in fair value of available-for-sale securities are other than temporary includes a quarterly analysis of the investments and a review by management of all investments for which the cost exceeds the fair value.  Any temporary declines in fair value are recorded as a charge to other comprehensive income.  If such impairment is determined by the Company to be other than temporary, the investment’s cost basis is written down to fair value and recorded in net income during the period the Company determines such impairment to be other than temporary.  Based on the Company’s analysis of its investments and our ability and intent to hold these investments for a reasonable period of time, there were no write downs on our available-for-sale securities during the three or six months ended December 31, 2012 or the fiscal year ended June 30, 2012.  The most significant available-for-sale security is the investment in Seabridge common stock, acquired in June 2011 and discussed in greater detail within our Fiscal 2012 10-K.  The Company will continue to evaluate this investment considering additional facts and circumstances as they arise, including, but not limited to, the progress of development of Seabridge’s KSM project.

DEBT
DEBT

5.             DEBT

 

The Company’s non-current debt as of December 31, 2012 and June 30, 2012 consists of the following:

 

 

 

As of

 

As of

 

 

 

December 31, 2012

 

June 30, 2012

 

 

 

Non-current

 

Non-current

 

 

 

(Amounts in thousands)

 

Convertible notes due 2019, net

 

$

297,697

 

$

293,248

 

Total debt

 

$

297,697

 

$

293,248

 

 

Convertible Senior Notes Due 2019

 

In June 2012, the Company completed an offering of $370 million aggregate principal amount of 2.875% convertible senior notes due 2019 (“2019 Notes”).  The 2019 Notes bear interest at the rate of 2.875% per annum, and the Company is required to make semi-annual interest payments on the outstanding principal balance of the 2019 Notes on June 15 and December 15 of each year, beginning December 15, 2012. The 2019 Notes mature on June 15, 2019.  Interest expense recognized on the 2019 Notes for the three and six months ended December 31, 2012, was $5.2 million and $10.3 million, respectively, and included the contractual coupon interest, the accretion of the debt discount and amortization of the debt issuance costs.

 

Revolving credit facility

 

The Company maintains a $350 million revolving credit facility.  As of December 31, 2012, the Company had no amounts outstanding under the revolving credit facility.  As discussed in the Company’s Fiscal 2012 10-K, the Company has financial covenants associated with its revolving credit facility.  At December 31, 2012, the Company was in compliance with each financial covenant.

STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY

6.             STOCKHOLDERS’ EQUITY

 

Common Stock Offering

 

On October 15, 2012, we sold 5,250,000 shares of our common stock, at a price of $90.00 per share, resulting in proceeds of $472.5 million before expenses.  The Company has invested the proceeds from this offering in United States treasury bills or cash bank accounts and intends to use the net proceeds from the offering for the acquisition of additional royalty interests and for general corporate purposes.

STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION

7.             STOCK-BASED COMPENSATION

 

The Company recognized stock-based compensation expense as follows:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(Amounts in thousands)

 

(Amounts in thousands)

 

Stock options

 

$

129

 

$

123

 

$

256

 

$

238

 

Stock appreciation rights

 

427

 

329

 

819

 

624

 

Restricted stock

 

649

 

565

 

1,779

 

1,651

 

Performance stock

 

600

 

851

 

1,046

 

1,553

 

Total stock-based compensation expense

 

$

1,805

 

$

1,868

 

$

3,900

 

$

4,066

 

 

Stock-based compensation expense is included within general and administrative in the consolidated statements of operations and comprehensive income.

 

There were no stock options granted during the three months ended December 31, 2012 and 2011, and 17,925 and 18,796 stock options granted during the six months ended December 31, 2012 and 2011, respectively.  As of December 31, 2012, there was $0.7 million of unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted-average period of 2.0 years.

 

There were no stock-settled stock appreciation rights (“SSARs”) granted during the three months ended December 31, 2012 and 2011, and 54,400 and 42,804 SSARs granted during the six months ended December 31, 2012 and 2011, respectively.  As of December 31, 2012, there was $2.0 million of unrecognized compensation expense related to non-vested SSARs, which is expected to be recognized over a weighted-average period of 1.8 years.

 

There were no shares of restricted stock granted during the three months ended December 31, 2012 and 2011, and 40,850 and 44,950 shares of restricted stock granted during the six months ended December 31, 2012 and 2011, respectively.  The restricted stock awards granted to officers and certain employees during the six months ended December 31, 2012, vest over a three year period beginning after a two-year holding period from the date of grant, with one-third of the shares vesting after years three, four and five, respectively.  As of December 31, 2012, there was $6.4 million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average vesting period of 3.6 years.

 

There were no shares of performance stock granted during the three months ended December 31, 2012 and 2011, and 45,600 and 49,600 shares of performance stock granted during the six months ended December 31, 2012 and 2011, respectively.  As of December 31, 2012, there was $4.3 million of unrecognized compensation expense related to non-vested performance stock, which is expected to be recognized over a weighted-average vesting period of 1.8 years.

EARNINGS PER SHARE ("EPS")
EARNINGS PER SHARE ("EPS")

8.             EARNINGS PER SHARE (“EPS”)

 

Basic earnings per common share were computed using the weighted average number of shares of common stock outstanding during the period, considering the effect of participating securities.  Unvested stock-based compensation awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of earnings per share pursuant to the two-class method.  The Company’s unvested restricted stock awards contain non-forfeitable dividend rights and participate equally with common stock with respect to dividends issued or declared.  The Company’s unexercised stock options, unexercised SSARs and unvested performance stock do not contain rights to dividends.  Under the two-class method, the earnings used to determine basic earnings per common share are reduced by an amount allocated to participating securities.  Use of the two-class method has an immaterial impact on the calculation of basic and diluted earnings per common share.

