Franco-Nevada lowers 2023 GEO guidance

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Franco Nevada Mining Corp. [FNV-TSX, NYSE], the Toronto based royalty and streaming company, reported strong fourth quarter and annual results for 2022.

Net income in the fourth quarter was US$165 million or $0.86 per share.

However, the company is warning investors to anticipate lower GEOs (gold equivalent ounces) for the year as current energy prices are below 2022 levels.

“Our diversified assets outperformed due to elevated energy prices in the year,’’ said Franco-Nevada CEO Paul Brink.

He said the company is pleased that First Quantum Minerals Ltd. (FM-TSX) and the government of Panama settled a recent tax dispute related to the Cobre Panama copper mine and have agreed on terms for a refreshed concession contract. Brink also said he looks forward to Cobre Panama achieving its expanded throughput capacity later this year.

Franco-Nevada shares eased 1.3% or $2.35 to $184.07 on volume of 119,190. The shares are currently trading in a 52-week range of $213.36 and $151.07.

Cobre Panama is a huge open-pit copper project located in the Panama jungle, about 120 kilometres west of Panama City and ranks as First Quantum’s key asset.

Cobre Panama is key asset for Franco-Nevada, which garnered 15% of its revenue from the Panamanian copper mine in the third quarter of 2022. Franco-Nevada bears no cost for the production that isn’t delivered the company has said.

Meanwhile, for 2023, Franco-Nevada expects GEO sales from its precious metal assets to range between 490,000 and 530,000 GEOs, consistent with 2022, but total GEO sales are expected to be between 640,000 and 700,000 GEOs a reduction from 2022 primarily based on lower assumed oil and gas prices. With respect to Cobre Panama, based on First Quantum’s most recent 2023 guidance of between 350,000 and 380,000 tonnes of copper, the company’s attributable GEO production would be between 131,000 and 142,000 GEOs.

Following, the restriction of concentrate shipments in February, the company has made a larger allowance for the impact of shipment timing for the year. As a result, the company has estimated that GEOs delivered and sold from Cobre Panama to be between 115,000 and 135,000 GEOs.

The company expects higher production from Anapaccay, MWS and Musselwhite, and initial contributions from new mines, including Magino, Seguela, and Salares Norte, partly offset by anticipated decreases in GEO sales from Antamina, Hemlo and Candelaria.

For its diversified assets, the company is guiding to lower GEOs, reflecting the assumed lower oil and gas prices, partly offset by higher GEO contributions from its iron ore and other mining assets.

For both its 2023 guidance and five-year outlook, when reflecting revenue from gold, silver, platinum, palladium and iron ore, oil and gas commodities to GEOS, the company assumed the following prices: US$1,800 an ounce gold, US$21 an ounce silver, US$900 an ounce platinum, US$1,500 an ounce palladium, US$120 per tonne iron ore, US$80 WTI oil, and US$3.00 per thousand cubic feet Henry Hub natural gas.

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