Franco-nevada Corporation · TSX:FNV
Franco-nevada — Investor Presentation (May 2010)
29 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 25 DOW/Gold 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 $250M of Free Cash Flow(2) ¾ 80% share price increase ¾ $50M in dividends ¾ 300 royalty interests ¾ $600M in liquidity FNV vs S&P/TSX since IPO FNV S&P
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 Ah f South Ahafo S th – Ghana* Gh * Hislop - Ontario Holt -
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): $124.3m (87% margin) By numbers: 196 mineral and 114 oil & gas By commodity: 78% precious metals, 22% other By region: 79% from USA & Canada Royalty Revenue(1) by Royalty Revenue(1) by Royalty Revenue(1) Country C
Slide 11: Sources of Gold Leverage
Sources of Gold Leverage Year Ended Royalty leverage comes from: Working December 31, 2009 – profit-based royalties (Goldstrike, Hemlo …) interests 5% – scaled l d royalties lti (Holloway, Holt …) Other 15% – gold streams (Palmarejo) Profit- Revenue- based Based 10% gold price move ≈ 13.4% revenue y
Slide 12: Growing Gold Royalty Revenues
Growing Gold Royalty Revenues(1) 50 45 40 35 30 ons) Oil & Gas ($ millio 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 42% growth in gold royalty revenue ‘09 vs vs. ’08 12
Slide 13: 2009 Financial Highlights
2009 Financial Highlights US $ millions ( (except t per share h and d %) 2009 2008 Royalty Revenue(1) $142.8 $150.6 Gold Royalty Revenue 100.5 70.7 Total revenue 199.7 151.0 Net income 80.9 40.3 Earnings per share $0.76 $0.41 Free Cash Flow(2) 124.3 131.7 Margin(3) 87% 87% Dividends $28.2 $21.8 Divi
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 revenues excluding other revenues* 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 Hollister 3
Slide 16: Recent Pipeline News
Recent Pipeline News Property Royalty Operator Update Tasiast 2% NSR Red Back Major reserve and resource expansions and $600m Mining Kinross investment. investment Royalty expected to begin paying in early 2011. Hollister 3-5% NSR Great Basin Commercial production expected in 2010. High grade Gold H
Slide 17: Franco-Nevada's Capacity for New Projects
Franco-Nevada’s Capacity for New Projects Capital Resources @ December 31, 2009 US$ Millions Working Capital $531 Marketable Investments (Primarily NEM & IRC) $76 Available Credit Facility $175 Total Available Capital $782 No debt, hedges or material capital obligations Additional capacity from ongo
Slide 18: Dividends paid to date
Dividends paid to date C$/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 18
Slide 19: Franco-Nevada's Advantages
Franco-Nevada’s Advantages Royalty Business Model Goldstrrike Established Diversified Portfolio 87% % Free Cash Flow Margins g Gold Quarry >$750m Available for Growth No Debt or Acquisition Obligations Growing Royalty Sector Palmarejo o >$30M $30M off A Annuall IIndicated di t d Di Dividends id d Tr
Slide 20: 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 20
Slide 21: Pipeline For Future Growth
Pipeline For Future Growth Current producers New in 2010-11 Near term 2012+ Longer term Goldstrike Holloway/Hislop/Holt Hemlo NPI Pinson Palmarejo* Hollister Detour Arturo Gold Quarry* Hemlo NSR Ahafo* Pandora platinum Stillwater Tasiast Falcondo nickel Kirkland Lake Marigold Marigold Rosemont Arcti
Slide 22: Track Record of Acquisitions since IPO
Track Record of 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 Ne
Slide 23: Organic Gold Growth Potential
Organic Gold Growth Potential Annual Incremental Royalty Potential c Project Operator Royaltyd @ $1100 gold Palmarejo Coeur d’Alene d 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
Slide 24: 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 May 3, 2010 $3,243m $2,483m $6,703m Pro
Slide 25: Comparables: EV/CF
Comparables EV/CF 30.0 27.6 25.8 25.0 25.0 22.7 18.5 18.4 19.3 20.0 17.6 FNV 15 0 15.0 RGLD SLW 10.0 NA Intermediate Average 5.0 0.0 EV/CF 2010 EV/CF 2011 Assumes Franco-Nevada does not invest its >$750m in currently y available capital p Royalties, gold and developed US & Canada assets should comma
Slide 26: Board of Directors
Board of Directors Position with Franco-Nevada Current or Past Major Experience Pierre Lassonde Director,, Chairman Chairman,, World Gold Council Vice Chairman, Director and President, Newmont Mining Co-CEO and Co-Founder, Old Franco-Nevada David Harquail Director, President & CEO Executive V.P., Ne
Slide 27: Two Years of Added Value ($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 27
Slide 28: 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 Marigold For Mt. Keith IRC $100m $675m 100% December 20, 2007 IPO issue p price 50% C$15.20/sh FNV S&P 0% 28
Slide 29: Franco-Nevada Corporation
Franco-Nevada Corporation ((in US$ 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 Option