Gold prices hold sharp gains as soft US jobs data fuels Fed rate cut bets
On Tuesday, 10 June 2025, Gold Royalty Corp (NYSE:GROY) presented at the John Tumazos Very Independent Research Virtual Conference, highlighting its transition to positive free cash flow and strategic growth plans. The company emphasized its diversified royalty portfolio and a disciplined approach to acquisitions, while addressing potential challenges such as equity dilution and debt management.
Key Takeaways
- Gold Royalty is transitioning to positive free cash flow, driven by its diversified portfolio.
- The company projects a 367% growth in gold equivalent ounces by 2029.
- Strategic focus includes deleveraging and potential dividends or buybacks.
- Management is cautious with acquisitions, focusing on harvesting existing investments.
- Key growth drivers include projects like Odyssey and Ren.
Financial Results
- Positive Free Cash Flow: Gold Royalty is moving into positive free cash flow territory, supported by over 240 royalties.
- 2025 Guidance: Projects 5.7 to 7.0k gold equivalent ounces (GEOs), representing a 16% growth over 2024.
- 2029 Guidance: Aims for 23 to 28k GEOs, marking a 367% increase from 2024.
- Revenue Projections: Expected to rise from $13 million in 2024 to $50-80 million by 2029.
- Debt Management: Prioritizing debt repayment, with convertible debentures recallable in November 2026.
Operational Updates
- Portfolio Composition: Over 240 royalties, with 7 currently cash flowing and 14 in development.
- Geographic Focus: Concentration in Nevada, Quebec, and Ontario.
- Commodity Focus: Predominantly gold-focused, with increasing copper exposure.
- Key Assets: Cote is on track for steady-state milling by year-end; Varus expects commercial production in Q2.
Future Outlook
- Growth Drivers: Odyssey is anticipated to be a major growth contributor, with Ren and South Railroad following.
- Exploration Activity: Partners are conducting significant exploration, with over 350,000 meters of drilling annually.
- Strategic Focus: Emphasis on deleveraging and generating free cash flow per share, with a disciplined acquisition strategy.
Q&A Highlights
- Equity Dilution Concerns: Management addressed concerns about over-spending and equity dilution, highlighting limited equity raises.
- Largest Growth Component: Odyssey is expected to be the largest contributor to growth, accounting for about 30% of NAV.
- Nevada Projects: Comfort expressed regarding permitting timelines for key projects.
Readers are encouraged to refer to the full transcript for a detailed account of the conference call.
Full transcript - John Tumazos Very Independent Research Virtual Conference:
Operator: The broadcast is now starting. All attendees are in listen only mode.
John, Host: We’re very pleased to host David Garoppolo, the chairman and CEO of Gold Royalty, and Jackie Przywlowski, the vice president capital markets, are gonna tell us all about their property portfolio. And without further ado, David, please begin.
David Garoppolo, Chairman and CEO, Gold Royalty: Yeah. John, thanks so much for having us on. I feel like we’re going through the cycle again with you multiple cycles with you because I go back at least thirty years with you back to my days at Ignico Eagle
John, Host: when I your CFO.
David Garoppolo, Chairman and CEO, Gold Royalty: Yeah. That’s right. And so you’ve followed all of my companies over the years. After Ignico, I, of course, joined Hudbay on the copper side, ran Goldcorp for a little while as well before we found a gold gold royalty. Just a little over four years ago, we we, IPO ed in March of twenty twenty one with a collection of 18 royalties on the the assets of Gold Mining Inc, the company we were spun out of, our former parent company.
We had a very successful IPO, and we went about growing the company. And really over the last four years, we spent quite a bit of time building out the portfolio, diversifying, adding scale into it, and creating, peer leading revenue growth in the sector, and that’s including the large cap names. We are by far the largest and fastest growing royalty vehicle in the space over the course of the next five years. And not just from a collection of random assets, we have some of the largest scale mines in North America. We have royalties on three of the five biggest producing gold mines in North America, and we have royalties on some very large scale mines outside of North America that we’ve added and complemented, our portfolio with over the course of the last couple of years as we focus on cash flowing, near cash flowing royalties to supplement and complement the significant growth tail that we have embedded with our portfolio.
This year is very much an inflection year. Maybe, Jack, we can go into the summary slide. In that, as I said, we’ve spent several years building out the portfolio, and now we’re at a cash flow inflection standpoint cash flow inflection point. Whereas last year, we actually had positive operating cash flow for the time in our history. This year, we’re into positive free cash flow, and it is from of over 240 royalties.
So again, we started with 18 royalties at our IPO just a little over four years ago and now have grown to over 240 royalties with royalties on some of the largest scale mines in North America. Seven cash flowing royalties currently, 14 in various stages of construction and development underpinning that growth that we’ll talk about a little later in the presentation. And you can see that early on in our history, in our life cycle in 2021, we had a much more robust multiple. We had a very strong currency coming out of the IPO. We IPO ed at $5 per share.
After the IPO, the stock continued to run north of $7 per share, recognizing the very healthy valuation that we had on those 18 royalties we started with, none of which were cash flowing, none of which were even in development. Even though they had a significant mineral endowment, they really didn’t have a clear line of sight to production. So we recognize we really needed to diversify portfolio from a couple of respects. We wanted to introduce some cash flow and some more immediate growth into the portfolio, but we also wanted to diversify our operating partnerships. Those 18 royalties were almost entirely with one operator, our former parent company Gold Mining Inc.
And seeing that there was a collection of small cap royalty companies that are all struggling for relevance, struggling to raise capital, we started roll up some of our competitors. And namely that included Ely royalties, Golden Valley and Abbotibi royalties. And what that did is immediately diversified our royalty portfolio by bringing in 150 additional royalties in the portfolio with multiple scores of other operators, but also brought in a royalty on Canadian Malartic, which is one of North America’s biggest producing gold mines, and a royalty on Wren, which is the underground extension of Goldstrike. So immediately by conducting that roll up, we brought in cash flow to basically keep the lights on, but also brought in substantial growth from one of the biggest gold mines in The United States as well. And then recognizing that we still had some cash in the treasury, but our currency was starting to erode.
