EP 89: First Generation Millionaire. David Garofalo, Chairman/CEO Gold Royalty Corp.

Updated: May 10

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This week on The Millionaire Choice Podcast, Tony talks with David Garofalo, CEO of Gold Royalty Corp. Tony and David discuss limited resources, fiat currencies, and protecting your assets from inflation.

David was born in Toronto, Canada. At age 16, his father had immigrated to Canada to flee post World War II Italy. With only just enough education to read and write in Italian, he taught himself English via movies and television.

About David Garofalo

Today, Mr. Garofalo has served as Chief Executive Officer, President, and Chairman of the board of directors of the Company since August 2020. David has worked in various leadership capacities in the natural resources sector over the last 30 years. Prior to joining the Company, he served as President, Chief Executive Officer and a director of Goldcorp Inc., a gold production company headquartered in Vancouver, until its sale to Newmont Corporation in April 2019. Prior to that, he served as President, Chief Executive Officer and a director of Hudbay Minerals Inc. from 2010 to 2015, where he presided over that company’s emergence as a leading metals producer.

Previously, he held various senior executive positions with mining companies, including Senior Vice President, Finance and Chief Financial Officer and a director of Agnico-Eagle Limited from 1998 to 2010 and as treasurer and other various finance roles with Inmet Mining Corporation from 1990 to 1998. He was named Mining Person of the Year by The Northern Miner in 2012 and Canada’s Chief Financial Officer of the Year by Financial Executives International Canada in 2009. He holds a Bachelor of Commerce from the University of Toronto and is a Fellow of the Chartered Professional Accountants in Canada and a Certified Director of the Institute of Corporate Directors. He also serves on the board of directors of the Vancouver Board of Trade and the Vancouver Symphony Orchestra.

Learn more about David Garofalo, https://goldroyalty.com/

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Show Transcript

Tony (00:00):

Welcome back to the Millionaire Choice Show. On today's show we're gonna learn a little bit something new. We've talked about gold, and mining, and gold ownership. We haven't really talked about gold royalties before. So, I'm eager to bring you all- David, I'm gonna mess this up, man. You're gonna have to tell us how to say this correctly. Garofalo?

David Garofalo (00:21):

Garofalo, but very, very close.

Tony (00:23):

Not too close. Not too bad, not too far off, but he is chairman and CEO and founder of Gold Royalty Corporation. He took this company public, and now he's helping people learn how to build well through royalties and gold. So, I'm eager to learn a little bit about this. Welcome to show, David.

David Garofalo (00:37):

Thanks for having me on. I'm glad to be here, Tony.

Tony (00:40):

So, in the pre-show, I really enjoyed your story and your background and you; like so many of us, but I think yours even has an interesting twist because you're the son of immigrants. And, we haven't had too many of those on. We've had, Dr.Ming Wang, who came on from, China. He's an immigrant from China. Some who's parents moved up from Argentina, and they were able to build wealth after their parents came in. But, you also came as an immigrant, correct?

David Garofalo (01:06):

Well, my parents did in the 1950s. I was born in Toronto, Canada. But, my parents were escaping post World War II Italy, where there was very little economic opportunity. They were leading a subsistence lifestyle and they came to North America in order to try to establish themselves and build some wealth.

Tony (01:26):

And so, for those who maybe haven't studied World War II history and things like that; that was Mussolini over Italy. He was in conjunction with Hitler. They were the tag team in the European theater.

David Garofalo (01:39):

Yep. They were the fascist duo, and both of them met a very untimely passing at the end of World War II. But, there was quite a bit of damage in Europe. I mean, that was the theater for destruction in World War II. So, a lot of Europe was just destroyed and bombed out. Italy and Germany for example, were really the recipients of heavy, heavy bombing. So, the economic infrastructure there was very badly damaged. So, it was very difficult for people wanting to finish school and to then to find an opportunity to raise their families.

Tony (02:16):

So, how old were your parents when they actually came to America?

David Garofalo (02:20):

Well, my dad was 16 years old, and my mom came a few years later. They met in Canada, and she was 20 years old. So, they came relatively young, and they met each other right around the time they were both about 20 years old, and got married very shortly thereafter.

Tony (02:36):

Oh, wow. So, your dad- let me make sure I get the story here- so, he came to America as an immigrant after World War II; turmoil and everything. And, did he come by himself, or did he come with his grandpa parents or he was solo.

David Garofalo (02:49):

Yeah, his dad died in North Africa fighting for Italy and World War II. So, it was just him and his siblings and his mom left back in Italy, and they were barely just getting by. So, my dad's older brother and sisters; four of them had already immigrated; two of them to Australia, and two of them to Canada. So, he followed his two sisters to Canada who had established themselves over several years and he initially lived in their basement until he found a job and was able to save enough to buy his own home.

