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JUNE 2011 PRESENTATION 1
JUNE 2011 PRESENTATION
1
Cautionary Statement
Forward-Looking StatementsCertain information contained in this presentation, including any information as to future financial or operating performance and other statements that express management'sexpectations or estimates of future performance, constitute "forward-looking statements". All statements, other than statements of historical fact, are forward-looking statements. Thewords “anticipate”, “plans”, “estimate", "expect", "expects", "expected" and similar expressions identify forward-looking statements. Forward-looking statements are necessarilybased upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive
ncertainties and contingencies The Compan ca tions the reader that s ch for ard looking statements in ol e kno n and nkno n risks ncertainties and other factors that mauncertainties and contingencies. The Company cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors that maycause actual financial results, performance or achievements of Franco-Nevada to be materially different from the Company's estimated future results, performance or achievementsexpressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factorsinclude, but are not limited to: fluctuations in the prices of the primary commodities that drive the Company’s Revenue (gold, platinum group metals, copper, nickel, uranium, oil andgas); fluctuations in the value of the Canadian and Australian dollar, Mexican peso, and any other currency in which the Company generates revenue, relative to the US dollar;changes in national and local government legislation, including taxation policies; regulations and political or economic developments in any of the countries where the Companyholds interests in mineral and oil and gas properties; influence of macroeconomic developments; business opportunities that become available to, or are pursued by us; reduced
t d bt d it it l liti ti titl di t l t d t i t t f th ti d l t itti i f t t ti t h i l diffi ltiaccess to debt and equity capital; litigation; title disputes related to our interests or any of the properties; development, permitting, infrastructure operating or technical difficulties onany of the properties; rate and timing of production differences from resource estimates; risks and hazards associated with the business of development and mining on any of theproperties, including, but not limited to unusual or unexpected geological formations, cave-ins, flooding and other natural disasters or civil unrest; integration of acquired assets. Theforward-looking statements contained in this presentation are based upon assumptions management believes to be reasonable, including, without limitation, the ongoing operation ofthe properties by the owners or operators of such properties in a manner consistent with past practice, the accuracy of public statements and disclosures made by the owners oroperators of such underlying properties, no material adverse change in the market price of the commodities, and any other factors that cause actions, events or results to differ fromthose anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking statements because of the inherent uncertainty. For additionalinformation with respect to risks, uncertainties and assumptions, please also refer to the “Risk Factors” section of our most recent Annual Information Form filed with the Canadiansecurities regulatory authorities at SEDAR on www.sedar.com, as well as our annual and interim Management’s Discussion and Analysis. The forward-looking statements herein aremade as of the date of this presentation only and Franco-Nevada does not assume any obligation to update or revise them to reflect new information, estimates or opinions, futureevents or results or otherwise, except as required by applicable law.
Non-IFRS MeasuresEBITDA, Adjusted EBITDA and Adjusted Net Income are intended to provide additional information only and do not have any standardized meaning prescribed by IFRS and shouldnot be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Definitions and reconciliations to IFRS can be found in our financialdisclosures. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate thesemeasures differently. The following notes are standardized for the attached presentation.
1. EBITDA is defined by the Company as Net Income excluding income tax expense, finance costs, finance income and depletion and depreciation.2 Adjusted EBITDA is defined by the Company as net income excluding income tax expense finance costs and income foreign exchange gains and losses gains and losses on investments
2
2. Adjusted EBITDA is defined by the Company as net income excluding income tax expense, finance costs and income, foreign exchange gains and losses, gains and losses on investments, income/losses from equity investees, depletion and depreciation and impairment charges related to royalty and stream interests and investments.
3. Adjusted Net Income is defined by the Company as net income excluding foreign exchange gains and losses, gains and losses on investments, impairment charges related to royalties, streams, working interests and investments; unusual non-recurring items; and the impact of taxes on all these items.
