Mr. Amir Adnani is the chairman of GoldMining Inc., the CEO of Uranium Energy Corp., as well as Chairman of Uranium Royalty Corp.
During the summer of 2020, Mr. Adnani and GoldMining Inc. announced the formation of a wholly-owned subsidiary called Gold Royalty Corp. (NYSE: GROY), and for which Mr. Adnani would serve as chairman.
To really appreciate the value proposition of Gold Royalty Corp., we need to step back and make sure that we understand the royalty and streaming business model.
Many companies operating in the gold space are in the business of exploration and development, which would typically involve drilling for gold. Royalty and streaming is an entirely different way of capturing the upside of mining activity.
Royalties are basically payments to a royalty holder by a property owner or project operator. Royalties are typically based on a percentage of the minerals produced and the revenues or profits generated from the property.
Similar to royalties but slightly different, “streams” are physical commodity purchase agreements. In exchange for an upfront deposit and ongoing payments for metal delivered, the holder purchases all or a portion of one or more metals produced from a mine at an agreed-upon price.
Royalty and streaming companies don’t have to mine for the gold themselves – they can instead fund the projects they like the most, let other companies do the legwork, and potentially profit from any gold discoveries.
We believe that it’s a highly compelling business model, with distinct advantages. With royalty companies, you get exposure to commodity prices; fixed operating costs; no development or sustaining capital costs; exploration and expansion upside without the overhead typically associated with those activities; a diversified asset portfolio; and the ability to grow without a major increase in management.
Gold Royalty Corp. is often focused on a particular type of royalty known as net smelter returns, or NSR. This is based on the value of production or net proceeds received by the operator from a smelter or refinery.
When Mr. Adnani revealed his newest venture in the resource space, this was the culmination of an effort to assemble an extensive portfolio of gold projects in mining-friendly jurisdictions.
For years, a looming reserve crisis has been a major issue in the gold sector. Assuming it continues, we believe this should put upward pressure on the spot gold price.
Key stats about Gold Royalty Corp:
- Its portfolio would include 17 newly created royalties comprised of 2% NSRs on 2 gold projects, 1% NSRs on 11 gold projects, and a 0.5% NSR on 1 gold project.
- 11 of the 14 NSRs would be associated with advanced-stage resource and development projects with exposure to the following aggregated resources:
- 11.4 million ounces of gold (14.3 million ounces of gold equivalent) in the measured and indicated categories.
- 13.8 million ounces of gold (16.6 million ounces of gold equivalent) in the inferred category.
- Gold Royalty Corp. would retain exposure to future discoveries through its precious metal portfolio covering over 1,290 square kilometers (139,000 hectares) in mining-friendly jurisdictions in five countries in the Americas.
- Additional opportunities to expand royalty portfolio through buybacks of existing NSR royalties ranging from 0.5% to 2% from third-party holders on up to 5 of the 14 projects.
To sum it up, Gold Royalty Corp. stood to gain 0.5% to 2.0% NSR royalties on the company’s interest in 14 existing projects with the opportunity to significantly expand the royalty portfolio.
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Of course, Mr. Adnani wasn’t alone in building up Gold Royalty Corp. His team includes accomplished executives in multiple industries, including mineral exploration and finance:
- Chairman and CEO David Garofalo: Former President and CEO of Goldcorp until its merger with Newmont in 2019; former President and CEO of Hudbay Minerals; former SVP Finance and CFO of Agnico-Eagle
- Chief Development Officer John Griffith: Former Head of Bank of America’s Metals and Mining Investment Banking
- Advisory Board Chairman Ian Tefler: Former Chairman of Goldcorp and the World Gold Council; built and led Wheaton River, Wheaton Precious Metals, and Uranium One
- Technical Services Director Alastair Still: Former Director of Corporate Development for Newmont Corporation; previously held senior leadership roles with Goldcorp, Placer Dome, and Kinross
- Chief Financial Officer Josephine Man: CFO of Uranium Royalty Corp; former partner with Ernst & Young LLP; former CFO of Jien Int’l Investment Ltd.; former VP Finance & Control of SAIS
Gold Royalty Corp.’s board of directors also includes a panel of top experts in the field, including:
- Alan Hair of Hudbay Minerals, Bear Creek Mining, and Great Panther Mining
- Ken Robertson of Ernst & Young LLP, Avcorp Industries, and Mountain Province Diamonds
- Garnet Dawson of GoldMining Inc. and Freegold Ventures
- Warren Gilman of Queen’s Road Capital Investment and CEF Holdings
Fast-forward to February of 2021, when GoldMining Inc. announced the IPO of Gold Royalty Corp. along with the application to list the company on the NYSE under the ticker symbol GROY.
