Franco-nevada Corporation · TSX:FNV
Franco-nevada — Investor Day (March 2016)
46 slides from Franco-nevada's investor day presentation, Mar 11, 2016
Slide 1: 2015 Results & Investor Day
March 11, 2016 2015 Results & Investor Day 1
Slide 2: Cautionary Statement
Cautionary Statement Forward Looking Statements This presentation contains “forward looking information” and “forward looking statements” within the meaning of applicable Canadian securities laws and the U.S. Private Securities Litigation Reform Act of 1995, respectively, which may include, but are
Slide 3: Management Participants
Management Participants David Harquail Sandip Rana Paul Brink Lloyd Hong Geoff Waterman President & CEO CFO SVP, CLO & COO Business Development Corporate Secretary Jason O’Connell Phil Wilson Managing Director, Vice President, Oil & Gas Technical 3
Slide 4: Agenda
Agenda Overview of 2015 Results: Sandip Rana Business Development: Paul Brink Oil & Gas Update: Geoff Waterman Jason O’Connell Associated Gold Ounces & REUs: Phil Wilson Outlook and Q&A: David Harquail 4
Slide 5: Overview of 2015 Results
Overview of 2015 Results Sandip Rana – CFO 5
Slide 6: 2015 Performance vs Guidance
2015 Performance vs Guidance 2015 Results 2015 Results 2015 without with 2014 Results Guidance1 Antamina Antamina GEOs2 293,000 335 – 355,000 347,049 360,070 Oil & Gas $74 m $20-$30 m $28 m $28 m Revenue Higher end of guidance achieved 1. Original March 26, 2015 guidance pre-Antamina 6 2. See note 4
Slide 7: Gold Equivalent Ounces Realized
GEOs1 Realized 400 Gold Equivalent (000 ounces) other 350 PGM 300 Silver Silver PGM 250 Gold 200 Precious Gold Metals 150 100 2011 2012 2013 2014 2015 GEOs1 realized increased 22.7% year over year 1. See note 4 on slide 42 7
Slide 8: GEOs: 2014 to 2015
GEOs1: 2014 to 2015 66,725 360,070 13,021 293,415 10,536 2,174 223 158 1. See note 4 on slide 42 8
Slide 9: Year Over Year Price Changes
Year Over Year Price Changes 4th Quarter Full Year 2015 2015 Gold 8.0% 8.4% Silver 10.4% 17.6% Platinum 26.2% 23.9% Palladium 23.1% 13.8% Oil 30.0% 38.6% Positive change outlook for 2016 9
Slide 10: Revenue Performance
Revenue Performance $450 1,800 Precious Metals Revenue (millions) $400 1,600 $405.5 Precious Metals Revenue: $350 $370.7 $381.3 1,400 $300 1,200 Record precious metals Gold Price ($/oz) $321.5 $354.8 $250 1,000 revenue despite commodity $200 800 prices $150 600 $100 400 $50 200 $0 - 2011 2012 2013 2
Slide 11: 2015 Financial Results
2015 Financial Results ($ millions except gold price, GEOs, per share and %) Q4 2015 Q4 2014 FY 2015 FY 2014 Gold Price ($/ounce) $1,104 $1,200 $1,160 $1,266 Gold Equivalent Ounces (GEOs)1 106,312 92,774 360,070 293,415 Revenue $121.3 $123.0 $443.6 $442.4 Adjusted EBITDA2 $95.8 $96.2 $339.3 $356.9 A
Slide 12: Adjusted Net Income: 2014 to 2015
Adjusted Net Income1: 2014 to 2015 137.5 47.8 18.5 88.9 20.2 1.2 0.3 1. See note 2 on slide 42 12
Slide 13: 2015 Q4 Revenue Sources
2015 Q4 Revenue Sources By Commodity By Geography 95% Precious Metals 84% from Americas 13
Slide 14: Impairments Recorded
Impairments Recorded Oil & Gas: $51.4 million • Weyburn Unit: $41.3 million • Midale Unit: $7.0 million Reflects lower oil prices • Well equipment: $3.1 million Red Lake (Phoenix): $11.4 million • Updated Mineral Resource Statement reflected significant decrease over previous estimate from its 2013
Slide 15: A High Margin and Scalable Business
A High Margin and Scalable Business 500 1,800 79.6% 81.5% 80.4% 80.7% 76.5% Margin1 1,600 400 Revenue 1,400 300 1,200 Gold Price2 ($/oz) 200 Millions $ 1,000 100 800 600 - Fixed Costs3 Stream & Other Costs4 400 -100 200 -200 - 2011 2012 2013 2014 2015 1. Please see note 3 on slide 42 2. Average base
Slide 16: Business Development
Business Development Paul Brink – SVP, Business Development 16
Slide 17: New Investment Opportunities
New Investment Opportunities Cerro Moro – Yamana Gold Since Existing 3rd party 1985 Brucejack – Pretium Resources royalties Hardrock – Premier Gold Mines Since Palmarejo – Coeur Mining By-product funding 2008 Cobre Panama – First Quantum Kirkland Lake – Kirkland Lake Gold Since Primary product Stibn
Slide 18: Cornerstone Investments
Cornerstone Investments Cobre Panama – Panama Candelaria – Chile $338 M → $1 B – First Quantum $648 M – Lundin Mining Antamina – Peru Antapaccay – Peru $610 M – Teck Corporation $500 M – Glencore Over $2 billion committed in past 18 months 18
