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Gold-Focused Royalty Firm Achieves Record Q4/19 Sales, Revenues
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Franco-Nevada's Q4/19 and full-year 2019 numbers and 2020 guidance are reviewed in a CIBC report.

In a March 9 research note, CIBC analyst Cosmos Chiu reported that Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) significantly beat earnings estimates in Q4/19 due to record sales of gold equivalent ounces and revenues.

Thus, CIBC increased its target price on the gold royalty streaming company to CA$162 per share from CA$157. In comparison, the stock, rated Outperformer by the bank, is trading now at around CA$140.45 per share.

Chiu highlighted that Franco-Nevada's strong Q4/19 included record sales of 153,396 gold equivalent (Au eq) ounces. This led to full-year 2019 sales of 516,438 ounces. The total was well above the high end of guidance of 465,000–500,000 ounces (465–550 Koz) and CIBC's forecast of 498 Koz. The high producer was the Cobre Panama mine in Panama, from which Franco Nevada received 43,554 ounces Au eq, also above guidance of 20–40 Koz.

With the strong sales, Franco Nevada posted total 2019 revenue of $844 million, surpassing consensus' estimate of $814 million, Chiu pointed out. Full-year oil and gas revenue of $115.9 million contributed about 14% to the total revenue. This was driven by oil and gas revenue in Q4/19 of $30 million, which exceeded projections.

Q4/19 adjusted earnings per share (EPS), cash flow per share (CFPS) and EBITDA all exceeded consensus and CIBC's estimate. Adjusted EPS was $0.59 versus $0.49, CFPS was $0.98 and EBITDA was $202 million.

At the end of 2019, Franco-Nevada had $132 million in cash and $1 billion-plus in available liquidity.

Chiu also noted that Franco-Nevada's 2020 production guidance of 550–580 ounces of Au eq is solid and reflects a more than a 10% year-over-year (YOY) increase. A primary contributor will be Cobre Panama, in its first full year of operation. CIBC forecasts 555 Koz and consensus estimates 560 Koz. Guidance is expected to be offset by a YOY oil and gas underperformance of about 25%, assuming a West Texas Intermediate oil price of $45 per barrel. 2020 oil and gas revenue is forecast at $80–90 million.

By 2024, Franco Nevada aims to produce 580–610 Koz Au eq versus CIBC's projection of 570 Koz.


1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from CIBC, Franco-Nevada Corp., Earnings Update, March 9, 2020

Analyst Certification:
Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

Potential Conflicts of Interest:
Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers. Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.

In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.

Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

Important Disclosure Footnotes for Franco-Nevada Corporation (FNV.TO)
• 2a These companies are clients for which a CIBC World Markets company has performed investment banking services in the past 12 months: Franco-Nevada Corporation
• 2e CIBC World Markets Inc. has received compensation for investment banking services from these companies in the past 12 months: Franco-Nevada Corporation
• 2g CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from these companies in the next 3 months: Franco-Nevada Corporation
• 7 CIBC World Markets Corp., CIBC World Markets Inc., and their affiliates, in the aggregate, beneficially own 1% or more of a class of equity securities issued by these companies: Franco-Nevada Corporation

For important disclosure footnotes for companies mentioned in this report that are covered by CIBC World Markets Inc., click here: Disclaimers & Disclosures.

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