Franco-Nevada Corp

NYSE:FNV

Earnings Call Analysis

Franco-Nevada's First Quarter Performance in 2024

Franco-Nevada's Q1 2024 revenue fell to $256.8 million, down 7% from last year, with adjusted EBITDA at $216.1 million. Gold equivalent ounces (GEOs) sold decreased 15% to 122,897. Despite lower volumes, higher gold and silver prices partially offset revenue decline. Key projects like Greenstone and Solaris Norte are on track for first production soon. The company affirmed its GEO guidance. With no debt and $2.3 billion in available capital, Franco-Nevada remains financially robust. Challenges include lower natural gas prices and ongoing arbitration issues concerning Cobre Panama. However, elevated gold prices and strategic acquisitions bolster their outlook.

Strong Start for Franco-Nevada in 2024

Franco-Nevada, a leader in the global royalty and streaming industry, demonstrated a mixed yet promising start in the first quarter of 2024. The company reported revenue of $256.8 million, a decline of 15% in gold equivalent ounces (GEOs) sold year-over-year, yet total revenue only fell by 7%, showcasing resilience aided by higher gold and silver prices.

Financial Performance Indicators

Adjusted EBITDA for Q1 2024 stood at $216.1 million, translating to an impressive margin of 84.2%. Adjusted net income was $146 million, down from $152.2 million in Q1 2023. The adjusted EPS came in at $0.76 per share, a decline of 3.8% from the previous year. Cash cost per GEO increased slightly to $273 from $263 in Q1 2023, largely maintained by the company's efficient cost management.

Commodity Prices and Its Impact

High gold and silver prices positively impacted revenue, while lower platinum and palladium prices constrained earnings. Specifically, the average gold price increased by $183 per ounce year-over-year for Q1 2024.

Guidance and Future Outlook

Despite the variability in commodity prices, Franco-Nevada maintained its guidance for GEOs sold. The company anticipates a stronger second half of the year, driven by new mines coming online such as Greenstone and Salares Norte. The management expects these developments to contribute significantly to achieving better margins.

Business Development and Expansion

The quarter saw Franco-Nevada closing key acquisitions, including natural gas royalties in Haynesville and smaller interests in various projects. This strategic expansion underlines the company’s ambition to diversify and strengthen its portfolio further.

Robust Financial Position

Franco-Nevada remains in a strong financial position, with no debt and $2.3 billion in available capital. This provides ample liquidity to pursue strategic acquisitions and withstand market volatility, thereby positioning the company for continued growth.

Operational Achievements and Challenges

The company faced challenges such as no contribution from Cobre Panama under preservation. However, increased production from other assets like Guadalupe and Sabeco offset some of these drawbacks. The management remains optimistic about resolving issues with Cobre Panama post-Panamanian elections.

Capital and Cost Management

Franco-Nevada demonstrated excellent cost management, with corporate admin costs rising at a much slower rate than revenues. This scalable business model enabled revenue to increase ninefold since 2008, while corporate costs only rose 2.5 times. The company incurred $1.4 million out of the guided $10-$15 million for Cobre Panama arbitration and expects this to be more weighted towards the second half of the year.

Earnings Call Transcript 2024-Q1

[Operator]

Good morning, and welcome to Franco-Nevada Corporation's First Quarter 2024 Results Conference Call and Webcast. This call is being recorded on May 2, 2024.[Operator's Instructions] I would now like to turn the conference over to your host, Candida Hayden, Senior Analyst, Investor Relations.

[Candida Hayden, executive]

Please go ahead. Thank you, Julie. Good morning, everyone. Thank you for joining us today to discuss Franco-Nevada's first quarter 2024 results. Accompanying this call is a presentation, which is available on our website at franco-nevada.com, where you will also find our full financial results. The presentation is also available to view on the webcast. During our call this morning, Paul Brink, President and CEO, Frank Nevada, will provide introductory remarks followed by Sandip Rana, Chief Financial Officer, who will provide a brief review of our results. This will be followed by a Q&A period. Our full executive team is available to answer any questions. Participants may submit questions by the telephone or via the webcast. We would like to remind participants that some of today's commentary may contain forward-looking information, and we refer you to our detailed cautionary note on Slide 2 of this presentation. I will now turn over the call to Paul Brink, President and CEO of Franco-Nevada.