Dow vs Gold:
40
45
32
30
35
16
Logarithmic Scale
20
258
DOW
/Gol
d
10
154
Arithmetic Scale
0
5
1
2
3Financial vs hard assets
Franco-Nevada
arej
o
A gold focused royalty & streaming company generating growing cash flow and dividends f di ifi d tf li f lit t
Palm
akeGrowth > 50% expected growth in 2011
World class discoveries
from a diversified portfolio of quality assets
Gol
dstr
iWorld class discoveries>$500M available capital
Yi ld 60% increase in monthly dividend
Tasi
astYield 60% increase in monthly dividend1.3% yieldIncreases in each of past 4 years
Sudb
uryLow Risk Royalty and streammodel
Secure and diversified portfolioProtected from inflationary costs
4S
Business Model Benefits
Gold ETF Franco‐Nevada Operators
Yield 0% >1% 0‐1%
Leverage to Gold Price 1 >1 >1
Exploration & Expansion Upside 0% 100% 100%
Exposure to Opex, Capex & Environmental Costs (NSR) 0% 0% 100%
Franco-Nevada provides yield and more upside th ld ETF ith l i k th tthan a gold ETF with less risk than an operator
5
Current and Future Assets
6*Does not include Franco-Nevada’s 135 oil & gas assets and 157 undeveloped oil & gas interests
Over 200 mineral royalties and streams*
Quality Operators & Assets
GoldstrikeBald MountainHemlo
StillwaterEast Boulder
Gold QuarrySubika
TasiastSubika
MarigoldMusselwhite
MorrisonPodolskyMcCreedy West
7
Secure and Diversified (Q1 2011 Revenues)
Australia4%
By Country By Asset
US
4% Other8%
US38%
Mexico30%
Canada20%
8
88% from North America86% from precious metals
Revenue Growth
70
80
50
60
Reflects
30
40
US$
(millions)
Oil & Gas + Other
PGM86%
precious metals in
year end top–up
payments
10
20 Gold
metals in Q1 2011
‐
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
20102009 2011
9
Diversified portfolio with growing precious metals2011
First Quarter Revenue Growth
80
50
60
70 O&G + other
PGM
30
40
50
($ M
illion
s)
Gold
10
20
0
Q1 2008 Q1 2009 Q1 2010 Q1 2011
St th
10
Strong year-over-year growth
Sources of Growth (Gold Revenue)
400%
450%
250%
300%
350%
+332%+332%
G ldG ld
150%
200%
250% Gold Gold Revenue Revenue
0%
50%
100%
+71%+71%Gold PriceGold Price
‐50%
0%
Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11
Growth from: ~20% gold price increase
11
Growth from: ~20% gold price increase~30% organic (expansions and start-ups from portfolio)~50% new acquisitions
Growth in the Pipeline
12
Growth From Existing Portfolio
Category Royalty* OperatorNew mines: • Duketon (2%)
• Lounge Lizard (2%)Peculiar Knob ( d ti t)
• Regis Resources• Kagara Ltd
WPG Resources• Peculiar Knob (production payment)• Red October (1.75%)
• WPG Resources• Saracen
Project restarts: • Falcondo (4.1% equity)• Holt (up to 10%)
• Xstrata• St Andrew Goldfields
Royalties reaching hurdles: • Subika (2%) • Newmont MiningRoyalties reaching hurdles: Subika (2%)• Ity (1 – 1.5%)
Newmont Mining• La Mancha
NPI’s pending payout: • Hemlo (50%)• Musselwhite (5%)
• Barrick Gold• Goldcorp
Permitting projects: • Prosperity (22% Au Stream) • Taseko• Rosemont (1.5%)• Perama Hill (2%)
• Augusta Resources• Eldorado Gold
Pre-feasibility stage: • Sandman (0.5 – 5%)• Garden Well (2%)• Goldfields (2%)
• Newmont/Fronteer Gold• Regis Resources• Brigus Gold( )
• Courageous Lake (1%)• Gurupi (1%)• HBJ Superpit (1.75%)• Agi Dagi (2%)• Kiziltepe (1.5 – 2.5%)
g• Seabridge Gold• Jaguar Mining• Alacer Gold• Alamos Gold• Ariana Resources
13* Note: Certain royalties do not cover the entire property or are rounded. See Annual Information Form for further details.** Risk adjusted undiscounted value reflecting total in-situ resources disclosed by operators on or before March 24, 2011.
