Dear Fellow Shareholders,

During fiscal 2014, our industry adapted to the “new normal” of weaker precious metals prices following the dramatic decline in gold and silver prices in late fiscal 2013. The average gold price for fiscal year 2014 was down 19% relative to the prior year. These prices compressed financial results for all precious metal companies, particularly in high debt and low margin companies. Many operators responded to the lower price environment by cutting operating costs, eliminating growth expenditures, scaling back projects, selling assets, and reducing or eliminating dividends.

Royal Gold stands in stark contrast to pressures experienced by others in the precious metal industry:

• We are financially robust with over $700 million in working capital and a $450 million untapped credit facility, giving us more than $1 billion in uncommitted liquidity;
• We continued to invest in the business, adding four new interests to our portfolio over the fiscal year, consisting of royalties at El Morro, Cortez and Goldrush, as well as a new streaming interest at Phoenix;
• We believe this is an excellent time to add new interests to our portfolio as royalty and stream products offer a compelling cost of capital to operators in the current environment;
• We experienced significant volume growth as Mt. Milligan entered production during the fiscal year and is now our largest single source of revenue;
• We returned over $53 million to shareholders in the form of dividends, which equates to about 36% of operating cash flow, marking our 13th straight year of increasing dividends;
• We achieved a total shareholder return of 84%; and
• We added significant talent to our board of directors during the fiscal year.

Financially Robust

Prior to the gold price declines experienced in late fiscal 2013, we took several measures that I reported on last year to make sure we were well positioned to grow the company in any metal price environment. We furthered those efforts in fiscal 2014 by increasing our credit line to $450 million, with improved terms and with an extended maturity.

We funded over $75 million in new opportunities out of very strong operating cash flow, which totaled $147 million during the fiscal year. We have slightly less than $100 million in future commitments, leaving us with one of the strongest uncommitted balance sheets in the business.

New Business

Over the last fiscal year we’ve given our shareholders exposure to properties with excellent development potential by investing in Goldcorp’s and New Gold’s El Morro project, Barrick’s Cortez mining complex and its nearby Goldrush project and Rubicon Minerals’ Phoenix project.

In August 2013, we acquired a royalty from Xstrata covering an estimated one-third of the total reserves at the El Morro copper gold project in Chile. Goldcorp holds 70% of the El Morro project, with the remaining 30% held by New Gold. El Morro is among the world’s highest grade undeveloped gold and copper porphyries, with reserves of 9.5 million ounces of gold and 7 billion pounds of copper.

“As Mt. Milligan production began to ramp up and our other properties continued to perform, investors took note of that growth and rewarded Royal Gold. We outperformed our sector and gold for fiscal 2014, delivering a total shareholder return of approximately 84%.“

In January 2014, we expanded our business in Nevada. We purchased a royalty on the southern end of Barrick’s Goldrush deposit. Goldrush has approximately 15 million ounces of gold resource and the system remains open in multiple directions, including lands subject to Royal Gold’s new royalty interest. We also increased our interests in certain portions of the Pipeline complex at Barrick’s Cortez gold mine. These new interests complement a host of other royalty interests we have in the area.

In February 2014, we completed a stream financing transaction with Rubicon to help develop its Phoenix gold project in Ontario, Canada. Rubicon projects a total life of mine production of 2.2 million ounces, with average estimated annual production of 165,300 ounces based on a 13 year mine life. The Phoenix project is currently under construction with first production expected in mid-calendar 2015.

Excellent Environment

Royal Gold is navigating this challenging commodity environment from a position of strength. While many in the industry are seeking capital to advance projects, we have the capital resources to invest in quality projects.

Royal Gold’s main competitors are debt and equity financings. Equity financing for many companies today is unavailable and, when available, it is often quite dilutive to per share financial results. Debt also has limited availability for smaller entities and is rarely a complete solution for project financing. By contrast, royalty and stream financing is available, its attributes are well understood by the industry, and it is gaining market share.

Our royalty and streaming products complement the industry’s focus on per share returns by limiting dilution and delivering a compelling cost of capital to our counterparties. We do our own due diligence, leveraging our operating experience carefully and seeking out strong management teams for long-term relationships. Our recent transaction with Rubicon at the Phoenix project is an excellent example.

