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Executives

Karen Gross – VP, Corporate Secretary

Tony Jensen – President and CEO

Stefan Wenger – CFO and Treasurer

Bill Zisch – VP, Operations

Bruce Kirchhoff – VP, General Counsel

Analysts

Cosmos Chiu – CIBC

Adam Schatzker – RBC Capital

Imaru Casanova – BJM

Andy Schopick – Nutmeg Securities

Mike Jalonen – Bank of America

John Doody – Gold Stock Analyst

Royal Gold, Inc. (RGLD) F3Q10 (Qtr End 03/31/10) Earnings Conference Call May 6, 2010 12:00 PM ET

Operator

Good morning. My name is Chris and I’ll be your conference operator today. At this time I’d like to welcome everyone to the Royal Gold fiscal 2010 third quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

(Operator Instructions)

Thank you. Ms. Gross, you may begin your conference.

Karen Gross

Hello everyone. Welcome to our fiscal third quarter 2010 conference call that is being webcast live. You will be able to access a replay of the call on our website at www.royalgold.com. Also on the website you will find our release detailing our financial results.

As always, this discussion falls under the Safe Harbor Provision of the Private Securities Litigation Reform Act. A discussion of the company’s current risks and uncertainties is included in the Safe Harbor statement in today’s release and is presented in greater detail in our filings with the SEC.

Participating on the call today are Tony Jenson, President and Chief Executive Officer; Stefan Wenger, Chief Financial Officer and Treasurer, Bill Heissenbuttel, Vice President, Corporate Development; Bill Zisch, Vice President, Operations; Bruce Kirchhoff, Vice President and General Counsel; and Stan Dempsey, Chairman.

A Q&A will follow our comments. We will also be discussing the company’s free cash flow, which is a non-GAAP financial measure. There is a free cash flow reconciliation in today’s release.

Now, I’ll turn the call over to Tony.

Tony Jensen

Good morning and thank you for joining us today. We are pleased to bring you up to date on our performance for the third fiscal quarter. Our business development activities during the quarter were very important for the future of our company.

In January we closed the Andacollo transaction with Teck. This investment combines the important characteristics of a long lived gold royalty revenue stream, near-term production and the quality operator operating in an attractive close country of Chile.

With the Andacollo concentrator now in ramp up, we expect this property will quickly become our largest contributor to royalty revenue in just a few more quarters.

In February we completed the acquisition of the International Royalty Corporation, the largest acquisition in the history of our company. The combination of Royal Gold and IRC brings together a portfolio of nearly 200 royalty properties and creates a combined company that holds royalty interest in some of the highest quality mines in the world. It generates substantial free cash flow and yields one of the most attractive budget development pipelines in the entire mineral industry.

It is particularly exciting to add the IRC assets to our portfolio at this time. As both Andacollo and Penasquito mines are ramping up initial production. It is also impressive to see the effect this business activity had on our reserves.

As of the end of December, gold reserves subject to our royalty interest increased 22% to 78.4 million ounces. Silver reserves subject to our royalty interest increased 12% to 1.3 billion ounces, and on a royalty ounce basis, we calculated that our equity gold reserves increased 148% to 3.3 million ounces. And, of course, as a royalty company these ounces are essentially cash free as we are not responsible for the development or operating cost to recover them.

This gold growth is largely driven by the Andacollo transaction and the additional royalty interest at Pascua Lama as a result of the IRC transaction.

Our portfolio of 33 revenue generating royalties performed well. We had record revenues for the fifth consecutive quarter. However, our financial results for the quarter were impacted by the acquisition cost related to the IRC transaction.

I will now ask Stefan Wenger, our CFO to report on those details and after Stefan, Bill Zisch, our Vice President of operations will provide an update on certain development in operating royalties. Stefan?

Stefan Wenger

Thank you, Tony and good morning everyone. For the third quarter we had royalty revenue of $35 million and free cash flow of approximately $14 million. Our revenue increased 68% over the comparable period; however, due to expenses associated with the IRC transaction, our free cash flow decreased by 22%. After adjusting for the IRC costs, our free cash flow is nearly $31 million, which was a 75% increase over the prior quarter and 87% of total revenue.

The contribution from gold represented 81% of our total revenue. One time transaction cost of $16.9 million associated with IRC impacted our net income, free cash flow, and earnings per share for the quarter.