Tony (03:21):

Now, you said before too; in the pre-show; neither one of your parents finished- did they not finish high school? I know they didn't get secondary ed, but what was the level of education that they were able to receive?

David Garofalo (03:32):

Both of them got about a grade three education, so they could read and write; in Italian of course; they didn't speak a word of English when they came to Canada. Now, my dad speaks English without even an accent. It's hard to tell he was even born in Italy. Cuz, he worked in Canada his entire adult life. But, really didn't have much of an education, so he didn't have a degree or anything like that. So, they had to take what work they could and both my parents were laborers.

Tony (04:02):

It's interesting. I think when I got out of college and started working in the manufacturing field at a tool and die shop, it was the first time I was ever told that some of the people I was working with couldn't read; cuz, I was doing some of this corporate messaging out to the guys that are in the workforce. And, I was told to use simpler words and to make sure that everybody understood everything that I was trying to communicate. And, that was such a foreign concept to me to realize that there are people that I'm working with on a daily basis whose education didn't allow them to be able to necessarily read and write proficiently.

David Garofalo (04:37):

That's a common immigrant story, particularly post World War II, just cuz the economic infrastructure- the educational infrastructure was so severely damaged. Kids just couldn't finish school. My parents were fortunate enough to read and write, but they had to learn their English watching movies and television. And, they both became fluent, proficient; they read well, they write well, but they had to do it the hard way.

Tony (05:01):

So, did your dad grow up on John Wayne?

David Garofalo (05:05):

He was more into the big dramas like, Gone with the Wind, and things like that. He really enjoyed movies like that. Big epic dramas made out of Hollywood, and learned his English. In fact, he named my sister, Vivian, after Vivian Lee, the lead actress in Gone with the Wind, which was one of his favorite movies.

Tony (05:28):

Well, sidebar here, I mean, we can talk and make this entertaining, but I didn't realize- I can't remember the name of the lady that was the author of Gone with the Wind, but when I was reading her history and story; and you may know it; but she had never written a book before in her life and then sat down and wrote, Gone with the Wind; which, I think is one of the top selling books of all time. And, I think it was like 600 pages or 1,200 pages or some ridiculous amount of work that she did. And then, she never wrote anything since. It was the only thing she ever wrote.

David Garofalo (06:02):

That was Margaret Mitchell. And, that was an epic. Yeah, for sure. And, obviously was one of the most renowned and highest grossing movies in real dollar terms ever.

Tony (06:15):

I was doing a little bit of research. I'm a big movie buffer- used to be, I've gotten away from it now- growing up, I remember watching that thing. It used to air on television about once a year. And, that was the big epic event in the 70s; the annual showing of Gone with the Wind for three or five days. They would show these big epic miniseries; or epic series; on television and we'd sit around the television watch those things. But, your parents; that's wild that your parents- third grade education. You also said that they had a lot of really strong work ethic, and they didn't necessarily build wealth, but they didn't mismanage their money. They didn't have a lot of money to manage, but they did manage it well. Right?

David Garofalo (06:58):

They built equity in their home. I mean that's where their wealth is tied up. And, my dad worked with the city for 40 years. So, came up with a decent pension, defined benefit, pensions where a thing once. These days, people are left to their own devices to save for their retirement. But, my dad had a good city pension. He still lives off of that. He's 85 years old now. My mom's about the same age. They live reasonably well; they're not extremely wealthy; but they built up a reasonable amount of capital. They were able to get their kids through university and college and degrees and good professions. And, that's the case for their siblings as well. They each had four brothers and sisters, and had they all had a lot of kids and all those kids went off to do university educations in spite of the fact that their parents came from such modest backgrounds.

Tony (07:49):

Interesting. So, work ethic was a big thing they instilled in you. That's something that you picked up and then obviously, money management. And then, when did you actually shift from the working class mindset; strong working class mindset; into this wealth mindset where you started building wealth?

David Garofalo (08:08):

Well, I was getting a business degree in university, which I did back in the 1980s, and then went to work on Canada's equivalent of Wall Street; Bay Street, in Toronto; for a long time, and worked in a number of businesses and established myself in the mining industry; which is a cyclical business. But, there are significant amounts of wealth created through exploration and discovery of mineral deposits that create vast amount of wealth, not only for the owners of the business, but also for the communities around there. And, understanding how to make an economic case for those mines; raise the capital for them; and ultimately, have some skin in the game through owning a share of stock options and what not; accumulating wealth through that; and realizing success through the success of the businesses.