We continue to be encouraged by the amount of deal flow in the business; but we will remain selective in our investments, seeking opportunities that we believe will provide strong total shareholder return.

Strong Volume

Thompson Creek’s Mt. Milligan mine commenced production in September 2013. After three quarters of progressively higher production, it is now our largest single revenue generator even though it ended our fiscal year at only about 65% of design capacity. Thompson Creek expects the mine will be near 80% capacity by calendar 2014 year end, with beginning production capacity scheduled for 2015. We estimate Mt. Milligan, once in full production, could become the largest gold stream in the business, and we are very enthusiastic about the returns we expect Mt. Milligan to generate for our shareholders.

The new production from Mt. Milligan adds to 36 other producing properties also providing revenue to Royal Gold. An operating or investment-oriented metals company would be hard pressed to replicate this level of diversification.

Teck’s Andacollo property in Chile and Goldcorp’s Peñasquito mine in Mexico were our other top producers. At Andacollo, production was 27% lower than a year ago as a lower grade portion of the deposit was mined according to schedule, while Peñasquito’s production increased 44% as Goldcorp accessed a higher grade portion of the deposit.

We continue to monitor progress on more than 160 development, evaluation and exploration investments. This includes our royalty on Barrick’s Pascua-Lama project. In late 2013, after investing over $5.4 billion on project development, Barrick announced the temporary suspension of construction at Pascua-Lama, and noted that a decision to restart development will depend on improved economics and reduced uncertainty related to legal and regulatory requirements. We believe that Pascua-Lama is a world class deposit, with total gold reserves of 15 million ounces subject to our interests. When this project commences production, it has the potential to be among our largest sources of revenue without the need for any additional capital contributions on the part of Royal Gold.

Total Shareholder Return

We are proud to have developed a business that rewards shareholders with a sustainable dividend. We returned over $53 million to shareholders in the form of dividends, which equates to about 36% of operating cash flow. This was our 13th consecutive year of increasing dividends.

“We are financially robust with over $700 million in working capital and a $450 million untapped credit facility, giving us more than $1 billion in uncommitted liquidity.”

As Mt. Milligan production began to ramp up and our other properties continued to perform, investors took note of that growth and rewarded Royal Gold. We outperformed our sector and gold for fiscal 2014, delivering a total shareholder return of approximately 84%.

Talent Reinforced

From a personal standpoint, we bid farewell to our Founder and Chairman Stanley Dempsey, who retired in May 2014, after 31 years of leadership with Royal Gold. Stan was the driving force behind Royal Gold’s evolution from an oil and gas company to a gold exploration and production company, and ultimately to one of the world’s largest royalty and streaming companies. Jim Stuckert and Denny Howell also retired from the board after decades of service to the company. Both were instrumental in financing the company in its earliest days and each provided excellent guidance over those many years. Our current management team owes a large debt of gratitude to these three gentlemen for establishing a strong and stable base from which the company can continue to grow.

“Royal Gold is navigating this challenging commodity environment from a position of strength. While many in the industry are seeking capital to advance projects, we have the capital resources to invest in quality projects.”

We took this time of change and used it to our advantage by adding two well-respected and experienced gold industry executives to the board. Kevin McArthur joined the board in February. Among other positions, Kevin was the prior President and CEO of Goldcorp and Glamis Gold, and is the current Vice Chairman and CEO of Tahoe Resources. Kevin brings a unique combination of operational and executive-level expertise, as well as common sense cultivated during his involvement in some of the most exciting growth developments in the mining industry over the last three decades. Chris Thompson joined the board in May. He is the prior President and CEO of Gold Fields and the Founder and CEO of Castle Group, which managed venture capital funds to finance the development of new gold mines. Chris has vast international transactional and operational experience in the mining industry and we will be well served by his knowledge of the business.

The board appointed William Hayes to lead the company as Chairman. Bill has served on the Royal Gold board of directors since 2008 and knows our business well. We welcome his leadership in this new role.

In closing, let me express my appreciation to all of our shareholders for your support of our efforts. It is a privilege to represent Royal Gold and, on behalf of all of our employees, we thank you for that support.

Sincerely,

Tony A. Jensen