Mr. David Harquail reports
FRANCO-NEVADA REPORTS STRONG Q1 2016 RESULTS AND INCREASES QUARTERLY DIVIDEND
Franco-Nevada Corp. has released its financial results for the first quarter of 2016. All figures are in U.S. dollars unless noted, and highlights include:
-
Record 106,621 gold equivalent ounces, a 25-per-cent increase over the first quarter of 2015;
- Record $132-million in revenue, a 21-per-cent increase;
- Net income of $30-million, or 18 cents per share;
- Adjusted net income of $28-million, or 17 cents per share;
- Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $103.7-million, or 62 cents per share;
- $500-million acquisition of a precious metals stream with reference to production from Antapaccay;
- $883.5-million of net proceeds raised through a bought deal equity financing;
- Quarterly dividend increased 4.8 per cent to 22 cents per share.
"Franco-Nevada's recent investments at Antamina and Antapaccay helped generate the record quarterly gold equivalent ounces and revenue results," stated David Harquail, chief executive officer. "These investments have further strengthened and diversified our portfolio with long-duration quality assets. Thanks to the support of our investors, Franco-Nevada was able to raise equity financing and is again debt free. The company now has over $186-million in cash and short-term investments, and $1-billion in available credit facilities, so is well positioned to continue to grow the portfolio. I am particularly proud that Franco-Nevada has today raised its dividend for the ninth consecutive year since its IPO (initial public offering). This speaks to the strength of the portfolio and the business model."
REVENUES AND GEOS BY ASSET CATEGORIES
For the three months For the three months
ended March 31, 2016 ended March 31, 2015
Revenue (in millions) GEOs (No.) Revenue (in millions) GEOs (No.)
Precious metals
Gold $91.5 76,753 $86.1 70,511
Silver 26.8 22,627 5.6 4,676
Platinum group metals 7.6 5,196 9.7 7,983
----- ------- ----- ------
Precious metals -- total $125.9 104,576 $101.4 83,170
----- ------- ----- ------
Other minerals 2.5 2,045 2.3 1,911
Oil and gas 3.6 5.5
----- ------- ----- ------
$132.0 106,621 $109.2 85,081
===== ======= ===== ======
For the first quarter of 2016, revenue was sourced 95 per cent from precious metals (69 per cent gold, 20 per cent silver and 6 per cent platinum group metals) and 82 per cent from the Americas (13 per cent United States, 16 per cent Canada and 53 per cent Latin America). Costs and expenses increased due to higher depletion and cost of sales as a result of the recent Antamina and Antapaccay acquisitions. Oil and gas production levels were stable while associated revenue was down slightly year over year due to lower average oil and gas prices. Cash provided by operating activities before changes to working capital was $99.4-million.
Corporate updates:
- Antapaccay: On Feb. 26, 2016, Franco-Nevada acquired for $500-million a precious metals stream from Glencore PLC with reference to production from the Antapaccay mine located in Peru.
-
Equity financing: On Feb. 19, 2016, Franco-Nevada completed a bought deal financing with a syndicate of underwriters for 19.2 million common shares at $47.85 per common share. Net proceeds were $883.5-million. As the existing shelf prospectus was mostly utilized, a new $2-billion shelf prospectus was filed on May 2, 2016.
-
Debt repayment: In March, all outstanding debt balances were repaid. At the end of the quarter, Franco-Nevada had $186-million in cash and short-term investments and $1-billion in available credit facilities.
Portfolio updates:
-
Precious metals -- U.S.: Gold equivalent ounces from U.S. precious metals assets were essentially unchanged year over year with increases from Goldstrike largely offsetting decreases at Stillwater and Gold Quarry. The South Arturo project currently being advanced by joint venture partners Barrick Gold and Premier Gold Mines is expected to contribute later in 2016. Klondex Mines is reporting exploration success at Fire Creek where Franco-Nevada has a 2.5-per-cent royalty. Franco-Nevada has agreed to restructure its existing royalties at the Castle Mountain gold project into a single 2.65-per-cent royalty covering a larger property.
-
Precious metals -- Canada: Gold equivalent ounces from Canadian precious metals assets decreased, compared with the first quarter 2015, with higher contributions from Detour Lake, Hemlo and Musselwhite being more than offset by a weaker quarter from Sudbury due to PGM prices. Operatorship of several Canadian royalties moved into stronger hands with Lake Shore Gold being acquired by Tahoe Resources and St Andrew Goldfields by Kirkland Lake Gold.
