Franco-nevada Corporation · TSX:FNV
Franco-nevada — Investor Presentation (September 2010)
28 slides from Franco-nevada's investor presentation, September 2010
Slide 1: A Gold Focused Royalty Company
A Gold Focused Royalty Company September 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: Franco-Nevada's Performance Since IPO
Franco-Nevada’s Performance Since IPO Dec. 2007 IPO of new Franco-Nevada for $1.26B (C$15.20/sh.) Since IPO IPO, Franco Franco-Nevada Nevada has delivered: ¾ $333M of Free Cash Flow(1) ¾ >100% share price increase ¾ $80M in dividends declared FNV vs. S&P/TSX Since IPO ¾ >300 royalty interests 2.50 ¾
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. Royalty Business Advantages Gold ETF Royalties Operators Leverage to Gold Price 2 3 3 Yield 2 3 3 Exploration & Expansion Upside 2 3 3 Reduced Downside of
Slide 5: Why The Royalty Sector Is Growing
Why The Royalty Sector Is Growing Market value of resource sector has increased 10x in past decade p More development p j projects g need financing Volatile commodity prices create sellers Less available commercial bank project lending B Base metal t l companies i can arbitrage bit precious i metals
Slide 6: Franco-Nevada Royalty Operators include
Franco- Nevada Royalty Operators include: Core Operators: Up and Comers: Goldstrike - Nevada Palmarejo – Mexico Mexico* Bald Mountain - Nevada Hemlo - Ontario Mesquite – California Cerro San Pedro – Mexico Gold Quarry – Nevada Nevada* Holloway - Ontario Subika – Ghana* Hislop – Ontario* Holt - Ontar
Slide 7: Franco-Nevada's Royalties
Franco-Nevada’s Royalties Year Ended Quarter Ended Dec 31, 2009 June 30, 2010 y y Revenue(1): Byy Royalty $142.8m $ $45.2m $ By Free Cash Flow(2): $124.3m (87% margin) $40.2m (89% margin) By numbers: 196 mineral and 114 oil & gas 198 mineral and 114 oil & gas By commodity: 73% precious metals, 27% o
Slide 8: Growth in Royalty Revenue from Precious Metal Assets
Growth in Royalty Revenue(1) from Precious Metal Assets 50 Oil & Gas 45 Other Minerals 40 PGM Gold 35 30 ns) ($ million 25 20 71% was Precious 15 Metals 10 5 0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Diversified Portfolio with Growing Precious Metals Component
Slide 9: Outlook for 2010
Outlook for 2010 Positives: Full yyear of p j and Holloway production at Palmarejo y Start up of royalties at Hislop, Ity and Duketon Hollister begins processing stockpiled ore Full year from Mt Keith royalty (acquired Oct ‘09) 09) Higher PGM and oil & gas prices Stronger g second half: Goldstrike w
Slide 10: 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 11: Sources of Gold Leverage
Sources of Gold Leverage Qtr Ended Royalty leverage comes from: June 30, 2010 – profit-based royalties (Goldstrike, Hemlo …) Other Working 1% – scaled royalties (Holloway, Holt …) interests 7% – gold streams (Palmarejo) Profit- based royalties 10% gold price move ≈ 17% Revenue Revenue- Based royalti
Slide 12: Major Organic Growth Drivers
Major Organic Growth Drivers Tasiast Mine 2% NSR - Mauritania oposed Kinross/Red Proposed oss/ ed Back ac merger e ge valued a ued a at $ $7.1 b o billion Production forecast of 205-215 koz in 2010 – Possible expansion to +800 koz in future years At expanded rates rates, potential incremental revenu
Slide 13: Other Organic Growth Potential
Other Organic Growth Potential Category Royalty Operator New mines • Duketon • Regis Resources • Holt-McDermott • St Andrew Goldfields Royalties reaching hurdles • Subika • Newmont • Ity It • La L MMancha h Profits royalties reaching • Hemlo NPI, (50%) • Barrick payout • Musselwhite NPI, (10%) • Gol
