Diversified Portfolio Outperformed
(in U.S. dollars unless otherwise noted)
“Franco-Nevada is reporting strong fourth quarter and annual results for 2022. Our Diversified assets outperformed due to elevated energy prices in the year, stated Paul Brink, CEO. We are pleased that First Quantum and the Government of Panama have agreed on terms for a refreshed concession contract and look forward to Cobre Panama achieving its expanded throughput capacity later this year. Precious metal GEOs and Diversified production in 2023 are expected to be consistent with 2022. We are however guiding to lower total GEOs for the year as current energy prices are below 2022 levels. The organic growth in our 5 year outlook comes from both mine expansions and new mines. Franco-Nevada is debt-free, is growing its cash balances and has an active pipeline of growth opportunities.”
Q4 2022 | 2022 | |||||||||
Q4 results | vs | Annual results | vs | |||||||
Q4 2021 | 2021 | |||||||||
Total GEOs1 sold (including Energy) | 183,886 GEOs | +1 % | 729,960 GEOs | +0.2 % | ||||||
Precious Metal GEOs1 sold | 129,642 GEOs | -7 % | 510,385 GEOs | -9 % | ||||||
Revenue | $320.4 million | -2 % | $1,315.7 million | +1 % | ||||||
Net income | $165.0 million ($0.86/share) | -25 % | $700.6 million ($3.66/share) | +5 % | ||||||
Adjusted Net Income2 | $164.9 million ($0.86/share) | +1 % | $697.6 million ($3.64/share) | +4 % | ||||||
Adjusted EBITDA2 | $262.4 million ($1.37/share) | -3 % | $1,106.9 million ($5.78/share) | +1 % | ||||||
Adjusted EBITDA Margin2 | 81.9 % | -0.5 % | 84.1 % | +0.1 % |
Strong Financial Position
Sector-Leading ESG
Diverse, Long-Life Portfolio
Growth and Optionality
Quarterly revenue and GEOs sold by commodity | |||||||||||
Q4 2022 | Q4 2021 | ||||||||||
GEOs Sold | Revenue | GEOs Sold | Revenue | ||||||||
# | (in millions) | # | (in millions) | ||||||||
PRECIOUS METALS | |||||||||||
Gold | 102,583 | $ | 178.2 | 109,637 | $ | 196.5 | |||||
Silver | 18,493 | 32.7 | 21,479 | 38.6 | |||||||
PGM | 8,566 | 15.5 | 7,683 | 14.0 | |||||||
129,642 | $ | 226.4 | 138,799 | $ | 249.1 | ||||||
DIVERSIFIED | |||||||||||
Iron ore | 6,230 | $ | 10.8 | 8,600 | $ | 15.5 | |||||
Other mining assets | 301 | 0.5 | 656 | 1.1 | |||||||
Oil | 19,619 | 34.2 | 16,148 | 28.9 | |||||||
Gas | 24,630 | 42.5 | 14,569 | 26.3 | |||||||
NGL | 3,464 | 6.0 | 3,771 | 6.8 | |||||||
54,244 | $ | 94.0 | 43,744 | $ | 78.6 | ||||||
183,886 | $ | 320.4 | 182,543 | $ | 327.7 |
Annual revenue and GEOs sold by commodity | |||||||||||
2022 | 2021 | ||||||||||
GEOs Sold | Revenue | GEOs Sold | Revenue | ||||||||
# | (in millions) | # | (in millions) | ||||||||
PRECIOUS METALS | |||||||||||
Gold | 401,756 | $ | 723.1 | 420,535 | $ | 750.6 | |||||
Silver | 77,232 | 139.9 | 97,234 | 172.7 | |||||||
PGM | 31,397 | 56.7 | 40,628 | 72.4 | |||||||
510,385 | $ | 919.7 | 558,397 | $ | 995.7 | ||||||
DIVERSIFIED | |||||||||||
Iron ore | 30,803 | $ | 55.5 | 49,748 | $ | 89.6 | |||||
Other mining assets | 3,760 | 6.9 | 2,836 | 5.2 | |||||||
Oil | 86,068 | 156.0 | 60,447 | 108.1 | |||||||
Gas | 84,227 | 150.9 | 44,685 | 79.8 | |||||||
NGL | 14,717 | 26.7 | 12,124 | 21.6 | |||||||
219,575 | $ | 396.0 | 169,840 | $ | 304.3 | ||||||
729,960 | $ | 1,315.7 | 728,237 | $ | 1,300.0 |
In Q4 2022, we earned $320.4 million in revenue, down 2.2% from Q4 2021. The decrease was driven by lower contributions from our Precious Metal and Iron Ore assets, largely offset by our Energy assets due to higher realized oil and gas prices. Precious Metal revenue accounted for 70.7% of our revenue (55.6% gold, 10.2% silver, 4.9% PGM). Revenue was sourced 90.5% from the Americas (26.8% South America, 22.8% Central America & Mexico, 27.0% U.S. and 13.9% Canada).
