## LETTER TO SHAREHOLDERS 

Royal Gold had another good year in 2001. Producing royalties provided $6.0 million in revenues, and we were able to purchase an additional royalty at the Pipeline Mining Complex, in Lander County, Nevada.We were pleased to also pay our second annual dividend of $0.05 per share. 

## PRODUCTION ROYALTIES 

Revenues from the Pipeline Mining Complex decreased from last year because the price of gold was lower for the same period. Our principal royalty (GSR1) has a sliding-scale feature.When the gold price goes down, we receive a smaller percentage of production. When the gold price goes up, we get more.The price referred to in our royalties is the London afternoon fix, averaged over a calendar quarter. In fiscal 2001, we had one quarter above $270 per ounce, which yielded a 2.25% rate on our GSR1 royalty.The other three quar- ters were at the 1.3% royalty rate, reflecting an average price slightly under $270 per ounce. 

We have two other royalties generating revenue at the Pipeline Mining Complex. Both of these interests (GSR3 and NVR1) are fixed-rate royalties. Our revenue from them reflects the ups and the downs of the gold price, but these royalties provide more downside protec- tion as compared to the GSR1 sliding-scale royalty. 

Gold prices have increased recently in response to the tragic terrorist attacks on the United States.We believe it is likely that the gold price will exceed an average of $270 in fiscal 2002. Our revenues grow dra- matically when the gold price increases. 

Our revenues also depend upon the productivity of the mines where we have royalties.The Pipeline Mining Complex is on schedule to produce 1.2 million ounces of gold in calendar 2001, and is projected to produce anoth- er 1 million ounces in calendar year 2002. Placer Dome, the operator at the Pipeline Mining Complex, has done a good job of optimizing production, and we believe it will continue to produce at high rates. 

Mining at the Pipeline Mining Complex has now moved into the South Pipeline deposit.The operation uti- lizes a fleet of 18 trucks, two 43 cubic yard shovels, and one 25 cubic yard shovel.This well-maintained fleet is guided by the latest global positioning satellite technolo- gy. Some of the trucks have recently been updated with lighter, larger capacity beds, further boosting productivity. 

We were particularly pleased to be able to announce some remarkable exploration results for the Crossroads discovery, southeast of South Pipeline. Placer Dome continues to drill in this area, and it will be working on resource and reserve estimates for this additional miner- alization. Much of the Crossroads material is subject to our GSR2 royalty — the so-called “super” royalty. It is called the “super” royalty because it pays out at 1.8 times the regular sliding-scale rate of GSR1, at all gold prices. 

We also continue to receive royalty revenue from the Bald Mountain Mine.This mine is also run by Placer Dome, and is a model of safe, efficient, open pit mining. 

Looking south to Argentina,Yamana Resources has been successful in putting its Martha mine into produc- tion.This underground mine is recovering high grade, direct shipping silver ore.The ore is of such high grade that it is put in one ton sealed sacks and sent by ocean freighter directly to a smelter in Canada. In July, we started receiving our share of this production. 

## EXPLORATION 

One way Royal Gold creates new royalties is to explore for precious metals, and to sell our discoveries, keeping a royalty.This is how we got into the Pipeline Mining Complex. 

This year, our exploration was limited to three ven- tures in central Europe.These ventures include a joint venture in Greece to explore gold deposits on the island of Milos, and gold exploration joint ventures in Romania and Bulgaria.We were successful in finding a sizeable deposit on Milos, but had to put the project on hold 

