Gold Royalty Corp. ($GROY)

Good day, and welcome to the Gold Royalty Corp. Fourth Quarter 2025 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. David Garofalo, Chairman and CEO. Please go ahead, sir.

Thank you, operator. Good morning, ladies and gentlemen, and thank you for participating in today's call to review our fourth quarter and 2025 results. Please note, for those not currently on the webcast, a presentation accompanying this conference call is available on the Presentations 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 2 of the presentation, which includes important cautionary notes. Speaking alongside me on today's call will be Andrew Gubbels, Chief Financial Officer; John Griffith, Chief Development Officer; Jackie Przybylowski, Vice President, Capital Markets. Last week, we marked the 5-year anniversary of Gold Royalty's IPO. I'm so proud of our team and what we've accomplished in our short history. We started in March 2021 with 18 royalties on nonproducing assets and no revenue. Today, we boast a portfolio of 258 royalties and streams, including 8 cash flowing assets, and we continue to selectively acquire accretive assets, including Pedra Branca in late 2025 and an additional royalty in Borborema, as John will walk through shortly. From no revenue in 2021, we passed through an important inflection point in 2025. We are proud to report a third consecutive quarter of positive free cash flow as well as another quarter of record revenue, adjusted EBITDA and operating cash flow. These cash flows are a manifestation of the tremendous potential we saw from the assets as we've been carefully curating our portfolio over the past 5 years, potential which is not yet fully realized as we have tremendous growth and value creation still to come. Our balance sheet has been strengthened, as Andrew will discuss later on in this call. We ended the year with no debt or convertible debentures, over $12 million in cash, a fully undrawn credit facility and outstanding common share purchase warrants that continue to be deeply in the money. This strong balance sheet will allow us to continue to opportunistically acquire accretive assets and to consider returning capital to our shareholders. With that, I will pass the call over to Andrew Gubbels to discuss the details of our fourth quarter results and our outlook on Slide 5.

Thank you, David, and good morning, everyone. We're pleased to report new records for revenue and adjusted EBITDA in the quarter and for the full year 2025. Adjusted EBITDA was $3.2 million in the fourth quarter, up from $2.5 million in the previous quarter and up from $1.2 million in the comparable quarter in 2024. Total revenue, land agreement proceeds and interest was $5.2 million, translating to 1,255 gold equivalent ounces in the quarter. For the year ended 2025, we generated $17.8 million in total revenue, land agreement proceeds and interest and $9.8 million of adjusted EBITDA, a 38% and 104% increase from the comparable period in 2024, respectively. This record year reflects the contribution of higher cash flows from the assets we added to the portfolio over the past few years and a continued focus on maintaining consistent low operating costs. The consecutive quarters of positive free cash flow improves our liquidity position and importantly, provides a solid foundation for funding the business moving forward. Further, our balance sheet liquidity position was boosted meaningfully from the equitization of the $40 million convertible debentures held by Queen's Road Capital and Taurus Funds in November and an upsized $103.5 million equity raise completed in December last year. The equity raise funded our $70 million Pedra Branca acquisition, repaid the outstanding balance previously drawn on the RCF, brought in new institutional investors onto our share register and left us in a positive net cash position at year-end. As we look forward to 2026, we remain well funded, having amended and upsized our credit facility to $150 million in February this year and having acquired additional cash flowing royalty on Borborema, we entered the year in a very strong financial position. As Dave alluded, with a self-funding business that generates consistent positive free cash flow and a clean balance sheet, we now have the flexibility to execute our strategy in the long term. Our current intent is to maintain a modest cash balance and to allocate additional cash generated from operations towards growth opportunities where appropriate, while evaluating capital returns to shareholders in future periods. I'll now pass the call over to our Chief Development Officer, John Griffith.

