aema presentation december 2017 final

29
NASDAQ: RGLD Industry Outlook Luncheon American Exploration and Mining Association Tony Jensen President and Chief Executive Officer December 7, 2017

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Page 1: Aema presentation december 2017 final

NASDAQ: RGLD

Industry Outlook Luncheon

American Exploration and Mining Association

Tony JensenPresident and Chief Executive Officer

December 7, 2017

Page 2: Aema presentation december 2017 final

NASDAQ: RGLD

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This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Suchforward-looking statements involve known and unknown risks, uncertainties, and other factors that could cause actual results to differ materiallyfrom the projections and estimates contained herein and include, but are not limited to: gold under pressure and expectations for a stronger dollar,global markets, US GDP and immunity to world risks, necessity for holding gold, industry ability to successfully find, develop and produce preciousmetals including gold, gold price performance compared to historical performance and other investment classes, supplies of fiat currencies and gold,successful precious metals companies trading at premiums, ability to maintain or increase cash flow from Pueblo Viejo or any or all of the otherCompany properties, a diverse portfolio, strong margins, lean structure, capital stewardship, and dividend returns and total shareholder returns inline with historical track records. Factors that could cause actual results to differ materially from these forward-looking statements include, amongothers: the risks inherent in the operation of mining properties; a decreased price environment for gold and other metals on which our stream androyalty interests are determined; performance of and production at properties, and variation of actual production from the production estimates andforecasts made by the operators of those stream and royalty properties from fiscal 2017 to fiscal 2020; decisions and activities of the Company’smanagement affecting margins, use of capital and changes in strategy; unexpected operating costs, decisions and activities of the operators of theCompany’s stream and royalty properties; changes in operators’ mining and processing techniques or stream or royalty calculation methodologies;resolution of regulatory and legal proceedings; unanticipated grade, geological, metallurgical, environmental, processing or other problems at theproperties; revisions or inaccuracies in technical reports, reserve, resources and production estimates; changes in project parameters as plans of theoperators are refined; the results of current or planned exploration activities; errors or disputes in calculating stream deliveries and royaltypayments, or deliveries or payments under stream or royalty agreements; the liquidity and future financial needs of the Company; economic andmarket conditions; the impact of future acquisitions and stream and royalty financing transactions; the impact of issuances of additional commonstock; and risks associated with conducting business in foreign countries, including application of foreign laws to contract and other disputes,environmental laws, enforcement and uncertain political and economic environments. These risks and other factors are discussed in more detail inthe Company’s public filings with the Securities and Exchange Commission. Statements made herein are as of the date hereof and should not berelied upon as of any subsequent date. The past performance of the Company, any commodity or the precious metals industry is not necessarilyindicative of its future performance. The Company disclaims any obligation to update any forward-looking statements.

Third-party information: Certain information provided in this presentation has been provided to the Company by the operators of properties subjectto our stream and royalty interests, or is publicly available information filed by these operators with applicable securities regulatory bodies, includingthe Securities and Exchange Commission. The Company has not verified, and is not in a position to verify, and expressly disclaims any responsibilityfor the accuracy, completeness or fairness of such third-party information and refers readers to the public reports filed by the operators forinformation regarding those properties.

Cautionary Statement

2

Page 3: Aema presentation december 2017 final

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Presentation Preface - Headwinds

Gold is Under Pressure

Stronger dollar

• Fed rate hike in December expected, and further strengthening anticipated

• US tax reform expectations

Global markets rising in unison, US markets hitting all time highs

US GDP at 3.3% annualized, highest in three years

Market is becoming immune to world risks

Risk off mentality – who needs gold?

Anyone seeking long term wealth

3

Page 4: Aema presentation december 2017 final

NASDAQ: RGLD

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Gold is Under Pressure

Stronger dollar

• Fed rate hike in December expected, and strengthening anticipated

• US tax reform expectations

Global markets rising in unison, US markets hitting all time highs

US GDP at 3.3% annualized, highest in three years

Market is becoming immune to world risks

Risk off mentality – who needs gold?

Anyone seeking long term wealth

Presentation Preface - Headwinds

Focus on building long term value, rather than worrying

about short term issues

4

Page 5: Aema presentation december 2017 final

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Buy and Hold – Creating Long Term Value

Agenda:

Gold is Precious

• Becoming increasing scarce

• Longer lead times to development

The industry must discover, permit, build and operate for long term value

Gold is Valuable

• A surprisingly competitive investment

• Critical store of investment

5

Page 6: Aema presentation december 2017 final

NASDAQ: RGLD

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Gold is Precious

Gold is a store of value because it is scarce

Approximately 187,200 tonnes, equal to ~6 billion ounces mined to date1,2

Current market value of all gold mined to date is $7.8 trillion3

• 2/3 of that gold has been mined since 1950

• Each year 2,500-3,000 tonnes of gold are mined

6

1 Source is World Gold Council.2 1 tonne = 32,150 ounces3 6 billion ounces *($1,283) current spot rate per ounce of gold on November 29, 2017.

