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Franco-Nevada (FNV) Acquires 2 Royalties From Premier for $6M

Zacks Equity Research

Recently, Franco-Nevada Corporation FNV acquired net smelter return ("NSR") royalties of Premier Gold Mines Limited ("Premier") for $6 million. Notably, the package consists of a 2% NSR on the PQ North Property, adjacent to the Musselwhite Mine in Northwestern Ontario, and a 1.5% NSR on the Rain/Emigrant and Saddle Properties located in Nevada.
On Jan 31, 2019, Franco-Nevada, through its wholly-owned Chilean subsidiary, acquired an existing 2% NSR on Gold Fields Limited’s GFI Salares Norte gold project for $32 million. NSR includes $27 million of Franco-Nevada common shares and $5 million in cash. Gold Fields has an option to buy back 1% of the NSR for $6 million within 24 months of commercial production.

Moreover, on Feb 21, 2019, Franco-Nevada acquired a 2% NSR on Marathon Gold Corporation’s (“Marathon”) Valentine Lake Gold Camp in central Newfoundland for C$18 million. Further, Marathon has an option to buy back 0.5% of the NSR for $7 million until Dec 31, 2022.

Franco-Nevada expects to generate $100-$115 million in revenues in 2019 from energy assets compared with the prior estimate of $70-$85 million, driven by the Marcellus royalty acquisition and stellar performance of energy assets. With continued development of its U.S. oil & gas assets, the company forecasts energy assets to contribute 16-17% of revenues by 2023.

Franco-Nevada has completed its $1-billion commitment for the Cobre Panama project. This July, Cobre Panama commenced production of initial gold and silver stream, and will likely produce 140,000-175,000 tons of copper in the current year. Further, the project is anticipated to be a major growth driver for the second half of this year. For 2019, the company estimates to produce upper end of the prior guidance of 20,000-40,000 ounces gold from the project.

The company expects Gold Equivalent Ounces (GEOs) to be at the upper end of the previously-issued guidance of 465,000-500,000 GEOs, driven by strong results so far, and increase in expected deliveries from the Cobre Panama project.

Franco-Nevada’s shares have appreciated 52% compared to the industry’s gain of 69.9%.

Zacks Rank & Other Stocks to Consider

Franco-Nevada currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the basic materials space are Kinross Gold Corporation KGC and Agnico Eagle Mines Limited AEM, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of 160% for 2019. The company’s shares have surged 79.7% over the past year.

Agnico Eagle has an outstanding projected earnings growth rate of 157.1% for the current year. The company’s shares have rallied 69.5% in a year’s time.

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