Franco-nevada Corporation · TSX:FNV
Franco-nevada — Investor Presentation (May 2010)
36 slides from Franco-nevada's investor presentation, May 2010
Slide 1: A Gold Focused Royalty Company
A Gold Focused Royalty Company May 2010 1
Slide 2: Cautionary Statement
Cautionary Statement Forward Looking Statements Forward-Looking 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: Dow vs Gold: Financial vs hard assets
Dow vs Gold: 45 40 35 30 DOW/Gold 25 20 15 10 5 0 Financial vs hard assets 3
Slide 4: 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: ¾ $285M of Free Cash Flow(2) ¾ 100% share price increase ¾ $50M in dividends ¾ 300 royalty interests FNV vs S&P/TSX Since IPO ¾ $650M in liquidity 250% ¾
Slide 5: Royalty Business Advantages
Royalty Business Advantages Your first dollar in is your last Revenue-based Revenue based royalties have no operating costs High margin and free cash flow generating business Free perpetual option on future discoveries on our lands Management is free to focus on growing shareholder value 5
Slide 6: 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 (eg. 50%) in exchange for: (1) an initial up front payment (2) ongoing fixed
Slide 7: Example of Royalty Mine Financing
Example of Royalty Mine Financing January 2009, Coeur d’Alene needed capital to finish construction of the Palmarejo silver-gold mine in Mexico Franco-Nevada Franco Nevada funded $75 million in return for a right to buy 50% of the future gold production at $400 per ounce (gold stream royalty) Repres
Slide 8: Why The Royalty Sector Is Growing
Why The Royalty Sector Is Growing Market value of resource sector has increased 10x 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 royalty c
Slide 9: 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 S bik – Ghana* Subika Gh * Hislop - Ontario Holt - Ontario M
Slide 10: Franco-Nevada's Royalties in 2009
Franco-Nevada’s Royalties in 2009 By Royalty Revenue(1): $142.8m By Free Cash Flow(2): $124.3m (87% margin) By numbers: 196 mineral and 114 oil & gas By commodity: 78% precious metals, 22% other By region: 79% from USA & Canada Royalty Revenue(1) by Royalty Revenue(1) by Royalty Revenue(1) Country C
Slide 11: Sources of Gold Leverage
Sources of Gold Leverage Year Ended Royalty leverage comes from: Working December 31, 2009 – profit-based royalties (Goldstrike, Hemlo …) interests 5% – scaled l d royalties lti (Holloway, Holt …) Other 15% – gold streams (Palmarejo) Profit- Revenue- based Based 10% gold price move ≈ y royalties 17%
Slide 12: Q1 2010 Highlights
Q1 2010 Highlights (US$ 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 $0.06 Free Cash Flow(3) 37.1 24.9 23.4 Free Cash Flow(3) per sh
Slide 13: Growth in Royalty Revenue from Precious Metal Assets
Growth in Royalty Revenue(1) from Precious Metal Assets 50 45 40 35 30 ns) Oil & Gas ($ 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 13
Slide 14: 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) 09) Higher PGM and oil & gas prices Stronger second half: Goldstrike waste stripping completed
Slide 15: Outlook for Longer Term Gold Growth
Outlook for Longer Term Gold Growth Gold only royalty revenues excluding other revenues * Hemlo H l $5 15 $5-15m Detour 12-13m Tasiast $10-11m Subika 6-11m Holt 3-4m Rosemont 1-2m Palmarejo $16-19m Marigold 1-4m Goldfields 1-2m Holloway-Hislop y p 4-5m Duketon 2-3m Perama Hill 2-3m $100.5m $100 5m H
Slide 16: Recent Pipeline News
Recent Pipeline News Property Royalty Operator Update Tasiast 2% NSR Red Back Major j reserve and resource expansions and $600m Mining Kinross investment. Royalty expected to begin paying in early 2011. Hollister 3-5% NSR Great Basin Commercial production expected in 2010. High grade Gold Hatter Gra
Slide 17: Franco-Nevada's Capacity for New Projects
Franco-Nevada’s Capacity for New Projects Capital Resources @ March 31, 2010 US$ Millions Working Capital $598 Marketable Investments (Primarily NEM) $52 Available Credit Facility $175 Total Available Capital $825 No debt, hedges or material capital obligations No debt, hedges or material capital ob
Slide 18: Prosperity Gold Stream
