Franco-Nevada Q4 2024 Earnings Call Transcript

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Provided by Quartr
March 10, 2025

There are 14 speakers on the call.

Operator

Good morning, and welcome to Franco Nevada Corporation's twenty twenty four Year End Results Conference Call and Webcast. This call is being recorded on 03/10/2025.

Speaker 1

At this time, all lines are in a

Operator

listen only mode. Following the presentation, we will conduct a Q and A session where you may ask a question through the phone line or webcast. If you are joining by webcast, you may submit a written question for the Q and A session at any time during this call by typing your question I would now like to turn the conference over to your host, Candida Hayden, Senior Analyst, Investor Relations. Please go ahead.

Speaker 2

Thank you, Joanna. Good morning, everyone. Thank you for joining us today to discuss Franco Nevada's year end twenty twenty four results. Accompanying this call is a presentation, which is available on our website at franconevada.com, where you will also find our full financial results. The presentation is also available to view on the webcast.

Speaker 2

During our call this morning, Paul Brink, President and CEO of Franco Nevada will provide introductory remarks followed by Sandeep Barana, Chief Financial Officer, who will provide a brief review of our results. This will be followed by a Q and A period. Our full executive team is available to answer any questions. Participants may submit questions via the telephone or via the webcast. We would like to remind participants that some of today's commentary may contain forward looking information and we refer you to our detailed cautionary note on Slide two of this presentation.

Speaker 2

I will now turn over the call to Paul Brink, President and CEO of Franco Nevada.

Speaker 1

Thanks, Candida. Good morning. First of all, welcome to Daniel Melchuck, who joined our Board in January. Daniel is an experienced director and spent much of his executive career at BHP, including roles heading operations in The Americas, running the copper, aluminum and nickel and manganese businesses and heading the exploration division. Daniel is Chilean based out of Santiago, and I'm sure will add valuable perspectives on many of the assets and the countries in which we invest.

Speaker 1

We ended the year well with a strong fourth quarter. Geo sales for the year were near the top end of our revised geo guidance range. For the tailwind from rising gold prices, we had higher quarterly revenue, adjusted EBITDA and adjusted net income compared to Q4 twenty twenty three, even without a contribution from corporate Panama. Twenty twenty four was the most active year in our history for business development. Ian and the team entered into more than $1,300,000,000 in acquisitions and commitments during the year.

Speaker 1

Transactions included a Goldstream investment in Castellan, Ecuador, a royalty on the Ancocho gold mine in Peru and a principally Goldstream on Sabania's Westland PGM operations in South Africa. All of them high quality ore bodies with potential to be very long life mines. One of our largest portfolio successes in 2024 was the completion of construction and commercial operation of Toca De Zinho in Brazil, where we have a 12.5% gold stream. No surprise, the mine built by the G Mining team was on time and on budget. Rather than just providing stream financing, Frank and Varda is the financial backer of G Men Ventures, having provided stream, debt and equity components.

Speaker 1

BZ is only the first of many mines GMEN will build and frankly, highest strong financial banking for the full year. In January, we announced a second partnership based on the same principles, a financing package that's discovered Silvers acquisition of Newmont's pork pine complex in Timmins, including a royalty credit facility and banking for their equity raise. Tony and the Kuch and team are absolutely the right group to revitalize the pulp line assets and realize the tremendous potential that still remains in the camp. This is possibly only the first move to consolidate operations in the camp And with financial backing from Franco, Discovery is well positioned for those next steps. The acquisitions over the last twelve months have the potential to add 85,000 to 95,000 geos per annum in medium term production profile, almost all gold ounces.

Speaker 1

With these new additions, along with organic growth from our existing portfolio, these drive the growth outlined in our 2025 guidance and outlook for the next five years. For 2025, the new contributions from Sabania's Western Lumber Operations and Port Puy Pine and full year contributions from Yanacocha, DZ, Greenstone and Salaras Norte will have a big impact. Some of the highlights for the longer term outlook are higher silver contributions from Antamina and new gold ounces from the start up of Ballantine Gold, Cascade Creek and Stipeline Gold. With Sandeep's management of our balance sheet, all the acquisitions were or will be when the discovery deal closes, from our cash balances, and we'll still have no debt and a substantial cash balance. Our growing operating cash flows also allowed us to increase dividends for the eighteenth consecutive time in January.

Speaker 1

Cumulative dividends since IPO are now greater than $2,500,000,000 Our business development team could do the break offs over the activity in the last twelve months, but I don't think that's going to happen. We have actual opportunities that could add more attractive assets this year. Finally, I'm very encouraged by the developments in Panama. President Molino has indicated a willingness to discuss corporate Panama this year and sentiment in Panama now appears more supportive of restarting.

Speaker 3

I

Speaker 1

think there are good odds we'll see positive progress this year. With that, I'll hand the call over to Sandy.

Speaker 4

Thank you, Paul. Good morning, everyone. As Paul mentioned, Franco Nevada ended the year with a strong fourth quarter, which was the result of both strong production from our asset base and higher precious metal prices. Precious metal prices with gold in particular reached record highs in 2024. On Slide four, you will see the comparison of commodity prices for both fourth quarter and full year 2024.

