Royal Gold USA : Reports Record Annual Revenue, Earnings and Cash Flow

Royal Gold, Inc. (NASDAQ: RGLD) (together with its subsidiaries, “Royal Gold” or the “Company,” “we” or “our”) reports record fiscal year 2017 net income of $102 million, or $1.55 per basic share, on record revenue of $441 million and record operating cash flow of $266 million.

Fiscal 2017 Highlights Compared to Fiscal 2016:

• Record revenue of $441 million, an increase of 23%
• Record net income of $102 million, an increase of 56%¹
• Record cash flow from operations of $266 million, an increase of 57%
• Record volume of 350,100 Gold Equivalent Ounces (“GEOs”²), an increase of 14%
• Record dividends paid of $61 million, an increase of 5%
• Repaid $95 million on revolving credit facility
• Average gold price of $1,259, an increase of 8%

The Company reports net income of $20 million, or $0.31 per share, on revenue of $109 million in its fiscal fourth quarter ended June 30, 2017. Fourth quarter net income included higher non-cash compensation costs and mark-to-market adjustments on warrants and Canadian deferred tax liabilities, as well as higher exploration and legal costs.

Fiscal Fourth Quarter 2017 Highlights Compared to Prior Year Quarter:

• Revenue of $109 million, an increase of 16%
• Operating cash flow of $65 million, an increase of 32%
• Volume of 86,700 GEOs, an increase of 16%
• Dividends paid of $16 million, an increase of 4%
• Repaid $50 million on revolving credit facility
• Average gold price of $1,257, in line with the prior year quarter

“We experienced a step change in our financial results in fiscal 2017 with increased volume from recent transactions,” commented Tony Jensen, President and CEO. “Our strong cash flow will be focused on new business, further strengthening the balance sheet and return to shareholders. Looking forward to the next several years, we see New Gold’s Rainy River mine, Barrick’s Cortez Crossroads deposit and Goldcorp’s Pyrite Leach Project at the Peñasquito mine driving further growth and revenue diversification.”

Recent Developments

Peak Gold Maiden Resource

The Peak Gold joint venture (“Peak Gold”), of which our Royal Alaska subsidiary is the manager, completed mineralized material³ estimate of the deposits located near Tok, Alaska. The estimate of measured and indicated resources⁴ contained within mineralized material assuming a $1,400 per ounce gold pit shell consists of approximately 1.3 million ounces of gold grading 3.46 grams per tonne (“gpt”), 5.1 million ounces silver grading 14.09 gpt, and 40 million pounds of copper grading 0.16%. Continuing exploration activity is focused on adjacent and regional targets.

Expansion of Credit Facility

We entered into a new $1 billion, 5-year revolving credit facility with a final maturity in June 2022. The new credit facility replaces Royal Gold’s prior $650 million credit facility that was set to mature in March 2021. Royal Gold repaid the $300 million outstanding under the prior credit facility using a combination of cash on hand of $50 million and borrowings under the new credit facility of $250 million, leaving $750 million of availability under the new credit facility.

Fiscal 2017 Overview

Fiscal 2017 revenue of $441 million included stream revenue of $314 million and royalty revenue of $127 million. The Company had inventory of approximately 14,100 ounces of gold and 536,800 ounces of silver at June 30, 2017, as previously announced, compared to 19,800 ounces of gold and 323,700 ounces of silver at June 30, 2016.

Our total revenue for fiscal 2017 of $441 million increased when compared with $360 million in fiscal 2016, due to higher volume across the portfolio with notable increases in gold production at Andacollo and higher gold and silver production at Pueblo Viejo.

Fiscal 2017 cost of sales was approximately $87 million, compared to $71 million in fiscal 2016. The increase is primarily attributable to an increase in gold production and silver stream production at Pueblo Viejo. Cost of sales is specific to our stream agreements and is the result of the purchase of gold, silver and copper for a cash payment.

General and administrative expenses increased to $33 million in fiscal 2017, from $32 million in fiscal 2016, primarily due to an increase in legal costs.

Exploration costs, which are specific to exploration and advancement of Peak Gold, increased to $13 million in fiscal 2017, from $9 million in fiscal 2016. As of June 30, 2017, Royal Gold has contributed $23 million to the project and obtained a 29.5% membership interest in Peak Gold.

Depreciation, depletion and amortization expense increased to $160 million in fiscal 2017, from $141 million in fiscal 2016. The increase was primarily attributable to increased gold sales and new silver sales from Pueblo Viejo.

