Candelaria Gold & Silver Stream

Transcription

1 Candelaria Gold & Silver Stream October 6, 2014

2 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 not limited to, statements with respect to future events or future performance, management s expectations regarding Franco- Nevada s growth, results of operations, estimated future revenues, requirements for additional capital, mineral reserve and mineral resource estimates, production estimates, production costs and revenue, future demand for and prices of commodities, expected mining sequences, business prospects and opportunities and the Candelaria gold and silver stream acquisition and its expected benefits. In addition, statements (including data in tables) relating to reserves and resources, gold equivalent ounces and royalty equivalent units are forward looking statements, as they involve implied assessment, based on certain estimates and assumptions, and no assurance can be given that the estimates will be realized. Such forward looking statements reflect management s current beliefs and are based on information currently available to management. Often, but not always, forward looking statements can be identified by the use of words such as plans, expects, is expected, budgets, scheduled, estimates, forecasts, predicts, projects, intends, targets, aims, anticipates or believes or variations (including negative variations) of such words and phrases or may be identified by statements to the effect that certain actions may, could, should, would, might or will betaken,occurorbeachieved. Forward looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Franco-Nevada to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. A number of factors could cause actual events or results to differ materially from any forward looking statement, including, without limitation: fluctuations in the prices of the primary commodities that drive royalty and stream revenue (gold, platinum group metals, copper, nickel, uranium, silver, iron-ore and oil and gas); fluctuations in the value of the Canadian and Australian dollar, Mexican peso and any other currency in which revenue is generated, relative to the U.S. dollar; changes in national and local government legislation, including permitting and licensing regimes and taxation policies; regulations and political or economic developments in any of the countries where properties in which Franco-Nevada holds a royalty, stream or other interest are located or through which they are held; risks related to the operators of the properties in which Franco-Nevada holds a royalty, stream or other interest, including changes in the ownership and control of such operators; influence of macroeconomic developments; business opportunities that become available to, or are pursued by Franco-Nevada; reduced access to debt and equity capital; litigation; title, permit or license disputes related to interests on any of the properties in which Franco-Nevada holds a royalty, stream or other interest; whether or not the Corporation is determined to have PFIC status; excessive cost escalation as well as development, permitting, infrastructure, operating or technical difficulties on any of the properties in which Franco-Nevada holds a royalty, stream or other interest; rate and timing of production differences from resource estimates; risks and hazards associated with the business of development and mining on any of the properties in which Franco-Nevada holds a royalty, stream or other interest, including, but not limited to unusual or unexpected geological and metallurgical conditions, slope failures or cave-ins, flooding and other natural disasters or civil il unrest; the integration ti of acquired assets and risks relating to the Candelaria gold and silver stream acquisition iti and its completion. The forward looking statements t t contained in this presentation are based upon assumptions management believes to be reasonable, including, without limitation: the ongoing operation of the properties in which Franco-Nevada holds a royalty, stream or other interest by the owners or operators of such properties in a manner consistent with past practice; the accuracy of public statements and disclosures made by the owners or operators of such underlying properties; no material adverse change in the market price of the commodities that underlie the asset portfolio; the Corporation s ongoing income and assets relating to determination of its PFIC status; no adverse development in respect of any significant property in which Franco-Nevada holds a royalty, stream or other interest; the accuracy of publicly disclosed expectations for the development of underlying properties that are not yet in production; integration of acquired assets; the completion of announced transactions and the absence of any other factors that could cause actions, events or results to differ from those anticipated, estimated or intended. However, there can be no assurance that forward looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements and investors are cautioned that forward looking statements are not guarantees of future performance. Franco-Nevada cannot assure investors that actual results will be consistent with these forward looking statements. Accordingly, investors should not place undue reliance on forward looking statements due to the inherent uncertainty therein. For additional information with respect to risks, uncertainties and assumptions, please refer to the Risk Factors section of our most recent Annual Information Form as well as our most recent Management s Discussion and Analysis filed with the Canadian securities regulatory authorities on and contained in Franco-Nevada s most recent Annual Report on Form 40-F filed with the SEC on The forward looking statements herein are made as of the date of this presentation only and Franco-Nevada does not assume any obligation to update or revise them to reflect new information, estimates or opinions, future events or results or otherwise, except as required by applicable law. Gold Equivalent Ounces ( GEOs ) include our gold, platinum, palladium and other mineral assets. GEOs are estimated on a gross basis for NSR royalties and, in the case of stream ounces, before the payment of the per ounce contractual price paid by the Company. For NPI royalties, GEOs are calculated taking into account the NPI economics. Platinum, palladium and other minerals are converted to GEOs by dividing associated revenue by the average gold price for the period. Our forward looking guidance assumes $1,300/oz Au; $1,400/oz Pt; $725/oz Pd and $20/oz Ag. 2

