Franco-Nevada Inks $178 Million Contract
- By Alberto Abaterusso
Franco-Nevada (FNV) has inked an agreement to purchase a certain percentage of Korea Resources Corp for production at Cobre Panama once the project gets underway.
Korea Resources Corp. holds a 10% indirect stake in Cobre Panama and the stream's fixed price is $178 million.
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The terms of the streaming agreement with Korea Resources Corp. are the same as the $178 million agreement that was announced by Franco-Nevada in Sept. 2017. It is related to a 10% interest acquisition of First Quantum Minerals from LS-Nikko Copper.
Franco-Nevada says that it will have streaming interests covering 100% of the Cobre Panama's ownership upon closing the deal. The closing is expected for the end of the current month.
Cobre Panama is one of the world's largest copper, gold and silver deposits, and is currently under construction. As of Franco-Nevada's third quarter 2017 report, the project is about 37% unfinished. For the advancement of the Cobre Panama project, Franco-Nevada has been granted rights on a 136 km extended area.
David Harquail, Franco-Nevada's Chief Executive Officer, commented:
"First Quantum has now substantially de-risked the project and expects to begin phased commissioning in late 2018 with continued ramp-up over 2019. Cobre Panama is expected to add materially to Franco-Nevada's growth profile beginning in 2019."
On Monday, following the news, shares of Franco-Nevada were nearly 3% down to $75.92 per share on the New York Stock Exchange.
For the 52 weeks ending on Monday, the stock gained 17% and outperformed the VanEck Vectors Gold Miners ETF (GDX):
Source: Yahoo Finance
The stock has a market capitalization of $14.55 billion, a price-book (P/B) ratio of 3.08 versus an industry average of 2.01 and an EV-to-EBITDA ratio of 28.02 versus an industry average of 10.14.
Over the 12 trailing months, Franco-Nevada's operations have produced an EbBITDA margin of 69.8% versus an industry median of 22.8%.
Franco-Nevada is currently trading a bit over the 52-week range of $60.10 to $86.06 per share. Analysts foresee a 5.3% upside in the market value of the stock to a price target of $79.91 within the next 52 weeks of trading. The recommendation rating is 2.8 out of 5.
(Disclosure: I don't have any positions in any security mentioned in this article.)
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 5 Warning Signs with FNV. Click here to check it out.
The intrinsic value of FNV
