A Gold Focused Royalty ompany Company May 2010

Transcription

1 A Gold Focused Royalty Company May

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 "expects", expected, estimated and similar expressions identify forward-looking statements. 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. 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 asrequired 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 2

3 Dow vs Gold: DOW/Gold Financial vs hard assets 3

4 Franco-Nevada s two year performance Dec IPO of new Franco-Nevada for $1.26B (C$15.20/sh.) In two years, Franco-Nevada has delivered: $285M of Free Cash Flow (2) 100% share price increase $50M in dividends 300 royalty interests $650M in liquidity $3.4B in market cap FNV vs S&P/TSX Since IPO 250% 200% 150% 100% 50% 0% FNV S&P 4

5 Royalty Business Advantages Your first dollar in is your last 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

6 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 production payment (typically $400/oz) NSR Stream One ounce sold at $1000 $1000 Applicable cost 0 $400 Margin for royalty y calc $1000 $600 Applicable % 5% 50% Revenue per oz to FNV $50 $300 Profit sharing royalties (NPI) 6

7 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 funded $75 million in return for a right to buy 50% of the future gold production at $400 per ounce (gold stream royalty) Represented at the time an effective 12% of net future mine revenues A Coeur alternative was a higher dilution financing Royalties are a new form of mine financing 7

8 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 companies creating vibrant market 8

9 Franco- Nevada Royalty Operators include: Core Operators: Goldstrike - Nevada Bald Mountain - Nevada Hemlo - Ontario Gold Quarry Nevada* Subika Ghana* Marigold - Nevada Musselwhite Ontario Stillwater Montana East Boulder - Montana Up and Comers: Palmarejo Mexico* Mesquite California Cerro San Pedro Mexico Holloway - Ontario Hislop - Ontario Holt - Ontario Tasiast - Mauritania Detour Lake - Ontario Goldstrike Palmarejo * post IPO acquisitions 9

10 Franco-Nevada s Royalties in 2009 By Royalty Revenue (1) : By Free Cash Flow (2) : By numbers: By commodity: By region: $142.8m $124.3m (87% margin) 196 mineral and 114 oil & gas 78% precious metals, 22% other 79% from USA & Canada Royalty Revenue (1) by Country Royalty Revenue (1) by Commodity Royalty Revenue (1) Components Other Australia 4% 2% Mexico 15% Canada 21% US 58% Other Minerals 2% PGM 8% Oil & Gas 20% Gold 70% Stillwater 7% Midale 3% Edson Other Minerals 6% 2% Weyburn 6% Pandora 1% Gold - Other 13% O&G Other 5% Goldstrike - NSR 15% Goldstrike - NPI 14% Palmarejo 13% Marigold 5% Gold Quarry 10% 10

11 Sources of Gold Leverage Royalty leverage comes from: profit-based royalties (Goldstrike, Hemlo ) scaled royalties (Holloway, Holt ) gold streams (Palmarejo) 10% gold price move 13% change in gold revenue * Working interests 5% Profitbased royalties 17% Year Ended December 31, 2009 Other 15% Revenue- Based royalties 63% Higher gold prices add further leverage from: resource to reserve conversion increased risk capital spending on Franco lands Royalties provide: - more leverage and yield than an ETF - less project, capital and cost risk than an operator * Management estimate based on $1000/oz gold price 11

12 Q Highlights (US$ millions except per share and %) Q1 10 Q1 09 Q1 08 Royalty Revenue (1) $41.8 $29.2 $27.5 Gold Royalty Revenue Total revenue (2) Net income Earnings per share $0.07 $0.04 $0.06 Free Cash Flow (3) Free Cash Flow (3) per share Margin (4) 89% 85% 85% Adjusted Net Income (5) Adjusted Net Income per share $0.08 $0.01 $0.05 (At March 31, 2010) (At March 31, 2009) (At March 31, 2008) Working capital $598.1 $185.2 $290.9 Total shareholders equity $2,010.6 $1,423.1 $1,528.8 (1) Royalty Revenue is defined by the Company as cash received or receivable from operating royalty assets earned during the period. (2) Includes fair value changes on derivative assets. (3) 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. (4) Margin is defined as Free Cash Flow (3) as a % of Royalty Revenue (1). (5) Adjusted Net Income is defined by the Company as net income excluding impairment charges related to royalties and 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. 12

