Gold Royalty Corp.

good morning everyone i'm your host joanne jobin and i'd like to welcome you to the gold royalty town hall forum hosted by vid media today's town hall will be focused on gold royalties quarterly performance including financial results and will be hosted by ceo david garofalo cfo andrew gobbles and peter benke who's the manager of corporate development and investor relations After the presentation, I will be delighted to moderate submitted questions from our audience. And now a few words on the company. Gold Royalty Corp is a precious metals focused royalty and streaming company offering creative financing solutions to the metals and mining industry. It currently has a diversified portfolio of over 190 royalties located in mining friendly jurisdictions throughout the Americas. The company's business model includes acquiring royalties, streams and similar interests at varying stages of the mine life cycle to build a balanced portfolio offering near, medium and longer term attractive returns for you, the investor. Now, one more item before we commence. If you do have any questions for the company, please place them into the Q&A tab at the top of your chat sessions. And please ensure that you fill in the short questionnaire at the end of the presentation. This really helps us and the company communicate more effectively with you for future town halls. And before I turn it over to the team, please note the forward-looking statement at the beginning of this presentation. David, the stage is yours.

Well, good morning, everybody. And Joanne, thank you so much for the kind introduction. As Joanne said, I will be joined shortly by Andrew Goebbels, who will talk about our quarterly results for the second quarter. And then Peter Benke, who will talk about the portfolio and update on our many assets with a diversified portfolio. But what I thought I'd do to kind of launch this discussion with you today is talk about the broader business, the gold markets, the state of the equity markets and our prospects going forward and the growth that we've achieved and expected to achieve going forward. So thank you so much for your time today. Delighted to take questions after our presentation and have a more fulsome discussion over the course of this hour. But thank you so much for your time today over the summer weekend. What I thought I'd do is what I'd like to welcome our existing shareholders. Delighted that you could join us today. But I thought for the newer shareholders, just give you a brief overview of the business. We are a precious metal focused royalty company, as the name of the company might indicate. But I would also say that while we're focused on precious metals, we have a very well diversified portfolio. with over 220 royalties in the portfolio across the Americas. So we have diversified asset exposure. And I would say that's the beauty of the royalty model is that we can offer a measured diversification far beyond what an operating company can offer. There's a practical limit to what even the biggest gold producing companies can manage within their portfolio, no more than maybe a dozen assets. There's really no limit to the amount of diversification we can achieve in our royalty portfolio because we're not managing the mines, we're effectively just managing a portfolio of contracts on these mines on which we own royalties. And so with a very small contingent of employees, eight full time equivalent employees, we could run a business ten times the size with the same contingent. So that means our cost structure is quite stable and is by virtue of our top line exposure. In other words, we get a royalty on the gross revenue from these mines. We have a very scalable business, one that has increasingly higher margins as our portfolio growth is achieved over the course of the next several years. So our margins will continue to expand our ability to return capital to shareholders we think will expand over time as well. As I said, over 200 royalties in the portfolio, a lot of expiration stage royalties, but we have a broad array of assets across the broad spectrum in the mining business from early stage expiration right through to production. We have five cash flow producing royalties, but I would say we also have a royalty on three of the biggest producing gold mines in North America. So it's not just a quantity proposition, it's a quality one as well. So we have tier one assets to provide an underpinning foundation to our business that will provide royalties for many, many decades to come. and significant optionality within all those early stage expiration opportunities. And the beauty of this model is once you own a royalty, you own it outright. You never have any capital calls. We don't have any capital commitments in our portfolio, which means that we have nothing but upside in our royalties once we own them. And so that's a lot of optionality for shareholders, not only for the gold price, but in the exploration and development success of our operating partners, which is also quite well diversified. And the reason we've been able to grow this business so rapidly over the last couple of years, I would say, is is a testament to the organizational depth that we have within our board and management collectively. We have over 400 years of industry experience. And that's given us unmitigated access to anybody in the mining industry. That's why we've been able to pick up assets almost all on a bilateral basis rather than competitive processes, which tend to result in royalty companies overpaying for assets. We have not overpaid for assets. We've had significant value, not only on an absolute basis, but on a per share basis since we launched this company a little over two years ago. And I'll get into a little bit more detail over the course of the presentation on that very topic. But before I do that, I thought I'd spend a little bit of time talking about the gold market. And the question I quite commonly get these days is, why isn't the gold price responding in these volatile times? And I would say it actually is responding extremely well on every front, in every major currency. In fact, gold is... is at an all-time high in every major currency other than the us dollar and even against the us dollar in spite of a flight to the us dollar across the world we've seen gold hold its value uh hovering around two thousand dollars an ounce very close to its all-time nominal high in spite of the fact that we've seen a flight to the us dollar from uh other countries where there's been political and economic volatility. And we've also seen rising nominal interest rates, which generally tends to drive capital out of gold. But what we've actually seen is that gold has held its value in US dollar terms. And the reason quite simply is, is while nominal interest rates have been increasing an unprecedented clip through the tightening efforts of central banks globally, the reality is with inflation so deeply entrenched, real interest rates, we believe, are starting to fall. As real interest rates fall, the gold price tends to go up. And that's really been the historical correlation or negative correlation we've seen really since the early 1970s when the U.S. dollar abandoned the gold standard. And we've seen a