Two new acquisitions increase growth outlook
“In 2020, the challenges of the COVID-19 pandemic highlighted the diversity of our portfolio, the commitment of our staff, and the resolve of the employees and communities at our assets,” stated Paul Brink, CEO. “With record precious metals prices through the year and the recovery of energy prices in the second half of the year, Franco-Nevada generated record financial results. We are pleased to announce a new precious metals stream on the Condestable copper mine in Peru and the acquisition of a portfolio of natural gas royalties in the Haynesville play in Texas. We expect strong growth in 2021 and over the next 5 years, driven by the ongoing Cobre Panama ramp-up, the two newly acquired assets and from broad organic growth across the portfolio. On the strength of this outlook, we are increasing the quarterly dividend to $0.30/share starting with our second quarter dividend payment in June which will be declared in May. We are proud that this 15.4% increase will mark our 14th annual dividend increase. We have also strengthened our commitment to increase diversity at Franco-Nevada by adopting a goal of at least 40% diverse representation at the Board and senior management levels.”
2020 | Q4/2020 | |||
Record annual results | vs | Strong Q4 results | vs | |
2019 | Q4/2019 | |||
GEOs1 sold | 521,564 | +1% | 147,476 | -4% |
Revenue | $1,020.2 million | +21% | $304.5 million | +18% |
Net income | $326.2 million ($1.71/share) | -5% | $176.7 million ($0.93/share) | +56% |
Adjusted Net Income2 | $516.3 million ($2.71/share) | +51% | $163.0 million ($0.85/share) | +47% |
Adjusted EBITDA3 | $839.6 million | +25% | $253.7 million | +26% |
Strong Financial Position
Sector Leading ESG
Portfolio Growth
Future Optionality
Annual revenue and GEOs Sold by commodity | ||||||
2020 | 2019 | |||||
GEOs Sold | Revenue | GEOs Sold | Revenue | |||
# | (in millions) | # | (in millions) | |||
Gold | 405,033 | $ | 718.1 | 387,663 | $ | 545.8 |
Silver | 59,606 | 106.4 | 58,906 | 83.2 | ||
PGMs | 47,038 | 86.2 | 52,813 | 75.6 | ||
Other Mining Assets | 9,887 | 17.8 | 17,056 | 23.6 | ||
Mining | 521,564 | $ | 928.5 | 516,438 | $ | 728.2 |
Oil | — | 55.7 | — | 87.5 | ||
Gas | — | 24.4 | — | 18.0 | ||
NGL | — | 11.6 | — | 10.4 | ||
521,564 | $ | 1,020.2 | 516,438 | $ | 844.1 |
Quarterly revenue and GEOs Sold by commodity | ||||||
Q4/2020 | Q4/2019 | |||||
GEOs Sold | Revenue | GEOs Sold | Revenue | |||
# | (in millions) | # | (in millions) | |||
Gold | 110,815 | $ | 208.4 | 117,698 | $ | 174.8 |
Silver | 20,403 | 38.0 | 15,427 | 22.8 | ||
PGMs | 11,162 | 20.9 | 16,271 | 24.6 | ||
Other Mining Assets | 5,096 | 9.4 | 4,000 | 5.9 | ||
Mining | 147,476 | $ | 276.7 | 153,396 | $ | 228.1 |
Oil | — | 15.7 | — | 23.6 | ||
Gas | — | 9.3 | — | 3.7 | ||
NGL | — | 2.8 | — | 2.7 | ||
147,476 | $ | 304.5 | 153,396 | $ | 258.1 |
For Q4/2020, revenue was sourced 90.9% from gold and gold equivalents (68.4% gold, 12.5% silver, 6.9% PGM and 3.1% other mining assets). Geographically, revenue was sourced 88.4% from the Americas (55.0% Latin America, 14.5% U.S. and 18.9% Canada).
Portfolio Additions
2021 Guidance
In 2021, we expect attributable royalty and stream sales to total 555,000 to 585,000 GEOs from our Mining assets and additional revenue of $115 to $135 million from our Energy assets. Of the royalty and stream sales from mining assets, we expect 375,000 to 405,000 GEOs from our various stream agreements. For 2021 guidance, silver, platinum and palladium prices have been converted to GEOs using commodity prices of $1,750 Au, $25.00 Ag, $1,100 Pt and $2,200 Pd. The WTI oil price and Henry Hub natural gas price are assumed to average $55 per barrel and $2.50 per mcf. We estimate depletion expense to be $250 to $280 million. The 2021 guidance and 5-year outlook below are based on public forecasts and other disclosure by the third-party owners and operators of our assets or our assessment thereof.
