Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Franco-Nevada’s (TSX, NYSE: FNV) fourth-quarter and full-year results release includes ‘record’ annual results, two new stream and royalty additions as well as a 15.4% increase to the quarterly dividend, starting in June.
The company has also announced that it has adopted a goal of at least 40% of diverse representation at the board and senior management levels.
Last year, Franco-Nevada sold 521,564 gold-equivalent ounces (a 1% increase over 2019), generating $1-billion in revenue (up 21% over the prior year), and reporting an adjusted EBITDA of $839.6 million (a 25% increase over 2019). These numbers include sales of 147,476 gold-equivalent oz. in the fourth quarter, which contributed $304.5 million to full-year revenues and $253.7 million to 2020 EBITDA.
Over 90% of last year’s revenue was from gold and gold-equivalents, with over 88% of the total revenues coming from the Americas
The company closed out the year with no debt, $534.2 million of cash and equivalents (versus $132.1 million at year-end 2019) and $1.9 billion in available capital.
In the earnings release, CEO Paul Brink noted that strong commodity prices drove the record financials.
“With record precious metals prices through the year and the recovery of energy prices in the second half of the year, Franco-Nevada generated record financial results.”
Over 90% of last year’s revenue was from gold and gold-equivalents, with over 88% of the total revenues coming from the Americas.
Latest portfolio additions feature a $165-million precious metals stream on the gold and silver produced from the operating and privately held Condestable underground mine in Peru. Starting this January, Franco will receive 8,760 gold oz. and 291,000 silver oz. a year until the end of 2015, at which time deliveries will vary based on the percentage of gold and silver in concentrate.
The major will pay 20% of the spot price for gold and silver for each ounce delivered. At the end of December, Franco also acquired a royalty portfolio in the Haynesville natural gas area in Texas for $135 million. Last quarter, these royalties generated $4.2 million.
Starting in the second quarter of 2021, the company’s dividend will increase to $30¢ a share, which represents the 14th consecutive dividend increase from the company.
This year, Franco expects to sell 555,000 to 585,000 gold-equivalent oz., with an additional $115 to $135 million expected from the energy assets. Over the next five years, the existing portfolio is expected to generate 600,000 to 630,000 gold-equivalent oz. by 2025 with an additional $150 to $170 million expected from the company’s energy assets. These numbers assume the start of production at assets such as Marathon Gold’s Valentine Lake project and Gold Fields’ Salares Norte project in Chile.
This five-year growth also incorporates expansions at Kirkland Lake Gold’s Detour mine, Kinross’ Tasiast in Mauretania and First Quantum’s Cobre Panama site in Panama.
(This article first appeared in the Canadian Mining Journal)