[Paul Brink, executive]

Thank you, Candida, and good morning. Yesterday, we held our AGM here in Toronto, and we're pleased to have Hugo Dryland join our Board. Hugo has, for many years, led Rothschilds Metal and Mining Advisory business and amongst other areas, has extensive experience in project finance and international arbitration. Hugo fills the seat left empty Randall Oliphant sadly passed away last year. Our diversified portfolio performed well, and production for the quarter met our expectations. And the Kaio sales were above and Candelaria go sales slightly below our expectations. Elevated gold prices boosted our revenue and translated directly into some of our highest several margins. Adjusted EBITDA margin was 84.2% and adjusted net income margin was 56.9%. Royalties and new mines continue to contribute to our growth during the quarter gold fields for the first gold at Salares Norte and Rothschilds Myerosa. Equinox and G Mining are on track for first production at Greenstone and Taca Tazino, respectively, in the coming months. Alamos' planned acquisition of Argano will help realize the full potential of the Magino and the Island deposits, including a potential expansion of the Magino mill facility. Alberta reported good progress on the construction of Valentine Gold and production there is expected to start in the first half of 2025. While Cobre Panama remains in preservation and safe management, we're hopeful that the issues can be resolved. Panamanian election takes place this Sunday, May 5. On the business development front, we closed the previously announced acquisition of natural gas royalties in the Haynesville and added a number of smaller interests, an incremental royalty on Pasqua-Lama, a royalty on Scotty Resources, property in the Golden Triangle BC, an increase to the Condatableye gold stream in Peru and a silver royalty on perpetua that might go property in Idaho. Our organic growth typically accelerates on the back of high gold prices. A highlight for the quarter is the success that Agnico Eagle continues to have expanding the detailed to Lake coal body and also the East Goldie body at Canadian Malartic. -- ramp up. We have no debt, $2.3 billion in available capital and an active deal pipeline. I'll hand the call over to Sandip.

[Sandip Rana, executive]

