Franco-nevada Corporation · TSX:FNV
Franco-nevada — Investor Presentation (April 2010)
24 slides from Franco-nevada's investor presentation, April 2010
Slide 1: A Gold Focused Royalty Company
A Gold Focused Royalty Company April, 2010 1
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: Who is Franco-Nevada?
Who is Franco-Nevada? Schulich & Lassonde started the gold royalty business in 1985 Franco-Nevada share price grew 30%+ per annum through 2001 Became 6th largest gold company in world by market cap 2002 Newmont & Normandy merger created world’s largest gold company Dec. 2007 IPO of new Franco-Nevada
Slide 4: Royalty Business Advantages
Royalty Business Advantages Your first dollar is your last Revenue based royalties have no operating cost exposure High margin Free Cash Flow business Free perpetual option on future discoveries on our lands Management is 100% focused on growing shareholder value 4
Slide 5: Royalty Business Advantages
Royalty Business Advantages Global Average Production Grade (g/t) Source: CIBC World Markets Inc. Source: CIBC World Markets Inc. & GFMS Capital Expenditure (US$/oz) Average Capital Expenditure(US$/oz) Newmont Barrick Resources (Moz) Gold Fields AngloGold Source: CIBC World Markets Inc. & UBS Source
Slide 6: Why The Royalty Sector Is Growing
Why The Royalty Sector Is Growing Market value of resource sector has increased 10-fold in past decade More development projects need financing Volatile commodity prices create sellers Less available commercial bank project lending Base metal companies can arbitrage precious metals values More royal
Slide 7: Example of Royalty Financing
Example of Royalty Financing Coeur d’Alene needed capital to finish construction of Palmarejo FNV provided $75M for right to buy 50% of gold production at $400/oz Represented at the time 12% of net future mine revenues Coeur avoided a dilutive equity financing Palmarejo silver‐gold mine Chihuahua, M
Slide 8: Franco-Nevada's Royalties in 2009
Franco-Nevada’s Royalties in 2009 By Royalty Revenue(1): $142.8m By Free Cash Flow(2): $124.3m (87% margin) By numbers: 196 mineral and 114 oil & gas By commodity: 78% precious metals, 22% other By region: 79% from USA & Canada Royalty Revenue(1) by Royalty Revenue(1) by Royalty Revenue(1) Country C
Slide 9: Franco-Nevada Royalty Operators
Franco- Nevada Royalty Operators Core Operators: Up and Comers: Goldstrike - Nevada Palmarejo - Mexico Bald Mountain - Nevada Hemlo - Ontario Holloway - Ontario Hislop - Ontario Holt - Ontario Gold Quarry - Nevada Ahafo South - Ghana Tasiast - Mauritania Marigold - Nevada Detour Lake - Ontario Musse
Slide 10: Growing Gold Royalty Revenues
Growing Gold Royalty Revenues(1) 42% Growth in Gold Royalty Revenue ‘09 vs. ’08 (1) Royalty Revenue is defined by the Company as cash received or receivable from operating royalty assets earned during the period. 10
Slide 11: Outlook for 2010
Outlook for 2010 Positives: Full year of production at Palmarejo and Holloway Start up of production at Hislop Hollister begins processing ore Robinson copper and gold royalties triggered Mt Keith royalty, acquired Oct 2009 Higher Oil & Gas and PGM prices Offsets: Lower contributions from: Gold Qu
Slide 12: Outlook for Longer Term Gold Growth
Outlook for Longer Term Gold Growth Gold only revenues excluding other revenues* Hemlo $5-15m Detour 12-13m Tasiast $10-11m Ahafo 6-11m Holt 3-4m Rosemont 1-2m Palmarejo $16-19m Marigold 1-4m Goldfields 1-2m Holloway-Hislop 4-5m Duketon 2-3m Perama Hill 2-3m $100.5m Hollister 3-5m Ity 1m Other 1-2m
Slide 13: Franco-Nevada's Capacity for New Projects
Franco-Nevada’s Capacity for New Projects Capital Resources @ December 31, 2009 US$ Millions Working Capital $531 Marketable Investments (Primarily NEM & IRC) $76 Available Credit Facility $175 Total Available Capital $782 No debt, hedges or material capital obligations Additional capacity from >$13
Slide 14: Franco-Nevada's Advantages
Franco-Nevada’s Advantages Royalty Business Model Goldstrike Established Diversified Portfolio 87% Cash Flow Margins >$700m Available for Growth No Debt or Acquisition Obligations Gold Quarry Growing Royalty Sector $30M of Annual Dividends Track Record of Value Accretion Palmarejo 14
Slide 15: Thank You
Thank You Goldstrike ‐ Barrick Weyburn Bald ‐ Cenovus Mountain ‐ Barrick East Boulder ‐ Stillwater Palmarejo ‐ Coeur Cerro San Pedro ‐ New Gold Mesquite – New Gold Marigold ‐ Goldcorp Robinson ‐ Quadra Tasiast ‐ Red Back Marigold ‐ Goldcorp 15
Slide 16: Background Slides
----------BACKGROUND SLIDES---------- 16
Slide 17: What Are Royalties?