 

The following tables summarize the effects of dilutive securities on diluted EPS for the period:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(in thousands, except share data)

 

(in thousands, except share data)

 

Net income available to Royal Gold common stockholders

 

$

27,217

 

$

23,411

 

$

51,987

 

$

45,906

 

Weighted-average shares for basic EPS

 

63,941,686

 

55,329,463

 

61,688,776

 

55,259,009

 

Effect of other dilutive securities

 

195,551

 

245,351

 

216,773

 

274,239

 

Weighted-average shares for diluted EPS

 

64,137,237

 

55,574,814

 

61,905,549

 

55,533,248

 

Basic earnings per share

 

$

0.42

 

$

0.42

 

$

0.84

 

$

0.83

 

Diluted earnings per share

 

$

0.42

 

$

0.42

 

$

0.84

 

$

0.82

 

 

The calculation of weighted average shares includes all of our outstanding stock: common stock and exchangeable shares.  Exchangeable shares are the equivalent of common shares in that they have the same dividend rights and share equitably in undistributed earnings and are exchangeable on a one-for-one basis for shares of our common stock.  The Company intends to settle the principal amount of the 2019 Notes in cash.  As a result, there will be no impact to diluted earnings per share unless the share price of the Company’s common stock exceeds the conversion price of $105.31.

INCOME TAXES
INCOME TAXES

9.             INCOME TAXES

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(Amounts in thousands, except rate)

 

(Amounts in thousands, except rate)

 

Income tax expense

 

$

16,315

 

$

14,051

 

$

32,776

 

$

26,433

 

Effective tax rate

 

37.2

%

36.7

%

38.3

%

34.4

%

 

The increase in the effective tax rate for the three months ended December 31, 2012, is primarily related to an increase in current year tax expense from changes in estimates of uncertain tax positions.  The increase in the effective tax rate for the six months ended December 31, 2012, is primarily attributable to (i) an increase in tax expense recognized in certain foreign subsidiaries without a corresponding U.S. foreign tax credit benefit, (ii) an increase in current year tax expense from changes in estimates of uncertain tax positions, and (iii) the prior year decrease in tax expense from changes in estimates of uncertain tax positions.

 

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal, state and local, and non-U.S. income tax examinations by tax authorities for fiscal years before 2008.

 

As of December 31, 2012 and June 30, 2012, the Company had $19.8 million and $19.5 million of total gross unrecognized tax benefits, respectively.  The increase in gross unrecognized tax benefits was primarily related to tax positions of International Royalty Corporation entities taken prior to or upon the acquisition by the Company during fiscal year 2010.  If recognized, these unrecognized tax benefits would impact the Company’s effective income tax rate.

 

The Company’s continuing practice is to recognize potential interest and/or penalties related to unrecognized tax benefits as part of its income tax expense.  At December 31, 2012 and June 30, 2012, the amount of accrued income-tax-related interest and penalties was $3.3 million and $2.8 million, respectively.

 

During the quarter ended December 31, 2012, the Company made a foreign withholding tax payment of approximately $17.2 million.  The Company expects to recover the amount of the payment within the next twelve months.  The $17.2 million payment has been recorded within Prepaid expenses and other current assets on our consolidated balance sheets.

SEGMENT INFORMATION
SEGMENT INFORMATION

10.          SEGMENT INFORMATION

 

The Company manages its business under a single operating segment, consisting of the acquisition and management of royalty interests.  Royal Gold’s royalty revenue and long-lived assets (royalty interests in mineral properties, net) are geographically distributed as shown in the following table.

 

 

 

 

 

 

 

 

 

 

 

Royalty Interests in

 

 

 

Royalty Revenue

 

Mineral Property, net

 

 

 

Three Months Ended

 

Six Months Ended

 

As of

 

As of

 

 

 

December 31,

 

December 31,

 

December 31,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

2012

 

2012

 

Chile

 

30

%

25

%

28

%

26

%

31

%

35

%

Canada

 

23

%

28

%

23

%

24

%

49

%

43

%

United States

 

19

%

16

%

18

%

20

%

4

%

5

%

Mexico

 

18

%

19

%

20

%

18

%

8

%

9

%

Australia

 

3

%

5

%

3

%

5

%

3

%

3

%

Africa

 

3

%

4

%

3

%

4

%

1

%

1

%

Other

 

4

%

3

%

5

%

3

%

4

%

4

%

FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS

11.          FAIR VALUE MEASUREMENTS

 

FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under ASC 820 are described below:

 

Level 1:     Quoted prices for identical instruments in active markets;

 

Level 2:     Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

 

Level 3:     Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

The following table sets forth the Company’s financial assets measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy.

 

 

 

At December 31, 2012

 

 

 

Carrying

 

Fair Value

 

 

 

Amount

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Assets (In thousands):

 

 

 

 

 

 

 

 

 

 

 

United States treasury bills(1)

 

$

524,982

 

$

524,982

 

$

524,982

 

$

 

$

 

Money market investments(1)

 

$

183

 

$

183

 

$

183

 

$

 

$

 

Marketable equity securities(2)

 

$

18,489

 

$

18,489

 

$

18,489

 

$

 

$

 

Total assets

 

 

 

$

543,654

 

$

543,654

 

$

 

$

 

Liabilities (In thousands):

 

 

 

 

 

 

 

 

 

 

 

Debt(3)

 

$

370,000

 

$

411,625

 

$

411,625

 

$

 

$

 

Total liabilities

 

 

 

$

411,625

 

$

411,625

 

$

 

$

 

 

(1)       Included in Cash and equivalents in the Company’s consolidated balance sheets.

(2)       Included in Available for sale securities in the Company’s consolidated balance sheets.

(3)       Included in the carrying amount is the equity component of our 2019 Notes in the amount of $77 million, which is included within Additional paid-in capital in the Company’s consolidated balance sheets.

 

The Company invests primarily in United States treasury bills with maturities of 90 days or less, which are classified within Level 1 of the fair value hierarchy.  The Company also invests in money market funds, which are traded by dealers or brokers in active over-the-counter markets.  The Company’s money market funds, which are invested in United States treasury bills or United States treasury backed securities, are also classified within Level 1 of the fair value hierarchy.  The Company’s marketable equity securities classified within Level 1 of the fair value hierarchy are valued using quoted market prices in active markets.  The fair value of the Level 1 marketable equity securities is calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company. The Company’s debt classified within Level 1 of the fair value hierarchy is valued using quoted prices in an active market.