Thank you, Paul. Good morning, everyone. As mentioned by Paul, our portfolio of assets continued to perform well and were in line with expectations for first quarter 2024. With respect to performance in the quarter, on Slide 4, we highlight the gold equivalent ounces sold for the last 5 quarters. As you are aware, Cobre Panama has not contributed any geos or revenue for 2024 that is under preservation and safe management. On the slide, we've highlighted over Pana separately for prior periods. Total GEOs sold for 122,897 for Q1 2024. This compares to 145,331 for the same period in 2023. Of this precious metal geos were 93,018 compared to $111,238 in the prior year. However, Cobre Panama is excluded from prior year comparatives. -- precious metals POs were actually higher year-over-year at 93018 versus 82,575GOs. This increase was due to strong contributions from Hanaka, Guadalupe and Sabeco, all of which had strong production in the first quarter of 2024. This increase was partially offset by lower GEO sold for Sudbury due to lower production and stole water, which was due to the impact of converting weaker platinum plating revenue to geos. In addition, we were delivered approximately 3,000 geos for Condasable, which remain in inventory at the end of the quarter. These ounces were not sold during the first quarter and have subsequently been sold post quarter end. Precious metal geos represented approximately 76% of total GEOs for the quarter. For diversified geos, our Vale royalty contributed an increase in GEOs for the quarter compared to prior year due to a higher-than-anticipated royalty payment, reflecting higher iron ore sales during the second half of 2023. As you know, each quarter, we make an estimate of what the royalty will be with the actual amount being announced by Vale in late March and September of each year. As a result, you will see adjustments to revenue twice a year in the first and third quarter of each year. Energy GEOs were lower at 21,082 for Q1 compared to 25,952 a year ago. The decrease in GEOs is a combination of lower revenue due to weaker natural gas prices, but also the impact of converting energy revenue to geos using higher gold prices. Q1 2024 saw continued movement in average commodity prices. As you see on Slide 5, gold and silver prices were higher for the quarter when compared to prior year. However, platinum and in particular, play in prices were significantly lower year-over-year, which did negatively impact the conversion of PGM revenue to Geos. Oil prices were relatively flat with natural gas being sharply lower. Slide 6 highlights our total revenue and adjusted EBITDA amounts for the last 5 quarters. As you can see from the bar charts, revenue and adjusted EBITDA are lower in Q1 2024 compared to prior quarters. The company recorded $256.8 million in revenue in first quarter and $216.1 million adjusted EBITDA, a margin of 84.2% was achieved for the quarter. The lower revenue and adjusted EBITDA are due to less GEOs sold during the quarter compared to prior year. The impact on both revenue and adjusted EBITDA of the lower GEOs was partially offset by higher gold and silver prices. In fact, while GEOs sold are lower by 15% year-over-year, total revenue was lower by 7%. As you turn to Slide 7, you'll see the key financial results for the company. As mentioned, total GEOs were 122,897, generating $256.8 million in revenue and $216.1 million in adjusted EBITDA. On the cost side, we did have a decrease in cost of sales compared to prior year as we did not incur the ongoing fixed cost for ounces delivered by Cobre Panama.Also, cost of sales is dependent on which assets deliver stream ounces as not all fixed payments per stream are equal. Depletion decreased to $58.2 million versus $61 million a year ago. The decrease in depletion was a combination of no depletion being recorded for Cobre Panama being partially offset by higher depletion for Anteciand the new Haynesville Matias acquisition. Adjusted net income was $146 million compared to $152.2 million in Q1 2023 and adjusted EPS of $0.76 per share for the quarter, lower by 3.8% versus prior year. Slide 8 highlights the continued diversification of the portfolio. From the chart, you can see that 76% of our first quarter 2024 revenue was generated by precious metals, with revenue being sourced 83% from the Americas. Slide 9 illustrates the strength of our business model to generate high margins. For Q1 2024, the cash cost per GEO, which is essentially cost of sales divided by gold equivalent ounces sold was $273 per GEO. This compares to $263 per TO in Q1 2023. Margin was approximately $1,800 per ounce in the first quarter. The average gold price was higher by $183 per ounce for Q1 2024 compared to Q1 2023. At the same time, Franco Nevada's margin was higher by $173 per ounce or 95% of the global price increase in the Same Sure. a rising commodity price environment, we expect to benefit fully as the cost per GEO sold should not increase significantly. The other cost component for the company besides cost of sales is our corporate administration costs. The royalty streaming business model is a scalable model. Our corporate admin costs have increased at a much slower rate than our revenue. Revenues increased ninefold from Q1 2008, while corporate equity costs has increased by 2.5x for the same period. Management believes we can continue to add to our portfolio and grow our business without adding significant overhead to the company. Earlier this year, we had guided to $10 million to $15 million in estimated costs for Cobrapama arbitration. For the first quarter, we incurred $1.4 million in costs. We expect the cost to be weighted more towards the second half of the year. And lastly, Slide 11 summarizes the financial resources available to the company when including our credit facility of $1 billion, total available capital as at March 31, 2024, to $2.3 billion. And now I'll pass it over to Julie, and we're happy to answer any questions.

[Operator]

[Operator's Instructions] Your first question comes from Brian MacArthur from Raymond James.

[Brian MacArthur, analyst]

You've left guidance of GEOs unchanged, but there's a lot of different assumptions, which you sort of talked about commodity prices moving in the first quarter. I mean, now you're much higher gold price assumptions going forward, much lower gas prices. My question really is, is there anything on a volume basis that significantly changed that you're seeing in your portfolio since the beginning of the year? And maybe it's oil and gas because gas prices are -- have gone down? And secondly, it looked like anticapi versus what you give on a gold GEO basis, had a pretty good first quarter. Is that sustainable? Or does it fall off through the year? It kind of goes into the overall volume question?