Tony (08:58):

So, mining is an interesting thing to me because a lot of times, as Americans, we're not very savvy with the mining industry. As I've heard it told- I would love to hear your insights on this. It's an interesting thing, cuz; taking gold out of the ground; you're automatically giving it an intrinsic value because of the effort it takes to pull out of the ground automatically gives it value. As contrast, you've got paper money, which used to have some real value. Today, it has no real value other than we believe that it has monetary value. So, we use it as exchange of goods, or exchange of services, but it really doesn't have any intrinsic value to it as paper currency. As we're seeing it erode right now; think of inflation, published by the number, 7.5% Percent, depending on who you talk to in the financial world, they're gonna tell you it's somewhere between 20-40%, is the real inflation rate in the States. I heard somebody the other day talking about groceries, and I've got some groceries I'm buying. I'm like, "wow, that was $9 six months ago, and now it's $15. That's more than 7.5%. But, talk to me about your mining experience. Was it mainly gold you were focused on, or was it other metals that were industrial metals?

David Garofalo (10:13):

I've been in the business for 32 years, and I've spent equal amounts in the base metal side of the business. So, copper and zinc; for example; and precious metals, gold and silver. Right now, I'm running this precious metal royalty company, but for a long period of time, I built copper mines; I built zinc mines. I've done both industrious and industrial precious metals. I think you hit the nail on the head in terms of your views on Fiat currency. Ultimately, every Fiat currency that's ever been created by man has failed, because the temptation to base that currency is so high, and gold is the one currency you can't print. You can't base gold. It's indestructible. It's got physical properties. It's a commodity. It's homogeneous. Gold is gold. That's certainly not the case for Fiat currency.

David Garofalo (11:06):

Since the U.S. Star has been debased from gold as its standard; back when the Brentwood system ended in the early 1970s under the Nixon administration, we've seen a state basement of the U.S. Currency and that's translated into inflation. Inflation is insidious. It eats away at your capital; eats away your wealth if you're not earning investment income on that capital; if you're not focused on earning investment income, and investing in good businesses. But, if you're leading the savings account every year you're losing upwards of 15-20% purchasing power because as you correctly pointed out; inflation's not 7.5%. If you're putting food in your stomach, putting fuel in your car, a roof over your head, it's decidedly into double digit territory. So, we're seeing an insidious basement of currency, and there's a method to that. There's a reason for that because there's been so much debt strapped on by sovereign countries; by governments; globally. There's no fiscally responsible way for those governments to repay that debt. So, what they're doing is basically debasing the debt by debasing the underlying currency.

Tony (12:16):

Just for clarity on that for you all listening; what he's talking about is because of inflation, the debt that was issued 20-30 years ago is easier to pay back now because your the wages are up; the amount of taxes are up. Everything goes up. So, the amount of debt that was taken on; let's say you took out a hundred thousand dollar loan. Well, let's use my parents for example; they took out $14,000 back in like 1972. That same house today is worth about $300,000. So, they're paying $140 a month. Now, you'd be lucky if you had a $1,400 a month house payment around this area. It's more common. You're gonna have $2,000-$2,500, and you pretty much are getting the same house. There's not a lot of difference in them, but that's what currency debasement is. Now, have you read the Creature from Jekyll Island? Have you read that book?

David Garofalo (13:13):

I haven't. No.

Tony (13:14):

It's a wonderful book. It keeps coming up every time I turn around. Right now, it keeps coming up in my circles. I've had the book for a number of years; it's sad to say; but I haven't read it, but I'm actually working through the audio book now, cuz it's a tough read. It's 600 pages, maybe. It's basically about the founding of the Federal Reserve Bank, but what's interesting about that does the same people that own, the U.S. Federal Reserve Bank pretty much own all the other federal reserve banks around the world. And this guy, I think it's Robert G. Griffin. I think that's his name, has done a wonderful job analyzing in like laying things out there about the founding of the federal reserve bank in the, twenties and thirties during the great depression.

Tony (13:54):

And then how that has played into monetary policy. Like you were saying, when the, the dollar became uncoupled from gold in the 1970s, what really gets me right now is all the talking pundits. Like all the people that are doing talk shows and they talk about the government, and I'm sorry if I offend anybody, that's listening to the show today talking about presidential, but I'm not, I'm a non-political guy. I think they're all crooks. Not all of them. A lot of them are crooks. just being honest and they're going like, oh bad monetary policy or man, he's making so many mistakes. And I keep hearing that over and over on these talk shows about, the political administration I'm going guys, have you not seen the obvious thing? It's not a mistake. It's not an accident. It's not bad monetary policy, it's criminal activity.