Page 7: Aema presentation december 2017 final

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Gold is Precious

Gold is a store of value because it is scarce

Exploration has become increasingly less efficient

Source: BMO Capital Markets, SNL Metals and Mining

7

Page 8: Aema presentation december 2017 final

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Gold is a store of value because it is scarce

Exploration investment hasn’t demonstrated pro rata increase in reserves

Reserve grade degradation over time; not only maturing assets

• South Africa dominant in 1970s

• Heap leaching in the 1980s

• Economies of scale in the 1990s

• Gold price increases in the 2000s

• Productivity peaking in last decade

Gold is Precious

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51 54 57 60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11 14Average Grade of Gold Mined in USA + Canada + Australia + South Africa

g/mt $/ Ounce

Gold Price (RHS)

Average Grade of Gold Mined and Gold Price

Grade (LHS)

Average Grade of Gold Mined in World

8

Page 9: Aema presentation december 2017 final

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Gold is Precious

Longer lead times to development and production

Adds to value by restricting supply

Initial exploration to production = 16 years (Source: S&P Global Market Intelligence)

Source: Schodde, 2014

9

Page 10: Aema presentation december 2017 final

NASDAQ: RGLD

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Buy and Hold – Creating Long Term Value

Agenda:

Gold is Precious

• Becoming increasing scarce

• Longer lead times to development

10

The industry must discover, permit, build and operate for long term value

Gold is Valuable

• A surprisingly competitive investment

• Critical store of investment

Page 11: Aema presentation december 2017 final

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Gold is Valuable

A competitive investment for all portfolios

Strong historical performance in all currencies

• 9.25% compounded annual average return since 2000

Relatively stable, when viewed on an annual average basis

11

Source: Bloomberg, Sprott

Page 12: Aema presentation december 2017 final

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Gold is Valuable

A competitive investment for all portfolios

Strong historical performance against other investment classes

Tremendous global liquidity

12

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Since 1971 20-year 10-year

Avg. annual return

US Cash US Bond Aggregate US stocks EM stocks

EAFE stocks Commodities LBMA Gold (US$/oz)

Gold's long-term performance compared to other financial assets*

*Based on total returns indices including MSCI US, MSCI ACWI ex US, JPMorgan 3-month US cash, BarCap US Bond Aggregate, Bloomberg Commodity for the 10- and 20-year average, and S&P Goldman Sachs Commodity since 1971 due to data availability. Gold performance based on the LBMA Gold Price. Data between January 1971 and December 2016.

Source: Bloomberg, NBER, ICE Benchmark Administration, World Gold Council

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US$/euro

US$/yen

US Treasuries

US$/sterling

JGBs

US Agencies

Gold**

S&P 500 (all stocks)

Euro/yen

UK Gilts

Dow Jones (all stocks)

German Bunds

US$bn/day

Gold trades more than many other major financial assetsAverage daily trading volumes in US$*

*Based on estimated annual averages as of December 2016.**Gold liquidity includes estimates on over-the-counter (OTC) transactions, and published statistics on futures exchanges, and gold-backed exchange-traded products.

Source: BIS; Bloomberg; Germany Finance Agency; Japan Securities Dealers Association; LBMA; UK Debt Management Office (DMO); World Gold Council

Stocks

BondsCurrencies

Page 13: Aema presentation december 2017 final

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Gold index value

US dollar Mark** Reichsmark Deutschemark ECU

Euro Yen Pound sterling Gold

Currencies have depreciated over time relative to gold

**The 'Mark' was the currency of the late German Empire. It was originally known as the Goldmark and backed by gold until 1914. It was known as the Papermark thereafter.

Source: Bloomberg, World Gold Council

Gold is Valuable

A critical store of value

All fiat currencies lose value against real assets over time

Most recent US Gold Standard, Bretton Woods 1944 – Nixon 1971

13

Page 14: Aema presentation december 2017 final

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Gold is Valuable

A critical store of value

Deflation: Making Sure ‘It Doesn’t Happen Here’

• Ben Bernanke, Federal Reserve Board, November 21, 2002

14

“Like gold, US dollars have value only to the extent that they are strictly limited in supply. But the US government has a technology called the printing press (or today, its electronic equivalent), that allows it to produce as many US dollars as it wishes at essentially no cost. By increasing the number of dollars in circulation, or even by credibly threatening to do so, the US government can also reduce the value of the dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services.”

