Franco-nevada Corporation · TSX:FNV
Franco-nevada — Investor Presentation (July 2009)
28 slides from Franco-nevada's investor presentation, July 2009
Slide 1: Growing a High Margin Gold Business
Growing a High Margin Gold Business July 2009
Slide 2: Cautionary Statement
Cautionary Statement Forward-Looking Statements This Presentation contains "forward-looking statements", which may include but are not limited to, statements with respect to future events or future performance, management's expectations regarding Franco-Nevada’s growth, results of operations, estima
Slide 3: Franco-Nevada
Franco-Nevada Leading gold royalty company High free cash flow(1) margins Goldstrike Secure and profitable assets Growing gold revenue Active acquirer with ~ $700m in Gold Quarry available capital Semi annual dividend increased to C$0.14 per share Part of S&P/TSX Composite Index with US$2.5B market
Slide 4: >300 Royalty Assets
>300 Royalty Assets % of Royalty Revenue (1) 68% 19% Majority of Royalty Revenue is from US & Canada (1) Royalty Revenue is defined by the Company as cash received or receivable from operating royalty assets 4 earned during the period. Percentages above are for the 3 month period ending March 31, 20
Slide 5: >300 Royalty Assets
>300 Royalty Assets BASE GROWING FUTURE UPSIDE GOLDSTRIKE PALMAREJO DETOUR >145 GOLD QUARRY TASIAST PANDORA EXPLORATION INTERESTS STILLWATER HOLLISTER PERAMA HILL >100,000 OIL & GAS HEMLO PINSON ACRES OF MARIGOLD ROSEMONT UNDEVELOPED ROBINSON FALCONDO O&G LANDS OTHERS… OTHERS… ARCTIC GAS >20 ESTABLI
Slide 6: 2008 Full Year Results
2008 Full Year Results US$ Millions Total revenue $151.0 Net income $40.3 Basic earnings per share $0.41 Free Cash Flow(1) $131.7 Free Cash Flow(1) margin 87% A high margin, cash flowing business with upside (1) Free Cash Flow is defined by the Company as operating income plus depletion and deprecia
Slide 7: 2009 Q1 Results
2009 Q1 Results Royalty Revenue(1) Free Cash Flow(2) $30.0 $30.0 $25.0 $25.0 85% 85% $20.0 $20.0 Other Millions Royalty Revenue(1) $15.0 $15.0 Free Cash Flow(2) $10.0 $10.0 Gold $5.0 $5.0 $0.0 $0.0 Q1/08 Q1/09 Q1/08 Q1/09 Growing gold Royalty Revenues… with high margins (1) Royalty Revenue is define
Slide 8: Growing Gold Royalty Revenues
Growing Gold Royalty Revenues(1) Three Months Ended Three Months Ended March 31, 2008 March 31, 2009 Base Oil & Gas Metals 19% Oil & Gas Gold 4% 39% 44% Gold PGM 12% 65% PGM 15% Base Metals/ Other 2% Absolute & relative proportion of gold expected to grow further in 2H 2009 (1) Royalty Revenue is de
Slide 9: Continued Growth in Gold Revenue
Continued Growth in Gold Revenue Palmarejo 2009(1) Palmarejo 2010+(2) 14.0 12.0 Palmarejo Annual Revenue Potential 10.0 Gold Minimum Capacity US$ (millions) Price 8.0 $800/oz $20m $24m 6.0 $900/oz $25m $30m 4.0 $1000/oz $30m $36m 2.0 - Q1/09 Q2/09 Q3/09 Q4/09 Minimum Potential (1) Royalty revenue ch
Slide 10: Financial Strength
Financial Strength Capital Resources US$ Millions Working Capital (Mar 31, 2009) $185 Marketable Securities (Mar 31, 2009) $52 Approx Net Proceeds from Financing $312 Available Credit Facility $150 Total Available Capital ~$700 No debt, hedges or capital obligations 10
Slide 11: Growth Through New Investments
Growth Through New Investments Investment Updates Dec 29, 2008 7.29% gross royalty April 2009: at Gold Quarry, $103 .5 million Increased minimum guidance to 14,400 oz/annum for 2009 Nevada Jan 21, 2009 50% gold March 30, 2009: $80 million First gold poured royalty stream at Palmarejo, Mexico ~$700 m
Slide 12: Growth From Existing Portfolio
Growth From Existing Portfolio Property Royalty Operator Update Tasiast 2% NSR Red Back Mining Reserves and resources have been rapidly expanded with resources now >4 Moz* Hollister 3-5% NSR Great Basin Gold Recent discovery on 5% royalty ground. Hemlo 3% NSR & Barrick Gold Underground development a
Slide 13: Franco-Nevada Attributes
Franco-Nevada Attributes Franco-Nevada is unique – Highest margins in business – Can generate free cash flow in all likely scenarios – Proven assets mostly in U.S. and Canada – Growing and increasingly diversified gold revenue Financial position is rock solid – $550m+ in working capital & marketable
Slide 14: Why Royalties? Why Franco-Nevada?
