Canadian gold firm Franco sees earnings growth
DENVER, Oct 19 (Reuters) - Franco-Nevada Mining Corp Ltd. (TSE: FN), the world's fifth-largest gold company, said on
Tuesday it expected to report second-quarter earnings growth roughly equivalent to that posted in its first quarter.
Canadian-based Franco, which profits by taking royalty stakes in mining projects throughout the world, said the company had
generated healthy earnings growth despite weakness in the gold price during much of the second quarter.
Franco earned C$25.5 million, or 16 Canadian cents a share, in the three months ended June 30, compared to a profit of
C$15.8 million, or 10 Canadian cents a share, in the same quarter last year.
The results represented a 61-percent increase in quarterly earnings on a year-over-year basis.
"We are anticipating an increase on earnings per share of roughly in the order and of the magnitude of what we reported in the
first quarter," Franco Chairman Seymour Schulich told delegates at the Denver Gold Group's annual conference.
Franco said a growing asset base, recent expansion of its 100-percent owned Ken Snyder mine in Nevada and a solid
debt-free balance sheet had positioned the company for solid long-term growth.
Schulich said Franco would generate about $1.6 billion in cash and marketable investments during the next five years at a gold
price of $300 an ounce, though he added the company would not be content to sit on its cash.
Franco, which recently merged with its sister company Euro-Nevada, does not hedge or forward sell any gold.
Hedging, a common practice in the industry, allows a company to guard against a fall in gold prices by selling future
production at a fixed price.
It can pay handsome dividends in an environment where confidence in gold is declining, but it can backfire when bullion prices
rise as happened last month.
Gold, which rose sharply in late September after 15 European central banks pledged to cap future bullion sales, traded at
about $311 an ounce on Tuesday.
Franco said it would continue to seek exposure to the upside of gold prices.
Its shares fell 60 Canadian cents to trade at C$27.60 a share in mid-afternoon trading on Tuesday on the Toronto Stock
Exchange.
($1=$1.49 Canadian)
(Paul Simao, Reuters Denver, 416-453-6759)
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