5-Year Outlook
Franco-Nevada expects its existing portfolio to produce between 600,000 and 630,000 GEOs by 2025, and additional revenue of $150 and $170 million from our Energy assets. This outlook assumes that the Cobre Panama project will have expanded its mill throughput capacity to 100 million tonnes per year during 2023. It also assumes continued deliveries from Sudbury into 2025, the commencement of production at Salares Norte, Hardrock, Stibnite Gold and Valentine Lake, and that the stream at MWS will have reached its cap. It is expected the remaining committed capital of $114.0 million for the Royalty Acquisition Venture with Continental will be funded. The commodity price assumptions are the same as those used for our 2021 guidance and assume no other acquisitions other than the Condestable stream.
Corporate Updates
Franco-Nevada is pleased to announce that its Board of Directors has decided to raise its quarterly dividend to $0.30 per share, effective for the second quarter of 2021. The dividend will be a 15.4% increase from the previous $0.26 per share quarterly dividend and will mark the 14th consecutive annual dividend increase for Franco-Nevada shareholders. Canadian investors in Franco-Nevada’s IPO in December 2007 will be receiving an effective 10.0% yield on their cost base. The Board of Directors plans on formally declaring the second quarter dividend of $0.30 per share in May 2021 with payment by the end of June 2021.
Franco-Nevada is also pleased to announce that its Board of Directors has adopted a goal of 40% diverse representation at the Board and senior management level by 2025. The new goal affirms Franco-Nevada’s commitment to improve the representation of women, black people, indigenous peoples, racial minorities, people with disabilities, and members of the LGBTQ+ community at the leadership level. The Company recognizes that diversity and inclusion are critical to its success and is striving to build on the progress it has already made.
Q4/2020 Portfolio Updates
Gold Equivalent Ounces Sold: GEOs sold for the quarter were 147,476, a decrease of 3.9% from the 153,396 sold in Q4/2019. Higher contributions from Hemlo, Cobre Panama, Antapaccay and Antamina were partly offset by lower contributions from Candelaria and Gold Quarry.
Latin America:
U.S.:
Canada:
Rest of World:
Energy: Revenue from the Energy assets decreased to $27.8 million in Q4/2020 compared to $30.0 million in Q4/2019. Revenues were negatively impacted by lower realized commodity prices and lower volumes associated with a reduction in drilling by operators. These factors were partly offset by the incremental royalties we recognized on our newly acquired interests in the Haynesville shale play of $4.2 million.
U.S.:
Canada:
Corporate Summary
Franco-Nevada Corporation is the leading gold-focused royalty and streaming company with the largest and most diversified portfolio of cash-flow producing assets. Its business model provides investors with gold price and exploration optionality while limiting exposure to many of the risks of operating companies. Franco-Nevada is debt free and uses its free cash flow to expand its portfolio and pay dividends. It trades under the symbol FNV on both the Toronto and New York stock exchanges. Franco-Nevada is the gold investment that works.
