A Gold Focused Royalty Company. December 2010

Transcription

1 A Gold Focused Royalty Company December

2 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, estimated future revenues, costs and timing of acquiring new royalties, equity and other resource related interests, requirements for additional capital, mineral reserve and resources estimates, production costs and revenue, future demand for and prices of commodities, expected mining sequences, business prospects and opportunities. All statements, other than statements of historical fact, are forward-looking statements. In addition, the words plans", expected, expectation, estimate, projections and similar expressions identify forward-looking statements. The forwardlooking statements contained in this Presentation are based upon assumptions management believes to be reasonable, including, without limitation, the ongoing operation of the properties 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, and any other factors that 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. Franco-Nevada cannot assure investors that actual results will be consistent with these forward-looking statements and readers are cautioned that forward-looking statements are not guarantees of future performance. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty therein. These risks, uncertainties and other factors include, but are not limited to: general business and economic conditions; fluctuations in the prices of the primary commodities that drive the Company s royalty revenue (gold, platinum group metals, copper, nickel, oil and gas); fluctuations in the value of the Canadian and Australian dollar, and any other currency in which the Company generates revenue, relative to the U.S. dollar; changes in national and local government legislation, including taxation policies; regulations and political or economic developments in any of the countries where the company holds interests in mineral or oil and gas properties; influence of macroeconomic developments; business opportunities that become available to, or are pursued by us; access to debt and equity capital; litigation; title disputes related to our interests or any of the underlying properties; operating or technical difficulties; risks and hazards associated with the business of development and mining, including, but not limited to unusual or unexpected operating difficulties, financial stress and other natural disasters or civil unrest. For additional information with respect to risks, uncertainties and assumptions, please also refer to the Risk Factors section of our most recent Annual Information Form filed with the Canadian securities regulatory authorities on as well as our Annual and interim MD&A. 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. Non-GAAP Measures Royalty Revenue, Free Cash-Flow, EBITDA, Margin and Adjusted Net Income are intended to provide additional information only and do not have any standardized meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Definitions and reconciliations to GAAP can be found in our financial disclosures. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP. Other companies may calculate these measures differently. The following notes are standardized for the attached presentation. (1) Royalty Revenue is defined by the Company as cash received or receivable from operating royalty assets earned during the period. (2) Free Cash Flow is defined by the Company as operating income plus depletion and depreciation, non-cash charges, and any impairment of investments and royalty interests. (3) Margin is defined as Free Cash Flow as a percentage of Royalty Revenue. (4) Adjusted Net Income is defined by the Company as net income excluding impairment charges related to royalties, working interests and investments; fair value changes for royalties accounted for as derivative assets; foreign currency gains/losses; gains/losses on sale of investments; and the impact of taxes on all these items. See Reconciliation of Non-GAAP Measures in the Appendix for calculation. (5) Includes fair value gains on derivative assets. 2

3 Franco-Nevada Dec IPO of new Franco-Nevada for $1.26B (C$15.20/sh.) Since IPO, Franco-Nevada has delivered: >100% share price increase >$377m of Free Cash Flow (2) >$75m in dividends paid >300 royalty interests $670m in liquidity $4.0B in market cap * S&P / TSX FNV * As at November 1,

4 Franco-Nevada A gold focused royalty company generating growing cash flow from a diversified portfolio of quality assets mostly in North America. Gold ETF Royalties Operators Yield 0% ~1% 0-1% Leverage to Gold Price 1 >1 >1 Exploration & Expansion Upside Exposure to Opex, Capex & Environmental Costs (NSR) 0% 100% 100% 0% 0% 100% Franco-Nevada provides more leverage and upside than a gold ETF with less risk than an operator 4

5 Growing Pipeline of Mineral Royalties >25 MINERAL OPERATIONS 114 oil & gas royalties and 184 undeveloped oil & gas interests not shown 5

