Franco-nevada Corporation · TSX:FNV
Franco-nevada — Investor Day (May 2010)
87 slides from Franco-nevada's investor day presentation, May 13, 2010
Slide 1: Analyst Working Session
Analyst Working Session May 13, 2010 1
Slide 2: Cautionary Statement
Cautionary Statement F Forward-Looking d L ki Statements St t t 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 op
Slide 3: Agenda
Agenda Financial Update (20 Minutes) Sandip Rana • Q1 2010 Financial Results • Revenue & Commodity Contribution • Revenue Sensitivity & Leverage Operating Mineral Assets Highlights (20 Minutes) Steve Aaker • Go ds e Goldstrike • Robinson ob so • Palmarejo • Marigold • Stillwater • Bald Mountain • Go
Slide 4: Management
Management Title Canada David Harquail President & CEO Sandip p Rana Chief Financial Officer Sharon Dowdall VP, Special Projects Jacqueline Jones Chief Legal Officer & Corporate Secretary H. Geoff Waterman Chief Operating Officer Paul Brink S.V.P. Business Development Petra Decher VP, Finance & Assi
Slide 5: Q1 2010 Results and Financial Highlights
Q1 2010 Results and Financial Highlights Sandip Rana – CFO 5
Slide 6: Company Continues to Deliver Strong Financial Results
Company Continues to Deliver Strong Financial Results Continued growth in Royalty Revenue • 43% year-over-year increase Continued growth in Gold Royalty Revenue • 43% year-over-year increase Strong Earnings & Free Cash Flow Working Capital Strong – Approximately $600M Diversification of Revenue 6
Slide 7: Q1 2010 Highlights
Q1 2010 Highlights (US$ millions except per share and %) Q1 ’10 Q1 ’09 Q1 ’08 Royalty Revenue(1) $41.8 $29.2 $27.5 Gold Royalty Revenue 27.4 19.1 12.2 Total revenue(2) 37.9 33.1 27.5 Net income 7.8 3.8 5.2 Earnings per share $0.07 $0.04 $0.06 Free Cash Flow(3) 37.1 24.9 23.4 Free Cash Flow(3) per sh
Slide 8: Growth in Royalty Revenue from Precious Metal Assets
Growth in Royalty Revenue(1) from Precious Metal Assets 50 45 40 35 30 ns) Oil & Gas ($ million 25 Base Metals & Other PGM 20 Gold 15 10 5 0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 75% of Royalty Revenue in Q1’10 Q1 10 derived from precious metals (1) Royalty Revenue
Slide 9: Royalty Revenue & Free Cash Flow
Royalty Revenue(1) & Free Cash Flow (“FCF”)(2) $44.3 3 Royalty Revenue(1) 88% $41.8 Free Cash Flow (2) 89% $39.0 $37.1 89% $36.4 2.9 $32..5 85% $ $32 FCF/Revenue % 85% $29.2 $27.9 $24.9 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 (1) Royalty Revenue is defined by the Company as cash received or receivab
Slide 10: Royalty Revenue by Commodity
Royalty Revenue(1) by Commodity Year Ended Three months ended December 31, 2009 March 31, 2010 O a d Oil and Other Oil & Gas G Gas Minerals 20% 23% 2% Other PGM Minerals Gold 2% Gold 8% 70% PGM 65% 10% (1) Royalty Revenue is defined by the Company as cash received or receivable from operating royalt
Slide 11: Quality Assets in Quality Jurisdictions
Quality Assets in Quality Jurisdictions Royalty Revenue(1) Components Royalty Revenue(1) by Country Three Months Ended March 31, 2010 Three Months Ended March 31, 2010 Australia Midale Other 2% 3% 3% O&G Other 7% Edson Palmarejo 8% 22% Base M B Metals t l Weyburn Mexico & Other 6% 22% 2% Gold Quarry
Slide 12: Growing Gold – Less Dependent on Goldstrike
Growing Gold – Less Dependent on Goldstrike Royalty Revenue(1) Contribution 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Goldstrike Precious Metals Remaining Royalty Revenue (1) Royalty Revenue is defined by the Company as cash r
