Categories: Precious Metals
Topics: General Precious Metals

GoldMining Inc. (TSX: GOLD) Chairman Amir Adnani on the Exciting Creation of Gold Royalty Corp., a 100% Gold-Only Royalty Company

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the Chairman of GoldMining Inc. (TSX: GOLD)(OTC: GLDLF), Mr. Amir Adnani. Amir, how are you this morning?

Amir Adnani: Hey, Gerardo. I'm doing really good. And you?

Gerardo Del Real: I am well, thank you for asking. Washing my hands, staying indoors. Let's get right to it. You had some news here a few days ago announcing the creation of Gold Royalty Corp. 

The market has really received the news well. I've read several research pieces that put a price target on GoldMining near the $6 level. Give us a breakdown. Why now? And let's get to the meat of the transaction, right?

Amir Adnani: Why now is really an excellent question. First of all, when you consider that we've been at it for close to a decade acquiring resource-stage gold projects – again, most of it during the bear market period for gold – at some point, I think it was inevitable and we always felt that extracting a royalty from our portfolio would be another way to return value to shareholders. 

The timing now just seems, frankly ideal, for the simple reason that the market is really there, and is placing substantial premiums on royalty and streaming companies. And I'm not talking about just the established players that seemed to trade at premium valuations compared to the actual producers. On the emerging side of things, there must have been not a week that has gone by in the last few months where there wasn't a new royalty company announced.

So you look at that and you look at valuations that emerging royalty companies are getting on development-stage projects when they're requiring royalties, we just felt that this put us in a position where we can create this company now, Gold Royalty Corp. and be able to really give our existing shareholders this additional and distinct form of value enhancement. You look at the portfolio that we were able to start out with, it includes 14 newly created royalties as comprised of 2% net smelter return. Those are NSRs on two projects, 1% NSRs on 11 gold projects, and 1.5% NSR on one gold project. 

The exposure is a lot of gold. As you know, we've got 11.4 million ounces of measured and indicated gold resources, 13.8 million ounces of inferred resources. Not only is it a substantial amount of critical mass with 14 royalties to come out of the gate with, but again, the exposure to this resource space that we've put together over the last decade and all the exploration upside, Gerardo. You look at the land that we cover. It's almost 1,300 square kilometers in 5 different countries. 

All the elements that royalty and streaming investors like to have; exposure to the upside potential, immediate exposure to the underlying commodity, in this case gold, and the ability to have a diversified portfolio. All of those things that we have in place with GoldMining, you check all those boxes when you create Gold Royalty Corp. If you think about it, it is the right time to create this entity because you're able to pass that value onto GoldMining shareholders in a non-dilutive way. 

Over the long term, obviously, we're going to explore the best value enhancing transaction for Gold Royalty Corp. Be it a potential spinoff, initial public offering, sale or merger, other transactions. But I can tell you myself, as the largest individual shareholder of GoldMining, we're going to do the most shareholder-friendly way. This initial step, obviously, it demonstrates that. We're not taking anything away from GoldMining shareholders. If you own shares in GoldMining, GoldMining owns currently 100% of Gold Royalty Corp. It's a wholly-owned entity and that value is very much there in place for GoldMining.

Gerardo Del Real: Do you feel the jurisdictional diversification sets Gold Royalty Corp. apart from some of the newer royalty companies that we're seeing come in the space recently? You mentioned the abundance of royalty companies. I remember a time in 2016, and a few years prior to that, frankly, where prospect generators and project generators became the flavor of the month. Do you feel that having that diversity of jurisdiction sets the company apart and sets it up well, moving forward?

Amir Adnani: Absolutely. I would say, there's probably a few things here that we should really take note of. One is the fact that we've had a lot of interest and inquiries come in since the announcement. One question that's come up is, "Well, how come every other gold company doesn't do this? How come these other guys didn't do it?" 

The answer is, well, if you have one property or two, maybe three at max – your typical junior company will have a few projects that they're developing or focused on. Many of them, as you know, are single asset focused developers. What the royalty investor is willing to give premium valuation to is not only size, but diversification, that being in multiple jurisdictions. 

