Franco-Nevada(US:FNV)2020-08-06 20:27Financial Data and Key Metrics Changes - For Q2 2020, adjusted EBITDA was $158.1 million, a 14.6% increase year-over-year [10] - Adjusted net income for Q2 2020 was $91.8 million, up 43.4% from $64 million in Q2 2019 [10] - Gold and gold equivalent revenue increased by 26% year-over-year, driven by higher gold prices, with the average gold price at $1,711 per ounce compared to $1,310 a year ago [9] Business Line Data and Key Metrics Changes - Gold equivalent ounces (GEO) sold in Q2 2020 were 104,330, slightly down from 107,774 in Q2 2019 [6] - Energy revenue decreased significantly from $27.6 million in Q2 2019 to $14.6 million in Q2 2020 due to lower oil and gas prices [9] - Hemlo mine showed substantial increases in GEOs delivered and revenue recognized compared to the previous year, benefiting from rising gold prices [8] Market Data and Key Metrics Changes - 92% of quarterly revenue was generated from gold and gold equivalents, with gold contributing 70%, silver 10%, PGMs 11%, and other mining 1% [11] - Revenue was sourced 82% from the Americas, with Latin America being the largest contributor [11] Company Strategy and Development Direction - The company is focused on cost management and maintaining a high-margin business model, with cash costs per ounce approximating $250 to $300 [13] - Management is optimistic about future growth, particularly as gold prices rise, and expects to benefit from a diversified portfolio of assets [19] - The company is actively pursuing business development opportunities, including smaller transactions and larger competitive bids [19][20] Management Comments on Operating Environment and Future Outlook - Management noted that almost all impacted assets have resumed normal operations, with only the Golden Highway assets remaining closed [5] - The company reinstated guidance for 2020, expecting GEO sold to be between 475,000 to 505,000 based on commodity price assumptions [14] - Management expressed confidence in the recovery of energy revenue as oil prices improve, particularly from the Weyburn asset [24] Other Important Information - The company is currently undergoing a CRA audit related to transfer pricing reassessments, with a potential tax owed of approximately $7 million [16] - The company has a cash balance building rapidly, with total available capital of $1.7 billion to deploy on new opportunities [22] Q&A Session Summary Question: Will there be a lag in deliveries from Cobre Panama as it ramps up? - Yes, deliveries are expected to ramp up by mid-August, with a potential lag of 4 to 6 weeks for payment recognition [23] Question: How is Weyburn expected to perform in the second half of the year? - Weyburn is expected to improve significantly in the second half of the year as oil prices recover [24] Question: What is the outlook for the ATM program and its use? - The ATM program is a tool for opportunistic cash management, with no specific ongoing revenue stream expected [28] Question: What are the key changes in guidance for 2020? - The main source of guidance change is the impact of COVID-19 on various assets, particularly Candelaria [30] Question: What are the thoughts on dividend increases? - The company aims for a sustainable and progressive dividend, with a commitment to increase it each year [32] Question: What is the expected split of GEO sold between Q3 and Q4? - A split of approximately 60:40 in favor of Q4 is expected for incremental GEO sold in the second half of the year [35] Question: What is the status of the SolGold transaction? - Due diligence is ongoing, with completion expected in the near term [37] Question: How sensitive is the revenue to commodity prices? - There is leverage in revenue from rising commodity prices, particularly in Canadian operations [50] Question: What is the company's approach to potential M&A opportunities? - The company remains opportunistic in pursuing M&A, focusing on good deposits and competitive pricing [44][81]