In addition, we accrued a tax charge of approximately $2 million associated with our intention of making a 338 tax election, which would step up the basis of the assets we required in the IRC transaction for U.S. income tax purposes. We believe that the benefit associated with the step up election will be significant over the life of the IRC properties.

The impact of $0.33 per share associated with these IRC and tax election related costs resulted in a net loss of $5.8 million or $0.13 per share in the current quarter compared with net income of $4.1 million or $0.12 per share for the third quarter of fiscal 2009. Excluding the IRC related costs, net income would have been $8.9 million or $0.20 per share.

Over the nine-month period we achieved record revenue and free cash flow with royalty revenue of $96 million and free cash flow of $65 million. This was an 86% increase in revenue and a 53% increase in free cash flow over the comparable period despite the impact on cash flow from the IRC charges.

Free cash flow for the nine-month period was 68% of revenue. Net income was $11 million or $0.26 per share as compared to $31.3 million or $0.92 in the prior year. For the nine-month period IRC transaction expenses and tax charges were about $0.39 per share.

It is important to remember that last year’s comparable period included the effects of a onetime gain of $31.5 million or $0.60 per basic share resulting from the restructuring of our Cortez royalties in connection with the Barrick transaction.

Excluding the IRC transaction related cost and the onetime gain in the prior year, net income for the current nine-month period would have been $27.1 million or $0.65 per share compared to net income of $10.8 million or $0.32 per share in the prior year.

Adjusted free cash flow for the current nine-month period would have been $81.1 million or 88% of revenues. On the cost side our total cash costs for the quarter excluding IRC transaction costs were approximately $3.8 million compared with $3 million in the prior year.

Approximately half of the increase was associated with higher production taxes that are directly associated with the revenue growth while the remaining increase was associated with increased accounting tax and legal fees.

Noncash compensation expenses increased to $2.5 million during the quarter compared with about $700,000 in the prior year consistent with our expectation of vesting of performance-based stock grants as a result of the completion of both the IRC and Andacollo acquisitions during the quarter.

Moving to DD&A our average DD&A rate for the quarter on a per goal equivalent ounce basis declined slightly to $410 per ounce compared with $435 per ounce in the prior year. We expect our average DD&A rate to remain in the low $400 per gold equivalent ounce range during the remainder of calendar 2010.

We ended the quarter with cash and receivables on the balance sheet totaling $90 million and we had outstanding debt of $255 million. During the quarter we amended our term loan facility with HSBC by adding the Bank of Nova Scotia as a lender and increasing the principal balance available to $130 million, which allowed us to retire Canadian $30 million of debentures that were inherited from IRC. We also extended the final maturity date to 36 months from the initial funding, which gives us a final maturity date of February 2013.

Not only was this restructuring cost effective but it also provides Royal Gold with more financial flexibility. We’re very pleased to have two strong partners like HSBC and Scotia involved with Royal Gold to our debt facilities.

Now I’ll turn the call over to Bill Zisch for an update on our portfolio properties.

Bill Zisch

Thank you, Stefan and good morning everyone. Before I discuss the performance of some of our principle properties, I’d like to take a moment to talk about the changes we have seen within our portfolio as we integrate the IRC assets and its development properties move into to operations.

In total we added 10 (pain) properties, almost a 50% increase in our producing assets. Two of these properties, the Southern Cross and Gwalia Deeps operations are located in Western Australia and operated by St. Barbara Limited.

Southern Cross is maintaining its production at 120,000 ounces per year. Gwalia Deeps recently reached its design production rate of 100,000 ounces per year and they expect rise in (order rates) will provide continue growth in 2011 and 2012.

Two other properties moved from the development stage to become producing properties since the first of the year. Avocet, (Inada) mine and (inaudible) targeted to produce a 120,000 ounces per year, shipped its first gold in February and Saracen’s South Laverton mine in Western Australia designed to be a 100,000 to 120,000 ounce producer reported its first gold in January and made their first shipment in February.

I also want to say that we are monitoring the Australian tax situation. It is too early in the process to determine if and how Royal Gold would be affected by this tax. I can’t say, however, that for the past three and nine month periods about 4% of our revenue came from Australia.

In addition to these new IRC properties we currently have 23 development projects in our portfolio. Teck’s Andacollo mine continued on its path towards full scale operations. Ramp up of operations began mid February after commissioning was completed with first store having been fed to the mill in mid January. Andacollo’s ramp up to a design target of 55,000 tons per day is expected to be completed in the third quarter of this year.

