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Franco-Nevada Corp.

TICKER: FNV:TSX; FNV:NYSE

Franco-Nevada Corporation is a resource royalty and investment company owning a diversified portfolio of precious and base metal royalties, oil and natural gas royalties and other interests. The portfolio includes assets in production, under development or in the exploration phase mostly located in geopolitically secure countries. Franco-Nevada intends to use its free cash flow to expand its portfolio and pay dividends.


The information provided below is from analysts, newsletters and other contributors. Please contact the company and visit its website before making an investment decision.

Expert Comments:

The Gold Report Interview with Jeff Killeen (3/26/14) "Franco-Nevada Corp. has a best-in-class portfolio and management team [of streaming royalty gold companies]. It has lots of cash on its balance sheet to make acquisitions. It has cornerstone assets that will continue to generate free cash flow even if commodity prices drop significantly." More >

Chris Lichtenheldt, Dundee Capital Markets (3/21/14) "Franco-Nevada Corp.'s management reiterated there still remains significant deal potential going forward. With $861M of working capital on the balance sheet at the end of 2013, plus a $500M undrawn credit facility (with $250M 'accordion' available), Franco remains well capitalized. . .Cobre negotiations are ongoing; management expects a resolution in the next couple months, after which the company will begin making capital contributions."

The Gold Report Interview with Cosmos Chiu (2/3/14) "Franco-Nevada Corp. exhibits the ability to excel, even at today's gold price. On the lower end of the cost curve, I like Franco-Nevada; it doesn't really have operating costs at all. It has quite a few accretive acquisition opportunities in the current environment for gold producers. . .Franco-Nevada offers a diversified portfolio. It's everywhere. It's a less risky way to get involved in the gold space, but at the same time get that upside when gold prices go higher." More >

The Gold Report Interview with Adrian Day (1/31/14) "Franco-Nevada Corp. is, in my view, far and away the best [of the royalty companies]. It has great management, a great balance sheet, about $900M in cash and no debt. It has a very broad portfolio of properties. It has royalties on 37 producing mines and more than 300 other, nonproducing royalties." More >

Cosmos Chiu, CIBC World Markets (1/29/14) "First Quantum Ltd. released an update for its Cobre Panama project. From Franco-Nevada Corp.'s perspective, we believe the higher envisioned average life-of-mine production for both gold (up 15%) and silver (up 20%) more than offset the change in timeline to start of production (expected Q4/17 versus 2016 previously). Overall, despite the timeline for Cobre Panama being extended, we believe today's update provides a more definitive roadmap to production, and a net positive for Franco Nevada."

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The Gold Report Interview with Paolo Lostritto (1/8/14) "Our top picks [include] Franco-Nevada Corp. because [it's] generating free cash flow yield even at lower gold prices and because we don't know how long this deflation period may last. . .Franco-Nevada is a bit of a hybrid. It's not the same as owning physical gold. It provides some dividend exposure. It also gives investors torque to the actual underlying commodity, which is another good thing. . .people who are sprinkling a bit of exposure to gold in their portfolio feel more comfortable with larger companies. Franco-Nevada is a larger company and is more defensive than some of the pure torque names with exposure to the cost side of the equation. . .[Franco's deal with Klondex Mines] is the type of deal that you can do in this market where you're tucking in an acquisition. There's a discovery value to being in a camp and having exposure. The real value proposition with owning a company like Franco-Nevada is getting the exploration opportunity without having to use your dollars." More >

Cosmos Chiu, CIBC World Markets (12/17/13) "We believe Franco-Nevada Corp.'s stream acquisition at Teranga Gold Corp.'s operations is a very good one for Franco. . .this stream will provide Franco with immediate cash flow. . .longer term, the Teranga stream is expected to generate organic growth for the Franco-Nevada story."

Alex Terentiew, Raymond James (12/16/13) "Our meeting with David Harquail cemented our opinion on why Franco-Nevada Corp. generally trades at a premium to its peers: 1) an impressive track record to-date building a highly diversified gold-focused royalty and stream portfolio; 2) a top-ranked management team and Board of Directors; 3) continuously growing dividend since its IPO in 2007; and 4) FNV's ability to leverage its expertise and unlevered balance sheet to do transformational deals for cash-strapped miners on attractive terms. . .we believe Franco-Nevada has been the go-to name for lower-risk gold exposure."