 

As of December 31, 2012, the Company also had assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis like those associated with royalty interests in mineral properties, intangible assets and other long-lived assets.  For these assets, measurement at fair value in periods subsequent to their initial recognition are applicable if any of these assets are determined to be impaired; however, no triggering events have occurred relative to any of these assets during the six months ended December 31, 2012.  If recognition of these assets at their fair value becomes necessary, such measurements will be determined utilizing Level 3 inputs.

COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES

12.          COMMITMENTS AND CONTINGENCIES

 

Mt. Milligan Gold Stream Acquisition

 

Refer to Note 2 for discussion on the Company’s commitment to Thompson Creek as part of the Mt. Milligan gold stream acquisitions.

 

Tulsequah Chief Gold and Silver Stream Acquisition

 

As of December 31, 2012, the Company has a remaining commitment of $50 million as part of its Tulsequah Chief gold and silver stream acquisition in December 2011.

 

Voisey’s Bay

 

The Company owns a royalty on the Voisey’s Bay mine in Newfoundland and Labrador owned by Vale Newfoundland & Labrador Limited (“VNL”).  The royalty is owned by the Labrador Nickel Royalty Limited Partnership (“LNRLP”), in which the Company’s wholly-owned indirect subsidiary, Canadian Minerals Partnership, is the general partner and 89.99% owner.  The remaining interests in LNRLP are owned by Altius Investments Ltd. (10%), a company unrelated to Royal Gold, and the Company’s wholly-owned indirect subsidiary, Voisey’s Bay Holding Corporation (0.01%).

 

On October 16, 2009, LNRLP filed a claim in the Supreme Court of Newfoundland and Labrador Trial Division against Vale Inco Limited, now known as Vale Canada Limited (“Vale Canada”) and its wholly-owned subsidiaries, Vale Inco Atlantic Sales Limited and VNL, related to the calculation of the NSR on the sale of concentrates, including nickel concentrates, from the Voisey’s Bay mine to Vale Canada.  The claim asserts that Vale Canada is incorrectly calculating the NSR and requests an order in respect of the correct calculation of future payments.  The claim also requests specific damages for underpayment of past royalties to the date of the claim in an amount not less than $29 million, together with additional damages until the date of trial, interest, costs and other damages.  The litigation is in the discovery phase.

RELATED PARTY
RELATED PARTY

13.          RELATED PARTY

 

Crescent Valley Partners, L.P. (“CVP”) was formed as a limited partnership in April 1992.  It owns a 1.25% net value royalty on production of minerals from a portion of Cortez.  Denver Mining Finance Company, our wholly-owned subsidiary, is the general partner and holds a 2.0% interest in CVP.  In addition, Royal Gold holds a 29.6% limited partner interest in the partnership, while our Chairman of the Board of Directors, the Chairman of our Audit Committee and one other member of our board of directors hold an aggregate 35.56% limited partner interest.  The general partner performs administrative services for CVP in receiving and processing the royalty payments from the operator, including the disbursement of royalty payments and record keeping for in-kind distributions to the limited partners.

 

CVP receives its royalty from the Cortez Joint Venture in-kind.  The Company, as well as certain other limited partners, sell their pro-rata shares of such gold immediately and receive distributions in cash, while CVP holds gold for certain other limited partners.  Such gold inventories, which totaled 12,837 and 12,581 ounces of gold as of December 31, 2012 and  June 30, 2012, respectively, are held by a third party refinery in Utah for the account of the limited partners of CVP.  The inventories are carried at historical cost and are classified within Other assets on the Company’s consolidated balance sheets.  The carrying value of the gold in inventory was approximately $7.9 million and $7.4 million as of December 31, 2012 and June 30, 2012, respectively, while the fair value of such ounces was approximately $21.3 million and $20.1 million as of December 31, 2012 and June 30, 2012, respectively.  None of the gold currently held in inventory as of December 31, 2012 and June 30, 2012, is attributed to Royal Gold, as the gold allocated to Royal Gold’s CVP partnership interest is typically sold within five days of receipt.

SUBSEQUENT EVENT
SUBSEQUENT EVENT

14.          SUBSEQUENT EVENT

 

On January 21, 2013, Royal Gold entered into Amendment No. 2 to Fifth Amended and Restated Revolving Credit Agreement (the “Amendment”), which amends the Company’s existing Fifth Amended and Restated Revolving Credit Agreement, dated May 30, 2012 (as amended from time to time, the “Revolving Credit Agreement”), among Royal Gold, as the borrower, certain subsidiaries of Royal Gold, as guarantors, HSBC Bank USA, National Association, as administrative agent and a lender, The Bank of Nova Scotia, as a lender, Goldman Sachs Bank USA, as a lender, and the other lenders from time to time party thereto, HSBC Securities (USA) Inc., as the sole lead arranger and joint bookrunner, and ScotiaBank, as syndication agent and joint bookrunner.

 

The Amendment revises the Revolving Credit Agreement to, among other things, (i) remove the current ratio, interest coverage ratio and debt service coverage ratio financial covenants, (ii) add a financial covenant requiring the Company to maintain a secured debt ratio below a certain level, (iii) increase the amount of unsecured indebtedness the Company is permitted to incur subject to its pro forma compliance with a leverage ratio test and to allow certain prepayments, refinancing and replacement of such unsecured indebtedness, (iv) increase the interest rate for borrowings under the Revolving Credit Agreement when the leverage ratio exceeds 3.0 to 1.0, and (v) take certain acquisitions into account in determining compliance with financial covenants.  Except as set forth in the Amendment, all other terms and conditions of the Revolving Credit Agreement remain in full force and effect.