Interest and other income increased to $9 million in fiscal 2017 from $4 million in fiscal 2016. The increase was primarily due to a gain on a former interest, consideration received as part of a legal settlement and termination of a non-principal royalty.

We recognized income tax expense totaling $26 million in fiscal 2017 compared with $61 million in fiscal 2016. This resulted in an effective tax rate of 22% for fiscal 2017 compared with (279%) in the prior fiscal year. The decrease is primarily related to tax impacts attributable to our Chilean subsidiary that were incurred during fiscal 2016.

At June 30, 2017, we had current assets of $140 million compared to current liabilities of $31 million, resulting in working capital of $109 million. This compares to current assets of $168 million and current liabilities of $26 million at June 30, 2016, resulting in working capital of $142 million. The decrease in working capital is primarily due to repayments on the outstanding balance under our credit facility.

During fiscal 2017, liquidity needs were met from $354 million in revenue net of our streaming payments and our available cash resources. As of June 30, 2017, the Company had $750 million available and $250 million outstanding under its revolving credit facility. Working capital, combined with the Company’s undrawn revolving credit facility, resulted in $859 million of total liquidity at June 30, 2017.

Fourth Quarter 2017 Overview

Fourth quarter revenue was $109 million compared to $94 million in the prior year quarter.Stream and royalty revenue totaled $78 million and $31 million, respectively, for the quarter. Revenue increased due to higher royalty volume principally from Peñasquito, increased silver sales from Pueblo Viejo and greater gold sales from Wassa and Prestea. We received the first quarter of copper deliveries from Mount Milligan, and those copper stream sales more than offset the reduced percentage of gold sales under our new streaming agreement.

Fourth quarter cost of sales of $20 million was slightly higher than $19 million recorded in the prior year quarter, driven by higher gold and silver sales from Pueblo Viejo.

General and administrative expenses increased to $10 million in the fourth quarter, compared to $8 million in the prior year quarter. The increase was primarily related to higher non-cash stock-based compensation charges and legal costs.

Exploration costs, which are related to Peak Gold, were higher, totaling $4 million in the fourth quarter, compared to $2 million in the prior year quarter.

Interest and other expense increased to $11 million from $9 million in the prior year quarter. The increase reflected higher borrowing costs associated with an increase in LIBOR compared to the prior year quarter, as well as higher undrawn commitment fees associated with the additional $350 million of revolver capacity under the new credit facility.

We recognized fourth quarter income tax expense of $8 million, compared to $5 million during the prior year quarter. This resulted in an effective tax rate of 31% compared to 22% in the prior year quarter. The increase was largely associated with the strengthening of the Canadian dollar relative to the US dollar, which impacted the valuation of certain Canadian deferred tax liabilities. As noted above, the fiscal 2017 effective tax rate was 22%.

PROPERTY HIGHLIGHTS

A summary of fourth quarter and historical production can be found on Tables 1 and 2. Calendar year 2017 operator production estimates of certain properties in which we have interests compared to actual production through June 30, 2017 can be found on Table 3. Results of our streaming business for the fourth quarter, compared to the prior year quarter, can be found on Table 4. Highlights at certain of the Company’s principal producing and development properties during the fourth quarter, compared to the prior year quarter, are detailed in our Annual Report on Form 10-K.

CORPORATE PROFILE

Royal Gold is a precious metals stream and royalty company engaged in the acquisition and management of precious metal streams, royalties and similar production based interests. The Company owns interests on 194 properties on six continents, including interests on 39 producing mines and 20 development stage projects. Royal Gold is publicly traded on the NASDAQ Global Select Market under the symbol “RGLD.” The Company’s website is located at www.royalgold.com.

Note: Management’s conference call reviewing the fourth quarter results will be held on Thursday, August 10, 2017, at noon Eastern Time (10:00 a.m. Mountain Time). The call will be webcast and archived on the Company’s website for a limited time.

