Gold Royalty Corp. (GROY) CEO David Garofalo on Q2 2022 Results - Earnings Call Transcript

May 25, 2022 2:17 PM ETGold Royalty Corp. (GROY)1 Like
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Gold Royalty Corp. (NYSE:GROY) Q2 2022 Results Conference Call May 25, 2022 10:00 AM ET

Company Participants

David Garofalo - President and CEO

John Griffith - Chief Development Officer

Conference Call Participants

Unidentified Company Representative

[Call Starts Abruptly] to another fantastic VID conference Town Hall session with the Gold Royalty. Joining us today we have David Garofalo, the President and CEO; and also we have John Griffith, our Chief Development Officer, joining us again. Gentlemen, how are you?

David Garofalo

Good. Thank you for having us on. We’re really delighted to be here.

Unidentified Company Representative

Very good. Thank you. It’s always been a great journey with you gentlemen. I know there may be some technical issues for one of our feeds here, so we’ll hope our best all the way through. But, having seen a recent press release that came out from Gold Royalty, there’s a lot of news as there always is for this company. Gentlemen, I know that there’s a lot to share. So, I’m going to step at the side. And we invite everyone who’s joining us today to let us know where you’re tuning in from, and to remember to post your questions at the Q&A. We’ll have a great chance with both our guests. Ask questions at the end of the session.

So, for now, gentlemen, I’ll leave you to the presentation.

David Garofalo

Thanks very much, Mark, and good morning, everybody. We’re delighted you could join us today to talk about our second quarter results and also an update on the prospects of our royalty portfolio, which has now grown to 195 royalties throughout the Americas with a heavy concentration in some of the best jurisdictions of the world, namely Nevada, Québec and Ontario, as judged by the Fraser Institute for geological prospectivity, low political risk or geological -- excuse me, low regulatory risk. But we will provide a fulsome update on many of our key assets, the tremendous cash flow trajectory that we have from our business. We’re starting to see the evidence of that in our first couple of quarters with strong cash flow -- record casual flow, in fact, in both the first and second quarter of this year with a heavy weighting in the second half of this year as some of our key assets start up production, namely Beaufor in Northwestern Québec.

Before I get into the presentation though, I do have to let you know that we’ll be making some forward-looking statements. And the disclaimer is enclosed in the slide deck. I ask you to read it at your leisure, but be appropriately cautioned.

I think the question I quite often get asked is in this inflationary environment with headline numbers as high as they’ve ever been in almost 50 years, why we haven’t seen the kind of response and goal that people have expected? And what we’ve tried to do here is encapsulate gold price performance really since the last major inflationary cycle in the ‘70s and ‘80s, just to give you some historical perspective. And these are nominal god prices. It doesn’t reflect inflation adjusted gold. And you can see that on a nominal basis, we are very much at all-time highs for the goal price. But we’re really just getting started because these headline inflation numbers, as I think you’ve heard me say before, significantly understate the reality on the ground. If you’re putting food in your stomach, fueling your tanks of your cars, if you’re sheltering yourself, your inflation is very deeply into double-digit territory, not unlike what we saw back in the ‘70s and ‘80s, when we had the last big monetary expansion. When we had -- last had an oil embargo, we saw gold prices achieve at the time north of $800 an ounce.

If you inflation adjust the gold price, you can see we’re nowhere near the all-time peaks. So, if you take that peak price that we saw in the last inflationary cycle almost 50 years ago, gold is still well below that. In fact, I think, like headline inflation numbers today, the headline inflation numbers back in the ‘70s did not reflect the reality on the ground. Those headline numbers tend to exclude the things that are most fundamental to how we live our lives, as I said, food, fuel and shelter. And so if you actually inflation adjust it for industrial inflation, gold achieved an all-time high back in the 1970s and early ‘80s of over $3,000 ounce. And so, we’re still a long way from that. We’re about 50% or more below where the all-time cyclical high is.

And this era that we’re experiencing right now, this inflationary cycle bears all the same hallmarks that we saw back in the ‘70s and ‘80s. Back in the early ‘70s, Nixon decoupled the U.S. dollar from the gold price, because we were in the middle of the war, the Vietnam War at the time. And he needed to print money to finance that war. And so, we saw massive monetary expansion.

Now, we’re having a war today, and we didn’t have a decoupling of gold from the U.S. dollar, but we did have a similar event in the credit crisis back in 2008 where all paper currencies were decoupled from reality. There was a global coordinated effort by the central banks to print money. And that’s gone on an unrelenting basis since the credit crisis. And so, the monetary expansion far exceeds what we saw in the 1970s. And like the 1970s, we have an oil embargo. Back then, it was imposed upon us by the Arab world. Today, it’s self-imposed. With the war between Russia and Ukraine, and like the war back in Vietnam in the ‘70s, we have a war in the Ukraine and potentially in broader Europe. And so, there is lot of the similarities, a lot of the flags that we saw back in the ‘70s that we’re seeing today.