Tony (14:48):

Like it's, that's, what's going on is there's an agenda. And they're, they're following an agenda, which is the basement of the currency. It is, a takeover of a financial system to, so to speak, more control over what's going on. I had also seen an article the other day talking about how the money that's getting issued out through BlackRock and Vanguard, which are two of the largest, asset holders in the country. I think BlackRock's got, I don't remember if it's 10 trillion in assets or something, but some ridiculous number of Vanguard's got a lot, I think, between those two. And there's a third; which I can't remember the name of; it's got something like 17 trillion in assets is that those guys are getting money from the Federal Reserve, and they're going out and up properties everywhere, especially like in my area in Nashville.

Tony (15:35):

And they're gobbling up driving up prices, but they're doing that with the government money. There's a projection that by 2030 the U.S. Government will be the number one, rental property owner in the United States that the Federal Government will be the number one. They'll be able to dictate; because of that; when you own that much market share, you have a monopoly on the rates and the prices. But, all of that ties back into what you were saying, the other earlier, which is the dollar being decoupled from gold, and then they could just print the money and then that, it's all like that system happens like even two thousand eight thousand nine housing crisis, which drove a lot of consolidation in the banking industry. People got gobbled up, again, another one of those control mechanisms that plays into it. So how does, how does somebody protect themselves against that, using, obviously a real money concept or with, gold, silver, or, royalties in the mining industry?

David Garofalo (16:36):

Yeah, look, you buy the assets that are finite. And, you talked about real estate. I would say commodities are quite finite. The amount of gold on the earth's surface is tiny. There's about 200,000 metric, tons of gold. It's been mined since the beginning of time. And that, visually, would fit into four Olympic sized swimming pools. So, there's a very minute amount of it available in central bank vaults and around people's wrists and fingers and necks and whatnot in terms of jewelry. We only mine; as an industry; 4,000 metric tons a year. So, we only add about 5% the global supply yearly. We're quite limited. We can't, flick on additional supply if the goal price goes up, cause it's really very, very difficult to build new mines. It's one that's very capital intensive. It requires a lot of upfront money to both explore and develop and construct the minds, but also takes a long time to get permits.

David Garofalo (17:30):

Has anybody ever tried to permit their mine in the U.S. these days? It's virtually I impossible. There's so much opposition to it. There's opposition around surrounding communities. It's very, very difficult to get the social license and permits required to build mines, never mind getting all the upfront capital you need. So, this is very finite in quantity. We can't just ramp up supply willy-nilly, unlike fiat currencies; U.S. dollar, the Euro, any paper currency in the world, you can increase supply to win. And, that should give you a sense of discomfort on ease and owning a lot of paper currencies. So you wanna own the things that are finite in quantity. There's so little gold on the earth's surface, and gold is precious. So, there's very little of it that you need to own to have a lot of capital protected.

David Garofalo (18:17):

An ounce of gold is $2,000 today; U.S. $2,000 an ounce. So, you can imagine how much capital you can preserve owning a very small quantity of gold. It's easy to store, and if you don't wanna store it, if you want to go through the costs of doing that, you can buy an ETF on the New York stock exchange. That's physically backed by goal. It's called the G.O.D. So you can get physical exposure to gold quite readily. And, I can say everybody should have at least a portion in their portfolio; 10-20%; to protect and safeguard their assets against the inflation that we have now, and make no mistake about it. We're in a cycle, it's likely to persist for quite a few years before the Federal Reserve gets a team back down. And so, you'll want protection for your capital in that inflationary environment.

David Garofalo (19:04):

So, the question you have to ask yourself then is how else can I play gold other than physically owning it or buying an ETF? What if you want leverage to higher gold prices? And, what I mean by that, if gold price goes up 10%, and you buy a mining company, then their profitability could go up 20 or 30%, because they're getting margin on gold, but say gold's $2000 and their costs are a $1,000. An ounce of gold goes up 10% from $2000 to $2,200. If you own the physical gold, you'll get that 10% uptick. But, if you own a mining company that a thousand dollars margin is gonna go to $1200, so you get a 20% bump in the value of that company, that's called leverage. And so, quite a few people; in order to get that leverage to higher gold prices; will buy the producers.

David Garofalo (19:53):

That's assuming that cost structures are stable. And, as we were talking about a little early on, Tony, cost structures aren't stable. Mining companies are not immune from inflation that we're seeing in general economy. And so, there may be cost pressures that undermine that increase in margin. That's why after 32 years of building the operating mines; I positioned myself in the royalty space where I'm providing capital to those producers and operators and taking royalties back. We get a fixed percentage of their revenue, typically half a percent, 1%, 2%, 3% of the revenue from the mine. And, we get that because we helped them get the capital. They need to build the mine. And because our exposures, just to the top line, we only get a percentage of the revenue. We don't get a percentage of the profit.