Chris Lichtenheldt, Dundee Capital Markets (12/12/13) "Franco-Nevada Corp. and Teranga Gold Corp. jointly announced a US$135M streaming transaction. . .Franco is entitled to the delivery of 22.5 Koz of gold annually over the next six years, followed by 6% of gold production. . .we view this transaction as a good example of Franco's investment style, which is to achieve a relatively assured return of its initial capital, with additional exploration and production potential coming for 'free'. . .we continue to view FNV shares as an attractive vehicle for exposure to gold prices."

Chris Lichtenheldt, Dundee Capital Markets (11/21/13) "In 21 of the 24 years it has been a publicly listed company (1984–2001, 2008–2013), Franco-Nevada Corp. has outperformed the gold producers. . .with its insulated cost structure, superior operational diversity, higher margins and free exploration upside, we expect the company to continue outperforming the average gold producer over the long-term. . .we believe Franco-Nevada has a superior business model and is a suitable investment for investors looking for high-quality exposure to gold prices. . .offering exceptionally high-quality exposure to gold prices, we are initiating coverage of Franco-Nevada with a Buy rating."

Ana Komnenic, Mining.com (11/6/13) "Franco-Nevada Corp., the world's largest gold royalty company, has reported net profits of $35.5M for Q3/13, a jump of nearly $15M on the previous reporting period, bringing its profits back in line with Q1/13. . .since Q2/13, the company has added more than 20 new royalties to its portfolio, most recently Kirkland Lake Gold Inc."

The Gold Report Interview with Adrian Day (9/11/13) "A company like Franco-Nevada Corp., which with a $6.5B market cap is the largest royalty company, has a very low-risk business model. The royalty companies make an investment, and once they do they're not responsible for anything going wrong. . .take a company like Franco-Nevada. It is the best of this type of company, with an 86% pre-tax margin. It's got $900M in cash with an unused line of credit and no debt—a beautiful company. Is it worth paying the premium? I say yes. . .Franco has lots of potential that is not factored into the company's projections or the stock price. For example, Franco has an option to buy a royalty on Taseko Mines Ltd., whose New Prosperity mine has been severely challenged by environmental problems. Once Taseko gets the permits, Franco will buy the royalty. If it doesn't get the permits, Franco won't buy the royalty—there's a lot of upside there." More >

The Gold Report Interview with Chris Mancini (8/19/13) "I like royalty and streaming companies [like] Franco-Nevada Corp. . .[it has] access to cash, [is] cash-flow generative [and has] royalty or streaming rights to lower-cost mines, which really aren't at much risk of coming offline in the lower gold-price environment. Franco-Nevada bought a royalty on Pretium Resources' Brucejack deposit in British Columbia. It bought a royalty on Midas Gold Corp.'s Golden Meadows deposit in Idaho. . .Franco-Nevada [is our] second-largest holding. We've held it since its IPO. Franco is able to benefit in good times because companies expand and also find more gold, but it doesn't have to put up any capital. And it has the ability to capitalize during the bad times by picking up some good royalties and good properties at very good valuations, which is what it has done in the past couple of quarters." More >

The Gold Report Interview with David H. Smith (6/19/13) David Smith: Franco-Nevada Corp. [is an] established, well-managed company with good cash hoards. [Dividend-paying companies] like Franco-Nevada could make the bedrock holding of a portfolio because they can keep giving you some extra profit vitamins while you're waiting for the share prices to turn around. A lot of times the dividend can be more reflective of the company's viability than the current share price.

TGR: As of March 31, 2013, Franco-Nevada had $867M in working capital, another $60M in marketable securities and about $500M in a credit facility that they haven't used. Any idea how that cash might be used?

