Executive Summary / Key Takeaways

• Franco-Nevada Corporation ($FNV) continues to demonstrate the strength of its inflation-protected royalty and streaming business model, achieving record financial results in Q1 and Q2 2025, primarily driven by elevated gold prices and strategic acquisitions.
• The company's "financial banker" strategy, offering diverse capital solutions (royalty, stream, debt, equity), differentiates it in a competitive landscape, fostering long-term partnerships and enhancing portfolio quality.
• A robust growth outlook is underpinned by a strong pipeline of assets, including significant contributions from recent acquisitions like Cote Gold and AngloGold's Arthur project, alongside organic growth from existing operations and potential restarts like Cobre Panama.
• FNV maintains a pristine balance sheet with no debt and substantial liquidity, generating approximately $1.3 billion in annual cash flow, providing ample "firepower" for continued strategic acquisitions and consistent dividend increases.
• While geopolitical risks and commodity price volatility remain, FNV's diversified, high-margin portfolio, coupled with its passive investment model, positions it for resilient performance and significant upside potential, particularly from the "free option" of Cobre Panama's eventual restart.

Setting the Golden Standard: Franco-Nevada's Enduring Business Model

Franco-Nevada Corporation stands as a premier player in the precious metals royalty and streaming sector, offering investors a unique, inflation-protected exposure to the mining industry without direct operational risks. Founded in 1986, the company's core business model revolves around acquiring royalties and streams on mining assets, providing upfront capital to operators in exchange for a percentage of future production or revenue. This passive investment approach inherently de-risks FNV from the direct costs and complexities of mine development and operation, including labor, energy, and geopolitical challenges that often plague traditional mining companies.

The company's overarching strategy is to be the "go-to gold stock," consistently prioritizing the acquisition of long-dated, high-quality precious metal assets, primarily gold, in stable jurisdictions. This focus is complemented by an opportunistic approach to diversifying into other commodities like copper, iron ore, and energy, particularly when market downturns present attractive entry points or when assets offer multi-decade reserve lives. This dual strategy allows FNV to capitalize on the robust fundamentals of gold while also benefiting from broader industrial and energy trends.

In a competitive landscape populated by other royalty and streaming companies such as Wheaton Precious Metals , Royal Gold , and Osisko Gold Royalties , Franco-Nevada differentiates itself through its sophisticated financial engineering and its ability to act as a "financial banker." This involves providing a comprehensive suite of capital solutions, including streams, debt facilities, and equity investments, tailored to support mining companies and reduce their financial risk. This innovative approach fosters deeper partnerships and allows FNV to secure interests in high-quality assets that might otherwise be inaccessible. For instance, the company's strong gross profit margin (71.16% TTM), operating profit margin (68.24% TTM), and EBITDA margin (93.92% TTM) underscore the inherent profitability and capital efficiency of its business model, often surpassing those of its peers who may have different strategic focuses or less diversified portfolios.

The broader industry currently benefits from a booming gold market, driven by a supply crisis characterized by flat output, falling ore grades, and soaring costs. Despite record margins, miners face challenges in boosting output due to labor issues, energy costs, and geopolitics. Macroeconomic conditions, including U.S. dollar weakness, geopolitical uncertainty, and sustained central bank gold buying, are primed to continue the gold rally. Analysts project gold prices could reach $3,500 by December 2025 and potentially $4,000 by mid-2026. This environment significantly benefits FNV's high-margin, inflation-protected model.

A History of Strategic Expansion and Record Performance

Franco-Nevada's journey has been marked by strategic growth, evolving from its 1986 founding to its current stature. An early example of its long-term vision was the 2012 stream financing agreement for the New Prosperity project, a $300 million commitment contingent on permitting. While this project faced significant delays due to permitting and Indigenous community opposition, leading to a minor impairment, recent positive shifts in relations with the Chukotun First Nation could unlock this "meaningful growth driver" for Franco-Nevada, potentially yielding 40,000-50,000 ounces of gold per year if mine development proceeds.

