In 1983, my friends and early mentors Seymour Schulich and Pierre Lassonde founded Franco-Nevada Mining, the world’s first gold royalty company.
The two uniquely gifted money managers were on to something big. It was originally Seymour—then an oil analyst at the Canadian investment firm Beutel, Goodman & Company, where he and Pierre met—who recognized that the royalty model used in the oil and gas industry had some of the highest returns on capital.
At the time, no one had applied this business strategy to the precious metals industry. Venture capital was challenging to secure. But with Seymour’s fastidious money management and Pierre’s vast mining expertise, the two raised $2 million. (That’s according to “Get Smarter,” Seymour’s 2011 memoir aimed at mentoring young Canadian professionals, which I highly recommend.)
Fast forward more than 30 years, and Franco-Nevada now has a market cap of over $8.2 billion, making it the world’s largest and most successful gold royalty company.
Franco-Nevada was my first initial public offering (IPO) to work on as a young analyst at Toronto-based, boutique investment firm Merit Investment Corp. Even then, I recognized the superiority of the business model. For the next 20 years, until it merged with Normandy Mining and Newmont Mining in 2002, I watched the company return an average 38 percent to shareholders annually.
Ever since its second IPO—Newmont spun it off in 2007—Franco-Nevada’s stock has outperformed both gold bullion and global gold miners.
Today, I’m just as convinced of Franco-Nevada’s business model. Its uniqueness allows the company and its royalty peers to generate high gross margins and ever-expanding dividends.
Class Acts in Philanthropy
I feel extraordinarily blessed to be able to call Seymour and Pierre my friends. The two are certified superstars of the resource sector. Pierre’s “The Gold Book,” published in 1990, is a seminal masterpiece on the topic of gold investing.
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