Why Royalties? Why Franco-Nevada?
Slide 15: Benefits of a Royalty Structure
Benefits of a Royalty Structure Exposure to: Operators Explorers ETF Bullion Metal price appreciation D D D D D Earnings and dividends D D U U U New Reserves D D D U U Expansion Potential D D U U U Reduced Exposure to: Capital costs D U U D D Operating costs D U U D D Environmental D U U D D Commodi
Slide 16: Royalty Business vs. Operating
Royalty Business vs. Operating Higher margin business Higher free cash flow(1) business No material capex, overhead or environmental obligations Flexible on acquisition size and numbers Can build a more diversified, lower risk asset portfolio Benefit rather than squeezed by commodity inflation Manag
Slide 17: Royalties are High Margin
Royalties are High Margin Royalty Owner Owner/Operator Economics Economics Excluding Capital Including Capital One oz sold at $900 $900 $900 Applicable cost per oz(1) - ~$440 ~$700 Margin per oz $900 $460 $200 Assume 4% 4% 4% 4% royalty/interest Cash Generated per oz $36 $18 $8 Royalty interest gene
Slide 18: Royalties are High Margin
Royalties are High Margin Operating Margins(1) – FNV vs. Gold Producers Gold at $950/oz Gold at $433/oz 100% 100% 90% 86% 90% 78% 80% 80% 70% 70% 60% 60% 50% 45% 50% FNV Producers 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 0% FNV maintains strong margins through the commodity cycle (1) Operating Margin c
Slide 19: Royalties are High Margin
Royalties are High Margin Gross Operating Margin (2009) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: RBC Weekly Valuation Tables (June 22, 2009) 19 RBC calculates Gross operating margin excluding G&A costs
Slide 20: Royalties Provide Real FCF
Royalties Provide Real FCF(1) Original Plant & Infrastructure Operator Royalty Holder Initial Property Investment Initial Investment for Processing Plant Incremental Investment Plant Expansion for Plant Expansion Initial Royalty Initial Investment for Investment Open Pit ` Incremental Investment for
Slide 21: Royalties are Lower Risk
Royalties are Lower Risk Cumulative Cash Flow – Royalty vs. Operator Royalty Closure & Costs subject Construction Operation Mill expansions or laybacks Reclamation to inflation Our royalty acquisition cost is our only cash exposure Note: Cost and revenue figures are indicative only. Royalty economic
Slide 22: Capital Spending Advantage
Capital Spending Advantage Oil and gas – Actual production versus forecast 900 800 Reflects 700 operator 600 spending on new wells and 500 secondary Mboe recovery with no 400 cash call to royalty interests 300 200 100 - 2000 2001 2002 2003 2004 2005 2006 2007 2008 1999 Production Forecast Actual Pro
Slide 23: Historic Valuations
Historic Valuations P/CF Multiple 60 50 40 30 20 10 90 91 92 93 94 95 96 97 98 99 00 01 0 Seniors Mid-Caps Royalty Cos Royalty companies traded at > 2X premium to producers 23 Source: Merrill Lynch Equity Research.
Slide 24: Valuation Upside
Valuation Upside P/FCF Multiples 50 45 40 35 30 FNV 25 Sr. Producer Avg. 20 Sr. NA Producer Avg. 15 10 5 0 P/FCF 2010 P/FCF 2011 Trading at a significant discount to operators on a FCF basis 24 Source: BMO Gold Pages (June 19, 2009)
Slide 25: Franco-Nevada Attributes
Franco-Nevada Attributes Franco-Nevada is unique – Highest margins in business – Can generate free cash flow in all likely scenarios – Proven assets mostly in U.S. and Canada – Growing and increasingly diversified gold revenue Financial position is rock solid – $550m+ in working capital & marketable
Slide 26: Franco-Nevada on TSX
Franco-Nevada on TSX Capital Structure: Common 111.9m shares outstanding (FNV) Warrants 5.75m @ $32/sh Mar. 2012 (FNV.WT) Warrants 5.75m @ $75/sh June 2017 (FNV.WT.A) Share Price Range(1) C$31.49 - C$11.62 Market Capitalization(2) US$2.5B Working Capital + Investments(3) US$550m Available Credit Fac
Slide 27: Appendix - Management
Appendix - Management Title Canada David Harquail President & CEO Sharon E. Dowdall Chief Legal Officer & Corporate Secretary H. Geoffrey Waterman Chief Operating Officer Paul Brink S.V.P. Business Development Petra Decher VP, Finance & Assistant Secretary Jason O’Connell Manager, IR & Business Deve
Slide 28: Appendix - Board of Directors
Appendix - Board of Directors Position with Franco-Nevada Current or Past Major Experience Pierre Lassonde Director, Chairman Chairman, World Gold Council Vice Chairman, Director and President, Newmont Mining Co-CEO and Co-Founder, Old Franco-Nevada David Harquail Director, President & CEO Executive