Slide 19: Growing Projected GEOs
Growing Projected GEOs 84,000 75,000 37,500 65,000 273,000 More diversified and longer duration portfolio Note: Base GEOs assumes 2014 GEO production without Candelaria. Cobre Panama expected to start contributing to GEOs in 2018. Illustration assumes no decrease in production from existing portfoli
Slide 20: Other Positive Portfolio News
Other Positive Portfolio News Adding New Ounces Timmins West • 144 GAP discovery & Tahoe Resources bid Detour Macassa • 23 year mine plan with West Detour 262 Mineral • Kirkland Lake expanding SMC discovery Fire Creek/Midas • Klondex’s exploration success & permits Assets Marigold • Silver Standard
Slide 21: Royalty Financing – Top Performing Companies
Royalty Financing – Top Performing Companies Junior and Intermediate Golds Positive Share Price Return - 2015 Performance 150% 125% 100% 75% Franco-Nevada Royalty or Stream 50% 25% 0% 21
Slide 22: Over $1.2 B of Available Capital
Over $1.2 B of Available Capital US$ 884 US$ 460 US$ 500 US$ 1,000 US$ 1,243 US$ 65 US$ 254 Debt free by March 31, 2016 1. As at December 31, 2015 2. See note 5 on page 42 3. Does not include the US$250 million accordion facility 22 4. All figures in chart in millions
Slide 23: Oil & Gas
Oil & Gas Geoff Waterman – COO Jason O’Connell – Managing Director 23
Slide 24: Franco-Nevada O&G Assets
Franco-Nevada O&G Assets Diverse portfolio of assets: • 6 major producing assets including Weyburn, Midale and Edson • 53 other producing assets • 19 exploration assets 94% oil & 6% gas1 Land position of >1 million acres 18 year 2P reserve life index2 Not all assets are depicted on map 1. Based on Q
Slide 25: O&G Assets – 2016 Revenue Guidance
O&G Assets – 2016 Revenue Guidance 80 120 70 100 Oil & Gas Revenue (Millions) 60 Oil Price - WTI ($US/bbl) Addition of 80 50 Weyburn NRI 40 60 30 40 20 20 10 0 0 2010 2011 2012 2013 2014 2015 2016E Revenue ($US) WTI (US$) 2016 revenue guidance: US$15 - $25 Million1 10% > in WTI = ~ 23% > in revenue
Slide 26: O&G Impairments
O&G Impairments Impairment to Weyburn and Midale assets • Total $51.4M ($41.3M for Weyburn, $7.0M for Midale, $3.1M for well equipment) • FNV took impairments due to a significant drop in commodity price • Impairment determined using GLJ Consultants1 valuation versus book values High quality assets
Slide 27: Active Market for Oil and Gas Opportunities
Active Market for Oil and Gas Opportunities FNV Acquisition: Weyburn 0.29% WI for C$6.4M May 2015: PWT royalty package - $321 million June 2015: Cenovus royalty package - $3.3 billion October 2015: PWT sale of Weyburn WI - $205 million November 2015: CNRL royalty package - $1.8 billion In market: PW
Slide 28: Associated Gold Ounces & REUs
Associated Gold Ounces & REUs Phil Wilson – VP, Technical 28
Slide 29: 2016 Asset Handbook
2016 Asset Handbook Includes: • Update on all our Producing & Advanced Assets • Details of ounces associated with each asset • Details of our REUs estimates • Oil & Gas reserves • Other corporate information Available Today: Website or Hard Copy via info@franco-nevada.com 29
Slide 30: AuEq Reserves Associated with FNV Assets
AuEq Reserves Associated with FNV Assets Stable year over year gold equivalent reserves Note: For a breakdown of Mineral Reserves and Resources by category and additional information relating to Mineral Reserves and Resources, calculated in accordance with National Instrument 43-101 or equivalent fo
Slide 31: Associated Notable Reserve Changes
Associated Notable Reserve Changes Positive Negative Changes Changes • Antapaccay • Goldstrike New Assets • Antamina Reserve • Canadian Malartic • Detour Decreases • Subika (new mine plan) (South Ahafo separately as of 2015) Reserve • Candelaria Growth or (updated figures midyear) Conversion • Ity (
Slide 32: AuEq Resources Associated with FNV Assets
AuEq Resources Associated with FNV Assets Operators have lowered their estimates Note: For a breakdown of Mineral Reserves and Resources by category and additional information relating to Mineral Reserves and Resources, calculated in accordance with National Instrument 43-101 or equivalent foreign c
Slide 33: Royalty Equivalent Units (REUs)