Speaker 4

Gold and silver prices increased significantly for both periods with gold higher by 34.7% in the quarter and 22.9% for the year. Prices for palladium, iron ore and oil continue to be volatile and were lower year over year. Slide five provides a recap of the company's performance against the revised guidance provided for last year. The updated guidance for 2024 provided for a range of 445,000 to 465,000 total deals sold. Of this total, the company guided 340,000 to 360,000 precious metal deals with the balance being from diversified assets.

Speaker 4

With the strong finish to end the year, the company ended the year with 463,334 geos sold, which was near the top end of the guidance range. We were also at the top end of the guidance range for precious metals with three fifty five geos to two eighty geos sold. The diversified assets, which include our non precious metal mining assets and energy assets resulted in just over 108,000 geos sold per year. I'd like to point out that the revenue generated from our diversified assets was actually in line with our expectations for the year. However, with a 37% higher average gold price in 2024 than our 1950 blended gold price when converting to geos sold that actually resulted in the per loss of 21,000 geos than if the gold price had remained at our budget prices.

Speaker 4

Turning to Slide six, you'll see the 2023 and twenty twenty four fourth quarter comparisons for geo sold revenue and adjusted EBITDA. Total geo sold were 120,063 in fourth quarter compared to 152,351 in fourth quarter twenty twenty three. Precious metal geos sold in fourth quarter twenty twenty four were $95,565 higher by 5% compared to prior year when excluding Correvam. For the fourth quarter, we received strong contributions from Candelaria and benefited from the continued ramp up of new mines tokens in EO and Greenstone. Candelaria delivered 26,891 geos for the quarter, which was almost 70% higher than prior year and twice as many geos as Q3 twenty twenty four.

Speaker 4

Diversified geos sold were $24,298 for the quarter compared to $32,770 for prior year despite diversified revenue being flat year over year. The approximate 8,000 geos sold difference is due to the impact of GEO conversion using higher book prices. Total revenue for the quarter was $321,000,000 compared to $303,300,000 last year, a 5.8% increase. Precious metals accounted for 79% of revenue. Adjusted EBITDA was 9% higher for the quarter at $277,400,000 compared to $254,600,000 in fourth quarter twenty twenty three.

Speaker 4

As you turn to Slide seven, you'll see a new measure that we have presented in our year end financial results. It is called net geos. As we look at our royalty and streaming business, we think it's important to evaluate contributions from assets based on margin contribution and not necessarily top line measures. Royalty geos are higher margin geos as there is minimal cost associated with each GO sold versus a stream for an ongoing fixed payment is required. The measure net GOs removes the cost of sales component for all GOs so that all GOs sold are represented after costs.

Speaker 4

For Q4 twenty twenty four, net geos were $107,140 for Franco Nevada compared to $129,527 in Q4 twenty twenty three. Slide eight highlights the key financial metrics used by the company. As mentioned, total geos sold were $120,063 generating $321,000,000 in revenue in fourth quarter. With respect to costs, we did have a decrease in cost of sales compared to Q4 twenty twenty three due to less stream ounces sold, which is predominantly related to the absence of Cobre Panama. Depletion decreased to $60,000,000 versus $68,900,000 a year ago.

Speaker 4

Depletion is based on actual mining geos sold and barrels of oil equivalent received on the energy side of the business. As we received less geos from Cobre Panama and Antipakai, this impacted depletion as those assets are higher per ounce depletion assets. Adjusted net income was $183,300,000 or $0.95 per share for the quarter, up 65% respectively versus prior year. Slide nine highlights the continued diversification of the portfolio. 76.5% of our full year 2024 revenue was generated by precious metals with revenue being sourced 83.9% from The Americas.

Speaker 4

Our largest contributor to revenue was Candelaria at 14.6% for the full year. Slide 10 illustrates the strength of our business model to generate high margins. For full year 2024, cash cost per geo, which is essentially cost of sales divided by gold equivalent ounces sold is $278 per Geo. This compares to $286 per Geo in 2023. For the quarter, the cash cost per ounce was $287 compared to $296 in fourth quarter twenty twenty three.

Speaker 4

As the gold price has risen, Franco Nevada has seen a significant increase in our margin per GEO. Margin was $2,375 per GEO in Q4 twenty twenty four. We've always stated that in a rising commodity price environment, we expect to benefit fully as the cost per geo sold should not increase significantly. With respect to the company's geo sold guidance for 2025, please refer to Slide 11. For 2025, we are guiding total geosold of between 465,000 to 525,000, which is a 7% increase over 2024.

Speaker 4

If we use constant pricing between 2025 and 2024, the increase would be 13% year over year. On this range, we are guiding 385,000 to 425,000 precious metal geos for the year. This is a 14% increase in precious metal geos over 2020. The overall main drivers for geos year over year are for precious metals will benefit from contributions from recent acquisitions. Savania Western Limb Mining Operation Stream, Porcupine Complex Royalty and Yanacocha Loti.

Speaker 4

We will continue to benefit from the ramp up of new mines that began production in 2024, so Continuio, Greenstone and Solaris Norte and we will begin to receive initial ounces from the currently under construction Ballantyne Gold Mine in the second half of twenty twenty five. Please note, we will no longer be receiving gold ounces from Mine Waste Solutions as the cap was reached in October 2024. Our guidance has been calculated using $2,800 per ounce for gold, dollars 31 for silver, dollars $9.50 platinum, dollars $9.50 for palladium and $100 iron ore. Obviously, prices are volatile and as they change, it will impact the conversion of non gold commodities to geos. On the energy side, we're using a price of $70 per barrel WTI and $3 MCF natural gas.

