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Franco-Nevada’s Revenue Exposure: How’s It Panning Out?

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Gold equivalent ounces

While Franco-Nevada’s (FNV) GEO (gold equivalent ounces) increased by 25% YoY (year-over-year) in 1Q16, its gold contribution remained fairly stable. Its silver contribution increased due to the acquisition of Antamina and Antapaccay. The revenue breakdown for 1Q16 includes 89% for gold and silver, 8% for PGM (platinum group metals), and 3% for oil and gas.

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Production growth

In terms of production growth, Franco’s GEO growth from gold declined YoY during 1Q16 mainly due to the timing and recognition of revenue by the company. The PGMs also delivered lower growth due to the lower prices for PGMs. This impacted the conversion of PGM ounces into GEOs. According to the company, the actual production for PGMs was fairly stable YoY. The largest growth component came from acquisitions such as Antapaccay, Antamina, and Karma.

Geographic exposure

On the geographic side, 82% of Franco’s 1Q16 revenues came from the Americas. Latin America was the largest contributor at 53%. It got 13% from the US (QQQ) and 16% from Canada. Franco-Nevada provides both stable and diversified exposure to precious metals.

During the call, management mentioned that while they could also look into oil and gas assets, they’re mainly focused on precious metals. It reiterated its stance of maintaining 80% exposure to precious metals.

Other royalty or streaming companies such as Silver Wheaton (SLW), Royal Gold (RGLD), and Sand Storm (SAND) are also deriving the majority of their revenues from precious metal streams.

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