Executive Summary / Key Takeaways

• The Free Cash Flow Inflection Is Real: Gold Royalty Corp. has crossed a fundamental threshold, achieving positive free cash flow in Q2 2025 while delivering record quarterly revenue, adjusted EBITDA, and operating cash flow. This marks the transition from an acquisition-driven story to a cash-harvesting business, with management targeting a net debt-free position by end of 2026.

• Peer-Leading Production Growth: The company’s 2029 outlook of 23,000-28,000 gold equivalent ounces represents a 360% increase from 2024 levels, driven by the successful ramp-ups of Côté, Vareš, and Borborema. This growth trajectory is underpinned by royalties on large-scale, long-life mines in tier-one jurisdictions, providing built-in expansion without additional capital outlay.

• Capital Allocation Pivot: With growing cash flows and a strengthened balance sheet, management has shifted priorities from portfolio building to debt reduction, with plans to opportunistically repay its $27.3 million revolving credit facility. The company is positioning itself to discuss shareholder returns by 2026, a luxury it could not previously afford.

• Valuation Disconnect Persists: Despite achieving record financial metrics and positive free cash flow, GROY trades at a significant discount to larger royalty peers on price-to-operating-cash-flow and enterprise value-to-revenue multiples. Management explicitly acknowledges this frustration, arguing the market has not recognized the intrinsic value of its diversified, Americas-focused portfolio.

• Execution Risk Is the Primary Variable: The investment thesis hinges on the successful ramp-up of key assets to commercial production. While Côté has already achieved nameplate capacity ahead of schedule, Vareš faced a guidance cut in July 2025, and Canadian Malartic’s Odyssey underground represents longer-term upside with sequencing uncertainty.

Setting the Scene: The Royalty Model and GROY’s Niche

Gold Royalty Corp., incorporated in 2020 and headquartered in Vancouver, Canada, operates in the precious metals royalty and streaming sector—a business model that provides upfront capital to miners in exchange for a percentage of future production. Unlike traditional mining companies, royalty firms bear no operating costs, environmental liabilities, or capital expenditure overruns. They simply collect a check when the mine produces, making them leveraged plays on metal prices and production volumes with minimal downside risk.

The company’s mission centers on investing in high-quality, sustainable mining operations to build a diversified portfolio of precious metals interests. GROY’s strategic focus has evolved dramatically since its March 2021 IPO, when it pursued an aggressive M&A strategy using its strong market currency. That acquisition spree in 2021 laid the foundation for today’s portfolio, but the pace slowed significantly as market conditions shifted. The company now finds itself at an inflection point where the portfolio it assembled is beginning to generate substantial cash flows.

GROY occupies a distinct niche in the royalty landscape. While giants like Franco-Nevada and Wheaton Precious Metals (WPM) command multi-billion-dollar market caps with hundreds of assets, GROY operates as an emerging mid-tier player with a concentrated portfolio of 17 properties. This concentration is not a bug but a feature: the company has deliberately focused on large-scale, long-life mines in late development, near-production, and ramp-up stages. The portfolio is heavily weighted toward the Americas, with over 85% of assets in Quebec, Ontario, and Nevada—jurisdictions that offer political stability, established mining law, and reduced geopolitical risk compared to many peer portfolios that stretch into riskier regions.

The industry structure favors scale, but it also rewards specialization. Major miners face increasing capital constraints and are turning to royalty financing to fund development without diluting equity or taking on debt. This creates a steady supply of royalty opportunities. Simultaneously, the gold price environment has turned strongly favorable, with spot prices recently exceeding $3,300 per ounce and averaging $3,279 in Q2 2025. This macro tailwind amplifies royalty cash flows without requiring additional investment, making GROY’s timing particularly advantageous.

Strategic Differentiation: The Americas-Focused Growth Portfolio

GROY’s core competitive advantage lies in its deliberate concentration on tier-one jurisdictions and its balanced approach across mine life cycles. While peers like Royal Gold (RGLD) and Sandstorm Gold maintain global portfolios that expose them to jurisdictional risk, GROY’s Americas focus reduces currency volatility, political interference, and regulatory uncertainty. This matters because it provides a more predictable cash flow stream and lower cost of capital over time.

The company’s portfolio strategy emphasizes royalties on assets that are either ramping up or have clear expansion potential. The Côté Gold Mine in Ontario, operated by IAMGOLD , represents a cornerstone asset. GROY holds a 0.7% NSR on this mine, which achieved nameplate throughput of 36,000 tonnes per day over 30 consecutive days by June 21, 2025—well ahead of the company’s Q4 2025 target. This de-risking of a major asset provides tangible evidence that the portfolio’s growth is not theoretical.

Similarly, the Vareš copper stream in Bosnia and the Borborema gold royalty in Brazil demonstrate GROY’s ability to secure interests on assets with significant expansion potential. At Borborema, Aura Minerals is progressing toward commercial production while simultaneously advancing permitting for a highway relocation that could grow mineral reserves from 812,000 ounces to over 2 million ounces, supporting a potential mill expansion from 2 million to 3-3.5 million tonnes per year. This optionality—where operators invest over $200 million in brownfield exploration around existing infrastructure—provides free upside that is not captured in consensus estimates.

