Franco-Nevada reports record gold royalties, weaker copper royalty

Mining royalty company Franco-Nevada intends to pay a semi-annual dividend of Cdn 14-cents share on December 18, 2009, partly thanks to record gold royalties.

RENO, NV - 

Toronto-based royalty company Franco-Nevada, whose investments can be a barometer of the precious metals sector in the Americas, said Monday it experienced record gold royalty revenue for the third quarter of $25.5 million.

Nevertheless, Franco also forecast that it expects royalty revenues from Barrick's Goldstrike Mine and the Stillwater Mining Company to be lower in the fourth quarter.

Barrick has shifted to lower ounce royalty production at the Goldstrike Mine in Nevada. Meanwhile, the company anticipates "a significant increase" in the royalty revenue from Newmont's nearby Gold Quarry operation.

Copper royalty revenue from Quadra Mining's Robinson copper and gold mine, located in White Pine County, Nevada, dropped from $804,000 for the first nine months of 2008 to $300,000 for the same period of this year. The copper price participation royalty is earned on 51% of annual copper sales in excess of 130 million pounds. However, Robinson had advised it will produce 120 million to 125 million pounds this year

Franco also has a net smelter royalty on 51% of gold sales in excess of 60,000 ounces at the Robinson project. Quadra Mining's recent production guidance suggests Robinson gold production of 90,000 ounces this year.

Royalty revenue from Stillwater Mining is also expected to drop this year although Stillwater has increased PGM production this year because average PGM prices this year are significantly below 2008 PGM prices.  However, Franco-Nevada does not anticipate that its royalty receipts will be affected by the cancellation of General Motors' contract with Stillwater. Royalty revenue from Stillwater is calculated in reference to spot PGM prices and is based on production levels, which so far have not been impacted by the loss of the GM contract.

Overall royalty revenue for Franco-Nevada was $36.4 million during the third quarter, a 9% decrease from $39.9 million a year ago. The decrease was attributed largely to lower oil and gas and PGM commodity prices and lower production from Goldstrike, offset by revenue from the Gold Quarry and Coeur d'Alene Mines' Palmarejo silver and gold mine royalty interest.

More three quarters of Franco's royalty revenue during the first nine months came from precious metals with 75% earned in the U.S. and Canada.

For the third quarter of this year, Franco reported a net income of 12.34 million or 11-cents per share, up from $9.9 million or 10-cents/sh a year ago. For the first nine months of this year, Franco reported a net income of $41.2 million or 39-cents a share, up substantially from the $25 million in net income or 26-cent/sh reported during the same period a year ago.

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