significant decline in the purchasing power of the U.S. dollar. In fact, The purchasing power of the U.S. dollar since the early 1970s has gone down 90%. And you can see that gold has done extremely well and is an accurate barometer of that inflation that's become so deeply entrenched in our economy and has been amplified recently with the monetary expansion we've seen in the great financial crisis since 2008. And also the amount of economic and political volatility we've seen globally. A lot of parallels in this inflation cycle to what we saw in the 1970s when we had a war and an oil embargo in the 70s. And we have a war and an energy embargo today. We had widespread inflation in the 1970s driven by the monetary expansion as well. The U.S. dollar abandoned the gold standard. We've had that same type of monetary expansion since the great financial crisis. In fact, it's been multitudes and multiples of what we saw in the 1970s. And we do believe that the Federal Reserve and central banks are on the cusp of pivoting on nominal rates, and that will more deeply entrench inflation. And we think we'll drive gold prices to real all-time highs well beyond what we've experienced recently. In fact, if you took the gold price back in the early 1980s, which was a little over $800 an ounce, and inflation adjusts that to today's dollars, that would be over $3,000 an ounce. And the other question I quite often get asked is, why aren't the gold equities performing well? And if you look at all the bellwether stocks in the industry, whether it's Newmont, Agnico Eagle, Barrick Gold, they're at half the valuations they were back in 2000, 2020, excuse me, when the gold price was last $2,000 an ounce. There's been a significant compressions of multiples in the gold sector. And there's a few factors that really are behind that. You know, one is We've seen strong performance in the general equity markets. This year alone, in spite of the volatility we've seen in the markets and rising interest rates, the S&P 500 general equities are up 17% this year. So there hasn't been an imperative to drive investors into gold and gold equities as a hedge against volatility in the general equity markets. We think that's about to change. Because the valuations in the general equity markets are extremely lofty, particularly in the technology sector, which continues to rally quite strongly. But there are valuations and multiples that are really unsustainable in the long term. And we do think there'll be a rotation back into resource stocks, given the scarcity of resources in the ground. Also, I think the other fact that is driving depressed valuations, particularly in the producer universe in the gold sector, is the fact that inflation is infecting their cost structures as well. And that's put pressure on their margins. And as a result, we've seen valuations depressed on the producer side. That's why the royalty model is so attractive. If you believe in this bull scenario for gold, it's because it provides you that top line exposure value. by protecting you from inflation. That's the great thing. And also gives you the expiration upside of our operating partners. So as our operators drill out these deposits and grow them from an expiration standpoint and grow the resources, we get that exposure without having to pay for it. Last year alone, And this year, our operating partners invested each year over $200 million in exploration in their underlying assets. We got the benefit of that exploration upside, and we contributed precisely zero to their exploration budgets. That's another great feature of the royalty model. And as we start to see the gold price gather its momentum in the face of declining real interest rates, which we think is inevitable in this inflationary environment and the amount of debt that's been strapped on globally, we think the royalty companies are going to provide the best upside with the best protection against inflation. And the opportunity you see within the royalty sector, more specifically, is a re-rate potential for the smaller cap players. What we offer in the smaller cap universe in the royalty space is the ability to grow. We offer a quality portfolio, which I think is comparable in quality. in quantity with the most seniors in the space at Gold Royalty Corp. But what we offer is an ability to grow off a much smaller base. As great as Franklin, Nevada, Wheaton Precious Metals and Royal Gold are, and they are great companies, it's very, very difficult for them to grow off such a substantial base. And we think in time, you're going to see a rotation of the larger cap names as the gold price drives momentum into the smaller cap universe that offers that growth. We have 60% compounded annual growth in revenue right through the end of the decade. from our existing portfolio. So it's all organic. It's already all paid for. And as we realize and crystallize that growth, we see a rotation out of the larger cap players into the smaller cap ones. And that reprieve potential is immense, particularly given that we're trading at very depressed valuations on a consensus basis of about 0.5 times NEV. Things that we've been able to control is how we grow our business. And since our IPO, we've seen our royalty portfolio increase 12-fold. From 18 royalties, these are our foundational royalties back in our IPO to over 220 royalties today. And on a consensus basis, we've seen a five-fold increase in our net asset value, the underlying value of our business. And again, this is based on analyst consensus estimates. These are not our internal estimates. But we've been very careful about husbanding our share count. We've only seen our share count go up three and a half fold over the same period of time. So what that translates into is a 50% increase in the underlying value of our business on a per share basis. That's tremendous value growth over the course of the last two and a half years. And the other important milestone that we expect to achieve next year is free cash flow generation for the first time. That's remarkable in any business. From inauguration a little over two years ago to free cash flow positive within three years, I would challenge any business in any industry to be able to do that that quickly. That's, again, a testament to the quality of the assets we've assembled, the quality of the management team. that's affected this tremendous growth in our net asset value. And as we'll see a little later on in the presentation, as Andrew and Peter get into it, tremendous revenue growth, free cash flow growth in the short to medium term. We have had in the face of scarce capital resources, to defer and suspend our dividend. But that's for a specific reason. We had the opportunity to acquire a very high quality copper silver royalty on an existing world-class mine in Mexico operated by one of the largest copper producers in the world, Capstone, which will add tremendous revenue growth in the short term. And I'm very confident that over time, as we start to generate free cash flow, positive free cash flow next year, that we'll revisit that dividend and reintroduce it back into the company. So with that, what I'd like to do is pass it on to Andrew to talk about our operating results for the second quarter of 2023. Andrew? Thanks, Dave.

