This miner beat analysts’ estimates by $0.05 last quarter and in the last 30 days, 10 analysts have increase their EPS estimates for this year.
Franco-Nevada (FNV)
From Adrian Day’s Global Analyst
Franco-Nevada (FNV) had another outstanding quarter, and has outperformed its peers handily this year. Significant development: it has invested for an additional 10% interest in Cobre Panama, the large copper deposit under construction by First Quantum, with commissioning scheduled for the second half of next year. The financing was in syndication with a unit of CK Hutchison of Hong Kong. Although the syndication was small, Franco used the deal to work through the details of such financing, so it is prepared for a larger deal.
Cobre now represents nearly 15% of Franco’s NAV, its largest single assets. The next two represent around 10% each; oil &gas in total is nearly 17% after the addition of two more relatively small assets. It has a total of 47 producing royalties and streams.
Franco also said it was confident in the structure it uses for offshore transactions, commenting (without names) on the dispute Wheaton has with the Canadian tax authorities. Assuming the same fact pattern, it would owe $10 million to $15 million for existing deals, an insignificant amount for Franco, though any negative ruling going forward would hit future revenues meaningfully. The company has $630 million in working capital, with available capital of $1.6 billion and no debt.
This is the one to own. We repeat what we have said many times: if you are to own only one gold company and hold it for a while, Franco is that company without question. While clearly demonstrating growth potential, it also has one of the lowest risk profiles of any gold stock. One analyst headed its recent report on the company, “Commanding the safe haven bid”. While we would not see today’s price—up from under $70 in early July—as a particularly bargain price to add to positions, nor for a trade, if you do not own, it’s as good as any.
Adrian Day, Adrian Day’s Global Analyst, www.adriandayglobalanalyst.com, 410-224-8885, November 11, 2017