Slide 13: Royalty Revenue Q1 2009 to Q1 2010
Royalty Revenue(1) Q1 2009 to Q1 2010 1,236 1,631 1,905 4,174 41,805 2,220 8,996 1,578 1,209 1 209 347 29,217 (1) Royalty Revenue is defined by the Company as cash received or receivable from operating royalty assets earned during the period. Note, revenue is in thousands of dollars. 13
Slide 14: Net Income Q1 2009 to Q1 2010
Net Income Q1 2009 to Q1 2010 2,780 459 4,174 8 414 8,414 16,557 16,138 7,714 7,781 3 797 3,797 4 548 4,548 Note, net income is in thousands of dollars. 14
Slide 15: Franco-Nevada's Capacity for New Projects
Franco-Nevada’s Capacity for New Projects Capital Resources @ March 31, 2010 US$ Millions Working Capital $598 Marketable Investments (Primarily NEM) $52 Available Credit Facility $175 Total Available Capital $825 No debt, hedges or material capital obligations Plus additional capacity from growing
Slide 16: Sources of Gold Leverage
Sources of Gold Leverage Higher leverage from royalty structure: Three months ended March 31, 2010 – profit based royalties (Goldstrike, Hemlo …) Working interests 7% – scaled l d royalties lti (Holloway, Holt …) – gold streams (Palmarejo) Other 22% Revenue- Based 10% gold price move ≈ Profit Profit
Slide 17: Precious Metal Contribution
Precious Metal Contribution* to Royalty Revenue in 2010 Gold Price $900/oz $1,000/oz $1,100/oz $1,200/oz $1,500/oz $50/bbl 82% 84% 85% 86% 89% $3.50 $60/bbl 79% 81% 83% 84% 87% $4.00 Oil & $80/bbl 75% 77% 79% 81% 84% Gas $4.50 $90/bbl 73% 75% 77% 79% 82% $5 00 $5.00 $100/bbl 70% 72% 74% 76% 80% $6.5
Slide 18: Additional Financial Details in Appendices
Additional Financial Details in Appendices Accounting Definitions for FCF & Adjusted Net Income Derivative Accounting for Palmarejo Book Values Income Taxes – Tax Depletion and Tax Balances – Applicable pp Statutory y Tax Rates Costs and Expenses & Interest Expense Capital Structure Liquidity & Capi
Slide 19: Operating Mineral Assets
Operating Mineral Assets Steve Ste e Aaker a e – Se Senior o VP Acquisitions cqu s t o s 19
Slide 20: Franco-Nevada Royalty Operators include
Franco- Nevada Royalty Operators include: Core Operators: Up and Comers: Goldstrike - Nevada Palmarejo – Mexico* Bald Mountain - Nevada Hemlo - Ontario Mesquite – California Cerro San Pedro – Mexico Gold Quarry – Nevada* Holloway - Ontario Ah f South Ahafo S th – Ghana* Gh * Hislop - Ontario Holt -
Slide 21: Goldstrike Royalties
Goldstrike Royalties View looking West D id Schumacher David S h h photo h t Goldstrike Royalties: • Located in Nevada & Operated by Barrick • 4% NSR and 5% NPI on the Post and Goldstrike claims • 4% NSR and 5% NPI on the Extension and Gold Bug claims • 2% NSR over the Bazza claims and a 2% NSR and
Slide 22: Goldstrike Royalties
Goldstrike Royalties 2009 results - Barrick reported: • Goldstrike produced 1,355 K oz at cash costs of $464/oz – A major waste removal phase began in 2H-09, 2H-09 with the processing of lower grade ores in the Betze-Post pit. 2010 guidance - Barrick expects: • Goldstrike production to decline to 1,
Slide 23: Goldstrike Royalties
Goldstrike Royalties Indicative Sources for Royalty Production ±25% of FNV oz 45-50% of FNV oz <5% of FNV oz (SP)* 25-30% of FNV oz * Stock Piles 23
Slide 24: Palmarejo
Palmarejo Gold Royalty Stream on Coeur’s Ag-Au project in Mexico • $75 million acquisition in January 2009 • 50% of gold produced from the 29 29,000 000 acre Palmarejo Property (uncapped) • less $400 per oz (increasing by 1% per annum after four years) • Minimum of 50,000 ozs per annum beginning Jul