Royalty Equivalent Units (REUs) Rationale: • Better representation of value for royalty and stream company • Reflects relative economics between NSRs, NPIs and Streams Limitations: • Requires management guidance regarding: o Ounces on royalty and stream claims vs public disclosure o NPI cost economi
Slide 34: REUs Comparison Year over Year
REUs Comparison Year over Year 12 1,800 +4% +4% +2% 1,600 10 M&I 1,400 8 1,200 Gold Price ($/oz) REUs (Moz) 1,000 6 800 -14% 4 600 P&P -12% -27% 400 2 Inferred 200 0 0 2012 2013 2014 2015 Modest increase despite commodity pressures Note: For further information on REUs as well as how they are calcul
Slide 35: Outlook
Outlook David Harquail, President & CEO 35
Slide 36: 2016 Expected GEO Changes vs 2015
2016 Expected GEO Changes vs 2015 Positive Negative Changes Changes • Acquired Feb 2016 • Conversion to Antapaccay Palmarejo Guadalupe by midyear • 60,000 – 70,000 GEOs • Full year 2016 • 2015 exceptionally Antamina Candelaria strong year • ~40,000 GEOs in 2016 • PGM prices impact PGM GEOs Karma • F
Slide 37: 2016 Guidance
2016 Guidance Expected GEOs1: 425,000 – 445,000 • 21% increase versus 2015 (assuming midpoint of guidance) Oil & Gas revenue: $15 to $25 million2 • Stable year over year Depletion • Estimate $250 - $275 million in 2016 (was $216.3 million in 2015) Cobre Panama funding: • Estimate $130 - $150 million
Slide 38: Five Year Outlook (2020)
Five Year Outlook (2020) Expect GEOs1: 500,000 – 520,000 • Cobre Panama fully ramped-up based on First Quantum’s projections • Candelaria delivering 65,000 GEOs/annum • Antapaccay delivering 75,000 GEOs/annum • Antamina delivering 37,500 GEOs/annum • Phased expansions from Subika and Tasiast Oil & G
Slide 39: Franco-Nevada since IPO
Franco-Nevada since IPO GEOs Revenue Adjusted Net Income1 (000s) (US$ millions) (US$ per share) 400 500 1.40 450 350 1.20 400 300 350 1.00 250 300 US$ per share GEOs (Koz) US$ Millions 0.80 200 250 0.60 200 150 150 0.40 100 100 50 0.20 50 0 0 0.00 '08 '09 '10 '11 '12 '13 '14 '15 '08 '09 '10 '11 '12
Slide 40: Franco-Nevada Provides: Why own a gold ETF?
Franco-Nevada Provides: Gold exposure at a discount Growth – organic and acquisitions FNV Dividends vs. ETF fees Gold FNV IPO: Dec 2007 S&P/TSX Global Gold Index 2008 2009 2010 2011 2012 2013 2014 2015 2016 Why own a gold ETF? At March 4, 2016; FNV and S&P/TSX Global Gold Index converted to USD 40
Slide 41: Q&A / Cautionary Note Regarding Mineral Reserve and Resource Estimates
Q&A Cautionary Note Regarding Mineral Reserve and Resource Estimates This presentation has been prepared in accordance with the requirements of Canadian securities laws in effect in Canada, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all mineral resource a
Slide 42: Notes
Notes 1. Adjusted EBITDA and Adjusted EBITDA per share are non-IFRS financial measures, which excludes the following from net income and net income per share: income tax expense/recovery; finance expenses and finance income; foreign exchange gains/losses and other income/expenses; gains/losses on th
Slide 43: Appendix – Non IFRS Measures
Appendix – Non IFRS Measures Three months ended Twelve months ended December 31, December 31, (expressed in millions, except per share amounts) 2015 2014 2015 2014 Net Income (Loss) $ (31.4) $ 1.2 $ 24.6 $ 106.7 Income tax expense (recovery) (4.9) 10.2 23.9 50.3 Finance costs 1.4 0.4 2.9 1.6 Finance
Slide 44: Appendix – Non IFRS Measures
Appendix – Non IFRS Measures Three months ended Twelve months ended December 31, December 31, (expressed in millions, except per share amounts) 2015 2014 2015 2014 Net Income (Loss) $ (31.4) $ 1.2 $ 24.6 $ 106.7 Foreign exchange (gains)/losses and other (Income)/expenses, net of income tax 1.0 1.1 5
Slide 45: Appendix – Income Taxes
Appendix – Income Taxes The depletion and balances at December 31, 2015: Applicable statutory tax rates as at December 31, 2015: Canadian combined income tax rates (Canadian Oil & CANADA Gas, Canadian Mining Assets, Foreign Mining Assets) • Canadian Oil & Gas: 10% decline balance ($381.8M CAD) •2016
Slide 46: Appendix - Book Value at Dec 31, 2015
Appendix - Book Value at Dec 31, 2015 ADVANCED & ADVANCED & PRECIOUS METALS – UNITED STATES PRODUCING EXPLORATION OTHER MINERALS PRODUCING EXPLORATION Goldstrike $99.9 M $0.0 M Mt. Keith $11.1 M $0.0 M Stillwater 153.9 0.0 Osborne 3.5 0.0 Gold Quarry 52.7 0.0 Other 1.0 80.0 Marigold 17.5 0.0 Bald Mo