Good morning. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to the Franco-Nevada Corporation first quarter results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Candida Hayden, you may begin your conference.
Thank you, Emily. Good morning, everyone. Thank you for joining us today to discuss Franco-Nevada's first quarter 2018 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. Sandip Rana, CFO of Franco-Nevada, will provide a brief review of our results, which will be followed by a Q&A period. Representatives from all our offices, including Toronto, Barbados, Denver, Perth, and some of our directors are present in our boardroom to answer any questions. Before we begin formal remarks, we would like to remind participants that some of today's commentary may contain forward-looking information. We refer you to our detailed cautionary note on slide two of this presentation. I will now turn the call over to Sandip Rana, CFO of Franco-Nevada.
Thank you, Candida. Good morning, everyone. As you will have seen from the press release issued yesterday, the company delivered another strong quarter of financial results. On slide three, we highlight the key financial results for the quarter ended March 31st, 2018, compared to prior year. The company achieved a number of financial records, which are all highlighted. The company did benefit from higher commodity prices during the quarter, particularly gold and oil, as well as benefiting from revenue generated by new oil and gas acquisitions made over the last two years. Due to the lower cost nature of our business model, recent commodity prices did have a significant impact on the company's EBITDA, margin and net income.
In addition, due to the mix of royalty versus streaming GEOs earned during the quarter, this also had a positive impact on cost of sales and depletion, resulting in higher adjusted EBITDA and adjusted net income results. These strong results continue to showcase the strength of the Franco-Nevada business model, the quality and diversity of the assets. From an operational standpoint, our royalty and stream assets continued to perform within expectations. As you turn to slide four, we have highlighted the change in GEOs from Q1 2017 to Q1 2018. The number of gold equivalent ounces from gold assets, excluding NPIs, did decrease year-over-year. This is in line with expectations, as we did expect a reduction in gold and silver ounces delivered from Candelaria, Guadalupe and El Futuro in 2018.
The reduction in deliveries from Candelaria and El Futuro are temporary, as we expect higher production in 2019 onwards. Turning to slide five, we have two charts on the page. The first highlights the precious metals revenue earned by the company for the previous five quarters, along with the average gold price over this period. As you can see, the precious metals revenue amount has remained fairly constant over this period. Although the gold price averaged higher in Q1 2018, the impact on precious metals revenue was reduced due to the lower GEOs earned, as mentioned earlier. The bottom chart highlights the oil and gas revenue and the average oil price for the last five quarters. Q1 2018 was a very strong quarter for oil and gas revenues.
This was due to the stronger oil price, lower operating costs at the Weyburn asset, and increased production from our newly added U.S. assets. As you are aware, one of our key business objectives is to generate at least 80% of our revenue from precious metals. Slide six highlights how that goal has been achieved over the last decade. At our IPO, we were slightly above 50% precious metals revenue. We made a conscious decision at the time to only enter into precious metal transactions until we reached at least 80%. Even with our recent move into the U.S. oil and gas royalty area, we are currently 87% precious metals revenue. With the addition of Cobre Panama, with deliveries beginning in 2019, we expect to remain above 80%. On slide seven, we provide a breakdown of our revenue by commodity and geographic location.
As mentioned, 87% of revenue for the quarter was generated by precious metals, with 68% being from gold, 14% silver and 5% PGMs. The geographic revenue profile has revenue being sourced 81% from the Americas. Slide eight highlights the diversification of our portfolio. The first chart shows that only two assets contributed more than 10% of our adjusted EBITDA individually, with another being at 9% for the quarter. Those three assets in total generate 35% of our adjusted EBITDA. The company is not economically dependent on any one asset. Diversification is our strength. The second chart highlights how adjusted EBITDA is distributed from a legal ownership perspective, with no legal entity accounting for greater than 40% of adjusted EBITDA. On slide nine, we highlight the strong margins the company achieves on a consistent basis. Our all-in sustaining cost per ounce was $295 per ounce for the quarter.
