Mining Forum Americas: Garofalo’s Gold Royalty the ‘envy of our peers’

Gold Royalty Achieves Free Cash Flow, Sets Sights on Quebec’s Abitibi Region

Gold Royalty Corp. has reached a significant milestone by starting to generate free cash flow and is now focusing on Quebec’s mineral-rich Abitibi region as its next growth frontier, according to Executive Chairman and CEO David Garofalo.

The NYSE American-listed company (GROY) has built a portfolio of cornerstone royalties on premier North American gold projects, including Agnico Eagle Mines’ Canadian Malartic Odyssey underground complex in Quebec, Iamgold’s Côté project in Ontario, and Nevada Gold Mines’ Ren deposit at Goldstrike, jointly owned by Barrick Gold (61.5%) and Newmont (38.5%).

“We’re over the hump into free cash flow,” Garofalo told The Northern Miner during a recent interview. “Odyssey is a keystone for us.”

The company’s strategic focus on Quebec is deliberate and calculated. Gold Royalty holds a 3% net smelter return (NSR) royalty on Odyssey North, most of East Malartic, and parts of Odyssey South/Norrie, plus a 1.5% NSR on the adjacent Midway project to the east.

At Odyssey, Agnico Eagle is executing a transformative shift, converting Canadian Malartic from Canada’s largest gold open pit into one of the country’s most significant underground operations. The mine development is advancing steadily, with first ore expected via ramp from the East Gouldie deposit in the second half of 2025, followed by shaft-hoisted ore approximately 12 months later. The operator is also studying a shaft extension and a potential second shaft to increase production capacity.

This Quebec-centered strategy aligns with Gold Royalty’s fundamental investment philosophy of prioritizing tier-one jurisdictions with robust legal frameworks and contract enforcement. “Our business is a stack of contracts,” Garofalo explained. “You want to be where paper is protected.”

The company’s improving cash flow position will initially be directed toward debt reduction. Gold Royalty holds a $40 million unsecured convertible debenture maturing in 2028, which becomes callable by the company in late 2026. “They’re deeply in the money, so we can effectively force conversion at the end of next year,” Garofalo noted.

Additionally, the company plans to repay short-term borrowings – representing about one-third of its $75 million revolving credit facility – from free cash flow by the end of 2025. Garofalo describes this facility as the company’s “credit card” for executing quick transactions.

“We expect to be completely debt-free by the end of 2026,” he said. “At that point we’ll actively contemplate returns of capital, whether buybacks or a dividend – whatever makes most economic sense.”

The royalty company maintains relatively fixed corporate costs of approximately $7-8 million annually, while its gold-equivalent ounce production is projected to grow substantially to 30,000 ounces from already-owned assets. “Our costs are largely fixed,” Garofalo explained. “As volume grows – and if gold prices cooperate – every incremental dollar drops through.”

Beyond the major growth drivers of Odyssey, Côté and Ren, several smaller contributors are strengthening Gold Royalty’s foundation. Aura Minerals’ Borborema mine in Brazil and Dundee Precious Metals’ Vareš mine in Bosnia and Herzegovina – where Gold Royalty holds a copper stream – have both commenced production, with operators considering expansions.

Garofalo also highlighted Orla Mining’s South Railroad project in Nevada, which is advancing through permitting, and organic royalty-generation successes like Blackrock Silver’s Tonopah West. Gold Royalty staked the latter in 2021 and farmed it out last year for cash plus a royalty. “That could be in production before the end of the decade – warp speed by mining standards,” he remarked.

The CEO describes the royalty business model as providing “free optionality” – top-line NSR exposure fully paid upfront with no capital calls, direct leverage to gold prices, and operator-funded growth. He points to approximately $200 million in annual exploration spending on ground covered by Gold Royalty’s agreements in recent years – expenditures the company doesn’t fund – alongside the model’s inherent scalability.

With just 14 employees, Gold Royalty efficiently manages hundreds of assets across the Americas, diversifying risk without diluting upside potential. “There’s no practical cap on how many royalties you can manage with a small team, as opposed to a major that can only manage effectively a set number of mines,” Garofalo said.

The royalty sector remains fragmented and periodically ripe for consolidation when equity markets reward scale. Gold Royalty followed this consolidation playbook in 2021 by acquiring Ely Gold Royalties to add the Ren royalty package and a larger U.S. pipeline, while also merging with Abitibi Royalties and Golden Valley Mines to secure its cornerstone Quebec exposure at Canadian Malartic/Odyssey.

While maintaining over 90% focus on gold, the company is comfortable with polymetallic systems such as gold-copper porphyries and volcanogenic massive sulphide camps, leveraging its team’s extensive operating experience in these environments.

“We have royalties in three of the five biggest producing gold mines in North America,” Garofalo emphasized. “So, we have a foundational, cornerstone element to our portfolio that’s really the envy of our peers in the small-cap universe and it means we’ll have an annuity from those assets for decades to come.”