6 Quality Operators: Core Operators: Goldstrike Bald Mountain Hemlo Gold Quarry Subika Marigold Musselwhite Stillwater East Boulder Tasiast Up and Comers: Palmarejo Mesquite Cerro San Pedro Holloway Hislop Holt Detour Lake Duketon Garden Well Goldstrike Barrick Marigold Goldcorp Tasiast Kinross Detour Detour Gold 6

7 Secure & Diverse Revenue* By Country By Royalty 95% of revenue from North America & 22% of revenue protected by minimum guarantees * Royalty Revenue - 9 Months to September 30,

8 Royalty Revenue (1) by Composition 60 Guidance for strong Q4 50 ($ millions) Oil + Gas & Other PGM Gold 83% Precious Metals 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Diversified Portfolio with Growing Precious Metals Component % Growth in Gold Royalty Revenue Q vs. Q % of Royalty Revenue in Q was Precious Metals Q3 Q4 8

9 Key Long Life Assets* - Major royalty revenue ~10 years - Stock pile revenue potential ~20 years - New layback potential ~ 20 years - Guadalupe discovery > 10 years - Existing reserves > 25 years - Existing reserves 11 years - Weyburn potential > 40 years - Existing resources > 20 years - Expanding reserves > 20 years - Expanding reserves > 15 years Management expectation based on current public information provided by operators. See Appendix for references & assumptions. 9

10 A Long Life Portfolio with Growing Value 10

11 Major Growth Tasiast Mine 2% NSR - Mauritania Kinross acquisition of Red Back valued at $7.1 B Annual Production* Indicative Annual NSR Payments (@$1,200/oz) Royalty becomes payable in 2011 Possible expansion up to 1.5 Moz in future years* New Kinross Plan TBD 2010 (286 koz) $0 2011/13 (346 koz) $8m Mid-term (1.0Moz) $24m Long-term (1.5Moz) $36m Undiscounted in-situ royalty value >500m** * Based on TD Equity Research, September 16, ** Based on Kinross September 9, 2010 Presentation: Range of potential resources of mt grading g/t at $1,200/oz. In-situ value based on upper end of range with no recovery rate applied. 11

12 Major Growth Detour Lake 2% NSR- Canada Detour Gold has started with long lead capital orders Total M+I project resources ~18 Moz* Potential incremental annual revenue >$15m** Opportunity to expand from 55 to 90 ktpd could lead to further royalty revenue growth Undiscounted in-situ royalty value >$425m*** * Based on press release dated May 25, ** Based on Detour feasibility study production of 649/koz at $1,200/oz. *** Based on Detour Gold s May 25, 2010 Press Release with M&I resources of 18 Moz at $1,200/oz. No recovery rate applied. 12

13 Additional Growth Category Royalty Operator New mines: Duketon (2%) Lounge Lizard (2%) Red October (1.75%) Project restarts: Royalties reaching hurdles: Subika (2%) Ity (1%) Falcondo (4.1% equity) Holt-McDermott (up to 10%) NPI s pending payout: Hemlo (50%) Musselwhite (5%) Pandora Platinum (5%) Permitting projects: Rosemont (1.5%) Perama Hill (2%) Pre-feasibility stage: Sandman (0.5 5%) Garden Well (2%) Goldfields (2%) Courageous Lake (1%) Gurupi (1%) Mara Rosa (1%) Agi Dagi (2%) Kizitepe ( %) * Note: Certain royalties do not cover the entire property. See Annual Information Form for further details. Regis Resources Kagara Ltd Saracen Xstrata St Andrew Goldfields Newmont Mining La Mancha Barrick Gold Goldcorp Anglo Platinum/Lonmin Augusta Resources Eldorado Gold Newmont/Fronteer Gold Regis Resources Brigus Gold Seabridge Gold Jaguar Mining Amarillo Gold Alamos Gold Ariana 13

14 Potential Gold Royalty Growth $40 $50m PGM & other revenues Up to $150m Incremental gold revenue* * Note: 2010E represents management estimate of additional gold revenue in 2010 at current gold prices. Asset estimates reflect potential revenue for upcoming advanced assets at full capacity and assumes top ranges for operator or analyst projections and $1,200/oz gold. 14

