Gold Royalty Corp.

Good day, everyone, and welcome to the Gold Royalty Corp second quarter 2025 results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I would like to turn the conference call over to David Garofalo, chair and CEO. Sir, please go ahead.

Thank you, operator. Good morning, ladies and gentlemen, and thank you for participating in today's call to review our second quarter 2025 results. Please note, for those not currently on the webcast, a presentation accompanying this conference call is available on the presentation page of our website. Some of the commentary on today's call will include forward-looking statements, and I would direct everyone to review slide two of the presentation which includes important cautionary notes. Speaking alongside me on today's call will be Andrew Goebbels, Chief Financial Officer, and Jacqui Price-Belowski, Vice President, Capital Markets. We are proud to report that this quarter we have firmly reached our inflection point, achieving positive free cash flow and another record quarterly revenue adjusted EBITDA and operating cash flow. We also continue to expect steady improvement over the coming quarters through the successful ramp-ups of several of our key assets, including Boris, which achieved commercial production on July 1st, Cote, which announced on June 23rd that it had reached its steady state run rate, and Borborema, which started operations on March 28th and continues to progress towards commercial production later this year. Growing cash flows and revenues. continue to improve our balance sheet, as Andrew will discuss in a moment. But first, I want to talk about our approach to capital allocation. Capital allocation continues to be an important strategic priority and will be even more important as we harvest cash through this year. Looking ahead, we need to gain a clear focus on debt reduction while considering capital returns to shareholders and pursuing strategic growth opportunities when appropriate. With our convertible debentures and outstanding common share warrants now deeply in the money and our growing free cash flow, we could be in an essentially net debt-free position by the end of 2026. We continue to monitor the landscape of consolidation across the royalty space. With the entry of new strategic capital into our sector and the recent announcement of two major mergers in the royalty space this year already, we do expect the pace of consolidation in the royalty sector to accelerate. While we can't predict the sequence or participants in industry consolidation, we believe the drive to create a mid-tier royalty company with organic growth in sufficient scale to attract global institutional equity investors while also realizing cost synergies will be a big driver of continued merger activity. While we believe the re-rate being experienced by Gold Royalty and some of our peers is partly reflective of this dynamic, We also expect that the realization of gold royalties peer-leading revenue and cash flow growth this year has been a large driver of our share price performance in 2025. The better news is that this is just the beginning of a minimum five-year period of pronounced attributable gold equivalent production growth across a portfolio of royalties and streams on large scale and long life mines in some of the best jurisdictions in the world. We spent significant time on our June 12th capital markets day discussing our capital allocation strategy and our views on consolidation. If you weren't able to attend the event live, I would encourage you to view the replay, which is archived on our website under investors and corporate presentation. With that, we'll pass the call over to Andrew Goebbels to discuss the details of our first quarter results and our look on slide four.

Thank you, David. Good morning, everyone. We're pleased to report new records for revenue and adjusted EBITDA in the quarter and half year. Adjusted EBITDA was $2.4 million in the quarter, a nearly 50% increase compared to the previous quarter. Total revenue, land agreement proceeds and interest was $4.4 million, translating into 1,346 gold equivalent ounces in the quarter. Our reported revenue included the recognition of $0.3 million in revenue related to royalties payable for prior periods after we received a favorable judgment in a previously announced dispute with the operator of the Jarrett Canyon mine regarding our per ton royalty interest. This judgment will not impact future royalty revenues should Jarrett Canyon restart. As David mentioned, We reported both positive operating cash flow and free cash flow this quarter. We are very excited about this transition to positive free cash flow, which is primarily due to the contribution of the Varus and Cote gold mines, strong gold prices, which averaged $3,279 per ounce in the quarter, and relatively flat Q2 G&A costs of $1.8 million. Our operating costs, which include G&A, and project evaluation expenses continue to be in line with an average of our other small-cap royalty and streaming peers, as we showed at our June 12th Capital Markets Day. Looking forward, we reiterate our 2025 and five-year outlook. We will use excess cash, including any proceeds, from the exercise of outstanding warrants to opportunistically repay the $27.3 million outstanding on our revolving credit facility. As our EBITDA grows over the coming quarters, we expect to deliver quickly, such that gold royalty is effectively debt-free by the end of 2026. I'll now pass the call over to Jackie to review our key operations.