[Sandip Rana, executive]

Thanks for the question, Brian. On a production basis, as we said, the asset, both mining and energy from a production volume basis are in line with expectations. So right now, from a production standpoint, they're in line, obviously, commodity prices are moving around, but we are within our guidance range at this point. With respect to EI would expect or we do expect to fall off towards -- for the rest of the year and still be within that guidance range we provided as part of our year-end results.

[Brian MacArthur, analyst]

And my second question just relates to Condastable and the increase from up to 37.5% and 25%. I assume everything else, the points where it kicks in are all still the same, so to be kind of middle 2030s or if you can guide when that -- you see that 25% to 37.5% kicking in, please?

[Paul Brink, executive]

Yes, the change really just relates to the final rate. So you wouldn't expect the rest to change meaningfully in the near to term.

[Brian MacArthur, analyst]

And is mid-20 30 sort of where you see that now kicking up. I just don't have the data on how that's developed since the original deal.

[Paul Brink, executive]

Yes. I don't have that immediately handy. We are fixed deliveries. I think it was for the first 5 years. those come off and it goes through a variable percentage in terms of the exact estimate as to when those -- the second variable percentage kicks in. I don't have that offhand. Unfortunately, we can chat offline.

[Brian MacArthur, analyst]

Great. And maybe my final question. Just, Sandip, on the accounting for the taxes on a global basis, can you just review how you're going to do that given when it technically gets enacted?

[Sandip Rana, executive]

So right now, it's not an active net of Barbados or Canada. So for the foreseeable future, our effective tax rate will be 15% roughly. But when it is enacted, assuming it's retroactive, there will be an adjustment in that quarter, which we did highlight, it will be an adjustment to taxes of about $47 million. And as guided at the end of the year, we expect our effective tax rate to be about 19% going forward.

[Operator]

Your next question comes from Heiko Ihle from HC Range.

[Heiko Ihle, analyst]

You've made quite a meaningful number of acquisitions here in the last few months. In your intro on the earnings release, you also state that you still have an active deal pipeline. -- unsurprising, but still good to hear. -- conceptually, are you seeing pricing improvement from sellers of streams that are more willing to negotiate right now? And if so, are you seeing this phenomenon more in mining or more in energy?

[Paul Brink, executive]

I'd say the -- in this environment, probably the main impact is with gold prices moving up, players that have got precious metal byproducts. It's a very attractive environment for them to raise capital through the sale of a precious metal stream that's the predominant trend right now, and that's making for an active deal pipeline.

[Heiko Ihle, analyst]

Fair enough. Building on that last question. I mean with gold prices where they are inflation levels where they are, has there been a bit of a shift with sellers looking for fixed fees versus a percentage of spot pricing as your cash payment? Or is there -- is it just the same and they more or less take whatever they can get.

[Eaun Gray, executive]

I would say, really, the market has shifted towards the percentage in terms of the fee we pay to the seller. Fixed is far less common these days. And I haven't seen any have any trend there recently other than to kind of maintain that.

[Operator]

Your next question comes from Cosmos Chiu from CIBC.

[Cosmos Chiu, analyst]

Maybe my first question is on Panama. As you know, the election is coming up this weekend on May 5. Is this something that you're watching closely? Any variables that you might be watching for? And do you see a potential outcome that could impact Franco-Nevada in the near term? Or is it really a longer-term sort of event too?

[Paul Brink, executive]

Cosmos, yes. We're working it closely in the lead up to the election and no surprise. Given what happened in the country and the purple sentiment against mining in against the mine, I'd say all the candidates have been quite circumspect in terms of commenting on what their approach might be, so we're hopeful that with the new government in place that there can be a new dialogue. And I'm sure that First Quantum will be engaging with whoever that is to see if there is a route to find a way to reopen the mine.

[Cosmos Chiu, analyst]

Of course. And going to your financial statements here. I noticed that your finance income, $16 million has increased quite a bit year-over-year and quarter-over-quarter as well. I just want to make sure, is that just due to the G-mining term loan? And if that's the case, what else is you more?