As you remember in early twenty twenty two, we saw the gold sector significantly de rate as interest rates started to go up, and we recognized we couldn’t do m and a accretively anymore. We started to very systematically in a disciplined fashion deploy some of our IPO capital to start to complement and supplement our portfolio and continue to diversify. And so we picked up a royalty on Cote, which is now producing and and will be Canada’s biggest producing gold mine as it achieves its designed commissioning rate over the course of this year. We picked up a royalty on Cozamin, which is Capstone’s highest grade copper mine silver producer as well in Mexico. We also did a project financing with Ora Minerals for their Boba Reima mine, which just started production about a month and a half ago and already is undertaking a study on expansion even as it’s achieving its design rates of production over the course of this year.
And and then finally, in terms of cash flowing royalties, we picked up a copper stream on the Varus mine in Bosnia, which is operated by Adriatic Metals, which is listed on the London Stock Exchange, about a billion dollar market cap company. That mine is operational. It’s been paying us stream payments for a couple of quarters now and is expected not only to achieve its design rate of production this year, but has already pre financed an expansion of about 60% of its production by 2027. So they have the capital to undertake that expansion once they achieve their commercial design rates later this year. And that’s an eighteen year reserve life.
So if there’s a recurring theme within the portfolio, we’ve tried to introduce long, long scalable assets, long life scalable assets within the portfolio to complement what we picked up through our roll up strategy over the course of 2021. And now, as I said, we’re at a point where we expect to generate positive free cash flow for the time in our history. And you can see, in in this graph, which encapsulates the growth that we’ve undertaken over the last four years, the pace of growth is slackened considerably, because our currency has weakened. As you can imagine, growth in our sector has been quite severely discounted And the market, for whatever reasons decided they wanna pay for growth once it’s in the rearview mirror for a quarter or two. With three large scale mines undergoing commissioning and achieving design rate of production this year in Cote, Varus, and Borberema.
The market is waiting for proof of concept on those large scale long life deposits that are coming into production and achieving design rate production this year. So, really, we’ve slowed down the pace of acquisition because we don’t have the currency to do so and really very much in harvest mode right now. We’re very much focused on deleveraging the small amount of debt we have on the balance sheet, which I’ll talk about a little later on in the presentation, and starting to generate positive free cash flow and importantly, free cash flow on a per share basis to demonstrate the quality of that portfolio, not only in terms of longevity of its reserves, but also its ability to generate significant cash flow and provide leverage to the gold prices that goes up and leverage to the exploration success of our operating partners who are at various points of optimizing these assets, both from a geological and operational standpoint. So Jackie, you can skip to the next slide. I think it’s important to understand that we really have a unique model in that we grow through multiple means.
And there are a number of royalty and streaming companies in our sector that focus on one or two of these pillars of growth, none of them really do all four and do them well. And I think that’s a testament to the longevity and depth of our management team. Collectively, our small management board have over four hundred years of industry experience. So there’s a lot of skills there. We come from operational mine development backgrounds, many of us.
Some of us have come from a transactional background. You know, for example, our head of corporate development used to run Bank of America’s mining group. Our our CFO used to run UBS’s mining group. So we have transactional bent to the management team, but within our board, we also have, like myself and Alan Hare, who’s on our board, Sam Ma, who’s our VP of evaluations, who come from an operational mine development background. So it’s a good complement of skills, which means we can grow through M and A when we have the currency to do so, and we did that in 2021.
We can do royalty financing as we did with Borberema back in late twenty twenty three. We can do party royalty acquisitions as we did with Cozamin and Cote where we bought royalties, from parties that were looking to monetize those royalties that preexisted. And then we generate royalties organically. So we have, you know, a gentleman in Quebec and another one in Nevada, who have long long tenured prospecting, business and experience. And what they do is stake exploration claims around existing mines and deposits, farms out the properties to the operators when they need them, and then take back a royalty in return and option payments on those properties.
So become a self perpetuating business that generates two to three new royalties per quarter, admittedly relatively early stage royalties, but frankly, the market doesn’t pay anything for those. So we’re happy to generate those through our sweat equity and continue to grow on a very accretive basis without having to expand scarce capital on acquiring early stage royalties. So you’d never see us buy a royalty in an early stage pre resource junior. It just doesn’t make a lot of sense for us because we can generate those royalties for free with the skill set that we have embedded within the organization. So we continue to grow, but continue to grow without expanding scarce capital or issuing additional stock and continue to populate the pipeline at the early stage while we’re waiting to harvest the returns on the significant capital we’ve invested in some of these later stage near cash flowing and cash flowing opportunities that we’ve added into the portfolio since our IPO back in March of twenty twenty one.
Okay, Jackie. This just gives you an overview of our portfolio from a number of perspectives. You can see very heavy concentration in Nevada, Quebec, and Ontario, where over 80% of our portfolio, both in terms of number and value are concentrated on three of the five best jurisdictions in the world, as judged by the Fraser Institute, which I’ll talk about in a minute. A very heavy concentration in gold. It’s not to say, that we wouldn’t look at other metals, but would be in a precious metal setting, polymetallic precious metal setting.
Quite often when we have royalties, they’re over the entire polymetallic deposit, not just on a specific metal within that, polymetallic deposit. That’s how royalties generally work. We only have one stream within the portfolio. All of our other assets are are royalties, so they’re over all the metals, at a particular deposit. So we have, we believe, particular expertise in gold bearing VMSs and copper gold porphyries if you look at our management board and what we built when we were operators and and, mine developers.
And so if we get some of those LME metals within that kind of polymetallic setting, we’re happy to diversify in a very natural way. We’re not going to try to force diversification, but you can see we have a very heavy concentration, at over 90% gold within the portfolio. A little bit more copper exposure in the short term. We’re probably more like 75%, 25% gold copper in the next three to five years as Varus and Cozamin represent a bigger component of our revenue. But most of our growth is coming from gold, in particular, when you look out later from Wren, which is the underground extension of Goldstrike operated by Barrick and Newmont, and also Odyssey, which is the underground extension of Canadian Malartic, that represents quite a significant leg of growth later in the decade and that’s pure gold.