Speaker 4

Using our budgeted gold price of $2,800 per ounce and the midpoint of our total GEOs guidance range, we expect a 25% increase in 2025 revenue over 2024. Also with respect to timing, we do expect to see better performance as the year progresses, so a stronger second half is expected. As we look forward over the next few years, we do forecast 2028 as the current high for geos sold based upon the information we have to date. For 2029, our outlook is 490,000 to 550,000 geos sold. Of this range, precious metals will be 375,000 to 415,000 geos.

Speaker 4

Main contributors will be higher production from Antamina due to access to higher grade ore based on the latest mine plan, full year contributions from Valentine Gold and new mine starts from Stib Knight Gold, SK III, Castle Mountain and Copperwort. We've also assumed the startup of Taka Taka with a partial year contribution. We assume mine expansions for Candelaria, Coricoeico and Antepakay and Magino. For the energy assets, we do assume an increase in production over the next five years resulting in an increase in geos. Also, we've held energy prices flat at $70 a barrel WTI and $3 in MCS natural gas.

Speaker 4

Overall, when you look at the outlook for geos sold, the company has approximately 12% built in organic growth from 2024 to 2029 at budgeted commodity prices, excluding Cobre Panama. This also assumes that no additional assets are added to the portfolio. Please note that for all outlook ranges, we have excluded Cobre Panama in our geo sold numbers. At Cobre Panama remained in production, we would have expected deliveries and sales of between 280,000 geos. One additional item to note with the legal proceedings that will move forward related to Cobre Panama, we're expecting to incur annual costs of approximately $10,000,000 per year.

Speaker 4

These costs will continue to be disclosed separately in our financials. Slide 13 summarizes the financial resources available to the company When including our credit facility of $1,000,000,000 total available capital at December 31 was $2,400,000,000 After year end, we have funded the $500,000,000 Subania Western Limb Complex acquisition and expect to fund the Port Klein royalty acquisition during second quarter. The company remains well capitalized to continue to add long lived high quality assets to the portfolio. And now I'll pass it over to Jonah and we're happy to answer any questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. The first question comes from Lawson Winder at Bank of America Securities. Please go ahead.

Speaker 3

Yes. Thank you very much, operator, and good morning, Paul and Sandeep. Wanted to start off with a couple of questions on cobra petima, if I might. So one would be just related to President Molino and some comments that he's made publicly, President Molino of Panama. He indicated that he would require all arbitrations to be halted prior to entering into discussions with First Quantum.

Speaker 3

I just wanted to confirm that that also included the Franco arbitration. And does Franco have the ability to put its arbitration on hold or just temporarily put it temporarily put it aside in order to facilitate those negotiations if needed?

Speaker 1

Thank you, Paul.

Speaker 5

A couple of things there, yes,

Speaker 1

separate arbitration processes under separate regimes. There is the ability under each of those processes that you can put the arbitration on hold for a fixed timeframe. So that is a possibility, although we haven't had any asks from any of the parties to put ours on hold yet.

Speaker 3

Okay, perfect. And then thanks for that, Paul. And then another comment that President Malinoh had made was just speaking about the economics of the prior deal negotiated under the Cortizo government relating to Cobre Panama and noting that it was unfavorable for Panama. Has Franco Nevada had any messages delivered or has any understanding what that could potentially mean for the Franco stream or whether it means anything at all? For example, there's been some discussion of a potential chain in the ownership position.

Speaker 3

So the potential ownership position going to the country of Panama. I mean, can you comment on any potential implications for for Franco there? I know it's highly speculative, but it has been mentioned many times in the Panamanian press. We'd just like to get your views.

Speaker 1

Yes. So first off, in terms of economics, I think that the deal that was negotiated a couple of years back was positive, was a good deal for Panama. You'll recall in particular it had the provisions that provided minimum payments in the order of $375,000,000 a year, which I think for any country is a particularly strong provision. So, I think there were good economics for Panama in that deal. I know there has been discussion of the country actually wanting to get a better deal, not surprised by that.

Speaker 1

In terms of way that may go for Franco, we're financiers here, not owners. So on the legalities of it, any change in ownership doesn't change the way that our stream is calculated. Any increase in taxes in country or any increase in royalties, none of that changes the way that our royalties are written.

Speaker 3

Yes. Okay. Thank you very much for those comments. Very helpful. And then just two of the other streams that I'd like to ask about, it

Speaker 4

would just be helpful to get

Speaker 3

a little bit of color on specifics. So with the SSW

Speaker 4

or

Speaker 3

the Sabanye Stillwater South African PGM stream, it's closed. Congratulations. And then just for Q1, when we think about the 7,000 GEOs from '24 and then the forty five day delay before any GEOs are actually delivered to Franco. How should we think about it when the first delivery might occur, whether it be Q1 or Q2 or what would you recommend us modeling with respect to that particular stream?

Speaker 4

It will often extend Deep. So it has closed. It closed a couple of weeks ago. The delivery from September to December for 2024, we will receive in Q1. And you're correct, the next delivery related to 2025 production, there's a forty five day time delay.

Speaker 4

So that will come in Q2. So for Q1, you should only be budgeting or estimating the delivery related to 2024.

Speaker 3

Okay, fantastic. And then just longer term, thanks for that Sandeep, just longer term thinking about the 2829 guidance, Magino and Ireland are now sort of moving in the direction of becoming one operation. So with Magino, there's a 3% royalty and then with Island, there's a 0.62 royalty. How is that delineated? Or is there the potential for those to become a combined royalty?