GROY’s royalty generator model, which creates early-stage royalties at minimal cost, further differentiates its approach. While the company has shifted its focus to acquiring near-term cash flowing assets, it continues to generate a couple of royalties per quarter through its generative model at effectively no cost. This creates a pipeline of future opportunities while generating incremental option payments, as seen with the $1 million payment received on the Tonopah West project earlier in 2025.

Financial Performance: Evidence of the Inflection

The numbers tell a clear story of a business reaching operational maturity. Total revenue, land agreement proceeds, and interest hit $4.4 million in Q2 2025, translating to 1,346 GEOs—a record quarterly performance. This followed Q1 2025’s $3.6 million and Q4 2024’s $3.8 million, demonstrating consistent sequential growth. For the full year 2024, the company achieved $12.8 million in total revenue, a 146% increase relative to 2023, marking the first full year of positive operating cash flows at $2.5 million.

Adjusted EBITDA in Q2 2025 reached $2.4 million, a 41% increase from the previous quarter’s $1.7 million. This margin expansion is structural, not cyclical. Management has maintained G&A costs at approximately $1.8 million per quarter while revenues scale, indicating that the operating cost structure will remain relatively stable as the five-year outlook materializes. This operating leverage is the hallmark of a successful royalty company—costs are fixed while revenue grows with production and metal prices.

The transition to positive free cash flow in Q2 2025 is the most significant financial milestone. This achievement was primarily driven by contributions from Vareš and Côté, strong gold prices averaging $3,279 per ounce, and disciplined cost control. The company ended Q2 with cash slightly above $3 million and $2.7 million in undrawn revolver capacity, meeting its $5 million liquidity threshold. This positions GROY to accumulate additional free cash flow in Q3 and Q4 2025 and evaluate opportunistic repayment of its $27.3 million revolving credit facility.

The balance sheet improvement is tangible. In November 2025, GROY announced an amended and upsized revolving credit facility of up to $100 million and completed an early redemption and conversion of its outstanding 10% convertible debentures due in 2028. This refinancing reduces interest costs and strengthens the company’s financial flexibility, supporting the path to being essentially net debt-free by the end of 2026.

Competitive Context: The Mid-Tier Advantage

GROY’s competitive positioning is best understood through direct comparison with its royalty peers. Franco-Nevada, with a $41.8 billion market cap and over 400 assets, trades at 31.9x operating cash flow and 27.0x sales. Wheaton Precious Metals, at $54.0 billion market cap, trades at 36.5x operating cash flow. Royal Gold ($18.5 billion market cap) trades at 30.6x operating cash flow, while Osisko Gold Royalties (OR) ($6.8 billion market cap) trades at 32.1x operating cash flow.

GROY, with a $798.9 million market cap, trades at 110.1x operating cash flow and 55.2x sales—multiples that are significantly higher than larger peers like Franco-Nevada (FNV) on a revenue basis (27.0x sales) and also higher on an operating cash flow basis, reflecting market skepticism about execution risk and portfolio concentration, but also its earlier stage of development and smaller scale. While FNV and WPM offer diversification, their growth rates are modest compared to GROY’s projected 360% increase in GEOs by 2029. GROY’s pure gold focus provides superior leverage to gold prices compared to WPM’s silver-heavy portfolio or RGLD’s base metal exposure.

The company’s Americas concentration is a structural advantage over peers with African or Latin American exposure. When geopolitical tensions or regulatory changes disrupt mining in riskier jurisdictions, GROY’s cash flows remain insulated. This jurisdictional premium is not reflected in its valuation relative to peers like Sandstorm Gold (SAND), which trades at 25.98x EV/EBITDA despite having a more geographically diverse and potentially riskier portfolio.

GROY’s smaller scale allows for nimbler deal execution and the ability to acquire royalties on mid-tier assets that are too small to move the needle for FNV or WPM. This creates a pipeline of opportunities that larger competitors overlook. However, the disadvantage is clear: GROY’s portfolio of 17 assets lacks the diversification that protects larger peers from single-asset disruptions. A production issue at Côté or Vareš would materially impact GROY’s cash flows, while a similar issue at any single asset would be immaterial to Franco-Nevada’s 400+ asset portfolio.

Outlook and Guidance: Conservative Assumptions, Significant Upside

Management’s guidance for 2025 anticipates 5,700 to 7,000 GEOs, representing a 16% increase from 2024 at the midpoint. Q1 2025 production represented approximately 20% of this guidance, with management explicitly stating that Q1 would be the lightest quarter due to winter weather impacts. This conservative approach—using the lower end of operator guidance for ramping assets—provides a credible foundation for beat-and-raise potential as Côté, Vareš, and Borborema exceed expectations.