And so while we may be skewed a little bit more towards copper in the short term, we’re very much gold focused in the longer term. And as you can also see, very heavy majority of our portfolio is now cash flowing or near cash flowing developing as they say. And so we’re very much starting to harvest that pronounced growth rate that I’ll talk about in a little bit more detail a little later in the presentation. So this is just another way to look at the quality of our portfolio, both from a geological, geopolitical, and and also regulatory standpoint. The Fraser Institute in Canada does an annual survey of jurisdictions globally for mining based on mineral potential, political risk, and regulatory risk.
And you can see we’re only to a Cisco royalties in terms of the quality of portfolio as judged by those three particular criteria. And Fraser Institute is again an economic independent economic think tank, operated out of British Columbia that does a survey on an annual basis. So we are in in what’s perennially rated three of the five best jurisdictions in the world, Nevada, Quebec, and Ontario by the Fraser Institute, by those very stringent criteria. And then what this provides you is a bit of a an overview of the landscape within the royalty sector, and it’s not an exhaustive list of royalty copies. There are a number that are missing, but these are meant to, demonstrate consensus multiples pricing at asset value multiples.
The reason we don’t have all the royalty companies within the sector, particularly the smaller cap players, is because a number of them don’t have research coverage. So this is based on published research coverage within the sector. And I think, what this message what the message that comes out of this graph is is that scale matters. And you can see three distinct categories of royalty and streaming companies. At the extreme right, you have the mega cap companies, the category killers, if you will, Wheaton, Frankel, and Royal Gold that are 10 to $30,000,000,000 plus market cap, and they’re getting the kind of multiple that comes with that kind of scale, diversity.
But they also have an exceptional track record of the oldest players in the space, Franco and and Royal yeah. So it it continues to
John, Host: grow post
David Garoppolo, Chairman and CEO, Gold Royalty: Some of
John, Host: them have fifteen year base metal deposits, and what the market is paying for is the the life of Salobo or whatever big deposits they’re in.
David Garoppolo, Chairman and CEO, Gold Royalty: That’s that’s right. And and you’re you’re much more diversified. As you can imagine, when you’re that large, it’s very difficult to find gold deposits new gold deposits to invest in to continue to perpetuate your business, at least ones that are of sufficient scale to move the needle. They’re almost nonexistent, and that’s because the producer universe has been shrinking for well over a dozen years because of lack of access to capital for the juniors that conduct all the grassroots exploration in our sector. So we’ve seen a steady decline in reserves in the gold sector, and we’ve seen these companies, in particular Wheaton and Franco, start to diversify away from gold but still gain a gold multiple.
And also a multiple that implies they have significant growth. And I think the reason that is is because there isn’t an alternative in the mid cap space. And in our view, a mid cap company is something in the 5 to $10,000,000,000 market cap range, which is a bit of a Goldilocks zone, and that’s big enough to be institutionally relevant in a global equity context, but still small enough to grow. And as good as the Cisco Triple Flag and Sandstorm are, they’re not quite at that scale yet. But I can tell you that all their CEOs recognize the imperative of achieving that scale because then they can start to close the gap between, the three mid cap players here.
Even though they’re getting premium multiples to NEB, they’re still discounted quite significantly relative to the large cap players in the space. So if general equity investors, global equity investors have an alternative to the three big guys that have sufficient liquidity for them to buy and sell, I think there’s a possibility that mid cap player, which doesn’t exist right now, could get a multiple superior to the seniors. And we’ve certainly seen that play out in the producer universe thirty years ago when I was at Ignico Eagle and just starting as CFO, and Sean had just taken over as CEO. Ignico was only a 90,000 ounce a year producer, $200,000,000 market cap. There was no midcap in the producer universe.
There was just Barrick and Newmont and a collection of small cap players and small producers. And then through, years of effort and mind building, EGNico did capture that mid caps, size at scale at about a million ounces a year, a 15% embedded growth, and they had a multiple of three times p to NAV by 2010 that was far superior to the what Barrick and Newmont were getting even though they were multiples the size of Ignico at the time. Ignico, of course, has taken that currency and continue to grow and do m and a, now they are eclipsing Barrick and Newmont in size. But really, capturing that mid tier is a a significant value proposition in terms of the potential to achieve a rerate if you can provide it, as I said, both liquidity and growth. And these big guys do provide liquidity, but they don’t necessarily provide growth.
The other value proposition of consolidation is the complete elimination of g and a costs. We absorbed three companies in 2010 or 2021, excuse me, and we eliminated $10,000,000 of annual g and a costs. Because at the end of the day, our business is about rolling the filing cabinet from one office to another. You know, we have enough people to run a business 10 times the size. We don’t need to scale up the number of people we have in the organization to run a much bigger royalty company.
And Franco and Wheaton and Royal have demonstrated that, the scalability of our business. And if you look at these smaller cap players collectively, you know, we guess there’s probably about 50 to $75,000,000 of excess G and A that could just simply be eliminated on an annual basis by seeing consolidation occur among these smaller cap players. So again, dual value proposition. One, creating scale to get the rerate and and get the liquidity to help accelerate that rerate, but also the significant elimination of annual cost drag, embedded in having all of these smaller cap players in the business. K, Jackie.
Thank you. This just gives you an overview of the pipeline. And, again, seven cash flowing royalties on the extreme right within the portfolio, 14 in various stages to development. The ones that are in yellow that are advanced exploration, have forty three one zero one resources on them. Everything in green is in the preresource stage.
So there’s over a 180 of those within the portfolio. So the vast majority of our portfolio is early stage, but what I would say is virtually all of those green ones, those pre resource ones, we didn’t buy. They were generated organically through our sweat equity, through our royalty generator model. So while we appreciate that probably 80% of consensus net asset value is focused on the right side of this pipeline, and we get very little other than nominal option value on these earlier stage opportunities, it’s important to emphasize we’re not buying those earlier stage opportunities. We’re creating them through our sweat equity.