Fourth Quarter Earnings Call Information:

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Cautionary “Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: With the exception of historical matters, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. Such forward-looking statements include statements about cash flow growth; Rainy River, Cortez Crossroads and the Peñasquito Pyrite Leach Project as new or expanding sources of revenue providing further growth and revenue diversification, and the expected timing of commissioning of these projects; and operators’ production estimates for calendar year 2017. Net gold and metal reserves attributable to Royal Gold’s stream, royalty and other interests are subject to certain assumptions and, like reserves, do not reflect actual ounces that will be produced. Like any stream, royalty or similar interest on a non-producing or not-yet-in-development project, our interests on development projects are subject to certain risks, such as the ability of the operators to bring the projects into production and operate in accordance with their feasibility studies and mine plans, and the ability of Royal Gold to make accurate assumptions regarding valuation and timing and amount of payments. In addition, many of our interests are subject to risks associated with conducting business in a foreign country, including application of foreign laws to contract and other disputes, foreign environmental laws and enforcement and uncertain political and economic environments. Factors that could cause actual results to differ materially from the projections include, among others, precious metals, copper and nickel prices; performance of and production at the Company's stream and royalty properties, including gold and copper production at Mount Milligan and gold and silver production at Pueblo Viejo; the ability of operators of development properties to finance project construction to completion and bring projects into production as expected; operators’ delays in securing or inability to secure necessary governmental permits; decisions and activities of the operators of the Company's stream and royalty properties; unanticipated grade, environmental, geological, seismic, metallurgical, processing, liquidity or other problems the operators of the Company’s stream and royalty properties may encounter; changes in operators’ project parameters as plans continue to be refined; changes in estimates of reserves and mineralization by the operators of the Company’s stream and royalty properties; contests to the Company’s stream and royalty interests and title and other defects to the Company’s stream and royalty properties; errors or disputes in calculating stream deliveries and royalty payments, or deliveries or payments not made in accordance with stream and royalty agreements; economic and market conditions; changes in laws governing the Company and its stream and royalty interests or the operators of the properties subject to such interests, and other subsequent events; as well as other factors described in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. Most of these factors are beyond the Company’s ability to predict or control. The Company disclaims any obligation to update any forward-looking statement made herein. Readers are cautioned not to put undue reliance on forward-looking statements.

Statement Regarding Third-Party Information: Certain information provided in this press release, including production estimates for calendar 2017, has been provided to us by the operators of the relevant properties or is publicly available information filed by these operators with applicable securities regulatory bodies, including the Securities and Exchange Commission. Royal Gold has not verified, and is not in a position to verify, and expressly disclaims any responsibility for, the accuracy, completeness or fairness of such third-party information and refers the reader to the public reports filed by the operators for information regarding those properties.

SCHEDULE A

Non-GAAP Financial Measures

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles (“GAAP”). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Our management uses Adjusted EBITDA and Adjusted Net Income as measures of operating performance to assist in comparing performance from period to period on a consistent basis; as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; in communications with the board of directors, stockholders, analysts and investors concerning our financial performance; as useful comparisons to the performance of our competitors; and as metrics of certain management incentive compensation calculations. We believe that these measures are used by and are useful to investors and other users of our financial statements in evaluating our operating performance because they provide an additional tool to evaluate our performance without regard to special and non-core items, which can vary substantially from company to company depending upon accounting methods, book value of assets and capital structure. We have provided reconciliations of all non-GAAP measures to their nearest U.S. GAAP measures and have consistently applied the adjustments within our reconciliations in arriving at each non-GAAP measure. We consider these items to be necessary adjustments for purposes of evaluating our ongoing business performance and are often considered non-recurring. Such adjustments are subjective and involve significant management judgment.

Adjusted EBITDA Reconciliation

Adjusted EBITDA is defined by the Company as net income (loss) plus depreciation, depletion and amortization, non-cash charges, income tax expense, interest and other expense, and any impairment of mining assets, less non-controlling interests in operating loss (income) of consolidated subsidiaries, interest and other income, and any royalty portfolio restructuring gains or losses. Other companies may define and calculate this measure differently. Adjusted EBITDA identifies the cash generated in a given period that will be available to fund the Company's future operations, growth opportunities, shareholder dividends and to service the Company's debt obligations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. See the table below for a reconciliation of net income to Adjusted EBITDA.

Adjusted Net Income (Loss) Reconciliation

Management of the Company uses adjusted net income (loss) to evaluate the Company’s operating performance, and for planning and forecasting future business operations. The Company believes the use of adjusted net income (loss) allows investors and analysts to understand the results relating to receipt of revenue from its royalty interests and purchase and sale of gold from its streaming interests by excluding certain items that have a disproportionate impact on our results for a particular period. The net income (loss) adjustments are presented net of tax generally at the Company’s statutory effective tax rate. Management’s determination of the components of adjusted net income (loss) are evaluated periodically and based, in part, on a review of non-GAAP financial measures used by mining industry analysts. Net income (loss) attributable to Royal Gold stockholders is reconciled to adjusted net income (loss) as follows:

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