Franco-Nevada Reports Q3 2024 Results
Initial Contributions from Tocantinzinho Stream
(in U.S. dollars unless otherwise noted)
TORONTO, Nov. 6, 2024 /PRNewswire/ - "Record gold prices generated higher revenues, Adjusted EBITDA and earnings in Q3 compared to Q2 2024," stated Paul Brink, CEO. "GEO sales were stable compared to Q2 although lower compared to Q3 2023 without the contribution from Cobre Panama. The quarter benefitted from contributions from the newly commissioned Tocantinzinho mine in Brazil, and increased contributions from royalties from the recently completed Greenstone mine and the newly acquired Yanacocha royalty. Candelaria reported an increase in copper and gold production for the quarter. While Candelaria's copper output is on track, Lundin Mining has revised its 2024 gold production guidance lower to reflect revised gold grades for the period. In addition, revenue from our Diversified assets translated into lower GEOs reflecting record gold prices. We have adjusted our 2024 guidance as a result. Franco-Nevada continues to benefit from higher gold prices with limited exposure to cost inflation. The company remains debt-free with substantial available capital and has a strong pipeline of potential precious metal streams and royalties."
Financial Summary
$275.7 million in revenue, -11% compared to Q3 2023, or +14% when excluding the impact of Cobre Panama remaining on preservation and safe management during the quarter
110,110 GEOs sold in the quarter, -32% compared to Q3 2023, which partly reflects:
22% due to the impact of Cobre Panama, and
3% due to record gold prices, reducing the conversion of non-gold revenue into GEOs
$213.6 million in operating cash flow, -9% compared to Q3 2023
$152.7 million in net income or $0.79/share, -13% compared to Q3 2023
$236.2 million in Adjusted EBITDA or $1.23/share, -7% compared to Q3 2023, or +16% excluding Cobre Panama
$153.9 million in Adjusted Net Income or $0.80/share, -12% compared to Q3 2023, or +12% excluding Cobre Panama
Quarterly dividend of $0.36/share effective Q1 2024, an annual increase of 5.88%
Strong financial position with no debt and $2.3 billion in available capital as at September 30, 2024
Sector-Leading ESG
Rated #1 precious metals company and #1 gold company by Sustainalytics, AA by MSCI and Prime by ISS ESG
Committed to the World Gold Council's Responsible Gold Mining Principles
Partnering with our operators on community and ESG initiatives
40% diverse representation at the Board and top leadership levels as a group
Diverse, Long-Life Portfolio
Most diverse royalty and streaming portfolio by asset, operator and country
Attractive mix of long-life streams and high optionality royalties
Long-life mineral resources and mineral reserves
Growth and Optionality
Mine expansions and new mines driving 5-year growth profile
Long-term optionality in gold, copper and nickel and exposure to some of the world's great mineral endowments
Strong pipeline of precious metal and diversified opportunities
Quarterly revenue and GEOs sold by commodity
Q3 2024
Q3 2023
GEOs Sold
Revenue
GEOs Sold
Revenue
#
(in millions)
#
(in millions)
PRECIOUS METALS
Gold (excluding Cobre Panama)
71,100
$
177.6
72,939
$
140.4
Silver (excluding Cobre Panama)
11,111
28.5
12,261
23.4
PGM
2,166
5.6
5,170
9.7
84,377
$
211.7
90,370
$
173.5
DIVERSIFIED
Iron ore
5,528
$
12.1
6,619
$
12.8
Other mining assets
1,068
2.7
1,677
3.2
Oil
14,366
32.5
20,926
38.2
Gas
2,576
8.4
4,098
9.9
NGL
2,195