As you can see, the cost per ounce has fluctuated over time, with Q1 2018 being one of the lowest. With the recovery in the average gold price during the quarter, we realized the GEO margin in excess of $1,000 per ounce, and this is highlighted by the strong adjusted EBITDA the company achieved during the quarter. I would like to again stress the strength of our business model and the scalability. As you can see on slide 10, the company's fixed cost, highlighted in light blue, has remained fairly constant as we continue to grow this business. Management believes we can continue to add to our portfolio and grow our business without adding significant overhead to the company. Our margin for Q1 2018 was 80.8%, which reflects the higher proportion of royalty ounces earned in the quarter. Slide 11 summarizes the financial resources available to the company.
We currently have $1.4 billion of available capital when including our credit facilities. During the quarter, we funded $90 million for the Delaware Oil transaction, as well as the Cobre Panama stream addition of $356 million. The company continues to have no debt. Before I turn it over to David, I would like to quickly speak about one other topic. The company provided some new disclosure in our year-end financial documents related to the start of an audit by CRA for the tax years 2012, 2013, and 2014. As was disclosed, the audit is in its preliminary stages, and the company is currently in an information-sharing stage with CRA. There is nothing further to disclose at this time. I will now turn it over to David.
Thank you, Sandip. I was particularly pleased to see the good results this quarter as we're not yet operating on all cylinders. Over the next year, we expect to benefit from increased production at Tasiast, Subika, Candelaria, and our oil and gas assets. Also adding more fuel to those cylinders will be the expected start of revenues from Cerro Moro, Sissingué, Brucejack, and finally Cobre Panama next year. I'm looking forward to the growth in our future numbers, especially as we get into 2019. Depending how you measure it, we believe the duration of our portfolio is at least 20 to 30 years. It's important that we manage it responsibly and maintain the culture that has made us so successful. We take succession planning very seriously. The time to make preparations is before you need them.
Paul Brink has led Franco-Nevada's business development team and activities for the past 10 and a half years. He's been very successful, and he's proven himself to be an able executive. He is steeped in the culture of Franco-Nevada. Yesterday, the board appointed Paul Brink as President and Chief Operating Officer. We expect this will broaden Paul's experience so that he can fulfill the expectation that he be our next CEO. In the interim, Pierre Lassonde is remaining Chair, and I'm remaining as the CEO. We're both looking forward to being part of Franco-Nevada's next phase of growth. I'm confident that Franco-Nevada has a great long-term future ahead of it with Paul taking on the future leadership of the company. With that, I'm going to turn it over to our new President and Chief Operating Officer to say a few words.
David, thank you for the kind words. I'm very excited to be taking on an expanded role and delighted to be carrying the torch for Franco in the future. The portfolio continues to exceed our expectations. The streams on the four large copper mines, Antamina, Candelaria, and Cobre, are all ahead of our deal assumptions, either through actual or planned production output or reserve expansions, and in many cases, both. Candelaria's production in 2018 is only temporarily restricted, and the asset has in fact had the greatest reserve expansion of the group. We're also very pleased with our oil and gas investments. Drill activity has exceeded our expectations. The U.S. tax rates have been cut from 37% to 23%, and the oil price has moved from when we started at $45 per barrel to now over $70 per barrel.
Looking forward, Franco's perfectly positioned as we move into an inflationary environment, both because we're not materially exposed to mining cost inflation and because we benefit from oil price inflation. We have our entire organization in the boardroom today. We'd be happy to take any of your questions. Operator, please queue up any questions.
Thank you. At this time, if you would like to ask a question over the phone, please press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press the pound key. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Cosmos Chiu from CIBC. Your line is open.
Hi, good morning, guys. Congratulations on a good quarter, and congratulations to Paul on the promotion. I just had a couple of questions. Just on the cost of sales for the quarter, obviously it was low compared to the past quarters, mainly due to the stream sales. Am I right that that's mostly from fewer GEOs from Palmarejo and Sudbury? Would it be safe to assume that the cost of sales would be expected to trend somewhat higher in the coming quarters?
Yes, Cosmos. It's predominantly Guadalupe, Palmarejo, yes, because we do pay the $800 per ounce there for the cost of sales. As a result, because of the drop there, it did have a larger impact on cost of sales. The other is Candelaria. We had lower ounces from Candelaria versus prior years, so there was impact there as well. Going forward, we do expect more production from Candelaria and stream ounces to continue on the same trend. I would expect cost of sales to increase going forward.