So that's why the barrier to entry is high. You can't just be a single asset company or a single mine operator and necessarily do this. Absolutely, the fact that we have quite a bit of critical mass with the total resource space, but in addition to that the diversification, that sets you apart, number one. 

Number two, many of the emerging royalty companies in the space right now, and even the big ones, by necessity have had to diversify away from gold. There perhaps is maybe 50% or 60% of their portfolio that is comprised of gold royalties. The rest is, in fact, everything and anything, ranging from oil and gas to other commodities. In this instance, you actually have 100% gold-only royalty with the 14 royalties that we've created newly. 

The third point is, as you can appreciate, Gerardo, all the new players that are entering the space, they all have one thing in common. They all have raised a bunch of cash, and as royalty companies are capital providers, these new companies are looking to deploy capital to buy royalties. So, they're all trying to do the same thing and hence they're all competing with each other. It's hyper competitive. We didn't write a big check to have to acquire 14 newly created royalties.

That is what's so unique and rare here. In today's hyper competitive royalty landscape, where you see over $100 million dollars just get announced the other day by one of the biggest players. Wheaton Precious Metals, for example, just announced $138 million streaming transaction on the Marmato Project, which is in Central Colombia. In fact, just 12 kilometers south of the 3 projects we have in Central Colombia. When you see these giant checks be written, a company like Wheaton Precious can write a big $138 million check like that. But for the emerging players, that's a lot of money to deploy and you're competing with a lot of other players. 

This is what really differentiates our story. We were able to just create 14 new royalties without writing a massive check. In fact, we didn't write a single check. As we move forward, this is another question that I've been getting, which is, "Well, are you guys not going to go compete with those other companies, those other royalty companies?" And the answer is, "No." We have a very distinct way that we can now and in the future grow and enhance our royalty business. As we do work on our existing portfolio of assets, that inherently increases the value of the newly created royalties that we have created and placed inside of Gold Royalty Corp. 

Gerardo, as we make new acquisitions, and as you know, that's something we're good at. We've been doing that for a decade. We've acquired over $80 million worth of resource stage projects. That's how we have the portfolio that we have today. We will stick to our knitting, make acquisitions, and as we make an acquisition, we add that project to our total inventory so our mineral bank continues to grow, but then we create a new royalty on every new acquisition. That's how our Gold Royalty Portfolio can grow as well. 

That is a very unique and different way than what every other royalty company out there is doing right now. Not only do you get 100% gold exposure, not only is it in a very diversified portfolio, but you're not trying to bring your checkbook to the party and compete with everyone else's checkbook on how to grow their royalty business. 

This is in fact, though, for those that are familiar, what we're talking about doing, and this structure here is very much in fact how Franco-Nevada was created when it was wholly-owned by Newmont. Newmont was, as it was growing its business, placing these royalties into Franco-Nevada, and it was spun out. This is how Newmont, in a way, collaborated with Maverix and created Maverix. The new royalty company had a lot of royalties mended in by Newmont in that instance as well. You look at Wheaton Precious, it was spun out of Gold Corp in a very similar fashion. 

Sometimes perhaps the advantage that a big property holder has, and in the case of GoldMining, you have that unusually large property for a company with our size and market cap. You cover the sector, you can confirm that. That gives you the opportunity, again, to be able to do what we've announced here, which is a non-dilutive layer of value to existing shareholders. 

In a way, if you own shares in GoldMining, it's as though you're getting involved with the new creation of a new royalty company at the ground level. That is an exciting proposition in an environment where publicly listed royalty companies are trading at substantial premiums.

Gerardo Del Real: Amir, that's well said. The transaction is well executed. I have to believe amongst the many calls you're getting, there has to have been quite a few congratulations. I'll add to that because this is clearly shareholder-friendly and the market reflects that. Congratulations.

Amir Adnani: Thank you, Gerardo, really appreciate it. I expect that we'll be able to really come out and demonstrate with follow-on development and news, hopefully, on how our main business, our main line of work – which is again, our two-prong strategy of expanding our property portfolio through these accretive acquisitions we've done and advancing them – how the Gold Royalty Corp. creation is very much complementary to our main platform for future acquisition and development and those plans.

Gerardo Del Real: Amir, look forward to having you back on to chat about that. Thanks again.

Amir Adnani: Thank you, Gerardo.