Currently throughput is running at about half of the design rate with periodic runs at about two thirds of capacity. The first shipment of concentrates is scheduled for this week.

A new project added from IRC is Yukon Zinc’s Wolverine mine. The silver rich poly-metallic deposit is located in Southeast Yukon. At current silver prices, we have a 9.45% royalty on the gold and silver.

Construction of the surface facilities and development of the underground mine commenced in 2009 and mine operation is scheduled for mid 2010.

Development also continues on schedule at Osisko’s Ciscos Canadian Malartic project in the Abitibi mining district in Quebec. The project is about 80% committed on construction capital and all major components are on the sight.

Osisko has maintained its guidance for commercial production in the second quarter of 2011 with preproduction stripping currently underway.

Our expanded portfolio continues to perform well with first quarter production results that were about 10% above expectations.

I’ll now focus on the quarterly performance of some of these principle producing properties. At Cortez, royalty revenue for the quarter was significantly above the operator’s plan as a sequencing of ore and realization of higher grades within the pipeline complex covered by our royalty interests were positive.

Barrick received a favorable court ruling allowing them to continue mining at Cortez Hills as planned. As we mentioned before as mining shifts to Cortez Hills, the production related to our royalty interest will decline.

In 2009, Cortez production from our GSR 3 royalty totaled about 360,000 ounces. With this year’s operating plan, we expect about 240,000 ounces to be produced from our royalty interest.

Taparko had another successful quarter with sales of almost 29,000 ounces. They have increased their planned production from prior year’s with a target 137,000 ounces to be produced in 2010.

As I mentioned last quarter in December Somita began a 90-day operational completion test period in an attempt to satisfy conditions of the Royal Gold Funding Agreement. Their performance during this test period was good and we are currently reviewing the report that has been submitted with regard to satisfying the completion test.

While Taparko continues to be one of our more substantial revenue contributors, if they continue to perform as they have over the last two quarters, they will likely meet the $35 million payment threshold associated with GSR 1 in the fourth quarter calendar 2010. At that time our royalty will convert to a 2% gross smelter return. They currently pay $25 million of the $35 million.

Operating results at Peñasquito now reflect combined oxide and sulfide production of gold, silver, lead and zinc as concentrates are now being produced from the sulfide circuit.

During the projects inaugural ceremony on March 23rd, Goldcorp reported that ramp up of the first sulfide processing line is likely to sustain design production levels of 50,000 tons per day during the third quarter of this year. In fact their productivity in March was about 46,000 tons per day.

An additional 50,000 tons per day are expected out of the second sulfide process in line in the fourth calendar quarter of this year. Lead and zinc concentrate recoveries and grades appear to be trending towards plan despite processing of transition ore.

GoldCorp’s production guidance for 2010 is for 180,000 ounces of gold, 13.4 million ounces of silver, 107 million pounds of lead and a 135 million pounds of zinc.

At Robinson, full access has been reestablished into the Veteran Pit. Additional floatation cells are fully operational and concentrate contracts allow for more flexibility with respect to concentrate grades. Although the complex nature of its ore body is likely to introduce monthly variability, Robinson expects to finish the year at its annual production guidance of 135 tons of copper and 80,000 ounces of gold. During the first quarter, gold production net plan in copper production was about 15% below plan.

The acquisition of our royalty interest in Valey’s Voisey’s Bay property in Newton (one) in Labrador as part of the IRC transaction has added another world-class asset to our portfolio. In spite of current labor issues, we believe this long-lived high quality asset represents a great value now and in the future.

During the quarter, the operation to produce nickel and copper as partial operations continue to feedstock (inaudible) material. Valey reported that it had resumed production from the Voisey’s Bay of void mine and mill which supplies nickel concentrate to Valey’s operations at Thompson (inaudible) and copper concentrates to clients in Europe.

Voisey’s Bay site is operating two weeks on, two weeks off producing about 3.5 million tons of nickel per month and 2.8 million tons of copper per month. This is about half of their normal monthly production capacity.

The Dolores mine is ramping up to design rates. While stacking of material in the heaps continues at 18,000 tons per day, Minefinders guidance trends up quarter-over-quarter as grade improves and volume and duration of ore under reach increases.

Performance during the first quarter exceeding planned gold production and silver was up in 1% of plan. Minefinders expects production to ramp up to ramp through 2010 to a steady state run rate of 120,000 ounces per year.