Secondly on the oil and gas, obviously the pickup in the oil price of late has been a tailwind. In terms of acquisition opportunities, how has the higher price impacted those discussions, and has that changed sort of the breadth of opportunities out there?
Hi, Kevin. It's Jason O'Connell here. The change in the oil price has benefited, obviously, the royalties that we've acquired to date. In terms of how it's impacting the opportunities that are out there, it hasn't quite worked its way into the market at this stage. I think buyers and sellers are still primarily focused on a longer-term strip price, which is still in the $50 a barrel range longer term. I expect that as time goes on, if prices are sustained at the levels they are, you're going to see a lot of transactions happening. There is a lot of opportunity right now in the U.S., as we've mentioned before, in the royalty space. We'll continue to look at those opportunities and look at the ones that will benefit our portfolio the most.
Okay, perfect. Thanks. That's all for me.
Again, if you would like to ask a question over the phone, please press star, then the number one on your telephone keypad. Our next question comes from the line of Steven Butler from GMP Securities. Your line is open.
Well, thanks, operator. Congratulations, Paul, and a job well done, guys, for 10 years. Maybe just a quick question on the oil and gas side. It was a good quarter, exceeding my estimates on revenues, Weyburn being one of them. Any trends there you say will be either sustainable or improving as we go? The STACK looks like it's improving as well, but maybe particularly as Weyburn set up for a sustainable performance here. You talked about a good Q1.
Steve, it's Jason again. In terms of the U.S. assets, I think you should expect to see those assets increase in revenue going forward. Those are sort of growth or development assets that, as operators develop those properties, the revenue should increase towards the back end of this year and going forward. In terms of Weyburn is a little bit more difficult to predict right now. As you know, the NRI there is subject to both operating and capital costs, and so it will depend on what Whitecap, who's the new operator there, it will depend on how they choose to allocate capital to that asset. I suspect that we'll probably have some news out of them towards the back end of this year as they sort of have bedded down the asset and figure out how they want to approach it going forward.
Okay. Thanks, Jason. Maybe Paul, from you, just remind us again how you maybe protected somewhat in the startup of Cobre Panama in terms of rates of return out of the gate.
Sure, Steve. The transaction with First Quantum on Cobre has some protection for us in terms of the ramp-up timing. The way that works is there is a minimum throughput that would need to be achieved by the start of next year. If it isn't, in effect, what we get is a 5% return on the capital that we've put out to date. The way we get that return is once the asset starts producing, the amount that we had paid per ounce is reduced from $400 an ounce as the base, plus inflation, down by $100 per ounce. We effectively pay less per ounce until we've made up that return on our cost of capital.
Okay. Would you see anything less than $100 an ounce decline, Paul, or is it just fixed at $100, or would it be a higher number if and-
It's just fixed at that $100 so that-
Right
I'll call it reduction would continue for longer period if we need to recover a larger amount.
Okay, got it. Thanks very much.
Our next question comes from the line of John Bridges from J.P. Morgan. Your line is open.
Morning, Paul. Congratulations. Morning, David. I understand there was a recent visit to Cobre Panama. I just wondered if you had any updates as to how the project's progressing. I guess the visit is a good sign there. Any recent takeaways from the progress?
We're seeing a lot of reports coming out. I think the analysts are just returning from site now, so I suspect that you will get a lot more detail from various folks over the next couple of days. From what we've seen on that, it seems that the strike activity earlier in the year has impacted likely timing. It sounds like that may be pushed back a couple of months in terms of the startup. Other than that, everything that I've seen from the analysts is very complimentary of the work that First Quantum is doing.
John, just to recall, when we gave our guidance back in March, I think we disappointed the Street because we assumed nothing from Cobre Panama in 2018. I think that's the correct assumption, that we probably only see revenues in this in 2019. I'm still happy with our projections.
Okay, that's good news. Well done, guys. Congratulations.
That's star one on your telephone keypad if you would like to ask a question. We have no further questions at this time. I will turn the call back over to Candida Hayden for closing remarks.
Thank you, Emily. We expect to release our second quarter 2018 results after market close on August eighth, with the conference call held the following morning. Thank you for your interest in Franco-Nevada. Goodbye.
This concludes today's conference call. You may now disconnect.