3 Candelaria Transaction Overview Lundin Mining Corporation has agreed to acquire Freeport-McMoRan Inc. s 80% interest in Candelaria Sumitomo has elected not to exercise its tag along right and will retain its 20% interest Purchase consideration for Lundin is US$1.8 billion, which is fully funded Franco-Nevada will provide US$648 million for a gold & silver stream Franco-Nevada has agreed to subscribe for up to C$50 million in Lundin equity 3

4 Gold & Silver Stream Terms Franco-Nevada will provide US$648 million upon closing Expected average stream ounces of 60,000 to 70,000 gold equivalent ounces (GEOs) 12 1,2 Stream equal to 68% of the payable gold & silver from 100% of the project Stream reduces to 40% of payable metals after 720,000 oz Au and 12 million oz of Ag are delivered Equivalent to 85% and 50%, respectively, of Lundin s attributable payable gold & silver Ongoing payments of US$400/oz Au and US$4.00/oz Ag Increases by 1% inflation after 3rd anniversary of closing Fixed payable metal terms and mill recovery collars Stream secured by share pledges and parent guarantee from Lundin It is expected that additional reserves reflecting additions to the Candelaria underground orebodies will be confirmed by the end of the first half of 2015 Large property position of >150 km 2 in area with multiple producing Cu mines Agreement subject to area of interest which almost doubles the property position with option to acquire a gold & silver stream based on an 8% discount rate (1) Based on a silver to gold ratio of 65:1. (2) Based on the average expected stream GEOs for next 5 years; stream GEOs for 2015 expected to be higher than 5 year average 4

5 Partnership with Lundin Mining Diversified base metals mining company producing copper, zinc, lead & nickel Operations in Portugal, Sweden, Spain, U.S.A. and a 24% interest in Freeport operated Tenke Fungurume Cu/Co mine in the DRC and cobalt refinery business in Finland Recently acquired the Eagle mine in Michigan from Rio Tinto which has recently commenced production Becomes one of the top 20 copper producers globally with acquisition of Candelaria 5

6 Candelaria Description Cu-Au-Ag A mine located in northern Chile s Atacama province Low altitude, close to tidewater and work force One of the 20 largest producing copper mines globally 1 20 year production history Reserve life through 2028 (14 years) Operations include a large open pit mine and three underground mines Significant infrastructure: Large modern port facility, which is under utilized at this time New desalination plant (500 l/s) commissioned in 2013 Ore is processed through a 75,000 tpd mill & concentrator as well as a smaller 3,800 tpd mill (1) Source: Wood Mackenzie. Based on 2013 production figures. 6

7 Candelaria Reserves & Resources Open Pit Mineral Reserves estimated using: US$2.00/lb Cu and US$1,000/oz Au Open Pit Mineral Resources estimated using: US$2.20/lb 20/lb Cu and US$1,000/oz Au Excellent exploration potential to further expand reserves & resources Mineral Reserves & Resources, 31 Dec 2013 Candelaria Open Pit Reserves Tonnes Cu Au Ag Category (000s) (%) (g/t) (g/t) Open Pit Mine 275, % Stockpile 92, % Underground Mines Reserves Tonnes Cu Au Ag Category (000s) (%) (g/t) (g/t) Santos 5, % Alcaparrosa 2, % Ojos del Salados 7, % Candelaria Norte 4, % Contained Metal Reserves & Resources Tonnes (000s) Cu (kt) Au (koz) Ag (koz) Total Reserves 380,419 2,050 1,542 24,603 Total M&I Resources 500,984 2,697 2,055 33,163 Total Inferred Resources 11, ,018 Note: (1) Source: Lundin Mining Corporation October 6, 2014 presentation. Please refer to Lundin s presentation for additional information. Please also refer to the Cautionary Statement found at slide 18 of this presentation. (2) Mineral Resources are reported within the boundaries of the Candelaria and Ojos Del Salado properties. Mineral Resources include Mineral Reserves. Mineral Resources are not Mineral Reserves and have not demonstrated economic viability. (3) Open pit Mineral Resources are reported within a conceptual pit shell based on metal prices of $2.20 per pound of copper and $1,000 per ounce of gold. Open pit Mineral Resources are reported at a cut-off grade of 0.2% copper. Underground Mineral Resources are reported at a cut-off grade of 0.6% copper. (4) Underground Mineral Reserves are reported at various cut-off grades and mining costs. Mineral Reserves for open pit, underground and stockpiles/work-in-progress for the Candelaria property are reported at cut-off grades of 0.25%, 0.81% and 0.24% copper, respectively. Underground mineral reserves for the Ojos del Salada property (Santos and Alcaparrosa) are reported at cut off grades of 0.84% and 0.75%, respectively. (5) Mineral resource and mineral reserve estimates also include a contribution from various operational work-in-progress stockpiles. (6) All figures are rounded to reflect the relative accuracy of the estimates. (7) Mineral Resources shown inclusive of Mineral Reserves. 7

