Gold Royalty recently announced plans to acquire both Abitibi Royalties and Golden Valley Mines. David Garofalo and Ian Ball weigh in.
The royalty space has been receiving increasing attention from investors, and earlier this month the market was shaken up by the news that three companies are set to join forces.
Gold Royalty (NYSEAMERICAN:GROY) announced plans to acquire both Abitibi Royalties (TSXV:RZZ,OTCQX:ATBYF) and Golden Valley Mines (TSXV:GZZ,OTCQX:GLVMF), creating an Americas-focused precious metals royalty company with nearly 200 royalties.
David Garofalo, president, CEO and chairman of Gold Royalty, and Ian Ball, president and CEO of Abitibi Royalties, spoke to the Investing News Network about the deal, as well as their thoughts on gold.
Garofalo, who was at the helm of Goldcorp when it merged with Newmont (TSX:NGT,NYSE:NEM), said he is confident this new deal with cross the finish line and explained its potential significance.
“Abitibi and Golden Valley have a tremendous cornerstone asset in a royalty on Canada’s biggest gold mine, Canadian Malartic,” he said. “That is a foundational asset for us … much as Gold Strike did to Franco-Nevada (TSX:FNV,NYSE:FNV) this could do for us in terms of a further rerate opportunity.”
Speaking about the royalty landscape, Ball noted that many newer companies are acquiring royalties on weaker operations since that’s where capital is required — but Gold Royalty won’t take that approach.
“You have to do things differently, because if you follow the path of all the other royalty companies you’re going to get the same result, and that’s probably a lower share price. So you have to think differently — you’ve got to get a lower cost of capital, a higher rate of return,” Ball explained.
Looking forward to the future of gold, Garofalo said he expects lower interest rates for longer and more printing of fiat currencies. He also doesn’t see inflation as transitory, despite what the US Federal Reserve has said — he thinks it’s here to stay and will rival and perhaps surpass what was seen in the 1970s.
“Gold at that time, at US$850 an ounce — that was the real all-time high, believe it or not, because if you inflation adjust that to today’s dollars that’s US$3,000 an ounce. That’s what I foresee in this cycle, and (I foresee it) in the short term — I’m talking about months, not years away.”
Watch the interview above for more insight from Ball and Garofalo.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.