Thanks, Andrew. Before the fourth quarter, Gold Royalty had not announced a material asset acquisition in over a year, demonstrating our disciplined approach as we have waited patiently for the right assets at the right time. On December 8, 2025, we announced the acquisition of royalties on Pedra Branca, which entitled us to 25% of net smelter returns from gold and 2% of net smelter returns from copper for the life of the mine. The Pedra Branca mine in Brazil is currently operated by BHP, although the asset has been sold to Corex Holding in a transaction which is expected to close this year. We are very excited to add this high-quality cash flowing asset to our portfolio. And for more information about Pedra Branca, please refer to our December 8 press release or our December 11 conference call. Links to both can be found on our website. Subsequent to year-end, on January 14, 2026, Gold Royalty announced that we had acquired an additional NSR royalty on Borborema. The 1.5% NSR royalty importantly marked our first successful co-investment with Taurus Mining Royalty Fund. Taurus acquired a 0.75% NSR and Gold Royalty acquired the same 0.75% NSR, bringing our total to a 2.75% NSR plus the royalty convertible gold-linked loan. We often get asked if there are still opportunities to acquire royalties and streams in the current environment of strong prices for gold, copper and other metals. Our 2 recent transactions and other recent royalty and stream deals announced by our peers show that there definitely are. It's worth noting that both of our recently acquired royalties were acquired from third parties, the Pedra Branca Royalty from Blackrock and the Borborema Royalty from Dundee Corporation. Both of these were acquired in quasi-bilateral processes where we negotiated directly with the sellers. Across our peer group, we have also recently seen new streams written by mine operators, likely taking advantage of disparity between long-term outlooks for commodity prices between operators and streamers. And we have also witnessed corporate level M&A. We continue to see growth opportunities across each of our 4 pillars of growth, namely third-party acquisitions, operator financings, corporate M&A and our royalty generator model. And we continue to actively pursue these opportunities in a disciplined manner. I'm pleased to say that we have a healthy pipeline of activities we're evaluating today. And I'll now pass the call to Jackie Przybylowski to review our guidance and to talk about some of our key assets.

Thanks, John. Along with our Q4 and 2025 results, we released our 2026 guidance and our longer-term 2030 outlook. We are expecting to report 7,500 to 9,300 GEO in 2026. At the midpoint of our guidance range, that's a 62% increase from our 2025 actual production of 5,173 GEO, including land agreement proceeds and interest. 2026 guidance assumes an average $5,150 per ounce gold price and an average $5.75 per pound copper price, which is consistent with consensus expectations. While our portfolio remains mostly gold-linked, our gold equivalent ounce guidance figure has some sensitivity to commodity price assumptions. We received royalties on copper at Cozamin and Pedra Branca and a stream on copper from Vareš, for example. Further, we have converted land agreement proceeds and interest, which are paid in U.S. dollars into approximately 684 gold equivalent ounces in our 2026 guidance at our assumed average gold price. To give the market an idea of the effect of commodity prices on our guidance, we presented a sensitivity table in our press release last night and which we're also showing here on Slide 9. As you can see on this table, our guidance on a GEO basis would go up with lower gold price and would go down with higher gold price due to the mechanics of calculating gold equivalent ounces. Longer term, we have provided a 5-year outlook for the second consecutive year. We expect 28,000 to 34,000 GEO in 2030, including approximately 600 GEO of land agreement proceeds and interest. At the midpoint, this represents a peer-leading over 490% increase relative to actual 2025 results. I also want to emphasize that our 2030 outlook continues to be mainly based on assets that are already largely derisked. Over 70% of our growth to 2030 includes assets that are already permitted, financed and built, at least to a first phase. And including the low-risk construction of satellite deposits, derisked assets represent over 90% of that growth. We also have a number of exciting updates in our earnings report, and I'll just highlight a few on this call. Aura Minerals has signed its road relocation agreement, which immediately unlocked mineral reserves at Borborema and will support expansion to 4 million tonnes per year from the current 2 million tonnes per year run rate. DPM Metals has restarted the Vareš mine and expects to reach its full production run rate by year-end 2026. And on the project front, Orla Mining released an updated feasibility study on the South Railroad and expects to start construction midyear 2026 on receipt of final project permits. And Blackrock Silver received its Class II Air Quality and Surface Disturbance Permit, and the company believes that the permitting process is on schedule and expects to receive all permits by mid-2027. Please see our earnings release for additional asset updates. With over 250 assets in our portfolio, we continue to expect a steady stream of exciting positive news flow. I'll pass the floor 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 the diversified portfolio that we have assembled over the last 5 years is a steady flow of exciting growth catalysts at our underlying assets. These near, medium and long-term catalysts will contribute to peer-leading growth that Jackie highlighted in our 2026 and 2030 outlooks. We continue to see compelling upside to our share price as our portfolio assets continue to develop and as the market gives us credit for this organic growth. Our valuation could be further boosted by accretive growth, but we emphasize that we will remain patient and disciplined as we consider any acquisitions and as we review our capital allocation options going forward. 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 September 30, 2025, the company had approximately 17 million outstanding share purchase warrants with each warrant exercisable into common shares at USD 2.25 per share exercise price. The warrants are listed on the NYSE American under the symbol GROY.WS, and they expire May 31, 2027. For more information on exercising warrants, please see our second quarter earnings press release. We invite you all to join our Q1 2026 earnings call on May 7 and our Annual Capital Markets Day in Toronto and online on June 18. Thank you, everyone, for tuning in to the earnings call. We'll now open up the call to Q&A. Operator?