5.5
2,191
4.6
25,733
$
61.2
35,511
$
68.7
Royalty, stream and working interests (excluding Cobre Panama)
110,110
$
272.9
125,881
$
242.2
Interest revenue and other interest income
—
$
2.8
—
$
—
Revenue and GEOs (excluding Cobre Panama)
110,110
$
275.7
125,881
$
242.2
Cobre Panama
—
$
—
34,967
$
67.3
Total revenue and GEOs
110,110
$
275.7
160,848
$
309.5
Year-to-date revenue and GEOs sold by commodity
YTD 2024
YTD 2023
GEOs Sold
Revenue
GEOs Sold
Revenue
#
(in millions)
#
(in millions)
PRECIOUS METALS
Gold (excluding Cobre Panama)
215,635
$
495.3
215,146
$
415.8
Silver (excluding Cobre Panama)
34,796
81.5
37,231
71.9
PGM
9,284
21.8
15,951
31.0
259,715
$
598.6
268,328
$
518.7
DIVERSIFIED
Iron ore
17,984
$
38.9
18,801
$
36.0
Other mining assets
3,223
7.4
5,435
10.3
Oil
44,713
94.6
54,847
102.2
Gas
11,450
31.5
19,800
41.0
NGL
6,156
15.0
7,203
14.0
83,526
$
187.4
106,086
$
203.5
Royalty, stream and working interests (excluding Cobre Panama)
343,241
$
786.0
374,414
$
722.2
Interest revenue and other interest income
—
$
6.5
—
$
—
Revenue and GEOs (excluding Cobre Panama)
343,241
$
792.5
374,414
$
722.2
Cobre Panama
30
$
0.1
100,280
$
193.5
Total revenue and GEOs
343,271
$
792.6
474,694
$
915.7
In Q3 2024, we recognized $275.7 million in revenue, down 10.9% from Q3 2023 (up 13.8% excluding Cobre Panama). Revenue in the 2023 period included contributions from Cobre Panama, which remained on preservation and safe management during the current period. During the quarter, we benefited from record gold prices, offset by lower contributions from Candelaria and our Energy assets. Precious Metal revenue accounted for 76.8% of our revenue (64.5% gold, 10.3% silver, 2.0% PGM). Revenue was sourced 81.2% from the Americas (38.3% South America, 8.1% Central America & Mexico, 17.0% U.S. and 17.8% Canada).
Guidance
We benefited from record gold prices in the first nine months of 2024, with revenue exceeding our initial expectations. Our full-year revenue for 2024 is expected to be between $1,050 million and $1,150 million. However, lower than expected gold production at Candelaria and slower ramp-ups at our newly contributing mines have resulted in fewer Precious Metal GEOs than originally anticipated. In addition, record gold prices in the current year have impacted the conversion of our non-gold revenue into GEOs. As a result, we are revising our GEO sales guidance as follows:
2024 Original Guidance1
2024 Revised Guidance2
Total GEOs
480,000 to 540,000
445,000 to 465,000
Precious Metal GEO sales
360,000 to 400,000
340,000 to 360,000
Our original guidance was based on the following assumptions for 2024: $1,950/oz Au, $22.50/oz Ag, $850/oz Pt, $900/oz Pd, $115/tonne Fe 62% CFR China, $75/bbl WTI oil and $2.50/mcf Henry Hub natural gas.
Our revised guidance is based on the following assumptions for the remainder of the year: $2,600/oz Au, $31.00/oz Ag, $950/oz Pt, $1,000/oz Pd, $100/tonne Fe 62% CFR China, $70/bbl WTI oil and $2.50/mcf Henry Hub natural gas.
Environmental, Social and Governance ("ESG") Updates
We continue to rank highly with leading ESG rating agencies. During the quarter, we expanded the Franco-Nevada Diversity Scholarship program by awarding four new diversity scholarships to mining engineering students at University of Toronto, Université du Québec, and École Polytechnique. Franco-Nevada is now providing scholarships to 13 students. We also renewed our funding support for the Enseña Perú education initiative in Peru.