ROYALTY INTERESTS IN MINERAL PROPERTIES (Tables)
Schedule of royalty interests in mineral properties

 

 

As of December 31, 2012

 

 

 

Accumulated

 

 

 

(Amounts in thousands):

 

Cost

 

Depletion

 

Net

 

Production stage royalty interests:

 

 

 

 

 

 

 

Andacollo

 

$

272,998

 

$

(35,950

)

$

237,048

 

Voisey’s Bay

 

150,138

 

(42,669

)

107,469

 

Peñasquito

 

99,172

 

(10,975

)

88,197

 

Las Cruces

 

57,230

 

(9,453

)

47,777

 

Mulatos

 

48,092

 

(21,490

)

26,602

 

Wolverine

 

45,158

 

(4,335

)

40,823

 

Dolores

 

44,878

 

(7,003

)

37,875

 

Canadian Malartic

 

38,800

 

(4,905

)

33,895

 

Gwalia Deeps

 

31,070

 

(5,628

)

25,442

 

Holt

 

25,428

 

(4,699

)

20,729

 

Inata

 

24,871

 

(8,015

)

16,856

 

Leeville

 

18,322

 

(15,262

)

3,060

 

Robinson

 

17,825

 

(10,570

)

7,255

 

Cortez

 

10,630

 

(9,697

)

933

 

Other

 

210,242

 

(118,447

)

91,795

 

 

 

1,094,854

 

(309,098

)

785,756

 

 

 

 

 

 

 

 

 

Development stage royalty interests:

 

 

 

 

 

 

 

Mt. Milligan

 

671,090

 

 

671,090

 

Pascua-Lama

 

372,105

 

 

372,105

 

Other

 

38,694

 

 

38,694

 

 

 

1,081,889

 

 

1,081,889

 

 

 

 

 

 

 

 

 

Exploration stage royalty interests

 

195,959

 

 

195,959

 

Total royalty interests in mineral properties

 

$

2,372,702

 

$

(309,098

)

$

2,063,604

 

 

As of June 30, 2012

 

 

 

 

 

Accumulated

 

 

 

(Amounts in thousands):

 

Cost

 

Restructuring

 

Depletion

 

Net

 

Production stage royalty interests:

 

 

 

 

 

 

 

 

 

Andacollo

 

$

272,998

 

$

 

$

(27,345

)

$

245,653

 

Voisey’s Bay

 

150,138

 

 

(33,192

)

116,946

 

Peñasquito

 

99,172

 

 

(9,075

)

90,097

 

Las Cruces

 

57,230

 

 

(6,499

)

50,731

 

Mulatos

 

48,092

 

 

(18,721

)

29,371

 

Wolverine

 

45,158

 

 

(1,625

)

43,533

 

Dolores

 

44,878

 

 

(6,021

)

38,857

 

Canadian Malartic

 

38,800

 

 

(3,292

)

35,508

 

Gwalia Deeps

 

28,119

 

 

(4,398

)

23,721

 

Holt

 

25,428

 

 

(2,980

)

22,448

 

Inata

 

24,871

 

 

(7,320

)

17,551

 

Leeville

 

18,322

 

 

(14,436

)

3,886

 

Robinson

 

17,825

 

 

(9,872

)

7,953

 

Cortez

 

10,630

 

 

(9,673

)

957

 

Other

 

208,463

 

 

(112,105

)

96,358

 

 

 

1,090,124

 

 

(266,554

)

823,570

 

 

 

 

 

 

 

 

 

 

 

Development stage royalty interests:

 

 

 

 

 

 

 

 

 

Mt. Milligan

 

455,943

 

 

 

455,943

 

Pascua-Lama

 

372,105

 

 

 

372,105

 

Other

 

40,022

 

(1,328

)

 

38,694

 

 

 

868,070

 

(1,328

)

 

866,742

 

 

 

 

 

 

 

 

 

 

 

Exploration stage royalty interests

 

200,676

 

 

 

200,676

 

Total royalty interests in mineral properties

 

$

2,158,870

 

$

(1,328

)

$

(266,554

)

$

1,890,988

 

AVAILABLE FOR SALE SECURITIES (Tables)
Schedule of available for sale securities

 

 

The Company’s available for sale securities as of December 31, 2012 and June 30, 2012 consists of the following (amounts in thousands):

 

 

 

As of December 31, 2012

 

 

 

 

 

Unrealized

 

 

 

 

 

Cost Basis

 

Gain

 

Loss

 

Fair Value

 

Non-current:

 

 

 

 

 

 

 

 

 

Seabridge Gold, Inc.

 

$

28,574

 

 

(10,245

)

$

18,329

 

Other

 

203

 

 

(43

)

160

 

 

 

$

28,777

 

$

 

$

(10,288

)

$

18,489

 

 

 

 

As of June 30, 2012

 

 

 

 

 

Unrealized

 

 

 

 

 

Cost Basis

 

Gain

 

Loss

 

Fair Value

 

Non-current:

 

 

 

 

 

 

 

 

 

Seabridge Gold, Inc.

 

$

28,574

 

 

(13,716

)

$

14,858

 

Other

 

203

 

 

(46

)

$

157

 

 

 

$

28,777

 

$

 

$

(13,762

)

$

15,015

 

DEBT (Tables)
Schedule of non-current debt

 

 

 

 

As of

 

As of

 

 

 

December 31, 2012

 

June 30, 2012

 

 

 

Non-current

 

Non-current

 

 

 

(Amounts in thousands)

 

Convertible notes due 2019, net

 

$

297,697

 

$

293,248

 

Total debt

 

$

297,697

 

$

293,248

 

STOCK-BASED COMPENSATION (Tables)
Schedule of stock-based compensation expenses

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(Amounts in thousands)

 

(Amounts in thousands)

 

Stock options

 

$

129

 

$

123

 

$

256

 

$

238

 

Stock appreciation rights

 

427

 

329

 

819

 

624

 

Restricted stock

 

649

 

565

 

1,779

 

1,651

 

Performance stock

 

600

 

851

 

1,046

 

1,553

 

Total stock-based compensation expense

 

$

1,805

 

$

1,868

 

$

3,900

 

$

4,066

 

EARNINGS PER SHARE ("EPS") (Tables)
Summary of the effects of dilutive securities on diluted EPS

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(in thousands, except share data)

 

(in thousands, except share data)