Slide 14: Acquired Growth
Acquired Growth Prosperity Gold Stream Subject to final permits – a major new long-life gold asset in Canada Proven operator with Taseko Mines Ltd. 22% of LOM gold production (>$400/oz) 13 million illi ounce resource (7.7 (7 7 million illi ounces recoverable in reserves) Net 65,000- 55,000 ounces to
Slide 15: Substantial Long Term Gold Growth
Substantial Long Term Gold Growth Gold only royalty revenues excluding other revenues * Prosperity $43-53m Hemlo $5-15m Detour 14-16m Tasiast $6-7m Subika 6-11m Holt 3-4m Tasiast Exp. 8-12m Marigold 1-4m Goldfields 1-2m Palmarejo j $21-25m $ Duketon 2 3m 2-3m Perama Hill 2-3m $ $100.5m Holloway-Hisl
Slide 16: Continued Financial Strength
Continued Financial Strength Capital Resources June 2010 December 2009 (US Millions) (US Millions) Working Capital $622 0 $622.0 $530 7 $530.7 Marketable Securities $32.5 $76.0 Available Credit Facility $175.0 $150.0 Total Available Capital $829.5 $756.7 No debt or hedges Plus additional capacity fr
Slide 17: Franco-Nevada's Advantages
Franco-Nevada’s Advantages Royalty Business Model Goldstrrike Strong St Organic O i Growth G th Portfolio P tf li New Prosperity Deal Capital for Further Deals Gold Quarry 89% Free Cash Flow Margins >$30M of Annual Indicated Dividends Track Record of Value Accretion Palmarejo o 17
Slide 18: 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 18
Slide 19: Dow vs Gold
Dow vs Gold: 45 32 40 35 16 30 Logarithmic Scale 25 DOW/Gold 8 20 4 15 10 2 5 Arithmetic Scale 1 0 Financial vs hard assets 19
Slide 20: Second Quarter Record Results
Second Quarter Record Results % % (US $ millions Q2 ‘10 10 Q2 ’09 09 Q1 ‘10 10 Change Change except per share and %) Royalty Revenue(1) $45.2 $32.9 37% $41.8 8% Gold Royalty Revenue 28.9 23.6 22% 27.4 5% Total Revenue(3) 67.1 45.1 49% 37.9 77% Net Income 27.6 25.1 10% 7.8 253% Earnings per share $0.
Slide 21: 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 22: 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 23: Organic Gold Growth Potential
Organic Gold Growth Potential Annual Incremental Royalty Potential c Project Operator Royaltyd @ $1,200 gold Palmarejo Coeur d’Alene 50% stream $21-25m $ eg Holloway–Hislop St Andrew Gold 4-6% NSR 4-7m e 2010/11 Hollister Great Basin Gold 3-5% NSR 3-5m e Hemlo NSR Barrick Gold 3% NSR 1-2m f $29-39m
Slide 24: Prosperity Gold Stream
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) F di contingent Funding ti t on: – permitti
Slide 25: Comparables
Comparables Royal Gold Silver Wheaton Commodity mix Mostly gold Mostly gold Mostly silver USA 42% Africa 27% Mexico 42% Revenues by geography(1) Canada 29% USA 24% S. America 24% Mexico 24% Mexico 12% Canada 11% Number of mineral royalties 198 192 20 Market cap at August 26, 2010 $3,578m $2,592m $7,
Slide 26: FNV vs S&P/TSX since IPO
FNV vs S&P/TSX since IPO 250% IPO Financing Palmarejo Financing Gold $1.3B $260m $75m $313m Quarry y $103m 200% 150% Offer For Ahafo IRC $675m Marigold Mt. Keith Prosperity $100m $350m 100% December 20, 2007 IPO issue price C$15.20/sh 50% 0% FNV S&P 26
Slide 27: 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 28: Franco-Nevada Corporation
Franco-Nevada Corporation Capital Structure(2) Analyst Coverage Shares Outstanding 114.1m BMO Capital Markets David Haughton BOA/Merrill Lynch y Mike Jalonen Warrants @ C$32/sh March 2012 5 75m 5.75m CIBC Capital Markets Cosmos Chiu Warrants @ C$75/sh June 2017 5.75m Credit Suisse Anita Soni Options
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