GROY

Business Context and Reporting Period

Company: Gold Royalty Corp. (GROY)

Filing Type: Form 20-F (Annual Report)

Reporting Period: Fiscal year ended December 31, 2024

Business Model: A precious metals-focused royalty and streaming company that acquires interests in mining properties across various stages of development. The company holds 248 royalty and streaming interests, with 7 currently on cash-flowing assets. It does not operate mines directly but relies on third-party operators.

Key Financial Metrics

Note: The company achieved its first year of positive cash flow from operations in 2024.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 231% year-over-year, driven by higher gold prices, full-year pre-production payments from the Borborema project, and initial revenue from the Côté Gold and Vareš mines.
• Profitability Improvement: Net loss narrowed significantly from $26.8 million in 2023 to $3.4 million in 2024. This improvement was largely due to the absence of the $22.4 million impairment charge recorded in 2023 and increased royalty income.
• Acquisitions: Completed the acquisition of the Vareš copper stream in Bosnia and Herzegovina for $50 million (cash and shares) in June 2024.
• Financing: Completed a bought deal offering in May 2024 raising approximately $34.5 million. Expanded and drew down on its credit facility to fund acquisitions.
• Asset Development: Côté Gold Mine achieved commercial production; Vareš Mine ramped up production; Borborema mine construction is on track for Q2 2025 production start.

Guidance, Outlook, and Risks

Outlook and Management Commentary

• Production Ramp-ups: Management expects Borborema to start production in Q2 2025. Vareš Mine is expected to reach nameplate capacity in the second half of 2025. Côté Gold is targeting 360,000–400,000 ounces of gold production in 2025.
• Strategic Alliances: Entered a three-year mutual cooperation agreement with Taurus Mining Royalty Fund to co-invest in precious metals royalties.
• Capital Structure: Amended credit facility in February 2025 to extend maturity to March 2028 and increase capacity to $75 million total (with $30 million base line).

Risks and Contingencies

• Operator Dependency: The company has limited control over exploration, development, and operational decisions made by third-party operators.
• Commodity Price Volatility: Revenue is directly tied to gold and copper prices, which are subject to significant market fluctuations.
• Concentration Risk: Approximately 72% of 2024 revenue was derived from six key properties (Borborema, Borden, Canadian Malartic, Cozamin, Côté, and Vareš).
• Regulatory and Environmental: Operations in foreign jurisdictions (e.g., Bosnia, Brazil, Mexico) face risks related to permitting, environmental regulations, and Indigenous land claims.
• PFIC Status: The company expects to be classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes, which may have adverse tax consequences for U.S. holders.

Investor Verification Checklist

• Operator Progress: Verify the production ramp-up schedules for Borborema (Q2 2025) and Vareš (H2 2025) against operator reports (Aura Minerals and Adriatic Metals).
• Debt Covenants: Review the financial covenants associated with the $25.3 million credit facility and $40 million convertible debentures to ensure compliance.
• Impairment Policy: Assess the methodology used for impairment testing of exploration-stage assets, given the significant impairment charge in 2023.
• Gold-Linked Loan: Monitor the fair value adjustments of the $10 million gold-linked loan to Borborema, which impacts earnings volatility.
• PFIC Implications: Confirm the tax treatment for U.S. investors given the expected PFIC status and the availability of Qualified Electing Fund (QEF) elections.