General Precious Metals
Gold Royalty Corp. (NYSE-American: GROY) CEO David Garofalo on Delivering Industry-Leading Growth on 200 Gold Royalties in a Rising Precious Metals Bull Market
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the chairman & CEO of Gold Royalty — Mr. David Garofalo. David, it’s great to have you back on. How are you today, sir?
David Garofalo: I'm delighted to talk to you and I'm great, Gerardo. Thanks for asking.
Gerardo Del Real: Well, I reached out because I thought, with the Fed blinking yesterday — that's kind of how I'm interpreting his words and the press conference and the decision yesterday — with the Fed blinking, I thought, who better to get on the telephone and have a conversation about where you see Fed policy pivoting towards, or if you see Fed policy pivoting.
Then, of course, I want to get your take on how Gold Royalty is positioned. But I also understand you're down at Rick Rule's conference, which I understand is getting some pretty good traction. How's the sentiment down there?
David Garofalo: It's really good. Look, there's a broad array of generalist investors here — many of them high net worth. They can invest in any industry, and they choose to invest their time, invest their travel dollars in learning more about the natural resources business because, like us, they think the cycle is coming particularly for precious metals.
Gerardo Del Real: Excellent! Let's get right into yesterday's Fed decision. The Fed raised rates but it was the commentary that I thought created a bullish sentiment in the stock market, in the bond market, and definitely in the precious metals space. Silver, today, is up over 6%. Gold is up nearly 2% and up 3% since the decision yesterday. What's your take on that, David?
David Garofalo: Look, I think he was very cautious in his language being Jerome Powell from the Federal Reserve and not signaling overly strongly that he would raise interest rates in the next cycle. He said he would do what was appropriate… but it's interesting. He said he thought they could avoid a recession.
Then, low and behold, the GDP numbers came up this morning — the day after his presentation — and we are technically in a recession in the US with two consecutive quarters of contraction. So you can foresee, I think, on the horizon, the need to pivot particularly given the debt levels that we're carrying as an economy whether it's to the government, corporate, or individual level.
We're three times the debt level on a per capita basis than we were in the last big inflationary cycle in the 1970s. There's very little latitude for the Federal Reserve to tighten in a very significant fashion to bring inflation back into check.
Gerardo Del Real: A lot of that debt needs to be serviced within the next two years and I think that gets overlooked, right? I think the Fed clearly has the data and is looking at it. I think you're 100% right, David. I think they're looking at this and saying, ‘Well, yes, we need to look tough on inflation… the inflation none of us saw coming and that we then called transitory… that now is public enemy number one.’
But I think they're also looking at how much of that debt needs to be refinanced within the next two years. There's no way that they continue to tighten, in my opinion, knowing that that is coming down the pipeline.
Let's talk about the pipeline. You have eight royalties on producing assets. You have 20 assets in development. You have positioned the company beautifully for what, I think, is going to be a historic precious metals bull market.
Talk to me a bit about the news here earlier this month. You received initial royalty payments from Newmont's producing mine. And as I mentioned, you have a portfolio that's as robust as any royalty company in the space.
David Garofalo: Well, we're very fortunate to have a royalty onboard — and it's in northern Ontario. We know it very well because when I was running Goldcorp, we actually built that mine. It's the first all-electric underground mine in the world and, obviously, very highly scored on an ESG basis.
The other significant news we got was Beaufor — a refinancing and restart of a new mine in northwestern Quebec by Monarch; poured its first gold this week. So we now have two new cash-flowing royalties to supplement what was already a very strong growth profile.
This all underpins — along with the 20 development stage assets that you correctly pointed out — 60% compounded annual growth in our revenue over the next 5 to 10 years. That's industry-leading at every scale.
Gerardo Del Real: What comes next? I’ve got to believe that, with what I know of your career, you're not one to sit back and just kind of wait for a bull market to develop. Are you still looking for accretive opportunities if they present themselves?
David Garofalo: That's the key word… it has to be accretive. We walked away from a deal, Elemental, earlier this year when we were invited to bid against ourselves, and we saw no additional accretion by doing that. We were disciplined and walked away, and we'll continue to look for accretive deals. But just by allowing our almost 200-strong royalty portfolio to come to fruition, we have industry-leading growth — and that's underpinned the 1.5% yield in our stock.
We introduced the dividend earlier this year, and I think there's a high prospect that we’ll increase that dividend over time as this cash flow growth is crystallized over the coming months and years.
Gerardo Del Real: Well said. David, it's always a pleasure. I'll let you get back to the conference. I know you're busy. Thank you so much for your time. Anything else to add to that, sir?
David Garofalo: No, that's great. Look, I do believe, as you said, we're in for a prolonged gold bull cycle. And I think that's going to be underpinned by significant inflation that the Federal Reserve, quite frankly, is powerless to avoid given the little latitude they have with debt service.
Gerardo Del Real: Couldn't agree more! Thanks again, David.
David Garofalo: Thank you, Gerardo.