Page 15: Aema presentation december 2017 final

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Gold is Valuable

A critical store of value

More dollars in circulation without underlying GDP growth leads to dollar devaluation

• Inflation is the oversupply of a currency

15

* US GDP Data from World Bank, 2017 GDP per capita data the same as 2016, 2017 not released. Source for M1 and M2 is U.S. Federal Reserve.Source for debt is U.S. Treasury, TreasuryDirect.

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Indexed US GDP and Money SupplyCY 1993 - October 2017

GDP* M1 Money Supply M2 Money Supply

Page 16: Aema presentation december 2017 final

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Gold is Valuable

A critical store of value

More dollars in circulation without underlying GDP growth leads to dollar devaluation

• Inflation is the oversupply of a currency

Money supply increasing to fuel deficit and debt

16

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Indexed US GDP, Gold Price, Debt O/S, & Money SupplyCY 1993 - Oct 2017

GDP* Gold Price Debt O/S M1 Money Supply M2 Money Supply

* US GDP Data from World Bank, 2017 GDP per capita data the same as 2016, 2017 not released. Source for M1 and M2 is U.S. Federal Reserve.Source for debt is U.S. Treasury, TreasuryDirect.

Page 17: Aema presentation december 2017 final

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Historical Gold Price and US Debt CeilingDecember 1993 - October 2017

Gold Price (LBMA PM) Debt Limit ($ billions)

Gold is Valuable

Source: Charles Schwab

A critical store of value

Current deadline to raise US debt ceiling is December 8, 2017

17

Source for historical gold price is at White House, Historical Tables. Source for gold price is from S&P Capital iQ.

Page 18: Aema presentation december 2017 final

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Gold is Valuable

A critical store of value

World fiat monetary supply increasing rapidly

Gold supply is essentially flat and becoming more constrained

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Cummulative Gold Supply OECD M1

OECD M1 and Cumulative Gold Supply, Index 1=1970

Index (1=1970)Index (1=1970)

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Page 19: Aema presentation december 2017 final

NASDAQ: RGLD

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Gold is Valuable

A critical store of value

World fiat monetary supply increasing rapidly

Gold supply is essentially flat and becoming more constrained

According to Ben Bernanke, this is…

• “equivalent to raising the prices in dollars of goods”

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Annual Average Gold Value of Cummulative Gold Supply

OECD M1

OECD M1 and Annual Average Gold Value of Cumulative Gold Supply, Index 1=1970

Index (1=1970)Index (1=1970)

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Page 20: Aema presentation december 2017 final

NASDAQ: RGLD

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Agenda:

Gold is Precious

• Becoming increasing scarce

• Longer lead times to development

Successful Precious Metal Companies are at a Premium

Buy and Hold – Creating Long Term Value

The industry must discover, permit, build and operate for long term value

Gold is Valuable

• A surprisingly competitive investment

• Critical store of investment

20

Page 21: Aema presentation december 2017 final

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Current market value of all gold equities is just $230B1

vs AAPL($804B), GOOGL($621B), MSFT($563B), FB($484B), AMZN($471B)

Buy and Hold – Creating Long Term Value

Val

ue

in $

USD

1 All market data from S&P Capital iQ. Based on average market capitalization, in $USD, for the period 7-1-2017 to 9-30-17.

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Page 22: Aema presentation december 2017 final

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12 monthsJun-30-2013

12 monthsJun-30-2014

12 monthsJun-30-2015

12 monthsJun-30-2016

12 monthsJun-30-2017

Go

ld P

rice

in U

S D

olla

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Cas

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Op

erat

ion

s

Cash From Operations Average Gold Price (Kitco)

Cash from Operations (OCF) Versus Gold Price FY13-17

OCF average = $170m per year

$266m

FY16 Revenue$359M

Mount Milligan

$11.3

Pueblo Viejo $51.9

Andacollo $11.0

Peñasquito $3.9

Wassa Prestea

$2.1

Cortez$0.4

Other $0.4

Incremental $M Revenue by Property FY16 to FY17

FY17 Revenue$441M

Cash Flow - Creating Long Term Value

Operating cash flow up 56% over prior year

Pueblo Viejo was a major revenue driver

Go

ld P

rice in U

S Do

llars

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Page 23: Aema presentation december 2017 final

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.