Slide 25: Palmarejo
Palmarejo Palmarejo began production in April 2009 Expanded 11‐year mine plan – Capacity to produce an average of 9 million silver ounces and 120,000 gold ounces annually Coeur announced a 54% increase in gold reserves during 2009 Capex for 2010 budgeted at $55 million $9.2 million budgeted $ g for
Slide 26: Stillwater Royalty
Stillwater Royalty Stillwater Royalty • 5% NSR o Payable on production from 813 of the 995 claims o Royalty claims cover the majority of the Stillwater mine and all off th the E Eastt Boulder B ld mine View looking south View looking south 26
Slide 27: Stillwater
Stillwater PGM metal price declines led to a restructuring of operations at the Stillwater complex in 2009, resulting g in: • reduced production from East Boulder • reduced total company workforce, including contractors, by 27%. • performance to date under the restructured mine plan and increased me
Slide 28: Gold Quarry Royalty
Gold Quarry Royalty Gold Quarry Royalty is based on: • 7 29% NSR of “Property” 7.29% Property production, production or • Minimum Annual Royalties (“MAR”) tied to unpaid “Property:” 1. Reserves 2 2. Stockpiles David Schumacher photo 2009 2010 Totals Forecast NSR Revenue ($ $m) $ $13.8 Royalty Oz Net
Slide 29: Gold Quarry – West Wall Layback
Gold Quarry – West Wall Layback Newmont’s GQ West Wall Layback In Feb-2010 Feb 2010, NEM announced a 2.9 2 9 Moz Proven and Probable reserve increase at Gold Quarry • Increase resulted from conversion of West Wall Layback resources announced last year • New P&P ounces will extend mine life of Gold Q
Slide 30: Gold Quarry Royalty
Gold Quarry Royalty Newmont’s GQ geotechnical failure In Feb-2010, NEM announced a geotechnical failure occurred at GQ, resulting in the deferral of 150,000 oz/year in production for both 2010 and 2011. NEM anticipates ti i t mining i i the th deferred d f d ounces in i 2012 and d 2013. • Franco und
Slide 31: Robinson Cu-Au Royalties
Robinson Cu-Au Royalties Robinson Royalties y Patented Claims Unpatented Claims • 0.225% NSR royalty • 10% price participation royalty on 51% of the gold produced above 60,000 oz • A price participation royalty on 51% of each pound of copper Kimbley Wedge produced in excess of 130 million pounds mul
Slide 32: Robinson Cu-Au Royalties
Robinson Cu-Au Royalties 2008 2009 2010 Actual Actual Forecast Au Revenue ($000) $2,868 $1,946 Cu Revenue ($000) $10,534 $10 534 $512 Production (K oz Au) (1) 137.6 99.0 80 P&P Reserves (K oz Au) 905 704 M&I Resources (K oz Au) (2) 1,901 1,993 Production ((Mlbs Cu)) 159.7 122.5 135 P&P Reserves (K t
Slide 33: Marigold
Marigold Marigold Royalties: • A variety of royalties exist on different sections sect o soof tthe epproperty, ope ty, including; c ud g; a 1.75% 5% NSR, 5% NSR, 0.5%-1.5% GR & a 2.5%-4% GR • FNV increased royalty exposure via a $20M acquisition in November 2009 • JV: 66.6% Goldcorp, 33.3% Barrick •
Slide 34: Bald Mountain
Bald Mountain Bald Mountain Royalties: • Located in Nevada & operated by Barrick • Royalties cover only a portion of the eastern side of the Bald Mountain mine • 4% NSR on most of the resources & 2.418% NSR on an area f formerly l kknown as Littl Little B Bald ld Mt Mtn • Exploration success resulte
Slide 35: Other Operating Assets