The period of 2024 and 2025 has been particularly active for business development, with over $1.3 billion in acquisitions and commitments. In 2024, FNV added interests in Newmont (NEM)'s Yanacocha gold mine in Peru, Sibanye 's Western Limb PGM operations in South Africa, and SolGold 's Cascabel copper-gold development project in Ecuador. The commissioning of the Tocantinzinho mine in Brazil, where FNV holds a 12.5% gold stream, also contributed to growth. This aggressive expansion continued into 2025, with the acquisition of a 4.25% NSR royalty on Discovery Silver 's Porcupine Complex for $300 million in Q1, and a significant royalty on IAMGOLD (IAG)’s Cote Gold Mine in Q2. Post-Q2, FNV further expanded its North American footprint by acquiring a royalty on AngloGold (AU)'s Arthur project in Nevada for $250 million. These acquisitions, combined with organic growth, are transforming Franco-Nevada's longer-term outlook. The company also recently announced a settlement on Canadian tax disputes on September 11, 2025, resolving a long-standing issue.

Financial Strength: Records, Margins, and Ample Firepower

Franco-Nevada's financial performance in the first half of 2025 has been exceptional, setting new records across key metrics. In Q2 2025, the company reported record revenue of $369.4 million, a 42% increase year-over-year, and record adjusted EBITDA of $365.7 million, up 65% from Q2 2024. Adjusted net income also surged by 65% to $238.5 million, or $1.24 per share. These results were primarily fueled by robust gold prices and strong contributions from assets like Guadalupe and Candelaria, as well as initial revenues from recent acquisitions such as Porcupine and Cote Gold. Precious metals constituted 82% of Q2 2025 revenue, with 86% sourced from the Americas.

The company's business model inherently generates high margins. While the cash cost per GEO increased to $299 in Q2 2025 from $264 in Q2 2024, the margin per GEO significantly expanded to just shy of $3,000, reflecting the leverage to higher gold prices. This demonstrates FNV's ability to fully benefit from rising commodity prices, as its cost structure remains relatively stable. For Q1 2025, FNV also reported record financial results, with revenue of $368.4 million and adjusted EBITDA of $321.9 million, even without contributions from Cobre Panama.

The impact of higher gold prices is also evident in the diversified segment. In Q2 2025, diversified GEOs sold decreased to 19,644 from 29,914 in the prior year, despite diversified revenue being only slightly lower at $62.7 million. This reduction in GEOs is a direct consequence of converting diversified revenue to GEOs at a higher gold price, highlighting the sensitivity of this metric to gold price fluctuations. For instance, a $100 increase in the gold price can result in approximately 4,700 fewer GEOs from other commodities.

Franco-Nevada maintains a robust liquidity position and a pristine balance sheet. The company ended Q1 2025 debt-free with $2.1 billion in available capital. Even after drawing $175 million on its credit facility to partially fund the $250 million Arthur acquisition in July 2025, total available capital stood at approximately $1.35 billion. With annual cash flow generation of around $1.3 billion, FNV possesses "plenty of firepower" for future transactions and can rapidly repay any credit facility draws.

This financial strength underpins its ability to consistently increase dividends, a track record it has maintained for 18 consecutive years, with cumulative dividends since its IPO exceeding $2.5 billion.

Competitive Edge and Strategic Differentiation

Franco-Nevada's competitive advantages stem from its unique business model and strategic execution. Unlike traditional miners, FNV's passive royalty and streaming model insulates it from direct operating costs and capital expenditures, leading to superior margins and predictable cash flows. This model, combined with its "financial banker" strategy, allows FNV to differentiate itself from direct competitors like Wheaton Precious Metals (WPM), Royal Gold (RGLD), and Osisko Gold Royalties (OR). While WPM focuses heavily on pure precious metals streams and RGLD on established royalties, FNV's willingness to provide a mix of stream, debt, and equity financing, as seen with G Mining (GMIN) and Discovery Silver (DSV), positions it as a more flexible and comprehensive partner. This approach not only secures high-quality assets but also reduces the financial risk for its partners, potentially increasing their valuations over time.

FNV's diversified portfolio, including significant exposure to energy assets, provides a qualitative edge in market positioning. This diversification allows FNV to capitalize on broader industry trends, such as the increasing demand for metals driven by electrification and grid modernization. While specific quantitative comparisons for all niche competitors are challenging, FNV's robust profitability margins (e.g., EBITDA margin of 93.92% TTM) reflect the efficiency and low-cost nature of its royalty and streaming model, which can be more resilient to commodity price fluctuations than less diversified peers. The company's established brand and extensive network of mining partnerships also act as significant barriers to entry in the royalty sector, limiting new entrants and bolstering its defensive market position.