EfficiencyDiverse Portfolio - Creating Long Term Value

195 property interests, of which 40 are producing1,2 and 21 are in development

87% revenue from precious metals3

89% of revenue from Canada, Chile, US, Mexico and Dominican Republic3

1 Producing properties not highlighted include Allan, Bald Mountain, Canadian Malartic, Dolores, Don Mario, El Limon, Gold Hill, Goldstrike, Gwalia, Holt, King of the Hills, Las Cruces, Leeville, Marigold, Meekathara, Mulatos, Rambler North, Robinson, Ruby Hill, Skyline, Soledad Mountain, South Laverton, Southern Cross, Taparko, Twin Creeks, Wharf, Williams and others.

2 Reflects portfolio on October 30, 2017.3 In FQ1 2018.

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Our gross margin is within the top 6% of S&P 500 constituents

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Gross Margin, Last 12 Months

S&P 500 Constituent

RGLD, 80% margin

Gro

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Source: S&P Capital iQ. Gross margin calculated as total revenue less cost of goods sold, divided by total revenue. A total of 456 of the S&P 500 constituents reported positive gross margin in the last 12 months.

Strong Margins - Creating Long Term Value

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Page 25: Aema presentation december 2017 final

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$0 $10,000,000 $20,000,000

NasdaqGS:MAR

NYSE:APH

NYSE:UHS

NYSE:M

NYSE:LEG

NYSE:OMC

NasdaqGS:FAST

NYSE:KSS

NYSE:AJG

NasdaqGS:FISV

NasdaqGS:IDXX

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NasdaqGS:NAVI

NYSE:UTX

NYSE:SEE

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NYSE:WFC

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NYSE:K

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NYSE:ALK

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S&P

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Revenue per employee

Source: S&P Capital iQ. Revenue per employee calculated as total reported revenue for the last 12 months, divided by total reported employees. 498 of the S&P 500 companies report total employees.

Lean Structure - Creating Long Term Value

Our revenue per employee is higher than 497 of the S&P 500

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Page 26: Aema presentation december 2017 final

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do

Go

ld C

orp

ora

tio

n

Res

olu

te M

inin

g Li

mit

ed

*New

cres

t M

inin

g Li

mit

ed

Sara

cen

Min

eral

Ho

ldin

gs L

imit

ed

*Go

ld F

ield

s Li

mit

ed

*Go

ldco

rp In

c.

Sib

anye

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ld L

imit

ed

Yam

ana

Go

ld In

c.

B2

Go

ld C

orp

.

*Cen

tam

in P

lc

Bar

rick

Go

ld C

orp

ora

tio

n

*Kin

ross

Go

ld C

orp

ora

tio

n

Evo

luti

on

Min

ing

Lim

ite

d

GDX Constituents Sorted by Shares Outstanding

Mill

ion

s o

f Sh

ares

Ou

tsta

nd

ing

at J

un

e 3

0, 2

01

7

RGLD has 14 million outstanding shares less than the next-highest GDX member

Discipline

* Company with an incorporation date that pre-dates Royal Gold, which was incorporated in 1981.

Equity Stewardship - Creating Long Term Value

26

Page 27: Aema presentation december 2017 final

NASDAQ: RGLD

|

Rainy River

Cortez Crossroads

Discipline

1 Calculated as reported cash from operations divided by common dividends paid during the same period. 2017 reflects trailing twelve months as reported through September 30, 2017. 2018 reflects approved dividend.

Shareholder Return - Creating Long Term Value

19% CAGR in dividends per share since 2001, and currently equates to $1.00 per share, a 1.2% annual yield, and an average 22% OCF yield1

27% 29%

12%

21%19%

25% 26%23%

34%30%

15%18%

25%

36%

29%

35%

22%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

Dividend Per Share Operating Cash Flow Yield Average Gold Price (source: Kitco)

An

nu

al D

ivid

end

s Pe

r Sh

are

Go

ld P

rice

in U

S D

olla

rs

27

Page 28: Aema presentation december 2017 final

NASDAQ: RGLD

|

Our focus is total shareholder return (TSR)

-200

0

200

400

600

800

1,000

1,200

1,400

Gold Price in US Dollars % Change Royal Gold Total Return Price % Change

S&P 500 Total Return Level % Change

RGLD+1261%

S&P 500+287%

Gold Price+313%

%

%

%

%

%

%

%

%

%

20-Year Total Shareholder Return

Perc

enta

ge C

han

ge in

To

tal R

etu

rn P

rice

Source: YCharts

Performance

Premium Performance - Creating Long Term Value

28

Page 29: Aema presentation december 2017 final

1660 Wynkoop Street, #1000

Denver, CO 80202

303.573.1660

[email protected]

www.royalgold.com

NASDAQ: RGLD