And so, again, the question you have to ask yourself is, why hasn’t the gold price responded? Well, back in the late 1970s, we had Paul Volker come into Federal Reserve and he started raising nominal interest rates, much like Jerome Powell is doing to Federal Reserve right now. And the gold price only started to respond as nominal rates started to go up. And that seems counterintuitive, because gold should be going up as interest rates go down. But the reality is like in late 1970s, even as nominal rates are going up, inflation is accelerating and real interest rates are diving deeper and deeper into negative territory.

So, it took a couple of years of that nominal tightening cycle for the gold price to achieve its peak. And I’d say, that’s what’s going to happen here. I do believe that we’ll achieve at least $3,000 ounce in this cycle and I think far beyond that, because the one difference between this inflationary cycle and the one we experienced in the 1970s is the level of debt that we’re carrying in our society, whether it’s at the sovereign level, the corporate level, and the personal level. Global debt to GDP now exceeds 350%. Back in the 1970s, it was only about a 100%. So, we’re carrying 3.5 times the debt per capita that we carried back in the ‘70s today.

That means the scope for the Federal Reserve and other central banks to raise interest rates meaningfully and certainly on a real basis is extremely limited, because they could very well bankrupt governments, bankrupt individuals, bankrupt companies, if they move too quickly. So, I believe this inflationary cycle, which is already quite entrenched, will accelerate, become more entrenched, because of the constraints that we have with the debt levels we’re carrying globally. So, I just watch this space. I think the gold price will respond, and I think the equities will eventually respond.

We haven’t seen the gold price equities or the gold equities respond in a meaningful way, even though the gold price has been quite robust because of the specter of inflation, which has really resulted in the baby being thrown out with the bathwater. There’s been a broad base selloff in general equities, which I’ve been predicting for a couple of years now, since we launched Gold Royalty, they’ve been saying that consistently that that would be a precursor to a meaningful run on the gold price and a meaningful run in gold equities. But initially, in a bear market, everything gets thrown out. Everything gets sold off, and then as capital starts to get redeployed, the more discerning investors will deploy capital in the defense of stocks. And I’d say, namely, the gold equities; and principally, I would say the mining royalty companies. And the reason I say that is because we are in inflationary cycle and mining equities are not immune from that, particularly the operators. The ones that are operating major mines that are building mines are going to experience inflation as we’re experiencing the general economy. And that’s why after 32 years of building and operating mines, I’m in the royalty business because it provides that maximum leverage, optimum leverage of the gold price, leverages the exploration success of our operators, but completely insulates our shareholders from cost inflation.

And we only have to look back about a dozen years to see what inflation does to the operators’ equity crisis. We came out of the credit crisis about a dozen years ago with gold, going up about 140%. And that’s as you see in this left handed chart. The mining equities significantly underperformed, they were only up about 60% -- 68%. And I’m talking about the producers. And the reason that was is because as we came out of the credit crisis and gold went up, we saw in the middle of the Chinese supercycle a lot of new mine building going on. So, that inflected the mining supply chain. We saw input costs go up dramatically. And even as the gold price was going up, margins were squeezed in the operation sides of business. So, we saw the mining equities, the operators underperform. The royalty companies vastly outperformed both the producers and the gold price. Because again, they provided that leverage to the gold price, the profitability went up, their margins went up dramatically because they are completely unexposed to input cost inflation because we just take a percentage of the top line. That’s the beauty of this business.

And I would argue, that’s exactly the point in the cycle that we are in now. I do believe the prospects for gold are very strong. I think gold will have a very, very strong run, as I articulated a little earlier on in the presentation. But I do think that we’re going to see a cycle of mine building necessarily and existentially required in the mining industry after 10 years of underinvestment. We’ve seen declining reserves and production, and the industry has to reverse that downward trajectory by building and exploring. And that’ll impact their supply chain and impact their operating costs. But I also think against a backdrop of inflation in the general economy, it’ll be far more amplified than it was 10, 12 years ago as we came out of the credit crisis. So, I think the royalty space is exactly where you need to be to get optimum exposure to the gold price while protecting yourself from inflation.

So, I do see that kind of outperformance in the royalty space again. But again, to be effective in the industry, you have to have scale. And we attempted to achieve that very, very quickly since our IPO, a little over a year ago, and the opportunity in achieving scale as the big category killers in our space clearly demonstrate Franco, Wheaton and Royal Gold is getting a higher multiple, lower cost of capital, which allows us to be competitive for new royalty opportunities and perpetuate our business. And you can see -- clearly see that we’re a value stock now. And some of that is because we’ve seen a general sell-off in the U.S. equity markets. And again, as I see discerning investors start to come back in and pick off value in the space, they’re going to be meaningfully buying into the royalty companies that provide meaningful growth. And we by far have the best growth trajectory and revenues in the entire sector. So, I think we’re best positioned, we see outsized performance.

