U.S. Markets closed

Franco-Nevada Reports 2018 Results

(in U.S. dollars unless otherwise noted)

TORONTO , March 19, 2019 /CNW/ - "Franco-Nevada's largest investment, Cobre Panama, has now begun milling ore. Along with improved production from a number of our key assets, we expect very good growth in our gold equivalent ounces over the next five years.  We are also seeing an increasing number of gold investment opportunities and have already added several smaller gold royalties this year," stated David Harquail , CEO. "Last year, our U.S. energy royalties substantially exceeded our expectations.  We expect these assets will continue to grow over the next five years."

2018 Financial Highlights

  • 447,902 Gold Equivalent Ounces1 (GEOs) sold
  • $653.2 million in revenue
  • $105.2 million in Cash Costs2 attributable to GEO production, or $239 per GEO
  • $519.6 million of Adjusted EBITDA3, or $2.79 per share
  • $139.0 million of net income, or $0.75 per share
  • $217.0 million of Adjusted Net Income4, or $1.17 per share
  • $177.8 million of cash and DRIP dividends paid


Q4/2018 Financial Highlights

  • 104,877 GEOs sold
  • $148.2 million in revenue
  • $21.5 million in Cash Costs2, or $208 per GEO
  • $118.7 million of Adjusted EBITDA3, or $0.64 per share
  • $31.3 million of net loss, or $0.17 per share, reflecting impairment charges of $75.4 million on the Sudbury assets
  • $44.7 million of Adjusted Net Income4, or $0.24 per share













 Revenue and GEOs by Asset Categories



2018


2017



GEOs


Revenue


GEOs


Revenue



#


(in millions)


#


(in millions)

Gold


344,107



$435.8


371,440



$467.2

Silver


61,737



78.2


77,426



98.1

PGMs


30,946



39.1


34,520



44.5

Other Mining Assets


11,112



14.0


14,359



18.2

Mining


447,902



$567.1


497,745



$628.0

Energy




86.1




47.0



447,902



$653.2


497,745



$675.0

                                    












 Revenue and GEOs by Asset Categories



Q4/2018


Q4/2017



GEOs


Revenue


GEOs


Revenue



#


(in millions)


#


(in millions)

Gold


79,623



$98.3


88,954



$113.4

Silver


12,895



16.1


18,843



24.1

PGMs


8,830



11.2


8,977



11.7

Other Mining Assets


3,529



4.4


3,065



4.0

Mining


104,877



$130.0


119,839



$153.2

Energy




18.2




14.0



104,877



$148.2


119,839



$167.2

 

For Q4/2018, revenue was sourced 87.7% from gold and gold equivalents (66.3% gold, 10.9% silver, 7.6% PGM and 2.9% other mining assets) and 12.3% from energy (oil, gas and NGLs). The portfolio is actively managed to maintain a focus on precious metals (gold, silver and PGM) with a target of no more than 20% from energy. Geographically, revenue was sourced 79.0% from the Americas (35.6% Latin America , 25.0% U.S. and 18.4% Canada ). Operating costs and expenses decreased year-over-year, reflecting lower stream ounce deliveries.

Corporate Updates

  • Salares Norte: On January 31, 2019 , Franco-Nevada, through a wholly-owned Chilean subsidiary, acquired an existing 2% NSR on Gold Fields' Salares Norte gold project in the Atacama region of northern Chile for $32.0 million , comprised of $27.0 million of Franco-Nevada common shares (366,499 common shares) and $5.0 million in cash. Gold Fields has an option to buy back 1% of the NSR for $6.0 million within 24 months of commercial production.
  • Valentine Lake : On February 21, 2019 , Franco-Nevada acquired a 2% NSR on Marathon Gold Corporation's ("Marathon") Valentine Lake Gold Camp in central Newfoundland for C$18.0 million . Marathon has an option to buy back 0.5% of the NSR for $7.0 million until December 31, 2022 .