Values are calculated at $1,400/oz Au, $4.25/lb Cu, $35/oz Ag and $15/lb Mo. No recovery rates are applied.
Risk adjusted potential value > $1 billion**
Growth from Discoveries
Tasiast (2% royalty)Potential >20m oz resource*Potential 1.5 moz/yr by 2015**Revenue expected to begins in Q3
Detour (2% royalty)>25m oz resource*Potential 660k oz/yr starting 2013**
Tasiast ‐Mauritania
Potential 660k oz/yr starting 2013Likely further expansion
Potential for >$60m/yr for >20 years*** Detour Lake ‐ Ontario
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* Based on press release dated January 31, 2011 from Detour Gold and February 3, 2011 from Trade Winds Block A. Tasiast potential based on BMO Research (Feb 17, 2011)
** Tasiast potential based on Kinross scoping study. Detour potential based on February 2, 2011 BMO analyst projections.*** Calculated at full operation at Tasiast by 2015, and 660 koz/yr at Detour Lake, and assuming $1400/oz gold price.
Growth from Acquisitions
Gold Wheaton acquired March 14, 2011:
~40%* revenue increase
Precious metals now >85% of revenue**
Greater gold leverage via stream structureEzulwini – South Africa
Adds further platinum and palladium exposure
Diversification - no asset greater than 15% of NAV**
MWS – South Africa
db d l k db
15* Est. 2011 revenue after March 14, 2011 closing of GLW transaction at $1500/oz Au, $1700/oz Pt, $700/oz Pd.** Broker Estimates
Morrison ‐ Sudbury Podolsky ‐ Sudbury McCreedy West‐ Sudbury
2011 Growth Outlook ($US million)
2010 Revenue: $227 million2011 R (M h id ) $325 $350 illi
If GLW added
2011 Revenue (March guidance): $325-$350 million
So far with Q1 results: As Reported Jan 1, 2011
Revenue $73.1 $100.0Adjusted EBITDA(2) $50.6 $68.0
On pace to meet or beat high end of 2011 guidance*
16* Assuming commodity prices at May 12, 2011 or original March consensus assumptions of $1,400/oz Au, $1750/oz Pt and $575/oz Pd.
Longer Term Growth Outlook ($1,400/oz Au)
450
500Includes:• Full year GLW assets• Tasiast & Detour expansions
Excludes:• Prosperity stream until permitted
300
350
400
)
expansions• Organic growth risk adjusted
50%Includes:• Higher prices vs. ‘10
200
250
US
$ (M
illio
ns
48%
• Nine months GLW• Start of Tasiast• Organic growth
50
100
150
0
2008A 2009A 2010A 2011E* 2012‐2015**
St G th O tl k
17
Strong Growth Outlook* Represents high end of 2011 March revenue guidance at consensus prices.** Potential Compounded Annual Growth Rate 2008-2015 based on potential incremental revenue to 2015. Incremental revenue calculation
based on operator guidance and consensus prices, including $1,400/oz Au.
Continued Financial Strength
Capital Resources March 31, 2011(US Millions)
Working Capital $306
Marketable Securities $55
Available Credit Facility $175
Total Available Capital $536
No debt or obligationsNo debt or obligationsNo capital or exploration costsOngoing free cash flow
18Note: Cash flow estimate based on consensus commodity prices ($1,400 Au, $1,750 Pt, $575 Pd, $80 Oil) and operator’s production guidance.
Growing Dividends
60% increase in monthly dividend starting in July
US$0.04 per share/mth or US$0.48 per share annualized
Represents third annual dividend increase since IPORepresents third annual dividend increase since IPO
1.3% yield on current share price
3.2% yield on cost for our IPO shareholders
F N d id f h hi h i ldFranco-Nevada provides one of the highest yields in the gold sector to institutional investors
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Why Own a Gold ETF?