Reconciliation to IFRS measures:
For the three months ended | For the year ended | |||||||
December 31, | December 31, | |||||||
(expressed in millions, except per GEO amounts) | 2020 | 2019 | 2020 | 2019 | ||||
Total costs of sales | $ | 114.2 | $ | 119.0 | $ | 399.8 | $ | 408.0 |
Depletion and depreciation | (67.5) | (72.7) | (241.0) | (263.2) | ||||
Energy operating costs | (1.9) | (2.2) | (6.4) | (7.3) | ||||
Cash Costs attributable to GEOs sold | $ | 44.8 | $ | 44.1 | $ | 152.4 | $ | 137.5 |
GEOs | 147,476 | 153,396 | 521,564 | 516,438 | ||||
Cash Costs per GEO sold | $ | 304 | $ | 287 | $ | 292 | $ | 266 |
For the three months ended | For the year ended | |||||||
December 31, | December 31, | |||||||
(expressed in millions, except per share amounts) | 2020 | 2019 | 2020 | 2019 | ||||
Net Income | $ | 176.7 | $ | 113.3 | $ | 326.2 | $ | 344.1 |
Income tax expense | 21.5 | 17.2 | 13.3 | 61.8 | ||||
Finance expenses | 0.8 | 2.1 | 3.5 | 10.6 | ||||
Finance income | (0.7) | (0.8) | (3.7) | (3.5) | ||||
Depletion and depreciation | 67.5 | 72.7 | 241.0 | 263.2 | ||||
Impairment charges (reversals) | (9.6) | — | 262.1 | — | ||||
Foreign exchange (gains)/losses and other (income)/expenses | (2.5) | (2.8) | (2.8) | (2.8) | ||||
Adjusted EBITDA | $ | 253.7 | $ | 201.7 | $ | 839.6 | $ | 673.4 |
Basic weighted average shares outstanding | 190.9 | 188.8 | 190.3 | 187.7 | ||||
Adjusted EBITDA per share | $ | 1.33 | $ | 1.07 | $ | 4.41 | $ | 3.59 |
For the three months ended | For the year ended | |||||||
December 31, | December 31, | |||||||
(expressed in millions, except per share amounts) | 2020 | 2019 | 2020 | 2019 | ||||
Net Income | $ | 176.7 | $ | 113.3 | $ | 326.2 | $ | 344.1 |
Impairment charges (reversals) | (9.6) | — | 262.1 | — | ||||
Foreign exchange (gains)/losses and other (income)/expenses | (2.5) | (2.8) | (2.8) | (2.8) | ||||
Tax effect of adjustments | (1.6) | 0.3 | (69.2) | 0.2 | ||||
Adjusted Net Income | $ | 163.0 | $ | 110.8 | $ | 516.3 | $ | 341.5 |
Basic weighted average shares outstanding | 190.9 | 188.8 | 190.3 | 187.7 | ||||
Adjusted Net Income per share | $ | 0.85 | $ | 0.59 | $ | 2.71 | $ | 1.82 |
FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions of U.S. dollars)
At December 31, | At December 31, | |||
2020 | 2019 | |||
ASSETS | ||||
Cash and cash equivalents (note 5) | $ | 534.2 | $ | 132.1 |
Receivables | 93.4 | 97.8 | ||
Prepaid expenses and other (note 7) | 36.1 | 48.8 | ||
Current assets | $ | 663.7 | $ | 278.7 |
Royalty, stream and working interests, net (note 8) | $ | 4,632.1 | $ | 4,797.8 |
Investments and loan receivable (note 6) | 238.4 | 183.2 | ||
Deferred income tax assets (note 16) | 45.1 | 6.8 | ||
Other assets (note 9) | 13.6 | 14.1 | ||
Total assets | $ | 5,592.9 | $ | 5,280.6 |
LIABILITIES | ||||
Accounts payable and accrued liabilities (note 10) | $ | 40.8 | $ | 41.8 |
Current income tax liabilities | 12.4 | 11.6 | ||
Current liabilities | $ | 53.2 | $ | 53.4 |
Debt (note 11) | $ | — | $ | 80.0 |
Deferred income tax liabilities (note 16) | 91.5 | 82.4 | ||
Other liabilities | 4.4 | 2.6 | ||
Total liabilities | $ | 149.1 | $ | 218.4 |
SHAREHOLDERS’ EQUITY (note 17) | ||||
Share capital | $ | 5,580.1 | $ | 5,390.7 |
Contributed surplus | 14.0 | 14.2 | ||
Deficit | (34.4) | (164.4) | ||
Accumulated other comprehensive loss | (115.9) | (178.3) | ||
Total shareholders’ equity | $ | 5,443.8 | $ | 5,062.2 |
Total liabilities and shareholders’ equity | $ | 5,592.9 | $ | 5,280.6 |
Commitments and contingencies (notes 22 and 23) | ||||
Subsequent event (note 24) |
The accompanying notes are an integral part of these consolidated financial statements and can be found in 2020 Annual Report available on our website
FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE INCOME
(in millions of U.S. dollars and shares, except per share amounts)
For the year ended | ||||
December 31, | ||||
2020 | 2019 | |||
Revenue (note 12) | $ | 1,020.2 | $ | 844.1 |
Costs of sales | ||||
Costs of sales (note 13) | $ | 158.8 | $ | 144.8 |
Depletion and depreciation | 241.0 | 263.2 | ||
