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Franco-Nevada (FNV) Hits New 52-Week High: What's Driving it?
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Franco-Nevada Corporation (FNV - Free Report) scaled a fresh 52-week high of $169.32 during the trading session on Apr 11, before retracting to close at $165.78. Higher prices for precious metals, energy, oil and iron ore are driving share price appreciation. Also, consistent focus on adding royalty and stream cost control actions contribute to the rally.
Price Performance
Franco-Nevada’s shares have gained 24% in the past year compared with the industry’s growth of 16%.
Image Source: Zacks Investment Research
Driving Factors
Franco-Nevada operates as a gold-focused royalty and stream company with additional interests in silver, platinum group metals ("PGM"), oil & gas and other resource assets. One of the inherent strengths of its business model is the diversification of its portfolio. The company is gaining from Cobre Panama, Antamina, Candelaria mines and the addition of the Condestable stream. Franco-Nevada’s largest revenue driver, Cobre Panama mine, contributed 18% to revenues in 2021, followed by Candelaria and Antapaccay both at 9%. First Quantum (which operates Cobre Panama) expects copper production from the mine to be between 330,000 and 360,000 tons for the current year compared with 2021 production of 331,000 tons. The company has royalties and streams on several properties mined by some of the most reputable mining companies in the world. It will gain from mine expansions and the construction of new mines in the years to come.
Given the company’s continued focus on cost cuts, Franco-Nevada continues to generate high margins. The cash costs per GEO (gold equivalent ounces) sold came in at $245 in 2021, down 11.6% from the prior-year period. The cost per GEO sold will likely remain stable in the current year, given the recent rally in gold prices.
Currently, gold prices are trading above $1,900 per ounce as the Russia-Ukraine conflict fueled safe-haven demand for the metal. Rising inflation, primarily due to high energy prices, supply constraints and robust demand as well as Fed’s interest rate hikes are driving gold prices. Apart from gold, PGMs, nickel, energy, and iron ore are currently all high. If the trend continues, this will boost the company’s revenues for the current year.
Franco-Nevada is debt-free and uses its free cash flow to expand the portfolio and pay out dividends. The company generated an operating cash flow of $955 million in 2021, up from the $804 million witnessed in 2020. It had $539.3 million cash in hand at 2021-end, up from $534 million reported as of the end of 2020. The company now has an available capital of $1.6 billion.
FNV is benefiting from Vale S.A’s (VALE - Free Report) Royalty acquisition. This buyout contributed to the company’s Diversified assets revenues in 2021. The company’s investments in Vale's outstanding Participating Debentures and 9.9% equity investment in Labrador Iron Ore Royalty Corporation provide exposure to mines producing high-grade iron ore products preferred by steelmakers seeking to reduce CO2 and other emissions from their operations.
In the current year, Franco-Nevada anticipates generating 35,000-55,000 GEOs from its Diversified Mining assets (Iron Ore and Energy) compared with 52,584 GEOs in 2021, driven by higher iron ore and oil and gas prices. For 2022, the company expects Energy assets to contribute between 125,000 and 145,000 GEOs compared with 117,256 GEOs in 2021, based on expected WTI oil prices of $85 and Henry Hub natural gas prices of $3.75. Total GEOs for the current year are expected to be between 680,000 and 740,000. Of this, GEOs from precious metal assets are expected to be 510,000-550,000.
Zacks Rank & Stocks to Consider
Franco-Nevada currently carries a Zacks Rank #3 (Hold).
Nutrien has an expected earnings growth rate of 108.7% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 37.4% upward over the last 60 days.
Nutrien has a trailing four-quarter earnings surprise of roughly 60.3%, on average. NTR has rallied around 98.3% in a year.
Commercial Metals has a projected earnings growth rate of 114.7% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised upward by 35.1% over the past 60 days.
Commercial Metals has a trailing four-quarter earnings surprise of roughly 15.9%, on average. CMC has gained around 47% in a year.
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Franco-Nevada (FNV) Hits New 52-Week High: What's Driving it?
