Franco-Nevada Corp T.FNV

Alternate Symbol(s): FNV

Metals & Mining Gold

Franco-Nevada Corporation is a Canada-based gold-focused royalty and streaming company with a diversified portfolio of cash-flow producing assets. The Company's business model provides investors with gold price and exploration optionality while limiting exposure to cost inflation. The Company is debt-free and uses its free cash flow to expand its portfolio and pay dividends. Its segments include Mining and Energy. The Company owns a portfolio of royalty, stream and working interests, covering properties at various stages, from production to early exploration located in South America, Central America and Mexico, United States, Canada, Australia, Europe and Africa. It invests in various commodities, including gold, silver, platinum group metals (PGM), iron ore, other mining assets, oil, gas and natural gas liquids (NGL). Its portfolio consists of approximately 419 assets covering 66,000 square kilometers (km2).

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Franco-Nevada Corp

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Post by retiredcfon Mar 12, 2021 3:29pm

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Post# 32787388

TD

Franco-Nevada Corp.

(FNV-N, FNV-T) US$118.69 | C$148.80

Condestable and Haynesville Add to Current Revenue Event

We have updated our model for Q4/20 financials, 2021 guidance, and operational updates.

Impact: POSITIVE

Adjusting our estimates for the new royalties at Condestable and Haynesville and operational updates (including Hemlo and Gold Quarry), our NAV-5% estimate has increased by 7% to $47.86 (from $44.71).
FNV is projecting 2021 GEOs of 555-585 kozs (TD: 579 kozs) and 600-630 kozs by 2025. The 2025 target includes a number of projects (Hardrock and Valentine Lake) that we do not model.
2021 energy revenue is expected to be $115mm-$135mm based on a WTI oil price of $55/bbl. 2025 energy revenue guidance is $150mm-$170mm.
FNV closed a $165mm precious metals stream on gold and silver production from the Condestable mine, an operating underground copper-gold-silver mine near Lima, Peru. The operation has a 15+ year mine life; over the first 10 years of the stream agreement, we estimate that FNV will receive ~13k GEOs per year. Based on TD's gold/silver price deck, we estimate an IRR of ~3%, assuming a 15-year mine life (~4.5% on a 20-year mine life).
The Condestable stream agreement includes a buy-down option. For a period of four years and subject to certain restrictions, the mine owner may, at its option, make a one-time special delivery of gold equal to $118.8mm (at the then current spot price), subject to the 20% ongoing payment, at which point the stream will drop from 63% of precious metals produced to 25%. Otherwise, the stream remains at 63% for the initial 10 years of the agreement, before declining to 25%. We estimate that if the owner elects to exercise the buy-down option within the first four years, it will substantially boost FNV's implied IRR.
In late-December, FNV acquired a royalty portfolio in the Haynesville natural- gas play for $135mm. Q4/20 royalty revenue of $4.2mm is expected to be representative of the 2021 revenue run-rate. The portfolio is projected to have an inventory capable of supporting 12 years of revenue at the current run-rate, followed by a slow decline (minus 5-10% per year) over 10-15 years. We estimate an IRR of ~11%.

TD Investment Conclusion

Our BUY recommendation and US$170.00 target price remain unchanged.