The five-year outlook to 2029 forecasts 23,000 to 28,000 GEOs, an increase of over 360% from 2024 levels. This outlook is based on assets that are “fully bought and paid for,” primarily consisting of mature and brownfield operations owned by experienced operators. The assumptions include a gold price of $2,212 per ounce and a copper price of $4.24 per pound—conservative relative to current spot prices above $3,300 per ounce for gold.

Key drivers of this growth include:

• Côté: IAMGOLD (IAG) expects steady-state throughput of 36,000 tonnes per day in Q4 2025, with potential upside to 42,000 tonnes per day from a Vertimill installation.
• Vareš: Adriatic Metals (ADT) expects full Phase I run rate of 800,000 tonnes per year in H2 2025, with funded expansions to 1 million tonnes in 2026 and 1.3 million tonnes by 2027.
• Borborema: Aura Minerals (AURA) targets commercial production in H2 2025, with Phase I processing 2 million tonnes per year for 83,000 ounces annually, and potential medium-term expansion to 3-3.5 million tonnes per year following highway relocation.
• Canadian Malartic (Odyssey): Agnico Eagle (AEM) plans to shift to a fully underground operation by 2028, with a potential second shaft study expected in 2026, though GROY’s royalty coverage is partial and represents upside not fully captured in consensus estimates.

Management’s commentary reveals a deliberate focus on deleveraging before considering shareholder returns. As David Garofalo stated, “We expect to be net debt free by the end of next year… at that point, we’re in a position to start to talk about returning capital to shareholders because then we’ll be in a very steady and long-term free cash flow generating phase.” This capital allocation discipline is appropriate for a company still building credibility with institutional investors.

Risks: Execution and Recognition

The primary risk to the thesis is execution failure at key ramping assets. Vareš’s guidance cut in July 2025—from 625,000-675,000 tonnes to 475,000-585,000 tonnes—demonstrates this vulnerability. While GROY maintained its full-year guidance, expecting offset from other assets, any further shortfall could pressure the stock. The root causes (poor weather, tailings filtration issues) appear temporary, but they highlight the operational risk inherent in a concentrated portfolio.

Canadian Malartic’s Odyssey underground represents significant upside but with timing uncertainty. The Q2 2025 royalty payment of just $18,000 was described as a “temporary issue of mine sequencing,” with 2025 production expected entirely from the Barnat Pit. The transition to underground production by 2028 is not guaranteed, and GROY’s partial coverage means it may not capture the full benefit of this expansion.

The valuation disconnect itself poses a risk. Despite management’s frustration, the market may continue to assign a discount until the company demonstrates sustained free cash flow over multiple quarters. The convertible debentures and warrants, while now deeply in-the-money, create potential dilution that could weigh on share price appreciation.

Jurisdictional concentration, while currently an advantage, could become a liability if political risk emerges in Quebec or Nevada. However, this risk is low relative to peers operating in less stable regions.

Valuation Context: Discounted Despite Inflection

At $4.04 per share, GROY trades at 110.1x operating cash flow and 55.2x sales, with an enterprise value of $844.1 million. While these multiples appear high in absolute terms, they reflect the company's earlier stage of development and high growth trajectory. The EV/Revenue multiple of 58.4x reflects the market’s skepticism about sustainability, yet this is precisely the multiple that should compress as cash flow scales and debt is reduced.

The company’s balance sheet is strengthening, with a debt-to-equity ratio of just 0.09 and a current ratio of 2.02. The gross margin of 92.5% demonstrates the inherent profitability of the royalty model, while the negative profit margin (-44.3%) reflects non-cash items and the early stage of cash flow generation rather than structural unprofitability. As operating cash flow grows from $2.5 million in 2024 toward the $70+ million implied by the 2029 outlook at current gold prices, these ratios will improve dramatically.

The key valuation driver will be the market’s willingness to assign a mid-tier multiple to a company achieving large-cap growth rates. If GROY executes on its 2029 outlook and eliminates net debt, the current valuation will likely prove conservative. Conversely, any stumbles in asset ramp-ups could justify the current discount.

Conclusion: The Mid-Tier Inflection Play

Gold Royalty Corp. represents a rare combination of a genuine inflection point and a compelling mid-tier opportunity. The company has transitioned from building a portfolio to harvesting cash flows, achieving positive free cash flow in Q2 2025 while laying the groundwork for 360% production growth by 2029. This growth is not dependent on new acquisitions but on assets that are “fully bought and paid for” in tier-one jurisdictions.

The investment thesis hinges on two variables: successful execution of the Côté, Vareš, and Borborema ramp-ups, and the market’s recognition of GROY’s unique positioning as a pure-play gold royalty company with Americas concentration. The valuation discount to peers appears unwarranted given the growth trajectory and jurisdictional advantages, but it will persist until the company demonstrates consistent delivery.

For investors, GROY offers leveraged exposure to gold prices with minimal operational risk, a strengthening balance sheet, and a clear path to shareholder returns by 2026. The concentration that creates execution risk also enables the peer-leading growth that larger, more diversified competitors cannot match. As free cash flow accumulates and debt is retired, the market will be forced to re-rate this mid-tier player toward its intrinsic value—or a larger competitor may do so through acquisition.