And that that means the potential for rate of return on those early stage opportunities is infinite. And I can give you a very tangible example of that. In 2021, Jerry Baughman, who runs our US business, staked Tonopah West, which you could see in the bottom of the yellow section of this this pipeline, and we sold it to BlackRock Silver last year, early last year, for about a million and a half dollars in cash and a royalty on the property. Now Tonopo West was staked in 2021. BlackRock Silver believes they can get it into production by 2027.
Now I can’t pretend that all of those, staking opportunities and generation opportunities that we create organically will have that kind of accelerated timeline to production, but does speak to the return power of this generator model when you do hit. Even if you hit on one out of 20, the rate of return, potential is immense, within embedded within this portfolio even though the market describes very little value to it. And the other element of this is none of these royalties have holding costs. Every royalty and stream we own, and we only have the one stream, is completely bought and paid for. We have no installment payments.
We have no capital calls. So we have unmitigated leverage to the gold price, and we have leveraged the expiration of our over 80 operating partners. So they conduct over $200,000,000 per annum on expiration on average. And Jackie knows I’m jumping around. And that’s equated to a little over 350,000 meters of drilling in the past year.
And in some years, it’s been over 600,000 meters of bank
John, Host: this slide about the current year? With the gold price of $33.50 or so, why would exploration dollars this year be lower than any of the last four years?
David Garoppolo, Chairman and CEO, Gold Royalty: Yeah. So I I would say a heavy heavy, a heavy, component of this exploration is brownfield in nature. And so there’s a lot of our royalties in the earlier stage that are not getting drilled aggressively because juniors simply don’t have access to capital. So a lot of those earlier stage royalties are sitting within small cap operators’ hands or small cap junior explorers’ hands. And so there was a you know, in 2021 and 2022, there was a a brief window opening for juniors to raise a bit of capital, and we saw an immediate acceleration in expiration in those years.
And then as we saw that window shut, we saw a bit of a deceleration. So it’s really been concentrated in brownfield exploration within larger cap players, within our our operating partnerships.
John, Host: If you could jump back to the prior slide
David Garoppolo, Chairman and CEO, Gold Royalty: Mhmm.
John, Host: About the different projects. This is really a fun slide. Four of your projects you’re focusing on are preproduction companies in Nevada, Fortitude Gold, BlackRock, Silver, I eighty Gold, and Orwell. Orla is probably big enough to finance in producing something. Are you comfortable that County Line, Tonopah West, Granite Creek, South Railroad can get permitted in a couple years?
Sometimes it takes six years in Nevada if you have to do the NEPA process.
David Garoppolo, Chairman and CEO, Gold Royalty: Well, I’ll give Jackie a chance to to jump in here. Go ahead, Jackie.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: Sure. Thanks. So so Granite Creek, underground is already permitted. So that one, is is I eighty’s highest priority, and will and will be in production or in full production ahead of the open pit. So so that one, permitting is a lower risk on.
I mean, it’s a brownfield site anyway, so the open pit shouldn’t be as difficult. But, but, certainly, the the underground is, is what’s in production now. County Lion, that’s a satellite deposit for Isabella Pearl. So, again, it’s it’s more or less a, a satellite pit for the existing operation that Fortitude’s already mining. So, it does, I think, generally, make things a bit easier when the operator has a a track record, particularly local.
South Railroad, as you said, Orla is probably the in the best position to finance, of of any of the the assets that you mentioned, you know, particularly after Orla acquired the the Musselwhite mine, from Newmont. It’s it’s got cash flowing assets, so it’s in good shape to, to finance, the development of South Railroad. Does need permits definitely. They are expecting to receive those permits, relatively soon and get that asset into production, as early as 2027. So very, very optimistic timeline there.
I think if there was a NEPA process, the company would have a an extended timeline in terms of guidance there. So I I don’t believe that that’s gonna be relevant for South Railroad, and and all reports from the company so far indicate that that’s moving forward on schedule. So, yeah, overall, we’re fairly comfortable. I think, you know, the the policies
John, Host: four Nevada projects in your ’29 revenue forecast?
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: So Granite Creek South Railroad are in our 2029 revenue forecast.
John, Host: But not Bonapaw, Weston County line?
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: That’s correct. Yeah.
John, Host: How about Jericho Canyon? Is that an is a restart of Jericho Canyon in year ’29?
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: Jericho Canyon, we have not put that in our forecast at all. We’ve written it down in effect, so so it’s not in our valuations at all.
John, Host: First Majestic idled it when the gold price was about $1,500 lower.
David Garoppolo, Chairman and CEO, Gold Royalty: Yep. Correct.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: We Yeah. We we we, we heard comments from First Majestic at the, the European Gold Forum back in April. You know, they they’re saying at that point when they idled it to to your point, gold was 1,500. Their all in sustaining costs were about 1,800, or or more. They think they can get the all in sustaining costs down slightly with some optimizations at site, and and, of course, gold prices are well above that now.
So they are looking to restart Jarrett Canyon. It’ll take time. You know, I think I think the the guidance they gave in April was sort of in the one to two year time frame.
John, Host: So Phenelon is a four or 5,000,000 ounce resource. The company owner is moving a little slow. Do you have that in your forecast?
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: It’s not in our 2029 forecast. No.
John, Host: Marigold is in production. Do you have, like, a satellite of Marigold?
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: Yeah. I think with Marigold, if I remember correctly, Dave, correct me if I’m wrong, but I think that one is, it has to it has to produce a certain to a certain threshold before we get paid on that one. And the same with Bald Mountain. It’s a fairly high threshold. Yeah.
David Garoppolo, Chairman and CEO, Gold Royalty: Yeah. It’s out of the current mine plan. So it’s not it’s not included in their current mine plan. So not included in our forecast at all, John. Is
John, Host: Midway a satellite of Caliber that’s selling out to Equinox? Or
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: Yeah.
