The startup of Coeur d’Alene Mines’ (CDM-T, CDE-N) Palmarejo mine in Mexico and elevated production levels at Barrick Gold’s (ABX-T, ABX-N) Goldstrike property in northern Nevada sent Franco-Nevada’s (FNV-T, FNNVF-O) revenues from gold royalties in the second quarter to US$23.6 million — a record high.
Overall royalty revenues — including gold, platinum group metals, and oil and gas — reached US$32.9 million, up from US$29.2 million in the first quarter, but down from US$40.9 million in the second quarter of 2008.
That was because average spot prices for oil, gas, platinum and palladium in the second quarter were down 48%, 66%, 42% and 47%, respectively, compared with average spot prices in the second quarter of last year.
In the second quarter, royalties from precious metals increased to 80% of total revenues (72% gold and 8% platinum group metals). The remainder was divided between oil (15%), gas (4%), and base metals and others (1%).
With no debt or hedges and working capital of US$512.9 million on top of an undrawn US$150-million revolving credit facility, Franco-Nevada is in an enviable financial position. Net income reached US$25.1 million, up from US$3.8 million in the first quarter and US$9.9 million in the second quarter of 2008.
Free cash flow tallied US$27.9 million (US27¢ per share) in the second quarter, compared with US$24.9 million (US25¢ per share) in the first quarter and US$35.3 million (US35¢ per share) in the second quarter of 2008.
News of the company’s second-quarter results sent Franco-Nevada shares up 87¢ or 3.34% in Toronto to close at $26.88. The company has a 52-week trading range of $11.62-31.49 and 112 million shares outstanding.
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