Franco-Nevada Reports 2011 Financial Results and Provides 2012 Update
TORONTO, March 21, 2012 /CNW/ - Franco-Nevada Corporation
today reported its financial results for the three and twelve months ended December 31, 2011. Financial results are prepared in accordance with International Financial Reporting Standards ('IFRS') and are expressed in millions of US dollars, unless otherwise noted. The Company's Consolidated Annual Financial Statements and Management's Discussion and Analysis can be found on our website at www.franco-nevada.com.Selected Financial Information
Q4 Q4
2011 2010 2011 2010
Revenue $ 118.5 $ 74.9 $ 411.2 $ 227.2
Operating
income (loss) (107.7) 28.8 28.0 85.8
Net income
(loss) (105.4) 17.2 (6.8) 62.7
Basic
earnings
(loss) per
share $ (0.80) $ 0.15 $ (0.05) $ 0.55
Dividends
paid per
share $ 0.32 $ 0.29
Adjusted
EBITDA(1) $ 94.2 $ 61.1 $ 327.3 $ 180.0
Adjusted
EBITDA(1) per
share $ 0.72 $ 0.53 $ 2.61 $ 1.58
Adjusted Net
Income(2) 40.8 23.4 136.0 52.1
Adjusted Net
Income(2) per
share $ 0.31 $ 0.20 $ 1.08 $ 0.46
AsatDecember31,
2011 2010
Cash and cash
equivalents $ 794.1 $ 413.9
Working
capital 851.1 572.7
Total Assets 2,901.0 2,007.0
Total
Shareholders'
Equity $ 2,834.2 $ 1,980.6
(1) Adjusted EBITDA is defined by the Company as net income
(loss) excluding income tax expense, finance income and
costs, foreign exchange gains/losses, gains/losses on the
sale of investments, income/losses from equity investments,
depletion and depreciation and impairment charges related to
royalties, streams, working interests and investments. See
Non-IFRS Measures at the end of this press release.
(2) Adjusted Net Income is defined by the Company as net income
(loss) excluding foreign exchange gains/losses, gains/losses
on the sale of investments, impairment charges related to
royalties, streams, working interests and investments,
unusual non-recurring items, and the impact of taxes on all
these items. See Non-IFRS Measures at the end of this press
release.
This press release contains forward-looking statements. Reference should be made to the Cautionary Statement on Forward-Looking Information at the end of this press release.
CEO Commentary
David Harquail, President and CEO, made the following comments:
'Franco-Nevada maintains its strong momentum. In 2011, revenue grew by 81% over 2010 levels which in turn was 46% above 2009 revenue. Our Q4 2011 revenue was another record. The revenue growth in the last two years has been driven by acquisitions, organic growth at our existing assets and higher gold prices. Our revenue mix in 2011 was 91% from precious metals and 79% from North American assets. We recorded impairments on two stream assets in the fourth quarter based on recent developments at those operations. Despite that, our guidance for 2012 is for higher revenue of $430 to $460 million (before payments under stream agreements), assuming $1,700 gold, $1,700 platinum, $750 palladium and $95 oil and continued steady state of operations. We are looking forward to revenue contributions from several additional royalties in early 2013.'
'2011 was a very active year for Franco-Nevada. In addition to listing on the NYSE, we added 12 new royalties and streams investing over $1.2 billion. 2012 is starting strong and we have already completed 3 acquisitions totaling approximately $110 million. We continue to see good opportunities and with the recent exercise of our 2012 warrants, we have over $960 million in capital available for further investments.'
Portfolio Highlights
Details of the individual revenue contributions by asset and commodity can be found in our Management's Discussion and Analysis available on our web site or in our Annual Information Form and Form 40-F.
New Acquisitions in 2012
-- Timmins West -Franco-Nevada acquired a 2.25% NSR royalty on the
Timmins West Complex in Ontario for $35 million. Lake Shore
Gold Corp. has announced that this gold operation is being
expanded and has promising resource growth potential. In
addition to the royalty, Franco-Nevada made a C$15 million
equity investment in Lake Shore Gold Corp.
-- Weyburn Unit -Franco-Nevada has doubled its working interest in
the Weyburn Unit in southeast Saskatchewan with a C$55 million
investment. This is a conventional unitized oil operation
operated by Cenovus Energy Inc.
-- Bronzewing -Franco-Nevada has increased its royalty on
Navigator's Bronzewing mine in Western Australia from 1% to 2%
for A$4.5 million.
Asset Highlights
-- Gold - U.S.: Our core U.S. gold assets including Goldstrike,
Gold Quarry and Marigold, continued to generate steady revenues
compared to 2010. Goldstrike was in a waste stripping phase in
2011 and is expected to generate higher revenue in 2012.