John, Host: So it’s not a part of it that’s in production. Alamos just sold Quartz Mountain to a junior. So that maybe has a little more focus now. Some of the things you’re not counting have a chance.
David Garoppolo, Chairman and CEO, Gold Royalty: Yeah. That’s right. And the the other I mean, is it you know, in terms of, back to your point of, you know, ownership changing hands, another one I should highlight is Borden, which is satellite deposit to the Porcupine Complex, which ironically, John, we built when I was running Goldcorp. It just by happenstance, we ended up with a royalty on it.
John, Host: I’m I’m taking Florence there Thursday next week. Great.
David Garoppolo, Chairman and CEO, Gold Royalty: Yeah. Yeah. So it’s it’s interesting because Discovery Silver’s now taking it over and Tony’s overcapitalized anticipating one that he wants to optimize operations, but also conduct much more aggressive exploration on Porcupine and Borden as well specifically to to deliver some growth within those assets that he just bought, reinvigorate, really long standing assets. Borden is a relatively young satellite deposit coming in operation about five years ago, but, we’re encouraged by the fact that Tony is devoting a lot more exploration to it. And in fact, at our, Capital Markets Day this week, we will have a representative from Discovery Silver coming to talk about Borden specifically.
John, Host: Which other co operators are coming to your programs, Lucy?
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: So US Gold Mining is coming to speak about Whistler. We’ve got, Discovery Silver, as Dave mentioned. We’ve got Woolbridge coming to talk about Phenelon, and we’ve got Agnigo Eagle coming to talk about, Canadian Malartic and Odyssey.
John, Host: Very good. Very good. Excuse me for interrupting. I I can look at this slide for hours because there’s all these different interesting deposits.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: We we I should mention, we also just published an updated, asset handbook and sustainability report. We call it the integrated report with those two together. That came out on Monday. So if you wanna dig into any of the assets in more detail or anybody in the audience, you can find that on our website fresh fresh off the printers.
David Garoppolo, Chairman and CEO, Gold Royalty: Good. Jackie, you might wanna continue here. I think we get into the cash flow and revenue forecasts, and I think that’s really in your belly. But go ahead.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: Sure. Thanks. So this slide, really, speaks to what what John was just asking about, really. I mean, our our 2025 guidance, we show on here, is 5.7 to 7,000 GEOs That we we put out in March, with our q four results. And the midpoint of that guidance is about a 16 growth over the 2024 actual result.
But most importantly, most exciting, would be our 2029 guidance. We’ve got 23 to 28,000 GEOs from 2024 to 2029. So in just a short five years, we’re expecting 367 growth. And most of that growth, you know, 85% of that growth comes from mature operations or what we’re calling here brownfield expansion sorry, brownfield expansion. So Orden, Cote, Cozamin, Bobrema, Odyssey, Ren and Veras, those are all projects, assets that are built.
Most of those are operating with the, with the exception of Ren, which is, the extension of, of Goldstrike, as Dave mentioned. So very low risk from a, development execution construction perspective. They do, in some cases, like Bulberema, Cote, Verus need to be fully ramped up to full run rate, but they are built and operating. The other, call it, 15 ish percent of that guidance is represented by what we’re calling advanced development. So South Railroad, County Line, Granite Creek.
We talked about these a little bit already. South Railroad is operated by Orla. It does require permits and construction, and Orla is targeting to have that in production in 2027. Granite Creek, the underground is already operating. That one’s owned and operated by I eighty Gold.
Of course, it hasn’t paid us yet. That’s an NPI royalty that we have. So, it does need to ramp up to full production and then recoup the capital that’s been put in by I eighty before we get paid. But that is, is undergoing a derisking process right now. I eighty is is capitalizing the mine, redoing exploration drilling, definition drilling, the feasibility study, and ramping that back up to full production.
So Granite Creek is not not requiring any permits for the underground, not requiring any major construction, but we’ve got it in advanced development because it’s not paying us today. And the county line is a satellite pit. It it is the extension of the Isabella Pearl line that forty two Gold is operating. So, again, it’s a little bit higher risk, but it’s part of a brownfields complex, and so we don’t view that as super high risk also. So in the guidance, in the 367% growth we’ve got in five years, There are very few, what I call, risky projects from a construction and execution perspective, and all of these projects essentially are in low risk jurisdictions.
And as David mentioned before, they’ve all been fully bought and paid for by us. We don’t have any capital calls or capital outlays to receive this growth. Just putting that growth in context, we’ve tried to benchmark against some of our peers. So this is against other royalty streaming companies and guidance that they put out also earlier this year, so same time frame as us. In 2025, like I said, we’ve got 16% growth year over year from ’24 at the midpoint of our guidance range, and that’s about in the pecking order of of similar royalty streaming companies.
But I mentioned there’s there’s a number of of companies that are actually no growth or negative growth this year versus last year, and this is on their own guidance. This is on their own definition of GEO. So it’s it’s a good it’s a good growth rate between last year and this year for us. We’re very happy with that. But more importantly, in 2029, our 367% growth rate is significantly higher than the peers that put out long term guidance.
Not everybody puts out long term guidance, and some some companies use different years. But, essentially, on comparable guidance, we are by far the highest growth rate, of other royalty streaming companies. And, again, some of the larger royalty streaming companies will be, very low growth, even over that five year horizon. I think we lost John.
John, Host: I just turned off my camera because either you froze or I my Internet faded.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: Okay.
John, Host: So I use less bandwidth without my camera.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: Okay. No. I’m glad we’re I’m glad you’re still with us. Okay. The next slide, we just wanna show a similar, but it’s on a slightly different basis.
Here, we’re showing this on a gold equivalent ounce consensus average estimate. So we’ve got five analysts covering us, and in the gold bars at the bottom here are the the median of the consensus expectations for our production on a GEO basis. You could see similar trajectory. I would point out that in 2029, the consensus is still below our guidance range, and so we do see upside, in 2029 versus where the street’s currently, expecting our our, production will be. But, also, I think it’s important to note that this isn’t a a major step change between ’28 and ’29.