2023 Guidance
Please see our MD&A for the year ended December 31, 2022 for more details on our guidance and see “Forward-Looking Statements” below.
For 2023, we expect GEO sales from our Precious Metal assets to range between 490,000 and 530,000 GEOs, consistent with 2022, but anticipate total GEOs sales to be between 640,000 and 700,000 GEOs, a reduction from 2022 primarily based on lower assumed oil and gas prices. With respect to Cobre Panama, based on First Quantum’s most recent 2023 guidance of between 350,000 and 380,000 tonnes of copper, our attributable GEO production would be between 131,000 and 142,000 GEOs. Following the restriction of concentrate shipments in February, we have made a larger allowance for the impact of shipment timing for the year. We have estimated GEOs delivered and sold from Cobre Panama to be between 115,000 and 135,000 GEOs. We expect higher production from Antapaccay, MWS and Musselwhite, and initial contributions from new mines including Magino, Séguéla and Salares Norte, partly offset by anticipated decreases in GEO sales from Antamina, Hemlo and Candelaria. For our Diversified assets, we are guiding to lower GEOs, reflecting lower assumed oil and gas prices, partly offset by higher GEO contributions from our Iron Ore and Other Mining assets.
We estimate depletion expense to be between $275 and $305 million. Our remaining capital commitment to the Royalty Acquisition Venture with Continental is $79.4 million. In addition, we expect to commence funding of our $250 million stream on the Tocantinzinho project at the end of Q1 2023.
5-Year Outlook
We expect our portfolio to produce between 760,000 and 820,000 GEOs in 2027, of which 565,000 to 605,000 GEOs are expected to be generated from Precious Metal assets. This outlook assumes the expansion of the mill throughput capacity to 100 million tonnes per year at Cobre Panama, increased attributable production from Vale’s Northern and Southeastern systems, production growth from the continued development of our U.S. Energy assets, and assumes the commencement of production at Stibnite, Copper World and Eskay Creek. In our 5-year outlook, we also anticipate that our attributable portion of gold and silver production from Candelaria will step down from 68% to 40%, and that our stream at MWS will have reached its cap in 2024.
For both our 2023 guidance and 5-year outlook, when reflecting revenue earned from gold, silver, platinum, palladium, iron ore, oil and gas commodities to GEOs, we assumed the following prices: $1,800/oz Au, $21/oz Ag, $900/oz Pt, $1,500/oz Pd, $120/tonne Fe 62% CFR China, $80/bbl WTI oil and $3.00/mcf Henry Hub natural gas. In addition, we do not assume any other acquisitions and do not reflect any incremental revenue from additional contributions we may make to the Royalty Acquisition Venture with Continental as part of our remaining commitment of $79.4 million. The 2023 guidance and 5-year outlook are based on public forecasts and other disclosure by the third-party owners and operators of our assets and our assessment thereof.