[Sandip Rana, executive]

So Cosmos, the interest income is in 2 places on the financials this quarter up in revenue. You'll see interest income that relates to actual interest on the G mining loan as well as the tenant note that we did at the end of last year. So any loans we've made up that interest is coming up in revenue now, and there was about $1.2 million for the quarter. The finance income you're referring to, the $16 million, that is the interest we're earning on our cash balance.

[Cosmos Chiu, analyst]

Okay. Okay. And is there a reason why you separate those 2 or just really account...

[Sandip Rana, executive]

It's all accounting, technical related. The loan interest because it's related to mining assets and up in revenue, and we intend to do more debt-like structures going forward. So we've included that uptown.

[Cosmos Chiu, analyst]

Okay. Sounds good. And then maybe one last question again on the accounting side as well. I know Brian asked it earlier in terms of the global minimum taxes. But it sounds like now Barbados has their own legislation and Canada also has their own sort of legislation that's going through. Is there a situation where in terms of timing, when legislation of 2 countries are being enacted? Is there a chance that things can get really complicated later on if they're enacted at different times, different quarters? Or is that something that we don't really need to worry?

[Sandip Rana, executive]

So our understanding right now, neither one has been active in laws. Barbados effective tax rate will be 15% going forward once the law is enacted, but our understanding is contingent on Canada implementing the GMT. So they should both come into play at the same time. But obviously, we'll have to wait and see.

[Operator]

Your next question comes from Tanya Jakusconek from Scotiabank.

[Tanya Jakusconek, analyst]

Some of my questions have been answered. But I've got to come back to just Hemlo, Sandy. How should we be thinking of this royalty because this one is always quite variable. What guidance can you give us for the year?

[Sandip Rana, executive]

It was lower than I expected in Q1, considering where commodity prices were. And I think Per Barrick's released yesterday, they had higher costs. So going forward, I think we stick with what we had guided to as part of our year-end guidance. It's probably going to be at this stage similar to last year, but we'll have to see how the year unfolds.

[Tanya Jakusconek, analyst]

Okay. And then for Mine Waste Solution that we're getting to the cap, so that would imply the rest of the year a bit lower, would that seem fair?

[Paul Brink, executive]

Yes. So we do anticipate to reach the cap in Q4 this year, depending upon how the next 2 quarters play out, it could be early in Q4.

[Tanya Jakusconek, analyst]

Okay. No, that's what we have as well. And then as we look at the year with everything said and done, and I appreciate a lot of variability, but should we be thinking that a slightly better second half with some of the new mines coming in? And can you just remind me for Q2 and Q3 when the new contributions are coming in. So first stronger second half, should we be thinking like 52%, 53% of GEOs and then the new mines, if you can remind me what who's coming in Q2, Q3.

[Paul Brink, executive]

Sure. Yes. So we do expect a stronger second half and not just because, as you said, the new mines will be online. In Q2, Greenstone is pouring -- sorry, Equinox is pouring first gold for Greenstone and second quarter, Solaris Norte, tokens with G-mining is Q3. I don't have the specific split as to whether it's 52, 48 or what have you, but definitely a stronger second half.

[Tanya Jakusconek, analyst]

I just want to make sure because production, I mean, you get paid exactly when they start producing. There's no deferral from my understanding, even if they're noncommercial.

[Paul Brink, executive]

Yes. So on the royalties, we accrue the revenue if ounces have been produced we're entitled to it. So we will accrue even if we haven't been paid, but we will accrue.

[Tanya Jakusconek, analyst]

Perfect. And then just on the environment, I think, Paul, you mentioned that what you're seeing right now is mainly streams on non-gold assets for precious metals, so base metal producers. Can you just come back and verify that we're looking at that sort of like $100 million to $300 million range. Is that still the range that you're thinking about for the stream?

[Eaun Gray, executive]

Yes. Good question. As Paul noted, it's an active pipeline. It's been evolving over the course of the year so far. I'd say, generally, the size has scaled up a bit, Tanya beyond 300, you're seeing more potential for larger transactions as well. So we're quite encouraged by that.

[Tanya Jakusconek, analyst]

And when you say larger transaction, are we talking in over $500 million or still under $5 million?