And I also have to take some personal responsibility for this underperformance this year. We were the top performing royalty stock last year, this year, not so much because we did launch a hostile deal for Elemental earlier this year. And that created a bit of an overhang to stock in addition to the broad based sell-off, you’ve seen in the U.S. equity markets. We demonstrated discipline by walking away. We were invited by Elemental to bid against ourselves. Nobody else bid on the company. We refused to do so. And I think that’s the right thing for our shareholders is sometimes you just have to walk away and be disciplined, and look on to other opportunities to offer better value. And that’s effectively what we’ve done and walking away from Elemental. But it hasn’t been that we haven’t been busy. It certainly didn’t slow us down as we had that royalty or hostile bid for Elemental outstanding and that we did pick up a royalty on Côté Gold, which is going to be Canada’s second largest gold mine when it comes into production late next year. We picked up an additional royalty on Beaufor, which starts up production next month and provides meaningful cash flow growth in the second half of this year for us.

And as you’ve seen over the last year, we’ve been very, very aggressive on the M&A side, picking off Ely, Abitibi and Golden Valley, which allowed us to grow our royalty portfolio from 14 royalties at our IPO to 195 royalties today across the Americas.

So, where it positions us today is a well-balanced, diversified portfolio with cash flow from six of those royalties with development stage assets of 21 royalties, which provide 60% compounded average growth in revenues over the next five years and beyond. And we’ve been so successful in building up critical mass in our revenue profile. We introduced the dividend only 10 months after our IPO. We now yield comfortably over 1%. And we just announced our second quarterly dividend yesterday. And there’s more to come. As our revenue growth kicks in, I have a high degree of confidence we’re going to be raising that dividend over time, as we realize that revenue growth.

Profitability will only just improve as we go forward because we carry a very small contingent of people. We have seven full-time equivalent employees. I have every confidence that our fixed costs will not go up and our headcount will not go up and we can run a business 10 times the size that we have today with the same contingent of the employees. So, really, our costs are quite fixed. Every incremental dollar of revenue goes right to the bottom line and allows us the prospect of increasing our dividend over time.

And we still remain with strong liquidity on the balance sheet. The management team I think has demonstrated their experience, their access to opportunities and how quickly we’ve been able to assemble this royalty portfolio, grow it and grow a revenue profile very meaningfully in just over a year of our existence since our IPO in March of 2021.

So, with that, I’d like to hand it off to John to talk about our quarter and some of our key assets within our portfolio. Thank you for your attention this morning. John, over to you.

John Griffith

Thanks very much, Dave, and a great pleasure to be speaking with everybody today.

As David mentioned, we announced our results, record revenues of $0.6 million, and $1.2 million for the three and six months respectively. And I think importantly, we’re really looking forward to the ramping up of our revenue profile coming from Beaufor and later in the year Canadian Malartic. And that will result in us having an estimated $5 million in revenue for 2022.

As Dave mentioned as well, we paid out our first dividend. We’re currently yielding, I think, it’s approximately 1.3% on a yield basis. And I think as the revenue profile accelerates, so too will hopefully our dividend as well.

Dave did mention strong liquidity of $25 million, which positions us very well for further growth. And I think the really exciting part about the business, notwithstanding the market sell-off that I think Dave articulated really well, is our business has never been stronger. I know we’ve had a relatively short existence, but we’re really well positioned. The assets and the partners with whom we share our profile -- asset profile have really been doing well, and a lot of good news coming out on the assets. And I’m going to share some of that with you today. So, a really strong backdrop for the Company in addition to the backdrop that Dave shared with you on the gold price.

I think, as we look at the revenue growth, I’ll move to the next slide, because I think this captures it nicely.

Over the next several years, our revenue growth is expected to be approximately 60%. So, by 2025, we’ll be more than $20 million in revenue. And I think what’s exciting is you go beyond 2027 and that number accretes to over $60 million as assets like Odyssey, REN, Fenelon, Côté and others really come into their stride. And I think this is going to allow us to really be very thoughtful about how much cash we want to return to our shareholders. And we would fully expect to be able to grow that dividend that we started to pay this last quarter in a meaningful way as this revenue ramps up.

Talking a little bit about the portfolio. As I think everybody knows, we have 195 royalties now, which makes us third in line behind Franco and SandStorm, just in terms of the sheer number of royalties we have. But what we really enjoy is the balance across that portfolio with six producing royalties, 21 of them in development to really provide that engine for growth. And beyond that 31 royalties in what we would describe as advanced exploration stage assets, and then a further 137 exploration royalties. And this really provides a great -- as I said great balance, but also long-term production and long-term optionality that could come from those exploration assets. We only need one or two of those to come to fruition, and it completely changes the value proposition.