8 Copper Price used for Calculating Reserves Freeport s price used to calculate its reserves is among the lowest of its peers $3.64 $3.65 $3.65 $3.71 $2.80 (1) $2.81 $3.00 $3.00 $3.00 $2.50 $2.00 Freeport McMoRan Lundin Teck Turquoise Hill Antofagasta First Quantum Hudbay Vale BHP Southern Copper Rio Tinto Source: Compilation provided by BMO Capital Markets based on Company filings. All figures in US$ Note: Reserve copper price unidentified for AngloAmerican, KGHM, and Glencore. (1) Teck copper prices vary from asset to asset and range from US$2.41 $3.30; US$2.80 is the most prevalent price. 8

9 Candelaria Historical Reserve Replacement Candelaria has a strong track record of reserve replenishment Gold reserves have increased over past 6 years despite ongoing production Gold Reserve Replacement 1,400 1,300 1,500 1,400 1,300 1,200 1,542 (114) (206) (299) (400) (483) (584) 2008A 2009A 2010A 2011A 2012A 2013A Current Beginning Year Reserves (kozs Au) Cumulative Production (kozs Au) Source: Provided by BMO Capital Markets based on Freeport McMoRan Inc. company filings. Note: Gold reserves and production shown on a 100% basis. 9

10 Reserve Additions Representative solids generated by Freeport Underground deposits at Candelaria (Susana, Damiana and others) expected to extend mine life with initial reserve statements expected in H

11 Candelaria Production and Stream Profile Expected average annual LOM recoverable production 1 of 126 Ktpa 90,000 Cu, 77 Koz Au and 1.4 Moz Ag 80, year life based on 2P reserves 70,000 60,000 High margin mine with LOM C1 cash costs of US$1.69/lb 2 50,000 Applicable stream ounces calculated on gold & silver contained in concentrate and using fixed payable metal terms Gold Equiva alent Ounces 40,000 30,000 20,000 Payable factor fixed at: 10,000 Au: 93% Ag: 90% Mill recovery factors have respective floors and ceilings of: Au: 68-73% Ag: 75-81% (1) Recovered metal from 100% of the asset based on Freeport plan (2) Note: Waste stripping is expensed and included in C1 operating cost forecasts. Does not include impact of stream. NOTE: Refer to appendix for sample calculation assuming different floor and ceiling recoveries FNV ApplicableStreamGEOs (based on Freeport plan) (3) (3) Expected applicable stream GEOs for 2014 from July 1, The amount of GEOs recognized in revenue by Franco-Nevada in 2014 may vary depending on the timing of concentrate shipments and sales 11

12 Franco-Nevada Long Term Growth Profile Candelaria applicable GEOs of35 40,000 2 Cobre Panama adds ~105,000 GEOs 4 Forecast ted GEOs Midpoint of 2014 guidance of ,000 1 GEOs Candelaria adds 60 70,000 GEOs E FNV Long Term Growth Candelaria expected to increase GEOs by ~25% through 2018 (1) Gold Equivalent guidance as per Franco-Nevada s Press Release dated March 19, 2014 does not include Oil & Gas revenue (2) Expected applicable stream GEOs for 2014 from July 1, The amount of GEOs recognized in revenue by Franco-Nevada in 2014 may vary depending on the timing of concentrate shipments and sales (3) Based on the average expected stream GEOs for next 5 years; stream GEOs for 2015 expected to be higher than 5 year average (4) Cobre Panama assumes 5 year average once the operation is fully ramped up 12

13 Franco-Nevada Pro-forma 2015 Revenue Other Minerals 2% Oil & Gas 13% Precious metals PGM 12% exposure expected to reach 85% Silver 4% Gold 69% Rest of World 17% US 16% Australia 5% Mexico and Chile 33% Canada 29% Additional diversity in safe jurisdictions 13

14 Upside Potential The mineral potential targeted by the proposed exploration program between is estimated at between 65 and 130 million tonnes of underground ore. Using current UG grades this could increase gold and silver ounces in resources by 25-50%. Opportunity to increase production rate with the introduction of additional higher grade underground material into the plan. Large property position of >150 km 2 in area with multiple producing Cu mines Area of interest effectively doubles the property position Number of existing deposits and mines in the area of interest FNV option to purchase a gold and silver stream at an 8% discount rate 14