The other four primary contributors to our revenue continue to perform as expected. Leeville and Mulatos and Goldstrike exceeded plan and Siguiri was just slightly below planned levels.

The portfolio of producing and development properties that we have constructed has performed well and Cortez production declines, historical royalty rate decreases and Siguiri reaches its revenue cap. Development properties like Andacollo, Canadian Malartic, Wolverine, and Peñasquito are well positioned to offset these declines and to continue the growth of our revenue stream.

And with that I will turn the call back over to Tony.

Tony Jensen

Thanks, Bill. We are starting to give you a workout on these conference calls with extended portfolio, thank you. Let me just come back to reserves for just a moment before some closing remarks. Compiling reserve information from our operators has become a much greater task than it once was. Five years ago we had a total of six properties and five different royalty operators. With the current portfolio at these six producing and development stage properties, we now reach out to the 35 operators to get updated reserve and production information. We will be releasing our complete annual reserve resource and production guidance from the operators for calendar 2010 within just the next few weeks.

In summary then, this has been a pivotal quarter of growth for the company with the closing of the Andacollo and IRC transactions. We now have close 200 royalty properties in our portfolio of which 33 are in production. These producing properties both performed well this quarter resulting in record quarterly revenue and we look forward to even more robust results in the coming quarters with increase revenue for Andacollo and Peñasquito in a full quarter of revenue from the IRC properties.

Operator, with that our prepared remarks are finished and we would be happy to answer any questions if there were some for us.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Cosmos Chiu from CIBC. Your line is open.

Cosmos Chiu – CIBC

I think this is a question for Stefan. Just want to chat more about the U.S. tax election to step up the basis of the IRC assets. Are you trying to get it to – step it up to the – your acquisition cost of IRC and have you had a chance to quantify what cash tax impact you might have? And how difficult is it to get the step up? Does it need to get approved by (inaudible)?

Stefan Wenger

Thanks for the question, Cosmos and I can address that. What we are looking at doing is making a 338 election under the U.S. tax rules and there is no approval that’s required, it’s really just condition on the company making the appropriate filings. And it’s fairly typical for a U.S. company that’s making a foreign acquisition to make this election. It does have a fairly significant future cash impact, positive future cash tax impact on us because it allows us to step to that purchase value for U.S. tax purposes. That means when the net income comes up from our foreign coporations under the U.S. rules, we will be able use that stepped up basis to shield some of that income coming out from the foreign locations. I am not at a position to where I could quantify that benefit but it’s a significant benefit that it’s well worth the upfront tax that we are incurring to get there.

And just one point, that upfront tax relates to small gain that we had on some of IRC U.S. assets that are under the Canadian assets. We evaluate that pretty thoroughly.

Cosmos Chiu – CIBC

So that tax charge you had in the current quarter, is that a onetime thing or will we be seeing more tax charges going forward?

Stefan Wenger

That’s a onetime charge that we accrued into this quarter based on our intention to make that election.

Operator

Your next question comes from the line of Adam Schatzker from RBC Capital. Your line is open.

Adam Schatzker – RBC Capital

Two questions if I could. Now that you have had a little more time to digest the IRC transaction, any surprises, positive or negative that you have uncovered as you look at the asset, especially some of the ones perhaps that you didn’t know as much about in the early parts of the process?

Tony Jensen

Really there hasn’t been any material surprises. I think we were somewhat conservative and a bit generic in our tax modeling and I think Stefan’s work, as he just described is probably an upside in value that we have been able to harness here. But apart from that, I don’t think there is any material difference in the assets now versus when we are in the acquisition process.

Adam Schatzker – RBC Capital

And I guess looking at some of these things like the frac sense and the potash, are here still interesting for you or do you have different thoughts on those that you see a little more about them.

Tony Jensen

We very much focused on the gold side of the portfolio. So we would be always be looking to maximize value in any of the rest of that that we could. It just material drivers to our business and so we just act opportunistically if some way came up that we could create value out of those.

Adam Schatzker – RBC Capital

I guess the other question is part of your game plan I guess in the longer term is to build through new royalty acquisitions. Are you guys getting to the point now or close to the point where you are done with IRC stuff and you can start looking at those again seriously?

Tony Jensen

I think we are at that point. This has been a heavy quarter for our legal team and our accounting team integrate the IRC transactions but we never stopped in our business development activities because as you know, it takes several months to get serious about an opportunity and get engaged. So we never slowed down on that side of it and I think now the rest of the company is catching up with our business development side and we are certainly ready to continue to look at new things.