DS: I'm sure Franco-Nevada is looking for undervalued acquisitions, extra streaming possibilities. People like Franco-Nevada's President Pierre Lassonde tend to make decisions that really make sense under the circumstances. The fact that the company is holding on to its money and focusing on getting costs down is what investors want to see. Companies like Franco-Nevada know how to solve problems. More >

The Gold Report Interview with Frank Holmes and Brian Hicks (6/7/13) "Some of the silver stocks are showing increased capacity for dividends, more free cash flow and low cash-flow multiples. One of my favorites is Franco-Nevada Corp. It pays a monthly dividend, higher than what you can make on a five-year government note. It has high profit margins, and management is very disciplined about its return-on-capital model." More >

Cosmos Chiu, CIBC World Markets (5/7/13) "We have fine-tuned our model ahead of the quarter to reflect actual commodity prices and to incorporate actual production results for assets from which Franco-Nevada Corp. derives royalty revenue. Overall, the performances of the underlying assets have been tracking reasonably well. . .2013 guidance provided last quarter was for 215–235 Koz Au eq (inclusive of 100–110 Koz from various stream agreements) with an additional $55M–65M in oil and gas revenue. We continue to believe guidance is on the conservative side. Higher royalty revenues are expected in 2013 from a number of the company's gold royalties, including Detour Lake, Gold Quarry, Hemlo NPI and Duketon, and from its oil and gas assets. Franco-Nevada remains a top pick in the precious metals space, with a strong balance sheet and steady cash flow generation."

The Gold Report Interview with Greg Orrell (4/24/13) "We own a couple of the big royalty companies in our portfolio [like] Franco-Nevada Corp. The company [has] committed significant dollars to individual projects of late. . .however, with the diversification of [its] asset base at this point, it should not be a problem. [Franco-Nevada is] positioned to grow revenues substantially over the next three years. Overall, I do like the royalty model." More >

The Gold Report Interview with Greg Dorsey (4/17/13) "We are bullish on Franco-Nevada Corp. If you look at it just on a price/earnings basis, you will scratch your head and wonder why you would pay up for something trading 30 times earnings. But the company has done an incredible job of sussing out good properties. It puts up money to advance mine development and it streams for the life of the project. . .I think precious metals represents about 90% of its revenue right now, but Franco wants to move into other commodities. . .Cobre Panama could be a big winner for Franco in the next decade." More >

The Gold Report Interview with Adrian Day (4/5/13) "Most of the royalty companies do have a certain amount of their revenue from non-gold. Franco-Nevada Corp. has a royalty on Stillwater Mining Co., which is PGM. . .Gold Royalties signed an agreement with Franco-Nevada whereby Franco has the right to participate in up to 50% in certain royalties that Gold Royalties comes across. It's as great deal for Franco because it can increase its royalty portfolio without putting the time or the people into looking for small royalties. . .if you're interested in seniors, look at Franco-Nevada." More >

The Gold Report Interview with Jordan Roy-Byrne (3/25/13) "We first bought Franco-Nevada Corp. in October 2011 at $35/share. It was a very strong stock that had corrected and appeared to have bottomed. Franco-Nevada went up to $60/share recently, but it's had a severe correction because of a huge amount of redemptions. It's about $46/share, about 20% off its high. It has cash-flow growth, and it's consistently leveraged to the bull market. Now is the time to buy. It's a no brainer. That's what I'm looking for. Don't buy the strong stocks when they are making all-time highs. Buy them after they've corrected, when they offer value." More >

David Haughton, BMO Capital Markets (2/26/13) "Franco-Nevada Corp. will soon start accepting royalty payments in kind, notably from Detour Gold Corp., which should be reflected in a 'Gold Accumulation Account' in upcoming financial statements. . .key near-term growth assets include Detour, which is expected to ramp up production in 2013, and Tasiast, which is completing a feasibility study for a major expansion. . .Franco-Nevada also has more than $1B in capital available for future acquisitions."