2019 Guidance

In 2019, Franco-Nevada expects attributable royalty and stream production to total 465,000 to 500,000 GEOs from its mining assets and revenue of $70 to $85 million from its energy assets. Of the royalty and stream production from mining assets, 305,000 to 335,000 GEOs are expected from Franco-Nevada's various stream agreements. For 2019 guidance, silver, platinum and palladium metals have been converted to GEOs using assumed commodity prices of $1,300 /oz Au, $15.25 /oz Ag, $825 /oz Pt and $1,500 /oz Pd. The WTI oil price is assumed to average $55 per barrel. The Company estimates depletion expense of $295 to $325 million .  2019 guidance and 5-year outlook below is based on public forecasts and other disclosure by the third-party owners and operators of our assets or our assessment thereof.

5-Year Outlook

Our outlook to 2023 assumes that the Cobre Panama project will have reached its initial 85 million tonnes per year mill throughput capacity before 2023 with no additional expansion. Using the same commodity price assumptions as were used for our 2019 guidance (see above) and assuming no other acquisitions, Franco-Nevada expects its existing portfolio to produce between 570,000 to 610,000 GEOs by 2023. Energy revenues at the same $55 per barrel WTI oil price assumption are expected to range between $140 to $160 million , and assumes all of the committed capital for the Continental Royalty Acquisition Venture is funded.

Q4/2018 Portfolio Updates

  • Mining — Latin America : GEOs from Latin American mining assets decreased in Q4/2018 to 42,435 GEOs compared with 60,568 GEOs in Q4/2017. Reduced deliveries from Candelaria and Guadalupe-Palmarejo had the largest impact.
  • Mining — U.S.: GEOs from U.S. mining assets increased by 9.2% in Q4/2018 compared with Q4/2017 mainly due to higher payments from Goldstrike and Bald Mountain. GEOs received from the U.S. mining assets were 21,244 GEOs.
  • Mining — Canada : GEOs from Canadian mining assets decreased slightly in Q4/2018 to 16,066 GEOs compared with Q4/2017 mainly due to reduced payments from Sudbury and Golden Highway.
  • Mining — Rest of World: GEOs from Rest of World mining assets were 25,132 GEOs during the quarter, a 7.1% increase compared to Q4/2017 as increased production from Subika and Tasiast positively impacted the quarter.
  • Energy: Revenue from the energy assets increased to $18.2 million in Q4/2018 compared to $14.0 million in Q4/2017, reflecting the additional contributions from our new investments in the SCOOP/STACK and positive year-over-year production from the Permian Basin interests. This was partially offset by lower revenue from our Canadian assets which were negatively impacted by price differentials and other factors.


Shareholder Information

The complete Consolidated Annual Financial Statements and Management's Discussion and Analysis can be found today on Franco‑Nevada's website at www.franco-nevada.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. In addition, Franco-Nevada has released its 2019 Asset Handbook and 2019 Environmental, Social and Governance (ESG) Report with updated disclosures on our assets and ESG related initiatives.

Management will host a conference call tomorrow, Wednesday, March 20, 2019 at 10:00 a.m. Eastern Time to review Franco‑Nevada's 2018 results, as well as discuss its 2019 and five-year outlook.

Interested investors are invited to participate as follows:

  • Via Conference Call: Toll-Free: (888) 390-0546; International: (416) 764-8688
  • Conference Call Replay until March 27 : Toll-Free (888) 390-0541; International (416) 764-8677; Code 656929#
  • Webcast: A live audio webcast will be accessible at www.franco-nevada.com


Corporate Summary

Franco-Nevada Corporation is the leading gold-focused royalty and stream company with the largest and most diversified portfolio of cash-flow producing assets.  Its business model provides investors with gold price and exploration optionality while limiting exposure to many of the risks of operating companies.  Franco-Nevada has a strong balance sheet and uses its free cash flow to expand its portfolio and pay dividends.  It trades under the symbol FNV on both the Toronto and New York stock exchanges.  Franco-Nevada is the gold investment that works.

