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Franco-Nevada Reports Q1 2024 Results

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Franco-Nevada Reports Q1 2024 Results

 

 

 

 

 

Gold Prices Fuel Margin Expansion

 

“Our diversified portfolio performed well and production for the quarter met expectations. Elevated gold prices translated directly into some of our highest ever margins,” stated Paul Brink, CEO. “Salares Norte commenced production during the quarter and Greenstone and Tocantinzinho are on track for first production in the coming months. Alamos’ planned acquisition of Argonaut will help realize the full potential of the Magino and Island Gold deposits. While Cobre Panama remains on preservation and safe management, we are hopeful that the issues can be resolved. Franco-Nevada has no debt, $2.3B in available capital and has an active deal pipeline.”

 

 

Q1 2024
Q1 2024 results vs
Q1 2023
Total GEOs1 sold 122,897 GEOs -15 %
Precious Metal GEOs1 sold 93,018 GEOs -16 %
Revenue $256.8 million -7 %
Net income $144.5 million ($0.75/share) -8 %
Adjusted Net Income2 $146.0 million ($0.76/share) -4 %
Adjusted Net Income Margin2   56.9 % +3 %
Adjusted EBITDA2 $216.1 million ($1.12/share) -6 %
Adjusted EBITDA Margin2 84.2 % +1.4 %

 

Strong Financial Position

  • No debt and $2.3 billion in available capital as at March 31, 2024
  • Operating cash flow of $178.6 million in Q1 2024
  • Quarterly dividend increased 5.88% to $0.36/share effective Q1 2024

 

Sector-Leading ESG

  • Rated #1 precious metals company and #1 gold company by Sustainalytics, AA by MSCI and Prime by ISS ESG
  • Committed to the World Gold Council’s Responsible Gold Mining Principles
  • Partnering with our operators on community and ESG initiatives
  • 40% diverse representation at the Board and top leadership levels as a group

 

Diverse, Long-Life Portfolio

  • Most diverse royalty and streaming portfolio by asset, operator and country
  • Attractive mix of long-life streams and high optionality royalties
  • Long-life mineral resources and mineral reserves

 

Growth and Optionality

  • Mine expansions and new mines driving 5-year growth profile
  • Long-term optionality in gold, copper and nickel and exposure to some of the world’s great mineral endowments
  • Strong pipeline of precious metal and diversified opportunities

 

 Quarterly revenue and GEOs sold by commodity
Q1 2024 Q1 2023
GEOs Sold Revenue GEOs Sold Revenue
# (in millions) # (in millions)
PRECIOUS METALS
Gold 77,563 $ 160.9 90,722 $ 172.2
Silver 11,688 25.0 14,813 28.6
PGM 3,767 8.1 5,703 11.4
93,018 $ 194.0 111,238 $ 212.2
DIVERSIFIED
Iron ore 7,301 $ 14.8 7,074 $ 13.1
Other mining assets 1,496 3.0 1,067 2.0
Oil 13,883 26.1 14,170 27.1
Gas 4,865 12.3 9,118 16.9
NGL 2,334 5.4 2,664 5.0
29,879 $ 61.6 34,093 $ 64.1
Revenue from royalty, stream and working interests 122,897 $ 255.6 145,331 $ 276.3
Interest revenue and other interest income $ 1.2 $
Total revenue 122,897 $ 256.8 145,331 $ 276.3

 

In Q1 2024, we recognized $256.8 million in revenue, down 7.1% from Q1 2023. While we benefited from the rally in gold prices during the quarter, we sold fewer GEOs than in the prior year period as Cobre Panama remains in preservation and safe management. GEOs sold during the quarter do not fully reflect production for the quarter as 3,036 GEOs from Condestable were held in inventory at March 31, 2024 and sold subsequent to quarter-end. Precious Metal revenue accounted for 75.5% of our revenue (62.7% gold, 9.7% silver, 3.1% PGM). Revenue was sourced 82.8% from the Americas (39.2% South America, 9.7% Central America & Mexico, 18.2% U.S. and 15.7% Canada). Revenue includes interest revenue and other interest income related to loans provided as part of our financing packages. For the three months ended March 31, 2024, we recognized $1.2 million in revenue related to the G Mining Ventures Term Loan and Skeena Convertible Debenture.

 

Environmental, Social and Governance Updates

 

During the quarter, we published our 2024 ESG Report that, among other things, highlights our key focuses for ESG due diligence, increased community contributions, progression of diversity goals and initiatives, and the adoption of reduction targets in respect of our corporate emissions. We also renewed our partnership with Perpetua Resources to support social capacity building at the Stibnite Gold Project. In furtherance of our goal to have diversity at the Board level on grounds broader than gender diversity, we made a firm commitment to appoint a racially or ethnically diverse director by no later than our annual general shareholder meeting in 2025. We continue to rank highly with leading ESG rating agencies.

