Franco Nevada revises targets after First Quantum update

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Franco Nevada Mining Corp. [TSX-FVN,NYSE] is revising its 2023 production targets following an update from its partner First Quantum Minerals Ltd. (TSX-FM) in relation to the company’s open pit copper mine in Panama.

Given the recent curtailment of operations at Cobre Panama and the risk of further disruptions at the mine, Franco-Nevada is adjusting its guidance for 2023 to 480,000 to 500,000 ounces of precious metal gold equivalent ounces (GEOs) and 620,000 to 640,000 total GEOs.

That compares to an earlier target of 490,000 to 530,000 precious metal GEOs and 640,000 to 700,000 total GEOs.

The announcement comes after First Quantum said its Minera Panama SA (MPSA) unit has further ramped down operations at Cobre Panama to one remaining ore processing train.

The disruption to operations is due to an illegal blockade of small boats at the mine’s Punta Rincon port. It said the illegal actions at the port have affected the delivery of supplies for the mine’s on-site power generation plant, which is necessary for full operations and for safe environmental stewardship, including operation and maintenance of the tailings management facility. Without shipments arriving at the port, First Quantum expects to run out of supplies for the power plant during the week commencing November 20, 2023.

If the illegal actions continue to prevent the deliver of supplies necessary to operate the power plant, MPSA is expected to ramp down the remaining processing train this week and temporarily halt production.

Franco Nevada will be affected by any decision to halt production as the Toronto based royalty and streaming company, recently garnered 15% of its revenue in a single quarter from Cobre Panama. Franco-Nevada bears no cost for the production that isn’t delivered the company has said.

First Quantum is a diversified mining company that is engaged in the production of copper, nickel, gold and zinc. It has operating mines in Zambia, Finland, Turkey, Spain and Mauritania.

Cobre Panama is First Quantum’s flagship operation. It 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.

On March 8, 2023, First Quantum and the government of Panama reached an agreement covering terms and conditions for a refreshed concession contract at Cobre Panama. Panama’s government and the mining company agreed on a contract which would guarantee the Central American nation annual income of US$395 million while allowing First Quantum’s local unit to operate the Cobre Panama project, an open pit copper mine for at least 20 years.

However, protesters have criticized both the deal and the mine’s environmental costs, even after Panamanian President Laurentino Cortizo on October 27, 2023, rejected all new mining projects.

Franco-Nevada shares eased 0.62% or $1.03 to $164.13 on Monday and are trading in a 52-week range of $217.70 and $160.34.

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