Other Operating Assets 2009 2009 Royalty Estimated 2010 2010 Operator Reserves(1) Production Revenue Prod. Subject to Forecast(2) Asset Operator/ Location (‘000 oz) (‘000 oz) (‘000 $US) FNV Royalty (%) (‘000 oz) Hollister(3) Great Basin/ Nevada 1,122 44.7 $1,555 100% 135 (3-5% NSR) Holloway/ St Andr
Slide 36: Oil and Gas
Oil and Gas Geoff Waterman – Chief Operating Officer 36
Slide 37: Oil and Gas
Oil and Gas Over 100 royalty and/or working interests in oil and natural gas properties ~72% of oil & gas Royalty Revenue(1) from Edson, Weyburn Unitt and U a d Midale da e U Unitt Long-life proved plus probable reserves (“2P”) of 6.6 mmboe for the above p properties p and 8.6 mmboe for all producin
Slide 38: Reserves
Reserves 942 mboe added during 2P (mboe) period (867 mboe at no $$) 8,350 8 589 8,589 Net reserve additions 239 mboe 11 4 year reserve life index 11.4 2009 GLJ Reserve report available on web site 942 -703 2008 Production Additions 2009 38
Slide 39: 2P Oil and Gas Reserves and RLI
2P Oil and Gas Reserves and RLI (years) 10,000 12.0 9 000 9,000 ex in years) 10.0 8,000 7,000 8.0 erve Life Inde 6 000 6,000 (mboe) 5,000 6.0 4,000 40 4.0 RLI (Rese 3,000 2,000 2.0 1,000 - - 12/31/2007 12/31/2008 12/31/2009 Oil (mboe) Gas (mboe) RLI Reserve replacement without exploration costs 39
Slide 40: Reserves
Reserves 2P by Commodity 2P by Area (mboe) NGL NG 6% Other Edson 23% 25% Oil Gas 62% 32% Midale 2P Reserves (mboe) 12% Weyburn 40% WI 36% ORR 64% 40
Slide 41: Production History (Actual & Forecast)
Production History (mboe) (Actual & Forecast) Actual & GLJ Forecast 900 808 800 750 703 700 663 591 600 orecast 2009 Forecast 2009 Forecast 500 Producttion Producttion 400 2009 Fo Actual Actual 300 200 100 - 2008 2009 2010E 2011E 2012E 41
Slide 42: Advanced Mineral Assets
Ad Advanced d Mineral Mi l Assets A t Paul Brink – S.V.P. Business Development p 42
Slide 43: Subika
Subika Subika Royalty: • 2% NSR on a portion of Ahafo South • Beginning after 1.2Moz are produced f from the th royalty lt property t (887,000 (887 000 oz off production to the end of 2009) • Covers ~78 km2 and all or portions of 3 of the 4 pits at Ahafo South • Announced in late 2009 for $58 millio
Slide 44: Tasiast
Tasiast Tasiast Royalty: • 2% NSR • Beginning after 600,000 oz are produced from the property (313 502 oz of production to the end of 2009) (313,502 • Operated by Red Back in Mauritania Recent Developments: • Red Back has forecasted production of 245koz – 265koz in 2010 • March 2010 announced reserv
Slide 45: Detour
Detour Detour Royalty: Recent Developments: • 2% NSR • Detour completed a C$275 million • Full feasibility stage project owned by Detour Gold in financing in November, 2009 toward Ontario development of the project Project Details • Pre-feasibility study in September, 2009 Expected Royalty Start-up(
Slide 46: Recent Development Project News
Recent Development Project News Property Royalty Update Hollister 3-5% NSR Great Basin recently signed an agreement with Newmont to process 30 000 to 30,000 t 50,000 50 000 ttons off stockpiled t k il d tto b be purchased h dbby NEM att $1,000/oz. Currently 51,000 tons are stockpiled containing 49,0
Slide 47: Outlook for Longer Term Gold Growth
Outlook for Longer Term Gold Growth Gold only royalty revenues excluding other revenues (1) Hemlo H l $5 15 $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 y p 4-5m Holloway-Hislop Duketon 2-3m Perama Hill 2-3m $100.5m $100 5m
Slide 48: Prosperity Gold Stream
Prosperity Gold Stream Paul au Brink – S S.V.P Business us ess Development e e op e t 48
Slide 49: Prosperity Gold Stream