The Gold Report Interview with Paolo Lostritto (1/23/13) "I follow Franco-Nevada Corp. . . There's definitely an attraction to the royalty model, which was pioneered by the founders of Franco-Nevada. There is a lot less risk, yet the shares still give you exposure to exploration upside. . . a company like Franco-Nevada just finished spending $1B on the Cobre Panama project with very little short-term impact on its share price. We believe the asset will eventually start to improve the share price as it gets closer to generating cash flow. It's very difficult to move the needle for larger royalty companies and as such they try and focus on longer-life assets or assets they believe have exploration upside." More >

Tanya Jakusconek, Scotia Capital (12/14/12) "Franco-Nevada Corp. has a streaming deal on Inmet Mining Corporation's Cobre Panama property where Inmet announced that it increased gold reserves by 47%. . .the addition of reserves adds nine years to the initial 31-year mine life under the initial mine plan. . .the addition of reserves is positive for Franco-Nevada."

The Gold Report Interview with Ralph Aldis (11/30/12) "You have to give the royalty companies some serious thought. They are insulated from capital cost increases, at least on the cost-structure side. Franco-Nevada Corp. . .has done very well." More >

The Gold Report Interview with Adrian Day (11/26/12) "Franco-Nevada Corp. is my favorite. It has $1.2B in cash on the balance sheet. It generates over $300M of free cash flow each year. Earnings should double in the next three years absent any new acquisition, and absent any increase in the price of gold. Earnings will double in three years just from the new royalties coming onstream. So I'm a big fan of the royalties as core holdings." More >

Morning Coffee (11/8/12) "It was a busy 24 hours for Franco-Nevada Corp. after the company announced a new royalty stream, Q3/12 earnings and a boost to its dividend. . .Franco-Nevada agreed to acquire an approximate 11.7% net royalty interest in the Weyburn Oil Unit from Penn West Petroleum Ltd. for $400M in cash. . .next up for the company was its Q3/12 results that saw it report adjusted net income of $0.31/share on revenue of $105.2M. . .Franco-Nevada also announced that it was boosting its monthly dividend by 20% to $0.06."

Michael Jalonen, Bank of America Merrill Lynch (11/7/12) "Franco-Nevada Corp. announced the purchase of an 11.7% net royalty interest (NRI) in the Weyburn Oil Unit for CA$400M in cash from Penn West; current production levels are 26 Mbblpd medium-grade, slightly sour crude. The reserve life index based on 2P reserves is more than 20 years. . .we estimate the NRI can generate around $43M of new revenue for the company."

Tanya Jakusconek, Scotia Capital (11/7/12) "Franco-Nevada Corp.'s Q3/12 was stronger than our estimates. The difference was in higher revenue (mainly at Goldstrike and Weyburn), lower operating costs and a lower tax rate than our modeling. . .the company increased its dividend by 20% to $0.72/share (annual) from $0.60/share; a monthly dividend of $0.06 per share was declared."

The Gold Report Interview with Cosmos Chiu (11/2/12) "To analyze royalty companies well, you need to understand the underlying contracts and the underlying mines. We have an advantage because we cover most of these underlying mines that actually pay a royalty to companies like Franco-Nevada Corp. . .at this time, I have Sector Outperformer ratings on Franco-Nevada and Silver Wheaton." More >

The Gold Report Interview with Jordan Roy-Byrne (10/8/12) "I love the royalty companies like Franco-Nevada Corp. I would definitely look at [the stock] if we get a pullback in October." More >

The Gold Report Interview with David Christensen (9/19/12) "The royalty sector is one of the stronger business models in the precious metals space, and. . .Franco-Nevada Corp. [is one of] the two big players. They have historically been phenomenal companies in the portfolio. We are very long-term shareholders in those names." More >

The Gold Report Interview with David Morgan (8/29/12) "Franco-Nevada Corp. has compounded about 20% a year. It's run by some of the smartest people in the business and the company has a ton of cash. Franco-Nevada knows how to inject cash into certain projects so it gets a royalty stream and upside on top of the royalty stream. It's now listed on the New York Stock Exchange." More >

Tanya Jakusconek, Scotia Capital (8/10/12) "Two acquisitions are positive for Franco-Nevada Corp.: AngloGold Ashanti Ltd. has agreed to acquire Mine Waste Solutions Ltd. for $335M. . .Franco-Nevada will receive 25% of all gold produced through the plant, including the AngloGold tailings, until it has received 312,500 oz gold. . .Gold One International Ltd. agreed to acquire the Ezulwini mine for $70M. Franco-Nevada will continue to receive its 7% gold stream."

