Franco-Nevada Corporation Q3 FY2025 earnings call

Key Points - Paul Brink highlighted record quarterly results driven by high gold prices, strong operations, new acquisitions, and sale of Cobre Panama stockpiles. The company made 6 acquisitions of significant gold interests over 18 months, with 3 already producing. - Progress at Cobre Panama included concentrate shipments, power plant pre-commissioning, and environmental audit work, with constructive comments from the President of Panama on resolving the mine closure. - The company was debt-free by quarter end, having funded acquisitions with cash flow and equity sales. - Sandip Rana mentioned total GEOs sold increased 26%, revenue up 77% to a record, and adjusted EBITDA up 81%. Benefited from recent acquisitions, Cobre Panama, Guadalupe, Candelaria, and new mines. - CRA settlement achieved, resolving tax dispute for Mexican and Barbadian subsidiaries with no Canada tax payment required for the period 2013-2019.

For the third quarter, 85% of Franco-Nevada's revenue was derived from precious metals. Total GEOs sold increased by 26% to 138,772 compared to the third quarter of 2024. Revenue reached a record $487.7 million, with adjusted EBITDA at $427.3 million, an 81% increase year-over-year. The company had $236.7 million in cash and cash equivalents at quarter end and was debt-free by quarter end. Key assets like Cobre Panama, Guadalupe, Candelaria, and recent acquisitions contributed to the results, with the company recording its first full quarter of revenue from Porcupine and Côté.

Guidance - Based on GEOs sold to date and Q4 expectations, total GEOs sold guidance was narrowed to 495,000-525,000 (originally 465,000-525,000). - Precious metal GEOs sold guidance was revised to 420,000-440,000 (originally 385,000-425,000) due to asset performance and contributions from Cobre Panama and Côté. - The company expects roughly 50% growth in GEOs over 5 years compared to last year, with long-term assets adding sustainable production.

Risks - Potential regulatory challenges with Cobre Panama mine restart, including delays in environmental audits or permitting processes. - Uncertainty around ownership changes affecting NPIs like Hemlo, where visibility into mining operations is limited. - Volatility in commodity prices could impact organic growth and deal opportunities.

Q: On the deal pipeline, can you talk a little bit more about the commodity focus?

A: Paul Brink stated the #1 commodity focus is precious metals, with a strong gold deal pipeline. While gold prices are high, the company has room for diversified deals if attractive opportunities arise. Australia is being targeted with a new team member, and there's good potential for growing business there.

Q: On the NPIs, how much visibility do you have in terms of what's being mined from the different areas into Q4 and potentially into 2026?

A: Sandip Rana said visibility is limited as mine plans are set at the start of the year, but Barrick's sale of Hemlo is encouraging, and new ownership may bring improvements. For Musselwhite, visibility is limited with payments occurring after year-end, and numbers are conservative.

Q: On the transaction environment in precious metals, are opportunities still in the $100 million to $500 million range?

A: Eaun Gray replied opportunities are still in that range, with good potential in asset sales and project financings, and the competitive landscape hasn't seen a noticeable change despite higher gold prices.

Q: On Argentina as a mining jurisdiction, what are current views?

A: Paul Brink mentioned San Jorge in Mendoza is encouraged by new RIGI program, and Taca Taca is hopeful for progress. Sandip Rana noted Taca Taca and San Jorge contribute around 5,000 GEOs to 2029 guidance.