David Garofalo (20:42):

We get percentage of the top line. It doesn't matter what happens to the operating costs of the mine. Cause our revenue goes up as the gold price goes up. So, we have complete insulation from operating capital cost inflation at the mindset. So, really it's the best of all worlds. It provides you leverage the gold price, and it also provides you exposure to the expiration upside at the mines. Because quite often those are geologically dynamic. They're still getting drilled out they're growing. Our royalty extends not only to the existing deposit and reserves, but any expansions, geological expansions they have through the expiration efforts of the operators that we have royalties on.

Tony (21:23):

So, let me just simplify that a little bit for listeners, cuz a lot of my listeners are newer to the investing circle, especially when it comes to mining. So, when you say capital, you're providing cash influx. So, you're raising capital. So, from an investor like me, and you'll take some of that capital, and you'll find an investment opportunity with a mining organization. Maybe they've gotta do a capital expenditure for some new equipment, or maybe they need to buy a new mining territory or land that they believe has assets underground or maybe exploration. Invest in some exploration. So, whatever it is that you're providing it for; that gives you basically a cut of their top line revenue. Which is very interesting because I don't I think most companies are paying off the net profit and you're saying they're paying off the gross revenue. Is that how that works?

David Garofalo (22:09):

That's correct. So, we get a percentage of the revenue; the gross revenue. So, it's not a net profit royalty. It's a net smelter returner net revenue royalty right off the top line.

Tony (22:21):

That's huge because a company can operate at a net loss, right? So, in that case you would be adding to their net loss line because you're getting paid first. You are like a debtor. So, is that because you're looked at as more of a debtor relationship, or are you looked at as an investor relationship with the mining?

David Garofalo (22:40):

It's a hybrid. We don't expect to get our capital paid back. It's not a loan in the strictest terms, we get our repayments in the form of royalties. We allocate that capital to the mining opportunity expecting to get double digit rates of return. Based on the reserves we know are in the ground at the time we give them that capital. But, if they are successful in exploring and growing their deposits geologically; cause quite often they're looking to expand the mine lives by drilling out their deposits and growing them more geologically. Our royalty extends to that expiration upside, which we don't value in the upfront evaluation when we're looking at whether we wanna put capital into the mine. So, that provides us a lot of option value on the expiration potential of the deposit.

Tony (23:28):

Okay. So, hypothetical speaking, that model sounds like it's amazing as long as the business stays in business, so what happens if a business folds or a mine shuts down. How does that work out?

David Garofalo (23:42):

Well, the royalty never goes away. So, if 10 years down the road, somebody comes up, picks up the ball and decides they wanna reopen the mine. The royalty's still there. It's permanently affixed to the deposits. So, we have infinite options. In fact, within our existing royalty portfolio, we have 192 royalties across deposits throughout the Americas. Principally, the two best jurisdictions in the world; Nevada in the United States, and Quebec. The two best gold mining jurisdictions in the world. We have a majority of our royalties there. Many of them are early stage exploration development stage assets, and they don't waste. We put them on the shelf and wait for those producers to develop those mines. We don't have to put any more capital into them. Once we own the royalty, we don't have to put any more money in. So, they have to raise the capital to build the mines.

David Garofalo (24:31):

They have to raise the capital to operate the mines. They undertake all of the construction risk, and we just wait in the shadows for those royalties to pay. We do have 28 royalties that are either paying now; they're producing; or in construction. So, we have a lot of cash-flow. In fact, we pay a dividend. Now, we have about 1% yield in our stock. We introduced a dividend just a month and a half ago, 10 months after our IPOs. So, we have a very good sustainable business with a lot of revenue growth. That gives me a lot of confidence to say that we're likely to grow that dividend overtime as our royalty revenue grows. But, those royalties; they last forever. That's the beauty of the royalty model. You put a little bit of capital up front to get that royalty, but you never have to put another dime in once you do that.

Tony (25:19):

What comes to mind when you say that- cause I'm more familiar with the publishing industry. During my time with the Ramsey organization; it's like a book, right? A book company, Simon Schuster, Harper Collins, Thomas Nelson, any of these guys. They get a writer to produce a book. They own the book. The writer gets a royalty, but as long as that book is out there doing something in the marketplace, the company is collecting income off of that. Amazon, why does Amazon have- 2 million titles, 3 million titles, whatever it is- they're doing it for distribution. They're the distributor, but those products are out there in the marketplace living and active. And, it's similar to that. You said you've got 192 royalties?