[Eaun Gray, executive]

There are transactions at the 500 and above level that are possible. So that's perhaps the change versus the last time we spoke. There still are smaller transactions. And as Paul said, byproduct transactions are more common than they work that said, with the capital still constrained to the gold space with gold producers. I think there's still decent loot to transact.

[Tanya Jakusconek, analyst]

I would assume, Eaun, with the higher gold price for gold producers that would want to put some sort of royalty or stream on our gold assets with this higher gold price their overall view on their valuation has gone up. Would that be a fair statement to say.

[Eaun Gray, executive]

Yes, I think so. byproducts presses producer is probably also a similar elevated view, did take a balanced view on gold price, but certainly constructive on that as well.

[Tanya Jakusconek, analyst]

Okay. And then, Ian, maybe just on -- I know in your Investor Day, I think it was Paul that mentioned that you are looking at lithium potential transaction and other non-gold transactions. Can you just comment on where you are on that, whether we're still -- those are in the pipeline and whether we can see those in 2024? Or is the focus still gold ahead of these non-gold?

[Jason O'Connell, executive]

I would say that the focus still is on goal. I think that's where we spend the majority of our time. That said, there are a lot of opportunities in many different commodities right now. Lithium is one that is interesting to us, just given where we are in the price cycle. There's obviously been a significant pullback in the lithium price, which has created a bit of a balance for developers looking to finance new mines. And so there is, as a consequence, potentially a role there for us to play a part. And so it's something that we're spending time on and we may be active this year, just depends on the opportunities that are in front of us.

[Tanya Jakusconek, analyst]

And what size would those opportunities be in Jason?

[Jason O'Connell, executive]

It's a range. I think probably the sweet spot for us would be maybe up $50 to $300 million, $400 million if we did something very sizable.

[Tanya Jakusconek, analyst]

Okay. And my last question, if I could, just on uranium, we've seen volatility in that space as well. Anything in terms of looking at uranium for you guys?

[Paul Brink, executive]

We do look at uranium from time to time. There aren't as many assets available for us to participate in. There's a couple that we keep our eye on, but it's not something that we're spending a lot of time on these despite the change in commodity price.

[Operator]

Your next question comes from John Tumazos from John Tumazos very Independent Research.

[John Tumazos, analyst]

It's always hard to figure out how the value things Presumably, Franco, as you approach new transactions, values them at the spot gold price or today 2,300-ish -- and then you put a capitalization rate based on the mine life and quality -- and maybe that would have been 8 or 10x revenue for a simple royalty or adjusting for how much in the money a stream is but gold stocks are actually a little bit lower even though gold is huge. And now there's the minimum tax rate, which equips your return a little bit. So is it fair to assume that given the valuation of gold stocks and the PAC status, not only at Franco, but your cures as well that you'd be capitalizing revenue at a lower rate going forward than you might have a couple of years ago? Also, interest rates are higher. That's another factor, excuse me.

[Paul Brink, executive]

John, it's Paul. A lot of things in there. one thing, any time we're looking at a property it's less so commodity prices, it's more figuring out what are we comfortable is there, happy price, pay for some price for what we're comfortable will get produced and then want to participate in the upside, and it's really getting the calls right and being able to participate in the upside that generally has the greatest impact on our returns. So the vast majority of our work, though, is figuring out what are we comfortable will get produced. -- particularly when you're looking at development projects, it's -- sometimes our view is less than what you can see in reserves. Sometimes it's far more That's, by far, the biggest determinant. In terms of commodity prices, we're trying to price deals in the context of the market. The trick is you don't want to get caught when prices run up sharply and paying peak prices. And on the other hand, when the market turns down, that's really where you want to get your deals done. You don't want to get caught up using bear market prices because you undervalue everything. So it's -- in a sense, it's trying to take a longer-term view of prices regardless of where the market has moved to the time. On your last comment in terms of rates and how do we think about rates, we think of it as a bit of a competitive advantage and the competitive advantage is we don't have much debt. So with so many parties, their cost of capital is moving up and down with their cost of debt. We don't really have that. So we think it's an advantage. We can do deals in the market, we can extend capital to people at a more consistent rate than other players over time. And so particularly when other folks are forced to use a higher cost of capital, we don't have to. And I think that's a bit of a competitive advantage.

