Gold Royalty Corp. — Form 20-F summary
Period note: The supplied filing is the annual report for the fiscal year ended September 30, 2022, filed December 23, 2022. It is not a 2021 Q4 filing; the filing provides a September 2021 quarter comparison for Q4 2022 but not a standalone 2021 Q4 summary. Amounts below are U.S. dollars unless stated otherwise.
Business context
Gold Royalty is a precious-metals royalty company that generally does not operate mines or fund their operating and development costs. Its portfolio comprised 204 royalties, including 7 on producing-stage properties; most were on exploration-stage properties. The Canadian Malartic property was identified as its sole material property for SEC mining-disclosure purposes. Revenue depends on third-party operators, mine production, and metal prices.
Financial performance and liquidity
| Metric | FY ended Sep. 30, 2022 | FY ended Sep. 30, 2021 |
|---|---|---|
| Revenue | $3.944 million | $0.192 million |
| Gross profit / gross margin | $2.188 million / approximately 55.5% | $0.028 million / approximately 14.6% |
| Net loss | $17.346 million | $15.006 million |
| Net loss per share | $0.14 | $0.45 |
| Adjusted net loss (non-IFRS) | $12.462 million | $9.346 million |
| Cash used in operating activities | $19.262 million | $11.950 million |
| Cash and cash equivalents at period-end | $7.048 million | $9.905 million |
| Working capital | $9.746 million | $6.380 million |
| Total assets | $688.614 million | $279.499 million |
FY2022 revenue included $3.108 million of royalty income, $0.386 million of advance minimum royalties, and $0.450 million of option income. The company reported total revenue and option proceeds, a non-IFRS measure, of $5.724 million; $1.780 million of option proceeds reduced the carrying value of mineral interests rather than being recognized as revenue. FY2022 royalty revenue was concentrated in Canadian Malartic ($1.132 million), Borden ($0.954 million), and Jerritt Canyon ($0.808 million).
Operating cash outflow increased year over year. The company attributed a substantial portion of the reported cash use to working-capital movements, including an $8.350 million decrease in accounts payable and accrued liabilities. Cash, cash equivalents, and marketable securities totaled approximately $14.2 million at year-end. The company had drawn $10 million on its $10 million secured revolving facility; its recorded bank-loan balance was $9.362 million. The facility matures March 31, 2025 and includes a conditional $15 million accordion. Reported non-current liabilities of $145.184 million included a $135.523 million deferred tax liability.
Q4 FY2022 revenue was $0.866 million versus $0.192 million in Q4 FY2021; Q4 FY2022 net loss was $4.677 million. The filing reports $4.032 million of dividends paid during FY2022, at $0.01 per share quarterly. Management said it believed available liquidity was sufficient for obligations and planned activities over the next 12 months, while noting long-term growth depends on external financing.
Material changes and unusual items
- Revenue rose from $0.192 million to $3.944 million, largely reflecting acquired royalties. Total assets increased to $688.614 million, primarily following acquisitions. The net loss widened, while loss per share improved because the weighted-average share count rose substantially.
- Completed the Golden Valley and Abitibi acquisitions in November 2021 for approximately $306 million of total consideration, principally shares; acquired the Côté Gold royalty for approximately $15.8 million; and acquired the Nevada Gold Mines portfolio for 9,393,681 shares. These transactions expanded the portfolio and increased share count.
- Recognized a $3.821 million impairment on the Rawhide royalty after the mine suspended operations due to working-capital constraints. Beaufor was also placed on care and maintenance in September 2022 after its operator cited financial and operational challenges; no impairment was recorded for Beaufor at year-end.
- Recorded a $4.588 million fair-value gain on derivative liabilities, primarily related to Ely warrants, and a $0.569 million fair-value loss on short-term investments. These non-cash and market-sensitive items affected reported results.
- Issued a $50 million at-the-market offering authorization but reported no sales under the program as of the filing date. It also announced a quarterly dividend program. The company said it would change its fiscal year-end to December 31 beginning in 2023.
Outlook, commentary, and risks
The company reported that FY2022 total revenue and option proceeds exceeded its previously stated $5.0 million guidance. The filing does not provide a clear numerical revenue or earnings forecast for the next fiscal year. Management’s growth plan centers on acquiring royalties and generating new royalties through its property portfolio; future results depend substantially on operator development schedules and production.
Key risks include dependence on third-party operators; concentration of current revenue among a small number of mines; commodity-price volatility; the large share of non-producing royalties that may never generate revenue; limited access to, and independent verification of, operator data; operator liquidity and financing constraints; royalty-title, contract, and buyback disputes; and environmental, permitting, jurisdictional, Indigenous-relations, and other mine-operating risks. Management also disclosed that U.S. holders may face adverse tax treatment because the company expects it may be a passive foreign investment company. Technical disclosures rely substantially on operator information that Gold Royalty generally cannot independently verify.
The consolidated financial statements were audited by PricewaterhouseCoopers LLP, which gave an unqualified opinion under IFRS. Management concluded disclosure controls and internal control over financial reporting were effective as of September 30, 2022; the filing does not include an auditor attestation on internal control.
Important facts for investors to verify
- Confirm the reporting period: this is FY2022, not 2021 Q4, and distinguish recognized revenue from the non-IFRS total revenue and option proceeds measure.
- Review the latest operator updates for Canadian Malartic/Odyssey, Côté Gold, Jerritt Canyon, Granite Creek, and Beaufor, including construction, production, funding, and restart assumptions.
- Assess liquidity and financing needs against operating cash burn, the drawn revolving facility, facility covenants and maturity, and any future ATM or other share issuance.
- Check the assumptions and valuation sensitivity behind acquired royalty carrying values, the Rawhide impairment, derivative valuations, and the large deferred tax liability.
- Evaluate portfolio concentration, non-producing asset exposure, contingent buybacks or production hurdles, potential dilution, dividend sustainability, and PFIC implications for U.S. investors.