Arrakis Global
Global Thematic Fund Manager
Franco-Nevada's 8% drop is an overreaction: an agreement to restart First Quantum's mine on these terms is incrementally positive, and the state joint venture is more of a First Quantum issue than a Franco one. The risk is that the state tries to insert itself ahead of Franco's stream. x.com x.comÂ
Franco-Nevada is a preferred, lower-torque way to play the June decision on the Cobre Panama copper mine, one that still works without a restart. A replied-to post argues First Quantum looks cheap into that decision, since the mine was shut for political and legal reasons rather than because the asset is broken. x.comÂ
Gold miners have not yet priced in what record gold prices mean for the sector, and the window to get in is shrinking. Newmont beat Q1 profit estimates even though output fell, showing the gold price tailwind is covering operational shortfalls; earnings should rise further when production normalizes. The majors have pricing power they have not had in years and operating leverage is building, while most investors remain in tech. x.com x.comÂ
Domestic precious-metal miners are favored, because as gold moves into its next leg up, things will get rough in some places and some governments will get greedy. @CandidMacro adds energy supply issues at mines in Mali and probably Australia. Favorites are Coeur Mining, Hecla Mining, Endeavour Silver, Blackrock Silver and FGOVF. x.com x.com x.comÂ
Franco-Nevada's premium valuation is becoming less justified as rivals rise and Franco dilutes its gold exposure with non-gold assets. It has long carried a JPMorgan-like premium in gold royalties. A post the author replies to notes Royal Gold trades at 13x free cash flow and 1.2x NAV, while Franco-Nevada and Wheaton Precious Metals historically trade at 20-26x free cash flow and 2x NAV. x.comÂ
Gold miners, unlike gold itself, turn a higher gold price into compounding cash returns. On a path to $8,000 gold, margins would widen far beyond today's roughly $2,400 an ounce even if all-in sustaining costs rose a third to $2,650. Free cash flow per share is at a record of about $15.70, roughly tripled since 2024, and the industry is buying back stock rather than mines, a combination never seen before. Relative to the S&P 500, miners have never been cheaper, not in 2008, 2015 or 2020. x.com … Show more
