Franco-nevada Corporation · TSX:FNV
Franco-nevada — Investor Presentation (June 2010)
34 slides from Franco-nevada's investor presentation, June 2010
Slide 1: A Gold Focused Royalty Company
A Gold Focused Royalty Company June 2010 1
Slide 2: Cautionary Statement
Cautionary y 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, esti
Slide 3: Franco-Nevada's two year performance
Franco-Nevada’s two y year p performance Dec. 2007 IPO of new Franco-Nevada for $1.26B (C$15.20/sh.) Since IPO, Franco-Nevada has delivered: ¾ $293M of Free Cash Flow(2) ¾ 100% share price increase ¾ >$70M in dividends declared ¾ 300 royalty interests ¾ $650M in liquidity 2.50 FNV vs S&P/TSX Since I
Slide 4: Franco-Nevada
Franco-Nevada A gold focused royalty company generating growing cash flow from a diversified portfolio of quality assets mostly in North America America. Royalty Business Advantages Your first dollar in is your last Revenue-based royalties have no operating costs High margin and free cash flow gener
Slide 5: Royalty Business Advantages
Royalty y y Business Advantages g Gold ETF Royalties Operators Leverage to Gold Price 2 3 3 Yield 2 3 3 Exploration & Expansion Upside 2 3 3 Reduced Downside of Operating, 3 3 2 Capital & Environmental Costs Franco-Nevada provides more leverage and upside than a gold ETF with less risk than an opera
Slide 6: What Are Royalties?
What Are Royalties? y Revenue or production royalty (NSR) – typically revenues/production t picall 2 to 5% of mine re en es/prod ction – paid in cash or in-kind at refinery each month Streaming royalty (Stream) – right to % of gold production from a mine (eg. 50%) in exchange for: (1) an initial up
Slide 7: Why The Royalty Sector Is Growing
Why y The Royalty y y Sector Is Growing g Market value of resource sector has increased 10x in past decade More M development d l projects j needd fifinancing i Volatile commodity prices create sellers Less available commercial bank project lending Base metal companies can arbitrage precious metals
Slide 8: Franco-Nevada Royalty Operators
Franco- Nevada Royalty y y Operators p include: Core Operators: Up and Comers: Goldstrike - Nevada P l Palmarejo j – Mexico* M i * Bald Mountain - Nevada Hemlo - Ontario Mesquite – California Cerro San Pedro – Mexico Gold Quarry – Nevada* Holloway - Ontario Subika – Ghana* Hislop - Ontario Holt - On
Slide 9: Franco-Nevada's Royalties in 2009
Franco-Nevada’s Royalties y in 2009 By Royalty Revenue(1): $142.8m By Free Cash Flow(2): $124.3m (87% margin) By numbers: 196 mineral and 114 oil & gas By commodity: 78% precious metals, 22% other B region: By i 79% ffrom USA & C Canada d Royalty Revenue(1) by Royalty Revenue(1) by Royalty Revenue(1
Slide 10: Sources of Gold Leverage
Sources of Gold Leverage g Year Ended Royalty leverage comes from: Working December 31, 2009 – profit-based profit based royalties (Goldstrike, (Goldstrike Hemlo …)) interests 5% – scaled royalties (Holloway, Holt …) Stream royalties – gold streams (Palmarejo) 15% Profit- Revenue- R based Based 10%
Slide 11: Q1 2010 Highlights
Q1 2010 Highlights g g (US$ 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 o a revenue Total e e ue(2) 37.9 3 9 33.1 33 27.5 5 Net income 7.8 3.8 5.2 Earnings per share $0.07 $0.04 $0.06 Free Cash Flow(3) 37 1 37.1 24 9
Slide 12: Growth in Royalty Revenue from Precious Metal Assets
Growth in Royalty y y Revenue(1) from Precious Metal Assets 50 45 40 35 30 $ millions) Oil & Gas 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 derived from precious metals 12
Slide 13: Outlook for 2010
Outlook for 2010 Positives: Full year of production at Palmarejo and Holloway Start up of production at Hislop Hollister begins processing stockpiled ore Full year from Mt Keith royalty (acquired Oct ‘09) Higher PGM and oil & gas prices Stronger second half: Goldstrike waste stripping completed High
Slide 14: Franco-Nevada's Capacity for New Projects
Franco-Nevada’s Capacity p y for New Projects j C it l Resources Capital R @M March h 31, 31 2010 US$ Millions Milli Working Capital $598 Marketable Investments (Primarily NEM) $52 Available Credit Facility $175 Total Available Capital $825 No debt, hedges or material capital obligations Additional
Slide 15: Prosperity Gold Stream
Prosperity p y Gold Stream May 2010 Announcement Major new long-life gold asset in Canada Open pit copper/gold porphyry in B.C. Proven operator with Taseko Mines Ltd. 22% of LOM gold production (>$400/oz) of 13 million ounce resource (7.7 million ounces recoverable in reserves) Net 65,000- 55,000 ou
Slide 16: Substantial Long Term Gold Growth
Substantial Long g Term Gold Growth Gold only royalty revenues excluding other revenues * Prosperity $44-48m Detour $14-17m Tasiast Exp. 6-11m Tasiast $9-11m Hemlo 5-15m Holt 3-4m Subika 6-11m Palmarejo $16-19m $16 19m M i ld Marigold 14 1-4m Rosemont 1-2m $100.5m Holloway-Hislop 4-5m Duketon 2-3m G
