Franco-Nevada Q4 2023 Financials Take A Hit Due To Cobre Panama

Franco-Nevada (TSX: FNV) has posted its financial results for 2023, which outline grappling with unprecedented challenges at Cobre Panama. The company’s CEO, Paul Brink, acknowledged the hurdles faced during the year and expressed optimism for resolution while maintaining a cautious approach toward the asset’s valuation.

“Despite the issue at Cobre Panama, our business remains robust and we continue to benefit from a long-duration, diversified portfolio,” Brink said in a statement.

The company touted that it finished 2023 with no debt and a substantial cash reserve of $1.4 billion. Additionally, Franco-Nevada reported generating nearly $1 billion in operating cash flow during the year.

The firm also announced a quarterly dividend increase of 5.88% to $0.36 per share effective Q1 2024.

In the final quarter of 2023, the company reported revenue of $303.3 million, experiencing a 5.3% decline compared to the same period in 2022. This downturn was primarily attributed to lower prices of gas, oil, and PGM (platinum group metals), albeit partially offset by higher gold prices. Precious metal revenue constituted a significant portion, accounting for 78.7% of the total revenue, with gold leading at 65.5%.

The firm sold 152,351 gold equivalent ounces (GEOs) in Q4 2023, a 17% drop from the previous year. Precious metal sold ended at 119,581 GEOs, also an 8% drop from last year.

However, the firm generated a net loss of $982.5 million for the quarter or a $5.11 loss per share, a decline from last year’s net income of $165 million. The loss is heavily driven by impairment losses of around $1.17 billion related to Cobre Panama. Recalibrating for select financial items, adjusted EBITDA came down to $254.6 million, but still down from last year’s $262.4 million.

For the full year 2023, the company generated $1.22 billion in revenue, down 7% from 2022. Net loss ended at $466.4 million, also down from a net income of $700.6 million last year. Adjusted EBITDA came in at $1.01 billion, a marginal drop from last year’s $1.11 billion.

The operations of Cobre Panama have been halted since November 2023 due to political and operational challenges, leading Franco-Nevada to undertake an impairment assessment of its Cobre Panama streams. Consequently, the company recorded a full impairment loss of $1,169.2 million, reflecting the prevailing uncertainties surrounding the asset.

While pursuing legal avenues to protect its investment, Franco-Nevada expressed its preference for an amicable resolution with the State of Panama. The company has notified the Ministry of Commerce and Industries of Panama of its intent to initiate arbitration under the Canada-Panama Free Trade Agreement, estimating damages of at least $5 billion.

Looking ahead, Franco-Nevada provided guidance for 2024, projecting 480,000 – 540,000 GEOs (with 360,000 – 400,000 GEOs in precious metal). For 2023, the firm was able to sell 498,447 GEOs (with 359,591 GEOs in precious metal. The company also added that it is anticipating between 540,000 and 600,000 GEOs in sales by 2028. This projection includes contributions from various mines and expansions, excluding any contributions from Cobre Panama.

Franco-Nevada last traded at $153.01 on the TSX.

Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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