In 2024, Franco-Nevada has invested more than a billion dollars in its growth; the group concluded three major transactions and a series of other, more modest ones.
Canadian royalty and streaming company Franco-Nevada (FNV) licked its wounds in 2024, after the Panamanian government closed the Cobre Panama copper and gold mine in November 2023. It provided around 20% of its production. FNV has in the meantime initiated arbitration proceedings, still hoping for a restart of the mine. Panamanian President Mulino has promised to decide the fate of Cobre Panama in 2025, after a thorough analysis.
Last year, FNV invested more than $1 billion in growth. In July, the group entered into a gold streaming agreement with Osisko covering SolGold’s Cascabel copper and gold project in Ecuador. According to the preliminary feasibility study carried out in March 2024, Cascabel will deliver to FNV on average, over the first 10 years, 50,000 troy ounces of gold equivalent, which corresponds to some 9% of its consolidated production. In August, FNV acquired Buenaventura’s royalties (1.8%) on Newmont’s Yanacocha project in Peru for $210 million. Yanacocha’s expected production in 2024 is 290,000 troy ounces of gold. As this project still offers scope for expansion (among others, the Conga project), FNV expects it to generate revenue for decades. One year after the start of Conga, FNV will issue 118,534 shares to Buenaventura (for an amount of $15 million), after which it will have a preferential right to the other royalties held by Buenaventura (including 0.5% on Conga). Last December, FNV announced a third major transaction: the signing, with Sybanie-Stillwater, of a precious metals streaming contract (70% gold, 30% palladium) worth $500 million, relating to three mines located in South Africa. The transaction will retroactively contribute to production (from 1is September) from FNV. The group will only draw on its cash flow ($1.3 billion as of September 30) to finance the three transactions. He also concluded more modest ones last year.
After nine months, the group’s production was 343,271 troy ounces of gold equivalent (374,414 ounces a year earlier, excluding the 100,280 ounces of gold delivered by Cobre Panama), of which 259,715 came from precious metals (268,328 a year earlier ) ; production declined at Candelaria and the start-up of new projects (including Equinox Gold’s Greenstone) was slower than hoped. The rise in precious metal prices nevertheless allowed revenues from them to rise year-on-year, from $518.7 million to $598.6 million. Production of other assets (mainly iron ore, oil and gas) also fell, as did revenues from them (from $203.5 million to $187.4 million). The group’s turnover after nine months, however, increased by 9.7%, from 722.2 million in 2023 to 792.5 million dollars. Adjusted operating cash flow (Rebitda) for its part plunged from $760.1 million to $674.2 million. FNV lowered its forecast production for 2024 to 340,000-360,000 troy ounces of gold equivalent for precious metals and to 445,000-465,000 for other assets.
Conclusion
After its plunge in 2023, the stock’s performance in 2024 is comparable to that of its rivals. The fundamentals still lead us to recommend purchasing it. And if Cobre Panama were brought back into service, the FNV course would benefit.
Tip: buy
Risk: medium
Rating : 1B
Course: $117.59
Ticker: FNV US
Code ISIN : CA3518581051
Market: NYSE
Capit. stock market: 22.7 billion USD
C/B 2023 : –
Expected P/E 2024: 36.5
Perf. price over 12 months: +5.5%
Dividend yield: 1.2%
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