[Operator]

Your next question comes from Tanya Jakusconek from Scotiabank.

[Tanya Jakusconek, analyst]

Sorry, I forgot to ask us how Cobre Panama. I know Cosmos asked about it with the election happening on May 5. But can you just review for us, when do the parties actually then get into office? Are we talking like July or thereabouts? And once they get into office, are we expecting more clarity? So maybe just a bit of a time frame for us on getting some news out on Cobre Panama.

[Paul Brink, executive]

Tanya, you're exactly right. Election coming up now, but the actual official change of government will only happen in July. So that's the first time that they could -- they're in a position of power. It doesn't mean that you can't have dialogue with them before that. But to your point, I don't expect any news, any direction on Cobre until later in the summer.

[Tanya Jakusconek, analyst]

Okay. No, that's very helpful because we maybe all be waiting Saturday, Sunday night and then Monday morning, thinking something might be said. But probably realistically, it's probably not until the end of the summer.

[Paul Brink, executive]

We hope sooner, but you got to be realistic.

[Operator]

There are no further questions on the phone line. I will now to Q&A session over to Candida Hayden. We will take questions from the webcast.

[Unknown Analyst]

Our first question comes from Dipan Nayak. Do you plan to do any share buybacks in 2024.

[Paul Brink, executive]

We do have a large cash balance on our balance sheet. But our #1 priority is to add assets to the portfolio. It comes down to what's the best use of a dollar and for us to continue to add assets. So no, the -- we don't intend to do a share buyback.

[Unknown Analyst]

Your second question also comes from Dipan Nayak. Do you have any option of storing physical gold, assuming price would go up in the medium term?

[Paul Brink, executive]

We do have the option. It comes down to streams versus royalties. Streams we do get physical credits of precious metals to Franco-Nevada. But for accounting to book revenue, we have to sell that metal. So that's what we do on a quarterly basis. There are some royalties that we actually do receive in kind. And so on any given time, we have roughly 20,000 to 25,000 ounces of gold to our account held in various refineries around the world. But there is no plan to increase that level at this stage.

[Diego Termite, analyst]

Next question comes from Diego Termite from Oster Capital Management. What are the next steps to consider in the Cobre Panama arbitration? And can the election have any impact on the process of arbitration.

[Lloyd Hong, executive]

Thanks for the question, Diego. It's Lloyd Hong. In terms of the next steps, as we previously disclosed, we have filed a notice of intent to initiate arbitration. And the next step following that would be to actually file a request for arbitration to formally kick that off. In terms of the election process, as Paul had mentioned, I mean, we are -- we hope for the first Quanta will be able to engage in a constructive dialogue with the new government once it's elected, which should lead to the potential restart of the mine. And obviously, that would impact whether the arbitration proceeds are not.

[Bernie Picchi, analyst]

Your next question comes from Bernie Picchi at Palisade Capital. BHP's interest in client sorry, Anglo makes me wonder if Franco-Nevada has opportunities in the current mining industry M&A environment, knowing this has not been your traditional area of opportunity.

[Lloyd Hong, executive]

Thanks for the question. I would say when I saw that potential acquisition, my first thought is that's a huge positive for the copper price. If BHP is acquiring assets, rather than building assets, it doesn't add to the world's copper supply. So I'm not surprised to see that the copper price is running up on the back of it. Could there be assets that come out of that, that would be -- create some deal activity for us, possibly, more actionable though and is a transaction that's already happened, and that's Newmont acquiring Newcrest. They've announced that they are asset sales that they are doing. So I think there should be some opportunities that come out of that M&A process.

[Candida Hayden, executive]

Thank you. There are no further questions from the webcast. This concludes our first quarter results conference call and webcast. We expect to release our second quarter 2024 results after market close on August 13, with the conference call held the following morning. Thank you for your interest in Franco-Nevada. Goodbye.

[Operator]

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.