Franco's Results Hit by Panama Loss, but Growing
Contributed Opinion

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Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) reported fourth-quarter revenue up 6% on the last quarter. For the year, Franco reported $1.1 billion in revenue for 2024, down 9% from 2023 due to the closure of Cobre Panama, which accounted for almost 20% of Franco's revenue before it was shut down in November 2023.

Excluding that mine, Franco's revenues were up around 30% on the prior-year quarter. The revenue was higher than the consensus estimates, mostly because of higher-than-expected oil and gas revenue. Even without a restart of Cobre Panama, Franco expects higher revenue this year based on some new royalties and streams. The outlook for the resumption of the Cobre Panama mine has improved, though there is a long way to go. Last week, the government said it would allow the shipment of Cobre Panama's stockpiled copper concentrate, while the president commented that now that the country's social security issues had been resolved, Cobre Panama was now the government's top priority.

After the rally in Franco's stock — more than 30% this year — Cobre Panama is partly priced into the share price. I believe, though, that much upside remains when the mine comes back on line. With top management, a rock-solid balance sheet ($1.5 billion in cash and no debt), and diversified revenue-generating assets, as well as a deep pipeline, Franco is a core holding for us.

We are holding for now.

Altius Revenues Fell, as Expected, With Stocks Still Undervalued

Altius Minerals Corp. (ALS:TSX) reported fourth-quarter earnings, ahead of estimates, after pre-announcing royalty revenue. Revenue was down for the fourth quarter and for the full year, with just over $58 million compared with $69 million in 2023. Demonstrating once again the benefits of a diversified portfolio, higher base metals prices, iron ore dividends, and renewable income growth helped offset lower potash prices and no coal revenues ($8 million in 2023).

Revenues are expected to recover this coming year, with potash sales increasing on the back of strong demand as prices stabilize. The company ended the year with $16 million in cash, after buying back just over $16 million of its own stock, which it continues to see as long-term undervalued. It has $108 million in debt, and nearly $200 million in shares of publicly traded companies, albeit not necessarily for near-term sale. This includes $108 million in shares of Labrador Iron Ore Royalty Corp., as well as $60 million in its Project Generation equity portfolio. Last year, it raised $26 million from PG portfolio sales in order to buy back shares.

Silicon Royalty Decision Is Pending

The major near-term development will be the possible sale of its 1.5% royalty on the Expanded Silicon Deposit. CEO Brian Dalton said the company was currently evaluating third-party interest in purchasing its royalty, without committing to completing a sale. I would not be surprised if the company decides to keep the royalty, now its single-largest asset by NAV.

He also noted that submissions had been delivered to the arbitrators on properties that had not been earlier decided (see Bulletin #943); a decision is expected within a month or so. Crucially, Altius' claim to its royalty on the key Silicon and Merlin deposits and surrounding land had been upheld in the original decision. With top management, countercyclical and insightful, a reasonably balance sheet, and strong diverse assets, Altius is a core holding for exposure to the broad commodities complex.

It is a Buy here as it continues to recover from the sudden month-end sell off.

Fortuna's Resources Up, as Reserves Decline

Fortuna Mining Corp. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) reported its year-end reserves declined about 11%, though resources increased meaningfully (M&I up 36%), while the grade at Séguéla also increased. Reserves fell due to production depletion, as resource conversion only partly made up the loss. Exploration results at various brownfields deposits around the mine remain encouraging, with continued high-grade intersections as the Kingfisher deposit.

The major surprise was that Fortuna stated that it had terminated its agreement to sell the San Jose mine to a private Mexican company, announced in January; no explanation was given, but Fortuna said it was continuing with the sales process. Strong, conservative management, a solid balance sheet, and diversified mines with growth potential make Fortuna a favorite mid-tier producer. Now that years of operational and political hic-coughs are behind them, Fortuna is regaining its appropriate valuation. It is still not fully valued in my view.

However, given a 32% jump in the stock price so far this month, we are holding.

Wheaton Sees Record Quarter, Though Valuation Now Rich

Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) reported fourth-quarter earnings as expected, after it had pre-released production numbers. Its revenue, earnings and cash flow all achieved record levels.

It ended the quarter with $818 million in cash (plus $2 billion undrawn on its credit facility). It did not purchase any shares back in the quarter, and did not renew its repurchase facility for the year ahead. Wheaton is the kind of company that appeals to generalist investors and will continue to perform well as the bull market unfolds.

However, given the stock is now at all-time highs, up 32% in the last two months, and long-term valuation highs, we are holding.

Royal Sees Lower Sales This Year, With Recovery Next

Royal Gold Inc. (RGLD:NASDAQ) provided weaker-than-expected guidance for this year because of lower production from Mt Milligan last year (sales lag production at the mine by about six months), as well as ongoing delays in the ramp-up at Pueblo Viejo.

Royal traditionally provides guidance into the year, after releasing year-end earnings in February. However, we expect sales to increase again in 2026, particularly as Pueblo Viejo reaches steady state.

Hold.

Kingsmen Back on Track After Long Covid-Related Slump

Kingsmen Creatives Ltd. (KMEN:SI) said all of its business segments rebounded in 2024, with revenue up over 10% while costs remained fairly stable, although profitability fell due to several impairments on projects initiated before and after COVID. Kingsmen was severely hit by the lockdowns in Singapore, China and the rest of Asia.

With these impairments likely behind it, and indeed some recoveries expected, we look for Kingsmen finally to regain its former glory. It restored its dividend in 2023, after cancelling it during COVID; this year's payout will be twice that of last year, for a 5.6% yield.

Hold for now, but we shall be looking for buying opportunities in this well-run niche company.

TOP BUYS this week, in addition to above, include Ares Capital Corp. (ARCC:NASDAQ), Lara Exploration Ltd. (LRA:TSX.V), and Fox River Resources Corp. (FOX:CSE).