Forward Looking Statements

This press release contains "forward looking information" and "forward looking statements" within the meaning of applicable Canadian securities laws and the United States Private Securities Litigation Reform Act of 1995, respectively, which may include, but are not limited to, statements with respect to future events or future performance, management's expectations regarding Franco-Nevada's growth, results of operations, estimated future revenues, carrying value of assets, future dividends and requirements for additional capital, mineral reserve and mineral resource estimates, production estimates, production costs and revenue, future demand for and prices of commodities, expected mining sequences, business prospects and opportunities, audits being conducted by the Canada Revenue Agency and available remedies, and the remedies relating to and consequences of the ruling of the Supreme Court of Panama in relation to the Cobre Panama project. In addition, statements (including data in tables) relating to reserves and resources and gold equivalent ounces ("GEOs") are forward looking statements, as they involve implied assessment, based on certain estimates and assumptions, and no assurance can be given that the estimates and assumptions are accurate and that such reserves and resources and GEOs will be realized. Such forward looking statements reflect management's current beliefs and are based on information currently available to management. Often, but not always, forward looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budgets", "scheduled", "estimates", "forecasts", "predicts", "projects", "intends", "targets", "aims", "anticipates" or "believes" or variations (including negative variations) of such words and phrases or may be identified by statements to the effect that certain actions "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Forward looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Franco-Nevada to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. A number of factors could cause actual events or results to differ materially from any forward looking statement, including, without limitation: fluctuations in the prices of the primary commodities that drive royalty and stream revenue (gold, platinum group metals, copper, nickel, uranium, silver, iron-ore and oil and gas); fluctuations in the value of the Canadian and Australian dollar, Mexican peso, and any other currency in which revenue is generated, relative to the U.S. dollar; changes in national and local government legislation, including permitting and licensing regimes and taxation policies and the enforcement thereof; regulatory,  political or economic developments in any of the countries where properties in which Franco-Nevada holds a royalty, stream or other interest are located or through which they are held; risks related to the operators of the properties in which Franco-Nevada holds a royalty, stream or other interest, including changes in the ownership and control of such operators; influence of macroeconomic developments; business opportunities that become available to, or are pursued by Franco-Nevada; reduced access to debt and equity capital; litigation; title, permit or license disputes related to interests on any of the properties in which Franco-Nevada holds a royalty, stream or other interest; whether or not the Corporation is determined to have "passive foreign investment company" ("PFIC") status as defined in Section 1297 of the United States Internal Revenue Code of 1986, as amended; potential changes in Canadian tax treatment of offshore streams; excessive cost escalation as well as development, permitting, infrastructure, operating or technical difficulties on any of the properties in which Franco-Nevada holds a royalty, stream or other interest; actual mineral content may differ from the reserves and resources contained in technical reports; rate and timing of production differences from resource estimates, other technical reports and mine plans; risks and hazards associated with the business of development and mining on any of the properties in which Franco-Nevada holds a royalty, stream or other interest, including, but not limited to unusual or unexpected geological and metallurgical conditions, slope failures or cave-ins, flooding and other natural disasters, terrorism, civil unrest or an outbreak of contagious diseases; and the integration of acquired assets. The forward looking statements contained in this press release are based upon assumptions management believes to be reasonable, including, without limitation: the ongoing operation of the properties in which Franco-Nevada holds a royalty, stream or other interest by the owners or operators of such properties in a manner consistent with past practice; the accuracy of public statements and disclosures made by the owners or operators of such underlying properties; no material adverse change in the market price of the commodities that underlie the asset portfolio; the Corporation's ongoing income and assets relating to determination of its PFIC status; no material changes to existing tax treatment; no adverse development in respect of any significant property in which Franco-Nevada holds a royalty, stream or other interest; the accuracy of publicly disclosed expectations for the development of underlying properties that are not yet in production; integration of acquired assets; the expected application of tax laws and regulations by taxation authorities; the expected assessment and outcome of any audit by any taxation authority; and the absence of any other factors that could cause actions, events or results to differ from those anticipated, estimated or intended. However, there can be no assurance that forward looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Investors are cautioned that forward looking statements are not guarantees of future performance. Franco- Nevada cannot assure investors that actual results will be consistent with these forward looking statements and investors should not place undue reliance on forward looking statements due to the inherent uncertainty therein. For additional information with respect to risks, uncertainties and assumptions, please refer to the "Risk Factors" section of Franco-Nevada's most recent Annual Information Form filed with the Canadian securities regulatory authorities on www.sedar.com and Franco-Nevada's most recent Annual Report filed on Form 40-F filed with the SEC on www.sec.gov. The forward looking statements herein are made as of the date of this press release only and Franco-Nevada does not assume any obligation to update or revise them to reflect new information, estimates or opinions, future events or results or otherwise, except as required by applicable law.