We have, as I think we’ve mentioned before, nearly 75% of our net asset value in the two key regions of Québec and Nevada. And as Dave mentioned, they’re top ranked by the Fraser Institute. And I think this is important. If you take the stable geopolitical profile that we have and you combine that with our very heavy, precious metals focus, you really end up categorizing this as a portfolio with stable geopolitical risk, the right kind of commodities to gain exposure to a rising gold price environment. You have longevity in our core asset base, you have stability, you have growth. And all of that is going to really allow us to grow our shareholder distribution profile for a considerable amount of time, going forward.

The best thing about all of this though is it’s all fully paid for. We don’t need to issue a single share; we don’t need to pay out a single dollar in order to continue to deliver this growth. But certainly we would also anticipate growing the company beyond what we already have by acquiring additional assets. Otherwise, my role as Chief Development Officer would be moot.

Taking a closer look at our cornerstone royalties, the first is really -- the first one I wanted to highlight is Odyssey. And the partners have made significant progress at Odyssey. The underground development is advancing according to plan. The ramp from surface to upper zones has reached the elevation of the third production level and the base of the first stoping horizon. Shaft sinking is expected to begin in the fourth quarter of 2022 and the first underground mineralized material from Odyssey South is expected to be processed through the existing Canadian Malartic plant in early 2023.

And importantly, what we’d like to highlight is that the current underground plan is expected to produce roughly 0.5 million ounces per annum over the next 18 years. But this only takes into account 47% of the mineralization. So, there’s significant upside potential. And we’d further illustrate that -- the mill capacity, there’s approximately 40,000 tons per day of excess mill capacity. And I think if you read some of the disclosure from both, Yamana and Agnico, you can certainly infer an expectation of increased production and throughput from Odyssey. So, we are really excited. Things are progressing very well.

Moving on to the next asset that I would like to highlight that’s REN. And on February the 10th of this year, Barrick announced a maiden inferred mineral resource estimate of approximately 1.2 million ounces, grading 7.3 grams per ton at REN. And I think as the Northern extension of the Carlin complex, REN is a key component of Barrick’s brownfield exploration strategy. And Barrick has highlighted that REN represents future growth for the Carlin complex and the potential to contribute to the life of mine plan in the near term, importantly. And the company’s initiated various mining studies to optimally design this as part of their Goldstrike mine.

Moving on to Côté, I think the -- I think that many will be aware of the announcements from IAMGOLD regarding a significant capital cost escalation at Côté. The important thing though for us is they are still holding the line on expected production at the end of 2023. And I think what these pronouncements by IAMGOLD really illustrate is the power of the royalty business model, because gold royalty is effectively completely insulated from these cost escalations. And it really speaks to the thesis that Dave was talking about in the first half of the presentation.

So, things are progressing well at Côté from our point of view. I know that obviously the cost overruns provide some anxiety for IAMGOLD shareholders. But from our point of view, the royalty’s in great shape, the mine should be producing back half of 2023. And this will provide a steady stream of revenue for us for many years to come.

The next asset that I wanted to highlight is Beaufor. And I’m pleased to say that Monarch is making good progress and actually production and operations are expected to start next month. And we anticipate once the operations are up and running that we will earn between $1.4 million and $1.7 million in revenue per annum from Beaufor. So, this is going to be a really nice asset contributing near-term cash flow, and is one of our key drivers of near-term growth.

The final asset that I’d like to talk about is Fenelon. And what we’d really like to focus on here is the significant amount of drilling. Wallbridge has announced a $70 million drill program in 2022 of which 115,000 meters is planned solely for Fenelon. And this will build on the already 330,000 meters of drilling that was completed between 2017 and 2021. Significant gold mineralization in the Ripley Zone is expected to be included in the updated Fenelon mineral resource estimate, which is expected later in 2023.

I’d like to wrap up by just highlighting the fact that in addition to the high quality portfolio that we’ve assembled, we’ve also been able to establish a strong capital markets presence in just over 12 months as a public company. We have four analysts, who’ve initiated research coverage on the Company, and we’re one of the most liquid stocks relative to our peer group. Strong liquidity allows investors to effectively invest in the company and manage their exposure. Many peer companies trade by appointment and are quite frankly uninvestible by meaningful institutions. Our balance sheet is healthy. Our management team will continue to execute on our strategy to accretively grow the portfolio to the benefit of all our stakeholders.

In summary, despite the recent share price performance, as a result of the broader market selloff, the fundamentals of our business have never been stronger. And we look forward to continuing to grow the Company as the assets start producing.

And I’d now like to hand over to the Q&A.

Question-and-Answer Session

Q - Unidentified Analyst

Thank you both gentlemen. It’s always great to see you here at VID conferences. You’re one of the most forthcoming companies that we have at our sessions. So, I’m very grateful for that. And we do have a very busy Q&A column happening. So we’re going to get right into the comments from around the world. Our first question comes and says, do you still see opportunities for further M&A at this point?

