Franco-nevada Corporation · TSX:FNV
Franco-nevada — Q2 2008 Earnings Presentation
24 slides from Franco-nevada's earnings presentation, August 2008
Slide 1: August 2008 Update with Q2 Results
August 2008 Update with Q2 Results David Harquail – CEO Alex Morrison – CFO Paul Brink – SVP
Slide 2: Cautionary Statement
Cautionary Statement Certain information contained in this Presentation, including any information as to our strategy, plans or future financial or operating performance and other statements that express management's expectations or estimates of future performance, constitute "forward-looking statem
Slide 3: Investment Environment
Investment Environment • Global inflationary pressures – Positive for gold prices – Negative for operating and capital costs Operating Margin = Total cost per ounce divided by average annual gold price Note: Cost numbers include ABX, NEM, IAG, KGC, GC, AUY, AEM • Credit crunch Source: Canaccord Adam
Slide 4: Benefits of a Royalty Structure
Benefits of a Royalty Structure Franco-Nevada Operators Explorers ETF Bullion Exposure to: Discovery potential 9 9 9 X X Production 9 9 X X X Expansion potential 9 9 X X X Acquisition potential 9 9 X X X Metal price appreciation 9 9 9 9 9 Reduced exposure to: Capital costs 9 X X 9 9 Operating costs
Slide 5: Franco-Nevada
Franco-Nevada Franco-Nevada is the leading resource royalty and investment company in terms of numbers of royalties, market capitalization, projected revenue and financial strength Issued Capital 100.3 million shares Listed December 20, 2007 Toronto Stock Exchange Symbol FNV Warrants Symbol FNV.WT S
Slide 6: Q1 & Q2 Comparisons
Q1 & Q2 Comparisons Q1 Q2 2008 2008 H1 (1) Total Revenue $27.5m $41.0m $68.5m Depletion and depreciation 15.5m 20.6m 36.2m Net Income 5.2m 9.8m 15.0m EPS $0.06 $0.10 $0.16 EBITDA(2) $23.3m $34.3m $57.6m EBITDA(2)per share $0.25 $0.34 $0.60 (1) New wells initiated in Q1 at Edson only included in Q2 d
Slide 7: First Half Comparisons
First Half Comparisons 2 yr c +57% EBITDA (1)(2) $68.5 Revenue(1) +48% $57.6 (1) For six months ended June 30. Figures for (Millions US$) 2006 and 2007 are performances of the portfolio of royalty assets under previous $48.6 ownership as a non-public entity prior to acquisition by Franco-Nevada. $43
Slide 8: H1 Revenues - $68.5m
H1 Revenues - $68.5m By Commodity By Region By Royalty Type Other 1% Working Interest 10% Oil Profit 26% Gold Based 42% 18% Revenue Gas Based 15% 71% PGMs 15% Other (incl, divs) Base Metals <1% 2% Precious metals focus with a secure asset base ٭forward looking estimate based on forecast productio
Slide 9: H1 Revenue – By Royalty
H1 Revenue – By Royalty $68.5m Expectations for H2: • Stronger Goldstrike revenues • Robinson has exceeded Au threshold in Q2 and expected to exceed Cu threshold in H1 • No Falcondo contribution due to oil price 9
Slide 10: Long Reserve Life
Long Reserve Life Oil & Gas • Goldstrike -14.9Moz Au P+P Reserves (mboe) 8,627 • Stillwater - 21.2Moz PGM • Oil and Gas – 8,627Mboe 6,123 5,808 8,312 1999 Production Additions 2007 Note - all reserves are as of December 31, 2007 10
Slide 11: Recent Pipeline News
Recent Pipeline News Hemlo (Interlake) - 3% NSR + 50% NPI - Development and initial mining has started Perama Hill - 2% NSR - Takeover by Eldorado Mining Detour Gold - 2% NSR - Operator reported 10.8m ounces in M&I resources in July Tasiast - 2% NSR - Operator reported production, resource and reser
Slide 12: Financially Strong
Financially Strong Cost of Operations Publicly quoted $4.1m marketable 6% G&A securities $47m $5.0m 7% Business Development Cash & Cash $0.7m Equivalents & Free Cash 1% Short-term Flow* Credit Facility investments $58.7m $150m $293m 86% Free Cash Flow* of $58.7m Liquidity and Capital Resources gener
