Franco-Nevada Corporation (NYSE:FNV) has reported record financial results for the first quarter of 2025, showcasing significant growth driven by elevated gold prices and strong production across its operations. The company achieved a total revenue of $368.4 million, marking a 43% increase from $256.8 million in the same quarter last year. This impressive performance is attributed not only to the rising gold prices but also to robust contributions from its Hemlo net profit interest (NPI) and energy interests.
In a conference call held on May 9, 2025, Paul Brink, President and CEO of Franco-Nevada, expressed his enthusiasm about the results, stating, "Today, we’re reporting our best financial results ever. We achieved record quarterly top and bottom line results and that without any contributions from Cobre Panama." The company’s adjusted EBITDA rose to $321.9 million, up 49% from $216.1 million in Q1 2024, while adjusted net income reached $205.6 million or $1.07 per share, both reflecting a 51% year-over-year increase.
Franco-Nevada sold a total of 126,585 gold equivalent ounces (GEOs) during the quarter, a 3% increase from 122,897 GEOs in Q1 2024. Precious metal GEOs sold amounted to 100,623, representing an 8% growth compared to the prior year. However, the company noted a decrease in diversified GEOs sold, with approximately 4,000 GEOs less than in the previous year, attributed to the impact of higher gold prices on revenue conversion.
Despite the challenges, Franco-Nevada ended the quarter debt-free, boasting $2.1 billion in available capital. This financial strength positions the company well for future growth opportunities. Brink highlighted a recent strategic acquisition, stating, "During the quarter, we closed the previously announced $500 million acquisition of a stream on Sibanye-Stillwater’s Western Limb Mining Operations and we received the initial payment, which relates to operations in the last four months of last year." This acquisition is expected to enhance the company’s asset base significantly.
The average gold price during the quarter saw a remarkable increase of 38% year-over-year, which played a crucial role in boosting Franco-Nevada’s revenues. The company also reported a cash cost per GEO of $304, up from $273 in Q1 2024, while the margin per GEO surpassed $2,500.
However, not all news was positive. Depletion costs rose to $68.4 million from $58.2 million a year ago, impacting overall profitability. Additionally, there remains ongoing uncertainty surrounding the Cobre Panama mine, with discussions about its future still unresolved. Brink noted that President Mulino of Panama has expressed a willingness to engage in discussions about the mine this year, which could lead to a resolution by year-end.
The company also faces volatility in palladium and oil prices, which were lower compared to the previous year. This fluctuation could potentially affect future revenue streams. Furthermore, Franco-Nevada highlighted a three-month delay between production and delivery of GEOs, which could impact cash flow timing.
During the earnings call, Sandip Rana, Chief Financial Officer, provided insights into the strong performance of the Hemlo NPI, which reported revenue of $17.7 million compared to $4.8 million a year ago. Rana explained that the NPI showed its leverage to higher gold prices, indicating a positive outlook for future quarters unless drastic changes occur.
The company’s energy portfolio also performed well, with strong contributions from new wells and rising natural gas prices. However, the outlook remains cautious, as the performance is closely tied to price stability. Rana indicated that the future performance of the energy segment would depend on price stability, with a flat profile expected if prices remain stable.
Analysts have weighed in on Franco-Nevada’s stock performance, with mixed reviews. Recently, TD Securities downgraded the stock from a "buy" to a "hold" rating, setting a target price of C$152.00. Conversely, BMO Capital Markets raised its rating to "strong-buy," and Stifel Nicolaus increased their target price from C$220.00 to C$265.00.
In other news, insider trading activity has been noted, with Senior Officer Lena Miller selling 1,700 shares at an average price of C$210.37, and Director Boris De Vries selling 500 shares at C$217.08. In total, insiders sold 16,054 shares of company stock worth $3,563,292 in the last ninety days.
Looking ahead, Franco-Nevada remains well-capitalized to pursue additional growth opportunities. The company is exploring various actionable opportunities to add further attractive assets this year, as indicated by Brink. He stated, "We remain well capitalized to add further growth and a business development team have a number of actionable opportunities that could add further attractive assets this year."
Overall, Franco-Nevada Corporation’s record financial results for Q1 2025 reflect a strong performance driven by elevated gold prices and strategic acquisitions, despite facing challenges related to depletion costs and uncertainties surrounding the Cobre Panama mine. As the company looks to the future, its solid financial position and commitment to growth could pave the way for continued success in the precious metals and energy markets.