-- Gold - Canada: Our Canadian assets generated higher gold
revenues in 2011 with the addition of three precious metals
streams from Sudbury and increased production from three mines
along the Golden Highway near Timmins. Also, our net profit
royalties became more significant in 2011 with the start of
royalty payments from Musselwhite and Macassa. In 2012, we are
expecting contributions from our new Timmins West royalty and
net profit royalties from Hemlo. Detour Gold announced
increases in reserves and resources in January 2012 and
completed a C$277 million financing. Detour Gold's construction
is progressing well with processing of ore expected by Q4 2012.
-- Gold - Australia: Our Australian gold assets are relatively
small but are showing solid growth. The Duketon tenements,
operated by Regis Resources, generated royalties from the new
Moolart Well mine. In the second half of 2012, Regis expects
production to begin at the larger Garden Well project and there
appears to be several additional development opportunities
beyond that all on the same Duketon royalty tenements.
-- Gold - International:Palmarejo was the largest revenue
generator in 2011 before the deduction for the cost of stream
ounces. It is expected to be a significant component of
revenue for the Company in 2012. Tasiast royalty payments
began in mid 2011 and are expected to benefit from a full year
of production in 2012. Our new gold streams at MWS and
Ezulwini were important contributors in 2011. MWS successfully
added a third module and operated well in 2011 despite several
permitting challenges. Ezulwini's operations continued to be
challenged with Franco-Nevada's 2011 revenues supported by a
minimum production guarantee. This guarantee expired at the
end of 2011 and lower revenue is expected from Ezulwini in
2012.
-- PGM Assets:Stillwater revenue was stronger in 2011 as a result
of higher production and PGM prices. The major addition to PGM
revenue in 2011 was the addition of PGM streams from Quadra
FNX's three mines in Sudbury. The operator has altered its mine
plans such that in 2012 we will see the focus of precious
metals production move toward the Levack (Morrison) mine while
deferring precious metals production at McCreedy West and
suspending operations at the end of 2012 at Podolsky. KGHM
International acquired Quadra FNX in March 2012.
-- Oil & Gas Assets: Oil & gas revenue in 2011 was comparable to
2010 revenue. 2011 oil & gas revenue was generated 83% from
oil and 17% from gas. 2012 oil & gas revenues are expected to
be higher than 2011 with the acquisition of an additional
working interest in the Weyburn Unit.
Other Asset Developments
-- MWSis owned by First Uranium which in March 2012 agreed to sell
the operation to AngloGold Ashanti subject to various approvals
which First Uranium announced that it expects to receive in Q2
2012. Franco-Nevada will be entitled to receive 25% of all the
gold produced through the MWS plant including treatment of
AngloGold tailings until Franco-Nevada has received 312,500
ounces of gold starting January 1, 2012. Franco-Nevada would
benefit from a stronger operator with production sourced from a
larger reserve.
-- Ezulwiniis also owned by First Uranium - which in March 2012
agreed to sell the operation to Gold One subject to various
approvals which First Uranium announced that it expects to
receive in Q2 2012. Franco-Nevada will continue to receive its
7% gold stream interest on Ezulwini's gold production following
Gold One's acquisition. Gold One has neighboring operations
which may provide operating synergies.
-- Edikan reached commercial production effective December 31,
2011. Franco-Nevada acquired an effective 1.5% NSR royalty in
2011. Perseus Mining is the operator and has announced that it
expects production of 220,000-240,000 ozs from Edikan in 2012.
-- Phoenixis being developed by Rubicon Minerals which recently
announced that it is now fully permitted to develop, construct
and operate a potential mining and milling facility.
Franco-Nevada has an effective 1.5% NSR royalty on the part of
the property lying primarily beneath the waters of Red Lake.
-- Rosemontis at its final permitting stages. Franco-Nevada has a
1.5% royalty on all minerals for this large copper/molybdenum
project in Arizona.
-- Relinchois a copper project in Chile being advanced by Teck
Resources which has announced that a full feasibility study is
now expected by Q1 2013. Franco-Nevada has a 1.5% NSR royalty.
-- Taca Tacais a promising copper project in Argentina with a
resource base now exceeding 1.5 billion tonnes. Lumina Copper
has been reporting significant new intercepts. Franco-Nevada
has a 1.08% NSR royalty.
-- South Kalgoorlieis operated by Alacer Gold which is considering
the HBJ Superpit development and mill expansion. Franco-Nevada
has a 1.75% royalty on the majority of the gold resource at
HBJ.
