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Friday, June 21, 2024

INVESTMENT: THE GOLD STANDARD FOR ROYALTIES

Gold Royalty Corp. is the gold standard for royalty companies!! Young, diversified, and sitting on some of the largest gold mine reserves in North America!

It’s ripe for turning hard work into profits this year. Gold Royalty collaborates with some of North America’s biggest miners on some of the continent’s grandest projects. 

Looking for an investment that has a huge upside with little risk and a healthy dividend to boot? You can count on it with Gold Royalty Corp. (NYSE American: GROY; NYSE American: GROY.WS)!

MAJOR ASSETS

The company’s two most valuable assets are extremely large gold mining projects in Canada. 

Odyssey, its largest asset, will become Canada’s largest underground mine. Its second-biggest asset, Cote, could become one of Canada’s largest gold mines.

Also helping to mitigate risk is not just the size of its assets, but their geographic diversity. Its portfolio consists of over 200 royalties located in mining-friendly jurisdictions throughout the Americas. 

VALUATION

Osisko Gold Royalties Ltd. (TSX: OR; NYSE: OR), a similar company to Gold Royalty Corp., has a much larger market capitalization of $3.59 billion compared to Gold Royalty’s market cap of only US$190.83 million. Investing in Gold Royalty Corp. now, before its valuation grows exponentially, is critical.

RISK (or lack thereof)

Unlike mining companies, royalty companies like Gold Royalty have limited exposure to operating and capital costs, providing investors with lower-risk exposure to fluctuating gold prices. 

Founded in 2021, Gold Royalty’s downside risk is at its lowest point yet, with 2024 likely being the first year of positive earnings. This gives investors upside exposure to gold prices and mining costs with minimal risk, especially considering Gold Royalty’s significant growth potential.

BLUE SKY UPSIDE ON TOP ASSETS

Gold Royalty’s biggest asset is the Odyssey project in the Canadian Malartic mine—one of Canada’s largest operating gold mines. The Odyssey encompasses roughly half of GROY’s NAV (net asset value). 

According to the Gold Royalty website, the Odyssey project is the underground extension of the Canadian Malartic open-pit mine. Odyssey is set to become Canada’s largest underground mine. 

The current mine plan envisions 500,000 to 600,000 oz of annual Au production until 2039, however, there is a strong potential to increase the annual throughput and life of the mine given the excess plant capacity and significant underlying mineral resources that are not currently in the mine plan, per the company website.

GROY acquired Canadian Malartic royalties in November 2021, through the acquisition of Abitibi Royalties & Golden Valley. GROY holds four royalties on portions of the Canadian Malartic Property, including a 3.0% NSR royalty on portions of the Canadian Malartic mine. 

The Malartic mine is located in the Town of Malartic, in the heart of Québec’s rich Abitibi Gold Belt. GROY receives 2.0%-3.0% NSR (net smelter return) from the operator, Agnico Eagle Mines Ltd., the world’s third-biggest bullion producer.

Agnico gained full operational control of Canada’s top gold mine (by annual output) after buying out Yamana Gold Inc.’s share in early 2023. Malartic generated almost 715,000 ounces of bullion in 2021, ranking it as North America’s fourth-largest producing bullion mine. Agnico was willing to shell out US$4.8 billion to Yamana shareholders to consolidate this prized asset.

OTHER MAJOR ASSETS

GROY’s second-biggest interest is in the Côté Gold Project. That’s located in the district of Sudbury, in the northeastern region of Ontario. Côté is being developed by a joint venture between another established gold-mining firm in IAMGOLD Corp., as the operator, and Sumitomo Metal Mining Co. Ltd.

At Côté, GROY holds a 0.75% NSR over the southern portion of the mine. The royalty is more exposed to the early years of production. Côté is expected to produce its first gold in 1Q24.

The current technical report mine plan outlines a 37,200 tpd open pit operation with an estimated average annual production of 495,000 oz gold over the first six years of operation; and an average annual production of 365,000 oz gold over the 18-year mine life to become one of Canada’s largest gold mines. 

GROY’s third-biggest interest is in the REN Project, an underground, high-grade deposit currently being developed as the northern, underground extension of the Goldstrike Mine, along the Carlin Trend in Nevada, USA. 

The Goldstrike Mine is the largest gold mine in the United States and has produced over 60 million ounces of gold. REN is located along the Carlin Trend which has produced over 70 million ounces of gold. 

The REN project is operated by Barrick Gold Corp. and owned by Nevada Gold Mines, a joint venture between Barrick (61.5%) and Newmont Gold Corporation (38.5%). Forr REN, GROY holds a 1.5% NSR and 3.5% NSR. 

OVERALL

Gold Royalty has a flexible balance sheet that enables it to manage and grow its operations while paying a quarterly dividend of $0.01 per share, which currently equates to an approximately 2.67% dividend yield. 

Though the company has operated at a loss since being listed on the NYSE American Stock Exchange on March 8, 2021, it is on the verge of achieving positive cash flow in 2024, according to executives at the company’s 2023 Investor’s Day on May 23. After losing $0.07 per share in cash flow in 2022 and likely posting a slight loss again in 2023, Gold Royalty could turn profitable in 2024, transforming losses into gains.

Year 2024 is when it could turn its earnings from red into black, and turn its gold into some serious green. 

SUMMARY OF GOLD ROYALTY

Quality assets: Gold Royalty offers exposure to some of the highest-grade, highest-lifespan, and largest gold mines in North America.

Minimal risk: Gold Royalty’s risk is limited. As a royalty company, it does not get burdened with the capital costs of mining.

Valuation: As a young company that’s been in existence for less than three years, it is severely undervalued versus its peers.

Profit: It’s on the cusp of turning a profit in 2024, the first time in its short history.

Blue-sky potential: Gold Royalty is a stock that you want to hold onto for the long term. In time, it’ll catch up with its peers and be worth several times more than it is today.

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