Update: Gold Royalties Corp. Sells Its Eagle/Lynx Royalty For $7 Million To Franco-Nevada, Pays Off Debt

| About: Gold Royalties (GRYCF)
This article is now exclusive for PRO subscribers.

Summary

Gold Royalties just sold its most valuable asset to Franco Nevada in order to pay off its outstanding debt obligation to Callinan Royalties.

The company is also issuing stock to Callinan Royalties.

I hadn't anticipated this and I think it has mixed consequences.

The stock is incredibly inexpensive at this point in time but it won't generate any interest until the gold price rises.

Gold Royalties (OTC:GRYCF) just announced that it has sold its Eagle/Lynx royalty to Franco-Nevada Gold (NYSE:FNV) for $7 million. This is the company's most valuable royalty asset, although as I pointed out in my analysis of the company, the project is high-risk at the current gold price given its large initial capex estimate along with its remote location in the Yukon.

We also learned that the company is issuing 2.6 million shares to Callinan Royalties (OTCPK:CCNMF) and using most of the proceeds from this deal - C$6.9 million (~$5.9 million) - in order to pay back its outstanding convertible debt.

As I suggested in my analysis, Gold Royalties was trading like a "dead asset" and this became more of a reality as the gold price took another leg down as investors threw in the towel under the assumption that the Eagle Project will not be built and that this royalty is worthless. This is clearly not the case and given that Gold Royalties paid $9 million for the royalty in 2012 - when the gold price was much higher - it is faring extremely well. Going forward, it now has no debt, a producing royalty in its Bachelor Lake Project (which is also supported by Sandstorm Gold (NYSEMKT:SAND) and a handful of exploration-stage royalties that have potential.

At this stage in the game, Gold Royalties is so inexpensive with a ~$2 million market capitalization, ~$250,000 in annual royalty income, and the Bradshaw Royalty (which I value at >$5 million) that I think it is one of the most compelling gold stocks out there. However, a lot of investors probably think that this is still a dead asset and my guess is that it will take a rising gold price to generate interest in the name even though it doesn't necessarily need this to generate sizable returns.

Disclosure: The author is long FNV.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.