Speaker 3

Or would it strictly depend on from where the ore comes? And so the context here is that the idea is to eventually close the island mill and process island ore at Magino. Is there an additive benefit here or is it just we have to figure out what the mix is between the two ore sources going forward to get to the right royalty level?

Speaker 4

Yes. So right now on Island, we only cover up a portion of the deposit. And so but at Magino, we cover the full land package. You're right, they are talking about shutting the Island Gold Mill and expanding the Magino mill to 15,000 tonnes per day. Alamos is reviewing that right now.

Speaker 4

So once they do that, it will just be a question of where does the ore come. When we did our deal, we had budgeted 11,500 tonnes per day coming from the Gino. So I think at a minimum that's what we should be receiving on any production going forward once they do expand the mill.

Speaker 3

And then in your current 2028 and 2029 guidance, that's the 11,500 tonnes per day. Is that correct?

Speaker 1

Correct.

Speaker 4

Correct.

Speaker 3

Thank you very much guys. Appreciate it.

Operator

Thank you. The next question comes from Cosmos Chiu at CIBC. Please go ahead.

Speaker 6

Thanks Paul and Sandeep. Maybe my first question is on geos and how you calculate it. Could you remind us each and every quarter how you calculate geos, how you convert commodities not gold into gold equivalent ounces? Is that based on the spot prices during that quarter? Or is it based on your assumption that you put out beginning of the year like today $2,800 and $31 an ounce?

Speaker 4

Hi, Cosmos. Yes, we will adjust at each quarter. So essentially at a high level, we'll take our non gold revenue and we will divide by the average gold price for the quarter. So obviously, you saw last year, gold prices increased and it impacted the number of geos or diversified assets generated even though the revenue was the same as what we had expected for the year.

Speaker 6

Yes. And Sandeep, as you mentioned last year, you had to change it because gold prices clearly fluctuated quite a bit beyond what you had expected beginning of twenty twenty four. But for 2025 guidance, I guess my question is, could you share with us how much buffer you've put into that guidance? And I guess my question is, how much can it withstand in terms of volatility and commodity prices? Just given that last year when you had to change your guidance in 2024, it was not exactly too well received.

Speaker 6

I'm just trying to see if that could happen again in 2025.

Speaker 4

If it does happen, it's actually a great thing because I mean the gold price has gone up significantly. But our guidance range is a 60,000 ounce range. You take the midpoint, so we've got 30,000 geos to the downside. If gold price went up around 20%, I think we'd still be okay. But obviously, it's a risk that's part of the way we calculate guidance.

Speaker 4

Certain years you benefit when other commodities outperform gold prices, but obviously gold outperforming now, it is impacting the conversion. But we did run a number of sensitivities. At this stage, we're comfortable with the range.

Speaker 6

Of course, yes. I agree. Higher gold prices is always better. In the end, it's revenue that really matters, it's cash flow that really matters. So I think you're correct, Sandeep.

Speaker 6

Maybe moving on to Cobay Panama. Paul, as you mentioned, the international arbitration seems to be under different regimes. And I think I noticed that your meeting is October 2026. I think First Quantum had mentioned that their meeting is February 2026. Could you maybe is there any importances that we should be aware of, of the different timing of the different sort of regimes that the arbitration is going under or is it pretty much the same?

Speaker 1

I don't think there's anything to read into the timing there, Cosmos. First, Quantum has the option of going either under the ICC, which they're going under. They could also go under the Canada Panama free trade agreement, which is what we're going under. It's MPSA that's pursuing it under the ICC. We don't have that option.

Speaker 1

So our only option is under the Canada Panama. The different tribunals have different timeframes that they work under. The difference in timing is just because of the different processes.

Speaker 6

Okay. But as you said, Paul, this is really plan B. I think your preferred alternative is to for the operator and the government to work out something on their own, right?

Speaker 1

Absolutely. That's always the best outcome.

Speaker 6

Of course. One last question, Porcupine. Could you maybe talk about how that deal came about? Clearly, this is the only royalty streaming involvement in the Newmont divestitures. And so how did the parties come together?

Speaker 6

What's the evolution of that deal? My other part of the question is that I see that you are providing a credit facility, Paul, as you mentioned, and an equity investment as well, more sort of full service financing. Is that the type of deal we could expect on a go forward basis or service on a go forward basis?

Speaker 5

Hi, Cosmos. It's Ian here. Hi, Amit. You're having a good day. Happy to answer that question.

Speaker 5

I guess first off in terms of how it came together. Tony Makuch, we know well a number of people within Franco Nevada have a strong relationship with Tony. And when those assets came for sale, the obvious strategy was to work with the ideal person to revitalize them. And so we quickly spoke with Tony and formed a strategy together as to how we would back him in doing that. And the rest is history.

Speaker 5

We did provide multiple tranches. And I think that's what you will see going forward. When we can do that, we find a suitable human asset will provide flexibility because capital markets aren't always the most efficient around these kinds of things. And when we see good ability to get a good return for our shareholders, we'll utilize other elements of the capital structure. So it's not going to be all of what we do, but certainly we hope it's a component going forward and we're very pleased with the result of that transaction.

Speaker 6

Great. Those are all the questions I have. Thanks once again, Paul, Sandeep and Yim. Thank you.

