PR Newswire
TORONTO, March 22, 2017
(in U.S. dollars unless otherwise noted)
Guidance exceeded and $110 million agreement to acquire second package of U.S. oil & gas royalties
TORONTO, March 22, 2017 /PRNewswire/ - Franco-Nevada's CEO, David Harquail, commented: "Our diversified portfolio continues to perform very well. In 2016, we exceeded our recently increased guidance ranges for both Gold Equivalent Ounces1 ("GEOs") and oil & gas revenues. The growth in 2016 is reflecting the contribution from acquisitions we made during the recent downturn and increased activity by many of the operators on our lands. Franco-Nevada has no debt and is growing its cash balances. We continue to see investment opportunities and Franco-Nevada has just agreed to acquire, for $110 million, oil & gas royalties on the Midland portion of the Permian Basin in Texas, U.S."
2016 Q4 Financial Highlights
2016 Full Year Financial Highlights
Revenue and GEOs by Asset Categories
Q4/2016 |
Q4/2015 | ||||||||||
Revenue |
GEOs |
Revenue |
GEOs | ||||||||
(in millions) |
# |
(in millions) |
# | ||||||||
Precious Metals |
|||||||||||
Gold |
$ |
112.8 |
93,775 |
$ |
88.0 |
79,800 | |||||
Silver |
21.9 |
18,650 |
18.9 |
17,112 | |||||||
PGM |
8.0 |
7,611 |
7.9 |
7,523 | |||||||
Precious Metals - Total |
$ |
142.7 |
120,036 |
$ |
114.8 |
104,435 | |||||
Other Minerals |
2.2 |
1,874 |
2.1 |
1,877 | |||||||
Oil & Gas |
10.4 |
— |
4.4 |
— | |||||||
$ |
155.3 |
121,910 |
$ |
121.3 |
106,312 |
For Q4/2016, revenue was sourced 91.9% from precious metals (72.6% gold, 14.1% silver and 5.2% PGM) and 87.2% from the Americas (18.5% U.S., 22.3% Canada and 46.4% Latin America). Operating costs and expenses decreased slightly year-over-year, reflecting a realized gain of $14.1 million on the partial buy back of the Kirkland Lake NSR. Oil & gas revenue increased 136%, reflecting both higher prices and production levels year-over-year. Cash provided by operating activities was $121.9 million, an increase of 43.5% compared to Q4/2015.
Corporate Updates
2017 Guidance
In 2017, Franco-Nevada expects attributable royalty and stream production to total 470,000 to 500,000 GEOs from its mineral assets and revenue of $35 million to $45 million from its oil & gas assets. Of the royalty and stream production, 335,000 to 345,000 GEOs are expected from Franco-Nevada's various stream agreements. For 2017 guidance, silver, platinum and palladium metals have been converted to GEOs using assumed commodity prices of $1,200/oz Au, $17.50/oz Ag, $950/oz Pt and $750/oz Pd. The WTI oil price is assumed to average $50 per barrel with a $3.50 per barrel price differential between the Edmonton Light and realized prices for Canadian oil. The Company estimates depletion expense of $265 million to $295 million. 2017 guidance and 2021 outlook below is based on assumptions including the forecasted state of operations from our assets based on the public statements and other disclosures by the third-party owners and operators of the underlying properties (subject to our assessment thereof).
2021 Outlook
Our outlook to 2021 further assumes that the Cobre Panama project will be ramping up production in 2019. At the same time, scheduled fixed ounce payments from Midas/Fire Creek, Karma and Sabodala are expected to step down to longer term royalty or stream payments. Using the same commodity price assumptions as were used for our 2017 guidance (see above) and assuming no other acquisitions, Franco-Nevada expects its existing portfolio to generate between 515,000 to 540,000 GEOs by 2021. Oil & gas revenues at the same $50 per barrel WTI oil price assumption are expected to range between $55 million and $65 million.
Q4/2016 Portfolio Updates
Shareholder Information and 2017 Asset Handbook
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.
