GOLD ROYALTY CORP. IPO
Can it be considered as Gold Rush stock to consider?
Gold Royalty Corporation is precious metals-focused royalty and streaming company offering creative financing solutions to the metals and mining industry. “Incorporated under the Canada Business Corporations Act, or the “CBCA,” as a subsidiary of GoldMining on June 23, 2020.”
What is Metal Royalty and Streaming?
Royalties and streams limit the holder’s exposure, in most instances, to exploration, development, operating, sustaining or reclamation expenditures typically associated with an operating interest in a mine.
While they have limited operating exposure, royalty and stream holders do however benefit from any resource expansion or upside generated by exploration success, mine life extensions and operational expansions within the areas covered by the interest.
A royalty and streaming business model provides greater diversification than typical mining companies. Royalty and streaming companies typically hold a portfolio of diversified assets, whereas mining companies generally depend on one or few key mines. Royalty and streaming companies therefore generally offer a relatively lower risk investment when compared to operating companies, while still offering potential upside to resource expansion and underlying commodity prices.
Gold Royalty Corp’s portfolio:
Gold Royalty Corp’s portfolio chart shows their presence region wise and by the commodity type. Commodity includes 13% Silver, 86% Gold and 1% as Copper.
Recent News:
On November 27, 2020 we entered into a royalty purchase agreement, referred to as the “Royalty Purchase Agreement,” with our parent company, GoldMining, pursuant to which GoldMining caused its applicable subsidiaries to create and issue to us royalty interests and transfer to us certain buyback rights held by its subsidiaries in consideration for 15,000,000 of our common shares. See “Business — Property, Plants and Equipment” for further information regarding such royalty and other interests.
On December 4, 2020, we completed a private placement, pursuant to which we issued 1,325,000 of our common shares at a subscription price of $2.15 per share for gross proceeds of $2,848,750. See “Business — Recent Developments.”
On February 3, 2021, we completed the acquisition of a 1.0% NSR on a portion of the Quartz Mountain Project, located in Oregon, USA in consideration for $150,000. See “Business — Property, Plants and Equipment”.
As a result of these risks and other risks described under “Risk Factors,” there is no guarantee that we will experience growth or profitability in the future.
Organizational Structure
Estimated Net Proceeds from this IPO
Approximately $26.5 million, or approximately $30.6 million if the underwriters exercise their option to purchase additional common shares and/or warrants from us in full, based on an initial public offering price of $5.00 per unit, after deducting underwriting discounts and commissions and estimated offering expenses payable by Gold Royalty Corp.
Proposed NYSE American symbol “GROY” (common shares); “GROY WS” (warrants)
Financial Health
Risks Involved
Apart from various risk factors explained in the prospect, key risk from my view:
1. Delay or suspension due to opposition from indigenous people
Royalty interest in the Yellowknife Project and potential future royalty interests in Canada and other jurisdictions may now or in the future be the subject of indigenous land claims
2. Environmental risks due to mining activities
Exploration, development and mining is subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production
3. Negative cash flows from operating activities
Negative cash flow from operating activities in the period from our incorporation until September 30, 2020 and the three months ended December 31, 2020. Use a portion of the proceeds of this offering to fund anticipated negative cash flow from operating activities in future periods.
4. Being a public company may strain resources
Being a public company and the applicability of these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
5. An “emerging growth company,” less attractive to investors
An “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Our Take on Gold Royalty Corp.
“Buy not on optimism, but on arithmetic.” — Benjamin Graham
Analyzing from their financial statements, and the risk factors, it seems they dont have much cash or financing options left. They are going public to get influx of funds to support their operations and future expansion. One big concern is negative cash flow, also, not being required to produce financial information could be eerie situation for investors. We are bearish on Gold Royalty Corp., unless they prove it otherwise in future.
We recommend you to do your own analysis before buying, and where to buy it from? we recommend, Questrade app, with personal experience on using this platform to buy and sell stocks, its great way to start.
