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RESEARCH ALERT-TD Securities downgrades Franco-Nevada

Oct 9 (Reuters) - Brokerage TD Securities downgradedgold-focused royalty company Franco-Nevada Corp to"hold", saying investors looking for increased leverage to goldprices are shifting back to miners.

Franco-Nevada shares, which have risen 51 percent so farthis year, fell 4 percent to C$57.07 on the Toronto StockExchange on Tuesday.

"If the upcoming third-quarter reporting season isrelatively uneventful for the gold producers, investors couldtake this as a sign that the worst of the bad news is behind theproducers," analyst Greg Barnes wrote in a note to clients.

Barnes said cost inflation that has plagued the industry isstarting to flatten out and gold prices are widely expected torise.

Gold prices have gained more than 13 percentyear-to-date, in large part because of the world's major centralbanks' efforts to keep monetary policy loose.

"Franco has outperformed gold bullion and gold producerequities for most of the past two years, but we sense a change,"said Barnes, who had a "buy" rating earlier.

Royalty companies such as Franco-Nevada and Silver WheatonCorp , which fund mining projects in return for aportion of future revenue, generated huge amounts of cash fromsuch deals even as the price of gold remained volatile.

The analyst, however, maintained his C$67.00 price target onthe stock.

(Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing bySriraj Kalluvila)

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Keywords: FRANCONEVADA RESEARCH/TDSECURITIES