-- Perama Hillreceived an approval in February 2012 and Eldorado
Gold has reported the project will now proceed to a full EIA
review and possible construction decision later in 2012.
Franco-Nevada has a 2% royalty.
-- Agi Dagi'sprefeasibility study is expected to be released by
Alamos Gold in the Q2 2012. Franco-Nevada has a 2% royalty
which includes the majority of the developing Camyurt
discovery.
-- Courageous Lakeis operated by Seabridge Gold which in January
2012 announced increased measured and indicated gold
resources. Franco-Nevada has a 1.02% royalty.
-- Calcatreu is owned by Pan American Silver which, in January
2012, announced that positive local legislation has encouraged
it to accelerate development activities in 2012 toward a
Preliminary Assessment and an EIA. Franco-Nevada has a 2.5%
royalty.
-- Tayloris being developed by St Andrew Goldfields and results of
a project pre-feasibility study were announced in February
2012. Franco-Nevada holds a 1% royalty.
Financial Results
Revenue
-- Revenue was $118.5 million for the fourth quarter of 2011
compared with $74.9 million for the fourth quarter of 2010. The
increase in revenue for the quarter was mostly attributable to
assets acquired in the Gold Wheaton transaction which
contributed $32.7 million to the Company's fourth quarter
revenue. In addition, revenue from Palmarejo was higher due to
increases in the average gold price and production levels.
Revenue also grew due to contributions from Musselwhite, the
Golden Highway assets (Holt, Holloway and Hislop) and the 2011
acquisition of the Edikan royalty. Revenue for 2011 was $411.2
million compared with $227.2 million for 2010, an increase of
81%. Growth in revenue for the year was driven by the
acquisition of the Gold Wheaton streams, higher average
commodity prices, higher production levels at Palmarejo,
Stillwater and the Golden Highway assets and the commencement
of payments on our Musselwhite royalty.
-- Revenue for the fourth quarter was earned 92% from precious
metal assets (80% gold; 12% PGMs), 7% from oil & gas (5% oil;
2% gas) and 1% from other minerals. For 2011, precious metals
revenue represented 91% (75% gold; 16% PGMs), oil & gas 8% (6%
oil; 2% gas) and 1% for other minerals. For 2011,
geographically, 79% of revenue came from North America (27% US,
26% Canada and 26% Mexico), Africa (16%), Australia (4%) and
Other (1%). The components of revenue were earned as follows:
37% revenue-based, 53% streams, 7% profit-based, 3% working
interests and 1% other.
Costs and expenses
-- Costs of sales include the costs of gold equivalent ounces
purchased under stream agreements, oil & gas production taxes,
operating costs on oil & gas working interests and net proceeds
taxes on mineral interests. Costs of sales for the fourth
quarter of 2011 were $17.4 million which included $14.9 million
for the cost of stream ounces. Depletion and depreciation was
$33.2 million, an increase of 24%, over $26.8 million recorded
in the fourth quarter of 2010. Depletion was higher due to the
addition of the Gold Wheaton assets and higher production at
Palmarejo, partially offset by lower depletion on Gold Quarry
and Goldstrike.
-- For the year ended December 31, 2011, costs of sales were $63.3
million compared to $29.5 million for the year ended December
31, 2010. The increase was attributable in part to the fixed
cost per ounce payable under the stream agreements acquired in
the Gold Wheaton acquisition and Palmarejo and Stillwater, due
to higher production levels. The increase was partially offset
by lower depletion on Goldstrike and oil & gas assets due to
lower production.
-- During the fourth quarter, the Company recorded impairment
charges of $152.4 million on its Ezulwini and Podolsky streams.
The operators have publicly announced changes to mine plans for
Ezulwini and the cessation of mining activities at the end of
2012 at Podolsky. As such, management determined that
indications of impairment were evident and completed an
impairment analysis. In addition, the Company recorded $17.5
million in impairment charges related to certain long-term
investments held which experienced a significant or prolonged
decline in their value. Please refer to the Company's annual
consolidated financial statements and management's discussion
and analysis for a more detailed analysis.
-- As part of the Gold Wheaton acquisition, the Company recorded a
$13.5 million mark-to-market gain offset by $7.8 million in
transaction costs in the year ended December 31, 2011. Under
IFRS, transaction costs associated with business combinations
are expensed rather than capitalized as was done under Canadian
GAAP. In addition, the Company recorded $8.2 million in gains
on the sale of certain investments during the year ended
December 31, 2011.
-- Income tax expense was $4.5 million and $45.9 million for the
three and twelve months ended December 31, 2011, respectively.