On March 11, 2021, GoldMining Inc. announced the closing of Gold Royalty Corp.’s IPO offering of 18,000,000 units – with Gold Royalty Corp. to take in gross proceeds of USD$90 million, which provided Gold Royalty Corp. with one of the strongest balance sheets among its peers.
Gold Royalty Corp. also has a significant investor in its corner since GoldMining Inc. holds 20,000,000 shares on its balance sheet. With that, GoldMining has a 49% equity stake in Gold Royalty Corp.
Since the IPO, it’s no exaggeration to say that the Gold Royalty Corp. team has hit the ground running. On March 17, for instance, Gold Royalty Corp. announced an agreement to acquire a 1.2% NSR on the advanced-stage Séguéla project, located in Côte d’Ivoire on the Ivory Coast of Africa.
This project is operated by Roxgold Inc., an experienced mine developer and operator who has reported being on track to make a construction decision in the first half of 2021. The Séguéla project features numerous prospective exploration targets within a total land package of 36,300 hectares.
As you would expect, Gold Royalty Corp. considers Séguéla a highly prospective project with significant exploration potential. The project contains a mineral resource estimate of 1,044,000 ounces of gold (12.8 million metric tons at 2.5 grams per metric ton) and 370,000 ounces of gold (2.4 million metric tons at 4.8 grams per metric ton) in the indicated and inferred mineral resource categories, respectively.
Under the agreement, Gold Royalty Corp. agreed to acquire a 1.2% NSR royalty on the Séguéla project from a subsidiary of Apollo Consolidated Ltd.
For important information regarding the PEA and the Séguéla project please see Roxgold’s technical report titled “NI 43-101 Technical Report – Séguéla Project, Worodougou Region, Côte d’Ivoire” with an effective date of November 30, 2020 and its 2020 AIF, which are available under its profile at at www.sedar.com
This provides an example of the type of value-added project Gold Royalty Corp. seeks to add to its royalty portfolio. In April 2020, Roxgold completed a preliminary economic assessment (PEA) and mineral resource estimate for the Séguéla project. The PEA disclosed, among other things:
- Life-of-mine gold production of 841,000 ounces with average annual gold production of 103,000 ounces;
- Average annual gold production of 143,000 ounces over the first three years of production with an estimated annual production peak of 154,000 ounces in year three;
- A conventional processing plant with a processing rate of 1.25 million metric tons per year with scalability incorporated into plant design for potential expansion
- A project payback of 1.2 years
- An after-tax internal rate of return of 66% utilizing a base case gold price of $1,450 per ounce
Please see GoldMining’s Annual Information Form for the year ending November 30, 2019, along with its technical reports and other filings at SEDAR for important information regarding the company and the above projects.
At the current count, Gold Royalty Corp. has royalties on no fewer than 18 properties, consisting of 18 NSRs on 12 resource-stage gold projects in the Americas.
The profile of these properties indicates diversification. For one thing, the assets span a number of geographies, including the U.S.A., Canada, Brazil, Colombia, and Peru.
Plus, there’s diversification in terms of the assets themselves. While other companies might focus exclusively on gold, Gold Royalty Corp. has royalties on assets with potential gold, copper, and silver mineralization.
