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Franco-Nevada Corporation Message Board

  • investora2z investora2z Jun 15, 2013 8:38 AM Flag

    May remain rangebound

    There is relative stability amongst gold stocks. The sentiments are still having a clear downward bias, but the utter gloom is not that prominent. This can change pretty quickly if gold prices crack, but till that time a range bound trade scenario is likely for most stocks in the sector. Franco-Nevada is around 14% above its recent lows and has done slightly better than some stocks in the sector. The analysts do prefer royalty / streaming companies to the mining companies because the risk is higher in those companies. The consensus price target for the stock is around $54 which is more than 35% away from the current market price. However, this looks nearly impossible right now. If the prices of precious metals stabilize over next few months, then there may be a little more confidence in the stocks from this sector. Many believe that the crash in prices over the last few months has already factored most of the negatives for the sector. So there have been acquisitions, and even Franco-Nevada acquired royalty rights in a company recently. There are reports that it may do more such deals in the near future. Coeur D'Alene also hinted at some acquisitions of smaller companies in Nevada. It already has a 5% stake in Pershing Gold Corporation (PGLC) which is expected to start production in 2014. In a recent interview, Franco-Nevada Chairman had stated that the companies had gotten a bit carried away when the prices of gold were at the highs. They started mining lower and for lower grades which ultimately prove to be costly when the prices crashed. He believes that the Gold prices will rebound when the currencies correct in values. But at that time, there will surely be other things to worry about. The problem for Franco also lies in the valuations. It is trading at a forward P/E of 32 which is high as compared with the peers.

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