Portfolio Additions
Acquisition of Royalty on Yanacocha Operations: As previously announced, on August 13, 2024, we indirectly acquired from Compañía de Minas Buenaventura ("Buenaventura") and its subsidiary, an existing 1.8% NSR on all minerals covering Newmont's Yanacocha mine and adjacent mineral properties, including Conga, located in Peru. Consideration for the Yanacocha royalty consisted of $210 million paid in cash on closing, plus a contingent payment of $15 million payable in Franco-Nevada common shares payable upon the Conga project achieving commercial production. The acquisition of the Yanacocha royalty was effective July 1, 2024.
Acquisition of Gold Stream on Cascabel Copper-Gold Project: As previously announced, on July 15, 2024, our wholly owned subsidiary, Franco-Nevada (Barbados) Corporation ("FNB") acquired a gold stream from SolGold with reference to production from the Cascabel project located in Ecuador. FNB partnered with Osisko Gold Royalties' subsidiary, Osisko Bermuda Limited ("Osisko"), to participate in the financing package on a 70%/30% basis. FNB will provide a total of $525 million and Osisko a total of $225 million for a total combined funding of $750 million, consisting of $100 million in pre-construction funding and $650 million towards construction once the project is fully funded and further derisked. During the quarter, FNB funded $23.4 million upon closing of the agreement.
Term Loan with EMX Royalty Corporation: As previously announced, on August 9, 2024, we funded a term loan to EMX Royalty Corporation of $35 million. Interest is payable monthly at a rate equal to the 3-Month Term Secured Overnight Financing Rate plus an applicable margin based on EMX's net debt to adjusted EBITDA ratio.
G Mining Ventures Private Placement and Warrants: As previously announced, on July 12, 2024, we completed a private placement of $25 million with G Mining Ventures at a price of C$2.279 per share (equivalent to C$9.116 per share following the merger between G Mining Ventures and Reunion Gold on July 15, 2024). La Mancha Investments S.à r.l. completed a concurrent $25 million private placement resulting in total proceeds to G Mining of $50 million. The placement was related to G Mining Ventures' business combination with Reunion Gold and advancement of the Oko West gold development project in Guyana. Franco-Nevada also holds share purchase warrants which allow the Company to acquire 2,875,000 common shares of G Mining Ventures at a price of C$7.60 for a total cost of C$21.9 million. Franco-Nevada expects to exercise such warrants prior to the accelerated expiry date of December 4, 2024.
Option to Acquire Royalty with Brazil Potash Corp.: Subsequent to quarter-end, on November 1, 2024, we acquired an option from Brazil Potash for $1.0 million to purchase a 4.0% gross revenue royalty on potash produced from Brazil Potash's Autazes project in Brazil.
Q3 2024 Portfolio Updates
Precious Metal assets: GEOs sold from our Precious Metal assets were 84,377, down 32.7% from 125,337 GEOs in Q3 2023, or down 6.6% from 90,370 GEOs when excluding Cobre Panama. Lower contributions from Candelaria and Antapaccay were partly offset by higher GEOs from Subika, and contributions from the recently constructed Tocantinzinho and Greenstone mines and the newly acquired Yanacocha royalty.
South America:
Candelaria (gold and silver stream), GEOs delivered and sold in Q3 2024 were lower than those sold in Q3 2023. In Q2 2024, mining rates were impacted by the interface of the open pit and historic underground mining stopes, requiring more stockpiled ore to be processed which reduced grades and recoveries. While production in the quarter increased due to access to higher grade ore and improved runtime in the SAG mills, Lundin Mining has revised its 2024 annual gold production guidance for Candelaria down to between 92,000 and 102,000 gold ounces (from 100,000 to 110,000 gold ounces previously) due to revised gold grades and expected recoveries for the period. Lundin Mining expects to achieve its original copper production guidance for Candelaria for 2024.
Antapaccay (gold and silver stream), GEOs delivered and sold were lower in Q3 2024 compared to Q3 2023. Mine scheduling was adjusted in part due to a geotechnical event which occurred in Q2 2024 and temporarily limited pit access. Deliveries improved in Q3 2024, and we expect deliveries to be between 50,000 to 60,000 GEOs as originally guided for 2024.
