Royalty twins see mixed earnings

Lower gold prices have left Franco-Nevada Mining (FN-T) with lower earnings for the 6-month period ended Sept. 30, compared with the corresponding period of 1997, whereas sister company Euro-Nevada Mining (EN-T) has posted a slight increase in earnings.

Franco-Nevada’s earnings were $20.6 million (or 26 cents per share), down from $26.5 million in the first half of 1997. First-half revenue fell to $35.3 million from $44.3 million a year before.

Euro-Nevada earned $11.4 million (12 cents per share) on revenue of $24.5 million in the period, compared with earnings of $10.7 million and revenue of $23.6 million in the first six months of 1997.

Both companies reported appreciable paper gains on foreign exchange, but neither took the gains into income. With substantial assets in the U.S., both companies benefited from the decline of the ratio between the Canadian and U.S. dollars.

Euro-Nevada credited dramatic increases in production at the Meikle mine in Nevada, operated by Barrick Gold (ABX-T), for the increase in revenue and earnings. A 6% fall in production at Barrick’s Betze-Post mine, also in Nevada, cut into Franco-Nevada’s royalty income, and lower oil prices depressed revenue from Franco-Nevada’s oil royalty division.

Full commercial production at the Ken Snyder mine, in which Franco and Euro each hold a half-interest, is expected in early 1999; the project is still on time and on budget.

Franco-Nevada, with $413 million in working capital, has also used the weak commodity markets to pick up additional royalty interests, having spent $153 million on new interests so far this year.