15 Attributes to Franco-Nevada Immediate stable cash flow Expected applicable stream ounces of 35,000 to 40,000 GEOs in Full year contributions expected to add 60,000 to 70,000 GEOs 2 Robust operation with upside potential Proven 20 year operation in a mining i friendly jurisdiction i Long mine life with further upside Additional potential from area of interest acquisitions Partnership with Lundin Experienced operator with growth potential and history of pursuing acquisitions i i Stream structure provides good alignment with operator (1) Expected applicable stream GEOs for 2014 from July 1, The amount of GEOs recognized in revenue by Franco-Nevada in 2014 may vary depending on the timing of concentrate shipments and sales (2) Based on the average expected stream GEOs for next 5 years; stream GEOs for 2015 expected to be higher than 5 year average 15

16 Franco-Nevada s Growing Portfolio Acquisitions Type US$Million Contributing in 2014 Oct 2013: Kirkland Lake Royalty $50 Nov 2013: Barrick Portfolio 20 Royalties $21 Jan 2014: Sabodala Stream $135 Feb 2014: Fire Creek/Midas 2 Royalties $35 Apr 2014: Cerro Moro Royalty $20 June 2014: AngloGold Portfolio 8 Royalties $2 Aug 2014: Karma Stream $75 Q4/ : Candelaria Stream $ new royalties and streams added d in past 12 months (1) Expected to close in Q

17 Capital Available Post Transaction Capital Resources Working Capital (6/30/2014) US$ 816 million Marketable Securities (6/30/2014) 50 million Equity Raise 1 (8/21/2014) / 480 million Credit Facility (undrawn) Candelaria Stream (Q4/2014) Lundin Equity Investment (Q4/2014) 500 million (648 million) (C$50 million) Total lavailable Capital US$ ~ billion (1) $500 million equity raise less 4% commission completed in August

18 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 and reserve estimates included in this presentation have been prepared p in accordance with NI and the Canadian Institute of Mining and Metallurgy Classification System. NI is a rule developed by the Canadian securities regulatory authorities which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Canadian standards, including NI , differ significantly from the requirements of the SEC, and resource information contained herein may not be comparable to similar information disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, the term resource does not equate to the term reserves. Under U.S. standards, mineralization may not be classified as a reserve unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The SEC s disclosure standards normally do not permit the inclusion of information concerning measured mineral resources, indicated mineral resources or inferred mineral resources or other descriptions of the amount of mineralization in mineral deposits that do not constitute reserves by U.S. standards in documents filed with the SEC. U.S. investors should also understand that inferred mineral resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimated inferred mineral resources may not form the basis of feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of contained ounces in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute reserves by SEC standards as in-place tonnage and grade without reference to unit measures. The requirements of NI for identification of reserves are also not the same as those of the SEC, and reserves reported by the Corporation in compliance with NI may not qualify as reserves under SEC standards. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S. standards. Accordingly, information containing descriptions of the Corporation s mineral properties set forth herein may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the U.S. federal securities laws and the rules and regulations thereunder. All scientific and technical information relating to the Candelaria and Ojos del Salada projects are based on and derived from the NI report, prepared for the Lundin Mining Corporation ( Lundin ), entitled Technical Report for the Compañia Minera Candelaria and Compañia Minera Ojos del Salado Copper Projects, Atacama Province, Region III, Chile dated October 6, 2014 (the Technical Report ) prepared by qualified persons within the meaning of NI The information contained herein is subject to all of the assumptions, qualifications and procedures set out in the Technical Report and reference should be made to the full details of the Technical Report which will be filed with the applicable regulatory authorities and made available on Lundin s profile at 18

19 Appendix: Sample Stream Calculation NOTE: Calculations for illustrative purpose and is not a reflection of expected outcome Example 1. low milling recovery Example 2. high milling recovery Gold Silver Gold Silver Ore Processed mt Ore Processed mt Grade g/t Grade g/t Contained in Ore kozs Contained in Ore kozs Actual Mill Recovery % 65% 70% Actual Mill Recovery % 90% 90% Subject to Collar: Subject to Collar: Mill Recovery (Cap) % 73% 81% Mill Recovery (Cap) % 73% 81% Mill Recovery (Floor) % 68% 75% Mill Recovery (Floor) % 68% 75% Smelter Payability % 93% 90% Smelter Payability % 93% 90% Stream Percentage % 68% 68% Stream Percentage % 68% 68% Stream Delivery kozs Stream Delivery kozs Stream GEOs kozs 62.3 Stream GEOs kozs 67.0 Recovery factor in event of low mill recovery Recovery factor in event of high mill recovery Note: The payability for calculating the stream is fixed regardless of actual payability for gold and silver under individual sales contracts 19