Consolidation is coming to the royalty and streaming sector - David Garofalo
Too many streaming and royalty businesses make the sector ripe for consolidation, said Royalty Gold CEO David Garofalo in a conversation with Kitco on Tuesday.
Garofalo said the sub-$1 billion market cap companies are “…all struggling to achieve relevance to investors because they don't have the liquidity and critical mass of investors.”
Gold Royalty (NYSE American: GROY) has a portfolio of 18 net smelter return royalties ranging from 0.5% to 2.0% covering 12 projects located in the Americas. Garofalo was the former head of Goldcorp.
Gold Royalty assembled many of the assets under Amir Adnani's GoldMining. Adnani is a Gold Royalty board member.
"At the bottom of the market [GoldMining] effectively paid about 10 cents on the dollar, and it accumulated across a dozen different development stage projects about 26 million ounces of gold reserve and resource, and about 31 million ounces on a gold equivalent basis," said Garofalo who said his team is putting the projects on more of a development footing.
In regards to the exploration sector overall, it is easier for juniors to raise money with high metals prices and general bullishness, but Garofalo said there is still business for streaming and royalty companies.
"Yes, the market is more open to juniors to raise capital, but I think it's still quite selective. Not all of them can raise money. So I think the streamers and royalty companies have a role to play in cultivating exploration," said Garofalo.
Garofalo is gold bull. He sees inflation raising precious metal prices, and he sees too many flaws in bitcoin for it to eclipse gold.
Bitcoin is digital and that's its fundamental weakness, said Garofalo. Gold is physical, which makes it more secure while cryptocurrencies will inevitably be undermined by market forces.
"It's inevitable that we'll see new entrants on the cryptocurrency side, and that really undermines the whole scarcity concept that Bitcoin is trying to espouse. It's just zeros and ones at the end of the day," said Garofalo.