 

Net income available to Royal Gold common stockholders

 

$

27,217

 

$

23,411

 

$

51,987

 

$

45,906

 

Weighted-average shares for basic EPS

 

63,941,686

 

55,329,463

 

61,688,776

 

55,259,009

 

Effect of other dilutive securities

 

195,551

 

245,351

 

216,773

 

274,239

 

Weighted-average shares for diluted EPS

 

64,137,237

 

55,574,814

 

61,905,549

 

55,533,248

 

Basic earnings per share

 

$

0.42

 

$

0.42

 

$

0.84

 

$

0.83

 

Diluted earnings per share

 

$

0.42

 

$

0.42

 

$

0.84

 

$

0.82

 

INCOME TAXES (Tables)
Schedule of income tax expense and effective tax rate

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

December 31,

 

December 31,

 

December 31,

 

December 31,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(Amounts in thousands, except rate)

 

(Amounts in thousands, except rate)

 

Income tax expense

 

$

16,315

 

$

14,051

 

$

32,776

 

$

26,433

 

Effective tax rate

 

37.2

%

36.7

%

38.3

%

34.4

%

SEGMENT INFORMATION (Tables)
Geographic distribution of royalty revenue and long-lived assets (royalty interests in mineral properties, net)

 

 

 

 

 

 

 

 

 

 

 

 

Royalty Interests in

 

 

 

Royalty Revenue

 

Mineral Property, net

 

 

 

Three Months Ended

 

Six Months Ended

 

As of

 

As of

 

 

 

December 31,

 

December 31,

 

December 31,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

2012

 

2012

 

Chile

 

30

%

25

%

28

%

26

%

31

%

35

%

Canada

 

23

%

28

%

23

%

24

%

49

%

43

%

United States

 

19

%

16

%

18

%

20

%

4

%

5

%

Mexico

 

18

%

19

%

20

%

18

%

8

%

9

%

Australia

 

3

%

5

%

3

%

5

%

3

%

3

%

Africa

 

3

%

4

%

3

%

4

%

1

%

1

%

Other

 

4

%

3

%

5

%

3

%

4

%

4

%

FAIR VALUE MEASUREMENTS (Tables)
Schedule of financial assets and liabilities measured at fair value on recurring basis

 

 

 

 

At December 31, 2012

 

 

 

Carrying

 

Fair Value

 

 

 

Amount

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Assets (In thousands):

 

 

 

 

 

 

 

 

 

 

 

United States treasury bills(1)

 

$

524,982

 

$

524,982

 

$

524,982

 

$

 

$

 

Money market investments(1)

 

$

183

 

$

183

 

$

183

 

$

 

$

 

Marketable equity securities(2)

 

$

18,489

 

$

18,489

 

$

18,489

 

$

 

$

 

Total assets

 

 

 

$

543,654

 

$

543,654

 

$

 

$

 

Liabilities (In thousands):

 

 

 

 

 

 

 

 

 

 

 

Debt(3)

 

$

370,000

 

$

411,625

 

$

411,625

 

$

 

$

 

Total liabilities

 

 

 

$

411,625

 

$

411,625

 

$

 

$

 

 

(1)       Included in Cash and equivalents in the Company’s consolidated balance sheets.

(2)       Included in Available for sale securities in the Company’s consolidated balance sheets.

(3)       Included in the carrying amount is the equity component of our 2019 Notes in the amount of $77 million, which is included within Additional paid-in capital in the Company’s consolidated balance sheets.

ACQUISITIONS (Details)
6 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended
Dec. 31, 2012
USD ($)
Dec. 31, 2011
USD ($)
Dec. 13, 2012
Seabridge Gold, Inc.
Additional Shares
USD ($)
item
Dec. 13, 2012
Seabridge Gold, Inc.
Additional Shares
CAD ($)
Dec. 13, 2012
Seabridge Gold, Inc.
NSR Royalty Option 1
CAD ($)
Dec. 13, 2012
Seabridge Gold, Inc.
NSR Royalty Option 2
CAD ($)
Dec. 3, 2012
Mt. Milligan
USD ($)
Sep. 3, 2012
Mt. Milligan
USD ($)
Dec. 31, 2012
Mt. Milligan
USD ($)
Aug. 8, 2012
Mt. Milligan
USD ($)
Jul. 31, 2012
Mt. Milligan
USD ($)
Aug. 15, 2012
Milligan III Acquisition
USD ($)
Aug. 8, 2012
Milligan III Acquisition
USD ($)
Acquisition of Royalty Interest in Mineral Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of payable ounces of gold purchased
 
 
 
 
 
 
 
 
 
52.25% 
 
 
12.25% 
Total purchase amount
 
 
 
 
 
 
 
 
 
$ 781,500,000 
$ 581,500,000 
 
$ 200,000,000 
Cash payment for each payable ounce of gold (in dollars per ounce)
 
 
 
 
 
 
 
 
 
435 
 
 
 
Cash paid for acquisition of royalty interests
215,032,000 
148,182,000 
 
 
 
 
95,000,000 
45,000,000 
 
 
 
75,000,000 
 
Total cash paid on pre-production commitment
 
 
 
 
 
 
 
 
669,600,000 
 
 
 
 
Future scheduled payments due for first quarter in calendar year 2013
 
 
 
 
 
 
 
 
62,000,000 
 
 
 
 
Future scheduled payments due for second quarter in calendar year 2013
 
 
 
 
 
 
 
 
37,000,000 
 
 
 
 
Future scheduled payments due for third quarter in calendar year 2013
 
 
 
 
 
 
 
 
12,900,000 
 
 
 
 
Common shares acquired in a private placement
 
 
1,004,491 
1,004,491 
 
 
 
 
 
 
 
 
 
Premium on share price as a percentage of the volume weighted-average trading price of common shares
 
 
15.00% 
15.00% 
 
 
 
 
 
 
 
 
 
Trading period used to calculate premium on share price
 
 
5 days 
5 days 
 
 
 
 
 
 
 
 
 
Payment made for common shares acquired
 
 
18,300,000 
18,000,000 
 
 
 