Slide 17: Move to Monthly Dividends
Move to Monthly y Dividends C$/share US$ 2008 June $0.12 $21.8 m December $0.12 $0.24 2009 June $0.14 $28.2 m December $0.14 $0 28 $0.28 2010* June $0.150 July $0.025 August $0.025 September $0.025 $34.0 m** October $0.025 November $0 025 $0.025 December $0.025 $0.30 G Growing Dividends * September
Slide 18: Franco-Nevada's Advantages
Franco-Nevada’s Advantages g R Royalty lt BBusiness i M Model d l Goldstrike Strong Organic Growth Portfolio New Prosperity Deal arry Capital for Further Deals Gold Qua 89% Free Cash Flow Margins >$30M of Annual Indicated Dividends Palmarrejo Track Record of Value Accretion 18
Slide 19: Thank You
----------THANK THANK YOU 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 19
Slide 20: Dow vs Gold
Dow vs Gold: 45 40 35 30 25 Gold DOW/G 20 15 10 5 0 Financial vs hard assets 20
Slide 21: Pipeline For Future Growth
Pipeline p For Future Growth Current producers New in 2010-11 Near term 2012+ Longer term Prosperity* Goldstrike Holloway/Hislop/Holt Hemlo NPI Pinson Palmarejo* Hollister Detour Dee/Arturo Gold Quarry* Hemlo NSR Subika* Pandora platinum Stillwater Tasiast Falcondo nickel Kirkland Lake Marigold Mari
Slide 22: Recent Pipeline News
Recent Pipeline p News Property Royalty Operator Update Tasiast 2% NSR Red Back Major reserve and resource expansions and $600m Mining Kinross investment. Royalty expected to begin paying in early 2011. Analysts expect further production expansion. Hollister 3-5% NSR Great Basin Commercial productio
Slide 23: Track Record of Acquisitions since IPO
Track Record of Acquisitions q since IPO >95% of capital deployed into gold assets Amount Asset Royalty Commodity Operator Location $104m Gold Quarry 7 29% 7.29% Gold Newmont Nevada Coeur $80m Palmarejo 50% Gold Mexico d’Alene $58m Subika 2% Gold Newmont Ghana $20m Marigold 2.5-5% Gold Goldcorp Neva
Slide 24: Organic Gold Growth Potential
Organic g 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 $24-31m Tasi
Slide 25: Prosperity Gold Stream
Prosperity p y Gold Stream Terms $350 million deposit funded pro-rata during construction with other financing for the project 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, p
Slide 26: Prosperity Gold Stream Production Profile
Prosperity p y Gold Stream Production Profile 350 200 180 300 160 250 140 200 120 Copper (Mlb) 100 150 80 oz) Gold (Ko 100 60 40 50 20 0 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 A Au iin C Conc. P d ti Production P fil (K Profile (Koz)) G ld Stream FNV Gold St (K (Koz)) C iin Conc. Cu C P d t
Slide 27: Prosperity Gold Stream Contribution Analysis
Prosperity p y Gold Stream Contribution Analysis 100% 95% 11.1% 15.8% 14.1% 17.6% 90% ontribution (%) ( 85% 80% Prosperity Relative Co FNV 75% 88.9% 84.2% 85.9% 82.4% 70% 65% 60% EV 2014 R Revenue 2014 CF NAV Prosperity contribution is highly accretive Note: Revenue and CF for estimates for FNV for
Slide 28: Prosperity Gold Stream Pro-forma NAV Breakdown
Prosperity p y Gold Stream 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 consen
Slide 29: Comparables
Comparables p P/NAV (x) 2.0 2.0x 1.8 1.8 16 1.6 1.6x 1.2x 0.8x 0.4x 0 0x 0.0x Nevada Wheaton Franco- Royal Freehold Gold Silver Att Attractive ti valuation l ti relative l ti to t peers Source: Courtesy of UBS. Based on Bloomberg, street research, IBES estimates. 29
Slide 30: Comparables
Comparables p Royal Gold Silver Wheaton C Commodity dit mix i M tl gold Mostly ld M tl gold Mostly ld M tl silver Mostly il USA 45% USA 40% Mexico 45% (1) Revenues by geography Canada 27% Africa 27% S. America 31% Mexico 22% Mexico 15% Sweden 11% Number of mineral royalties 197 192 19 Market cap at
Slide 31: 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 32: Two Years of Added Value ($US)
Two Years of Added Value ($US) ( ) Cumulative dividends MC = $2.9B Added market value New Equity Added Cumulative equity financing US $1.1B Value to Investor MC = $1.7B US $0 2B $0.2B MC = $1.3B Equity Financings IPO Dec 2007 2008 Dec 2008 2009 Dec 2009 32
Slide 33: FNV vs S&P/TSX since IPO
FNV vs S&P/TSX since IPO IPO Financing Gold Palmarejo Financing 250% $1.3B $260m Quarry $75m $313m $103 $103m 200% 150% Ahafo Offer For Marigold IRC $675m Mt. Keith $100m Prosperity 100% $350m December 20, 2007 IPO issue price 50% C$15.20/sh 0% FNV S&P 33
Slide 34: Franco-Nevada Corporation
Franco-Nevada Corporation p Capital Structure(2) Analyst Coverage Shares Outstanding 114.02m BMO Capital Markets David Haughton W Warrants t @ C$32/sh C$32/ h M March h 2012 5 75 5.75m BOA/Merrill Lynch Mike Jalonen Warrants @ C$75/sh June 2017 5.75m CIBC Capital Markets Cosmos Chiu Credit Suisse An