Franco-Nevada(FNV) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company recorded total revenue of $303.3 million for Q4 2023, with adjusted EBITDA of$ 254.6 million, resulting in an EBITDA margin of 83.9% [17][35] - The total GEOs sold for the year were 607,045, within the guidance range, with precious metals GEOs at 488,109 [38] - A noncash impairment loss of approximately $1.2 billion was recognized due to the halt in production at Cobre Panama, leading to a net loss of$ 982.5 million or $5.11 per share for the quarter [40][45] Business Line Data and Key Metrics Changes - Precious metal GEOs represented 79% of total GEOs for Q4 2023, while energy GEOs significantly decreased to 25,640 GEOs compared to 47,713 a year ago due to lower energy prices [15][16] - The company expects to benefit from new mines such as Tocantinzinho, Greenstone, and Salares Norte, which will drive organic growth through 2028 [10][21] Market Data and Key Metrics Changes - Gold prices increased by over 14% for Q4 2023 and almost 8% for the year, while palladium prices significantly decreased year-over-year [43] - The company anticipates total GEOs sold in 2024 to be between 480,000 to 540,000, excluding Cobre Panama, with precious metals GEOs expected to be 360,000 to 400,000 [47] Company Strategy and Development Direction - The company aims to maintain a sustainable and progressive dividend, increasing it for the 17th consecutive year, with a focus on capital allocation to responsible operations [9][10] - The strategy includes maintaining a strong balance sheet to capitalize on growth opportunities, especially in a capital-scarce environment [37][122] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business outlook despite challenges at Cobre Panama, highlighting a robust cash flow and no debt [35] - The company is hopeful for a resolution regarding Cobre Panama and a potential restart of production, which would positively impact future deliveries [40][73] Other Important Information - The company has approximately$ 2.4 billion in total available capital as of December 31, 2023, including a credit facility of $1 billion [52] - Annual costs related to legal proceedings for Cobre Panama are expected to be between$ 10 million to $15 million [51] Q&A Session Summary Question: What is the long-term guidance considering the step-downs in agreements? - Management indicated that negotiations vary by transaction, and they aim to achieve acceptable returns while considering the timing of deals [53][54] Question: Can you clarify the arbitration claims and their potential value? - The company is pursuing independent arbitrations, with a minimum claim of$ 5 billion based on damages and market valuation [104][127] Question: What factors influenced the decision to take the impairment on Cobre Panama? - The impairment decision was based on management judgment considering the impact on share price and the halt in production due to political issues [107][108] Question: How does the company view the current market environment for new streams and royalties? - The company sees good opportunities across commodities, with a focus on precious metals, and is actively looking for transactions [138][139]