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What Boosted Franco-Nevada’s 1Q16 Revenue?


May. 10 2016, Published 3:39 p.m. ET

Record GEOs

Franco-Nevada (FNV) delivered GEO (gold equivalent ounces) of 106,621 ounces during the quarter. While the company’s newly acquired Antapaccay gold and silver stream delivered two months of production, the Antamina mine, acquired during 4Q15, delivered its first quarter of full production.

Strong production growth also came from Detour Lake, Hemlo, Musselwhite, Goldstrike, and Candelaria. However, the strong performance was partially offset by lower platinum group metal revenues.

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Production guidance is intact

The company maintained its 2016 guidance for 425,000–445,000 GEO and $15 million–$20 million in oil and gas revenues. It has a 2020 production target of 500,000–520,000 GEOs.

The company achieved revenues of $132 million in 1Q16—an increase of 21% YoY (year-over-year). This is despite 3% lower gold prices in 1Q16—compared to the same period last year. Its adjusted EBITDA (earnings before interest, tax, depreciation and amortization) also grew 24% YoY to $103.7 million.

Future growth drivers

GEO contributions and oil and gas revenues should increase in the coming quarters.

  • Contributions from Antapaccay will increase because it delivered only two months of production in 1Q16 due to the timing of the transaction.
  • Lundin Mining upwardly revised the production guidance for Candelaria for 2016.
  • Other assets keep on ramping up including Karma. It was acquired from Endeavor Mining.
  • Higher oil processing could also boost its oil and gas revenues in the upcoming quarters.

In the long term, the Cobre Panama project is expected to contribute significantly to production growth. The only remaining funding on this project is $662 million through 2016–2018. The company also mentioned that the South Arturo project, advanced by Barrick Gold (ABX) and Premier Gold Mines, should start contributing in late 2016. Franco also has 2% royalty on Kinross Gold’s (KGC) Tasiast project. It should start contributing in 2018.

The Sprott Gold Miners ETF (SGDM) invests in US-listed gold miners. Kinross Gold forms 14% of SGDM’s holdings. Investors can also get exposure to gold by investing in the iShares Gold Trust ETF (IAU) and the SPDR Gold Shares ETF (GLD). They both track gold prices.


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