Net Income
-- Net loss for the fourth quarter of 2011 was $105.4 million, or
$0.80 per share, and Adjusted Net Income(2) for the fourth
quarter was $40.8 million, or $0.31 per share. For the year
ended December 31, 2011, the net loss was $6.8 million, or
$0.05 per share, compared with net income of $62.7 million, or
$0.55 per share, for 2010. Adjusted Net Income(2) for the year
ended December 31, 2011 was $136.0 million, or $1.08 per share,
compared with $52.1 million, or $0.46 per share, for the year
ended December 31, 2010.
-- Adjusted EBITDA(1) was $94.2 million, or $0.72 per share, and
$327.3 million, or $2.61 per share, respectively, for the three
and twelve months ended December 31, 2011. Our definitions of
these non-IFRS financial measures and the reconciliations to
IFRS measures can be found in the Company's Annual Management's
Discussion and Analysis and at the end of this press release.
Balance Sheet and Capital Structure
-- As at December 31, 2011, Franco-Nevada had a strong financial
position with no debt or hedges, cash and cash equivalents of
$794.1 million, working capital of $851.1 million, and
investments valued at $74.4 million, of which $44.1 million are
held in publicly traded equity investments. The Company has an
undrawn $175.0 million unsecured revolving term credit facility
available.
-- 5,563,223 warrants were exercised after year end which
contributed $179.6 million to cash.
-- As at March 21, 2012, the Company had outstanding 143.9 million
shares, 12.6 million warrants (including 6.1 million assumed
from the acquisition of Gold Wheaton), 2.4 million stock
options, 0.4 million Gold Wheaton stock options, 0.1 million
restricted share units and a special warrant exerciseable into
2 million warrants.
Dividend Declaration
-- Today, the Board of Directors of Franco-Nevada declared the
monthly dividend of $0.04 per share for each of April, May and
June 2012. The April dividend will be paid on April 26, 2012
to shareholders of record on April 12, 2012, the May dividend
will be paid on May 31, 2012 to shareholders of record on May
17, 2012 and the June dividend will be paid on June 29, 2012 to
shareholders of record on June 15, 2012.
-- The Canadian dollar equivalent is determined based on the noon
rate posted by the Bank of Canada on March 20, 2012. Under
Canadian tax legislation, Canadian resident individuals who
receive 'eligible dividends' are entitled to an enhanced
gross-up and dividend tax credit on such dividends.
Shareholder Information
The complete Financial Statements and Management's Discussion and Analysis can be found today on Franco-Nevada's website at www.franco-nevada.com and by tomorrow on SEDAR at www.sedar.com and EDGAR at www.sec.gov. Management will host a conference call on March 22, 2012 at 10:00a.m. Eastern Time to review the results. Interested investors are invited to participate as follows:
-- Conference Call: Local: 647-427-7450; Toll-Free:
1-888-231-8191; Title: Franco-Nevada Corporation Fiscal 2011
Financial Results.
-- Conference Call Replay: A recording will be available until
March 29, 2012 at the following numbers:
Local: 416-849-0833; Toll-Free: 1-855-859-2056; Pass code:
51746868.
-- Webcast: A live audio webcast will be accessible at
www.franco-nevada.com.
-- Slides: A presentation to accompany the conference call will be
available on the Company's website prior to the call.
Other Corporate - Analyst & Investor Day and PFIC Statement
Franco-Nevada Management is scheduled to host an Analyst & Investor Day on May 8, 2012 at 2:00 pm EST. This session will provide further background and details on the Company's asset portfolio. The event will be held at the TSX Broadcast Centre in the Exchange Tower, 130 King Street West, Toronto and will also be broadcast via teleconference.
Based on its current and anticipated business activities and financial expectations, Franco believes, on a more-likely-than-not basis, that it will not be a passive foreign investment corporation ('PFIC') for its current tax year ending on December 31, 2012. For a more detailed discussion of Franco-Nevada's PFIC status, please see 'CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS' contained on Franco-Nevada's website at www.franco-nevada.com and in Franco-Nevada's annual report on Form 40-F which will be filed with the Securities and Exchange Commission on EDGAR at www.sec.gov. This, combined with the NYSE listing obtained in September 2011, is expected to facilitate the purchase of Franco-Nevada shares by US investors.
Corporate Summary
Franco-Nevada Corporation is the leading gold royalty and stream company by both gold revenues and number of gold assets. The Company trades under the symbol FNV on both the Toronto and New York Stock Exchanges. Franco-Nevada has delivered superior returns to investors through its diversified portfolio of cash-flow producing assets and has interests in some of the largest new gold development and exploration projects in the world. Franco-Nevada's business model benefits from rising commodity prices and new discoveries while limiting operating and capital cost inflation.