Slide 13: FNV is Uniquely Well Positioned
FNV is Uniquely Well Positioned • Royalty model is ideal in this inflationary environment • Generating strong cash flow: – World class assets and operators – Unique mix of Gold, PGM’s and O&G – 97% of revenue from North American and Australian assets – 84% EBITDA* to revenue margin • Long term pipel
Slide 14: Supporting Slides
Aha Supporting Slides
Slide 15: Our Business Model Strengths
Our Business Model Strengths Simple non-operating business No material operating or capex challenges Leading operators Barrick, Goldcorp, Xstrata, EnCana, etc. Geopolitically secure Mostly US, Canada, Australia Gold focus with diversification Gold, PGM, O&G, Base Metals Balanced profile Producing, d
Slide 16: Royalty Types & Advantages
Royalty Types & Advantages • Revenue-based Royalty (NSR/GOR) – Limited exposure to operating or capital costs • Profit-based Royalty (NPI) – Exposure to, but no funding of, operating or capital costs • Advantages: – Your first dollar is your last – Easy to administer and grow – Management can focus
Slide 17: ~285 Royalty Interests
~285 Royalty Interests King Christian Roche Point Drake Hecla Detour Lake Perama Hill Eskay Creek Mouska Stillwater Holloway/Holt Hemlo (Interlake) Operating Mesquite Tasiast Advanced Rosemont Falcondo Exploration Cerro San Pedro Mt. Muro North Lanut Oil & Gas Hollister Ity Kasese Dee Gold, Storm, P
Slide 18: Pipeline of Future Royalties
Pipeline of Future Royalties • ~145 mineral exploration properties Exploration • ~100,000 acres of W. Canada mineral lands • ~1.1 Tcf Arctic Gas resource Rosemont, Detour Lake, • ~15 mineral projects under Hollister, Dee, Pandora, development or advanced exploration Moolart Well, Pinson, Hemlo Cerro
Slide 19: Commodity Price Leverage
Commodity Price Leverage* Sensitivity of 2008 Revenue to a 10% Increase in Commodity Price Estimated 11.8%* Estimated combined increase in total revenue if all commodities increase on average by 10% Commodity price leverage from: Does not reflect changes in: • Net profit and working interests • Tota
Slide 20: Strategic Growth Options
Strategic Growth Options Acquire Existing Royalties Create New Royalties Precious Metals Streams Non-Operating JV Interests Owning and Converting Properties / Resources 20
Slide 21: Why Now?
Why Now? Factor 2000 Now Capitalization of Sector $160 billion +$1.5 trillion Gold Price $255/oz $875/oz Available risk capital Limited Tightening Royalty Creation Ad-hoc Common practice Sentiment of buyers Falling values Demand driven Catalysts for sellers Limited Majors selling non-core assets Orp
Slide 22: Royalty Creation
Royalty Creation ● FNV has an effective 9% ownership in certain gas reserves in the Canadian Arctic – 1.1 TCF resource net to FNV – Petro-Canada has the largest interest in these gas fields ● FNV owns P+NG mineral rights on 100,000 acres in Western Canada that can be farmed out for royalties 22
Slide 23: Management
Management Title Canada David Harquail President & CEO Sharon Dowdall Chief Legal Officer H. Geoff Waterman Chief Operating Officer Paul Brink S.V.P. Business Development Jason O’Connell Associate, Investor Relations & Business Development Debbie McEnaney Controller Cindy Smith Land Analyst Donna An
Slide 24: Board of Directors
Board of Directors Position with Franco-Nevada Experience Pierre Lassonde2 Director , Chairman Past Chairman, World Gold Council Vice Chairman, Director and President, Newmont Co-CEO and Co-Founder, Old Franco-Nevada David Harquail Director, President & CEO Executive V.P., Newmont President & MD, Ne