13 Growth in Royalty Revenue (1) from Precious Metal Assets ($ million ns) Oil & Gas Base Metals & Other PGM Gold Q Q Q Q Q Q Q Q Q % of Royalty Revenue in Q derived from precious metals 13

14 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) Higher PGM and oil & gas prices Stronger second half: Goldstrike waste stripping completed Gold Quarry minimum royalty realized in Q4 Robinson copper and gold royalties triggered Expectation of strong growth in

15 Outlook for Longer Term Gold Growth Gold only royalty revenues excluding other revenues * $100.5m Palmarejo $16-19m Holloway-Hislop 4-5m Hollister 3-5m Other 1-2m Tasiast $10-11m Holt 3-4m Marigold 1-4m Duketon 2-3m Ity 1m Hemlo $5-15m Detour 12-13m Subika 6-11m Rosemont 1-2m Goldfields 1-2m Perama Hill 2-3m $70.7m Fully paid assets no further investment in $ or mgm t time 2008A 2009A 2010/11E 2011/12E 2012/14E ~$100m in potential new gold Royalty Revenues (1) by 2014 *Appendix provides detail to pro-forma estimates assuming operator projections and $1100 gold. 15

16 Recent Pipeline News Property Royalty Operator Update Tasiast 2% NSR Red Back Major reserve and resource expansions and $600m Mining Kinross investment. Royalty expected to begin paying in early Hollister 3-5% NSR Great Basin Gold Commercial production expected in High grade Hatter Graben discovery falls on 5% royalty ground. Hemlo 3% NSR & 50% NPI Barrick Gold Steady mining on royalty ground expected to being in Detour 2% NSR Detour Gold Major reserve and resource expansions. Feasibility expected this quarter. Holloway/ Hislop Sliding Scale & 4% NSR St Andrew Goldfields Recent start of production and new high grade discovery Other Various Various Duketon start of production, Rosemont & Perama Hill permitting, Falcondo possible restart 16

17 Franco-Nevada s Capacity for New Projects Capital March 31, 2010 US$ Millions Working Capital $598 Marketable Investments (Primarily NEM) $52 Available Credit Facility $175 Total Available Capital $825 No debt, hedges or material capital obligations No debt, hedges or material capital obligations Additional capacity from ongoing free cash flows 17

18 Prosperity Gold Stream New Acquisition Gold stream on LOM gold production from Prosperity Long life project in Canada Open pit copper/gold porphyry Asset value is approx. 50% copper and 50% gold * Focus asset for Taseko Mines Ltd. Proven operator in the region * Revenue calculated at $1,100/oz Au and $2.50/lb Cu. 18

19 Prosperity Gold Stream Terms $350 million deposit funded pro-rata during construction with other financing for the project and 2 million FNV 2017 share warrants Right to purchase gold equal to 22% of LOM gold in concentrate for $400/oz (inflation adjusted) Funding contingent on: permitting, project being fully financed, and 75% of concentrate contracted for 5 years Deposit funded pro-rata with other sources of capital Completion test at 90% level Minimum gold delivery after 27 months from first draw at 80% of plan until completion Secured by a lien on the Prosperity property 19

20 Prosperity Gold Stream Asset Profile Parameter P&P Recoverable Reserves * MI&I Resources Avg. Annual Gold Production First five years ** Life-of-mine Cash costs net of byproducts *** First five years ** Life-of-mine Metric 3.6 Blb Cu 7.7 Moz Au 5.3 Blb Cu Moz Au 294 koz Au, 122Mlb Cu 247 koz Au, 108Mlb Cu $0.28/lb $0.59/lb * The mineral resources and reserve estimates set forth above have been taken from the technical report entitled "Technical Report on the 344 Million Tonne Increase in Mineral Reserves at the Prosperity Gold-Copper Project, British Columbia, Canada" dated December 17, 2009 filed (with an effective date of November 2, 2009) by Taseko on SEDAR and completed by Taseko staff under the supervision of Scott Jones, P. Eng., Vice-President, Engineering of Taseko and a qualified person under National Instrument The technical report contains detailed information with respect to resource and reserve quantities and grades; key assumptions, parameters and methods used in preparing the resource and reserve estimates; and the extent to which the resources and reserves may be materially affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant issues. Mr. Jones has reviewed and approved the information set forth above. ** First year is half year *** $1.65/lb Cu and $650/oz Au, C$/US$ of $0.82 as per Taseko January 2010 Presentation. 20