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information contained in this press release, including any information as to future financial or operating performance and other statements that express management's expectations or estimates of future performance, constitute 'forward-looking information' and 'forward-looking statements' within the meaning of applicable Canadian securities laws and the United States Private Securities Litigation Reform Act 1995, respectively. All statements, other than statements of historical fact, are forward-looking statements. The words 'anticipates', 'anticipated', 'believes', 'plans', 'estimate', 'expect', 'expects', 'expected', 'forecasted', 'targeted' and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Readers are cautioned that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual financial results, performance or achievements to be materially different from estimated future results, performance or achievements expressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to: uncertainties relating to the closing of the First Uranium transactions referred to herein; fluctuations in the prices of the primary commodities that drive royalty and stream revenue (gold, platinum group metals, copper, nickel, uranium, silver and oil & 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 US dollar; changes in national and local government legislation, including permitting and licensing regimes and taxation policies; regulations and political or economic developments in any of the countries where properties in which Franco-Nevada holds a royalty, stream or other interest are located; 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 or any of the properties in which Franco-Nevada holds a royalty, stream or other interest; the Company's PFIC status; 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; rate and timing of production differences from resource estimates; 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 or civil unrest; 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, assumptions relating to: the closing of the FirstUranium transactions referred to herein; 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 Company's ongoing income and assets relating to determination of its PFIC status; no adverse development in respect of any significant property in which Franco-Nevada holds a royalty, stream or other interest, 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. Accordingly, readers should not place undue reliance on forward-looking statements because of the inherent uncertainty. For additional information with respect to risks, uncertainties and assumptions, please also refer to the 'Risk Factors' section of Franco-Nevada's most recent Annual Information Form filed with the Canadian securities regulatory authorities on SEDAR at www.sedar.com and Franco-Nevada's most recent Form 40-F filed with the Securities and Exchange Commission on EDGAR at www.sec.gov as well as Franco-Nevada's annual MD&A. The forward-looking statements herein are made as of the date of this press release only and Franco-Nevadadoes 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 and on SEDAR and on EDGAR.
Non-IFRS
Measures
Reconciliation
Three months ended Year ended
December31, December 31,
(Expressedin
millions except
per share
amounts) 2011 2010 2011 2010
Net Income
(Loss) $ (105.4) $ 17.2 $ (6.8) $ 62.7
Income tax
expense 4.5 8.1 45.9 39.5
Finance costs 0.2 0.6 2.3 2.3
Finance income (1.4) (1.0) (4.3) (3.9)
Depletion and
depreciation 33.2 26.8 130.6 88.6
Impairment on
stream
interests 151.2 4.1 151.2 4.1
Impairment on
investments 17.5 1.5 17.5 1.5
Foreign
exchange
gains/losses
and other
expenses (3.6) 4.8 3.1 10.8
Loss from
equity
investee - - 1.7 -
Gain on
investments (2.0) (1.0) (13.9) (25.6)
Adjusted EBITDA $ 94.2 $ 61.1 $ 327.3 $ 180.0
Basic Weighted
Average Shares
Outstanding 131.3 114.1 125.4 114.0
Adjusted EBITDA
per share $ 0.72 $ 0.53 $ 2.61 $ 1.58
Net Income
(Loss) $ (105.4) $ 17.2 $ (6.8) $ 62.7
Foreign
exchange
(gain) loss
and other
expenses, net
of income tax (0.3) 3.1 2.9 7.4
Gain on
acquisition of
Gold
Wheaton/sale
of
investments,
net of income
tax (1.2) (1.1) (20.0) (22.0)
Mark-to-market
changes on
derivative (2.1) - - (0.2)
Loss from
equity
investee, net
of income tax - - 1.7 -
Impairment of
stream/royalty
interests 130.2 2.9 130.2 2.9
Impairment of
investments 15.1 1.3 15.1 1.3
Transaction
costs of Gold
Wheaton, net
of income tax - - 7.8 -
Foreign
withholding
taxes 4.5 - 4.5 -
Credit
facility costs
written off,
net of income
tax - - 0.6 -
Adjusted Net
Income $ 40.8 $ 23.4 $ 136.0 $ 52.1
Adjusted Net
Income pershare $ 0.31 $ 0.20 $ 1.08 $ 0.46
Franco-Nevada Corporation
CONTACT: please go to our website at www.franco-nevada.comor contact:
Stefan Axell
Manager, Investor Relations
416-306-6328
Sandip Rana
Chief Financial Officer
416-306-6303