Franco-Nevada to Acquire Additional Precious Metals Stream

Franco-Nevada Corporation’s FNV fully-owned subsidiary, Franco-Nevada (Barbados) Corporation ("FNB"), has agreed to purchase a precious metals stream on Korea Resources Corp.'s 10% indirect interest in the Cobre Panama project for $178 million.

The terms of this deal is similar to the $178 million precious metals stream announced by the company in September 2017 in regard to the acquisition of a separate 10% interest from LS-Nikko Copper Inc. by First Quantum Minerals Ltd.

FNB, Korea Resources and First Quantum have inked a definitive sale and purchase agreement, which is expected to complete at the end of this month, subject to customary closing conditions. Post the closure of the deal, FNB will have precious metal stream interests covering 100% of the ownership of Cobre Panama.

Additionally, FNB expects to fund the total amount of $356 million without a syndication partner. Earlier, the company considered CEF Holdings Limited as a possible one-third syndication partner.

According to the company, FNB's existing precious metals stream has been in place since 2015. It covers First Quantum's 80% interest in Cobre Panama. This is a roughly $1 billion commitment with FNB funding prorated to project expenditures of First Quantum. FNB has funded $727 million under the original stream till the end of 2017 and has a remaining balance of $273 million.

Moreover, First Quantum has considerably de-risked the project and expects to start phased commissioning in late 2018 with continued ramp-up over 2019. Franco-Nevada expects Cobre Panama to add materially to its growth profile starting 2019.

Shares of Franco-Nevada have declined 3.2% in the last three months, underperforming the industry’s 4.8% gain.

 

 

Zacks Rank & Key Picks

Franco-Nevada currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Methanex Corporation MEOH, Steel Dynamics, Inc. STLD and BASF SE BASFY, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex has an expected long-term earnings growth rate of 15%. Its shares have moved up 27.9% over a year.

Steel Dynamics has an expected long-term earnings growth rate of 12%. Its shares have rallied 36.9% in a year’s time.

BASF has an expected long-term earnings growth rate of 8.7%. Its shares gained 23.4% over a year.

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