Bank of America Merrill Lynch Conference May 2011

Transcription

1 Bank of America Merrill Lynch Conference May

2 Cautionary Statement Forward-Looking Statements Certain information contained in this presentation, including any information as to future financial or operating performance and other statements that express management's expectations or estimates of future performance, constitute "forward-looking statements". All statements, other than statements of historical fact, are forward-looking statements. The words anticipate, plans, estimate", "expect", "expects", "expected" and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The Company cautions the reader that such forward-looking statements involve knownn and unknown n risks, uncertainties and other factors that may cause actual financial results, performance or achievements of Franco-Nevada to be materially different from the Company's estimated future results, performance or achievements expressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to: fluctuations in the prices of the primary commodities that drive the Company s Net Revenue (gold, platinum group metals, copper, nickel, uranium, oil and gas); fluctuations in the value of the Canadian and Australian dollar, Mexican peso, and any other currency in which the Company generates revenue, relative to the US 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 and oil and gas properties; influence of macroeconomic developments; business opportunities that become available to, or are pursued by us; reduced access to debt and equity capital; litigation; title disputes related to our interests t or any of the properties; development, permitting, infrastructure t operating or technical difficulties on any of the properties; 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, including, but not limited to unusual or unexpected geological formations, cave-ins, flooding and other natural disasters or civil unrest; integration of acquired assets following completion of acquisition. The forward-looking 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. Accordingly, readers should not place undue reliance on forward-looking statements because of the inherent uncertainty. 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 Management s Discussion and Analysis. 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, Adjusted Net Income and Net Revenue 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 and stream 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 and stream 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 Net Revenue is defined by the Company as cash received or receivable from operating royalty and stream assets, net of any: (i) cash outlays required to purchase stream production, (ii) state and provincial commodity taxes; and (iii) cash outlays associated with working interests. 2

3 Dow vs Gold: DOW/Gold 8 Logarithmic Scale Arithmetic Scale Financial vs hard assets 3

4 Franco-Nevada A gold focused royalty & streaming company generating growing cash flow and dividends from a diversified portfolio of quality assets Palma arejo Growth 49% expected 2011 growth World class discoveries >$500M available capital Gold Stri ike Yield 60% increase in monthly dividend 1.3% yield Highest dividend of gold peers Tasiast Low Risk Royalty model Diversified portfolio 90% margin* Sudbury * Note: Margin of Pre-tax Free Cash Flow to Royalty Revenue for

5 Royalty Model Gold ETF Franco-Nevada Operators Yield 0% ~1% 0-1% Leverage to Gold Price 1 >1 >1 Exploration & Expansion Upside 0% 100% 100% Exposure to Opex, Capex & Environmental Costs (NSR) 0% 0% 100% Franco-Nevada provides yield and more upside than a gold ETF with less risk than an operator 5

6 Current and Future Assets Over 200 mineral royalties* *Does not include Franco-Nevada s 135 oil & gas assets and 157 undeveloped oil & gas interests 6

7 Long Life Assets Goldstrike Mining ~10 years Stock pile processing ~20 years Gold Quarry New layback potential ~ 20 years Palmarejo Guadalupe development > 10 years Stillwater Existing reserves > 25 years Oil & Gas Existing reserves Weyburn potential 10 years > 40 years Falcondo Existing resources > 20 years Tasiast Expanding reserves > 20 years Detour Expanding reserves > 15 years Most key asset lives > 20 years * Management expectation based on current public information provided by operators. ** See Appendix for references & assumptions. 7

8 Quality Operators Goldstrike Bald Mountain Hemlo Stillwater East Boulder Gold Quarry Subika Tasiast Marigold Musselwhite Morrison Podolsky McCreedy West 8

9 Royalty Revenue (1) Growth $205.4 million = 44% growth year over year ($ millions) Oil + Gas & Other Oh PGM 81% precious metals in Gold 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Diversified Portfolio with Growing Precious Metals 9

10 Value Creation through Exploration Tasiast (2% royalty) Potential 20 moz resource* Potential 1.5 moz/yr by 2015** Revenue begins 2011 Detour (2% royalty) >25 moz resource* Potential 660 koz/yr starting 2013** Potential future expansion Tasiast Potential for >$60m/yr for >20 years*** Detour Lake * Based on press release dated January 31, 2011 from Detour Gold and February 3, 2011 from Trade Winds Block A. Tasiast potential based on BMO Research (Feb 17, 2011) ** Tasiast potential based on Kinross scoping study. Detour potential based on February 2, 2011 BMO analyst projections. *** Calculated at full operation at Tasiast by 2015, and 660 koz/yr at Detour Lake, and assuming $1400/oz gold price. 10