We actually expect steady growth or consensus is expecting steady growth year over year. So 2025 was better than 2024. ’26 will be better than 2025 as Bovaryma, Verus, Cote continue to ramp up. In 2027, we see Rennes starting production, South Railroad starting production. We see Verus and Bovaryma potentially having expansions.
So there’s significant growth and significant catalyst in the next couple of years. And then 2028, potentially, see Ignico Eagle Odyssey shaft being finished and higher production through the shaft. So, again, a significant step up in ’28 before we get into the end of the decade. So it’s not just one asset. It’s not just one location, but we see a significant steady growth every year, over the next five or so years.
What we’re showing in the line charts above this bar is different gold prices. So we’ve basically just taken the consensus average volume forecast on a GEO basis, and we’ve multiplied it by different gold prices. So you can see around current spot gold prices, our revenues go from about $13,000,000 in 2024 to 50 or $80,000,000 by the end of the decade at roughly spot gold prices. And that’s translates directly to free cash flow to us. So, we do expect our recurring, g and a cost will stay fairly flat at about 7 or $8,000,000 per year.
As as we pay our debt down, as we generate cash and pay our debt down, well, our interest charges will actually decrease. So we were, we were operating cash flow positive in 2024 for the time. We’ll be free cash flow positive in 2025, meaning we’ll also cover, our interest costs through our revenues. And then and then that continues to grow as exponentially as revenue and potentially even more dramatically than revenue if we pay that interest down over the next few years. So very exciting time.
We’re at a real inflection point between ’24 and ’25 as as we see that free cash flow generate positively and and grow pretty significantly from here. I mentioned already some of the catalysts. I’m not gonna go through this in a lot of detail, but we just we show this slide just to show that there are a lot of, potential positive news flow items, potential positive catalysts in our portfolio over the next few years. So this year is really about execution, Bovirimah, Cote, Ferris. And then and then we’ve got optimizations at Borden.
We’ve got the shaft at Odyssey, which would potentially be another major catalyst for us. And as Igneko talks more about that next year, that could unlock some more value for us. And then we’ve got some other studies, Tonopo West, South Railroad, and then we’ve got the expansions at Verus, Boubarema, and we’ve got the the shaft being completed at Odyssey, the initial production at Ren, initial production at South Railroad, and then and then Tonopo West, as David mentioned, starting construction in a few years. So very exciting time for us. And, you know, as as companies continue to develop these assets and other assets are earlier in the pipeline, we’ll continue to add more catalyst to our list.
Got more, asset detail if we wanna go through that. I can can talk a little bit more about Verus, I guess, to start. So Verus, as David mentioned, we have a copper stream on a 100% of the copper. Copper is a small byproduct for Verus. It’s essentially a silver mine with, lead and zinc as well.
When it’s fully ramped up, it it is expected to be one of the top 10 silver mines, in the world on a silver equivalent basis. You may have seen some news out recently. Adriatic Metals, the operator, has been approached by Dundee Precious Metals about potentially an acquisition. So that’s, still to be determined, but, but it just really shows, the quality of the asset and and how, other operators are are paying attention to to this terrific mine. It recently started production last year, and it’s still ramping up to commercial production.
It it does expect to hit commercial production in the second quarter, so over the next couple weeks. Its its run rate right now will be about, 800,000 tons per year and expected to hit that full run rate, in the second half of this year. There’s two phases to growth. There’s the phase to get to 1,000,000 tons per year. They say minimal cost to that.
It’s about a million dollars or less, that they would need to invest to get to that million, million tons per year level. They expect to hit that in 2026. And then another expansion to 1,300,000 tons per year, that would be about 25,000,000 US investment, and that’s expected to be reached in 2027. Adriatic did raise, 80,000,000 Aussie dollars or 50,000,000 US in February, so that should be well financed to cover, not only those expansions, but also working capital in the near term as well. They had, as most mines do, sort of a challenging start.
They had some issues with, weather, for example, tailings facility, but they have, very recently put in some very good news. They made significant progress in April. Their their production, both on a volume, throughput milled, and on a silver equivalent production, have been at records in April, and so they are, very positively, looking forward to continuing that trajectory later this year. Cote Gold, I’m Gold’s the operator there. I think that’s a very well known mine.
As David said, it’s one of the biggest mines in North America, biggest gold mines in North America. That started production a little while ago, a couple years ago, and hit commercial production last year already. And it’s on track to reach its steady state meeting to date by the end of this year. So things are going very, very well at Cote. They have talked about expansion.
So right now, it’s a 36,000 tons per day operation. They could expand that with the installation of a verdict mill to about 42,000 tons per day. The mine capacity is about 50,000 tons per day, so they are also looking for other optimization opportunities to match mining and milling capacity. So so that would be positive for us, of course, if if the the expansion was was completed early. Our royalty is not full not doesn’t fully cover the entire Cote mine operation.
It it’s on one zone. It’s called Zone 5 Of Cote. It’s, the southern portion of the pit. It’s also the portion that they’re mining, it’s fairly early in the mine life. We’re getting about, 40% of production coming from that Zone 5 right now, and we’re expecting it will, it will be depleted in about the six years of mine life.
So it’s a high priority near term cash flow for us and high priority for for IAMGOLD as well. And the last one on this list of key assets is Bobarema. So Bobarema is operated by Ora Minerals. We have a 2% NSR on Bobarema. This mine started production in late March of this year on schedule, on budget, and it’s expected to hit commercial production in q three.
Right now, the mine the the ore bodies are bisected by a highway that goes through through the asset. Once they relocate the highway, which they’re permitting right now, they’ll be able to expand the reserve. And and when they expand the reserve, they will also look to expand the throughput of that operation. So right now, it’s about 2,000,000 tons per year operation. They’re talking I think we’ve heard them say three, three and a half, 4,000,000 tons per year for the fully expanded operation.