Prosperity Gold Stream Overview Gold stream on LOM gold production from Prosperity Long life project in Canada Focus asset for Taseko Mines Ltd. Proven operator in the region p Open pit copper/gold porphyry p Asset value is approx. 50% copper and 50% gold(1) (1) Revenue calculated at $1,100/oz Au an
Slide 50: Prosperity Gold Stream – Terms
Prosperity Gold Stream Terms $350 million deposit funded pro-rata during construction with other g for the p financing project j and 2 million FNV 2017 share warrants Right to purchase gold equal to 22% of LOM gold in concentrate for $400/oz (inflation adjusted) Funding contingent on: – permitting,
Slide 51: Prosperity Gold Stream – Asset Profile
Prosperity Gold Stream Asset Profile Parameter Metric P&P Recoverable Reserves(1) 3.6 Blb Cu 7.7 Moz Au MI&I Resources 5.3 Blb Cu 13.3 Moz Au Avg. Annual Gold Production First five years (2) 294 koz Au, 122Mlb Cu Life-of-mine 247 koz Au, Au 108Mlb Cu Cash costs net of byproducts(3) First five years
Slide 52: Prosperity Gold Stream – Development Status
Prosperity Gold Stream Development Status BC environmental assessment certificate issued January 2010 Federal environmental assessment process expected to be complete – Q3 2010* Following permitting, expect two and a half years of construction and commissioning * Taseko May 12th, 2010 Press Release
Slide 53: Prosperity Gold Stream – Production Profile
Prosperity Gold Stream Production Profile 350 200 180 300 160 250 140 200 120 Copper (Mlb) C 100 150 80 old (Koz) 100 60 40 Go 50 20 0 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 Au in Conc. Production Profile (Koz) FNV Gold Stream (Koz) Cu in Conc. Production Profile (Mlb) Long mine life Source
Slide 54: Prosperity Gold Stream – Asset Quality
Prosperity Gold Stream A Asset tQQuality lit LOM 1st 5 Yrs $0.59/lb $0 28/lb $0.28/lb Low total operating costs net of byproducts (1) First year of the five years is a half year (2) By-product cost calculated assuming $1.65/lb Cu and $650/oz Au, C$/US$ of $0.82 (3) Costs are shown before impact of g
Slide 55: Prosperity Gold Stream – Contribution Analysis
Prosperity Gold Stream Contribution Analysis 100% 95% 11.1% 15.8% 14.1% 17.6% 90% ution (%) 85% ative Contribu 80% Prosperity FNV 75% 88.9% 84 2% 84.2% 85.9% Rela 82.4% 70% 65% 60% EV 2014 Revenue 2014 CF NAV Prosperity contribution is highly accretive Note: Revenue and CF for estimates for FNV for
Slide 56: Prosperity Gold Stream – Potential Upside
Prosperity Gold Stream Potential Upside Gold resource of 13.3Moz* is approx 20% larger than approx. current reserve Change in mill configuration may increase throughput currently planned >70,000 tpd Exploration p p potential on the 85km2 concession * See Taseko Technical Report dated November 2, 200
Slide 57: Strengthening the Leading Gold Royalty Portfolio
Strengthening the Leading Gold Royalty Portfolio PRO-FORMA NAV BREAKDOWN Base Metals 8% Prosperity 18% Oil & Gas 16% Palmarejo 14% Other Gold 20% Goldstrike 12% Gold Quarry Stillwater 6% 6% A key long-life addition to the portfolio Source: Broker research at analyst consensus prices. Includes NAV of
Slide 58: Increasing Precious Metals Exposure
Increasing Precious Metals Exposure 2010E Revenue 2014E Revenue Base Metal 5% Oil & Oil & Gas Gas Base Metal 18% 10% 2% Precious Precious Metal Metal 80% 85% Pro-forma revenue 85% precious metals Estimates using current prices of $1,100/oz Au, $78/bbl oil, $4.00/mcf gas, $1,650/oz Pt & $500/oz Pd .