Operator

Thank you. The next question comes from Josh Wolfson at RBC Capital Markets. Please go ahead.

Speaker 7

Thanks very much. First question on

Speaker 8

the five year guidance. I noticed the inclusion of the underground production expansion at Candelaria and then also Tukatuka, we don't have a lot of insights as to what the production contribution could be for those opportunities. Is the company able to provide a bit more disclosure there or maybe what the volume contribution would be?

Speaker 4

Sure. So Candelaria underground expansion, they talked about it going from 14,000 tonnes per day to 22,000 tonnes per day. And they'll likely make the decision later this year. So we obviously, we've made the assumption that they will go ahead with that, but they have to disclose whether they will or not. On TacaTaca, we just thought looked at where First Quantum is and with everything going in Argentina, it would likely be their next project that they develop.

Speaker 4

In 2029, we've assumed a partial ramp up. It works out to about 4,000 GEOs to Franco in the total, so it's not significant.

Speaker 8

Got it. Thank you very much. And then just a couple of sort of small details. So for Paul Marijo, the disclosures talk about production declining in 2029. Is the should we assume that production stays steady through 2028 versus some of the very high levels this year?

Speaker 4

That's correct. From 2025 to 2028, it's pretty consistent and then it's about a 50% drop in 2029.

Speaker 1

And Josh, those operations have had a great history of being able to replace ounces. So that's what's in the mine plan today. We hope that in the interim that there'll be the ability to extend that mine plan.

Speaker 8

Got it. Thank you. And one last small housekeeping question. For Bald Mountain, and I know it's not a huge asset in terms of the overall production, But just because the royalty has come up pretty strongly in recent years and the royalty can vary quite a bit depending on what land is being mined. For these new Redbird pits, any sort of idea what the royalty rate would be?

Speaker 4

Off the top of my head, Josh, I can't recall. I'll have to

Speaker 1

get back to you on that.

Speaker 7

Okay. Thanks very much.

Operator

Thank you. The next question comes from Heiko Ihle at H. C. Wainwright. Please go ahead.

Speaker 7

Hey there, Paul, Sandeep and team. Thanks for taking my questions. Recent market volatility has been quite rocky. I mean today is another fun day in the markets. It gets a bit of an open ended question, but I mean do you already see some impact of what's going on just in pretty much every stock in these out there flowing down into your M and A discussions or is this essentially offset because gold still sitting at $2,900

Speaker 1

Everyone is impacted by volatility in some form. But I got to say that the gold mining industry is very fortunate in terms of in most places you can put the gold on a plane and apply it to wherever you want and sell it wherever you want. So I'd say of all the industries, it's probably the least impacted.

Speaker 7

Okay. And it doesn't come up in conversation where people are like, I want to get out now

Speaker 1

or soon? No, no, no. Certainly, we haven't had any conversations like that.

Speaker 4

Okay.

Speaker 7

Building on what you almost just answered a little bit, have there been rumblings of countries trying to your awards put stuff on planes and get it out of there, make that a little bit tougher given what's going on geopolitically right now?

Speaker 1

Not in a sense of operations cycle, although I'm sure you're familiar that there's been a huge movement in stocks, particularly gold stocks out of London and into The U. S. And I believe there's some of that happening in terms of copper stocks as well. But I haven't other than that, I haven't heard it in any of that in other jurisdictions.

Speaker 7

Fair enough. That's reassuring. I'll get back to you.

Operator

Thank you. The next question comes from Daniel Major at UBS. Please go ahead.

Speaker 9

Hi there. Thanks for the question. Can you hear me okay?

Speaker 1

Yes.

Speaker 9

Great. Thanks. Just the first question and you, I think, have partially answered already, but can you just run us through the delta, the key driver for the moderation in the guidance 2029 versus 2028?

Speaker 4

Sure. Hi, Daniel. It's Sandeep here. Really the main adjustment is Guadalupe Palmarejo, where you essentially based on the mine plan that we have right now, and as Paul mentioned, the mine continues to be extended over time. So we're hopeful that the mine life will continue to be extended.

Speaker 4

You get a 50% drop in

Speaker 1

geos and

Speaker 4

that's essentially the drop in 2029.

Speaker 9

Thank you. That's clear. And then the second question, just thinking slightly bigger picture about the Espany deal and the profile that you've provided. I mean, when we look at this kind of asset towards the upper end of the cost curve, obviously, a large reserve life, but in the context of a commodity with potentially challenging longer term fundamentals, Ivanhoe has the plans to bring on the Platte Reef towards the end of the decade? I mean, how concerned are you about the longevity of production basis, the kind of cost position of the asset and the fundamental outlook for the market?

Speaker 5

Hi, Daniel. It's Ian Gray again. Happy to meet you. In terms of the assets, I actually think that when you look at the cost curve, you'll see their work towards the middle, especially when you account for byproducts. Relative to the Platte Reef, you have very significant non PGM byproducts coming out of the UG2, which Sanyes is focused on.

Speaker 5

So things like chrome, iridium, ruthenium have kind of non catalytic uses. So that stands to benefit these operations relatively compared to some of the others. The infrastructure, this is a market that as you I'm sure well aware off take of concentrate is very limited as to where it could go. Sabanye is fully integrated. A lot of these other operations, it's unclear whether they have all of the off take or other things such as water and other key elements for production that are necessary.