And so that would be a significant upside for us as well. The highway relocation is expected sometime in q two or q three from a permit perspective, and then they would do the work concurrently relocating the highway and expanding the mill at the same time. I’ve got some other assets here, John. I think I’m not sure if we wanna go through them all in detail. I’m happy to talk through more of them or or do
John, Host: I think we’ve mentioned almost all of them already.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: Yep. Can can go to the next one. Do you wanna
David Garoppolo, Chairman and CEO, Gold Royalty: Yeah. Maybe I’ll pick it up from here. And and the message of this slide is the very high correlation between the gold price and unit all in sustaining costs in the producer universe. And and I mentioned earlier on the difficulty producers are facing right now is a lack of reserve growth because the juniors have not had any consistent access to capital for well over a decade. So there hasn’t been, a lot of discoveries occurring.
And as a result, we’ve seen a steady depletion of reserves are down 40% from their peak in 2012. And so that’s one phenomenon that producers are dealing with, which probably explains why valuations are depressed relative to where the gold price is. They’re still not they really haven’t caught the bid you would have expected to catch at these record gold prices. But the other phenomenon that they experienced is cost inflation. Certainly, weren’t immune from the inflation we experienced in the general economy that was, I guess, catalyzed by COVID, but really happened because of, years of monetary expansion that ultimately had to lead to inflation.
Money supplies increased really exponentially since the great financial crisis, and that had to come to roost in terms of inflation. But more recently, their margins have expanded. The gold price has really accelerated this year. The gold price is up, I think over $700 an ounce, around $700 an ounce. And so you’ve seen actually margins expand at the mine site level.
But inevitably what happens when you’re running a mine is when you get to the mine phase, you’re not using your long term reserve pricing to figure out, how much of that material you’re gonna put through the mill. You’re gonna be using something closer to spot prices. So inevitably, what’ll happen is grades will be diluted by lower grade material, which is gonna be making money at these gold prices. And that will result in all in sustaining unit costs going up even though we’ve seen labor costs and energy costs really not inflate to the extent they were a couple of years ago. And that’s why you’ve always seen a bit of a catch up between all in sustaining costs and the gold price.
We’ve seen this separation before, but it’s generally a short term phenomenon and we go back to a very high correlation of all in sustaining costs to the gold price. In fact, the r squared is around 98 over this thirty year period. So it’s a very, very high correlation and really those are the factors behind it. So, you know, understandably investors are saying, well, maybe there isn’t the leverage in the producer universe as, you know, we thought there was. And and really, that has been the trade over the last dozen years or so.
We haven’t seen a reinflation of the valuations, the multiples we saw coming out of the great financial crisis when all metal prices were really roaring, and we saw, really, really good multiples. That hasn’t recurred at this point of the cycle, and I think it’s, again, that twin phenomenon of declining reserves and all in sustaining costs that are quite sticky.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: Very strong.
David Garoppolo, Chairman and CEO, Gold Royalty: We talked about this slide earlier on, so I’ll skip on to our our our share ownership, Jackie, and talk about a little bit about our shareholder base. And that’s a bit of a story because when we IPO ed back in March of twenty twenty one, that was largely retail driven IPO, very little institutional participation. We have strategics and insiders that own about 30%. That includes our former parent company, Gold Mining Inc. The other 70% of our shareholder base floats, but it’s largely retail or has been until recently.
One of the reasons we created the role for Jackie when we brought her in as an Excel side analyst at BMO is we really wanted to start to focus on diversifying the shareholder base, bringing in that marginal investor on the institutional side that’s largely not participated in the story because they didn’t see this as a self sustaining business. They were waiting for us to get to that free cash flow, part of our life cycle. Now we are. And and not only do we have free cash flow this year, but pronounced growth free cash flow at virtually any gold price going forward over the next five years as a result of a significant increase in volume from some of these large scale mines that we have within our portfolio. The next slide just gives you an overview of our our research coverage.
We have five analysts that currently cover us. There is one other Sultan analyst very close to launching coverage. Stay tuned. It’s it’s with a dealer that you all of you will be very familiar with. He’s in the final strokes of of getting his research piece published.
As you can see, very healthy volume for a company of our size. We’re trading close to 2,000,000 shares a day as a relatively liquid. Again, it’s because we had such such a well diversified and well embraced IPO back in March 2021 in the retail universe of The US. We’re listed just on the NYC American, other trading symbol g r o y g Roy. The only debt we have outstanding is effectively our line of credit with Bank of Montreal and National Bank Financial.
That’s been an evergreen three year secured facility. We’ve drawn about a of it. Our priority this year is to take that free cash that we expect to generate and start to pay down that, you know, what I call credit card debt. We used to acquire some really important assets like Varis and most recently Garrison, but we’d like to pay that back and maintain that availability. When our currency is healthy and we can start to populate the pipeline again later stage acquisitions, we’d like to be able to use debt as opposed to equity and then really repay that debt at a free cash flow.
The convertible debentures are actually in the money. They were five year unsecured piece of paper, mature in November of twenty twenty eight, recallable by us in November of twenty twenty six. So in about a year and a quarter from now, we can actually force conversion and, really basically eliminate all of our debt by the end of next year. So, John, with that, I think that kind of covers the story. In purely growth in revenue, purely growth in free cash flow over the course of the next number of years.
We’ve built that a, I think, an enviable portfolio of some significant cornerstone foundational generational assets, including Cote, Canadian Malartic, and the underground extension of Goldstrike. But we’ve complemented that with assets like cars that have eighteen years of reserve life. They’re getting scaled for Barema that has at least a dozen years of reserve life. It’s also being scaled up through an expansion as well the next couple of years. And all of that expansion really comes free to our shareholders.
So unmitigated leverage of the gold price, leverage at expiration, and the expansion that our operating partners are looking to undertake as they look to optimize the assets they’ve built out.
John, Host: David, in the fourfold revenue growth in four years, nine over 25, what is the single largest component of the growth?
David Garoppolo, Chairman and CEO, Gold Royalty: Jackie, you go ahead. You can you can answer that.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: Yeah. So I think I think Canadian Malartic or Odyssey would be the single biggest contributor to that growth. That that asset is about 30% of our NAV alone. And and as that shaft gets sunk as the production from underground expands, we’re expecting more and more of that production will come from areas of our of our royalty coverage. So that that’s that’s that’s definitely the biggest.