David Garofalo

Certainly. Look, there’s been a proliferation of these companies, royalty companies in the space over the last while. And as John correctly pointed out, many of them do trade by appointment, they are illiquid, they’re unable to access capital. And recognizing that, some of the companies we took over last year, the management teams at Ely, Golden Valley, and Abitibi recognized the deficiency in their platform. They had great assets, but they didn’t have the ability to access further capital to grow their business. And they hopped on board. And in fact, all of the founders of the companies that we took over are still meaningfully involved with us, both as shareholders and contributors to us day-to-day. Jerry Baughman and Trey Wasser, the co-founders of Ely still help run our Nevada business. They generate royalties for us. As John pointed out, our generator platform is still a meaningful source of growth for us. And similarly, Glenn Mullan at Golden Valley runs our business in Ontario, Québec, and does exactly the same thing that Jerry does in Nevada, generates royalties for us effectively for free by staking exploration claims. So, he’s enjoying the liquidity that our platform offers, our access to capital, so he can continue to do what he does extremely well and has done extremely well for over 30 years.

So, I do think there’s still more opportunity out there. There needs to be that rationalization. And we need to create a mid-tier player, we’re none exist currently. There is no $5 billion market cap royalty company that’s big enough to matter the institutional investors but small enough to grow meaningfully. When you’re Franco-Nevada, you’re $30 billion to $40 billion in market cap already, how do you double from there? How do you meaningfully grow your business? It’s a great business. It’s a blue chip, but how do you double the value of your business. When you’re a $500 million market cap company, $1 billion or even $5 billion market cap company, their prospects for a double, triple are much higher than they are when you’re already a large cap company with limited scope for growth.

Unidentified Analyst

Terrific. Thank you, David. Great context there. Moving on to next question, why did the Elemental bid fail and why did you not increase the bid? And what’s next?

David Garofalo

Look, I think ultimately what it came down to was there was a very closely held shareholder base, and that’s why the Company literally trades thousands of dollars of stock per day. It’s very, very illiquid. And I have to take responsibility. I underestimated the ability to break into that cabal of shareholders. I thought there was one or two of them that would want path to liquidity in a much larger vehicle. They have a -- I think a strong asset base, it complements what we have. They’re more Australia, Africa focused; we’re Americas focused. They’re in good jurisdictions in Australia, obviously. So, it was good complementary fit. But I underestimated their desire to get a pack of liquidity and get to a larger platform. And we were invited to bid against ourselves and we declined. And we were not provided access to data. So, it was very difficult for us to look for value in the absence of having access to more meaningful data, to see if there was value that the market wasn’t seeing.

And so, we had to walk away. We have to demonstrate discipline with our shareholders. We have to show them that we value their shares, and then we’re not just going to throw it away. And it’s a currency, and the minute we just continually print that currency without any view to value, then you’re undermining the value of that currency. So, we’ll be disciplined in anything we do on the M&A side.

Unidentified Analyst

Great. Thank you, David. Great overview there. Next question comes in and says, what are you hearing is the key reasons why the stock trades at such a deep discount to NAV? And what can you do that’s when you’re under control to help close the gap?

David Garofalo

Look, I think what we can do is go out and tell the story. We do have a very, very compelling story. We have a very diversified portfolio with significant growth in the best jurisdictions in the world, and a business that’s going to do exceedingly well in an inflationary environment. That’s the story we need to tell. And we need to continue to add assets, both on assets that add value in a for sure basis. But, even if we allow our existing asset base to mature without any other acquisitions, we’re going to deliver significant cash flow for share growth for our shareholders in the next several years, all of these projects are in mid-gestation right now. And we’re going to benefit obviously from the upside that the gold price offers. But the other element and the other dimension of our story is virtually all of our key assets are being explored aggressively, and we enjoy that exploration upside without having to put a dime in. As John said, all of our royalties are bought and paid for. We don’t have to put another dime in. So, every time our operating partners find another ounce in the ground, every time the gold price goes up, every time they produce an incremental ounce of production, we enjoy entirely that upside without having to pay for it.

Unidentified Analyst

Great. Thank you for that, David. Question from James comes in, says, why does management -- sorry, when does management expect to start receiving payments from the 3% royalty on Canadian Malartic underground, also approximately how much of the Odyssey project does the NSR cover?

David Garofalo

John, do you want to handle that one?

John Griffith

Sorry. I was struggling with my mute button there. I beg your pardon. I think, the -- we’re certainly expecting to see some moderate cash flows coming out of Canadian Malartic going forward for the next couple of years. But I think, when Odyssey ramps up, it’ll be later 2023, 2024. And really, I think where we start to see maximum revenue from Odyssey is going to be 2026, 2027. And as I mentioned in my comments, that’s when we expect to see revenue hit approximately $60 million, and that’s largely driven by Odyssey, but also other assets like REN and Côté.