Operator

Your next question comes from Imaru Casanova from BJM. Your line is open.

Imaru Casanova – BJM

I just had a couple of questions. The first is regarding what we should expect going forward with your cost of operations and G&A. They were a little bit higher this quarter than the previous quarter a bit higher than my expectation. So I was wondering, Stefan, maybe you could give us an idea of what we should expect going forward.

Stefan Wenger

I will point out and I said it in my remarks as well, the biggest impact on our costs and this impacted the cost of operations line, G&A and business development to a smaller extent was we are non-cash stock-option or stock expense costs, those were $2.5 million this quarter compared to about $700,000 in the last quarter and that gets allocated to those three line items that I spoke of. The reason for that as we have some performance base stock compensation and based on the Andacollo and IRC deals, some of those have accelerated vesting. And I expect to see that remain high for our fourth fiscal quarter and then I would expect to see that charge drop off in the fiscal ‘11.

As far as the cash costs, we have had a growing business and we have incurred higher cash costs over the last several quarters fiscal – when there is lot of activity, there is certainly some more general costs that are impacting our business as well, particularly on the auditing side where every transaction we do has additional audit cost and there is a lot of tax work going on. I don’t really have an outlook on those costs. We are still going to look to be very cautious with respect to our spending. We are very cost cautious organization, so I will look to manage that going forward.

Imaru Casanova – BJM

Okay, thank you. The other question I have is again in the income statement part, your DD&A expenses for us to calculate that, we estimate that going forward, will you be providing us with a breakdown of how you are going to split basically the cost of the IRC transaction amongst the different assets there?

Stefan Wenger

We will be putting out our 10-Q in a couple of days and that will have a breakout but it won’t be as detailed as what you are looking for. If you recall for the Barrick transaction we also put out an 8-K that had a more detailed breakdown of our final purchase allocation and I expect we will do that again once this IRC allocation is final. At this point we are still calling that preliminary as we button up a few valuation items but we will make this a much quick process than we did on the Barrick valuation exercise.

So we would expect to get something out on that.

Imaru Casanova – BJM

And just a couple of more questions just to make sure I get the numbers right. What’s your current number of shares outstanding as of today?

Stefan Wenger

Yes, the current number of shares outstanding is 49.2 million and that includes about 47 million Royal Gold common shares and then we also have some exchangeable shares that you need to add to that number, and both of those are on our balance sheet that we have put out.

Imaru Casanova – BJM

Okay. So the 49.2 million already includes the 1.8 million exchangeable in the Canadian subsidiary?

Stefan Wenger

That’s correct, and that will also be on the front of our 10-Q for your information.

Imaru Casanova – BJM

And just last question is on the – want to know if you had any news on the Holt-Holloway royalty and the legal dispute there, it’s pretty significant royalty at this goal prices. So I am wondering if there is any developments there.

Tony Jensen

Tony here. We are watching that closely and we have Bruce Kirchhoff, our General Counsel that I would ask to respond to that.

Bruce Kirchhoff

We are still waiting for a schedule for reach to the Appellate Court and following briefing oral argument to the Appellate Court. So short answer is no, there (inaudible).

Operator

Your next question comes from Andy Schopick from Nutmeg Securities. Your line is open.

Andy Schopick – Nutmeg Securities

Yes, it has become a much more complicated and difficult company to understand, an awful lot has taken place here in a short period of time. Stefan, I am going to ask you if you could comment for me on a just few financial issues here on the balance sheet. Now the long-term debt of $229 million, how comfortable is management with the current leverage position and are there really any plans to begin to reduce that debt overtime?

Stefan Wenger

Yes, Andy, thanks for the question.

Andy Schopick – Nutmeg Securities

I got more.

Stefan Wenger

To answer your question directly – I will be happy to take more, we are very comfortable with the amount of leverage based on our existing and future cash flow. We have really put a lot of new cash flow into this company so that the debt is not a concern as far as a debt service perspective. What does become challenging is balancing our capital needs with respect to business development and that’s something that we are very comfortable dealing with as we go forward and I am very tied in with Bills and Tony on those efforts to make sure we are capitalizing in the company properly as needed.

Tony Jensen

I would also just offer up that our LIBOR rate on this – the rate on the interest on the debt makes it very attractive capital for us. So we are quite pleased as to –-

Andy Schopick – Nutmeg Securities

At this time, that could be subject to dramatic changes as well down the road.

