David Garofalo is leading Gold Royalty Corp, striving to capitalize on the upcoming boom in gold exploration as the gold price increases to a new peak. A deficit arose in gold exploration and development as the industry focused on harvesting existing assets rather than continually replacing with new deposits. Innovation, a need to improve the water and carbon footprint, and economic factors combine as challenges and opportunity to unlock significant growth in investment and returns through the expected increases in gold demand and price.
Significant volumes of capital are expected to flow into the industry as juniors begin their exploration quest, and the royalty corps, who have significantly lower risk and hence can raise capital most cost effectively, can provide that capital. Less exposure, upside on the increase in the gold price, exploration upside on assets, could produce double digit returns. But can the industry innovate fast enough to improve their environmental impact?
Show Notes
David Garofalo believes the world is poised for a significant bull run in base and precious metals prices. Strong fundamentals combined with supply deficits in gold and copper will cause significant appreciation in prices. Investors can participate in this upside through investing in vehicles like Gold Royalty Corp, a royalty and streaming company that IPO-ed in March 2021 with capital to invest in exploration and development juniors at lower finance cost, and boasting an executive and board hat are experienced as industry operators.
Several factors point to higher prices: gold benefits during quantitative easing and hyper-inflation, gold remains a reserve currency, ETFs now facilitate institutional investment in gold, high barriers to entry and a long development cycle that cause inelastic gold supply to demand.
David comments that there is a significant need for new investment in gold exploration and development as the industry has been focused on harvesting existing assets rather than continually replacing with new deposits. Gold is a very cyclical business yet companies undertaking the exploration and development have 10, 15, even 20 years from first discovery to production so it is impossible to time the market. The primary challenges in developing new mines remain the same as always – impact of inflation and constraints in supply of people and machinery.
The gold industry is making significant strides to improve their environmental impact; they have done well and continue to improve in carbon intensity as equipment is scaled and commercialized to replace carbon fuels, but there is a long way to go in improving water consumption. The newer technologies being developed are naturally more capital intensive upfront but the savings and enhancements in water consumption, reduction of risk and reduced mine closure costs should be enough economic incentive to justify industry adoption. Funding at reasonable rates, like by the royalty corps, can provide the early stage assistance required.
Tune in to hear about:
- What is so different about the composition of the Gold Royalty Corp executive and management, compared to competitor royalty corporations?
- Advances occurring in the environmental aspect of the gold industry.
- Why demand for gold is now higher than 20 years ago, and will further drive the price.
- Why a cyclical peak above $3000/ounce expected in this run, will be the first to exceed the $850/ounce achieved in 1981 at the last peak.
- And more.
Mentioned in this episode:
GROY and GROY.WS listed on the NYSE
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