Unidentified Analyst

Very good. Thank you for that. Moving on to the question from Vernon, asking what type of royalty -- excuse me. What type of royalty company are you striving to be? Are you an -- income company? What kind of shareholders do you aim for?

David Garofalo

Well, look, I think the one thing that we haven’t done is done streaming. So, we’re happy to look at royalties and streams and we’ll structure ourselves accordingly. We just haven’t found any value in the streaming business right now, but we are looking actively for those. We’re precious metal focused, if that’s the question you’re asking. We probably have some room for diversification. We’re over 90% gold right now. We have about 3% silver and 7% copper exposure in terms of the assets we currently hold. So, we have some scope for diversification, but only in the context of buying a precious metal royalty. If we pick up some base metal exposure in the context of buying a precious metal royalty, because quite often deposits are polymetallic, then we’re happy to take on a bit of diversification. But it gets a bit risky to our multiple if we go below say 70% to 80% precious metal. So, we’ll make sure that we stay within that range at a minimum to ensure that we get the optimum multiple in the marketplace.

Unidentified Analyst

Great. Thank you, David, for that. We have a couple of viewers that are looking for this answer. Real G&A was in the order of US$4.9 million in the most recent quarter. Can you provide a more representative run rate might be and when that might be achievable?

David Garofalo

Yes. So, look, there was a lot of one-time costs in those G&A costs in the six months. For example, I think there was almost $5 million of nonrecurring G&A costs, essentially pertained to the significant M&A activity we undertook over the course of six months of the year. So, those are non-recurring. The biggest component of our G&A costs, believe it or not is our -- insurance we’re U.S. listed. Last year, that was $2.5 million hit to our G&A. This year, we’ve actually been able to bring that down to about $1.7 million. So, that actually is an excess of our other cash G&A.

We don’t carry a lot of headcount. We have seven full-time equivalent employees. And I say full-time equivalents because we only have four actual full-time employees. And then, we share some resources with some of the other companies that we share office space with. We share an ESG specialist, we share a controller, and we share an IT specialist and so on. We share a mining engineer. We share a geologist. So, we’re able to share those resources across an ecosystem of other companies. So, we keep our G&A costs extremely low. But from time to time, we will undertake transaction costs. We hire subject matter experts, consultants to help us do our due diligence, but that helps keep our overhead low on a continuing basis, if we focus those G&A costs, those non-recurring costs on specific transactions.

Unidentified Analyst

Great. Thank you for that, David. Question here from JP. JP understands that you’ve acquired your royalties in exchange for GROY, without including Sprott, McEwen, et cetera, will we be seeing more stock hit the market from acquired companies?

David Garofalo

Well, look, I think, whenever you’re taking over another company, there’s always a period of settlement in the stock. It’s hard for me to say who’s been buying and selling. There’s definitely been some exodus of some of the shareholders from some of the legacy companies. But by and large, some of the key shareholders, whether it’s Rob McEwen and Eric Sprott, Jimmy Lee, those guys have hung in there as far as I know, and supported the stock, believe in the story. And we’ve been able to acquire some very, very smart investors as a result of the acquisition of these companies. And they’re in there for the long-term. And that includes Ian Telfer, who is a cornerstone investor in our IPO. He’s the chair of our advisory board. He was the one that created the whole streaming model with Wheaton Precious Metals getting spun out Goldcorp 15 years ago. So, we’ve got some very smart money and the story, and I’m very proud to have him in our shareholder.

Unidentified Analyst

Another question we’ve heard this before in other town halls, David, are you going to list in Canada?

David Garofalo

So, right now, there doesn’t seem to be imperative to do that. We are the most liquid stock among our peers on the NYSE. Having access to the deep pools of capital in the U.S. has served us well. And it hasn’t prevented our shareholders in Canada from buying the stock. And I think at the end of the day, whether you’re in Canada or the U.S., you want to buy the stock where it’s most liquid and it’s always going to be most liquid in New York.

Unidentified Analyst

Okay. Thank you for that. Next question comes in. Can you please discuss Rawhide and why the impairment there?

David Garofalo

John, do you want to cover that?

John Griffith

Yes, sure. I think, the key there is that the operators, we’re in a situation where they weren’t able to continue to operate the asset in a profitable manner. And as a result, we went in and did some analysis and we took a decision to write that asset off because, we think there’s a very real risk that we’re not going to see continued production out of Rawhide. It’s really quite that simple.

Unidentified Analyst

Anything to add David, or are you good there?

David Garofalo

Yes.

Unidentified Analyst

Okay. Thank you so much. Next question. How is the prospect generation outside of the business going? Have you been successful in optioning out prospects year to date?

David Garofalo

John, over to you.

