Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) held its "investor day" a few days ago, with an overview of the business and an outlook for this year and beyond. It is looking for minor growth in gold-equivalent ounces ("GEO") production, driven by new mines (including Tocantinzinho in Brazil and Greenstone in Canada) and two major mine expansions.
Last year, the company had over $950 million in cash flow from 488K GEOs, which was down from over 510K in 2022. For this year, the company is guiding to between 480K and 540K ounces. The guidance excludes Cobre Panama, which it has written off. Given the Cobre Panama incident, the company emphasized its diversification, by asset, geography, operator and commodity; with 118 cash-flowing assets, no single asset is expected to contribute more than 15% of its revenue.
Cobre was contributing almost 20% before it was shut down by the Panamanian government. An election in May is expected to bring in a more business-friendly government; new discussions are expected but a mine restart won’t be soon. Franco has also initiated international arbitration.
Oil and Gas and Strong Balance Sheet Help Franco
The company said it did not intend to grow its oil and gas business beyond 20% of revenues; last year, it contributed 21% of revenues, excluding Cobre Panama. None of this was new, as Franco had previously provided its 2024 guidance (see last Bulletin, #906). The company has $1.4 billion in cash, no debt, and almost 1 billion available on revolving credit facilities.
I will note, however, that once again, the company started its "investor day" with a presentation on ESG, which is putting the cart before the horse, in my mind. Franco, with a rock-solid balance sheet, strong management, and diversified assets and deep pipeline, remains a core holding for us.
It is selling at long-term valuation lows, and can be bought by investors who do not own.
Royal’s Partial Results Within Guidance
Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX) reported first-quarter stream production results totaling almost 50,000 GEOs at the midpoint of its guidance. Streams represent about 70% of the company’s production.
The company also said that, as of the quarter end, it held 16,800 ounces of gold, almost 350,000 ounces of silver, and 400 tonnes of copper in inventory. The company will report its royalty production and financials next month. Royal probably has more leverage to higher gold prices than other major royalty companies.
It can be bought if you do not own.
Osisko Tracking Guidance, With New Royalties Ahead
Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE) reported its first-quarter operating results with revenue of $60.7 million from 22.3K GEOs. This is down 4% from the previous quarter, as expected, but tracking above annual guidance and above analyst consensus. Osisko has CA$71 million in cash at the end of the quarter, after a $44 million repayment of its credit facility.
The company said it plans to continue to reduce its outstanding balance. Later this year, Osisko has two new mines on which it holds royalties start production, including Tocantinzinho. Full financials will be released next month. Osisko has solid growth ahead and is even a potential take-over candidate.
Hold.
Fortuna Beats Estimates, but Not From Gold or Silver
Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) reported first-quarter production of 112k gold-equivalent ounces, above analyst estimates. Though both gold and silver were slightly below estimates, by-products lead and zinc were above. Overall production is on track for the company’s annual guidance.
Gold production was down 16% on the previous quarter, but up 49% from a year ago, boosted by the Séguéla mine, which commenced production in mid year. It continues to perform well, with throughput above nameplate capacity.
The company repaid another $40 million on its debt ($121 million since the third quarter) and repurchased over 1 million shares. Overall, these are solid results. Fortuna continues to be a favorite, with a re-rating underway as it continues to execute well.
However, following a 75% jump in the stock price since the end of February, we are holding for now.
TOP BUYS this week, in addition to above, include Nestlé SA (NESN:VX; NSRGY:OTC), Gladstone Investment Corp. (GAIN: NASDAQ), Orogen Royalties Inc. (OGN:TSX.V), and Lara Exploration Ltd. (LRA:TSX.V).
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- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Franco-Nevada Corp., Osisko Gold Royalties Ltd., Fortuna Silver Mines Inc., Orogen Royalties Inc., and Lara Exploration Ltd.
- Adrian Day: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with: All. I determined which companies would be included in this article based on my research and understanding of the sector.
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