Management will host a conference call tomorrow, Thursday, March 23, 2017 at 11:00 a.m. Eastern Time to review Franco‑Nevada's 2016 results, as well as discuss the 2017 and five-year outlook. In addition, Franco-Nevada will be releasing its 2017 Asset Handbook with updated disclosures on our assets and the number of gold ounces and royalty equivalent units associated with each asset.
Interested investors are invited to participate as follows:
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 is debt free 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.
For more information, please go to our website at www.franco-nevada.com or contact:
Stefan Axell |
Sandip Rana | |||
Director, Corporate Affairs |
Chief Financial Officer | |||
(416) 306-6328 |
(416) 306-6303 | |||
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. 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; 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: Adjusted Net Income and Adjusted EBITDA 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.
Reconciliation to IFRS measures:
Three months ended |
Year ended | ||||||||
December 31, |
December 31, | ||||||||
(expressed in millions, except per share amounts) |
2016 |
2015 |
2016 |
2015 | |||||
Net Income (Loss) |
$ |
(4.5) |
$ |
(31.4) |
$ |
122.2 |
$ |
24.6 | |
Income tax expense (recovery) |
13.4 |
(4.9) |
45.7 |
23.9 | |||||
Finance expenses |
0.8 |
1.4 |
3.6 |
2.9 | |||||
Finance income |
(0.9) |
(2.1) |
(3.5) |
(5.3) | |||||
Depletion and depreciation |
67.2 |
65.8 |
273.8 |
216.3 | |||||
Non-cash costs of sales |
1.2 |
1.7 |
6.5 |
6.6 | |||||
Impairment charges |
67.5 |
62.8 |
67.5 |
62.9 | |||||
Impairment of investments |
— |
0.1 |
— |
2.0 | |||||
Gain on sale of royalty interest |
(14.1) |
— |
(14.1) |
— | |||||
Gain on investments |
(7.9) |
— |
(12.4) |
(0.9) | |||||
Foreign exchange (gains)/losses and other (income)/expenses |
(0.5) |
0.8 |
(0.2) |
4.1 | |||||
Adjusted EBITDA |
$ |
122.2 |
$ |
94.2 |
$ |
489.1 |
$ |
337.1 | |
Basic Weighted Average Shares Outstanding |
178.3 |
156.8 |
175.2 |
156.9 | |||||
Adjusted EBITDA per share |
$ |
0.69 |
$ |
0.60 |
$ |
2.79 |
$ |
2.16 |
Three months ended |
Year ended | ||||||||||
December 31, |
December 31, | ||||||||||
(expressed in millions, except per share amounts) |
2016 |
2015 |
2016 |
2015 | |||||||
Net Income (Loss) |
$ |
(4.5) |
$ |
(31.4) |
$ |
122.2 |
$ |
24.6 | |||
Foreign exchange (gains)/losses and other (income)/expenses |
(0.5) |
0.8 |
(0.2) |
4.0 | |||||||
Impairment charges |
67.5 |
62.8 |
67.5 |
62.9 | |||||||
Impairment of investments |
— |
0.1 |
— |
2.0 | |||||||
Gain on sale of royalty interest |
(14.1) |
— |
(14.1) |
— | |||||||
Gain on investments |
(7.9) |
— |
(12.4) |
(0.9) | |||||||
Tax effect of adjustments |
4.3 |
(11.9) |
4.7 |
(9.6) | |||||||
Other tax related adjustments: |
|||||||||||
Indexation adjustment |
— |
— |
0.1 |
(0.4) | |||||||
Valuation allowance |
(2.5) |
— |
(4.4) |
0.9 | |||||||
Impact of change in depreciation rate |
— |
4.0 |
— |
4.0 | |||||||
Impact of tax increases |
0.6 |
(0.7) |
1.0 |
1.4 | |||||||
Adjusted Net Income |
$ |
42.9 |
$ |
23.7 |
$ |
164.4 |
$ |
88.9 | |||
Basic Weighted Average Shares Outstanding |
178.3 |
156.8 |
175.2 |
156.9 | |||||||
Adjusted Net Income per share |
$ |
0.24 |
$ |
0.15 |
$ |
0.94 |
$ |
0.57 |
FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions of U.S. dollars)
December 31, 2016 |
December 31, 2015 | ||||
ASSETS |
|||||
Cash and cash equivalents (Note 5) |
$ |
253.0 |
$ |
149.2 | |
Short-term investments (Note 6) |
— |
18.8 | |||
Receivables |
71.1 |
65.1 | |||
Prepaid expenses and other (Note 7) |
37.1 |
41.6 | |||
Current assets |
361.2 |
274.7 | |||
Royalty, stream and working interests, net (Note 8) |
3,668.3 |
3,257.5 | |||
Investments (Note 6) |
147.4 |
94.8 | |||
Deferred income tax assets (Note 17) |
21.3 |
16.1 | |||
Other assets (Note 9) |
23.4 |
31.2 | |||
Total assets |
$ |
4,221.6 |
$ |
3,674.3 | |
LIABILITIES |
|||||
Accounts payable and accrued liabilities (Note 10) |
$ |
21.0 |
$ |
18.0 | |
Current income tax liabilities (Note 17) |
16.6 |
2.8 | |||
Current liabilities |
37.6 |
20.8 | |||
Debt (Note 13) |
— |
457.3 | |||
Deferred income tax liabilities (Note 17) |
37.5 |
33.2 | |||
Total liabilities |
75.1 |
511.3 | |||
SHAREHOLDERS' EQUITY (Note 18) |
|||||
Common shares |
4,666.2 |
3,709.0 | |||
Contributed surplus |
41.6 |
44.3 | |||
Deficit |
(336.8) |
(302.2) | |||
Accumulated other comprehensive loss |
(224.5) |
(288.1) | |||
Total shareholders' equity |
4,146.5 |
3,163.0 | |||
Total liabilities and shareholders' equity |
$ |
4,221.6 |
$ |
3,674.3 | |
Commitments (Note 20) |
|||||
Subsequent events (Notes 13 & 22) |
The accompanying notes are an integral part of these consolidated financial statements and can be found in our 2016 Annual Report available on our website
FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(in millions of U.S. dollars, except per share amounts)
2016 |
2015 | |||||
Revenue (Note 14) |
$ |
610.2 |
$ |
443.6 | ||
Cost of sales |
||||||
Costs of sales (Note 15) |
105.8 |
93.1 | ||||
Depletion and depreciation (Note 8) |
273.8 |
216.3 | ||||
Total cost of sales |
379.6 |
309.4 | ||||
Gross profit |
230.6 |
134.2 | ||||
Other operating expenses (income) |
||||||
Corporate administration (Notes 16 & 18) |
20.7 |
15.1 | ||||
Business development (Note 16) |
3.4 |
2.7 | ||||
Impairment charges (Note 8(b)) |
67.5 |
62.9 | ||||
Gain on sale of royalty interest (Note 8(c)) |
(14.1) |
— | ||||
(Gain) loss on sale of gold bullion (Note 2(b)) |
(2.3) |
2.2 | ||||
Total other operating expenses (income) |
75.2 |
82.9 | ||||
Operating income |
155.4 |
51.3 | ||||
Foreign exchange gain (loss) and other income (expenses) (Notes 2(b) & 6) |
0.2 |
(4.1) | ||||
Realized gain on investments |
12.4 |
0.9 | ||||
Impairment of investments |
— |
(2.0) | ||||
Income before finance items and income taxes |
168.0 |
46.1 | ||||
Finance items |
||||||
Finance income |
3.5 |
5.3 | ||||
Finance expenses (Note 13) |
(3.6) |
(2.9) | ||||
Net income before income taxes |
167.9 |
48.5 | ||||
Income tax expense (Note 17) |
45.7 |
23.9 | ||||
Net income |
$ |
122.2 |
$ |
24.6 | ||
Other comprehensive income (loss): |
||||||
Items that may be reclassified subsequently to profit and loss: |
||||||
Unrealized gain (loss) in the market value of available-for-sale investments, net of income tax expense of $5.3 (2015 - income tax recovery of $1.6) (Note 17) |
52.9 |
(27.0) | ||||
Realized change in market value of available-for-sale investments, net of income tax expense of $1.6 (2015 - income tax recovery of $nil) (Note 6) |
(10.6) |