 
 
 
 
 
 
Holding period of shares as a condition to acquire additional shares
 
 
270 days 
270 days 
 
 
 
 
 
 
 
 
 
Additional percentage of royalty that can be acquired
 
 
0.75% 
0.75% 
 
 
 
 
 
 
 
 
 
Percentage of royalty that can be acquired
 
 
 
 
1.25% 
2.00% 
 
 
 
 
 
 
 
Purchase price of royalty
 
 
 
 
100,000,000 
160,000,000 
 
 
 
 
 
 
 
Number of installments in which the purchase price of royalty is payable
 
 
 
 
 
 
 
 
 
 
 
Installment period in which the purchase price of royalty is payable
 
 
540 days 
540 days 
 
 
 
 
 
 
 
 
 
Proceeds from sale of shares in private transaction
 
 
14,600,000 
14,400,000 
 
 
 
 
 
 
 
 
 
Premium on share price
 
 
2,400,000 
 
 
 
 
 
 
 
 
 
 
Realized loss on trading securities
 
 
$ 1,300,000 
 
 
 
 
 
 
 
 
 
 
ROYALTY INTERESTS IN MINERAL PROPERTIES (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Jun. 30, 2012
Royalty interests in mineral properties
 
 
Cost
$ 2,372,702 
$ 2,158,870 
Restructuring
 
(1,328)
Accumulated Depletion
(309,098)
(266,554)
Net
2,063,604 
1,890,988 
Production stage royalty interests
 
 
Royalty interests in mineral properties
 
 
Cost
1,094,854 
1,090,124 
Accumulated Depletion
(309,098)
(266,554)
Net
785,756 
823,570 
Production stage royalty interests |
Andacollo
 
 
Royalty interests in mineral properties
 
 
Cost
272,998 
272,998 
Accumulated Depletion
(35,950)
(27,345)
Net
237,048 
245,653 
Production stage royalty interests |
Voisey's Bay
 
 
Royalty interests in mineral properties
 
 
Cost
150,138 
150,138 
Accumulated Depletion
(42,669)
(33,192)
Net
107,469 
116,946 
Production stage royalty interests |
Penasquito
 
 
Royalty interests in mineral properties
 
 
Cost
99,172 
99,172 
Accumulated Depletion
(10,975)
(9,075)
Net
88,197 
90,097 
Production stage royalty interests |
Las Cruces
 
 
Royalty interests in mineral properties
 
 
Cost
57,230 
57,230 
Accumulated Depletion
(9,453)
(6,499)
Net
47,777 
50,731 
Production stage royalty interests |
Mulatos
 
 
Royalty interests in mineral properties
 
 
Cost
48,092 
48,092 
Accumulated Depletion
(21,490)
(18,721)
Net
26,602 
29,371 
Production stage royalty interests |
Wolverine
 
 
Royalty interests in mineral properties
 
 
Cost
45,158 
45,158 
Accumulated Depletion
(4,335)
(1,625)
Net
40,823 
43,533 
Production stage royalty interests |
Dolores
 
 
Royalty interests in mineral properties
 
 
Cost
44,878 
44,878 
Accumulated Depletion
(7,003)
(6,021)
Net
37,875 
38,857 
Production stage royalty interests |
Canadian Malartic
 
 
Royalty interests in mineral properties
 
 
Cost
38,800 
38,800 
Accumulated Depletion
(4,905)
(3,292)
Net
33,895 
35,508 
Production stage royalty interests |
Gwalia Deeps
 
 
Royalty interests in mineral properties
 
 
Cost
31,070 
28,119 
Accumulated Depletion
(5,628)
(4,398)
Net
25,442 
23,721 
Production stage royalty interests |
Holt
 
 
Royalty interests in mineral properties
 
 
Cost
25,428 
25,428 
Accumulated Depletion
(4,699)
(2,980)
Net
20,729 
22,448 
Production stage royalty interests |
Inata
 
 
Royalty interests in mineral properties
 
 
Cost
24,871 
24,871 
Accumulated Depletion
(8,015)
(7,320)
Net
16,856 
17,551 
Production stage royalty interests |
Leeville
 
 
Royalty interests in mineral properties
 
 
Cost
18,322 
18,322 
Accumulated Depletion
(15,262)
(14,436)
Net
3,060 
3,886 
Production stage royalty interests |
Robinson
 
 
Royalty interests in mineral properties
 
 
Cost
17,825 
17,825 
Accumulated Depletion
(10,570)
(9,872)
Net
7,255 
7,953 
Production stage royalty interests |
Cortez
 
 
Royalty interests in mineral properties
 
 
Cost
10,630 
10,630 
Accumulated Depletion
(9,697)
(9,673)
Net
933 
957 
Production stage royalty interests |
Other
 
 
Royalty interests in mineral properties
 
 
Cost
210,242 
208,463 
Accumulated Depletion
(118,447)
(112,105)
Net
91,795 
96,358 
Development stage royalty interests
 
 
Royalty interests in mineral properties
 
 
Cost
1,081,889 
868,070 
Restructuring
 
(1,328)
Net
1,081,889 
866,742 
Development stage royalty interests |
Other
 
 
Royalty interests in mineral properties
 
 
Cost
38,694 
40,022 
Restructuring
 
(1,328)
Net
38,694 
38,694 
Development stage royalty interests |
Pascua-Lama
 
 
Royalty interests in mineral properties
 
 
Cost
372,105 
372,105 
Net
372,105 
372,105 
Development stage royalty interests |
Mt. Milligan
 
 
Royalty interests in mineral properties
 
 
Cost
671,090 
455,943 
Net
671,090 
455,943 
Exploration stage royalty interests
 
 
Royalty interests in mineral properties
 
 
Cost
195,959 
200,676 
Net
$ 195,959 
$ 200,676 
AVAILABLE FOR SALE SECURITIES (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Jun. 30, 2012
Available for sale securities
 
 
Cost Basis
$ 28,777 
$ 28,777 
Unrealized Loss
(10,288)
(13,762)
Fair Value
18,489 
15,015 
Seabridge Gold, Inc.
 
