Increase in market value possible for Franco-Nevada (March 07, 1988)

As holder of a considerable royalty interests in American Barrick Resources’ Goldstrike property near Elko, Nev., Franco-Nevada Mining of Toronto finds itself in an enviable position.

Franco-Nevada holds a 4% royalty and 5% net profit interest in the Goldstrike property, where Barrick expects to increase its output from 52,000 oz gold last year to a possible 860,000 oz annually by 1991. With 4.7 million oz gold in the proven and probable category and a new reserve update still to come, the economic resource on Franco- Nevada’s lands is estimated at eight million ounce with the deposit still open in all directions.

To delineate a mineralization area measuring 4,200×800 ft and containing geologically inferred reserves of 10 million oz, Barrick has 12 drill rigs on site.

Assuming 90% recoveries, capital costs of $300 million and operating costs of $200 per oz, Franco- Nevada estimates that the aggregate pretax cashflow to the Toronto company could be $375 million(C) or over $30 per share.

Meanwhile, Franco-Nevada reported net income of $238,000 for the 9-month period ended Dec 31, compared to a loss of $649,000 during the same period last year.

Revenues for the first nine months of 1987 were $733,000, up from $442,000 in the 9-month period ended Dec 31, 1986.

Franco-Nevada’s reported cash position of $4,886,000 on Dec 31 was also an increase on the $3,246 reported during the first nine months of 1986.

At presstime, Franco-Nevada shares were trading at $7.38 on the Toronto Stock Exchange in a 52- week range of $16.75 and $3.60.

As holder of a considerable royalty interests in American Barrick Resources’ Goldstrike property near Elko, Nev., Franco-Nevada Mining of Toronto has a golden opportunity to increase its market value.

Franco-Nevada holds a 4% royalty and 5% net profit interest in the Goldstrike property where Barrick expects to increase its output from 52,000 oz gold last year to a possible 860,000 oz annually by 1991. With 4.7 million oz in the proven and probable category and a new reserve update still to come, Franco- Nevada’s holdings could be worth much more than its current market value of around $135 million(US).

To delineate a mineralization area measuring 4,200 x 800 ft and containing geologically inferred reserves of 10 million oz, Barrick currently has 12 drill rigs on site.

Assuming 90% recoveries, capital costs of $300 million and operating costs of $200 per oz, Franco-Nevada estimates that the aggregate pre-tax cash flow to the Toronto company could aggregate $375 million(C) or over $30 per share.

While the Oct 19 market debacle has wiped away around 40% of Franco-Nevada’s market value, the company is still worth around $200 million, says Bill White, senior vice- president and director, corporate and government finance at Merrill Lynch.

Meanwhile, Franco-Nevada reported net income of $238,000 for the 9-month period ended Dec 31, compared to a loss of $649,000 during the same period last year.

Revenues for the first nine months of 1987 were $733,000, up from $442,000 in the 9-month period ended Dec 31, 1986.

Franco-Nevada’s reported cash position of $4,886,000 on Dec 31 was also an increase on the $3,246,000 reported during the first nine months of 1986.

At press-time, Franco-Nevada shares were trading at $7.38 on the Toronto Stock Exchange in a 52- week range of $16.75 and $3.60.