15 Continued Financial Strength Capital Resources September 2010 (US Millions) December 2009 (US Millions) Working Capital $640 $531 Marketable Securities $31 $76 Available Credit Facility $175 $150 Total Available Capital $846 $757 No debt or hedges Plus additional capacity from >$160M per year in Free Cash Flow (2) Note: Cash flow estimate based on recent commodity prices and operator s production guidance. 15

16 Exploration Success on Franco-Nevada Lands Royalty Millions of Ounces* Franco Royalty Undiscounted in-situ value at $1200 gold price Tasiast Detour Duketon Subika Kinross mid range resource projection September 2010 Detour Gold M+I resource May 2010 Regis Resources addition of Garden Well October 2010 Newmont expansion project February % $500m 18 2% $425m 3 5 2% $100m 7 9 2% $200m Gold Quarry Courageous Lake Other resource growth Newmont Greater GQ layback May 2010 Seabridge Gold resource preliminary assessment Bald Mountain, Marigold, Hemlo, Musselwhite, Sandman, Gurupi, Goldfields, Mara Rosa, Agi Dagi, Kizitepe TBD TBD TBD 10 1% $120m TBD Various Exploration success is the major source of value creation * Operator projections of potential resources in all reported resource categories. Franco-Nevada royalty may not cover 100% of property. 16

17 Franco-Nevada Major discoveries on royalty lands 91% Free Cash Flow Margins >$670m in Capital for Further Deals >$33m of Annual Dividends Track Record of Value Accretion Goldstrike Palmarejo Gold Quarry 17

18 THANK YOU Goldstrike Barrick Weyburn Cenovus Bald Mountain Barrick East Boulder Stillwater Palmarejo Coeur Cerro San Pedro New Gold Mesquite New Gold Marigold Goldcorp Marigold Goldcorp Robinson Quadra FNX Tasiast Kinross 18

19 Dow vs Gold: Logarithmic Scale Arithmetic Scale Financial vs hard assets 19

20 Third Quarter Record Results (US $ millions except per share and %) Q3 10 Q3 09 % Change Total Revenue (5) $52.2 $ % Net Income % Earnings per share $0.16 $ % Cash Flow from Operating Activities (1%) Royalty Revenue (1) % Gold Royalty Revenue % Free Cash Flow (2) % Free Cash Flow (2) per share $0.39 $ % Margin (3) 91% 89% 2% Adjusted Net Income (4) $14.8 $ % Adjusted Net Income (4) Per Share $0.13 $ % Shares Outstanding % 20

21 Track Record of Transactions since IPO >95% 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 $58m Subika 2% Gold Newmont Ghana $20m Marigold 2.5-5% Gold Goldcorp Nevada A$20m Mt Keith 0.375% Nickel BHP Australia $350m Prosperity 22% Gold Taseko Canada Mines with top operators, large land positions and exploration upside 21

22 Appendix Asset Life Assumptions & References Goldstrike - Barrick 2009 Annual Report. December 2009 reserve of 12.2 moz and 2009 production of 1.36 moz implies mine life of 9 years. Barrick 2009 Annual report states Barrick expects to fully process ore in stockpiles by ( Gold Quarry Newmont Investor Day Presentation from May 27, Gold Quarry West Wall Layback has potential to add 10 years of additional mine life beginning in ( Palmarejo - Coeur d Alene Mines, Palmarejo Technical Report, January States mine life of 13 years. ( Stillwater Stillwater press release dating February 25, Reserve of 20.6 moz at December 31, 2009 and 2009 production rate of 530 koz. Implies mine life >25 yrs. ( Oil & Gas Oil & Gas Reserve Report by GLJ Petroleum Consultants Ltd.. ( Falcondo Xstrata Nickel October 2009 reports a reserve of 74.2 Mt grading 1.29% Ni. Press release from Xstrata Nickel dated October 12, 2010 indicates capacity at 50% of approximately 14,000 tonnes of Ni per annum or implied full capacity of 28,000 tonnes of Ni per annum. Implies >20 yr mine life. Tasiast September 22, 2010 Denver Gold Forum Presentation by Kinross. Estimate 425m tonnes of ore and processing of 60ktpd. Implies mine life of +19 years. ( Detour - May 25, 2010 Feasibility Study for Detour Lake describes16 year mine plan. ( Franco-Nevada does not operate or explore but relies on others. Because it is not an operator, it must rely on decisions made by others, decisions on which it has little or no influence. It must also assume that public disclosure by its operators is accurate and true. Information contained herein is based on information made available by these operators. 22