NON-IFRS MEASURES:  Cash Costs, Adjusted EBITDA, and Adjusted Net Income are intended to provide additional information only and do not have any standardized meaning prescribed under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.  These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS.  Other companies may calculate these measures differently. For a reconciliation of these measures to various IFRS measures, please see below or the Company's current MD&A disclosure found on the Company's website, on SEDAR and on EDGAR. Comparative information has been recalculated to conform to current presentation.

  1. GEOs include our gold, silver, platinum, palladium and other mining assets. GEOs are estimated on a gross basis for NSR royalties and, in the case of stream ounces, before the payment of the per ounce contractual price paid by the Company. For NPI royalties, GEOs are calculated taking into account the NPI economics. Platinum, palladium, silver and other minerals are converted to GEOs by dividing associated revenue, which includes settlement adjustments, by the relevant gold price. The gold price used in the computation of GEOs earned from a particular asset varies depending on the royalty or stream agreement, which may make reference to the market price realized by the operator, or the average for the month, quarter, or year in which the mineral was produced or sold. For Q4/2018, the average commodity prices were as follows: $1,228 gold (2017 - $1,274 ), $14.55 silver (2017 - $16.70 ), $822 platinum (2017 - $920 ) and $1,157 palladium (2017 - $993 ).  For 2018, the average commodity prices were as follows: $1,268 gold (2017 - $1,257 ), $15.71 silver (2017 - $17.05 ), $881 platinum (2017 - $948 ) and $1,028 palladium (2017 - $870 ).
  2. Cash Costs attributable to GEO production and Cash Costs per GEO are non-IFRS financial measures. Cash Costs attributable to GEO production is calculated by starting with total costs of sale and excluding depletion and depreciation, costs not related to GEO production such as our Energy operating costs, and other non-cash costs of sales such as costs related to our prepaid gold purchase agreement. Cash Costs is then divided by GEOs sold, excluding prepaid ounces, to arrive at Cash Costs per GEO.
  3. Adjusted EBITDA and Adjusted EBITDA per share are non-IFRS financial measures, which exclude the following from net income and earnings per share ("EPS"): income tax expense/recovery; finance expenses; finance income; depletion and depreciation; non-cash costs of sales; impairment charges related to royalty, stream and working interests and investments; gains/losses on sale of royalty interests; gains/losses on investments; and foreign exchange gains/losses and other income/expenses.
  4. Adjusted Net Income and Adjusted Net Income per share are non-IFRS financial measures, which exclude the following from net income and EPS: foreign exchange gains/losses and other income/expenses; impairment charges related to royalty, stream and working interests and investments; gains/losses on sale of royalty interests; gains/losses on investments; unusual non-recurring items; and the impact of income taxes on these items.


Reconciliation to IFRS measures:
















For the three months ended

For the year ended



December 31, 


December 31, 

(expressed in millions, except per GEO amounts)


2018


2017


2018


2017

Total costs of sales


$

86.3


$

99.0


$

365.9


$

415.0

Less: Depletion and depletion



(61.5)



(63.8)



(247.7)



(273.0)

Less: Energy operating costs



(1.9)



(1.2)



(5.9)



(4.6)

Less: Non-cash costs of sales



(1.4)



(3.0)



(7.1)



(7.7)

Cash Costs attributable to GEO production


$

21.5


$

31.0


$

105.2


$

129.7

GEOs, excluding prepaid ounces



103,344



116,506



439,902



489,077

Cash Costs per GEO


$

208


$

266


$

239


$

265

 
















