Franco Nev Corp (FNV) PT Raised to $160 at Raymond James

Raymond James analyst Brian MacArthur raised the price target on Franco Nev Corp (NYSE: FNV) to $160.00 (from $158.00) while maintaining a Outperform rating.

The analyst comments "Transaction: FNV has announced that it has entered into a comprehensive financing transaction to support Discovery Silver’s proposed acquisition of the Porcupine Complex. The transaction includes: i) a 4.25% NSR royalty for $300 mln, consisting of two tranches on production from the Porcupine Complex, ii) a $100 mln senior secured term loan available to be drawn by Discovery within two years of closing, and iii) approximately $49 mln of equity participation with a cornerstone investment in a concurrent C$225 mln (approximately $155 mln) Discovery equity raise. The 4.25% NSR royalty consists of a 2.25% of NSR in perpetuity on all minerals produced and a 2.0% of NSR on all minerals produced until the earlier of i) royalty payments equivalent to 72 koz gold (attributable solely to the 2.0% NSR royalty) or ii) a cash payment equal to a pre-tax annual IRR of 12% in reference to a $100 mln attributable purchase price. The $100 mln senior secured loan is available for 2 years post-closing at a rate of 3-month SOFR + 450 bps and the loan provides for an upfront fee equal to 2% on any principle drawn, a standby fee of 100 basis points per annum on undrawn funds, and the issuance by Discovery of US$1 mln of 3-year common share purchase warrants. The loan has 7-year maturity with amortization of 5% per quarter after year 5, with no restrictions on pre-payment. As part of a concurrent C$225 mln (~US$155 mln) public offering, FNV has committed to purchase 76,388,888 subscription receipts for an aggregate purchase price of ~C$68.8 mln (or US$47.9 mln) or, if the over-allotment option is exercised by the underwriters, a total of 78,833,333 subscription receipts for an aggregate purchase price of about C$71.0 mln (or US$49.4 mln). Upon closing, FNV will own ~9.9% of Discovery’s issued and outstanding common shares. FNV has agreed to a two-year lock-up in respect of Discovery common shares acquired in the offering commencing on the closing of the acquisition. Closing of the transaction is subject to customary conditions, including the successful completion of the acquisition by Discovery, which is expected to occur in 1H2025. FNV also have the right to purchase a matching 2.25% perpetual royalty should certain claims adjacent the operations be acquired in the future. The royalties would add immediate gold revenues from a well-established operating complex in Ontario. The updated technical report in relation to the Porcupine Complex outlines a mine plan for the Hoyle Pond, Borden and Pamour mines which combined are expected to produce ~285 koz Au on average over the next 10 years and to produce a total of ~4.9 Moz Au over a 22-year mine life. We have updated our forecasts for the transaction."

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