John Griffith

Yes. I think that’s a great question because it’s one of the most exciting avenues of growth. When I think about growth in terms of increasing the number of royalties, there’s really four key strategies. One is this particular point, which is organic growth. And we’ve got three elements to that organic growth. The first is the work that Jerry Baughman does in Nevada. We’ve been able to enter into a new contract with one of the very largest gold companies, and that arrangement really results in us leasing some land to this company. They’re going to be doing drilling on it. And to the extent that they then exercise their options, it converts into a royalty. And basically what that means is we’ve generated that royalty for a portion of what we pay Jerry’s salary. So, it is one of the very cheapest ways to generate royalties. I can tell you that we’ve got a further two arrangements also with major gold producers that we’re hoping to be able to close, I would say within weeks.

In the case of Québec with Glenn Mullan, and we’re really thrilled to have Glenn be on our board, but also on our management team. And Glenn continues the activity that he was instrumental in building Golden Valley and Abitibi, and he’s doing exactly the same thing. And he has closed a transaction with Eldorado Gold, where we’ve got a free carried joint venture that could again, translate into a royalty, to the extent that Eldorado is successful with its drill program on that property. So, that’s a very healthy part of our business.

I did mention there were three other elements. We continue to look at the opportunity to write new royalties, provide fresh capital to operating companies. We continue to look at acquiring existing third-party royalties, and then of course the M&A strategy around consolidation.

Unidentified Analyst

Great. Thank you for that, John. A couple of broader lens questions coming in here. I’ll move to this one. Newfoundland, reportedly one of the best mining jurisdictions, are you avoiding it intentionally? Is there something there that not dealt with or not crystallized yet? Just curious your thoughts on our find friends on the rocket.

David Garofalo

John, over to you.

John Griffith

Yes. No, I -- definitely not intentional. I think it’s really a question of the opportunity set that is in front of us. And we -- at any one point in time, we’re looking at, at least 10 to a dozen opportunities that are in all parts of the globe. We don’t -- we certainly [Technical Difficulty]

Unidentified Analyst

Bit of a delay there on John. I knew we had a bit of a tech issue at the start. Let’s just give it a second.

David Garofalo

John, I think we’ve lost you on sound there. But anyways, just to answer that question on Newfoundland, definitely not avoiding it, geologically prospective jurisdiction, one where we from time to time do see opportunities. We just haven’t transacted yet. So, it’s definitely within our radar. Canada’s a great place to be, regardless of the jurisdiction, province or the territory.

Unidentified Analyst

Very good. Thank you for that. Excellent. And John is back. I think we have that solved. If I’m not mistaken here. John, are you clear and free there? Not quite. Okay. We have max headroom there. Let’s move on to a broader question in terms of other jurisdictions. That’s a great segue, David. Thank you. In terms of where else in the world are you looking, what’s on the horizon?

David Garofalo

Well, look, obviously with the Elemental bid, Australia would’ve been a great jurisdiction for us to be in. Western Australia was a top rated jurisdiction by the Fraser Institute last year. And so, it’s currently within our radar. We did bid on something in West Africa last year, Séguéla and that’s public. Would’ve liked to pick up that asset. Good geology in a jurisdiction with an operator that knows it well. Unfortunately, we were scooped by Franco-Nevada. It shows you how scarce these opportunities are when the biggest royalty companies of the world actually bowed down to scoop, what was relatively small royalty from us. So, we’ll continue to look in good jurisdictions. If we start with the geological model, we’re looking for good geology, good operators, and we’ll be in jurisdictions that have a good track record from a regulatory standpoint on the mining side.

Unidentified Analyst

Great. Thank you, David. And thanks. We’re still waiting for John to join us in full strength here. So, we’ll move on to a couple other questions here. What negative monetization are you placing on Elemental?

David Garofalo

I’m not sure I understand that question, negative monetization. We don’t have any meaningful interests in Elemental. And so, I’m not sure what that means. Okay. I apologize if you want to provide some clarification in the text feed here, we’d be happy to answer the question.

Unidentified Analyst

We’ll watch for that from Bob. Thanks. Next question comes on the U.S. listing. Is your company considered Canadian for CRA foreign reporting T1135 purposes? It’s asking IR and never got a response, any clarification?

David Garofalo

I’m going to get Peter Behncke to get back to you specifically on that tax filing. I know enough tax to be dangerous. But what I would say is we are Canadian incorporated. We’re Canadian domiciled. So, we’re a Canadian company that happens to be listed in the U.S. So, again, I think we walk like a duck and quack like a duck. So, we are -- but let me get Peter to get back to you specifically on your tax filing question, because I don’t recognize that tax form.

Unidentified Analyst

Thank you for that. Next question coming in, just want to -- this question from Dennis [ph] says, would Gold Royalty ever invest in another gold royalty stocks such as Great Bear Royalties or perhaps acquire such a company?