For the three months ended


For the year ended



December 31, 


December 31, 

(expressed in millions, except per share amounts)


2018


2017


2018


2017

Net Income


$

(31.3)


$

43.5


$

139.0


$

194.7

Income tax expense



11.7



16.9



50.1



41.3

Finance expenses



2.2



1.0



4.6



3.4

Finance income



(0.7)



(1.8)



(3.1)



(5.4)

Depletion and depreciation



61.5



63.8



247.7



273.0

Non-cash costs of sales



1.4



3.0



7.1



7.7

Impairment of royalty, stream and working interests



76.0





76.0



Impairment of investments





4.5





4.5

Gain on investments





(2.0)





(2.0)

Foreign exchange (gains)/losses and other (income)/expenses



(2.1)



(0.9)



(1.8)



(1.1)

Adjusted EBITDA


$

118.7


$

128.0


$

519.6


$

516.1

Basic weighted average shares outstanding



186.4



185.5



186.1



182.9

Adjusted EBITDA per share


$

0.64


$

0.69


$

2.79


$

2.82

 
















For the three months ended

For the year ended



December 31, 


December 31, 

(expressed in millions, except per share amounts)


2018


2017


2018


2017

Net Income


$

(31.3)


$

43.5


$

139.0


$

194.7

Foreign exchange (gains)/losses and other (income)/expenses



(2.1)



(2.7)



(1.8)



(2.9)

Impairment of royalty, stream and working interests



76.0





76.0



Impairment of investments





4.5





4.5

Tax effect of adjustments



(0.3)



1.0



(0.6)



(0.1)

Other tax related adjustments:













Valuation allowance









0.1

Utilization of tax attributes for which no deferred tax asset was previously recognized





(1.3)





(5.1)

Barbados Tax Reform impact



2.4





2.4



U.S. Tax Reform impact





7.1



2.0



7.1

Adjusted Net Income


$

44.7


$

52.1


$

217.0


$

198.3

Basic weighted average shares outstanding



186.4



185.5



186.1



182.9

Adjusted Net Income per share


$

0.24


$

0.28


$

1.17


$

1.08

 

FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions of U.S. dollars)











At December 31, 



At December 31, 



2018



2017

ASSETS








Cash and cash equivalents (Note 5)


$

69.7



$

511.1

Receivables



75.5




65.9

Prepaid expenses and other (Note 7)



33.3




39.4

Current assets



178.5




616.4









Royalty, stream and working interests, net (Note 8)



4,555.6




3,939.2

Investments (Note 6)



169.7




203.1

Deferred income tax assets



17.3




14.5

Other assets (Note 9)



10.7




15.2

Total assets


$

4,931.8



$

4,788.4









LIABILITIES








Accounts payable and accrued liabilities (Note 10)


$

23.6



$

21.5

Current income tax liabilities



1.4




1.1

Current liabilities



25.0




22.6









Debt (Note 13)



207.6




Deferred income tax liabilities



67.3




60.3

Total liabilities



299.9




82.9









SHAREHOLDERS' EQUITY (Note 18)








Share capital



5,158.3




5,107.8

Contributed surplus



15.6




14.2

Deficit



(321.7)




(310.0)

Accumulated other comprehensive loss



(220.3)




(106.5)

Total shareholders' equity



4,631.9




4,705.5

Total liabilities and shareholders' equity


$

4,931.8



$

4,788.4

















Commitments and Contingencies (Notes 20 and 21)








Subsequent events (Note 23)








 

The accompanying notes are an integral part of these consolidated financial statements and can be found in our 2018 Annual
Report available on our website

FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in millions of U.S. dollars, except per share amounts)












2018



2017


Revenue (Note 14)


$

653.2



$

675.0











Cost of sales









Costs of sales (Note 15)



118.2




142.0


Depletion and depreciation



247.7




273.0


Total costs of sales



365.9




415.0


Gross profit



287.3




260.0











Other operating expenses (income)