Tony Jensen

Surely it can, and we are watching that closely obviously.

Andy Schopick – Nutmeg Securities

Okay, also does this have any impact or bearing on your dividend policy at all?

Tony Jensen

No, it does not.

Andy Schopick – Nutmeg Securities

If I could ask Stefan to also comment a little bit more on the royalty interest and mineral properties which have now risen to above $1.5 billion. Now I assume that number reflects all of your properties, both those that are revenue producing and otherwise. Is that correct?

Stefan Wenger

Yes, that’s correct and there will be a good table that shows where that’s broken out in our 10-Q that will get filed.

Andy Schopick – Nutmeg Securities

Okay, then I will –

Stefan Wenger

And all of that relates to properties we split out to our producing properties, the development stage and also to some exploration stage assets.

Andy Schopick – Nutmeg Securities

Okay, finally on the balance sheet. If you would just comment a little bit on the net deferred tax liabilities of $155 million. How is that broken down and can you just elaborate a little bit on that?

Stefan Wenger

Yes, the vast majority of that came to us with the IRC acquisition and really reflects the tax basis difference between what we’re putting on our books and what the Canadian tax basis differences for those assets. I mentioned that tax step up election that we’ve made.

Andy Schopick – Nutmeg Securities

Yes.

Stefan Wenger

And less purposes it didn’t take away a Canadian tax difference for which we’ll get credited in US for taxes paid in Canada. But that’s really how the perks accounting works. You put all the value on the assets and then also book up that liability for future taxes relating to the bases differences.

Andy Schopick – Nutmeg Securities

Okay. One final thing here on IRC, I did hear on CNBC the other day and I wasn’t paying that close of attention, but I heard that nickel prices had come down very sharply and of course as I recall nickel is the predominant royalty here from the IRC property. Just any comment about how that royalty stream looks going forward based on recent developments?

Tony Jensen

Andy, of course the strike is still on there at (inaudible) and so as Bill just reported we’re at little less than 50% production capacity now with them operating two weeks on and two weeks off. We just don’t have clarity into the likelihood of one that’s strike might come to an end. It’s been going on since October 1, we very much would like to see the parties come together on that, but we – we’re hopeful that at the very least that they’ll be able to continue to operate at the existing production levels and then ramp up in a very reasonably quick fashion as soon as the strike is settled.

Andy Schopick – Nutmeg Securities

Well, Tony my question was more directly related to the nickel pricing, I know nickel has been a terrific play here over the past year but more recently I think it’s a taking a big hit and I just don’t know again how that royalty stream is going to be affected by the overall pricing in nickel. How it’s generally tied to the price of nickel.

Tony Jensen

Actually, it would be tight, the near term price I can’t say whether its spot or exactly how that contract reads but, I don’t know what you’re referring to is regarding to a big reversal in nickel price?

Andy Schopick – Nutmeg Securities

Something happened in the last day or two where nickel prices had come down a lot again, I was only kind of heard it.

Tony Jensen

Yes, and Andy we’ve seen with some of the Greek issues we’ve seen a lot of sell-off in some of the base metal but not significantly. We saw in copper as well. So I’m not particularly worried about the long term value of that asset.

Andy Schopick – Nutmeg Securities

Okay, I’ll pass it on. Thank you.

Tony Jensen

Thanks Andy.

Operator

Your next question comes from Mike Jalonen from Bank of America. Your line is open.

Tony Jensen

Good morning Mike.

Mike Jalonen – Bank of America

Good morning. Just afternoon here in Toronto. Thank you Tony. At least my name got spelled right, that was good. Just a question for Stefan, I was just wondering, I guess going back to depreciation. You gave us a little $400 per ounce for depreciation but its – I’m guessing I’m taking the lazy man’s way just to try to get a millions of dollars from you because I see your depreciation and your running 11, $12 million in the first two quarters and $13 million of one month of IRC. Would it safe to say it would be more 16, $17 million in the fourth quarter.

Stefan Wenger

Mike, this is Stefan. I’m not comfortable giving out a dollar number for DD&A because its heavily tied to our production at the properties and it’s just too odd to say, I think if you take it on a per ounce basis, it’s a better comparison. I can say that right now we have – we’re in that $400 dollar an ounce range on the low side, the two biggest contributors to that are probably Taparko and Siguiri. As Bill mentioned we’re going to be reaching a cap Taparko and once that’s been reached actually spend – expect a decrease in DD&A on a per ounce basis but on a gross dollar basis you will see DD&A increase substantially as these IRC assets come on to full stream, also as Andacollo comes in and Penasquito come on, but I can’t say that on a per ounce basis Andacollo, Penasquito are below as far as an average costs where we’re at today.