Franco-Nevada Corporation (FNV - Free Report) scaled a fresh 52-week high of $169.32 during the trading session on Apr 11, before retracting to close at $165.78. Higher prices for precious metals, energy, oil and iron ore are driving share price appreciation. Also, consistent focus on adding royalty and stream cost control actions contribute to the rally.
Price Performance
Franco-Nevada’s shares have gained 24% in the past year compared with the industry’s growth of 16%.
Image Source: Zacks Investment Research
Driving Factors
Franco-Nevada operates as a gold-focused royalty and stream company with additional interests in silver, platinum group metals ("PGM"), oil & gas and other resource assets. One of the inherent strengths of its business model is the diversification of its portfolio. The company is gaining from Cobre Panama, Antamina, Candelaria mines and the addition of the Condestable stream. Franco-Nevada’s largest revenue driver, Cobre Panama mine, contributed 18% to revenues in 2021, followed by Candelaria and Antapaccay both at 9%. First Quantum (which operates Cobre Panama) expects copper production from the mine to be between 330,000 and 360,000 tons for the current year compared with 2021 production of 331,000 tons. The company has royalties and streams on several properties mined by some of the most reputable mining companies in the world. It will gain from mine expansions and the construction of new mines in the years to come.
Given the company’s continued focus on cost cuts, Franco-Nevada continues to generate high margins. The cash costs per GEO (gold equivalent ounces) sold came in at $245 in 2021, down 11.6% from the prior-year period. The cost per GEO sold will likely remain stable in the current year, given the recent rally in gold prices.
Currently, gold prices are trading above $1,900 per ounce as the Russia-Ukraine conflict fueled safe-haven demand for the metal. Rising inflation, primarily due to high energy prices, supply constraints and robust demand as well as Fed’s interest rate hikes are driving gold prices. Apart from gold, PGMs, nickel, energy, and iron ore are currently all high. If the trend continues, this will boost the company’s revenues for the current year.
Franco-Nevada is debt-free and uses its free cash flow to expand the portfolio and pay out dividends. The company generated an operating cash flow of $955 million in 2021, up from the $804 million witnessed in 2020. It had $539.3 million cash in hand at 2021-end, up from $534 million reported as of the end of 2020. The company now has an available capital of $1.6 billion.
FNV is benefiting from Vale S.A’s (VALE - Free Report) Royalty acquisition. This buyout contributed to the company’s Diversified assets revenues in 2021. The company’s investments in Vale's outstanding Participating Debentures and 9.9% equity investment in Labrador Iron Ore Royalty Corporation provide exposure to mines producing high-grade iron ore products preferred by steelmakers seeking to reduce CO2 and other emissions from their operations.
In the current year, Franco-Nevada anticipates generating 35,000-55,000 GEOs from its Diversified Mining assets (Iron Ore and Energy) compared with 52,584 GEOs in 2021, driven by higher iron ore and oil and gas prices. For 2022, the company expects Energy assets to contribute between 125,000 and 145,000 GEOs compared with 117,256 GEOs in 2021, based on expected WTI oil prices of $85 and Henry Hub natural gas prices of $3.75. Total GEOs for the current year are expected to be between 680,000 and 740,000. Of this, GEOs from precious metal assets are expected to be 510,000-550,000.
Zacks Rank & Stocks to Consider
Franco-Nevada currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the basic materials space include Nutrien Ltd. (NTR - Free Report) and Commercial Metals Company (CMC - Free Report) , both flaunt a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today's Zacks #1 Rank stocks here.
Nutrien has an expected earnings growth rate of 108.7% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 37.4% upward over the last 60 days.
Nutrien has a trailing four-quarter earnings surprise of roughly 60.3%, on average. NTR has rallied around 98.3% in a year.
Commercial Metals has a projected earnings growth rate of 114.7% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised upward by 35.1% over the past 60 days.
Commercial Metals has a trailing four-quarter earnings surprise of roughly 15.9%, on average. CMC has gained around 47% in a year.