11 Organic Value Creation Category Royalty* Operator New mines: Duketon (2%) Lounge Lizard (2%) Peculiar Knob (production payment) Red October (1.75%) Project restarts: Falcondo (4.1% equity) Holt (up to 10%) Regis Resources Kagara Ltd WPG Resources Saracen Xstrata St Andrew Goldfields Royalties reaching hurdles: Subika (2%) Newmont Mining Ity (1 1.5%) La Mancha NPI s pending payout: Hemlo (50%) Musselwhite (5%) Barrick Gold Goldcorp Permitting projects: Prosperity (22% Au Stream) Taseko Rosemont (1.5%) Augusta Resources Perama Hill (2%) Eldorado Gold Pre-feasibility stage: Sandman (0.5 5%) Garden Well (2%) Goldfields (2%) Courageous Lake (1%) Gurupi (1%) HBJ Superpit (1.75%) Agi Dagi (2%) Kiziltepe ( %) Newmont/Fronteer Gold Regis Resources Brigus Gold Seabridge Gold Jaguar Mining Alacer Gold Alamos Gold Ariana Resources Risk adjusted potential value > $1 billion** * Note: Certain royalties do not cover the entire property or are rounded. See Annual Information Form for further details. ** Risk adjusted undiscounted value reflecting total in-situ resources disclosed by operators on or before March 24, Values are calculated at $1,400/oz Au, $4.25/lb Cu, $35/oz Ag and $15/lb Mo. No recovery rates are applied. 11

12 GLW Catalyst for Growth Acquisition of Gold Wheaton: ~40%* revenue increase Precious metals now >85% of revenue** Greater gold leverage via stream structure Ezulwini South Africa Adds further platinum and palladium exposure Diversification - no asset greater than 15% of NAV** MWS South Africa Morrison Sudbury Podolsky Sudbury McCreedy West Sudbury * Est revenue after March 14, 2011 closing of GLW transaction at $1500/oz Au, $1700/oz Pt, $700/oz Pd. ** Broker Estimates 12

13 GLW Greater Gold and PGM leverage NPV By Commodity NPV By Asset PGM 19% Oil & Gas/ Other 14% Gold 67% Detour Gold 5% Quarry 5% Stillwater 8% Tasiast 8% MWS 8% Other FNV Assets 23% Sudbury 12% Oil & Gas 9% Gold Strike 10% Palmarejo 12% Precious metal contribution now >85% PGM division larger than oil & gas Contributes two of the top five assets No asset greater than 15% by value Source: Broker consensus estimates 13

14 GLW Increased Diversification Australia 3% Revenue By Geography Mexico 17% South Africa 11% US 35% Revenue By Asset Type Working Interest 3% Stream 46% Revenue Based 37% Canada 34% Profit Based 14% 86% North America revenues 60% from leveraged profit & stream assets Note: Pro-forma revenue for 2010 including contribution from GLW assets. 14

15 2011 Outlook 9 months of Sudbury, MWS & Ezulwini Higher Au, PGM and oil prices Higher Palmarejo production Smaller asset startups & expansions Falcondo re-start Temporarily lower on Goldstrike Lower minimum i at Gold Quarry 2011 GAAP Revenue guidance 2010 GAAP Revenue on same basis Net stream ounces $325m to $350m $227m 135,000 to 155,000 stream ounces * Note: Revenue for 2011 is calculated as gross revenue and includes gross stream revenue before payments of $400/oz (See MD&A for further details). Revenue calculated using consensus commodity prices for 2011; $1,400/oz Au, $1,750/oz Pt, $575/oz Pt and $80/bbl oil. 15

16 GAAP Revenue Outlook ($1,400/oz Au) $ Millions) ( % 49% 72% Includes: Full year GLW assets Tasiast & Detour expansions Organic growth risk adjusted Excludes: Prosperity stream until permitted A 2009A 2010A 2011E* ** CAGR of 18% over 8 years ** * Represents mid-range of 2011 revenue guidance at consensus prices. ** Potential Compounded Annual Growth Rate based on potential incremental revenue to Incremental revenue calculation based on operator guidance and consensus prices, including $1,400/oz Au. 16