Mike Jalonen – Bank of America

Okay. Thank you.

Operator

Your next question comes from John Doody from Gold Stock Analyst. Your line is open.

John Doody – Gold Stock Analyst

Hi guys, couple of more questions on the debt level. The current term loan I guess you’re paying back, the second half million a quarter with a $26 million and plus?

Stefan Wenger

That’s correct, John.

John Doody – Gold Stock Analyst

And the bullet on the revolver, couple of years down the road. What kind of – is there any interest on the part of the Company to accelerate the repayment of the debt?

Stefan Wenger

Well I think we would look to do that John as we build cash flow, we’ll continue to balance the capital needs of the Company in new acquisitions with accelerating the data…

John Doody – Gold Stock Analyst

As you’re able to?

Stefan Wenger

Yes, I think in the near term you’ll see us build some cash and as we talked about it couple of calls back watch that LIBOR rate if we start getting concerned about that we can pay down those facilities but I think we would attack those little quicker than the amortization rate of the term loan.

John Doody – Gold Stock Analyst

The stock seems to be stuck for the last 18 months around 50 bucks plus or minus $5 and I’m just wondering with so many wonderful things coming online for the Company, you’ve missed to market is afraid of some kind of share of sale that might get rid of the debt and but move further the shareholder interest?

Stefan Wenger

That could very well be John, I don’t have any particular comments on that.

John Doody – Gold Stock Analyst

I told you, you’re not going to tell me, so. Okay, great. Thanks, keep up the good work and I’m glad to see Andacollo has got enough water now so there is not an issue.

Stefan Wenger

Yes, they seem to be operating just fine and the long term solution there is progressing wells so that seems to be enhanced.

John Doody – Gold Stock Analyst

Good. Thanks a lot.

Stefan Wenger

Thanks John.

Operator

(Operator Instructions) Your next question comes from Adam Schatzker from RBC Capital. Your line is open.

Adam Schatzker – RBC Capital Markets

Actually guys, my question was just answered. Thank you.

Tony Jensen

Thanks Adam.

Operator

Your next question comes from Andy Schopick from Nutmeg Securities. Your line is open.

Andy Schopick – Nutmeg Securities

Thank you. Although you did touch upon this in your prepared remarks relative to giving us some guidance that Taparko and Cortez are going to start to decline and that you hope that much of that effect will be offset by other royalty properties now in the stream. I certainly hope that management is going to take every measure to communicate to the investment community as well as it can the potential impact on upcoming quarters from some of these shifts, that are going to be fairly significant here or some things kind of either come off or decline sharply with others hopefully coming on stream here. I’m really not clear at this time what the effects are going to be and my concern is that one or two or three quarters down the road here there could be some kind of hick up, it’s hard for me to know right now how this is all going to balance out and I don’t know but you want to comment any further about it.

Stefan Wenger

Andy, we have given the production guidance for Cortez. We’ve also given very clear guidance when Taparko is likely to come and as well as Siguiri. So that’s out of the equation I think it’s pretty well known, but the ramp up scenario is probably more over a year.

Andy Schopick – Nutmeg Securities

Yes.

Stefan Wenger

And so if we look to, we look to Penasquito and they have given guidance and we have no reason that they will meet that guidance. They’ve done a very good job coming along the entire production milestones that they’ve set out and Andacollo seems to be coming along quite nicely as well. We were just with (inaudible) last week and had good conversation with them and had no reason to believe that they aren’t going to be up to full production in third quarter and sure happy to sit down with you if there is some more concerns that you’d like to talk about there.

Andy Schopick – Nutmeg Securities

Got to be fine. Thank you.

Stefan Wenger

Thanks Andy.

Operator

And you have no further questions at this time.

Tony Jensen

Well, thank you very much for joining us today. We very much appreciate your interest in Royal Gold and we look forward to as Andy just mentioned continue to update you as we go forward in the coming quarters. Thanks very much.

Operator

This concludes today’s conference call. You may now disconnect.

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Source: Royal Gold, Inc. F3Q10 (Qtr End 03/31/10) Earnings Call Transcript
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