Total costs of sales | $ | 399.8 | $ | 408.0 |
Gross profit | $ | 620.4 | $ | 436.1 |
Other operating expenses (income) | ||||
Impairment charges and reversals (note 8) | $ | 262.1 | $ | — |
General and administrative expenses | 28.8 | 28.8 | ||
Gain on sale of gold bullion | (7.0) | (2.9) | ||
Total other operating expenses | $ | 283.9 | $ | 25.9 |
Operating income | $ | 336.5 | $ | 410.2 |
Foreign exchange gain (loss) and other income (expenses) | $ | 2.8 | $ | 2.8 |
Income before finance items and income taxes | $ | 339.3 | $ | 413.0 |
Finance items (note 15) | ||||
Finance income | $ | 3.7 | $ | 3.5 |
Finance expenses | (3.5) | (10.6) | ||
Net income before income taxes | $ | 339.5 | $ | 405.9 |
Income tax expense (note 16) | 13.3 | 61.8 | ||
Net income | $ | 326.2 | $ | 344.1 |
Other comprehensive income | ||||
Items that may be reclassified subsequently to profit and loss: | ||||
Currency translation adjustment | $ | 19.6 | $ | 32.3 |
Items that will not be reclassified subsequently to profit and loss: | ||||
Gain on changes in the fair value of equity investments at fair | ||||
value through other comprehensive income (“FVTOCI”), | ||||
net of income tax (note 6) | 43.8 | 9.9 | ||
Other comprehensive income | $ | 63.4 | $ | 42.2 |
Comprehensive income | $ | 389.6 | $ | 386.3 |
Earnings per share (note 18) | ||||
Basic | $ | 1.71 | $ | 1.83 |
Diluted | $ | 1.71 | $ | 1.83 |
Weighted average number of shares outstanding (note 18) | ||||
Basic | 190.3 | 187.7 | ||
Diluted | 190.7 | 188.0 |
The accompanying notes are an integral part of these consolidated financial statements and can be found in our 2020 Annual Report available on our website
FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of U.S. dollars)
For the year ended | ||||
December 31, | ||||
2020 | 2019 | |||
Cash flows from operating activities | ||||
Net income | $ | 326.2 | $ | 344.1 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depletion and depreciation | 241.0 | 263.2 | ||
Share-based payments | 5.6 | 4.9 | ||
Impairment charges and reversals | 262.1 | — | ||
Unrealized foreign exchange loss | 0.4 | — | ||
Deferred income tax (recovery) expense | (35.2) | 22.7 | ||
Other non-cash items | (12.0) | (7.8) | ||
Acquisition of gold bullion | (37.9) | (31.8) | ||
Proceeds from sale of gold bullion | 52.7 | 36.2 | ||
Operating cash flows before changes in non-cash working capital | $ | 802.9 | $ | 631.5 |
Changes in non-cash working capital: | ||||
Decrease (increase) in receivables | $ | 4.4 | $ | (22.3) |
Decrease (increase) in prepaid expenses and other | 1.4 | (14.3) | ||
(Decrease) increase in current liabilities | (4.8) | 22.8 | ||
Net cash provided by operating activities | $ | 803.9 | $ | 617.7 |
Cash flows from investing activities | ||||
Acquisition of royalty, stream and working interests | $ | (311.1) | $ | (443.9) |
Acquisition of energy well equipment | (1.5) | (1.3) | ||
Proceeds from sale of investments | 3.6 | 13.0 | ||
Acquisition of investments | — | (3.9) | ||
Net cash used in investing activities | $ | (309.0) | $ | (436.1) |
Cash flows from financing activities | ||||
Proceeds from at-the-market equity offerings | $ | 135.7 | $ | 136.0 |
Repayment of term loan | (80.0) | (80.0) | ||
Proceeds from draw of term loan | — | 160.0 | ||
Repayment of revolving credit facilities | — | (485.0) | ||
Proceeds from draw of credit facilities | — | 275.0 | ||
Credit facility amendment costs | — | (0.8) | ||
Payment of dividends | (154.9) | (138.2) | ||
Proceeds from exercise of stock options | 7.4 | 13.2 | ||
Net cash used in financing activities | $ | (91.8) | $ | (119.8) |
Effect of exchange rate changes on cash and cash equivalents | $ | (1.0) | $ | 0.6 |
Net change in cash and cash equivalents | $ | 402.1 | $ | 62.4 |
Cash and cash equivalents at beginning of year | $ | 132.1 | $ | 69.7 |
Cash and cash equivalents at end of year | $ | 534.2 | $ | 132.1 |
Supplemental cash flow information: | ||||
Cash paid for interest expense and loan standby fees | $ | 2.4 | $ | 9.5 |
Income taxes paid | $ | 51.2 | $ | 38.6 |
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