The world’s gold miners will be running on the spot for years to come as a surge in gold prices prompts them to secure new production from less profitable projects, according to the largest mine streaming and royalty company. “In my mind, the industry is ex-growth,” said David Harquail, chief executive officer of Franco-Nevada Corp.
After a downturn that squeezed capital investments, most gold producers have no choice but to invest in new projects as existing mines are depleted, Harquail said Wednesday in an interview. They’ll be faced with options that are, cumulatively, unlikely to boost global gold production or lower the sector’s overall costs.
“None of those projects are really great,” Harquail said at the BMO Capital Markets mining conference in Florida. “They would have been built by now if they were.”
As a result, Harquail said Franco-Nevada plans to do more deals in the non-precious metals space, with a particular focus on oil and gas. The company’s mandate allows it to have as much as a fifth of its portfolio outside precious metals, and he would like to deploy capital to get to that level soon. Currently 94 percent of Franco-Nevada’s holdings are in precious metals, he said.
That translates into “firepower” of as much as $1 billion that Franco-Nevada can invest in non-gold deals in the next year or so, Harquail said. In November, the company spent $100 million on a package of oil and gas assets, “so I’m 10 percent done.”
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