The sentiments for the sector have not changed much, but the utter gloom has receded slightly. There have been downgrades for Franco-Nevada, but the consensus price target is in excess of $53.50 which indicates significant upside potential from current levels. Despite the correction, the fundamentals are a little stretched with a forward P/E of around 32. The price to sales is also high at around 13.5. However, analysts have a preference for royalty / streaming companies in the sector due to the lower risk. The company may acquire more royalty rights in other assets to take advantage of the low valuations. The company had around $825 million cash, but some reports state that the funding for these acquisitions may be from debt. Mining companies like Coeur D'Alene have also hinted at acquiring stake in companies which surround its properties in Nevada. It already has a 5% stake in Pershing Gold Corporation (PGLC) which is expected to start operations next year. Franco-Nevada had recently acquired royalty rights in Midas Gold. There is a realization that the crash in gold prices over past many months has factored in most of the negatives for the sector. Meanwhile, the stock is relatively stable, and is more than 14% above recent lows of ~$34.50 The relative stability in gold prices has supported most of the companies and they have become relatively quiet. But the range bound movement may continue, and it is quite possible that it may take weeks to get some positivity into the system. If the gold prices crack, then obviously all bets are off. As stated in an interview by Chairman of FNV, the current problems of the sector can be traced to the fact that gold miners started mining lower,and for lower grades when the prices were booming. The increased costing has hurt many companies after the prices have corrected.