Antamina (22.5% silver stream), GEOs delivered and sold were relatively consistent in Q3 2024 compared to Q3 2023. While throughput and copper production increased compared to the prior year period, silver grades were lower, as expected based on the life of mine plan.
Tocantinzinho (gold stream) – In September 2024, G Mining Ventures announced its Tocantinzinho mine achieved commercial production. The mine is planned to ramp up production through H2 2024, targeting nameplate throughput by Q1 2025. Tocantinzinho is expected to average annual gold production of 174,700 ounces over a 10.5-year mine life and 196,200 ounces for the first five full years. Franco-Nevada received initial deliveries of 1,108 GEOs in Q3 2024.
Yanacocha (1.8% royalty) – Newmont reported higher leach pad production in Q3 2024 as a result of injection leaching. Newmont's production guidance for 2024 for the Yanacocha mine was approximately 290,000 ounces and the mine produced 260,000 gold ounces year-to-date as of the end of September 2024. Franco-Nevada recognized 1,156 GEOs in revenue in Q3 2024.
Cascabel (gold stream and 1% royalty), SolGold continues to report progress on the development of the project, including the receipt in August 2024 of the underground exploration and geotechnical drilling permits.
Salares Norte (1-2% royalties) – Gold Fields reported that following the first gold pour at Salares Norte in March 2024, the plant was temporarily shut down and ramp-up suspended due to severe winter weather conditions. Gold Field's most recent guidance indicated an estimated gold equivalent production for the mine of between 40,000 and 50,000 ounces for 2024 (220,000 and 240,000 ounces initially).
Central America & Mexico:
Cobre Panama (gold and silver stream), Production at Cobre Panama has been halted since November 2023 with mining activities currently on preservation and safe management. During the quarter, President Mulino made public statements to the effect that his government intends to address the Cobre Panama mine in early 2025. An integrated audit of Cobre Panama is also expected to be conducted with international experts to establish a factual basis to aid in decision making for the future of the mine. As disclosed in Q2, 2024, Franco-Nevada filed a request for arbitration to the International Centre for Settlement of Investment Disputes on June 27, 2024. While we continue to pursue these legal remedies, we strongly prefer and hope for a resolution with the State of Panama providing the best outcome for the Panamanian people and all parties involved.
Guadalupe-Palmarejo (50% gold stream), GEOs sold from Guadalupe-Palmarejo in Q3 2024 decreased relative to Q3 2023 due to lower grades.
U.S.:
Stillwater (5% royalty), GEOs from our Stillwater royalty decreased in Q3 2024 compared to Q3 2023. Sibanye-Stillwater announced in September 2024 a further restructuring of its US PGM operations as a result of current PGM prices. Sibanye-Stillwater is now guiding to production of 265,000 PGM ounces starting in 2025. Production guidance for 2024 remains unchanged and is expected to be between 440,000 to 460,000 PGM ounces.
Goldstrike (2-4% royalties & 2.4-6% NPI), GEOs from our Goldstrike royalties decreased in Q3 2024 compared to Q3 2023 due to less open pit stockpile tons from royalty ground being processed through the Goldstrike processing facilities, resulting in lower payments for our royalties.
South Arturo (4-9% royalty) – GEOs from South Arturo increased in Q3 2024 compared to Q3 2023 as royalty payments from the restart of open pit mining are beginning to be received. South Arturo is part of Nevada Gold Mines' Carlin operations.
Canada:
Detour Lake (2% royalty), In June 2024, Agnico Eagle released the results of a technical study reflecting the potential for a concurrent underground operation at Detour Lake that would increase annual production to approximately one million ounces for 14 years starting in 2030. Agnico Eagle expects to commence a two-kilometre exploration ramp in Q1 2025, which will be used collect a bulk sample and to facilitate infill and expansion drilling of the current underground mineral resource.
Macassa (Kirkland Lake) (1.5-5.5% royalty & 20% NPI), GEOs from Macassa were higher in Q3 2024 ...