Growth Outlook: A Pipeline of Opportunity

Franco-Nevada's future growth trajectory is compelling, driven by both recent acquisitions and organic expansion within its existing portfolio. The company's 2025 guidance projects total GEOs sold between 465,000 and 525,000, with precious metal GEOs ranging from 385,000 to 425,000. These projections are based on commodity price assumptions of $3,250 per ounce for gold and $37 per ounce for silver. Management anticipates performance to skew towards the upper end of this range, partly due to incremental contributions from the Cote Gold royalty and the expected 10,000 GEOs from Cobre Panama concentrate shipments in Q3 2025.

Looking further ahead, Franco-Nevada forecasts 2028 as a peak year for GEO sales, with an outlook of 490,000 to 550,000 total GEOs by 2029, including 375,000 to 415,000 precious metal GEOs. This outlook represents approximately 12% built-in organic growth from 2024 to 2029, excluding any new acquisitions or the restart of Cobre Panama. Key drivers for this growth include:

• U.S. Permitting: Projects like Perpetua (PPTA)'s Stibnite Gold, Hudbay (HBM)'s Copper World, and Castle Mountain are advancing, benefiting from a more streamlined permitting process in the U.S. Castle Mountain, for instance, could contribute significantly to the latter part of the five-year outlook, potentially producing 200,000 ounces per year, with FNV holding a 2.65% royalty across the property and an additional 2% on one specific pit.
• Accelerated Development: SolGold (SOLG)'s Cascabel project in Ecuador, where FNV has a stream, is now indicating first production as early as 2028 due to new management's efforts to accelerate development.
• New Mine Starts & Expansions: Full-year contributions from Valentine Gold, new mine starts from Eskay Creek and Stibnite Gold, and partial contributions from Taca Taca are expected. Mine expansions at Candelaria, Coroccohuayco, Antapaccay, and Magino will also contribute.
• Energy Sector: The energy assets are projected to see increased production over the next five years, with price assumptions held flat at $70 per barrel WTI and $3 per MCF natural gas.

Risks and the Cobre Panama "Free Option"

Despite its robust position, Franco-Nevada faces several risks. The ongoing situation at Cobre Panama remains a key uncertainty. While the mine is currently in preservation and safe management, and FNV has fully impaired the asset, sentiment in Panama is shifting towards a restart, with President Mulino indicating a willingness to discuss the mine's future in early 2025. Franco-Nevada has suspended its arbitration proceedings at the request of the Panamanian government to facilitate these discussions, emphasizing that a restart is the best outcome for all parties. The company views Cobre Panama as a significant "free option," representing potential upside not currently factored into its guidance, which could increase GEOs and revenues by approximately 30% if it returns to full operation.

Other risks include commodity price volatility, which can impact the conversion of non-gold revenues to GEOs, and dependence on the operational performance of its mining partners. For example, Antapaccay's Q2 2025 performance was lower than expected due to delivery timing, and Candelaria's gold grades were below expectations in Q3 2024, leading to revised guidance from Lundin Mining (LUN). While FNV resolved some Canadian tax disputes, an ongoing transfer pricing dispute with the CRA could still lead to potential exposure. The company also acknowledges geopolitical risks in regions like South Africa, though it views its Sibanye-Stillwater (SBSW) investment favorably due to South Africa's developed mining economy and recent political improvements.

Conclusion

Franco-Nevada Corporation stands as a compelling investment proposition, distinguished by its resilient and high-margin royalty and streaming business model. The company's record financial performance in 2025, driven by a strong gold market and strategic acquisitions, underscores its ability to generate significant value for shareholders. FNV's innovative "financial banker" approach, coupled with its diversified portfolio and robust balance sheet, provides a unique competitive advantage, enabling continuous growth and consistent shareholder returns.

With a clear growth outlook fueled by a strong project pipeline and the potential for Cobre Panama to emerge as a substantial "free option," Franco-Nevada is well-positioned for sustained long-term success. While the company remains exposed to commodity price fluctuations and operational risks of its partners, its passive investment model and strategic asset selection mitigate many of these challenges. For discerning investors seeking exposure to the precious metals sector with a focus on stability, growth, and superior margins, Franco-Nevada offers a golden blueprint for enduring value creation.