Royalty sisters report mixed quarter

Rescheduling of operations at Barrick Gold’s (abx-t) Goldstrike project in Nevada has boosted first-quarter earnings for Euro-Nevada Mining (an-t), while impeding those of sister company Franco-Nevada Mining (fn-t).

During the three months ended June 30, Euro earned $6.3 million on revenue of $12.5 million, compared with $3.7 million on $7.5 million in the comparable period in 1996. Per-share earnings were up 56% from last year, at 14 cents.

In stark contrast, Franco’s per-share earnings were down 30% from 1996 results, at 35 cents. Net earnings amounted to $12.9 million on revenue of $22.2 million, compared with $17.5 million on $27.6 million in 1996.

Franco’s reversal in earnings is attributed to lower gold production from Goldstrike’s Betze-Post mine and to a $66-per-oz. decline in the price of gold realized by the company. The lower production was a consequence of having transferred mining equipment from Betze-Post to accelerate production development at Goldstrike’s Meikle mine.

Franco holds royalties and net profits interests in both mines, whereas Euro’s are restricted to the latter. As Meikle only entered the production stage last September, it did not contribute to Euro’s coffers in the first quarter of 1996.

Franco’s chairman, Seymour Schulich, says production will be accelerated at Betze-Post during the second half of the year and should make up for the lost ounces and lift the company’s earnings for the remainder of the year.

Although Euro similarly suffered from lower realized gold prices during the period, Schulich, who also serves as Euro’s chairman, says “the incremental production at Meikle was great enough to overcome this.”

Schulich adds that Euro also benefited from royalties held in the newly commissioned Briggs gold mine in northwestern Nevada and the Rosebud gold mine in southern California. The former is a 50-50 joint venture between Hecla Mining (hl-n) and Sante Fe Pacific Gold (gld-n), with Helca acting as operator. The latter mine is wholly owned and operated by Canyon Resources (cau-x).

In other news, shareholders of Franco-Nevada and Euro-Nevada have approved a split of each company’s shares on a 2-for-1 basis. This represents the second year in a row that management has taken this action, which Schulich describes as being in the best interest of smaller investors.

“Both stocks got back to the same level they were before we split them [last year],” he says. “The prices were getting so high as to preclude small investors from really participating in a round-lot basis.”

Both companies began trading on the split basis earlier this month.