Environmental, Social and Governance Updates
During the quarter, we partnered with Glencore at Antapaccay to help fund the Alto Huarco community potable water project in Espinar, Peru and also fulfilled our charitable commitment under our BlackNorth pledge. We continue to rank highly with leading ESG rating agencies. We were awarded a Sustainalytics Global 50 Top Rated rating, given to the top 50 companies in the Sustainalytics ratings universe, and received our 2022 CDP score of “B-“.
Portfolio Additions
Cobre Panama Update
As previously announced on February 23, 2023, ore processing operations at Cobre Panama were suspended while negotiations between First Quantum and the Government of Panama on a refreshed concession contract were ongoing. On March 8, 2023, First Quantum and the Government of Panama agreed and finalized the draft of a concession contract for Cobre Panama. The proposed concession contract is subject to a 30-day public consultation process and approvals by the Panamanian Cabinet, Comptroller General of the Republic and the National Assembly. MPSA has received authorization from the Panama Maritime Authority and concentrate loading operations at the Punta Rincón port have resumed. Cobre Panama processing operations have resumed to normal levels with all three trains operating. MPSA continues to remobilize the workforce to full staffing levels.
Q4 2022 Portfolio Updates
Precious Metal assets: GEOs sold from our Precious Metal assets were 129,642, compared to 138,799 GEOs in Q4 2021. Higher contributions from Hemlo, Tasiast and Subika (Ahafo) were more than offset by lower deliveries from Antapaccay, Cobre Panama and Guadalupe-Palmarejo.
South America:
Central America & Mexico:
U.S.:
Canada:
Rest of World:
Diversified assets: Our Diversified assets, primarily comprising our Iron Ore and Energy interests, generated $94.0 million in revenue, up from $78.6 million in Q4 2021, reflecting higher realized oil and gas prices relating to our Energy assets.
Iron Ore:
Energy:
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 cost inflation. 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 of Non-GAAP Financial Measures:
For the three months ended | For the year ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(expressed in millions, except per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income | $ | 165.0 | $ | 220.9 | $ | 700.6 | $ | 733.7 | ||||||||
Impairment reversals | — | (75.5) | — | (68.0) | ||||||||||||
Foreign exchange (gain) loss and other (income) expenses | (0.1) | 1.3 | (3.6) | 3.0 | ||||||||||||
Finance income related to repayment of Noront loan | — | — | (2.2) | — | ||||||||||||
Tax effect of adjustments | — | 19.3 | 2.8 | 17.8 | ||||||||||||
Other tax related adjustments | ||||||||||||||||
Recognition of previously unrecognized deferred tax assets | — | (2.3) | — | (12.9) | ||||||||||||
Adjusted Net Income | $ | 164.9 | $ | 163.7 | $ | 697.6 | $ | 673.6 | ||||||||
Basic weighted average shares outstanding | 191.7 | 191.2 | 191.5 | 191.1 | ||||||||||||
Adjusted Net Income per share | $ | 0.86 | $ | 0.86 | $ | 3.64 | $ | 3.52 |
For the three months ended | For the year ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(expressed in millions, except per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income | $ | 165.0 | $ | 220.9 | $ | 700.6 | $ | 733.7 | ||||||||
Income tax expense | 30.0 | 44.7 | 133.1 | 124.1 | ||||||||||||
Finance expenses | 0.7 | 0.9 | 3.2 | 3.6 | ||||||||||||
Finance income | (6.7) | (0.7) | (12.6) | (3.7) | ||||||||||||
Depletion and depreciation | 73.5 | 78.2 | 286.2 | 299.6 | ||||||||||||