 

Portfolio Additions

  • Financing package with Scottie Resources: Subsequent to quarter-end, on April 15, 2024, we acquired a 2.0% gross production royalty on all minerals produced on Scottie Resources Corp.’s (“Scottie”) claims in the Stewart Mining Camp in the Golden Triangle in British Columbia, Canada, for a purchase price of $5.9 million (C$8.1 million). Additionally, we acquired 5,422,994 common shares of Scottie for an aggregate of $0.7 million (C$1.0 million).
  • Amendment of Condestable Stream – Peru: On March 27, 2024, we amended our Condestable precious metal stream agreement to increase the Phase 2 variable deliveries from 25% of gold and silver produced to 37.5%, by paying an additional $10.0 million deposit.
  • Acquisition of Silver Royalty on the Stibnite Gold Project – U.S.: On March 21, 2024, we acquired a NSR interest covering all of the payable silver production from the Stibnite Gold project in Idaho for a purchase price of $8.5 million.
  • Funding of G Mining Ventures Term Loan: On January 29, 2024, we funded $42.0 million under our term loan commitment to G Mining Ventures. Subsequent to quarter-end, on April 19, 2024, we funded the remaining $33.0 million, thereby fulfilling our term loan commitment. The term loan is part of a financing package we provided to G Mining Ventures in July 2022 in connection with the Tocantinzinho gold project, in Brazil.
  • Acquisition of Royalties on Pascua-Lama Project – Chile: On January 3, 2024, we acquired an additional interest in the Chilean portion of Barrick Gold Corporation’s Pascua-Lama project for a purchase price of $6.7 million. Including the interest we acquired in August 2023, at gold prices exceeding $800/ounce, we now hold a 2.941% NSR (gold) and a 0.588% NSR (copper) on the property.
  • Acquisition of Additional Natural Gas Royalty in the Haynesville – U.S.: As previously announced, on November 21, 2023, we agreed to acquire a royalty portfolio in the Haynesville gas play in Louisiana and Texas for $125.0 million and funded an initial deposit of $12.5 million. The transaction closed on January 2, 2024, and we funded the remainder of the purchase price of $112.5 million.

 

Q1 2024 Portfolio Updates

 

Precious Metal assets: GEOs sold from our Precious Metal assets were 93,018, compared to 111,238 GEOs in Q1 2023. Higher contributions from Antapaccay, Guadalupe-Palmarejo and Subika (Ahafo) were more than offset by lower deliveries from Cobre Panama and Antamina.

 

South America:

  • Candelaria (gold and silver stream) – GEOs delivered and sold in Q1 2024 were relatively in line with Q1 2023. In February 2024, Lundin Mining reported an overall increase in Mineral Resources at Candelaria, reflecting additional drilling at La Espanola and Santos offset by lower underground Mineral Resources due to changes to underground mining regulations.
  • Antapaccay (gold and silver stream) – GEOs delivered and sold were higher in Q1 2024 compared to Q1 2023. Operations were temporarily suspended as a result of socio-political tensions in early 2023.
  • Antamina (22.5% silver stream) – GEOs delivered and sold were lower in Q1 2024 compared to Q1 2023. Silver production at the mine was lower than in the prior year period due to a decrease in average silver grades as anticipated based on the life of mine plan.
  • Condestable (gold and silver stream) – We received 3,036 GEOs in Q1 2024, consistent with deliveries in Q1 2023. However, ounces were sold subsequent to quarter-end and remained in inventory as at March 31, 2024.
  • Tocantinzinho (gold stream) – G Mining Ventures reported the physical construction of the Tocantinzinho project was 89% complete as of the end of March 2024 and remains on track for commercial production in H2 2024. According to the 2022 feasibility study, the project is expected to produce an average of 196,000 ounces of gold annually for the first five years.
  • Salares Norte (1-2% royalties) – Gold Fields announced that production at the Salares Norte mine started with the pouring of its first gold-silver doré on March 28, 2024. Ramp-up of the mine to steady state production is progressing with gold equivalent production of 250,000 ounces expected for 2024. Once steady state production is reached, production is expected to increase to 580,000 gold equivalent ounces in 2025.
  • Posse (Mara Rosa) (1% royalty) – Hochschild Mining announced that the first gold pour took place on February 20, 2024, with commercial production expected in Q2 2024. Mara Rosa is expected to produce between 83,000 to 93,000 gold ounces in 2024 and has reported expected average annual production of approximately 80,000 gold ounces over an initial mine life of 10 years, with approximately 100,000 gold ounces annually over the first four years.
  • Cascabel (1% royalty) – In February 2024, SolGold announced the completion of a new pre-feasibility study, which outlined reduced initial capital costs and a 28-year mine plan containing 3.2 million tonnes of copper, 9.4 million ounces of gold, and 28 million ounces of silver (540 million tonnes grading 0.60% copper, 0.54 g/t gold, and 1.62 g/t silver).