David Garofalo (26:00):


Tony (26:03):

The more of those you get out there; the more you're creating this residual business model that lives on in perpetuity. So, that's fascinating. I haven't really come across that before. I'm sure it's been out there forever, but this is my first time hearing about it. Interesting. So, how would somebody go about plugging into that? Do you have; for example; minimums and things like that? Do you have to deal with the credit investors only?

David Garofalo (26:28):

No, we're public, we're on the NYC American under the trading symbol, GRGY. So, you can buy our stock on the NYC like any other stock. We IPO-ed back in March of last year, we raised 90 million U.S. in our IPO. We got a post money valuation of 200 million on the IPO, but then we went about consolidating some of our competitors. It's a fairly fragmented industry. We started with 14 royalties at are IPO. Then we took over three of our peer companies, EL Gold, Golden Valley, Abitibi, and we grew our royalty portfolio from 14 to 192 royalties. We've got a bid out for another of our peer companies. Elemental, which would add another 9 royalties to the portfolio, and bring us to over 200. So, we've been able to grow largely through MNA, and through the acquisition in a couple of cases of royalties on individual assets. So, we look at multiple fronts in order to continue to accumulate Royal opportunities in the portfolio.

Tony (27:27):

That's fascinating. So, is there any competitor in your industry that's doing the same thing you're doing, because it sounds like you raised the capital and then gobbled up all the little guys; which, that obviously works for other companies as well, but in the royalty space for mining?

David Garofalo (27:46):

It's not a huge industry, but there are three mega cap companies or large cap companies in the space, Franco-Nevada, Wheaton Precious Metals in Canada, and Rural Gold, based out of Denver. Those three companies are large cap. Large cap in the royalty space would be, 15-30 billion, and then there's everybody else. There's a collection of probably 8-10 small cap players, including ourselves. We have a market cap of about 700 million, but there are many companies in that same snack bracket, and we think there's too many of them, so we came in with the thesis that the second needed to be rolled up. In other words, we need to start to consolidate them to cut down gene costs, to get diversity in our portfolio, grow portfolio quickly, 14 royalties when we started wasn't diverse enough.

David Garofalo (28:38):

Now we have 192 royalties to our MNA efforts. So, we have a lot of diversity in our portfolios as a result of that. We have a lot of growth embedded in that portfolio. Cause we have assets at every stage from early stage expiration right through to production. That gives us a lot of organic growth as a result of that. It's all paid for. We don't have to put another dime in to see that revenue growth. We're gonna see our revenue grow on a compounded average basis of almost 60% over the next two years. And, over five years we're going to see our royalty revenue more than quintuple. We have a lot of growth, and we've been able to do that through MNA. So, I would say there's still lots of scope for consolidation and the opportunity as I see it is to create a mid-tier company, in sort of a 4-5 billion market cap range where one doesn't exist. Now, that would be big enough to matter to a broad institutional investor universe, but small enough to grow meaningfully as we add additional royalty opportunities to the portfolio.

Tony (29:38):

Man. That's fascinating. I think the consolidation's really interesting. I can see that your business strategies are very interesting and sound. Now, did you say you're at 192? Forgive me, if I keep missing the number. And, what would you say your goal is in the next 12 months to five years?

David Garofalo (30:00):

So, in 12 months on March 11, we've grown fourfold, and we've grown the royalty portfolio more than tenfold. So, that growth is still possible going forward. Even if we're not successful in getting any more MNA done, we have a lot of revenue growth or ready in the mix. So, this year, our royalty revenue is 7 million; in two years, it'll be 22 million. And in five years; by consensus estimates; we're gonna be about 50 to 60 million of royalty revenue with the existing portfolio. That requires not a dime of additional investment from a us because we already own those royalties. They're already paid for, and they're already generating revenue and growing revenue going forward over the next 3-5 years. As many of these projects are in construction and development and expansion. We're gonna see a really big pickup in the revenue from those royalty opportunities that we already own. So, I would say watch the space; our revenue is growing dramatic. Butt, I do think there's still room for us to grow even more rapidly than what we're projecting, given the scope for MNA.

Tony (31:10):

I love it. So, I have to laugh a little bit. I'm grinning here. I'll tell you why; are you a James Bond fan?

David Garofalo (31:19):

Oh, I love James Bond. Sure.

Tony (31:20):

So, oh my gosh. I'm drawing a blank on his name. The James Bond- he just retired. What's his name?

David Garofalo (31:26):

Daniel Craig.

Tony (31:27):

Daniel Craig. Okay. So, we're talking about gold. This is a B rated movie; off the circuit; but it's called Cowboys and Aliens. Have you ever seen it?