 
Available for sale securities
 
 
Cost Basis
28,574 
28,574 
Unrealized Loss
(10,245)
(13,716)
Fair Value
18,329 
14,858 
Other available for sale securities
 
 
Available for sale securities
 
 
Cost Basis
203 
203 
Unrealized Loss
(43)
(46)
Fair Value
$ 160 
$ 157 
DEBT (Details) (USD $)
1 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2012
Dec. 31, 2012
Dec. 31, 2012
Long-term debt disclosure
 
 
 
Total debt, non-current
$ 293,248,000 
$ 297,697,000 
$ 297,697,000 
Convertible notes due 2019, net
 
 
 
Long-term debt disclosure
 
 
 
Total debt, non-current
293,248,000 
297,697,000 
297,697,000 
Aggregate principal amount of convertible senior notes issued
370,000,000 
 
 
Interest rate on convertible senior notes (as a percent)
 
2.875% 
2.875% 
Interest expense recognized
 
5,200,000 
10,300,000 
Revolving credit facility
 
 
 
Long-term debt disclosure
 
 
 
Maximum availability under the revolving credit facility
 
$ 350,000,000 
$ 350,000,000 
STOCKHOLDERS' EQUITY (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
0 Months Ended 6 Months Ended
Oct. 15, 2012
Dec. 31, 2012
Dec. 31, 2011
Common Stock Offering
 
 
 
Shares sold
5,250,000 
 
 
Sale price per share (in dollars per share)
$ 90.00 
 
 
Proceeds from common stock issued, net of commission and expenses
$ 472,500 
$ 473,776 
$ 2,917 
STOCK-BASED COMPENSATION (Details) (USD $)
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Stock-based compensation expense.
 
 
 
 
Stock-based compensation expense
$ 1,805,000 
$ 1,868,000 
$ 3,900,000 
$ 4,066,000 
Stock Options
 
 
 
 
Stock-based compensation expense.
 
 
 
 
Stock-based compensation expense
129,000 
123,000 
256,000 
238,000 
Granted (in shares)
 
 
17,925 
18,796 
Unrecognized stock-based compensation expense
 
 
 
 
Unrecognized stock-based compensation expense related to non-vested awards
700,000 
 
700,000 
 
Weighted-average period of recognition of unrecognized stock-based compensation expenses of non-vested awards
 
 
2 years 
 
Stock Appreciation Rights
 
 
 
 
Stock-based compensation expense.
 
 
 
 
Stock-based compensation expense
427,000 
329,000 
819,000 
624,000 
Granted (in shares)
 
 
54,400 
42,804 
Unrecognized stock-based compensation expense
 
 
 
 
Unrecognized stock-based compensation expense related to non-vested awards
2,000,000 
 
2,000,000 
 
Weighted-average period of recognition of unrecognized stock-based compensation expenses of non-vested awards
 
 
1 year 9 months 18 days 
 
Restricted Stock
 
 
 
 
Stock-based compensation expense.
 
 
 
 
Stock-based compensation expense
649,000 
565,000 
1,779,000 
1,651,000 
Granted (in shares)
 
 
40,850 
44,950 
Unrecognized stock-based compensation expense
 
 
 
 
Unrecognized stock-based compensation expense related to non-vested awards
6,400,000 
 
6,400,000 
 
Weighted-average period of recognition of unrecognized stock-based compensation expenses of non-vested awards
 
 
3 years 7 months 6 days 
 
Restricted Stock |
Officers and Certain Employees
 
 
 
 
Stock-based compensation expense.
 
 
 
 
Vesting period of awards granted to officers and certain employees
 
 
3 years 
 
Holding period of awards granted to officers and certain employees, as a vesting condition
 
 
2 years 
 
Fraction of the shares granted to officers and certain employees, vesting in year three (as a percent)
 
 
0.33 
 
Fraction of the shares granted to officers and certain employees, vesting in year four (as a percent)
 
 
0.33 
 
Fraction of the shares granted to officers and certain employees, vesting in year five (as a percent)
 
 
0.33 
 
Performance Shares
 
 
 
 
Stock-based compensation expense.
 
 
 
 
Stock-based compensation expense
600,000 
851,000 
1,046,000 
1,553,000 
Granted (in shares)
 
 
45,600 
49,600 
Unrecognized stock-based compensation expense
 
 
 
 
Unrecognized stock-based compensation expense related to non-vested awards
$ 4,300,000 
 
$ 4,300,000 
 
Weighted-average period of recognition of unrecognized stock-based compensation expenses of non-vested awards
 
 
1 year 9 months 18 days 
 
EARNINGS PER SHARE ("EPS") (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
EARNINGS PER SHARE ("EPS")
 
 
 
 
Net income available to Royal Gold common stockholders
$ 27,217 
$ 23,411 
$ 51,987 
$ 45,906 
Weighted-average shares for basic EPS
63,941,686 
55,329,463 
61,688,776 
55,259,009 
Effect of other dilutive securities (in shares)
195,551 
245,351 
216,773 
274,239 
Weighted-average shares for diluted EPS
64,137,237 
55,574,814 
61,905,549 
55,533,248 
Basic earnings per share (in dollars per share)
$ 0.42 
$ 0.42 
$ 0.84 
$ 0.83 
Diluted earnings per share (in dollars per share)
$ 0.42 
$ 0.42 
$ 0.84 
$ 0.82 
Exchange ratio for conversion of exchangeable shares of RG Exchangeco into shares of Royal Gold common stock
 
 
 
2019 Conversion Notes, Initial conversion price per share of common stock (in dollars per share)
$ 105.31 
 
$ 105.31 
 
INCOME TAXES (Details) (USD $)
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Jun. 30, 2012
INCOME TAXES
 
 
 
 
 
Income tax expense
$ 16,315,000 
$ 14,051,000 
$ 32,776,000 
$ 26,433,000 
 
Effective tax rate (as a percent)
37.20% 
36.70% 
38.30% 
34.40% 
 
Total gross unrecognized tax benefits
19,800,000 
 
19,800,000 
 
19,500,000 
Accrued income-tax-related interest and penalties
3,300,000 
 
3,300,000 
 
2,800,000 
Foreign withholding tax payments
$ 17,200,000 
 
 
 
