Adrian Day is a long-standing expert in resources, mining and royalty streaming stocks. In his Global Analyst newsletter, the London-based money manager updates some of his favorite ideas among streamers.
Franco Nevada (FNV), following its record quarter and year, has increased its dividend, by 30%, a larger-than-normal amount. The company felt comfortable doing that with more than $1 billion revenue, and its largest asset, Cobre Panama, with its first full year of operation behind it.
The company expects another record year ahead, particularly with Cobre continuing to ramp up production, another cornerstone asset Candelaria back up and running, and a third, Antamina, expecting an increase in silver deliveries.
The oil and gas unit had a good 2020 and is expecting another strong year this. Overall, it is expecting 10% in gold-equivalent ounces (“geo’s”).
Franco Nevada has no debt, $530 million in cash, and $1.4 billion available on its credit facility for any new acquisitions. It sees most likely areas for opportunities in acquisition or mine development financing.
The company is well diversified, more so than other large royalty companies, with no single asset, or singe operator contributing more than 13% of its revenue (Cobre Panama).
It has top management and balance sheet. Although it has rebounded off its low at $106 at the end of February, Franco remains a buy, particularly for those who do not already own it.
Wheaton Precious Metals (WPM) met its 2020 guidance with fourth-quarter production of 185,000 “GEOs”, and 673,000 for the year. It is expecting production to be about 5% higher this coming year, a somewhat modest call given that 2020 production was hurt by Covid-restrictions.
Guidance for the next five years is somewhat improved; its largest revenue source — Vale’s Salobo mine — is in the midst of an expansion which is scheduled to commence in the first-half of next year.
A new mine, Pampacancha in Peru, is being delayed due to new covid restrictions in that country, though Wheaton did receive its first shipment of cobalt from Voisey’s Bay.
Wheaton increased its dividend again, by 30% over 2020, following its policy to pay about 30% of cash flow — at a tad over 1.3%. After paying down almost $300 million on its credit facility, Wheaton is now net debt neutral, with about $2 billion still available for new transactions. Wheaton is a buy.