David Garofalo (31:37):

I have. I can't remember the premise, but I do remember the movie.

Tony (31:41):

Well, Daniel Craig is in it, and the whole premise was that these aliens came down. Basically wanted the gold and they had a ship in the ground. They were mining all this gold and Daniel Craig's lover, wife, whatever- because he had given her this gold pendant; she had these aliens come and take her, cuz they were tracking gold. They were basically flying around and getting gold, but it was just the oddest movie ever. And, I'm just sitting here going; thinking about gold; I'm going, "Hey, Hollywood produces some really weird stuff. That was a pretty weird one. It's pretty entertaining. That was well produced." But what's interesting- historically, this is where we go back to what you're saying. You're saying 15-20% in gold. Financial advisors might say 5%, just all relative to who you're talking to; in this season of life with the us dollar basically collapsing.

Tony (32:31):

I mean, we've got this stuff going on with Ukraine and Russia. I just read today that Russia; because of the Swift System; the bankers have cut them out of the Swift System. Well, now they're on the Chinese financial system now. So, they're doing transactions; Visa, MasterCard, cutoff access inside of Russia where they just flip the switch. I think it's called- the new Chinese system is- Union Pay! I think called Union Pay. So, they're doing transactions now based off the Chinese financial system; which, you go back to what you said earlier. We didn't talk about the petrol dollar today, but when we came off the gold standard, the way the U.S. dollar became the reserve currency; or part of it; was trading oil.

Tony (33:15):

Everybody agreed to trade oil and U.S. dollars. A few years ago, China opened up their markets, and now the world can trade oil in the dollar, or they can trade oil in the Chinese yuan. So, you're seeing a lot of competition come from China in the financial market. They're working on becoming a world reserve currency as well. I think they're well on their way, but for them to become a world currency, they have to weaken the guy that's on the block already. I think that's what we're seeing; the decline of U.S. dollar as the world's money. It's better to be prepared for that than obviously not be prepared for that. Gold is one way to do that.

Tony (33:57):

Now, do you follow Jim Rickards at all, or some of the other guys? I follow Lynette Zang some. She's with ITM trading and they're the gold buyers. Jim Rickards was a former CIA analyst; financial analyst; and he's a big gold guy now. So, he's out there and he's projecting gold. He's got a couple really good books for you all that wanna read 'em; Jim Rickards, Death of Money and Road to Ruin are two books that are in my library. I highly recommend you read those. If you wanna protect your family's finances, give them a listen or look. But, he's projecting that Gold's gonna hit like a two-tier bump, and you're gonna see it steadily rise. And, these guys out there are talking about gold int the 10,000+ range; going up to 10, 13, 14, 15,000 dollars. Now, it's possibly as high as- someone will say it'll hit that tier; about 15; it'll stagnate for a while, and then it'll keep going up, and we'll hit eventually like $25,000 or so. What's your feeling on that?

David Garofalo (34:57):

Well, I do think the potential for a parabolic increase in the gold price is there. All the ingredients are there. My interim call for the gold price is $3,000 an ounce. And, where I've come up with that number is; I went back to the last major inflationary cycle we had, which was in the 1970s. At that point, we were going through similar phenomenon. We had supply chain disruptions cause of the oil embargo. We had monetary expansion post Bretton Woods, through the seventies and we saw inflation go decidedly in the double digit territory, and Paul Volker came into the Federal Reserve in 1979 as the head and started to tighten interest rates much like it's happening right now. We're gonna see nominal rates start to go up. But, the problem is; of course, inflation's all entrenched and it's accelerating.

David Garofalo (35:44):

So, even though nominal rates will go up, the Federal Reserve rate will probably go up 25 basis points here and there inflation is gonna continue to get higher. So, that means real interest rates; which is basically the nominal rate. Less inflation is gonna decidedly go deeper and deeper into negative territory. That's why I was saying earlier on, if you leave your money in a savings account, it might get a half percent, but if inflation's 15%, you're losing purchasing power of 15% a year. So, real interest rates are very, very deeply into negative territory and will stay there. So, when that happened in the late 1970s as interest rates were going up; gold galloped. Gold went up to- at the time- in a high of $850 an ounce, even with interest rates going up for a couple of years. And, if you inflation adjust that to 2022 dollars, that would be $3,000 an ounce. So, there's no reason; given all of the groundwork that's been done to expand money supply since the credit crisis a dozen years ago; why wouldn't we see at least $3,000 an ounce, if not well beyond that.

Tony (36:46):

Now, when in the early seventies, where did gold start at versus how high it went? I remember being young at that time. I remember being at the babysitters, watching the financial stations. I remember gold being around $300 an ounce. I don't remember it as a kid getting to that higher number of $900, but where did it start at? Was it around a $100 when we entered that decade?