Thanks, Andrew. Turning to slide five, I'll review a few of the key developments in our asset portfolio. Cote has achieved a major milestone, achieving nameplate throughput. IAMGOLD reported that on Saturday, June 21st, 2025, the Cote processing plant operated at nameplate capacity of 36,000 tons per day on average over 30 consecutive days. Nameplate capacity was reached well ahead of the company's target of Q4 2025, and our revenue from Cote was strong at over $1 million in the quarter. Ion Gold expects further improvement with the installation of a second cone crusher later this year, which is expected to improve the reliability of the combination circuit and de-bottleneck the dry side of the plant, offering the potential for further optimizations and improvements in the near future. Aura Minerals continues startup activities at Boberama after the mine achieved first production in late March. Aura has maintained its 2025 guidance of 33,000 to 40,000 ounces of gold produced. While the asset has not yet declared commercial production, the operator continues to expect this milestone in the current quarter. As such, we continue to receive pre-production payments of 250,000 ounces of gold per quarter, which contributed a meaningful $1.2 million in revenue in the second quarter at strong gold prices. Offsetting the strong performances at Cote and Bobrema, we reported $18,000 in revenue at Ignico Eagle's Canadian Malartic mine in the second quarter, We view this relatively light result as a temporary issue of mine sequencing. The operator continues to highlight the tremendous potential at Odyssey in the longer term, including a potential extension to shaft number one and installation of a second shaft. We also continue to watch Adriatic Metals Varus mine, which achieved commercial production on July 1st, 2025, roughly in line with the operator's target of Q2 2025. On July 28th, Adriatic Metals reduced its full year 2025 guidance to 475,000 to 585,000 tons ore milled from 625,000 to 675,000 tons previously. Despite the guidance cut at Ferris, Gold Royalty maintains its full year guidance of 5,700 to 7,000 GEO in 2025. as the shortfall at Veris is expected to be partly offset by better-than-expected performance from other portfolio assets, including the assets mentioned previously. We are also maintaining our five-year guidance at 23,000 to 28,000 GEO, and we continue to note that this longer-term outlook is fully bought and paid for and is comprised mostly of mature and brownfield operations owned by experienced and well-funded operators. With that, I'll pass the call back to David for closing remarks.

Thank you, Jackie. There's indeed lots to get excited about as you look across our portfolio and the various high-quality assets ramping up and entering production. One of the key benefits to our diversified portfolio is a steady flow of exciting growth catalysts at our underlying assets. Those near, medium, and long-term catalysts will contribute to peer-leading growth that Jackie highlighted in our 2029 outlook. Our relative valuation chart shows that Gold Realty has made significant progress towards fair value on a price and net asset value basis since our first quarter call on May 8th. However, we continue to see compelling upside to our share price as our portfolio assets continue to develop according to our 2029 outlook. And we emphasize that we will remain patient and disciplined as we consider any acquisitions and as we review our capital allocation options going forward. Paying down our revolving credits facility will continue to be one of our priority uses of capital. As our share price has now been comfortably above our warrant exercise price for some time, we think it's prudent to highlight this to any warrant holders on today's call. As of June 30th, 2025, the company had approximately 20 million outstanding share purchase warrants, with each warrant exercisable into a common share at US 225 per share. The warrants are listed on the NYC American under the symbol GROY.WS and expire May 31st, 2027. For more information on exercising warrants, please see our second quarter earnings press release. Thank you everyone for tuning in to the earnings call. And with that, I'd be happy to open up the call to Q&A. Operator?

Ladies and gentlemen, at this time, we will begin the question and answer session. If you would like to ask a question, you may press star and then one using a touch tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to cue in to the question queue on the audio side. We'll pause momentarily to assemble the roster.

Jamie, while we're assembling the roster, I do have a question that's come in by email. Could Gold Royalty specifically state how the free cash flow from Q2 2025 was handled?

Well, I'll pass that on to Andrew to answer.

thanks thanks david and jackie um yes we did generate positive free cash flow for um q2 of this year um at this stage with respect to free cash flow um i would like to target um our cash balance inclusive of our under on revolver above five million dollars and we had cash a little above three million dollars we've got um $2.7 million in undrawn revolver capacity as well. We are slightly above $5 million at this stage. I do expect in Q3 and Q4 to accumulate more free cash flow. And as we do, we will consider or evaluate the repayment of a revolver. So at this stage, given we finished the quarter, we're slightly above that that I'm looking to keep, and we will start looking at repayments to the revolver moving forward in the coming quarters.

And once again, if you would like to ask a question, please press star and then 1. We do have a question on the audio side, and this comes from Eric Windmill from Scotiabank. Please go ahead with your question.

Oh, hi. Good morning, Dave and team. Thanks for taking my question. Just wondering if you can elaborate all on Jarrett Canyon, the revenues you received, and how we should think about Jarrett for the balance of this year and next year. Are you expecting any additional revenues to come in there? Be helpful. Thank you.

I'll hand that off to Jackie.

Yeah, sure. Thanks, Eric, for the question. So the revenues that we received were We're in relation to a settlement that had been reached earlier this year, just at the end of the quarter. So our royalty on Jarrett Canyon includes two components. It's a 0.5% NSR. And as Andrew mentioned, there's a sliding per ton rate as well. And that's the aspect that was disputed. The settlement that we've recorded in the quarter represents the final amount for that settlement that we were expecting. We had previously accrued a small amount as well, but this 0.3 million is the final amount that we were expecting. So, we're not expecting any further revenues from Jarrett Canyon this year and nothing else related to that settlement. And if Jarrett Canyon were to restart and the company, First Majestic, has indicated that they are looking at restarting, then, of course, we would receive the royalty revenues both from the 0.5% NSR and the sliding per ton rate going forward. But we're not expecting anything else until the mine were to restart.