Speaker 5

Whereas these are very much a fully integrated operation. So we take a lot of comfort that long term they'll be strong producers from that basket and fully integrated nature of the operations.

Speaker 9

Okay. Thanks for that. And then just final one. In the last couple of calls, you've filled the questions and there's been some talk about fertilizers, potash. I see you acquired a small option from Brazil Potash Corp.

Speaker 9

Can you give us any sense of how advanced are you in this segment of the market with other potential deals and how they rank relative to other opportunities out there?

Speaker 1

Thanks. And maybe on the strategy overall, the you know, our objective is to be the go to gold stock and that means always focused is on gold and precious metals. But I've always said also, sometimes you can take advantage of good opportunities in other commodities when they come along. And hence, we have had a diversified component over time. The opportunity with Brazil potash there is for a very low entry point.

Speaker 1

We were able to get an option to write a royalty if and when that very large potash project does get developed. I think it's high likelihood it does. This is a very attractive deposit. It sits very close to the huge agricultural area in Brazil. Its cost advantages in terms of logistics are very substantial.

Speaker 1

So I'm very hopeful that we'll get to excise that option over time. Other than that, as we look at the pipeline that there as usual, there's a mix of what we're looking at, precious metal and diversified, but by far the most of it is precious metal. And so I expect that's most likely what you'll see as we go forward the next number of months.

Speaker 9

Great. Thanks so much. I'll get back in the queue.

Operator

Thank you. The next question comes from Brian MacArthur at Raymond James. Please go ahead.

Speaker 10

Hi, good morning and thanks for taking my questions. Most of them answered, but can I go back to the delta between '28 and '29? I get it, Guadalupe comes down and I guess you're saying it's the full 25,000 ounces, but can I confirm then on the Antakapai, you talk about it cutting back in 2028? Is that at the beginning of the year or is that partially through the year? I'm still trying to make up the difference between 2028 and 2029.

Speaker 4

Yes. So Brian, you have a it's partway through 2028, so you'll have a full year drop in 2029. So you do lose ounces from Antipakai in 2029. So between Guadalupe and Antipakai, you lose some ounces. And then on the other side, you've got Copper World, you've got Taka Taka that will pick up some of that difference.

Speaker 10

Great. Thanks. And just on Candelaria while I'm at it, the step down from 68 to 40, again, is that partially through the year in your assumptions on 2027 or at the beginning of the year?

Speaker 4

A partial year.

Speaker 10

Great, thanks very much.

Operator

Thank you. The next question comes from Tanya Jakusconek at Scotiabank. Please go ahead.

Speaker 11

Great. Good morning, everyone. Thank you so much for taking my three questions. I just wanted to follow again on this guidance and a lot of it has been answered. But maybe what I just would like to clarify with you is that the Pomerajal last year is 2029, MiWay solution is gone.

Speaker 11

Is there anything else that is sort of in the timeframe not contributing or is dying out over the timeframe that we should be aware of?

Speaker 4

From a materiality standpoint, Tanya, those are the two largest.

Speaker 11

Okay, perfect. And then you mentioned I wanted to understand what is your assumption for Stillwater? As you are aware, we have quite a drop in 2025. And then as Yes, so Yes, go ahead.

Speaker 4

Sorry. So Stillwater as the operator has guided 265,000 PTM ounces for 2025. We've assumed that for three years and then it ramps back up subsequent to that.

Speaker 11

And back to that five hundred thousand or six hundred thousand year range?

Speaker 5

Five hundred thousand.

Speaker 11

Okay. Thank you. And then just continuing on the guidance, you mentioned the Energy division is increasing over this timeframe. You used to provide guidance on what the energy contribution. So if I think of your 2029 or 2028 guidance, we were able to see what percentage 79%, eighty % gold or even 76% gold.

Speaker 11

What would you put the energy as a percentage within your 2025%, twenty twenty eight %, and 29%

Speaker 4

guidance? So I think for 25% we did disclose what the percentage would be energy. For 29% off the top of my head, I'd say around 16%, seventeen % of geos.

Speaker 11

Okay. All right. That's helpful. Thank you. And then just the final one on guidance is you mentioned that Sandy said it's going to be stronger second half.

Speaker 11

And so we understand what about the Sabanye deal. Obviously, the supply ramp up occurring. How should I be thinking first half, second half? Is it a very big difference? Is it a 45, 50 five?

Speaker 11

And again, this assumes your price forecast and assuming them to be flat without movement in commodities. But if I think of it that way, is it a 40 five-fifty five?

Speaker 4

Just numbers I've looked at in our budgeted assumptions, I'd say it's 40 seven-fifty three.

Speaker 11

Okay. And is it quarter over quarter improvement? Should I be thinking of it that way as well?

Speaker 4

Second quarter will be better than Q1 just because of the timing of the sub Hennae, but I look to Q3 and Q4 not too far off from each other.

Speaker 11

Okay. All right. So those are my guidance questions. My second one has to do with Cobre Panama. Just wanted to confirm again, is there any further discussions on the concentrate on-site and whether that may be dealt with ahead of these decisions and or other in 2026.

Speaker 11

Maybe Paul, is there anything on the concentrate and remind me the size of this concentrate?

Speaker 1

Tanya, there are discussions that the company has been keen to be able to move initially what were the remaining explosives off-site. Second is to move that concentrate off-site. They do have an agreement. They have been able to move the explosives. So discussions continue on the concentrate.