As they've mentioned, I'll run you through some of the highlights of our second quarter. In Q2, you'll note we've maintained our financial guidance of $5.5 to $6.5 million of revenue and land agreement proceeds for the year. Now, this is despite lower revenue in the second quarter, which has really been due to resequencing of production within the Barnett pit at the Canadian Malartic mine. We are confident that that cash flow expected from Malartic will be substantially recovered in the second half of this year. And as a result, have maintained our financial guidance for 2023. Our Q2 2023 cash operating costs were down 30% compared to the second quarter of 2022. Now, this continues a trend which occurred in the first quarter, and we expect to continue going forward as well. It has been a concerted effort to focus on ensuring we have cost discipline in our business, which has been borne out in the last two quarters. The lower operating costs has helped offset the lower revenue, as I mentioned before, and contributed to an unchanged adjusted net loss per share of two cents in the quarter. We're also on track to meet our expectations for recurring cash operating costs of between $7 and $8 million for the year. In the quarter, our operators, including Niko Eagle, IAM Gold, Barrick Gold, Wallbridge, and I-80, amongst others, all announced positive developments at their respective projects. Given the weighting in our portfolio towards the growth end of the market, this has further de-risked our world-class portfolio and given us even more confidence about our future. To compliment the positive momentum of these growth assets, as Dave mentioned just previously, we announced the acquisition of the producing Cozumel royalty at the end of July. This royalty adds immediate cash flow from established copper mine in Mexico and fits quite well with our current portfolio. Finally, our team in Nevada has generated two new royalties through our proprietary royalty generator model. This is something that's unique to Gold Royalty. We're the only royalty company that does have a dedicated team focused on generating new royalties in this manner. And we've created 37 new royalties within the company since 2021. Now, taking a quick glance at our capital structure and capital markets activity in the second quarter, Our share and capital structure remained fairly consistent in the quarter with the company continuing to generate strong trading liquidity of around a million dollars of shares traded per day. That again is in excess of many of our smaller competitors. We also had two new analysts initiate research coverage in the second quarter. which also adds to more of the flow in our stock. Scotiabank initiated with an outperform recommendation and a $3 target price, and National Bank also initiated coverage also with an outperform recommendation and a $2.85 share target price. Scotiabank and National joined our five other existing analysts, all of which have target prices well above Gold Royalty's current share price. Now, let me add a few points on the new Cozumel royalty. As I mentioned at the end of July, we acquired a 1% NSR on the Cozumel copper silver mine in Mexico. Many on the phone who are familiar with capstone copper will be familiar with this mine. It's been operating for quite a while. The Cozumel royalty is immediately cash-flowing. It's generated roughly a million dollars in royalty proceeds for the holder of the royalty over the last 12 months. So we do expect it to be additive to our near-term cash flow profile as well. We're bullish on copper prices. We are primarily a precious metals royalty company, but we do see the appeal of good quality assets in commodities such as copper as well. And in this scenario, consistent with some of the other assets in our portfolio that are more growth-weighted, we're very excited to be working with a great operator that our team knows very well in Capstone Copper. This team has had a strong performance track record at the mine over a number of years, which is very positive for us as well. The royalty, as I mentioned previously, fits very well in our existing portfolio, complements our growth profile by adding that immediate cash flow in the near term. A few more words on Cozumel. The mine itself has consistently operated within the first quartile of a copper cash cost curve, which gives it quite a bit of defensibility in a volatile market. The mine life extends to 2030 based on its current reserves. And with current brownfield exploration, we see good potential for continued resource conversion. and potential mine life extension. Moving forward, we were also encouraged by drill results in the Malinoche and Malinoche footwall zones, which could add additional resources into the mine plan. Now, for more information, as with all the royalties in our portfolio, I do encourage you to review Capstone Copper's disclosure on the Cozumel mine. Now, with that, I will pass it on to Peter to provide an update on our portfolio.