-
Precious metals -- Latin America: Gold equivalent ounces from Latin American precious metals assets increased substantially as a result of the recent investments in Antamina and Antapaccay. Antamina delivered 17,781 gold equivalent ounces while Antapaccay delivered 8,918 gold equivalent ounces. The Antapaccay precious metals stream was acquired during the quarter, and the gold equivalent ounces received reflects only two months of deliveries during a seasonably weak period. Candelaria also had a strong quarter, and Lundin Mining has revised its guidance higher for 2016. The Cobre Panama project continues to advance, and Franco-Nevada expects to advance $25-million to $35-million in the second quarter.
-
Precious metals -- rest of world: Gold equivalent ounces from rest-of-world precious metals assets decreased slightly year over year mainly due to timing of deliveries from the Sabodala fixed-ounce obligation. Karma contributed an initial 1,250 gold equivalent ounces in the quarter with 12,500 gold equivalent ounces scheduled to be delivered in 2016. True Gold, the previous operator of the Karma mine, was acquired by Endeavour Mining subsequent to quarter-end. Kinross has announced it is proceeding with a phase one expansion of the Tasiast mine, on which Franco-Nevada has a 2-per-cent royalty, which it expects will increase average production to 409,000 ounces per annum from 2018 to 2027. Kinross also indicated that it is studying a larger phase two expansion which could result in even-higher production.
-
Oil and gas: Revenue from oil and gas assets was $3.6-million in the first quarter of 2016, compared with $5.5-million in the first quarter of 2015. Most of the decrease in revenue is attributable to lower realized oil prices.
Dividend declaration
Franco-Nevada is pleased to announce that its board of directors has declared a quarterly dividend of 22 cents per share. The dividend is a 4.8-per-cent increase from the previous 21-cent-per-share quarterly dividend and marks the ninth consecutive annual dividend increase for Franco-Nevada shareholders. Canadian investors in Franco-Nevada's IPO in December, 2007, are now receiving an effective 7.3-per-cent yield on their cost base.
The dividend will be paid on June 30, 2016, to shareholders of record on June 16, 2016. The Canadian-dollar equivalent is determined based on the noon rate posted by the Bank of Canada on May 3, 2016. Under Canadian tax legislation, Canadian resident individuals who receive eligible dividends are entitled to an enhanced gross-up and dividend tax credit on such dividends.
The company adopted a dividend reinvestment plan (DRIP) commencing with the October, 2013, dividend. Participation in the DRIP is optional. The company will issue the additional common shares through treasury at a 3-per-cent discount to the average market price, as defined in the DRIP. However, the company may, from time to time, in its discretion, change or eliminate the discount applicable to treasury acquisitions or direct that such common shares be purchased in market acquisitions at the prevailing market price, any of which would be publicly announced. The DRIP and enrolment forms are available on the company's website. Registered shareholders may also enroll in the DRIP on-line through the plan agent's self-service web portal on the company's website. Beneficial shareholders should contact their financial intermediary to arrange enrolment.
Shareholder information
The complete condensed interim consolidated financial statements and management's discussion and analysis can be found today on Franco-Nevada's website, on SEDAR and on EDGAR.
Management will host a conference call tomorrow on Thursday, May 5, 2016, at 8:30 a.m. Eastern Time to review Franco-Nevada's 2016 first quarter results.
Interested investors are invited to participate as follows via conference call:
Toll-free: 888-231-8191
International: 647-427-7450
The conference call replay is available until May 12:
Toll-free: 855-859-2056
International: 416-849-0833
Passcode: 91205248
Webcast: A live audio webcast will be accessible on the company's website.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(in millions of U.S. dollars, except per-share amounts)
For the three months
ended March 31,
2016 2015
Revenue $132 $109.2
Costs and expenses
Costs of sales 24.4 22.4
Depletion and depreciation 65.5 51.7
Impairment of royalty, stream and working interests - 0.1
Corporate administration 5.4 4.1
Business development 0.3 0.5
---- -----
95.6 78.8
---- -----
Operating income 36.4 30.4
Foreign exchange gain (loss) and other income (expenses) 1.9 (2.6)
Income before finance items and income taxes 38.3 27.8
Finance items
Finance income 1.1 0.8
Finance expenses (1.3) (0.4)
Net income before income taxes 38.1 28.2
Income tax expense 8.1 9
---- -----
Net income $30 $19.2
---- -----
Other comprehensive income (loss)
Items that may be reclassified subsequently to profit and (loss)
Unrealized gain (loss) in market value of available-for-sale 15.8 (6.7)
investments, net of income tax of $200,000 (2015 income tax
recovery of $1.1-million)
Realized change in market value of available-for-sale (1.5) -
investments
Currency translation adjustment 49.5 (89.2)
Other comprehensive income (loss) 63.8 (95.9)
---- -----
Total comprehensive income (loss) $93.8 $(76.7)
---- -----
Basic earnings per share $0.18 $0.12
Diluted earnings per share $0.18 $0.12
We seek Safe Harbor.
© 2024 Canjex Publishing Ltd. All rights reserved.