Franco-Nevada richer

Standing apart from most of its struggling peers, Franco-Nevada Mining (FN-T) has reported record 6-month earnings from continuing operations.

For the six months ended Sept. 30, Franco earned $55.1 million (or 49 per share) from continuing operations on revenue of $85.4 million, compared with earnings of $44.2 million (20 per share) on revenue of $80.1 million in the corresponding period last year.

The results are restated to reflect Franco’s disposal of the Australian division and the Ken Snyder mine in Nevada, which are reported as discontinued operations. Including discontinued operations, Franco’s earnings for the recent six months rise to $77 million.

For the recent three-month period (which is Franco’s current second quarter, though the company is changing its financial year-end to Dec. 31 from March 31), the company earned a total of $30.2 million on revenue of $45.2 million, compared with $31.8 million on revenue of $42.1 million a year earlier.

Second-quarter operating margins increased to 93% from 79% a year ago, owing to a strong performance from the company’s diversified royalty portfolio, its oil and gas division and its 20% interest in Normandy Mining (ndy-t). Management expects these margins to remain stable for the remainder of the fiscal year.

Of note, revenue from Franco’s Stillwater royalty has increased 6% quarter over quarter and 13% year over year, owing to higher production, while its Goldstrike royalties increased 17% year over year, again because of higher production.

September was punctuated by two significant developments for Franco. The first was AngloGold‘s (AU-N) US$1.7-billion takeover offer for Normandy, which translates into a 20% premium over the market capitalization of the Australian miner prior to the deal’s announcement. Franco-Nevada has not yet decided whether to tender its shares.

The second major development was the proposed conversion by Echo Bay Mines (ECO-T) of its debt into shares — a move that would give Franco effective control over the company. The major says that, pending shareholder approval, it expects to maintain a 49.5% interest in Echo Bay following the conversion.

Franco has also agreed to exchange a 2% net smelter return royalty on the Briggs mine in California for a 7.3% equity position in Canyon Resources (CAU-X) and a 3% NSR on production in excess of 175,000 oz. from April 1, 2001.