David Garofalo

Well, look, there’s a lot of companies out there that we’re looking at. We’ll be opportunistic. There has to be value. We have to be able to demonstrate the value on a per share basis for our shareholders before we do any M&A. And currently with our stock at these depressed levels at discount to NAV as we showed you in that previous scale, it’s very, very difficult for us to contemplate any meaningful M&A at this stage. Well -- we’re going to focus on our business. We’re in a business generating our own royalties, looking at individual royalty opportunities with the substantial liquidity we have in our balance sheet, the access to debt we also have and with our debt providers, the CIBC and BMO. So, watch this space, but I’d say we’re going to be very, very careful about what we do on the M&A side to ensure that we are creating value for our shareholders.

Unidentified Analyst

Terrific. Thank you, David. And note that John has left the call for now. So, there may be an opportunity for him to join us before we say goodbye, but certainly want to thank him so far for his contributions. Just looking ahead, at this point, we always like to offer an opportunity here, David, to say, where do we look to over the next 6, 9, 12 months? What are we -- what’s on the horizon? What are the things we should watch for as we’re watching the Company?

David Garofalo

Well, there’s lots of activity, both in terms of revenue growth, we talked about Monarch’s restarting the Beaufor Mine next month, and that’ll provide a meaningful upward lift in our revenue in the second half of the year. So, our revenue is very much backend loaded, and we’re in a great position to continue to pay our dividend. But there’s also been meaningful exploration. And John touched on many of those. We’re drilling many hundreds of thousands of meters, or at least our operating partners are many of our projects. And that means meaningful exploration information, which grows resources, which grows our exposure to those resources. Collectively, we’re exposed to over 80 million ounces of gold resource within our 195 royalties in our portfolio. That is poised to grow given the amount of exploration that’s being conducted on those major projects, whether it’s Fenelon, whether it’s Canadian Malartic, whether it’s Côté, REN, the undergrad extension of Goldstrike. These are all chunky long life assets in the best jurisdictions in the world.

And as they grow geologically, our exposure to them grows from a royalty perspective. And so, we provide that meaningful leverage to exploration success. That’s the beauty of the royalty model, well -- having to pay for any of that expiration. Beyond this year and next, we’re seeing meaningful revenue growth from Côté as it comes into production, end of next year, as I mentioned earlier on that’s the second biggest gold mine and will be the second biggest producing gold mine in Canada when it’s up and running. And we have a royalty on the highest grade portion of the pit where they’re going to be mining as -- on a priority basis at early stages of that mine life. And then, the revenue growth will start to kick in from Canadian Malartic at the Odyssey underground, as it starts to mine more and more from the underground portion of that project is a transition from open pit to underground.

And we have many, many other levers for revenue growth going forward. As I said, we have 21 projects in various stages of development. That provides meaningful revenue growth for many, many years to come.

Unidentified Analyst

Terrific. David, that’s a great overview. Thank you. I often like to end with this question, which is when you drive home at night with all the changes that have happened, the ups and downs, we started talking with the Ely Gold, transaction. So many things have shifted and moved since then. What do you get most excited about as the head of the Company for long-term? You described some in detail just now, but I’m curious what David thinks himself that perhaps we often don’t have a chance to hear.

David Garofalo

Well, it’s the infinite optionality that we have in our portfolio. I talked about the six that are in production, the 21 in development, but then we have 160-plus other royalties, the provider of shareholders, infinite optionality. They get no value in the marketplace, and I don’t need all 165 of those to hit, 5 or 10 of them will do. And they will provide outsize growth in terms of value, cash flow, exploration upside for our shareholders for many, many years to come, for decades, if you will. We have a foundational element to our story. That’s the envy of every other smaller cap royalty company in the space. How many companies have royalties in the three biggest gold mines in North America, Canadian Malartic, Côté and Goldstrike? We have that, and we are only a little over a year old. So, it’s incredible what we’ve been able to accomplish. And then, we have all that optionality that we have talked about beyond those foundational assets. So, that gets me very, very excited.

Unidentified Company Representative

Very Good. I hear that loud and clear. David, it’s always a pleasure to joining with you in these town halls, and our thanks to John for joining us for the time that he cared. I appreciate that. This is why we do what we do is to bring companies and investors together to learn, be informed and make very educated decisions of where they want to put their investments as they move forward as investors.

So, thank you for bringing all you have today. We look forward to watching the Company in the coming months. And we’ll also look forward to another great town hall. I’m sure that’s not too far away.

David Garofalo

We are looking forward to that next quarter. Thanks everybody for attention this morning.

Unidentified Company Representative

Terrific. Thanks so much, David. And thank you to everyone joining us today. We just want to thank you for being part of this. Your energies are key part of why we do what we do. And here is John for the final bow as we say thank you very much for your time. So, that’s fine gentleman from Gold Royalty. That was a brief cameo apparently, but, it was nice to see a little bow at the end of the show. So, thanks for that. Wishing everyone a great day and we look forward to the next time to meet you here at good conferences. Bye for now.

David Garofalo

Thank you.

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