There’s a lot of other ones that are quite exciting in there too, like Ren, but but Odyssey would definitely be the biggest.
John, Host: So, David, in ’86, I was at a firm that paid semiannual bonuses. And there was an account receivable from a government securities trading firm that went bad, and there was no profit. So management said they were gonna cut the research bonus full 40%. And I said, well, I’ll just take a six month sabbatical. And it turned out the drug analyst quit and went to paying Weber, and they only cut us back 15%.
But I took a three month working sabbatical, And I went from Tucson to Alaska to Black Hills Of South Dakota and visited national parks and mineral properties, camped half of the time. When I wanted to have a free dinner, I visited a mine manager. And I sent in handwritten research reports, and they published them. And that summer, the gold stocks doubled. So I went back to the office in September, and the brokers were shaking my hands and thanking me for coming back.
So I’m thinking how you’ve got everything laid up for revenue to go up fourfold without doing anything more. And some of the shareholders might be worried that you’re gonna try to do something more and do financings, and the stock market didn’t like it when you sold stock for berries. So my question and I was kidding you about this before we started. You know, I don’t know if you like skiing or fishing or hiking, or beaches, but, where would you go if you took a two year sabbatical? How good of an idea do you think it is, and would you make all the officers take a sabbatical too?
And maybe if you want, just give them half pay and cut a little bit of G and A.
David Garoppolo, Chairman and CEO, Gold Royalty: Yeah. No. No. It’s it’s an excellent question. And if you look at, the pace of growth, it was very aggressive at the early stage of our life cycle when we had the currency to do so.
You know, we were at a very rich valuation in 2021 coming out of the IPO, recognized it as such, and aggressively grew and diversified the portfolio. Since then, the pace of acquisition has slowed dramatically. The last major deal we’ve done was a year ago, actually a year thirteen months ago, which was the Varis acquisition. And we haven’t issued a lot of equity. If you look at our our track record, we did an equity raise in our IPO.
And then, three more than three years later, we did an equity raise for Varis. So in our four and a half year existence, we’ve gone to market exactly twice. And, in the case of the IPO, was to populate the treasury so that we could diversify the portfolio. In the case of the VARUS acquisition, it was to acquire a generational asset that will represent one of the 10 biggest silver producers in the world with eighteen years of reserve life, with no brownfield exploration done to this point because the operator has been singularly focused on construction. So we we bought a generational asset there.
Yes. The market definitely punished us, but I think that’s a function of the fact that Adriatic had virtually no research coverage in North America. So there was a complete lack of familiarity of the asset, but over time, that asset’s demonstrated to be a very, very high quality asset. And now we’ve seen interest from other large scale operators that wanna take it over. We’re not surprised because top 10 silver producers in the world are completely scarce in a very robust silver environment right now.
So I’m not surprised that it’s gonna end up probably in larger hands, and and that’s good news for us because it’s a well capitalized operator. It’s likely to spend more money on exploration, more money on expansions, and that comes free to us. We get that optionality for free. But you’re right. We haven’t been able to buy anything in the last year.
It’s not to say we haven’t looked. We’ve been priced out of everything because our our equity is too expensive right now. There there’s just no way for us to participate in this market. So we always look. We’re in a perpetual state of due diligence, but we’re not in a perpetual state of execution.
And just to put that in in hard numbers, we’ve looked at over 400 opportunities since our IPO. We put offers in on 40. We’ve executed on 10. So we have to look at a lot of things to get to that narrow end of the funnel where we can actually buy something. And on on the ones that we’ve executed, we have to have the currency to demonstrate that we actually can do something accretive.
We don’t have the currency right now, so we continue to look because that’s what we should be doing. Because if the currency comes back and we think there’s something accretive out there that
John, Host: we’re How about golf if you don’t like skiing or beaches?
David Garoppolo, Chairman and CEO, Gold Royalty: I don’t like golf either. So I I’m 35 years of
John, Host: I like skiing. Don’t even bother to look and read the bible or get, you know, get religion or something.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: We’ve been keeping pretty busy telling the good story to as many people as possible.
David Garoppolo, Chairman and CEO, Gold Royalty: Yeah. Jack Jackie’s run off my feet. My travel schedule’s more more populated than it ever has been, but it’s really just telling the story and telling about telling mark you know, institutional investors about the quality of this portfolio we’ve assembled. And and quite often, the refrain is we go into these meetings with institutions that Jackie knows really well because she was a sell side research analyst is, like, I never heard of this company before. And and that’s the reason we brought Jackie in is we needed some profile with those institutions, and this was a way to to to get those meetings and and start to get a bit more diversity in our world or in our, share ownership.
And and that’s paid some dividends this year. Our stock is up about 60%, and I think that we’re still discounted heavily through our NAV, but we’re starting to close the gap a little bit.
John, Host: Well, super. Thank you for the update and all the progress, and I’m just rooting for you to, you know, fly fish or hike or discover nature. And you don’t even need to do anything for a couple of years, a whole bunch of you.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: John, I think I
John, Host: all the money you would save evaluating projects.
Jackie Przywlowski, Vice President, Capital Markets, Gold Royalty: The the good news is we have we have other really compelling uses of our capital right now, paying down the debt, maybe maybe paying some back to the shareholders in a dividend or a buyback at some point in the future. But, yes, sure. If we get cash in the in the door through this revenue growth that we’re expecting, it it doesn’t have to be spent on new growth if if that’s not the smart way to do it. We have we have other obvious uses of that capital too.
John, Host: Super. Good luck. Thank you. Sorry if I kidded you too much.
David Garoppolo, Chairman and CEO, Gold Royalty: No. Not at all.
John, Host: It’s not golf. Okay. Take care.
David Garoppolo, Chairman and CEO, Gold Royalty: No. No. I’ll take up Greek cooking. I’ll come down and visit you. You can, you know, cook.
John, Host: Get easy. Bye bye.
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