Franco-Nevada (TSX: FNV) reported a sharp increase in second quarter earnings as elevated metal prices flowed through its royalty and streaming portfolio, though the quarter fell short of the record it set three months earlier.
Revenue rose 57% to $580.9 million from the same period a year ago. Net income climbed 43% to $354.0 million, or $1.84 a share, while adjusted net income increased 46% to $349.2 million, or $1.81 a share. Adjusted EBITDA reached $529.7 million, up 45%.
Each of those figures trailed the first quarter, when revenue hit $650.7 million and adjusted earnings came in at $2.38 a share. Taken together, the two quarters still produced a record first half, with revenue of $1.23 billion and adjusted net income of $807.5 million.
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Adjusted EBITDA margin came in at 91.2%, down from 99.0% a year earlier, and the adjusted net income margin narrowed to 60.1% from 64.6%. More conspicuous was operating cash flow, which grew just 12% to $482.5 million against a 57% revenue gain, a gap that reflects the timing of stream deliveries and working capital rather than any change to the underlying business, but a gap nonetheless.
Franco-Nevada finished the quarter debt free with $1,014.2 million in cash and $4.3 billion in available capital, including $2.25 billion in undrawn revolving credit and roughly $1.0 billion in equity investments. The company declared a quarterly dividend of $0.44 a share, payable Sept. 24.
The company put a portion of that capital to work after quarter end, adding roughly $83 million in royalties across Australia, Canada and the U.S.
On the production side, Franco-Nevada sold 132,405 gold equivalent ounces, an 18% increase, with net GEOs sold rising 20% to 122,205. Precious metals accounted for 114,111 GEOs and 86% of revenue. Gold contributed 91,224 ounces and $403.0 million, silver 19,695 GEOs and $83.5 million, and platinum group metals 3,192 GEOs and $12.2 million.
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Diversified assets made up the remaining 18,294 GEOs, led by oil at 10,057 GEOs.
Costs per ounce moved higher. Average cash cost worked out to roughly $347 per GEO, up from about $299 a year ago, though the figure remains modest against prevailing gold prices and is a function of the streaming agreements’ fixed delivery payments.
Guidance was left unchanged at 510,000 to 570,000 GEOs for the year, and the company said it is tracking toward the upper half of that range on the strength of elevated oil prices and expected deliveries from stockpile processing at Cobre Panamá. Through the last six months, gold and PGM output sits at roughly 45% of the guidance midpoint and silver at 50%, while diversified revenue of $164.8 million has already reached 59%.
Cobre Panamá itself remains halted, but government approved stockpile processing began in May, with Franco-Nevada expecting deliveries of about 23,100 gold ounces and 265,000 silver ounces starting in the third quarter.
“Our portfolio is set to benefit from strong organic growth evidenced by resource increases, planned mine expansions and project advancements,” Chief Executive Officer Paul Brink said. “With $4.3 billion in available capital, the Company is well positioned to take advantage of a strong pipeline of deal opportunities.”
Franco-Nevada last traded at $334.84 on the TSX.
