From Scotia this MorningLabrador Iron Ore Royalty Corp. Franco-Nevada Discloses 9.9% Equity Stake
OUR TAKE: Positive.
Franco-Nevada (FNV-T) disclosed that it has accumulated a total of 6.3 million common shares of LIF-T, representing a 9.9% equity stake. FNV-T is now LIF-T's largest shareholder. The position was acquired over several years for a total investment of $93M (or $14.72 per share).
We note that in addition to FNV-T, fellow royalty companies Altius Minerals (ALS-T) and Anglo Pacific (APF-L) currently own 4.5% and 1.6% respective equity stakes in LIF-T as per their most recent disclosures (collectively, the three royalty companies own 16.0% of LIF-T). Although FNV-T noted that it has no intention of increasing its position at current prices, we view this disclosure as a positive development for LIF-T shares.
LIF-T shares are trading at a P/NAV8% of 1.21x based on our relatively conservative Fe price deck. However, based on our spot Fe 8% NAVPS of $115.28, the shares are currently trading at a P/NAV of only 0.33x. Given that Fe prices remain very elevated (62%/65% Fe spot prices are at US$178/t and US$212/t), we continue to see material upside risk to our near-term dividend estimates for LIF-T.