Gold Royalty Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: Achieved positive free cash flow and record quarterly revenue, adjusted EBITDA and operating cash flow, marking an inflection point for the company.
  • Positive Sentiment: Key assets Varis reached commercial production in July and Boba Reyma is on track for commercial production later this year, supporting steady growth ahead.
  • Positive Sentiment: Maintaining a clear capital allocation strategy focused on debt reduction, with the potential to be net debt free by 2026 as convertible debentures and warrants are deeply in the money.
  • Positive Sentiment: Reported Q2 adjusted EBITDA of $2.4 million, up nearly 50% quarter-over-quarter, on revenue of $4.4 million, including a favorable $300,000 settlement from JR Canyon.
  • Neutral Sentiment: Despite a guidance cut at Verus, the company reaffirmed its 2025 gold equivalent ounce guidance of 5,700–7,000 GEO and views temporary underperformance at Canadian Malartic as a sequencing issue.
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Earnings Conference Call
Gold Royalty Q2 2025
00:00 / 00:00

There are 3 speakers on the call.

Operator

Good day, everyone, and welcome to the Gold Royalty Corp. Second Quarter twenty twenty five Results Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded.

Operator

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 twenty twenty five 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.

Operator

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 Jackie Przybylowski, 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 Varis, which achieved commercial production on July, which announced on June 23 that it has reached its steady state run rate and Boba Reyma, which started operations on March 28 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.

Operator

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 maintain 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 2026. We continue to monitor the landscape of consolidation across the royalty space.

Operator

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 and 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 rerate being experienced by Gold Royalty and some of our peers is partly reflective of

Speaker 1

this

Operator

dynamic, we also expect that the realization of Gold Royalty's 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 12 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, I will pass the call over to Andrew Goebbels to discuss the details of our first quarter results and our outlook on Slide four.

Operator

Thank you, David, and good morning, everyone. We're pleased to report new records for revenue and adjusted EBITDA in the quarter and half year. Adjusted EBITDA was $2,400,000 in the quarter, a nearly 50% increase compared to the previous quarter. Total revenue, land agreement proceeds and interest was $4,400,000 translating into thirteen forty six gold equivalent ounces in the quarter. Our reported revenue included the recognition of $300,000 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 JR Canyon mine regarding our per ton royalty interest.

Operator

This judgment will not impact future royalty revenues should JR 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 Verus And Cote Gold mines, strong gold prices, which averaged $3,279 per ounce in the quarter and relatively flat Q2 G and A costs of $1,800,000 Our operating costs, which include G and 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 12 Capital Markets Day. Looking forward, we reiterate our twenty twenty five and five year outlook. We will use excess cash, including any proceeds from the exercise of outstanding warrants to opportunistically repay the $27,300,000 outstanding on our revolving credit facility.

Operator

As our EBITDA grows over the coming quarters, we expect to delever quickly such that Gold Royalty is effectively debt free by the 2026. I'll now pass the call over to Jackie to review our key operations.

Speaker 2

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, 06/21/2025, the Cote processing plant operated at nameplate capacity of 36,000 tonnes per day on average over thirty consecutive days. Nameplate capacity was reached well ahead of the company's target of Q4 twenty twenty five, and our revenue from Cote was strong at over $1,000,000 in the quarter.

Speaker 2

IronGold 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 debottleneck the dry side of the plant, offering the potential for further optimizations and improvements in the near future. Ora Minerals continued start up activities at Bovarema after the mine achieved first production in late March. Ora 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 preproduction payments of 250,000 ounces of gold per quarter, which contributed a meaningful $1,200,000 in revenue in the second quarter at strong gold prices.

Speaker 2

Offsetting the strong performances at Cote and Bobrema, we reported $18,000 in revenue at Ignico Eagle's Canadian Malartic mine in second quarter. We view this relatively light result as 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 the second shaft. We also continue to watch Adriatic Metals' Verus mine, which achieved commercial production on 07/01/2025, roughly in line with the operator's target of Q2 twenty twenty five. On July 28, Adriatic Metals reduced its full year 2025 guidance to 475,000 to 585,000 tonnes or milled from six and twenty five thousand to 675,000 tonnes previously.

Speaker 2

Despite the guidance cut at Verus, Gold Realty maintains its full year guidance of 5,700 to 7,000 GEO in 2025 as the shortfall at Verus 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. And with that, I'll pass the call back to David for closing remarks.

Operator

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 for 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 pricing at asset value basis since our first quarter call on May 8.

Operator

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 credit 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 06/30/2025, the company had approximately 20,000,000 outstanding share purchase warrants with each warrant exercisable into a common share at US $2.25 per share.

Operator

The warrants are listed on the NYC American under the symbol GROYDotWS and they expire 05/31/2027. For more information on exercising warrants, please see our second quarter earnings press release. Thank you, everyone, for tuning into the earnings call. And with that, I'd be happy to open up the call to Q and A. Operator?

Operator

If you would like to ask a question, you may press star and then 1 using a touch tone telephone. To withdraw your questions, you may press star and 2. 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 queue in to the question queue on the audio side. We'll pause momentarily to assemble the roster.