 

Central America & Mexico:

  • Cobre Panama (gold and silver stream) – Production at Cobre Panama has been halted since November 2023 with mining activities currently on preservation and safe management.
  • Guadalupe-Palmarejo (50% gold stream) – GEOs sold from Guadalupe-Palmarejo increased in Q1 2024 compared to the same quarter in 2023, reflecting increased production at the mine due to better head grade and recoveries.

 

U.S.:

  • Stillwater (5% royalty) – GEOs from our Stillwater royalty decreased in Q1 2024 compared to Q1 2023 as the decline in PGM prices more than offset higher production at the mine. Sibanye-Stillwater is repositioning its U.S. PGM operations in light of the lower palladium price environment.
  • Bald Mountain (0.875-5% royalties) – GEOs from our Bald Mountain royalties were higher in Q1 2024 than in Q1 2023 due to mine sequencing.
  • Marigold (0.5-5% royalties) – GEOs from our Marigold royalties were lower in Q1 2024 than in Q1 2023 as production is taking place on ground that carries a lower royalty rate. Production is anticipated to progress to higher royalty rate ground in 2027 through the end of the current mine life.
  • Stibnite Gold (gold and silver royalties) – Perpetua Resources received a letter of interest from the Export-Import Bank of the United States for potential debt financing of up to $1.8 billion.

 

Canada:

  • Detour Lake (2% royalty) – Agnico Eagle reported it expects the mill to reach a throughput of 28.0 million tonnes per annum by the end of 2024 and continues to evaluate underground mining scenarios. Agnico Eagle expects to provide an update on the project, mill optimization efforts and ongoing exploration results in Q2 2024. Exploration drilling focussed on infill drilling the West Pit Extension, west of the West Pit mineral resources and near the potential underground exploration ramp.
  • Hemlo (3% royalty & 50% NPI) – GEOs from our Hemlo royalties were lower than in Q1 2023 reflecting higher underground mining costs. Barrick anticipates production at Hemlo to improve relative to 2023, where production was impacted by interruptions to the underground operations.
  • Brucejack (1.2% royalty) – GEOs from our Brucejack royalty were lower in Q1 2024 than in Q1 2023. Newmont, which acquired Brucejack through its acquisition of Newcrest Mining in November 2023, anticipates an increase in production in 2024 compared to 2023.
  • Macassa (Kirkland Lake) (1.5-5.5% royalty & 20% NPI) – Agnico Eagle reported that commissioning of the ventilation system upgrade at Macassa was completed in Q1 2024. Production from long hole stopes in the Near Surface deposit continued in Q1 2024, and development of the AK deposit progressed for initial production in Q4 2024.
  • Magino (3% royalty) and Island Gold (0.62% royalty) – Argonaut and Alamos announced a definitive agreement whereby Alamos will acquire all of the issued and outstanding shares of Argonaut. The combination is expected to create one of Canada’s largest, lowest cost and most profitable gold mines. The transaction is expected to result in substantial synergies through shared infrastructure between the adjacent Magino and Island Gold mines. Alamos has noted potential longer-term upside through a single optimized milling complex at Magino with an expansion of between 15,000 and 20,000 tonnes per day.
  • Canadian Malartic (1.5% royalty) – Agnico Eagle reported that ramp development reached the first production level of East Gouldie in February 2024. Exploration drilling continued to return positive results to the east of the East Gouldie mineral resources, demonstrating the potential to add inferred mineral resources.
  • Greenstone (3% royalty) – Equinox Gold announced that ore was introduced into the grinding circuit on April 6, 2024, with first gold pour expected in May 2024 and commercial production targeted for Q3 2024. Equinox Gold also announced that it had entered into an agreement to consolidate its ownership interest to 100% of the Greenstone project. On a 100% basis, Greenstone is expected to produce between approximately 175,000 and 208,000 gold ounces in 2024, and average annual production of approximately 400,000 gold ounces over an initial mine life of 14 years.
  • Valentine Gold (3% royalty) – Production at Valentine Gold continues to be anticipated in H1 2025. The project is now owned by Calibre Mining, which acquired Marathon Gold in January 2024. Average annual production of approximately 195,000 gold ounces is expected, over an initial mine life of 12 years.