[Operator Instructions] And our first question will come from Heiko Ihle with H.C. Wainwright.

I mean we're in an environment of $4,600 gold, obviously, volatility in the last 24 hours has been insane. Crazy news all over the newspapers, wars, geopolitical risks. Do you want to just walk us through your thought process that you apply to potential M&A and the discount rates that you assign to assets given current geopolitical turmoil? And building on all of that, now I'll leave it to that one question given that's probably like 4 in 1. And building on all of that, are you -- is there a certain countries that you may be more focusing on than you were, call it, 6 months ago or even 3 months ago than today?

Thanks, Heiko. I'll hand that off to John Griffith to respond to you. Thank you.

Heiko, I think you're absolutely right about the volatility and uncertainty in the current environment. But I don't think we can let that noise really influence our decision-making. We typically look at commodity prices on a consensus basis when we're evaluating opportunities. And because of that and the dislocation between consensus and spot prices, we've seen that in many instances, others have been willing to accept much lower rates of return on transactions than we otherwise would have. In other words, we're really staying disciplined and focused. And we will remain that way during these uncertain times. So I don't think the current aberrations really change our view or strategy. And I think regarding geographies, we're very fortunate to have 85% approximately of our net asset value in North America and the remaining 15% in several jurisdictions as well. And I think we have no real pressure to go and deploy capital in parts of the world where risk is perceived to be volatile and a lot higher.

The next question will come from Tate Sullivan with Maxim Group.

In your MD&A, you highlight the sensitivities to copper and gold prices given your current producing assets. Are you still focused mostly on copper and gold in terms of evaluating assets going forward? And did you demonstrate this consistency by selling the tungsten-related asset in the U.S. in the fourth quarter?

Thanks, Tate. I'll hand that off to John again.

Sorry, the question, Tate, could you just repeat it, please?

Still focusing on copper and gold predominantly and what you're evaluating going forward? And just I noted your the tungsten asset-related sale in the fourth quarter as a demonstration of that strategy.

Yes, sorry. The -- I guess the focus for us remains very much on precious metals. We do feel very comfortable looking at what I would describe as the conventional or larger value LME traded commodities such as copper, zinc and nickel. And I think it also ties in nicely with our skill set, both management and Board have a lot of experience in building and operating mines in those various commodities. I don't think you're going to see us depart materially from that strategy unless we were potentially to acquire a larger portfolio of assets, which had smaller commodity-focused assets that fell outside of that ambit, if you will. And yes, I think for us, the sale of the tungsten asset was certainly opportunistic. The party that acquired that asset is really focused on a more sort of esoteric perspective of building a non-precious metal, nondiversified royalty company, and they were willing to pay up for an asset that had very low value, little to no value in our portfolio.

Okay. And second for me, if I may. I mean, today's gold price moved down as much as 7%. Can you comment on just what you think is behind that? And are you willing to comment on short-term market fluctuations, please?

Yes, I think that's a great question. Ironically, I think it is because of the political turmoil. Quite often, I get asked, why isn't the gold responding to war events or significant economic calamities. And I think typically what happens when those events occur is it becomes a risk-off trade and risk assets are sold regardless of the underlying fundamentals. So I actually see events like this, like the Iran war or economic calamities like the great financial crisis or COVID for that matter, as distractions from the underlying fundamentals of the commodity. And I think in gold's case, like every other risk asset being sold today, it is being sold off. But inevitably, what happens and invariably what's happened after these calamities in the past is when the risk trade comes back on and capital starts to be put back to work, fundamentals come back into play. And the fundamentals for gold, in my view, are irrefutable in that we're going to see continued and relentless debasement of the occurrences given the absolute amount of debt that's being strapped on. In spite of the fact that we're seeing record revenues, fiscal revenues in the U.S., we're seeing still record fiscal deficits and continued compounding of unsustainable debt at the U.S. government level and for that matter, across the Western world. And inevitably, that will lead to continued debasement of the underlying fiat currency to debase the debt. And I think those fundamentals will come back into play and gold being the one currency that can't be printed, can't be debased, will inevitably go up as it has relentlessly for the last 50 years in spite of the volatility in the short to medium term.

And this will conclude the question-and-answer session. I would like to turn the conference back over to Mr. David Garofalo for any closing remarks.

Well, thank you all for your kind attention. If you have any follow-up questions, of course, Jackie is available at [email protected] or any of us, first initial last name at @goldroyalty.com, if you have any other follow-up questions, we'll be delighted to hear from you. I hope you have a good rest of your day in spite of the volatility in the markets.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.