Franco-Nevada(FNV)2022-08-11 17:44Financial Data and Key Metrics Changes - The company reported record financial results for Q2 2022, with revenues of 301.2 million, both representing year-over-year increases [22][24][27] - Adjusted net income was 1.2, a 6% increase [27][28] - The adjusted EBITDA margin was 85.5%, reflecting the high-margin nature of the business [22][24] Business Line Data and Key Metrics Changes - Gold and gold equivalent ounces (GEOs) sold in Q2 2022 were 191,052, slightly down from 192,379 in Q2 2021 [16][17] - Energy assets saw a doubling of GEOs year-over-year due to higher energy prices, with revenue from energy assets increasing from 91.5 million [21][23] - The company maintained its guidance for total GEOs sold in 2022 at 680,000 to 740,000, with precious metal GEOs estimated at 510,000 to 550,000 [36][37] Market Data and Key Metrics Changes - Approximately 70% of Q2 2022 revenue was generated from precious metals, with 91% of revenue sourced from the Americas [29] - Cobre Panama was the largest revenue generator, contributing 18% of total revenue for the quarter [29] Company Strategy and Development Direction - The company is focused on growing its portfolio by adding more precious metal assets and is seeing a good pipeline of opportunities [14][102] - Franco-Nevada aims to maintain a high proportion of revenue from precious metals, targeting to generate less than 20% of revenue from energy assets [101][102] - The company is exploring partnerships with developers and is open to adding exposure in regions like Argentina, which has strong geological potential [71][102] Management's Comments on Operating Environment and Future Outlook - Management highlighted the low-risk nature of the business in the current inflationary environment and expressed confidence in the company's ability to generate cash flow with no debt [6][14] - The company is optimistic about the future, expecting contributions from new mines and expansions in existing operations [12][14] Other Important Information - Franco-Nevada was named one of the Best 50 Corporate Citizens in Canada by Corporate Knights in 2022 [13] - The company committed $1 million to environmental and community support programs as part of the Tocantinzinho transaction [13][41] Q&A Session Summary Question: Impact of Stillwater flood on Q3 - Management indicated that the flood at Stillwater would likely result in a reduction of approximately 2,000 GEOs if operations restart in Q3 [43] Question: Energy market outlook - Management discussed the resilience of oil prices, noting that while prices have recently pulled back, they expect continued strength in the market [46][49] Question: M&A environment and deal sizes - Management acknowledged increased competition in the industry and emphasized the importance of selecting quality assets while being flexible in financing structures [52][80] Question: Geopolitical risks in South America - Management is monitoring political changes in South America but remains committed to maintaining a diversified portfolio [62][64] Question: Future precious metal opportunities - Management noted a focus on primary precious metal opportunities, reflecting current market conditions [66] Question: Hemlo's contribution in upcoming quarters - Management forecasted Hemlo's contribution to be approximately CAD 5 million to CAD 6 million per quarter for the next two quarters [73] Question: Appetite for Argentine exposure - Management expressed openness to adding exposure in Argentina, citing the country's strong geological potential [71]