David Garofalo (37:08):

$35 an ounce pre-Bretton Woods. So, when the U.S. Star was pegged with gold. The gold price was artificially set at $35 an ounce. So, when it was unpegged, then it went from $35 to $850. So, that's quite a dramatic exponential. And, that's the type- so, when you cite predictions of 10, 15, 20, $25,000 an ounce, it's that trajectory that we saw post Bretton Woods. It's very similar. They're obviously a much more deflated base for the gold price given how the base fee currencies have been since really the 1970s.

Tony (37:45):

Now, I'm a firm believer- before we wrap up today- I'm a firm believer that the financial system is- how do we say- manipulated. That's the word. M-A-N-I-P-U-L-A-T-E-D, manipulated, and stock market gold prices; everything. I feel that way very strongly. So, when we look at real wealth, and I've said this on the show; future millionaires listening, real wealth is owning a business that can produce revenue or income; that is a way. It could be a rental property that could be treated as a business, but real estate, and also gold and silver. Those are three very tangible things that exist in the physical world that are real money versus things that are fake money. Fiats; four letters; oddly enough, "fake" is also four letters.

Tony (38:31):

And so, you're dealing with fake money. And, what's interesting when you said $35 an ounce for gold. When FDR basically made it illegal to own gold, he had all Americans turn in their gold. And, if I remember the numbers correctly, Americans would turn in their gold and they went through a couple rounds of turning in gold and the government paid them $28 an ounce for their gold. Then they stopped collecting. A few months after that, the government reset the gold price to like $35 an ounce. So, you're sitting here telling me that from 1935 to the 1970s; roughly 40 years; the gold price didn't change at all. They didn't modify- it was done.

David Garofalo (39:12):

That's exactly right.

Tony (39:13):

That doesn't sound right either. So, what I'm a big believer in is that; these guys, these bankers, these institutional people; we say "the rich keep getting richer, and the poor keep getting poorer;" the gap. It's not necessarily that simple, but the gap keeps widening. These guys are taking their fake money; they're figuring out how to make this fake money, and they're buying all the real assets. That's why you see Black Rock buying up land. You've got Jeff Bezos and Bill Gates buying up hundreds of thousands of acres of land; literally square miles. It's huge; how much land they have. And, JP Morgan- Chase bank has over like 600 million ounces of silver. Warren Buffet has been buying up railroads. So, all of the big guys are buying all the physical assets, and you're going, "okay, what's really going on?" They know that there's gonna come an implosion or something, and they're getting ready for that to happen. But, whereas the American public really doesn't buy gold like it did back then. Mentally, we're in a different place. It's all almost like we've been reprogrammed to think that gold is obsolete or silver is obsolete when actually that's the real money and the cash is the fake money. Would you agree with that?

David Garofalo (40:27):

Yeah, absolutely. I'd say anything that doesn't have physical properties is really infinite in nature. Paper is infinite; gold is finite. Commodities are finite. Land is finite. Those prices; the asset price inflation will continue to gallop because there's just more and more paper chasing that finite amount of hard goods. There's only so much copper on the surface. There's only so much gold on the surface that's available, but there's an infinite amount of paper. And, when I hear the Federal Reserve talking about "tapering," I chuckle. Because, tapering doesn't mean they're gonna contract money supply. It just means they're gonna grow it, but a little less quickly. So, we're very much in an expansionary mode, and we'll be there for a long, long period of time. Cuz there- as I said earlier on; there's no way for them to repay the debt they've strapped on not just during the COVID crisis, but really since the credit crisis, over a dozen years ago where they had to re-inflate the economy to save the economy from financial ruined in the financial system; banks were about to collapse.

David Garofalo (41:33):

So, they just reflated- they dropped money from helicopters, but guess what? They never stopped.

Tony (41:39):

And, I think that's all by design too. When you see gas prices; where they're at; yeah, everything's just outta control. So, that's conversation for another day. But, David, I really appreciate you being on the show. Future millionaires, you're listening to David Garofalo, chairman and CEO of the Gold Royalty Corporation, David, how people are gonna find out for you. What do you have that you can educate him with to get him moving? Cause I love the idea of investing in gold with your company and versus a traditional route. It seems like a really good option.

David Garofalo (42:10):

Feel free to visit our website. It's really easy to remember goldroyalty.com, and again; our trading symbol in New York stock exchange America is GROYWS.

Tony (42:21):

Love it, man. I'll probably end up throwing a few dollars your way too. It sounds like a great thing to follow up on. Thank you so much for your time today.

David Garofalo (42:28):

Thank you.

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