17 Continued Financial Strength Capital Resources March 24, 2011 Pro Forma (US Millions) Working Capital $260 Marketable Securities $70 Available Credit Facility $175 Total lavailable Capital $505 $505M in available capital at March 24, 2011 $250M per year in Free Cash Flow (2) Note: Cash flow estimate based on consensus commodity prices ($1,400 Au, $1,750 Pt, $575 Pd, $80 Oil) and operator s production guidance. 17

18 Dividend 60% increase in monthly dividend US$0.04 per share starting with July 2011 dividend 1.3% yield on current share price 3.2% yield on cost for our IPO shareholders Franco-Nevada provides one of the highest h yields in the gold sector to institutional investors 18

19 Franco-Nevada Growth and yield at lower risk 49% Expected Revenue Growth in 2011 Palma arejo World Class Discoveries (Tasiast, Detour) >$500m Capital for Growth 60% Dividend Increase in 2011 Diversified & Secure Portfolio 90% margins* Why own an ETF? Tasiast Gold Stri ike Sudbury * Note: Margin of Pre-tax Free Cash Flow to Royalty Revenue for

20 Appendices Goldstrike Barrick Bald Weyburn Mountain Cenovus Barrick East Boulder Stillwater Palmarejo Coeur Cerro San Pedro New Gold Mesquite New Gold Marigold Goldcorp Marigold Goldcorp Robinson Quadra FNX Tasiast Kinross 20

21 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, February States mine life of 8 years from Assumption of 3 yrs of additional mine life based on 4.0 M tonne M&I resource mined at 1.4 M tonnes per year. ( 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.. ( nevada.com). 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. Itmust also assume that public disclosure by its operators is accurate and true. Information contained herein is based on information made available by these operators. 21

22 Franco-Nevada Directors & Management Pierre Lassonde David Harquail Derek Evans (1) Graham Farquharson (2) Louis Gignac (1) Randall Oliphant (1) Hon. David R. Peterson (2) Directors Director, Chairman Director, President & CEO Director Director Director Director Director Management David Harquail Sandip Rana Jacqueline Jones Geoff Waterman Paul Brink Steve Alfers President & CEO Chief Financial Officer Chief Legal Officer & Corporate Secretary Chief Operating Officer SVP, Business Development Chief of U.S. Operations (1) Member of the Audit and Risk Committee (2) Member of the Compensation and Corporate Governance Committee 22

23 Franco-Nevada Corporation Capital Structure Shares Outstanding 126.3m Analyst Coverage BMO Capital Markets David Haughton 2012 Warrants (C$32 exercise price) 5.75m BOA/Merrill Lynch Mike Jalonen 2013 Warrants (1) (C$64.27 exercise price) 4.05m CIBC Capital Markets Cosmos Chiu 2014 Warrants (1) (C$32.14 exercise price) 2.08m Credit Suisse Anita Soni 2017 Warrants (C$75 exercise price) 5.75m GMP Securities Craig West Options & other 3.53m Paradigm Capital Don MacLean RBC Capital Markets Stephen Walker m Scotia Capital David Christie Share Price Range (2) C$ TD Securities Greg Barnes C$27.75 UBS Securities Brian MacArthur Market Capitalization $4.7B Wellington West Paolo Lostritto Working Capital + Marketable $330m Investments Major Shareholders Available Credit Facilities $175m Fidelity US Debt or Hedges Nil Invesco Trimark Canada Annual Dividends (Indicative) (3) $61m T. Rowe Price US Management Ownership 4.6% Blackrock Europe (6.2% diluted) Oppenheimer US (1) Warrants now of Franco-Nevada GLW Holdings Corp. that upon exercise will entitle the holder thereof, at its election, to receive either of a Franco-Nevada common share or C$5.20 in cash, per warrant. Former $10 GLW warrants each still exercisable at $10/warrant. To acquire one whole FNV share, approximately 6.43 warrants need to be exercised (i.e. $64.27/FNV share). Former $5 GLW warrants each still exercisable at $5/warrant. To acquire one whole FNV share, approximately 6.43 warrants need to be exercised (i.e. $32.14/FNV share). (2) Previous 52 weeks. (3) Year starting July with current shares outstanding. 23