 

Rest of World:

  • MWS (25% stream) – GEOs delivered and sold from our MWS stream were higher than in Q1 2023 due to higher production.
  • Tasiast (2% royalty) – GEOs from our Tasiast royalty were higher than in Q1 2023 as a result of strong grades, higher recoveries and record throughput following the completion of the Tasiast 24k project.
  • Subika (Ahafo) (2% royalty) – GEOs from our Subika (Ahafo) royalty were higher than in Q1 2023 as production at Subika increased due to higher open pit grade and stronger underground mining rates.
  • Séguéla (0.6% royalty) – On March 30, 2024, Fortuna Silver Mines exercised its option to buy-back 0.6% of the 1.2% NSR by paying $6.5 million (A$10 million) to Franco-Nevada, such that our NSR on the Séguéla mine is now 0.6%.

 

Diversified assets:  Our Diversified assets, primarily comprising our Iron Ore and Energy interests, generated $61.6 million in revenue, down from $64.1 million in Q1 2023.

 

Iron Ore:

  • Vale Royalty (iron ore royalty) – Revenue from the Vale royalty increased compared to Q1 2023. The increase is due to a higher than anticipated royalty payment reflecting higher attributable iron ore sales during the H2 2023 period. For the Q1 2024 period, production was in line compared to Q1 2023 in the Northern System. Higher production from the Southeastern System, where the royalty is not yet payable, was driven by increases at Itabira and Brucutu.
  • LIORC – LIORC declared a cash dividend of C$0.45 per common share in the current period, compared to C$0.50 in Q1 2023. LIORC reported production at IOC for Q1 2024 of 4.5 million tonnes, up from 4.3 million tonnes in Q1 2023, and confirmed 2024 production guidance remains unchanged at 16.7 million tonnes to 19.6 million tonnes.
  • Caserones (0.517% effective NSR) – GEOs from our interest in Caserones were higher than in Q1 2023. On January 19, 2024, EMX Royalty Corp. exercised an option to acquire a portion of our interest for a sale price of $4.7 million, such that our effective NSR on Caserones is now 0.517%.

 

Energy:

  • U.S. (various royalty rates) – Revenue from our U.S. Energy interests decreased compared to Q1 2023. While revenue from our oil assets was consistent with the prior year, overall revenues declined due to lower revenue from our gas assets. Contribution from our new Haynesville gas acquisition was offset by lower realized gas prices and volumes at our existing Haynesville assets.
  • Canada (various royalty rates) – Revenue from our Canadian Energy interests was slightly lower than in Q1 2023. Higher production and revenues from our Orion asset were offset by lower revenue from the Weyburn NRI, due to prior period adjustments.

 

Dividend Declaration

 

Franco-Nevada is pleased to announce that its Board of Directors has declared a quarterly dividend of US$0.36 per share. The dividend will be paid on June 27, 2024, to shareholders of record on June 13, 2024 (the “Record Date”). The dividend has been declared in U.S. dollars and the Canadian dollar equivalent will be determined based on the daily average rate posted by the Bank of Canada on the Record Date. Under Canadian tax legislation, Canadian resident individuals who receive “eligible dividends” are entitled to an enhanced gross-up and dividend tax credit on such dividends.

 

The Company has a Dividend Reinvestment Plan (the “DRIP”) which allows shareholders of Franco-Nevada to reinvest dividends to purchase additional common shares at the Average Market Price, as defined in the DRIP, subject to a discount from the Average Market Price in the case of treasury acquisitions. The Company will issue additional common shares through treasury at a 1% discount to the Average Market Price. The Company may, from time to time, in its discretion, change or eliminate the discount applicable to treasury acquisitions or direct that such common shares be purchased in market acquisitions at the prevailing market price, any of which would be publicly announced. Participation in the DRIP is optional. The DRIP and enrollment forms are available on the Company’s website at www.franco-nevada.com. Canadian and U.S. registered shareholders may also enroll in the DRIP online through the plan agent’s self-service web portal at www.investorcentre.com/franco-nevada. Canadian and U.S. beneficial shareholders should contact their financial intermediary to arrange enrollment. Non-Canadian and non-U.S. shareholders may potentially participate in the DRIP, subject to the satisfaction of certain conditions. Non-Canadian and non-U.S. shareholders should contact the Company to determine whether they satisfy the necessary conditions to participate in the DRIP.

 

This press release is not an offer to sell or a solicitation of an offer for securities. A registration statement relating to the DRIP has been filed with the U.S. Securities and Exchange Commission and may be obtained under the Company’s profile on the U.S. Securities and Exchange Commission’s website at www.sec.gov.

 

Shareholder Information

 

The complete Condensed Consolidated Interim Financial Statements and Management’s Discussion and Analysis can be found on our website at www.franco-nevada.com, on SEDAR+ at www.sedarplus.com and on EDGAR at www.sec.gov.

 

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.

 

Posted May 2, 2024

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