What Are Royalties? Revenue or production royalty (NSR) – typically 2 to 5% of mine revenues/production – paid in cash or in-kind at refinery each month Streaming royalty (Stream) – right to % of gold production from a mine (ex. 50%) in exchange for: (1) an initial upfront payment (2) ongoing fixed
Slide 18: Sources of Gold Leverage
Sources of Gold Leverage Higher leverage from royalty structure 5% – NPI's (Goldstrike NPI, Interlake NPI) Revenue-based 15% Royalties – Scaled Royalties (Holloway, Holt) Profit-based (NPI) – WI‘s (Midale WI, Weyburn WI) 17% 63% Royalties Stream Royalties – Gold Streams (Palmarejo) Working Interests
Slide 19: Acquisitions since IPO
Acquisitions since IPO >90% of capital deployed into gold assets Amount Asset Royalty Commodity Operator Location $104m Gold Quarry 7.29% Gold Newmont Nevada $80m Palmarejo 50% Gold Coeur d’Alene Mexico Ahafo South $58m 2% Gold Newmont Ghana Mine $20m Marigold 2.5-5% Gold Goldcorp Nevada A$20m Mt Ke
Slide 20: Appendix - Organic Gold Growth Potential
Appendix - Organic Gold Growth Potential Annual Incremental Royalty Potential c Project Operator Royaltyd @ $1100 gold Palmarejo Coeur d’Alene 50% stream $16-19m eg Holloway–Hislop St Andrew Gold 4-6% NSR 4-5m e 2010 Hollister Great Basin Gold 3-5% NSR 3-5m e Hemlo NSR Barrick Gold 3% NSR 1-2m f $24
Slide 21: Comparables
Comparables Royal Gold Silver Wheaton Commodity mix Mostly gold Mostly gold Mostly silver USA 58% USA 48% Mexico 47% (1) Revenues by geography Canada 21% Africa 30% Peru 12% Mexico 15% Mexico 13% Sweden 20% Number of mineral royalties 196 ~200 19 Market cap at April 6, 2010 $3,154m $2,436m $5,757m P
Slide 22: Comparables
Comparables Assumes Franco‐Nevada does not invest its >$750m in currently available capital Royalties, gold and developed US & Canada assets should command a premium Source: RBC Equity Research: March 29, 2010 CF estimates & prices at April 6, 2010; EV includes acquisition obligations 22
Slide 23: Board of Directors
Board of Directors Position with Franco-Nevada Current or Past Major Experience Pierre Lassonde Director, Chairman Chairman, World Gold Council Vice Chairman, Director and President, Newmont Mining Co-CEO and Co-Founder, Old Franco-Nevada David Harquail Director, President & CEO Executive V.P., Newm
Slide 24: Franco-Nevada Corporation
Franco-Nevada Corporation (in US$ unless otherwise noted) Capital Structure(2) Analyst Coverage Shares Outstanding 114.0m BMO Capital Markets David Haughton Warrants @ C$32/sh March 2012 5.75m BOA/Merrill Lynch Mike Jalonen Warrants @ C$75/sh June 2017 5.75m CIBC Capital Markets Cosmos Chiu Options