Speaker 1

It is one of the first things I'd like to get moving as the government gets more willing to discuss progress on the mine. In terms of value of the concentrate, I think the value is in the order of $250,000,000 It's the total value of the concentrate.

Speaker 11

Okay. Well, that would be good if we could at least deal with the concentrate. And then just remind me again on your security on the asset, if you have security at the asset level, but you do not have a parent guarantee, right? Just so that I remember this correctly.

Speaker 1

So our security, MPSA is the operating entity in Panama. So we are secured on the shares of MPSA that operating entity as when we look at all these deals, as any good bank will tell you where you want to be as close to the asset as possible. So very happy with the security structure that we have at Coburna.

Speaker 11

Okay. So the security of the asset, but you don't have a corporate guarantee, right?

Speaker 1

We have undertakings up the chain that the various entities would ensure that the undertakings of MPSA are fulfilled, which is of course the usual sort of provisions that you would get from a corporate.

Speaker 5

And maybe one thing to add Tanya, in order to have the arbitration directly with Panama, it's very important that you're linked directly to the asset. So in a lot of cases, if you're just a corporate obligation, you wouldn't be able to avail yourself of that type of protection.

Speaker 11

Okay. It's one

Speaker 4

of the benefits

Speaker 1

of that structure.

Speaker 11

As I said hopefully we don't get there, hopefully all of this is resolved, which is best for everybody here. Okay. So maybe my last question and I'll just continue on the M and A side, on the transaction side. We've done a lot of deals on the gold front, potash was a smaller one. So where do we stand now on the commodity mix of your the deals that you are currently looking at in the market?

Speaker 11

Maybe we can just review size wise, is it still the $300,000,000 to $500,000,000 is that still the deal size? And are you focused now more on precious metals or have you done enough precious metals? Where are we on that mix?

Speaker 5

It's Eddie, it's Ian again. So in terms of metals, I think Paul alluded earlier to the fact that we're still very much focused on precious metals. The vast majority of what we're looking at right now is precious metals. It doesn't mean that there aren't good opportunities outside of that, but in terms of just the deal flow, that's primarily what we're seeing at the moment. I think it's a good time.

Speaker 5

And in terms of the complexion of the deals, what I would really say is what you saw last year is a good reflection of kind of what we're seeing now. Last year obviously was also unprecedented in terms of total dollars that we deployed, very happy about just how active we were and the investments that we made. But in terms of what they look like very similar in terms of whether it's size or reason for doing the deal.

Speaker 11

Okay. And would it also still be for asset test for development of assets? Is it still that financing options for smaller companies? Is that still the case?

Speaker 5

Absolutely. I think a core pillar of our business development efforts is project finance. I think we've got a strong team to do that, well placed with our balance sheet. So we continue to focus very much on trying to do significant project financing deals.

Speaker 11

Okay. And then I wanted to ask just on the non gold side, you said there could be opportunities come up. Are there opportunities in the non gold side of your business? And if so, what sort of size of those potential transactions?

Speaker 5

Certainly, there are opportunities that span arranged in terms of size, but probably similar to what we've been looking at on the precious metals side, Tanya. Some are smaller, some are medium size.

Speaker 11

Okay. So that's $300,000,000 to $500,000,000 Okay. And would we still continue to keep focusing on the sort of, non gold commodities that you have historically looked at or is energy back in the game? I guess what I'm asking. Would you consider energy in that non gold component?

Speaker 11

I know you have to put a pause button on it for a while.

Speaker 1

So Tanya, we're as usual, the diversified strategies is all around being opportunistic rather than starting with a particular commodity. So energy is the if the right opportunities there, we would also add, we've got better room currently, but nothing currently active.

Speaker 11

Okay. Thank you so much for taking my questions. I'll let someone else. I really appreciate it. Thank you.

Operator

Thank you. The next question comes from Martin Pradeer at Veritas. Please go ahead.

Speaker 12

Yes. Thank you for taking my question. Can you give us some precision on what do you expect from Toquetticinio and Ballantyne Gold for 2025?

Speaker 4

Sure. So for 2025, Ballantyne will be ramping up in the second half of the year. So it's minimal. It's 1,500 to 2,000 geos. Tokens in Neo fully ramped up by just over 20,000 geos.

Speaker 12

Okay. Thank you. And I've seen a lot about the CRA and you continue having that, that is a recurring issue. Do you expect some kind of decision in this year, this coming year?

Speaker 4

Obviously, we're a large cap taxpayer in the view of CRA. So we are constantly audited, no different than other large cap taxpayers. Obviously, we had three audit issues outstanding, two got resolved where they dropped the reassessments, we've got the transfer pricing dispute that's ongoing. We continue to work with CRA. Would I like to resolve it this year?

Speaker 4

Absolutely. But with CRA, it's just a question of timing and what their views are. So we continue to move forward, but no resolution at this time.

Speaker 12

Okay. But the 2013, '20 '16 or something like that, isn't that part supposed to aren't supposed them to reach a decision this year?

Speaker 4

Yes. So you have to they reassessed us, we appealed and then you have to go through a process and work your way towards a potential court date. We're working through that process. You have to go through discovery. We've done that.

Speaker 4

Now it's just a case of can you resolve it yourselves or do you end up in court. So no decision at this time.

Speaker 12

Okay, great. Thank you very much.

Operator

Thank you. The next question comes from John Tumazos at John Tumazos Very Independent Research. Please go ahead.