We believe that Gold Royalty has a vast and broad-based gold-copper-silver royalty portfolio. Its North American suite of mineral properties include:
- Yellowknife (Northwest Territories, Canada): Royalty of 1% NSR, 12,239 hectares, orogenic gold system, 0.739 million inferred ounces of gold equivalent
- Whistler (Alaska, U.S.A.): Royalty of 1% NSR, 17,159 hectares, gold-copper porphyry, 6.731 million inferred ounces of gold equivalent
- Almaden (Idaho, U.S.A.): Royalty of 0.5% NSR, 1,895 hectares, low-sulfidation epithermal system, 0.16 million inferred ounces of gold equivalent
- Quartz Mountain (Oregon, U.S.A.): Royalty of 1% NSR, 1,952 hectares, 1.147 million inferred ounces of gold equivalent
Gold Royalty Corp.’s South American royalty portfolio includes:
- Crucero (Peru): Royalty of 1% NSR, 4,600 hectares, an orogenic gold system with mineralization open laterally and at depth, 1.147 million inferred ounces of gold equivalent
- São Jorge (Brazil): Royalty of 1% NSR, 45,997 hectares, an orogenic gold system with favorable metallurgical studies, 1.035 million inferred ounces of gold equivalent
- Batistao (Brazil): Royalty of 1% NSR, 5,108 hectares, early-stage exploration project with orogenic gold system
- Cachoeira (Brazil): Royalty of 1% NSR, 5,677 hectares, an orogenic gold system with environmental permit submitted to the government for review, 0.538 million inferred ounces of gold equivalent
- Surubim (Brazil): Royalty of 1% NSR, 14,611 hectares, early-stage exploration project with an orogenic gold system, 0.503 million inferred ounces of gold equivalent
- Titiribi (Colombia): Royalty of 2% NSR, 3,919 hectares, gold-copper porphyry and epithermal system with three deposits and six mineralized targets, 3.44 million inferred ounces of gold equivalent
- La Mina (Colombia): Royalty of 2% NSR, 3,208 hectares, gold-copper porphyry and epithermal system with favorable preliminary metallurgical test results, 0.427 million inferred ounces of gold equivalent
- Yarumalito (Colombia): Royalty of 1% NSR, 1,453 hectares, gold-copper porphyry and epithermal system with favorable preliminary metallurgical results, 1.502 million inferred ounces of gold equivalent
All of these properties are in the development stage, except the Batistao asset, which is an exploration-stage project.
When you add it all up, Gold Royalty Corp.’s multinational resource portfolio represents 14.6 million ounces in the inferred category and 11.8 million ounces in the measured and inferred category.
We believe that these projects enjoy a prime location in a mineral-rich, mining-friendly district, important infrastructure already in place, and a potential for prospectivity as demonstrated through historic testing, drilling, and/or production.
Let’s review the company’s financials.
We believe that Gold Royalty is in a rock-solid capital position. This company has the most cash on hand in its peer group – $84.5 million, nearly double what the runner-up has.
Gold Royalty Corp. has also sought to maint a tight share structure from the outset: as of March 16, 2021, there were 40.8 million common shares of GROY stock outstanding plus 9 million warrants.
There’s also another important feature of Gold Royalty Corp. that you won’t necessarily find in other gold companies: a committed ESG (environmental, social, and governance) profile. In this regard, Gold Royalty Corp. remains committed to meaningful and long-term benefits for all stakeholders.
With royalty and streaming agreements held with mine operators located worldwide, Gold Royalty Corp. seeks to partner with companies that are committed to leading responsible mining and ESG practices through their participation and transparent reporting initiatives.
We believe that Amir Adnani and Gold Royalty Corp. have built a precious metal royalty and streaming company from the ground up, with a strong management team that seeks to lower investor risk with royalty rights to a number of attractive properties.
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Readers should refer to GoldMining’s and Gold Royalty’s publicly filed documents on SEDAR and EDGAR for further important information regarding these companies and their businesses.
The terms “Mineral Resource”, “Indicated Mineral Resource”, and “Inferred Mineral Resource” used herein are Canadian mining terms udefined under the Canadian Institute of Mining and Metallurgy and Petroleum (the “CIM”) Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as may be amended from time to time. These definitions differ from the definitions in the United States Securities & Exchange Commission (“SEC”) Industry Guide 7. As such, information contained herein concerning descriptions of mineralization and resources under Canadian standards may not be comparable to similar information made public by U.S. companies in SEC filings.
The Seguela PEA is preliminary in nature, includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the Seguela PEA will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
Inferred Mineral Resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under applicable Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies. It cannot be assumed that part or all of an Inferred Mineral Resource will be upgraded to a Mineral Reserve.
This article, includes the terms “Measured Mineral Resource,” “Indicated Mineral Resource” and “Inferred Mineral Resource.” These terms are defined under the Canadian CIM Definition Standards, which are not necessarily the same as U.S. requirements.
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The Company’s publications often pertain to gold and mining stocks, which discuss a direct relationship between the price of gold or silver and the stock price of a gold or silver mining stock. We discuss with respect to various issuers that there is a relationship between the price of gold or silver to the stock price of a gold or silver mining stock, i.e. that the higher the price of gold or silver, the higher the price of the stock. You should use extreme caution in adopting any such conclusions, because such statements do not account for any of the following factors:
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We have been compensated by Gold Royalty Corp three hundred and twelve thousand dollars canadian on April twenty third of twenty twenty one for a one year agreement paid to Wallace Hill Partners LTD. We also own shares in the Gold Royalty Corp.