Unlocking Gold’s Potential: Insights from Gold Royalty’s CEO David Garofalo

Welcome to FinTech TV.

I'm Johnny Fernandez.

Gold is at record highs, and investors are reassuring and assessing how to get exposure to the metal.

Now joining me today is David Garofalo, the chairman and CEO of Gold Royalty Corp.

David, thank you so much for being with us.

Great to be here.

I'm well, thank you.

Thanks for having me on.

So, David, your company, you guys are at a high right now.

You guys have different uh assets across North America.

You guys have been uh with the NYSC American.

So let's talk about how did you get to this part in your with your company.

Well, we actually IPOed 5 years ago, so we're here to celebrate our 5th anniversary of being on the NYSC American.

And what we've done over the course of the last 5 years is collect 250+ royalties across mines throughout the Americas, into South America, and also Eastern Europe.

And what that gives us is unmitigated leverage to the gold price.

We own a percentage of the gross from all of these mine sites, and so we're not exposed to the cost structures of the mine.

We get a percentage of the top line, and that gives our shareholders the comfort of getting leverage of the gold price without having to worry about cost inflation, which unfortunately is endemic in the current economy.

So let's talk about your assets.

A lot of your assets are in Canada, Nevada, and in Brazil.

So, when you are evaluating where to invest, how do you guys do that?

Well, we do a bottom-up analysis, so we're former operators of mine developers.

I've been in the business for close to 40 years building and operating mines, and so we do, uh, quite a bit of diligence on the mines to ensure that they have adequate economics so that we can finance them and have the certainty that we're not only going to get leverage of the gold price over the course of the mine life, but also leverage of the exploration upside of the mineset because our royalties run with the land.

So as our operating partners invest in exploration to grow their deposits geologically, we get the benefit of their exploration success without actually having to contribute to it, because once we own a royalty, we own it in perpetuity, and as the mine grows, then the value of our royalty grows as well.

So, let's talk about growth.

Now, you're expecting for gold to, to reach record-level highs by 2030.

So, what is, why is that?

So, we're getting uh 500% growth in our attributable production from our royalties, and that's a result of a number of mines in construction.

We have 7 cash flowing royalties now.

We have another 14 in various stages of construction development.

That's underpinning that 500% growth in our gold equivalent.

Uh production over the next 5 years.

At current gold prices, we're gonna be generating well north of $100 million US per annum of free cash flow, uh, from the existing royalty portfolio that's completely bought and paid for.

So we don't have to put another installment payment in.

We have no cash calls.

We're effectively harvesting the return on the significant investments we've made in growing that portfolio from 18 royalties in our IPO to over 250 royalties today.

So, something that caught my attention that you said is that this growth is already fully paid for.

So, what exactly does that mean for investors?

So that means they don't have to worry about any uh destruction of capital.

We don't have any capital calls.

That means the returns are really unmitigated.

In other words, we don't have any expenditures due on any of our royalties.

So effectively, we're harvesting a return on the significant investments we've made over the last 5 years in building this portfolio to over 250 royalties.

So, you've built a team that has experienced mine builders and well-connected executives in this business.

So, why is it important to surround yourself with these type of people and with well-experienced people in this industry?

Cause at the end of the day, this is a business about sourcing deals that we can finance, mine development deals where we can provide capital to develop, expand, and otherwise optimize existing mines and gain a return in the form of royalties.

So that requires not only a lot of experience and Mine development operations so we can do effective due diligence, but also it gives us a lot of connectivity in the industry.

We have over 400 years of industry experience within a very small and mighty team of only about 1 dozen employees, and that allows us to connect for deals, uh, and be able to pick up the phone and look and source for transactions that we can provide capital in and get a very strong rate of return for our shareholders.

So David, your company, it has no debt.

It has a positive free cash flow in.

2025.

So, in an environment like this, why is it so important to be in this situation, in this scenario where there is no debt and you have positive flow?

Well, that means we're in that flywheel, uh, point of a life cycle of our business.

In other words, we don't have to issue equity to finance, uh, the acquisition of new royalty opportunities.

We have $200 million of dry powder.

We have an undrawn line of credit of $150 million.

We've got $50 million of cash.

On the balance sheet.

So that means we can, uh, draw on our existing resources without having to go back to the market and dilute our shareholders to source new deals that are gonna be cash flow and value accreted to our shareholders.

So David, we've covered a lot of ground right now.

Is there anything that we've missed that you want to add into this?

Well, I think we have to talk about the fundamentals of the gold price.

Really, what underlies our story is the ability to provide leverage to increasing gold prices, and gold prices are likely to double from here in my view, to close to 1000.

100 $0 an ounce because the debasement of fiat currencies that's going on now is unmitigated.

It's irreversible because the amount of debt that's been strapped on globally.

Global debt to GDP has never been higher.

At 350% global debt to GDP in the US alone, $40 trillion of debt growing every day.

There's no way for the governments to service this debt.

The only thing they can do is continue to expand money supply, debase their currencies, reduce the purchasing power.

Gold provides protection against.

Basement of those currencies.

Gold can't be printed.

It's the one currency that can't be printed.

And that's why we've seen gold prices over a 50-year horizon go from $35 an ounce to over $5600 an ounce in terms of the most recent peak, whereas the purchasing power of the underlying currencies has gone down 99% over the same period of time.

That dynamic is irreversible, and so you want to position yourself as an investor in companies that provide you unmitigated leverage of the gold price.

And as I said, the royalty model is ideally suited for that.

Because we protect from inflation, we get a percentage of the gross from the mine site, so as gold prices go up, our percentage of the gross goes up.

And we have no costs.

We have effectively 12 employees.

Our costs are flat, and our, our leverage is, is unmitigated, and our margins only expand as the gold price goes up.

And with the setup that we have right now with gold and how it's increasing, what's next for you guys?

What does the next 5 years look like for you?

Well, as I said, we have 500% growth from the existing portfolio of assets, but with $200 million of dry powder, we can.

Continue to source deals without having to dilute our shareholders.

We can put more cash flowing royalties into the portfolio and deliver per share value, uh, from a significant capital resource that we have available on the balance sheet.

Awesome.

Well, David, thank you so much for your time.

It's a pleasure to have you here today, Johnny.

Nice meeting you.

Likewise.

And of course, for more information on David and Gold Realty, you can head over to Fintechtv.com.

Again, I'm Johnny Fernandez, and thank you for tuning in.