1.1 | ||||
Currency translation adjustment |
21.3 |
(163.4) | ||||
Other comprehensive income (loss) |
63.6 |
(189.3) | ||||
Total comprehensive income (loss) |
$ |
185.8 |
$ |
(164.7) | ||
Basic earnings per share (Note 19) |
$ |
0.70 |
$ |
0.16 | ||
Diluted earnings per share (Note 19) |
$ |
0.69 |
$ |
0.16 |
The accompanying notes are an integral part of these consolidated financial statements and can be found in our 2016 Annual Report available on our website
FRANCO-NEVADA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of U.S. dollars)
2016 |
2015 | |||||
Cash flows from operating activities |
||||||
Net income |
$ |
122.2 |
$ |
24.6 | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||
Depletion and depreciation |
273.8 |
216.3 | ||||
Non-cash costs of sales |
6.5 |
6.6 | ||||
Share-based payments |
5.0 |
4.5 | ||||
Impairment charges (Note 8) |
67.5 |
62.9 | ||||
Gain on sale of royalty interest |
(14.1) |
— | ||||
Unrealized foreign exchange loss |
0.5 |
3.7 | ||||
Mark-to-market on warrants |
(0.4) |
0.5 | ||||
Gain on investments |
(12.4) |
(0.9) | ||||
Impairment of investments |
— |
2.0 | ||||
Deferred income tax expense |
3.5 |
(2.2) | ||||
Other non-cash items |
(1.2) |
(0.8) | ||||
Acquisition of gold bullion (Note 2(b)) |
(53.5) |
(66.6) | ||||
Proceeds from sale of gold bullion (Note 2(b)) |
67.3 |
60.8 | ||||
Operating cash flows before changes in non-cash working capital |
464.7 |
311.4 | ||||
Changes in non-cash working capital: |
||||||
(Increase) decrease in receivables |
(6.0) |
7.0 | ||||
Increase in prepaid expenses and other |
(4.5) |
(3.8) | ||||
Increase (decrease) in current liabilities |
16.8 |
(0.3) | ||||
Net cash provided by operating activities (Note 2(b)) |
471.0 |
314.3 | ||||
Cash flows from investing activities |
||||||
Proceeds from sale of investments |
28.6 |
25.6 | ||||
Proceeds from sale of royalty interest |
30.3 |
— | ||||
Acquisition of investments |
(1.6) |
(111.3) | ||||
Acquisition of royalty, stream and working interests |
(744.8) |
(1,016.8) | ||||
Acquisition of oil & gas well equipment |
(2.1) |
(3.6) | ||||
Acquisition of property and equipment |
(0.2) |
— | ||||
Net cash used in investing activities (Note 2(b)) |
(689.8) |
(1,106.1) | ||||
Cash flows from financing activities |
||||||
Net proceeds from issuance of common shares |
883.5 |
— | ||||
Proceeds from draw of Credit Facility |
— |
480.0 | ||||
Repayment of Credit Facility |
(460.0) |
(20.0) | ||||
Credit facility amendment costs |
— |
(2.3) | ||||
Payment of dividends |
(118.1) |
(94.1) | ||||
Proceeds from exercise of stock options |
16.3 |
10.5 | ||||
Net cash provided by financing activities |
321.7 |
374.1 | ||||
Effect of exchange rate changes on cash and cash equivalents |
0.9 |
(25.6) | ||||
Net change in cash and cash equivalents |
103.8 |
(443.3) | ||||
Cash and cash equivalents at beginning of year |
149.2 |
592.5 | ||||
Cash and cash equivalents at end of year |
$ |
253.0 |
$ |
149.2 | ||
Supplemental cash flow information: |
||||||
Cash paid for interest expense and loan standby fees |
$ |
3.0 |
$ |
3.0 | ||
Income taxes paid |
$ |
30.7 |
$ |
27.8 |
The accompanying notes are an integral part of these consolidated financial statements and can be found in our 2016 Annual Report available on our website
SOURCE Franco-Nevada Corporation