On the desk today · Franco-Nevada Corporation
They don't dig. They don't drill. They just own a piece of what comes out.
| TSX / NYSE · FNV |
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The Gold Company
That Never Digs
In 1983, an oil analyst named Seymour Schulich and a mining engineer named Pierre Lassonde sat in an office in Toronto and had an idea the mining industry thought was crazy. Schulich had spent years studying royalty companies in the oil patch — businesses that financed drilling but never operated a rig. The returns were extraordinary. Nobody had tried this in gold. So they raised $2 million, founded Franco-Nevada, and set out to do something no gold company had done: own a piece of what comes out of the ground — without ever touching a shovel, a truck, or an ounce of ore. The mining world laughed. Schulich and Lassonde collected.
I was looking at gold prices on my phone a few weeks ago — they'd crossed $3,400 an ounce. I thought about what it costs to run a gold mine. The diesel. The labor. The blasting. The environmental permits. The trucks breaking down at 14,000 feet. Then I thought about the company that doesn't do any of that — and still collects a check every time an ounce comes out. That company is Franco-Nevada.
Franco-Nevada is not a mining company. It doesn't own mines. It doesn't operate them. It doesn't employ miners. It provides upfront capital to mining companies in exchange for a percentage of future production — delivered at a fixed cost, forever. If costs at the mine go up, Franco-Nevada's payment stays the same. If the mine floods, Franco-Nevada doesn't pay the cleanup. The operator absorbs all the risk. Franco-Nevada just collects.
Schulich and Lassonde founded the company in Toronto in 1983. Their first royalty — bought in 1986 on the Goldstrike property in Nevada — cost about $2 million. Shortly after, Barrick Gold purchased Goldstrike and discovered a 50-million-ounce orebody underneath it. That single royalty made Franco-Nevada. The company merged with Newmont Mining in 2002 for nearly $3 billion. In 2007, Lassonde led a spin-off — relaunching Franco-Nevada via a $1.2 billion IPO, the largest mining IPO in North American history.
The 2025 numbers are records. Revenue hit $1.8 billion — up 64% from the year before. The adjusted profit margin before interest, taxes, and depreciation was 91%. Ninety-one cents of every dollar. Operating cash flow was $1.5 billion. The balance sheet carried zero debt with $3.1 billion in available capital. Franco-Nevada's cash cost per gold-equivalent ounce was $325. It sold those ounces at a margin of $3,110 each. You will not find a margin like that in any mining company — because Franco-Nevada is not a mining company.
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That 91% margin tells you everything. Mining companies — the ones that actually dig — run margins of 20% to 40% in a good year. Franco-Nevada runs at 91% because it has no mines to operate. No fuel bills. No labor disputes. No equipment breakdowns. It sends money to a mine. The mine sends back gold. The spread is almost pure profit.
The pricing power is built into the contract structure. When gold prices rise, Franco-Nevada's revenue rises — but its cost per ounce barely moves. In 2020, the cash cost was $242 per ounce. In 2025, it was $325. That's a 34% increase over five years. But the average gold price more than doubled in the same period. The margin per ounce went from $1,528 to $3,110. Franco-Nevada doesn't set prices. The gold market does. And every time the market moves up, the margin widens.
I keep returning to that first Goldstrike royalty. Schulich and Lassonde paid $2 million for it. The property was a small heap-leach mine run by a company called Western States Mining. Then Barrick bought the land and drilled deeper. Fifty million ounces. One of the largest gold discoveries in history — sitting underneath a royalty that two guys from Toronto had bought for the price of a house. That's the model. You don't need to find the gold yourself. You just need to own a piece of the land where someone else finds it.
The flywheel runs on reinvestment. Franco-Nevada takes its cash flow — $1.5 billion in 2025 — and deploys it into new royalties and streams. Each new deal adds another production stream. No single asset contributes more than 13% of revenue. The portfolio now holds more than 430 assets, with $3.1 billion in dry powder for the next acquisition. The company has raised its dividend for 19 consecutive years.
WHY THIS WORKS
Zero operating risk. Franco-Nevada doesn't run mines. It doesn't employ miners. If costs spike, if a mine floods, if a strike shuts production — the operator absorbs the loss. Franco-Nevada's cost stays fixed.
Gold price is the lever. When gold rises, Franco-Nevada's revenue rises — but costs barely move. The margin per ounce more than doubled between 2020 and 2025. The upside is asymmetric.
430 assets, no concentration. No single property is more than 13% of revenue. A problem at one mine barely moves the needle. The portfolio absorbs the shock.
Perpetual contracts on finite resources. Most royalties and streams last for the life of the mine — decades. Franco-Nevada collects a percentage of every ounce produced, every year, until the resource is exhausted.
What most people miss: in 1986, two guys from Toronto paid $2 million for a royalty on a small heap-leach mine in Nevada. Barrick Gold later discovered 50 million ounces underneath it. That single bet built a $1.8 billion-a-year business with a 91% margin, zero debt, and zero mines. The mining industry called the royalty model crazy in 1983. Forty-three years later, Franco-Nevada is the only gold company that has never operated a mine — and the most profitable one in the world.
