Franco-Nevada eyes growth despite Panama closure

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Franco Nevada Mining Corp., [FNV-TSX, NYSE] a gold-focused royalty and streaming company with a large portfolio of cash-flow producing assets, reported a net loss of US$466.4 million or $2.43 a share in 2023.

In late, 2023, Franco was challenged by a production halt at First Quantum Minerals Ltd.’s (FM-TSX) Cobre Panama copper mine in Panama. Franco-Nevada was hit hard by the closure decision because it is a partner in the project and recently garnered 15% of its revenue in a single quarter from the open pit copper mine which is located in the Panama jungle, about 120 kilometres west of Panama City.

However, in a press release containing Franco’s 2023 financial results and its 5-year production outlook, Franco-Nevada CEO Paul Brink said the company’s business remains robust as it continues to benefit from a long-duration, diversified portfolio.

“We finished US$1.4 billion in cash and cash equivalents,’’ he said. “The balance of our business performed well in 2023 and is expected to grow in 2024 with contributions from the completion of the Tocantinzinho (Para State Brazil), Greenstone (Ontario) and Salares Norte (Northern Chile) gold mines.’’

As previously disclosed, Cobre Panama has been in preservation and safe management (P&SM) with production halted since November 2023, following protests and Panama President Cortizo’s call for a mining moratorium.

As a result of these events, the company carried out an impairment assessment of its Cobre Panama streams at December 31, 2023 and has recognized a full impairment loss of US$1.17 billion. “This impairment has been taken without prejudice to, or without at present attributing any specific value to, the legal remedies that may be obtained through any arbitration proceedings or otherwise,’’ the company said.

Meanwhile, Franco-Nevada said it assumes that Cobre Panama will remain in P&SM through 2024 and it has not included any contributions from the asset in its production forecasts. This year, the company is forecasting total GEO (gold equivalent ounce) sales (excluding Cobre Panama) of between 480,000 and 540,000, ahead of 498,447 in 2023. Precious metal GEO sales are forecast to be 360,000 to 400,000, this year compared to 359,591 in 2023.

The company expects its portfolio to generate sales of between 540,000 and 600,000 GEOs in 2028, of which 385,000 to 425,000 GEOs are expected to be generated from precious metal assets. This outlook assumes the commencement of production at Valentine Gold (Newfoundland), Stibnite Gold, Eskay Creek (British Columbia), Castle Mountain (California) phase 2 and Copper World (Arizona).

“It includes an expected increase in attributable sales from Vale SA’s [VALE-NYSE] northern and southeastern systems, higher production from Guadalupe-Palmarejo and Antamina (Peru), and continued production from Sudbury through the end of 2023.

Franco-Nevada’s 2023 results were released after the close of trading on March 5, 2024, when the shares closed at $153.01. The shares trade in a 52-week range of $217.70 and $139.18.

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