Q: Since the mine in Panama is 20% of FNV revenues and the share price is down about 20% from the approximate $200 valuation expected with the current price of gold (based on past episodes), would you consider the total loss of this revenue stream to be "in the price", or is there further downside if the court ruling goes against the mine?
5i Research Answer:
Because the Panama mine is so profitable, it actually accounts for about 45% of the company's EBITDA. With the stock down 57% in a year, a total write off does seem to be embedded in the stock now. That being said, sentiment can still move stocks lower. Also, if FM decided to write off the mine completely, it would take a very large charge to earnings (non-cash, but it would be a big number and perhaps scare investors). There might also be higher-than-expected closing costs if the mine were to be shuttered. Thus, we would still expect lots of volatility in the shares for some time.