150%
200%
FNVFNV
50%
100%
GoldGold
50%
0%S&PS&P
-50%
Franco-Nevada is outperforming gold by delivering:Growth (>50% revenue growth expected in 2011)
Q1’08 Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 Q3’09 Q4’09 Q1’10 Q2’10 Q3’10 Q4’10 Q1’11
Growth (>50% revenue growth expected in 2011) Profits and Yield (60% dividend increase in 2011) Business model that minimizes inflationary cost risksParticipation in world class discoveries (Tasiast Detour)
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Participation in world class discoveries (Tasiast, Detour)Diversified and secure portfolioStrong balance sheet with>$500m for further growth
Q & A
Goldstrike ‐ Barrick Palmarejo ‐ Coeur Detour – Detour Gold
Mesquite – New GoldTasiast ‐ KinrossMWS – First Uranium
East Boulder ‐ Stillwater Weyburn ‐ CenovusSudbury – Quadra FNX
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Q1 2011 Financial Highlights
(US $ millions except per share and %) Q1 ’11 Q1 ’10 VAR % Change
Revenue $73.1 $47.0 $26.1 56%
Gold Revenue $52.7 32.4 20.3 63%
Cost of Sales 11.1 6.7 4.4 66%
Net Income 21.2 15.0 6.2 41%
Earnings Per Share $0.18 $0.13 $0.05 38%
EBITDA (1) 55.9 43.7 12.2 28%
Adjusted EBITDA(2) 50.6 36.7 13.9 38%
Adjusted EBITDA(2) Per Share $0.43 $0.32 $0.11 34%
Adjusted Net Income(3) 21.4 8.3 13.1 158%j
Adjusted Net Income(3) per share $0.18 $0.07 $0.11 157%
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2011 Outlook (March 24, 2011 Guidance)
9 months of Sudbury, MWS & Ezulwini
Higher Au PGM and oil pricesHigher Au, PGM and oil prices
Higher Palmarejo production
Smaller asset startups & expansions
Falcondo re-start
Temporarily lower on Goldstrike
L i i t G ld Q
$325m to $350m
Lower minimum at Gold Quarry
2011 GAAP Revenue guidance
$227m
135,000 to 155,000 stream ounces
2010 GAAP Revenue on same basis
Net stream ounces
23* Note: Revenue for 2011 is calculated as gross revenue and includes gross stream revenue before payments of $400/oz (See MD&A for
further details). Revenue calculated using consensus commodity prices for 2011; $1,400/oz Au, $1,750/oz Pt, $575/oz Pt and $80/bbl oil.
stream ounces
Long Life Assets
Goldstrike Mining ~10 yearsStock pile processing ~20 years
Gold Quarry
Palmarejo
Stock pile processing ~20 years
New layback potential ~ 20 years
Guadalupe development > 10 years
Stillwater
Oil & Gas
Existing reserves > 25 years
Existing reserves 10 years Weyburn potential > 40 years
Falcondo
Tasiast
Weyburn potential > 40 years
Existing resources > 20 years
Expanding reserves > 20 yearsTasiast
Detour
2010 2015 2020 2025 2030 2035 2040+
Expanding reserves > 20 years
Expanding reserves > 15 years
24* Management expectation based on current public information provided by operators.** See Appendix for references & assumptions.
2010 2015 2020 2025 2030 2035 2040+
Most key asset lives > 20 years
Asset Life Assumptions & References
Goldstrike ‐ Barrick 2009 Annual Report. December 2009 reserve of 12.2 moz and 2009 production of 1.36 moz implies mine life of 9 years. Barrick 2009 Annual report states Barrick expects to fully process ore in stockpiles by 2035. (www.barrick.com)
Gold Quarry – Newmont Investor Day Presentation from May 27, 2010. Gold Quarry West Wall Layback has potential to add 10 years of additional mine life beginning in 2019. (www.newmont.com)
Palmarejo ‐ Coeur d’Alene Mines, Palmarejo Technical Report, February 2011. States mine life of 8 years from 2011. Assumption of 3 yrs of additional mine life based on 4.0 M tonne M&I resource mined at 1.4 M tonnes per year. ( )(www.coeur.com)
Stillwater – Stillwater press release dating February 25, 2010. Reserve of 20.6 moz at December 31, 2009 and 2009 production rate of 530 koz. Implies mine life >25 yrs. (www.stillwatermining.com)
Oil & Gas – Oil & Gas Reserve Report by GLJ Petroleum Consultants Ltd.. (www.franco‐nevada.com).