 
SEGMENT INFORMATION (Details)
3 Months Ended 6 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Jun. 30, 2012
Chile
 
 
 
 
 
Geographic distribution of royalty revenue and long-lived assets (royalty interests in mineral properties, net)
 
 
 
 
 
Royalty Revenue (as a percent)
30.00% 
25.00% 
28.00% 
26.00% 
 
Royalty Interests in Mineral Property, net (as a percent)
31.00% 
 
31.00% 
 
35.00% 
Canada
 
 
 
 
 
Geographic distribution of royalty revenue and long-lived assets (royalty interests in mineral properties, net)
 
 
 
 
 
Royalty Revenue (as a percent)
23.00% 
28.00% 
23.00% 
24.00% 
 
Royalty Interests in Mineral Property, net (as a percent)
49.00% 
 
49.00% 
 
43.00% 
United States
 
 
 
 
 
Geographic distribution of royalty revenue and long-lived assets (royalty interests in mineral properties, net)
 
 
 
 
 
Royalty Revenue (as a percent)
19.00% 
16.00% 
18.00% 
20.00% 
 
Royalty Interests in Mineral Property, net (as a percent)
4.00% 
 
4.00% 
 
5.00% 
Mexico
 
 
 
 
 
Geographic distribution of royalty revenue and long-lived assets (royalty interests in mineral properties, net)
 
 
 
 
 
Royalty Revenue (as a percent)
18.00% 
19.00% 
20.00% 
18.00% 
 
Royalty Interests in Mineral Property, net (as a percent)
8.00% 
 
8.00% 
 
9.00% 
Australia
 
 
 
 
 
Geographic distribution of royalty revenue and long-lived assets (royalty interests in mineral properties, net)
 
 
 
 
 
Royalty Revenue (as a percent)
3.00% 
5.00% 
3.00% 
5.00% 
 
Royalty Interests in Mineral Property, net (as a percent)
3.00% 
 
3.00% 
 
3.00% 
Africa
 
 
 
 
 
Geographic distribution of royalty revenue and long-lived assets (royalty interests in mineral properties, net)
 
 
 
 
 
Royalty Revenue (as a percent)
3.00% 
4.00% 
3.00% 
4.00% 
 
Royalty Interests in Mineral Property, net (as a percent)
1.00% 
 
1.00% 
 
1.00% 
Other
 
 
 
 
 
Geographic distribution of royalty revenue and long-lived assets (royalty interests in mineral properties, net)
 
 
 
 
 
Royalty Revenue (as a percent)
4.00% 
3.00% 
5.00% 
3.00% 
 
Royalty Interests in Mineral Property, net (as a percent)
4.00% 
 
4.00% 
 
4.00% 
FAIR VALUE MEASUREMENTS (Details) (USD $)
Dec. 31, 2012
Jun. 30, 2012
Assets:
 
 
Marketable equity securities
$ 18,489,000 
$ 15,015,000 
Carrying Amount
 
 
Assets:
 
 
United States treasury bills
524,982,000 
 
Money market investments
183,000 
 
Marketable equity securities
18,489,000 
 
Liabilities:
 
 
Debt
370,000,000 
 
Amount of equity component of convertible notes
77,000,000 
 
Recurring basis |
Fair value
 
 
Assets:
 
 
United States treasury bills
524,982,000 
 
Money market investments
183,000 
 
Marketable equity securities
18,489,000 
 
Total assets
543,654,000 
 
Liabilities:
 
 
Debt
411,625,000 
 
Total liabilities
411,625,000 
 
Recurring basis |
Level 1
 
 
Assets:
 
 
United States treasury bills
524,982,000 
 
Money market investments
183,000 
 
Marketable equity securities
18,489,000 
 
Total assets
543,654,000 
 
Liabilities:
 
 
Debt
411,625,000 
 
Total liabilities
$ 411,625,000 
 
COMMITMENTS AND CONTINGENCIES (Details) (USD $)
In Millions, unless otherwise specified
1 Months Ended 6 Months Ended
Oct. 31, 2009
Dec. 31, 2012
Canadian Minerals Partnership
Dec. 31, 2012
Altius
Dec. 31, 2012
Voisey's Bay Holding Corporation
Dec. 31, 2012
Tulsequah
Percentage of ownership interest
 
 
 
 
 
Remaining commitment amount
 
 
 
 
$ 50 
Percentage of ownership interest held in Labrador Nickel Royalty Limited Partnership ("LNRLP")
 
89.99% 
10.00% 
0.01% 
 
Commitments and Contingencies
 
 
 
 
 
Minimum damage amount claimed by Labrador Nickel Royalty Limited Partnership ("LNRLP")
$ 29 
 
 
 
 
RELATED PARTY (Details) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Dec. 31, 2012
oz
item
Jun. 30, 2012
oz
Related party
 
 
Maximum period of days gold inventory allocated to Royal Gold in an in-kind distribution will be held before sale
5 days 
 
Crescent Valley Partners, L.P. ("CVP")
 
 
Related party
 
 
Percentage of royalty interests acquired
1.25% 
 
General partner ownership percentage held by Denver Mining Finance Company
2.00% 
 
Limited partner ownership percentage held by Royal Gold
29.60% 
 
Number of board of director members holding limited partner interests
 
Aggregate percentage of limited partner interests held by certain Royal Gold executives
35.56% 
 
Quantity of gold inventories (in ounces)
12,837 
12,581 
Carrying value of the gold in inventory
$ 7.9 
$ 7.4 
Fair value of the gold in inventory
$ 21.3 
$ 20.1 
SUBSEQUENT EVENT (Details) (Subsequent event, Revolving Credit Agreement)
0 Months Ended
Jan. 21, 2013
Subsequent event |
Revolving Credit Agreement
 
Subsequent Event
 
Debt instrument covenant, leverage ratio
3.0