Even with the periodic gold sector smackdowns, Franco Nevada is not far from its all time highs -
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One gold stock that's most unlikely to disappoint you regardless of what gold prices do is Franco-Nevada
(NYSE:FNV). Its shares have historically outperformed those of the largest gold miners and are almost always the first to bounce back after a gold-price crash
. There's a solid reasoning behind this pattern: Franco-Nevada earns a significantly higher margin
, as it's a gold streaming
company and so buys gold from mining companies for low prices to sell at spot rates without bearing any mining-related costs and risks
With streams on more than 50 producing and 42 developing mines
, Franco-Nevada can grow its sales as these mines expand, without having to spend money
. Its largest revenue-generating gold stream mines include:
First Quantum's Cobre Panama in Panama.
Lundin Mining's Candelaria in Chile.
Glencore's Antapaccay in Peru.
Its low-cost, asset-light business model with leverage to gold prices also explains why Franco-Nevada has increased its dividend for 14 straight years
There's another reason to consider Franco-Nevada: the additional revenue sources it's exploring while remaining primarily a gold company. So after venturing into oil and gas some years ago, Franco-Nevada bought iron ore royalties
from U.S. mining giant Vale and Canada-based Labrador Iron Ore this past April. Any rally in oil prices and uptick in infrastructure spending, and therefore demand for iron ore from steel manufacturers
, should add to Franco-Nevada's top line.
With those additions, here's what Franco-Nevada's growth forecast now looks like:
Metric Actual 2020 2021 Guidance 2025 Guidance
Gold equivalent ounces (GEOs) sold 522,000 580,000-615,000 630,000-660,000
GEO revenue $928 million $1.05 billion $1.13 billion
Energy revenue $92 million $125 million $160 million
Total revenue $1.02 billion $1.18 billion $1.29 billion
DATA SOURCE: FRANCO-NEVADA.
Clearly, Franco-Nevada is headed for much bigger things after a record 2020. Chances are, if you check back in a couple of years, you'll think the stock was a steal at today's price.