Speaker 13

Congratulations on putting $1,000,000,000 to work and for the $55,000,000 in discovery suck to basically double in a month. Well done. If you wanted to go to the beach or fish or play golf for the rest of the year, you've done a good job for the shareholders, you earned it. In all seriousness, could you tell us your criteria in terms of minimum rate of return, gold price or other. So in evaluating future deals to not reduce the average quality of the portfolio given some of the great deals you have in hand.

Speaker 13

And are your criteria primarily numerical, quantitative or is qualitative geologic inference more important to you than an NPV?

Speaker 1

John, I think you've answered the question there.

Speaker 13

At the end of the day, you got to

Speaker 1

be invested in good ore bodies and our overall objective is to make sure that we do that and anything that we added to the portfolio is a great quality ore body. We anytime we look at a deal and our board constantly reminds us of this, whatever you put in your spreadsheet, it's not going to happen. Our ore bodies will develop and grow over time, commodity prices will change over time. So the focus is on the quality of your bodies, getting the right ones in the portfolio. You know how we think about it, which is we're prepared to accept the low rate of return for what you can see today on those ore bodies.

Speaker 1

But if you pick the ones that have got the best odds of getting bigger over time, that's really where we make our return. The focus is, what are your bodies with great economics that we can be very comfortable, we're going to get our money back. And then what are we exposing ourselves to? What's the potential optionality? What's the multiple of our money that we can make if our hopes and dreams come true for the expansion of the bodies.

Speaker 13

Thank you. In terms of the new Discovery silver investment, is it limited to exactly the land holdings bought from Newmont at closing and the existing Dome Mill? And for example, if Tony were to buy back his old company Lakeshore Gold from Pan Am, should we assume that's excluded from your royalty?

Speaker 5

John, it's Ian here. Thank you for the kind words upfront. On the discovery deal, I guess, first of all, what matters to us is relationships. And so we are very much trying to support Tony in his efforts. And as he's alluded to, to the market, he has very ambitious plans for that camp and we want to be there to support him on those.

Speaker 5

We agreed some partnership clauses in the agreement to provide us certain rights in certain circumstances, but we are, I would say, more as a kind of commercial relationship kind of very keen to help him as he looks at the one you there are many other opportunities, not just one in the area. So we're keen to help him evaluate how we may be able to maximize value for Discovery shareholders of which of course we are one. So it's an exciting

Speaker 4

one for us.

Speaker 13

Thank you.

Operator

Thank you. We have no further questions on the phone. I'll turn the call back over to Candida Hayden.

Speaker 2

Thank you. Our first question comes from Bernie Picci at Palisade Capital Management. Traditionally, Franco Nevada has avoided investments in certain places, Russia, China, for example. Rule of law is critical. I was surprised by your investment in Sylvania Stillwater.

Speaker 2

Africa has generally not been an area of interest for Franco Nevada. Can you explain this decision further?

Speaker 1

Thanks for the question there. Our objective is be a low risk weighted investors can invest in the industry, gold and the benefit of exploration upside. The approach geopolitically is you got to make sure that most of your assets are in great countries and we're blessed to have so many assets Canada, U. S, Australia.

Speaker 4

There are

Speaker 1

a lot of other good mining countries in the world and so we're also exposed in Chile, Peru, Brazil. We do have assets in West Africa and we have had assets in South Africa, in particular for many years, we've had an interest in mine waste. It wasn't planned this way, but actually the mine waste deal has ended. It was about 20,000 plus ounces a year in Geos and we're able to do the Sibanye deal similar amount over the long term. So our exposure to South Africa is about the same as it was previously.

Speaker 1

South Africa is different from much of Africa. It is a very well developed mining economy. It's got a long history. It's got good labor force, good suppliers, and it does have a goodwill or as opposed to for mining. So in terms of the amount of explosion that we've got, roughly the $500,000,000 are comfortable in putting that in South Africa.

Speaker 1

It does have its risks and its political risks. I actually think it's on the uptick in recent years. You had the change in government. The ANC is still leading it, but for the first time, it's a government of national unity. And I think that's put some checks and balance on the ANC, and there is a good level of optimism in country that it has there's a change in direction in terms of the quality of government management.

Speaker 1

I think you've seen very practical results in terms of a turnaround in the power situation and also real good results on the ground in terms of improving the transportation infrastructure. So quite happy with that investment in South Africa. I think it's going to do us well over time.

Speaker 2

Our next question is also from Bernie Picchi at Palisade Capital Management. When you say there is $250,000,000 of concentrate on-site at Cobre Panama that you and First Quantum would like to move, how much of that is yours versus First Quantum?

Speaker 1

I haven't done the math recently, Depends on what the gold price is at the time obviously, but that roughly the value there that we are due to receive is $15,000,000

Speaker 4

to $20,000,000

Speaker 2

Thank you, Paul. There are no further questions from the webcast. This concludes our twenty twenty four year end results conference call and webcast. We will host our Investor Day on Tuesday, 03/25/2025. The in person presentation will be hosted at the Lumi Experience Centre in Toronto at 1PM Eastern Time.

Speaker 2

The presentation will also be available to view virtually. Registration details are available on our website. We expect to release our first quarter twenty twenty five results after market close on May 8 with the conference call held the following morning. Thank you for your interest in Franco Nevada. Goodbye.

Operator

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.

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Earnings Conference Call
Franco-Nevada Q4 2024
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