General Precious Metals
Gold Royalty Corp. (NYSE-American: GROY) CEO David Garofalo on Announcing First-Ever Dividend to GROY Shareholders in a Rising Gold Market
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the CEO of Gold Royalty Corp. — Mr. David Garofalo. David, how are you today? Happy New Year!
David Garofalo: Happy New Year to you, Gerardo! I'm glad to be with you again.
Gerardo Del Real: A busy, busy start to 2022. It doesn't seem like you took that much time off for holiday. You've had a couple of recent pieces of news. The most recent one is one I want to get into.
You just announced a quarterly dividend, which is something that's uncommon for a company as young as Gold Royalty Corp., and I want to get into that. But before we go into the specific news as it relates to the company, the last time you and I spoke, we both shared an optimistic outlook for the precious metals space in 2022.
It seems like you were pretty on track with your statement then. I'm wondering how you feel about the space now.
David Garofalo: Well, I think that the inflation rates we've seen — the headline CPIs — have only emphasized the importance of gold as a safeguard of your capital. And inflation at 7% headline, I think, vastly understates what we're actually experiencing.
If you're putting food in your stomach, fuel in your car, or a roof over your head — you're experiencing far in excess of 7% inflation. It's insidious. It's eating away at your capital. You're not earning anything in your bank accounts. If you leave it in your bank accounts, inflation is eating it away to the rate of 7%, 8%, 10% or above. It's taking away your capital. It's robbing you of your capital.
Gold is preserving capital. And not only is it preserving capital but it's showing signs of life here as inflation rears its ugly head. And I'm so very optimistic that gold is going to have a long run here, not unlike what we experienced in the late-1970s when we last had a big inflation cycle.
Gerardo Del Real: I completely agree. Gold Royalty now has expanded to nearly 200 royalties. There's six producing mines within that royalty portfolio. I believe there's seven that are under development. A lot of behind-the-scenes work that goes into expanding that portfolio in a methodical way.
But we have to talk about this dividend! First off, congrats to you and shareholders because to achieve this milestone at such an early stage in the company's history, I think, speaks to the quality and caliber of the team that you've been able to put together. Can you speak to the recent announcement here?
David Garofalo: Yeah, well, I think it speaks to the quality of the asset base we've assembled in very short order from our IPO in March of last year when we only had 17 royalties — a very modest portfolio — none of them cash flowing at the time.
And then, through the acquisition of three of our peer companies, we've added almost 180-plus royalties into the portfolio, and many of them are cash flowing or near cash flowing. That's given us a solid foundational cash flow that we felt gave us the comfort to put in a sustainable dividend that we think we can grow over time as our cash flow grows.
We think we have the highest compound average growth rate and cash flows in the industry over the next five years, and we believe that'll underpin a potential increase in dividend over time.
Gerardo Del Real: You're clearly and aggressively still looking to vend in, to roll in, option in, buy in — however you want to word it — accretive royalties. Can you speak to the strategy for 2022?
David Garofalo: Well, we think there's still going to be more consolidation in the sector. It's still quite highly fragmented. We've been active in that regard. As I said, we've ended up merging with three of our competing companies in the last year, and that's allowed us to vastly expand and diversify our portfolio and introduce significant cash flow growth in.
We have announced a takeover of Elemental Royalties and encourage investors to look at the takeover documents, which are filed at the SEC on Edgar. But we think that's going to be a recurring theme in the sector, generally. I think there is still lots of scope for consolidation.
Scale is important in our industry in the royalty business; this scale gives us higher multiples, gives us access to capital, which allows us to perpetuate and continue to grow our business on an accretive basis for our shareholders.
Gerardo Del Real: You mentioned the access to capital. How's the balance sheet looking?
David Garofalo: Well, we're still sitting at about US$40 million in cash. No debt on the balance sheet so very conservatively capitalized. And we're generating cash flow, which means that we're going to continue to grow our balance sheet.
We'll continue to deploy capital and add more cash flowing assets over time. We have significant pipeline growth within our existing 191 royalties that we think will give us cash flow growth for the foreseeable future.
Gerardo Del Real: Exciting start to the year! I look forward to an exciting 2022. Thank you so much for your time as always. Anything to add to that?
David Garofalo: Gerardo, it's an exciting time for the gold industry. And I still say that the best place to play gold is in the royalty space where you get that top-line-exposure / optimum-leverage of the gold price.
And you're completely insulated from inflation that we're all experiencing in every industry in our everyday life because we're exposed to just revenue. We provide that leverage to the gold price without exposing our shareholders to cost inflation.
Gerardo Del Real: Well said. Thanks again, David.
David Garofalo: Thanks, Gerardo.