Franco boosted by Normandy

Franco-Nevada Mining‘s (FN-T) second-quarter earnings got a boost from its newly acquired stake in Australia’s Normandy Mining (NDY-N).

Franco’s 19.99% stake in Normandy delivered record quarterly production of 634,843 oz. of gold, up from 557,521 oz. a year earlier. Cash costs during the recent quarter were US$153 per oz.

Franco acquired the interest in the Australian miner by swapping its Ken Snyder mine and Midas properties in Nevada, plus US$48 million in cash, for 446.1 million Normandy shares. Franco retains a net smelter return royalty that increases to 10% from 5% at gold prices above US$400 per oz. The deal became effective April 1.

During the quarter, the company realized a price of US$275 per oz. of gold, compared with the average spot price of US$267 per oz.

For the three months ended June 30, earnings totalled $25 million (16 per share), compared with year-ago earnings of $21.9 million (14 per share). Revenues increased 6% to $40.2 million from $38 million the previous year. Mining revenues climbed to $18.8 million from $14.8 million. Cash flow from operations hit $27.5 million, compared with $20.1 million a year earlier.

The company’s operating margin increased to 91% from 86% last year helped along by the new Normandy stake and its oil and gas division, where revenues increased 16%. The company sees margins staying stable for the rest of the fiscal year.

During the quarter, Anglo Platinum, a subsidiary of Anglo American (AAUK-Q), resumed paying advance royalty payments from the Pandora platinum group metal property in South Africa. The company had been making the payments for the past six years, but subsequent to a development decision, announced they would no longer do so. Franco has a 5% net profits royalty on the Pandora property.

The company attributed the improved results to “continued strong performance from its diversified base of gold, platinum metals and oil and gas royalties.”

At the end of June, the company had no debt and working capital plus market value of investments totalling $1.5 billion, including cash of $848 million. The company remains unhedged.