General and administrative expenses



22.6




24.9


Impairment of royalty, streams and working interests (Note 8)



76.0





Gain on sale of gold bullion



(0.1)




(0.3)


Total other operating expenses (income)



98.5




24.6


Operating income



188.8




235.4


Foreign exchange gain and other income (expenses)



1.8




1.1


Realized gain on investments






2.0


Impairment of investments






(4.5)


Income before finance items and income taxes



190.6




234.0











Finance items









Finance income



3.1




5.4


Finance expenses



(4.6)




(3.4)


Net income before income taxes



189.1




236.0











Income tax expense (Note 17)



50.1




41.3


Net income


$

139.0



$

194.7











Other comprehensive (loss) income


















Items that may be reclassified subsequently to profit and loss:









Changes in the fair value of available-for-sale investments, net of income









 tax (Note 6)






38.4


Reclassification for realized loss in fair value of available-for-sale investments (Note 6)






2.4


Currency translation adjustment



(68.3)




77.2











Items that will not be reclassified subsequently to profit and loss:









Changes in the fair value of equity investments at fair value through other









comprehensive income, net of income tax (Note 6)



(18.4)





Other comprehensive (loss) income



(86.7)




118.0











Comprehensive income


$

52.3



$

312.7


Basic earnings per share (Note 19)


$

0.75



$

1.06


Diluted earnings per share (Note 19)


$

0.75



$

1.06


 

The accompanying notes are an integral part of these consolidated financial statements and can be found in our 2018 Annual
Report available on our website

FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of U.S. dollars)












2018



2017


Cash flows from operating activities









Net income


$

139.0



$

194.7


Adjustments to reconcile net income to net cash provided by operating activities:









Depletion and depreciation



247.7




273.0


Non-cash costs of sales



7.1




7.7


Share-based payments



5.2




4.6


Impairment of royalty, stream and working interests



76.0





Unrealized foreign exchange gain



(0.4)




(1.7)


Gain on investments






(2.0)


Impairment of investments






4.5


Deferred income tax expense



10.0




21.8


Other non-cash items



(1.1)




(1.9)


Acquisition of gold bullion



(25.6)




(24.1)


Proceeds from sale of gold bullion



12.5




19.0


Operating cash flows before changes in non-cash working capital



470.4




495.6


Changes in non-cash working capital:









(Increase) decrease in receivables



(9.6)




5.2


Decrease in prepaid expenses and other



11.6




3.3


Increase (decrease) in current liabilities



2.4




(15.5)


Net cash provided by operating activities



474.8




488.6











Cash flows from investing activities









Acquisition of royalty, stream and working interests



(988.0)




(499.5)


Acquisition of energy well equipment



(1.6)




(1.7)


Proceeds from sale of investments



0.9




12.6


Acquisition of investments






(12.3)


Net cash used in investing activities



(988.7)




(500.9)











Cash flows from financing activities









Proceeds from draw of credit facilities



237.0





Repayment of credit facility



(27.0)





Credit facility amendment costs



(0.5)




(1.0)


Payment of dividends



(136.1)




(125.8)


Proceeds from exercise of warrants






356.4


Proceeds from exercise of stock options



4.2




10.1


Net cash provided by financing activities



77.6




239.7


Effect of exchange rate changes on cash and cash equivalents



(5.1)




30.7


Net change in cash and cash equivalents



(441.4)




258.1


Cash and cash equivalents at beginning of period



511.1




253.0


Cash and cash equivalents at end of period


$

69.7



$

511.1











Supplemental cash flow information:









Cash paid for interest expense and loan standby fees


$

3.7



$

2.4


Income taxes paid


$

28.5



$

38.2


 

The accompanying notes are an integral part of these consolidated financial statements and can be found in our 2018 Annual
Report available on our website

Cision

View original content:http://www.prnewswire.com/news-releases/franco-nevada-reports-2018-results-300815093.html

SOURCE Franco-Nevada Corporation


View original content: http://www.newswire.ca/en/releases/archive/March2019/19/c5780.html