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What Does Franco-Nevada Own in Canada?

By Dan Caplinger - Jul 6, 2017 at 10:52AM

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The precious metals streamer has deals with mines around the world, but for revenues, there's no place like home.

Franco-Nevada (FNV 2.02%) is a Canadian precious metals and energy specialist, and while it's globally diversified, it has more streaming agreements and royalties deals connected to assets in Canada than to  any other nation. Precious metals streams from its home country accounted for more than a third of its 2016 adjusted EBITDA, and their performance is essential to the health of the company.

Franco-Nevada's producing precious metals assets in Canada

Here's a list summarizing all of Franco-Nevada's Canadian precious metals assets that are currently paying revenue, as listed on its website:

Asset

Operator

Revenue to Franco-Nevada in 2016

Sudbury, Ontario

KGHM International

$30.5 million

Detour Lake, Ontario/Quebec

Detour Gold

$13.3 million

Hemlo, Ontario

Barrick Gold (GOLD 2.07%)

$12.7 million

Kirkland Lake, Ontario

multiple

$5.2 million

Golden Highway, Ontario

Kirkland Lake

N/A

Musselwhite, Ontario

Goldcorp (GG)

$5.1 million

Timmons West, Ontario

Tahoe Resources

$3.2 million

Canadian Malartic, Quebec

Yamana Gold (AUY 1.19%) / Agnico Eagle Mines (AEM 3.03%)

$2.1 million

Data source: Franco-Nevada. NA = not available.

Where the streamer gets most of its loonies

As you can see, a handful of properties represents most of Franco-Nevada's revenue from its Canadian operations. The Sudbury mine is the most important, producing not only gold but also platinum and palladium; platinum group metals provided almost three-quarters of the project's revenue in 2016. With a 50% precious metals stream, Franco-Nevada hopes that output from Sudbury will stay strong for a long time.

Elsewhere in Canada, Franco-Nevada has several solid performers. Detour Lake produced almost 540,000 gold ounces in 2016, and is expected to come in between 550,000 and 600,000 gold ounces this year. Hemlo involves a 3% net smelter royalty and a 50% net profits royalty on a portion of Barrick Gold's assets, with gold production expected between 205,000 and 220,000 ounces in 2017.

Smaller assets

Franco-Nevada also has many properties that pay smaller but consistent revenues. In the Kirkland Lake area, Franco-Nevada's royalty deals include the key Macassa mine, where Kirkland Lake Gold expects production of 180,000 to 185,000 ounces this year. Multiple royalty interests in the Golden Highway area involve sliding scales of 0.25% to 15% depending on production, and two of the mines there are expected to produce a total of 120,000 to 130,000 gold ounces in 2017.

The Musselwhite mine should produce about 265,000 ounces this year, with Franco-Nevada carrying a 5% net profits interest royalty. The Timmons West project gives Franco-Nevada a 2.25% net smelter royalty on a mine that should produce 165,000 to 185,000 ounces of gold this year. The streaming company's 1.5% gross royalty on the Canadian Malartic gold project has seen steady gains in revenue in recent years, and the mining companies that operate the project see production continuing to climb to as much as 650,000 ounces in 2018.

Can Franco-Nevada grow in Canada?

Several projects aren't yet paying off for Franco-Nevada, but have the potential to do so. Here's a list of its Canadian assets that are currently in earlier stages of exploration and production.

Asset

Operator

Brucejack, British Columbia

Pretium Resources

Hardrock, Ontario

multiple

Dublin Gulch, (Eagle) Yukon

Victoria Gold

Red Lake, Ontario

Rubicon Minerals

Courageous Lake, Northwest Territories

Seabridge Gold

Goldfields, Saskatchewan

Fortune Bay

Monument Bay, Manitoba

Yamana Gold

Red Mountain, British Columbia

IDM Mining

Cariboo, British Columbia

Barkerville Gold Mines

New Prosperity, British Columbia

Taseko Mines (TGB -5.22%)

Data source: Franco-Nevada.

The most interesting of these assets is the proposed New Prosperity mine in British Columbia, where Taseko Mines has been involved in a long battle to start production. At this point, Franco-Nevada hasn't put up any money, committing only to provide $350 million if Taseko can actually get permits and financing for New Prosperity. With Canadian environmental regulators opposing the company's plans for the site, the mine might never open, but Franco-Nevada essentially holds a costless option in case the project eventually wins approval and gets underway.

Other assets show the breadth of Canada's natural resources. From the Dublin Gulch (Eagle) claims in Yukon to the Courageous Lake area in remote portions of the Northwest Territories and various mines in the central provinces of the country, Franco-Nevada has high hopes for developments that will lead to new streams of gold and other precious metals.

This streaming and royalty giant will inevitably get a lot of its revenue from its native land. Although most investors focus on projects that are already in production, its deals for sites still in development could become Franco-Nevada's key growth drivers in the coming years.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Franco-Nevada Stock Quote
Franco-Nevada
FNV
$170.28 (2.02%) $3.37
Goldcorp Inc. Stock Quote
Goldcorp Inc.
GG
Barrick Gold Corporation Stock Quote
Barrick Gold Corporation
GOLD
$16.74 (2.07%) $0.34
Yamana Gold Inc. Stock Quote
Yamana Gold Inc.
AUY
$5.10 (1.19%) $0.06
Agnico Eagle Mines Limited Stock Quote
Agnico Eagle Mines Limited
AEM
$46.26 (3.03%) $1.36
Taseko Mines Limited Stock Quote
Taseko Mines Limited
TGB
$1.09 (-5.22%) $0.06

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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