23 Franco-Nevada 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., Newmont Mining President & MD, Newmont Capital S.V.P., Old Franco-Nevada Derek Evans (1) Director President & CEO, Pengrowth Energy Trust CEO, Focus Energy Trust Renaissance Energy Limited Graham Farquharson (2) Director President, Strathcona Mineral Services Ltd. Board Member, Placer Dome and Cambior Inc. Louis Gignac (1) Director President, G Mining Services Inc. President and CEO, Cambior Inc. Randall Oliphant (1) Director Executive Chairman, New Gold Inc. CEO, Barrick Gold Corporation Hon. David R. Peterson (2) Director Partner and Chairman, Cassels Brock & Blackwell LLP Twentieth Premier of Ontario Board Member, Old Franco-Nevada (1) Member of the Audit and Risk Committee (2) Member of the Compensation and Corporate Governance Committee 23

24 Franco-Nevada Team Title Canada David Harquail President & CEO Sandip Rana Chief Financial Officer Jacqueline Jones Chief Legal Officer & Corporate Secretary Geoff Waterman Chief Operating Officer Paul Brink S.V.P. Business Development Petra Decher VP, Finance & Assistant Secretary Philip Wilson VP, Technical Sharon Dowdall VP, Special Projects Jason O Connell Director, Business Development Debbie McEnaney Controller Donna Andrejek Corporate & Contract Administrator Cindy Smith Land Analyst Lena Miller Senior Accountant Candida Hayden Office Manager Executive Assistant U.S. Stephen Alfers Chief of U.S. Operations Steven Aaker SVP, Acquisitions Jeff Jenkins Director of Finance U.S. Operations Edward Jackson Director of Mineral Lands Katie Griffith Land Administrator Australia Kevin McElligott Managing Director 24

25 FNV vs S&P/TSX since IPO 250% 200% IPO Financing $1.3B $260m Gold Quarry $103m Palmarejo $75m Financing $313m FNV 150% 100% Ahafo Marigold Mt. Keith $100m Offer For IRC $675m Prosperity $350m 50% December 20, 2007 IPO issue price C$15.20/sh S&P 0% 25

26 Appendix - Franco-Nevada Corporation Capital Structure (2) Shares Outstanding m C$32/sh March m C$75/sh June m Options and Other (avg C$17.98/sh) 2.87m Share Price Range (1) Market Capitalization (2) Working Capital + Marketable Investments (3) m C$35.48-C$25.37 $4.0B $670.4m Available Credit Facilities $175m Debt or Hedges 2010 Dividends (Indicative) (4) $35m Management Ownership (3) 5.0% (6.6% diluted) Nil Analyst Coverage BMO Capital Markets David Haughton BOA/Merrill Lynch Mike Jalonen CIBC Capital Markets Cosmos Chiu Credit Suisse Anita Soni GMP Securities Craig West National Bank Financial Tanya Jakusconek Paradigm Capital Don MacLean RBC Capital Markets Stephen Walker Scotia Capital David Christie TD Securities Greg Barnes UBS Securities Brian MacArthur Wellington West Paolo Lostritto Major Shareholders Fidelity US Invesco Trimark Canada T. Rowe Price US Blackrock Europe Oppenheimer US (1) Previous 52 weeks (2) As at November 1, 2010 (3) As at September 30, 2010 $CAN/$US =