Okay, great. Super helpful. Appreciate it. Maybe just one more if you don't mind, but if you could comment on the merger landscape. I know you touched on it in the preamble at the outset, but just curious, you know, it's obviously an exciting time in the royalty space and, you know, gold royalty stock is appreciated pretty substantially this year. You know, how does that affect your plan and would you be more likely to be a consolidator or look to be acquired? I mean, you've got a good organic profile. Anything you could touch on there would be helpful. Thank you.

Thanks very much, Eric. Look, I do think that consolidation can only accelerate from here. Obviously, the fundamentals of the gold price are very helpful in that regard. But also, there's been new entrants in the space. Namely, we've seen a very large stablecoin fund and Tether taking a very significant investment in one of our peers and with the stated objective of consolidating the sector and putting more capital to work and perhaps creating more stable coin products backed by royalties and streams that can only enhance the amount of capital available for the smaller cap universe of royalty players. So I'm optimistic that will lead to more consolidation and lead to significant synergies. There's probably $50 to $75 million of excess G&A among the smaller cap players in the space. So there's a lot of value to be created through consolidation and scale. And I think the creation of a mid-tier player has always been a driving corporate vision for Gold Royalty. You know, one that's sufficiently large and liquid to attract generalist equity investors, but still small enough to grow in contrast to some of the larger cap players in our space who are excellent companies, but don't have the growth profile that a mid-tier competitor can create. And we think that can create a significant re-rate opportunity We've always seen ourselves as a player in the space. We want to eventually be a consolidator, but we don't feel we're in a position right now or have the currency to be a significant consolidator. What we want to do is harvest a very strong rate of return from the significant investments we've made in our portfolio. So I would say over the short term, we're very much focused on making sure that our business is running well, it's deleveraging, and hopefully in time returning cash flow to shareholders in various forms. But hopefully in time, we'll be a consolidator as opposed to being acquired.

Okay, great. Thank you very much. I really appreciate the call. I'll hop back in queue. Cheers.

Once again, if you would like to ask a question, please press star and then 1. We do have an additional question from John Bear from Ascend Wealth Advisors. Please go ahead with your question.

Thank you. Thank you for taking the question here. Sort of as a follow-up to that last question, when you're looking at acquiring a royalty, how far out do you typically look at the project coming online? In other words, are you looking at a two- to three-year timeframe, five years, and how does that play into your strategy?

We have Peter Benke, who's our Director of Corporate Development and Investor Relations, also on the call taking questions. So, I'll hand that off to Peter to answer.

Thanks, David, and thanks for the question, John. The answer is really it depends. I'd say for M&A individual asset acquisitions through financing or third party, we are looking at that line of sight to cash flow. So, Assets where there's a clear path, a capitalized operator that's going to develop that asset. So to your examples within that five-year window. Longer-term assets, so early expiration state royalties, we actually generate those ourselves through our royalty generator model, primarily in Nevada. So we can get longer-dated assets effectively for free. So our focus for non-organic growth is really in that near-term asset cash-flowing royalty.

Okay. And then jurisdictionally, staying primarily in Canada and the U.S., are you looking elsewhere? Are there other jurisdictions that are considered, let's say, relatively stable that you are investigating or see opportunities in?

Yeah, no, it's a good question. With our strong base, over 85% of our business in Quebec, Ontario, Nevada, we have that scope to look abroad, and we have looked abroad. But to your point, staying in safe jurisdictions is definitely a priority. So we go where there's high-quality assets, we've got good trust in the operators, and there's that rule of law in place that we can enforce our royal peer streaming contracts. but as we've made in the last couple of years, investments through Brazil. We'd love to have interests in Australia, although those opportunities are sometimes less frequent. And then parts of Africa that would be selective, but we have a very strong base to begin with, and we continue to look for opportunities in Canada and the USA as well.

Last question, appreciate it, is at what point would you consider investing reinstating dividend?

Yeah, I was going to grab that one. Thanks. So, you know, at this stage, we're very much focused on deleveraging. And as I said earlier on in the call, we expect to be net debt free. By the end of next year, we expect our debentures will convert given how deep in the money they are. We also expect to largely repay our revolver. And I think at that point, we're in a position to start to talk about returning capital shareholders because then we'll be in a very steady and long-term free cash flow generating phase of our existence.

Yeah, that's good. Getting delevered is a very important thing, in my opinion. Thank you very much for taking my questions. Good luck.

And ladies and gentlemen, at this time, and showing no additional questions, I'd like to turn the floor back over to management for any closing remarks.

Well, thanks, everybody, for your attention today. Of course, we're always delighted to hear from you. If you'd like to call in at our 1-800 number, we're happy to return calls or email us, either jackiep.goldroyalty.com or david.goldroyalty.com. As well, Peter and Andrew would be happy to take your questions as well if you'd like to email us or call us. Hope to hear from you over the course of the quarter.

And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.