Falcondo – Xstrata Nickel October 2009 reports a reserve of 74.2 Mt grading 1.29% Ni. Press release from Xstrata Nickel dated October 12, 2010 indicates capacity at 50% of approximately 14,000 tonnes of Ni per annum or implied full capacity of 28,000 tonnes of Ni per annum. Implies >20 yr mine life.
Tasiast – September 22, 2010 Denver Gold Forum Presentation by Kinross. Estimate 425m tonnes of ore and processing of p , y p g60ktpd. Implies mine life of +19 years. (www.kinross.com)
Detour ‐May 25, 2010 Feasibility Study for Detour Lake describes16 year mine plan. (www.detourgold.com).
Franco‐Nevada does not operate or explore but relies on others. Because it is not an operator, it must rely on decisions made by others decisions on which it has little or no influence It must also assume that public disclosure by its operators
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made by others, decisions on which it has little or no influence. It must also assume that public disclosure by its operatorsis accurate and true. Information contained herein is based on information made available by these operators.
Directors & Management
DirectorsPierre Lassonde Director, Chairman
David Harquail Director, President & CEO
Derek Evans(1) Director
Graham Farquharson(2) Director
L i Gi (1) Di tLouis Gignac(1) Director
Randall Oliphant(1) Director
Hon. David R. Peterson(2) Director
ManagementDavid Harquail President & CEO
Sandip Rana Chief Financial Officer
Jacqueline Jones Chief Legal Officer & Corporate Secretary
Geoff Waterman Chief Operating Officer
Paul Brink SVP, Business Development
Steve Alfers Chief of U S Operations
26(1) Member of the Audit and Risk Committee(2) Member of the Compensation and Corporate Governance Committee
Steve Alfers Chief of U.S. Operations
Franco-Nevada Corporation
Capital Structure
Shares Outstanding 126.3m
2012 Warrants (C$32 exercise price) 5.75m
Analyst CoverageBMO Capital Markets David Haughton
BOA/Merrill Lynch Mike Jalonen
2013 Warrants(1) (C$64.27 exercise price) 4.05m
2014 Warrants(1) (C$32.14 exercise price) 2.08m
2017 Warrants (C$75 exercise price) 5.75m
yCIBC Capital Markets Cosmos Chiu
Credit Suisse Anita Soni
GMP Securities Craig West
Paradigm Capital Don MacLeanOptions & other 3.53m
147.46m
Share Price Range (2) C$38.38-C$27.75
Paradigm Capital Don MacLean
RBC Capital Markets Stephen Walker
Scotia Capital Tanya Jakusconek
TD Securities Greg Barnes
UBS Securities Brian MacArthurC$27.75
Market Capitalization $4.5B
Working Capital + Marketable Investments $361m
Available Credit Facilities $175m
UBS Securities Brian MacArthur
Wellington West Paolo Lostritto
Major ShareholdersFidelity USAvailable Credit Facilities $175m
Debt or Hedges Nil
Annual Dividends (Indicative)(3) $61m
Management Ownership 4.5%
Fidelity US
Invesco Trimark Canada
T. Rowe Price US
Blackrock Europe
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(5.8% diluted) Oppenheimer US
(1) Warrants now of Franco-Nevada GLW Holdings Corp. that upon exercise will entitle the holder thereof, at its election, to receive either 0.1556 of a Franco-Nevada common share or C$5.20 in cash, per warrant. Former $10 GLW warrants each still exercisable at $10/warrant. To acquire one whole FNV share, approximately 6.43 warrants need to be exercised (i.e. $64.27/FNV share). Former $5 GLW warrants each still exercisable at $5/warrant. To acquire one whole FNV share, approximately 6.43 warrants need to be exercised (i.e. $32.14/FNV share).
(2) Previous 52 weeks.(3) Year starting July 1. 2011 with current shares outstanding.