Impairment reversals | — | (75.5) | — | (68.0) | ||||||||||||
Foreign exchange (gain) loss and other (income) expenses | (0.1) | 1.3 | (3.6) | 3.0 | ||||||||||||
Adjusted EBITDA | $ | 262.4 | $ | 269.8 | $ | 1,106.9 | $ | 1,092.3 | ||||||||
Basic weighted average shares outstanding | 191.7 | 191.2 | 191.5 | 191.1 | ||||||||||||
Adjusted EBITDA per share | $ | 1.37 | $ | 1.41 | $ | 5.78 | $ | 5.72 |
For the three months ended | For the year ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
(expressed in millions, except Adjusted EBITDA Margin) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Adjusted EBITDA | $ | 262.4 | $ | 269.8 | $ | 1,106.9 | $ | 1,092.3 | ||||||||
Revenue | 320.4 | 327.7 | 1,315.7 | 1,300.0 | ||||||||||||
Adjusted EBITDA Margin | 81.9 | % | 82.3 | % | 84.1 | % | 84.0 | % |
FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions of U.S. dollars)
At December 31, | At December 31, | |||||||
2022 | 2021 | |||||||
ASSETS | ||||||||
Cash and cash equivalents (Note 5) | $ | 1,196.5 | $ | 539.3 | ||||
Receivables | 135.7 | 119.8 | ||||||
Loan receivable (Note 6) | — | 39.7 | ||||||
Prepaid expenses and other (Note 7) | 50.9 | 52.6 | ||||||
Current assets | $ | 1,383.1 | $ | 751.4 | ||||
Royalty, stream and working interests, net (Note 8) | $ | 4,927.5 | $ | 5,149.3 | ||||
Investments (Note 6) | 227.2 | 235.9 | ||||||
Deferred income tax assets (Note 17) | 39.9 | 49.4 | ||||||
Other assets (Note 9) | 49.1 | 23.9 | ||||||
Total assets | $ | 6,626.8 | $ | 6,209.9 | ||||
LIABILITIES | ||||||||
Accounts payable and accrued liabilities (Note 10) | $ | 43.1 | $ | 33.6 | ||||
Current income tax liabilities | 7.1 | 9.6 | ||||||
Current liabilities | $ | 50.2 | $ | 43.2 | ||||
Deferred income tax liabilities (Note 17) | $ | 153.0 | $ | 135.4 | ||||
Other liabilities | 6.0 | 6.1 | ||||||
Total liabilities | $ | 209.2 | $ | 184.7 | ||||
SHAREHOLDERS’ EQUITY | ||||||||
Share capital (Note 18) | $ | 5,695.3 | $ | 5,628.5 | ||||
Contributed surplus | 15.6 | 16.1 | ||||||
Retained earnings | 940.4 | 484.9 | ||||||
Accumulated other comprehensive loss | (233.7) | (104.3) | ||||||
Total shareholders’ equity | $ | 6,417.6 | $ | 6,025.2 | ||||
Total liabilities and shareholders’ equity | $ | 6,626.8 | $ | 6,209.9 | ||||
The consolidated financial statements and accompanying notes can be found in our 2022 Annual Report available on our website
FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(in millions of U.S. dollars and shares, except per share amounts)
2022 | 2021 | |||||||
Revenue (Note 12) | $ | 1,315.7 | $ | 1,300.0 | ||||
Costs of sales | ||||||||
Costs of sales (Note 13) | $ | 176.9 | $ | 178.3 | ||||
Depletion and depreciation | 286.2 | 299.6 | ||||||
Total costs of sales | $ | 463.1 | $ | 477.9 | ||||
Gross profit | $ | 852.6 | $ | 822.1 | ||||
Other operating expenses (income) | ||||||||
General and administrative expenses | $ | 22.5 | $ | 19.6 | ||||
Share-based compensation expenses (Note 14) | 10.1 | 11.2 | ||||||
Impairment reversals (Note 8) | — | (68.0) | ||||||
Gain on sale of gold bullion | (0.7) | (1.4) | ||||||
Total other operating expenses (income) | $ | 31.9 | $ | (38.6) | ||||
Operating income | $ | 820.7 | $ | 860.7 | ||||
Foreign exchange gain (loss) and other income (expenses) | $ | 3.6 | $ | (3.0) | ||||
Income before finance items and income taxes | $ | 824.3 | $ | 857.7 | ||||
Finance items (Note 16) | ||||||||
Finance income | $ | 12.6 | $ | 3.7 | ||||
Finance expenses | (3.2) | (3.6) | ||||||
Net income before income taxes | $ | 833.7 | $ | 857.8 | ||||