Speaker 2

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

Operator

Well, I'll pass that on to Andrew to answer. Thanks. Thanks. Thanks, David and Jackie. Yes.

Operator

We did generate positive free cash flow for q two of this year. At this stage, with respect to free cash flow, I would like to target a cash balance inclusive of our undrawn revolver above $5,000,000. We have cash a little above $3,000,000. We've got $2,700,000 in undrawn revolver capacity as well. We are slightly above $5,000,000 at this stage.

Operator

I do expect in q three and q four to accumulate more free cash flow. And as we do, we will consider or evaluate the repayment of our revolver. So at this stage, given we finished the quarter, we're slightly above that threshold that I'm looking to keep when 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 one. We do have a question on the audio side, and this comes from Eric Windmill from Scotiabank.

Operator

Just wondering if you can elaborate at all on Jared Canyon, the revenues you received and how we should think about Jared for the balance of this year and next year? Are you expecting any additional revenues to come in there? It'd be helpful. Thank you. I'll hand that off to Jackie.

Speaker 2

Oh, yes. Sure. Thanks. Thanks, Eric, for the question. So the the revenues that we received were were in in relation to a settlement that that had been reached earlier earlier this year, just at the end of the quarter.

Speaker 2

So our royalty on Jarett Canyon includes two components. This is 0.5% NSR. And as Andrew mentioned, there's a sliding per ton rate as well. And that's that's the aspect that was disputed. The the settlement that we've recorded in in the quarter represents the the the final amount for that settlement that we were expecting.

Speaker 2

We had previously accrued a a small amount as well,

Operator

but

Speaker 2

this this point 3,000,000 is the is the final amount that we're expecting. So we're not expecting any further revenues from Jura Canyon this year, and nothing else related to that settlement. And if if Jura Canyon were to restart and and the company, first Majestic, has has indicated that they are looking at restarting, then then, of course, we would receive the 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 until the mine were to restart.

Operator

Okay. Great. Super helpful. Appreciate it. Maybe just one more, if you don't mind, but just a comment on the merger landscape.

Operator

I know you touched on the preamble at the outset, just curious, you know, obviously exciting time in the royalty space and, you know, gold royalty stock has 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.

Operator

Yes. Thanks very much, Eric. Look, I do think that consolidation can only accelerate from here. Obviously, the fundamentals of the gold price are are very helpful in that regard. But, also, there's been new entrants in the space.

Operator

You know, namely, we've seen a a very large stablecoin fund in Tethr taking a very significant investment in one of our peers and with a stated objective of consolidating the sector and putting more capital to work and perhaps creating more stablecoin products backed by royalties and streams. That 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 $75,000,000 of excess g and a among smaller cap players in the space. So there's a lot of value to be created through consolidation and scale.

Operator

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 contract with some of the larger cap players in our space who are excellent companies but don't have the growth profile that mid tier competitor can can create. And we think that can create a significant rerate opportunity. We've always seen ourselves as a player in the space. We want to be eventually be a consolidator, but we're 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.

Operator

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 consolidator as opposed to being acquired. Okay. Great.

Operator

Thank you very much. I really appreciate the color. I'll hop back in queue. Cheers. Once again, if you would like to ask a question, please press star and then 1.

Operator

We do have an additional question from John Bear from Ascend Wealth Advisors. Please go ahead with your question. You. Thank you for taking the question here. Sort of as a follow-up to that last question.

Operator

When you're looking at acquiring a royalty, how far out do you typically look at the project coming online? In other words, you're looking at a two to three year time frame, five years, and how does that play into your strategy? Well, we have Peter Beneke, 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

Speaker 1

the question, Don. The answer is really it depends. I'd say for M and 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.

Speaker 1

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 nonorganic growth is really in that near term cash flowing royalty. Okay. And

Operator

then jurisdictionally, staying primarily in in in Canada and The US, 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.

Speaker 1

No. It's it's a good question. With our strong base, over 85% of our business in Quebec, Ontario, Nevada, we have that scope to to look abroad, and we have we have looked abroad. But to your point, staying in safe jurisdictions is is definitely a priority. So we go where there's high quality assets.

Speaker 1

We've got good trust in the operators, and there's a rule of law in place that we can enforce our royalty or streaming contracts. But we've as we've made in the last couple of years investments through Brazil, we'd love to have interest in Australia, those opportunities are sometimes less frequent. And then parts parts of Africa that would be 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.

Operator

Last question, appreciate it, is at what point would you consider reinstating dividend? Yeah. I think for Yeah. I ahead. Yeah.

Operator

Was gonna grab that one. Vince, 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.

Operator

And I think at that point, we're in a position to start to talk about returning capital to shareholders because then we'll be in a very steady and long term free cash flow generating phase of our existence. Yeah. That that's good. Getting de levered is a very important thing, in my opinion. Thank you very much for taking my questions.

Operator

Good luck. Mhmm. And ladies and gentlemen, at this time, I'm 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.

Operator

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@goldroyaltydot,uh,com or Dave David Vigarroff, excuse me, @goldroyalty.com as well. Peter and Andrew would be happy to take your questions as well if you'd like to e mail 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.

Operator

We thank you for joining. You may now disconnect your lines.

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