21 Prosperity Gold Stream Production Profile Go old (Koz) Copper (Mlb) Au in Conc. Production Profile (Koz) FNV Gold Stream (Koz) Cu in Conc. Production Profile (Mlb) Long mine life Source: Based on Mine Production Profile in Taseko Technical Report dated November 2, Current environmental approval applications are for a mine plan with a 20 year mine life. 21

22 Prosperity Gold Stream Contribution Analysis 100% Rela ative Contribu ution (%) 95% 90% 85% 80% 75% 70% 11.1% 88.9% 15.8% 84.2% 17.6% 82.4% 14.1% 85.9% Prosperity FNV 65% 60% EV 2014 Revenue 2014 CF NAV Prosperity contribution is highly accretive Note: Revenue and CF for estimates for FNV for 2014 are assumed to be the same as the BMO research revenue and CF estimate for 2013 at $925/oz Au. Revenue and CF for Prosperity are based on $925/oz for 2014 (first full year of payments). EV is based on May 6, 2010 closing price for FNV. NPV estimate for FNV and Prosperity is based on analyst consensus estimates. The long term average consensus price used for gold is $860/oz. 22

23 Prosperity Gold Stream Strengthening the Leading Gold Royalty Portfolio PRO-FORMA NAV BREAKDOWN Oil & Gas 16% Base Metals 8% Prosperity 18% Other Gold 20% Palmarejo 14% Goldstrike 12% Gold Quarry 6% Stillwater 6% A key long-life addition to the portfolio Source: Broker research at analyst consensus prices. Includes NAV of mining assets only, cash is not reflected. Prosperity NAV calculated using long term average consensus price for gold of $860/oz. 23

24 Substantial Long Term Gold Growth Gold only royalty revenues excluding other revenues * Prosperity $44-48m $100.5m Palmarejo $16-19m Holloway-Hislop 4-5m Hollister 3-5m $70.7m Other 1-2m Tasiast $10-11m Holt 3-4m Marigold 1-4m Duketon 2-3m Ity 1m Hemlo $5-15m Detour 12-13m13 Subika 6-11m Rosemont 1-2m Goldfields 1-2m Perama Hill 2-3m 2008A 2009A 2010/11E 2011/12E 2012/14E ~$150m in potential new gold Royalty Revenues (1) by 2014 * Appendix provides detail to pro-forma estimates assuming operator projections and $1,100/oz gold. 24

25 Move to Monthly Dividends C$/share 2008 June $0.12 December $0.12 $ June $0.14 December $0.14 $ * June $0.150 July $0.025 August $0.025 September $0.025 October $ November $0.025 December $0.025 $0.30 US$ $21.8 m $28.2 m $34.0 m** Growing Dividends * September to December dividends are indicative and subject to board declaration. ** Based on C$=$US and 114m shares outstanding. 25

26 Franco-Nevada s Advantages Royalty Business Model Strong Organic Growth Portfolio Goldstr rike 89% Free Cash Flow Margins >$825m Available for Growth Growing Sector & Opportunities >$30M of Annual Indicated Dividends Track Record of Value Accretion ld Quarry Palmarejo Go 26