Slide 59: Geopolitical Stability
Geopolitical Stability 2010E Revenue 2014E Revenue Australia Other 3% 4% Australia 3% Other 10% Canada 21% Mexico Canada 21% Mexico 38% 15% US US 51% 34% Prosperity y increases revenue from Canada Franco-Nevada estimates using current prices of $1,100/oz Au, $78/bbl oil, $4.00/mcf gas, $1,650/oz Pt
Slide 60: Substantial Long Term Gold Growth
Substantial Long Term Gold Growth Gold only royalty revenues excluding other revenues (1) Prosperity $44-48m Hemlo $5-15m D t Detour 12 13 12-13m Tasiast $10-11m Ahafo 6-11m Holt 3-4m Rosemont 1-2m Palmarejo $16-19m Marigold 1-4m Goldfields 1-2m $100.5m Holloway-Hislop 4-5m Duketon 2-3m Perama Hill
Slide 61: Increased Gold Price Leverage
Increased Gold Price Leverage Existing gold leverage: 1.3:1 – NPI NPI'ss (Goldstrike NPI, Interlake NPI) – Scaled Royalties (Holloway, Holt) – Gold Streams (Palmarejo) Prosperity stream gold leverage: 1.6:1 Gold Price Revenue Prosperity Revenue @ 1,100/oz $45.4M Prosperity Revenue @ 1,210/oz $52.5M
Slide 62: Current Capital Resources Untouched
Current Capital Resources Untouched Franco-Nevada expects to generate sufficient funds from operations to fund its commitment without using current capital resources Capital Resources @ March 31, 2010 US$ Millions Working Capital $598 Marketable Investments (Primarily NEM) $52 A ailable Credit Facil
Slide 63: Summary
Summary Accretive acquisition on all metrics Long life asset in Canada with proven operator and exploration upside FNV funds f only as project is de-risked 22% of 13.3 million ounces* of gold * See Taseko Technical Report dated November 2, 2009 for Assumptions 63
Slide 64: Summary
Summary David a d Harquail a qua – C CEO O 64
Slide 65: Franco-Nevada's two year performance
Franco-Nevada’s two year performance Dec. 2007 IPO of new Franco-Nevada for $1.26B (C$15.20/sh.) In two years years, Franco-Nevada has delivered: – $250M of Free Cash Flow(1) – 80% share price increase – $50M in dividends – 300 royalty interests – $600M in liquidity FNV vs S&P/TSX since IPO FNV S&P
Slide 66: Dividends paid to date
Dividends paid to date C$/sh US$ millions June 2008 $0.12 $21.8m Dec 2008 Dec. $0 12 $0.12 June 2009 $0.14 $28 2m $28.2m Dec. 2009 $0.14 $50 million in dividends paid to date 66
Slide 67: Indicated Dividends for 2010
Indicated Dividends for 2010** Final semi-annual dividend to be paid in June followed by start of monthly dividends in July C$/share US$ June 2010 $0.150 July $ $0.025 August $0.025 September $0.025 October $0.025 November $0.025 December $0 $0.025 025 $0.30 $34 million* Three years of growing annua
Slide 68: Franco-Nevada's Advantages
Franco-Nevada’s Advantages Royalty Business Model Goldstrrike Established Diversified Portfolio 89% % Cash Flow Margins g Gold Quarry Most Available Capital No Debt or Hedges Strong Organic Growth Profile >$30M $30M off A Annuall IIndicated di t d Di Dividends id d Track Record of Value Accretion Pa
Slide 69: 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 69
Slide 70: Appendices
Ok) Franco-Nevada Appendices
Slide 71: Appendix - Table of Contents
Appendix - Table of Contents Accounting Definitions for FCF & Adjusted Net Income Derivative Accounting for Palmarejo Book Values Income Taxes – Tax Depletion and Tax Balances – Applicable Statutory Tax Rates C t and Costs dEExpenses & IInterest t t Expense E Capital Structure Liquidity q y & Capita
Slide 72: Appendix - Free Cash Flow
Appendix - Free Cash Flow Free Cash Flow is defined by the Company as operating income plus depletion and depreciation depreciation, non non-cash cash charges charges, and any impairment of investments and royalty interests. Q1 2010 Q1 2009 (millions) (millions) Operating income $11 7 $11.7 $4 7 $4.