The Gold Report Interview with Adrian Day (8/1/12) "By far, Franco-Nevada Corp. [is my favorite large-cap gold company]. It's not the cheapest, but I like the model. It's a royalty company, and royalties tend to be low risk; they also give you exposure to the upside through production increases and exploration success. Franco-Nevada has top management, $1B in cash on the balance sheet, diversified assets and a very good pipeline. Its recent revenue increases have come from the increase in the price of gold, and also from acquisitions. Interestingly, they've also come from old legacy assets that are finally generating revenue. Some of these are new properties coming into production, on which Franco-Nevada has a royalty, so it starts earning money. But they're also net profit royalties rather than net smelter. Finally, the mine becomes profitable so it starts earning some money from the royalty. Franco-Nevada has about 210–220 mineral assets, not counting oil and gas, about 40 of which are currently producing. CEO David Harquail said that another 24 of them have 'reasonable potential' to commence production in the next five years." More >

Bob Kirtley, SK Options Trading (7/10/12) "If Franco-Nevada Corp. can continue the growth in earnings it has already achieved in its brief existence, the current price will be bid much higher. Expect this growth to come primarily from the 20 advanced-stage assets it currently holds. . .although this stock is far from cheap, the potential exists for huge growth in earnings."

The Gold Report Interview with Frank Barbera (5/21/12) "You have the royalty companies that look attractive, like Franco-Nevada Corp. . . Franco-Nevada is a blue-chip company. It has stellar leadership in Pierre Lassonde, who built up the company from nothing years ago. It has an outstanding portfolio and an enticing balance sheet. Franco-Nevada has resisted this particular downdraft. Large-cap, senior companies like Barrick, Newmont or Goldcorp have seen 30–40% declines in the last few months. Franco-Nevada has basically held even. I believe that Franco-Nevada today is the kind a truly great growth story on the order of some of the best growth stocks we have seen in the last few decades." More >

Jordan Roy-Byrne, The Daily Gold (5/10/12) "Franco-Nevada Corp. shares continue to perform beautifully in a difficult environment. Look for a range from $40–46 over the next few months. It will take some more consolidation but we expect shares to make a significant breakout sometime in the next four months."

David Haughton, BMO Nesbitt Burns (5/8/12) "Franco-Nevada Corp. reported Q1/12 adjusted net income of $43.6M, or $0.31/share, in line with consensus of $0.31/share, but ahead of our estimate at $0.26/share. . .in Q1/12, the company generated revenue of $105M with 89% derived from precious metals (72% gold; 17% platinum group metals), 10% from oil and gas and 1% from other minerals, which is well ahead of the 70% corporate target for the precious metals mix and suggests scope for more diversification ahead."

Anita Soni, Credit Suisse (5/8/12) "Franco-Nevada Corp.'s Q1/12 adjusted EPS of $0.31 is largely in line with consensus. . .the company has balance-sheet flexibility with $912.2M in net cash: Franco-Nevada indicated that it will not lower its gold exposure below an 80% threshold, and reiterated its commitment to remaining primarily a gold royalty company. . .the company maintained revenue guidance of $430–460M. Franco-Nevada is well poised to meet that, running 2% below the required quarterly run rate with many royalties expected to come on-line in H2/12."

The Gold Report Interview with Paolo Lostritto (4/30/12) "Development mining companies that have run out of options will be looking to do a deal out of necessity. We believe there are more opportunities for activity involving royalty and streaming companies. This is a perfect environment for companies like Franco-Nevada Corp., Sandstorm Gold Ltd. . .it opens the door for them to get involved with development projects that may otherwise have been supported by the equity markets." More >

The Gold Report Interview with Matt Badiali (4/25/12) "Royalty companies are my favorite. I love them. The really big, safe ones are the best, [like] Franco-Nevada Corp. . .These companies have 50 to 80 royalty streams. If their royalty stream on one mine ends, it is just a dimple in their revenue stream. Most of these royalty companies could survive 10 losses with only a modest hit to their revenue. . .they have very diluted political and mine-specific risk." More >

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