Prosperity Gold Stream New Acquisition Gold stream on LOM gold production from Prosperity Long life project in Canada Open pit copper/gold porphyry Asset value is approx. 50% copper and 50% gold* Focus asset for Taseko Mines Ltd. Proven operator in the region * Revenue calculated at $1,100/oz Au and
Slide 19: Prosperity Gold Stream: Terms
Prosperity 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, – proj
Slide 20: Prosperity Gold Stream: Asset Profile
Prosperity Gold Stream Asset Profile Parameter Metric P&P Recoverable Reserves* 3.6 Blb Cu 7.7 Moz Au MI&I Resources 5.3 Blb Cu 13 3 M 13.3 Moz A Au Avg. Annual Gold Production First five years ** 294 koz Au, 122Mlb Cu Life-of-mine 247 koz Au, 108Mlb Cu Cash costs net of byproducts*** First five yea
Slide 21: 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 22: Prosperity Gold Stream: Contribution Analysis
Prosperity Gold Stream Contribution Analysis 100% 95% 11.1% 15.8% 14.1% 17.6% ution (%) 90% 85% ative Contribu 80% Prosperity FNV 75% 88.9% 85.9% Rela 84 2% 84.2% 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 23: Strengthening the Leading Gold Royalty Portfolio
Prosperity 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 consensus
Slide 24: Substantial Long Term Gold Growth
Substantial Long Term Gold Growth Gold only royalty revenues excluding other revenues * Prosperity $44-48m Hemlo $5-15m D t Detour 12 13 12-13m Tasiast $10-11m Subika 6-11m Holt 3-4m Rosemont 1-2m Palmarejo $16-19m Marigold 1-4m Goldfields 1-2m $100.5m Holloway-Hislop 4-5m Duketon 2-3m Perama Hill 2
Slide 25: Move to Monthly Dividends
Move to Monthly Dividends C$/share US$ 2008 June $0.12 $0 12 $21.8 m December $0.12 $0.24 2009 June $0.14 $0 14 $28.2 m December $0.14 $0.28 2010* 2010 June $0.150 $0 150 July $0.025 August $0.025 September $0.025 $34.0 m** October $0 $0.025 025 November $0.025 December $0.025 $0.30 Growing Dividend
Slide 26: Franco-Nevada's Advantages
Franco-Nevada’s Advantages Royalty Business Model Goldstrrike Strong Organic Growth Portfolio 89% % Free Cash Flow Margins g Gold Quarry >$825m Available for Growth Growing Sector & Opportunities >$30M of Annual Indicated Dividends Palmarejo o T k Record Track R d off Value V l A Accretion ti 26
Slide 27: 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 27
Slide 28: Pipeline For Future Growth
Pipeline 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 Marigo
Slide 29: Track Record of Acquisitions since IPO
Track Record of Acquisitions since IPO >95% of capital deployed into gold assets Amount Asset Royalty Commodity Operator Location $104m Gold Quarry 7.29% Gold Newmont Nevada Coeur $80m Palmarejo 50% Gold Mexico d’Alene $58m Subika 2% Gold Newmont Ghana $20 $20m M i ld Marigold 2 5 5% 2.5-5% G ld Gol
Slide 30: Organic Gold Growth Potential
Organic Gold Growth Potential Annual Incremental Royalty Potential c Project Operator Royaltyd @ $1100 gold Palmarejo Coeur dd’Alene Alene 50% stream $16 19m $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
Slide 31: Comparables: P/NAV
Comparables P/NAV (x) 2.0 2.0x 1.8 1.8 1.6 1.6x 1.2x 0.8x 0 4x 0.4x 0.0x Nevada heaton Franco- Royal eehold Gold Silver Wh S N F Fre Attractive valuation relative to peers Source: Courtesy of UBS. Based on Bloomberg, street research, IBES estimates. 31
Slide 32: Comparables
Comparables Royal Gold Silver Wheaton Commodity mix Mostly gold Mostly gold Mostly silver 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 May 17, 2010 $3,609m $2,431m $7,18
Slide 33: Board of Directors
Board of Directors Position with Franco-Nevada Current or Past Major Experience Pierre Lassonde Director,, Chairman Chairman,, World Gold Council Vice Chairman, Director and President, Newmont Mining Co-CEO and Co-Founder, Old Franco-Nevada David Harquail Director, President & CEO Executive V.P., Ne
Slide 34: Two Years of Added Value ($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 MC = $1.3B Equity Financings IPO Dec 2007 D 2008 Dec 2008 2009 Dec D 2009 34
Slide 35: 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 $103m 200% 150% Ahafo Offer For Marigold IRC $675m Mt. Keith $100m Prosperity 100% $350m December 20, 2007 IPO issue p price 50% C$15.20/sh 0% FNV S&P 35
Slide 36: 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