Slide 73: Appendix - Adjusted Net Income
Appendix - Adjusted Net Income Adjusted Net Income is defined by the Company as Net Income excluding; impairment charges related to royalties, royalties working interests and investments; fair value changes for royalties accounted for as derivative assets; foreign currency gains/losses; gains/losses
Slide 74: Appendix - Palmarejo Gold Stream Accounting
Appendix - Palmarejo Gold Stream Accounting Accounting Treatment – Minimum Royalty (“MR”) • Fair value accounting required to be used; • MR will be marked to fair value at each balance sheet date;; • Adjustments in fair value recognized in income as a separate income statement caption; • Separate de
Slide 75: Appendix - Palmarejo Gold Stream Accounting
Appendix - Palmarejo Gold Stream Accounting Fair Value of Palmarejo MR is sensitive to changes in key assumptions (discount rate, gold prices, project parameters); Generates significant non-cash variations to total revenue and earnings, which will be recognized quarter by quarter. Palmarejo Royalty
Slide 76: Appendix - Net Book Values
Appendix - Net Book Values At December 31 31, 2009 Exploration Producing & Development Gold Barrick Goldstrike $ 183 $ - Bald Mountain 17 - Gold Quarry 94 - Palmarejo 135 - Marigold 24 - Other 78 125 $ 531 $ 125 PGMs Stillwater $ 210 $ - Pandora 19 $ 229 $ - Other Minerals Robinson $ 9 - Falcondo 29
Slide 77: Appendix - Income Taxes
Appendix - Income Taxes Tax Depletion and Balances at December 31 31, 2009 Canada – Canadian oil & gas: 10% declining balance - C$155m – Canadian mining: 30% declining balance - C$10m – Foreign assets: lesser of income or 30% declining balance - C$54m US – Generally uses cost depletion on a units-of
Slide 78: Appendix - Income Taxes
Appendix - Income Taxes Applicable Statutory Tax Rates (At March 31 31, 2010) Canadian combined(1) income tax rates declining – 2010 – 28.34% – 2011 – 26.29% – 2012 – 24.57% 24 % – 2013 – 24.24% US combined((1)) income tax rate is 37 37.12% 12%((2)) Australian income tax rate is 30% Mexican income t
Slide 79: Appendix - Costs and Expenses
Appendix - Costs and Expenses Total $6.6 million (For the year ended December 31, 2009) Nevada Net Proceeds Taxes 52% Oil & Gas Production Taxes 22% Oil & Gas Operating Costs on WI 17% Montana Net Proceeds Taxes 9% Expense pe se co components po e ts – Standby fee for Credit Facility ~ $250,000 per
Slide 80: Appendix - Liquidity & Capital Resources
Appendix - Liquidity & Capital Resources Full Credit facility of $175 million available Total Liquidity of $621.5 million at March 31,, 2010 Current cost of advances – – BMO Prime Rate plus 0.125% Short-term – – BMO Base Rate plus 0.125% investments 28% Cash and Subject j to 0.5625% standby y fee on
Slide 81: Appendix - Organic Gold Growth Potential
Appendix - Organic Gold Growth Potential Annual Incremental Royalty Potential c Project Operator Royaltyd @ $1100 gold Palmarejo a a ejo Coeu d Coeur d’Alene e e 50% st stream ea $16-19m $ 6 9 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
Slide 82: Appendix - Edson (Alberta)
Appendix - Edson (Alberta) Liquids-rich gas play 209 km. west of Edmonton 15% ORR over 25,920 gross acres AECO-C spot prices less GCA processing i costt Wells drilled at no cost to Franco- Nevada RLI: 7 years Operator: 82
Slide 83: Appendix - Weyburn/Midale Units (Saskatchewan)
Appendix - Weyburn/Midale Units (Saskatchewan) Weyburn Midale Unit Unit 83
Slide 84: Appendix - Weyburn Unit (Saskatchewan)
Appendix - Weyburn Unit (Saskatchewan) Unitized oil play 129 km. southeast of Regina Medium sour crude (28 to 31 degree API, 2% sulphur) 1.11% non-operated working interest, 0.44% royalty C$10 to t C$15/bbl differential diff ti l tto Ed Edmonton t LiLight ht price i CO2 miscible flood started in 200
Slide 85: Appendix - Midale Unit (Saskatchewan)
Appendix - Midale Unit (Saskatchewan) Unitized oil play 40 km southeast of Weyburn Medium sour crude (28 ( to 31 degree API, 2% % sulphur)) 1.59% non-operated working interest, 1.18% royalty C$10 to C$15/bbl differential to Edmonton Light price CO2 injection began in 2005, over 10 patterns operating
Slide 86: Appendix - Exploration
Appendix - Exploration Non-producing land – 12,000 net acres of unproved non producing land under lease – Interests in 184 non producing agreements which include ~100,000 gross acres of undeveloped mineral title, available for farm out Arctic Gas – Discovered by Panarctic Oils between 1969 and 1986
Slide 87: Franco-Nevada Corporation
Franco-Nevada Corporation Capital Structure(2) Analyst Coverage Shares Outstanding 114.02m 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 (Avg C$16.00/sh) 2.43m GMP Secu