Income tax expense (Note 17) | 133.1 | 124.1 | ||||||
Net income | $ | 700.6 | $ | 733.7 | ||||
Other comprehensive (loss) income, net of taxes | ||||||||
Items that may be reclassified subsequently to profit and loss: | ||||||||
Currency translation adjustment | $ | (92.0) | $ | (4.0) | ||||
Items that will not be reclassified subsequently to profit and loss: | ||||||||
(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) | (36.7) | 22.6 | ||||||
Other comprehensive (loss) income, net of taxes | $ | (128.7) | $ | 18.6 | ||||
Comprehensive income | $ | 571.9 | $ | 752.3 | ||||
Earnings per share (Note 19) | ||||||||
Basic | $ | 3.66 | $ | 3.84 | ||||
Diluted | $ | 3.65 | $ | 3.83 | ||||
Weighted average number of shares outstanding (Note 19) | ||||||||
Basic | 191.5 | 191.1 | ||||||
Diluted | 191.9 | 191.5 | ||||||
The consolidated financial statements and accompanying notes can be found in our 2022 Annual Report available on our website
FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of U.S. dollars)
2022 | 2021 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 700.6 | $ | 733.7 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depletion and depreciation | 286.2 | 299.6 | ||||||
Share-based compensation expenses | 8.2 | 8.0 | ||||||
Impairment reversals | — | (68.0) | ||||||
Unrealized foreign exchange loss | 3.3 | 1.5 | ||||||
Deferred income tax expense | 37.4 | 37.1 | ||||||
Other non-cash items | (3.5) | (3.0) | ||||||
Acquisition of gold bullion | (46.7) | (40.0) | ||||||
Proceeds from sale of gold bullion | 51.6 | 27.5 | ||||||
Changes in other assets | (26.7) | (10.7) | ||||||
Operating cash flows before changes in non-cash working capital | $ | 1,010.4 | $ | 985.7 | ||||
Changes in non-cash working capital: | ||||||||
Increase in receivables | $ | (15.9) | $ | (26.4) | ||||
Increase in prepaid expenses and other | (3.2) | (2.4) | ||||||
Increase (decrease) in current liabilities | 8.2 | (1.5) | ||||||
Net cash provided by operating activities | $ | 999.5 | $ | 955.4 | ||||
Cash flows used in investing activities | ||||||||
Acquisition of royalty, stream and working interests | $ | (139.6) | $ | (758.7) | ||||
Acquisition of investments | (48.5) | (17.2) | ||||||
Acquisition of energy well equipment | (1.9) | (1.8) | ||||||
Proceeds from settlement of loan receivable | 42.7 | — | ||||||
Proceeds from sale of investments | 1.8 | 12.7 | ||||||
Net cash used in investing activities | $ | (145.5) | $ | (765.0) | ||||
Cash flows used in financing activities | ||||||||
Payment of dividends | $ | (197.6) | $ | (179.6) | ||||
Proceeds from draw of revolving credit facilities | — | 150.0 | ||||||
Repayment of revolving credit facilities | — | (150.0) | ||||||
Credit facility amendment costs | (0.9) | (1.0) | ||||||
Proceeds from exercise of stock options | 9.5 | 0.4 | ||||||
Net cash used in financing activities | $ | (189.0) | $ | (180.2) | ||||
Effect of exchange rate changes on cash and cash equivalents | $ | (7.8) | $ | (5.1) | ||||
Net change in cash and cash equivalents | $ | 657.2 | $ | 5.1 | ||||
Cash and cash equivalents at beginning of year | $ | 539.3 | $ | 534.2 | ||||
Cash and cash equivalents at end of year | $ | 1,196.5 | $ | 539.3 | ||||
Supplemental cash flow information: | ||||||||
Dividend income received | $ | 19.7 | $ | 30.2 | ||||
Interest and standby fees paid | $ | 2.4 | $ | 2.4 | ||||
Income taxes paid | $ | 95.1 | $ | 93.5 |
The consolidated financial statements and accompanying notes can be found in our 2022 Annual Report available on our website
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