27 THANK YOU 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 Tasiast Red Back 27

28 Pipeline For Future Growth Current producers New in Near term Longer term Goldstrike Palmarejo* Gold Quarry* Stillwater Marigold Robinson Oil & gas others >20 MINERAL OPERATIONS >100 O&G OPERATIONS Holloway/Hislop/Holt Hollister Hemlo NSR Tasiast Marigold Duketon Ity others... ROYALTIES UNDER DEVELOPMENT OR REACHING PAYOUT Hemlo NPI Detour Subika* Falcondo nickel Rosemont Goldfields Perama Hill others PROJECTS AT FEASIBILITY, PERMITTING, FINANCING STAGES OR ON STANDBY Prosperity* Pinson Dee/Arturo Pandora platinum Kirkland Lake Arctic Gas >145 other exploration assets >100,000 acres of undeveloped O&G land BROAD EXPOSURE TO FUTURE POTENTIAL UPSIDES AT NO COST Assets in place for continued gold revenue growth * new acquisitions post IPO 28

29 Track Record of Acquisitions 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 255% 2.5-5% Gold Goldcorp Nevada A$20m Mt Keith 0.375% Nickel BHP Australia $350m Prosperity 22% Gold Taseko Canada Operating mines with top operators, large land positions and exploration upside 29

30 Organic Gold Growth Potential 2010 Project Operator Royalty Annual Incremental Royalty $1100 gold Palmarejo Coeur dalene d Alene 50% stream $16-19m 19m Holloway Hislop St Andrew Gold 4-6% NSR 4-5m Hollister Great Basin Gold 3-5% NSR 3-5m Hemlo NSR Barrick Gold 3% NSR 1-2m $24-31m Tasiast Red Back Miningi 2% NSR $10-11m11 Holt St Andrew Gold 10% NSR 3-4m Marigold Goldcorp 1.4-4% NSR 1-4m Duketon Regis Resources 2% NSR 2-3m Ity La Mancha 1-1.5% NSR 1m $17-23m Hemlo NPI Barrick Gold 50% NPI $5-15m Detour Detour Gold 2% NSR 12-13m Subika Newmont 2% NSR 6-11m Rosemont Augusta Resources 1.5% NSR 1-2m Goldfields Linear Gold 2% NSR 1-2m Perama Hill Eldorado Gold 2% NSR 2-3m $27-46m Management s projection of start of royalty. Applicable royalty rate at $1100 gold for sliding scale royalties. li Reflects operators public guidance as of December Reflects management s projections based on available data for production and costs (where applicable) was a half year of production is increment for full year. Gold only. With copper & silver, royalty potential is $7-9m. 30

31 Comparables P/NAV (x) 2.0x 1.6x x 0.8x 04x 0.4x 0.0x Royal Gold Fre eehold Silver Wh heaton Franco- Nevada Attractive valuation relative to peers Source: Courtesy of UBS. Based on Bloomberg, street research, IBES estimates. 31

32 Comparables Royal Gold Silver Wheaton Commodity mix Mostly gold Mostly gold Mostly silver Revenues by geography (1) Canada 27% Africa 27% S. America 31% USA 45% USA 40% Mexico 45% Mexico 22% Mexico 15% Sweden 11% Number of mineral royalties Market cap at May 17, 2010 $3,609m $2,431m $7,187m Proforma liquidity Debt Acquisition obligations Enterprise Value (2) $3,390m $2,632m $7,711m Total Assets (1) $2,117m $1,586m $2,286m Tax basis of assets (provides tax shield) High Low -- LTM net royalty revenue (1) (3) $155m $118m $216m Indicative annual dividends (4) $30m $17m $0 (1) For period ended March 31, 2010 (2) SLW asset obligations include a portion of the Barrick transaction, Rosemont, and Navidad obligations. (3) Royalty revenue less cost of purchasing ounces for streams. LTM = Last twelve months (4) Current per share payout at 0.95 C$/US$ 32

33 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., 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 33

34 Two Years of Added Value ($US) Cumulative dividends Added market value New Equity Cumulative equity financing MC = $1.7B MC = $2.9B US $1.1B Added Value to Investor MC = $1.3B US $0.2B IPO Equity Financings Dec 2007 Dec Dec

35 FNV vs S&P/TSX since IPO IPO $1.3B Financing $260m Gold Quarry $103m Palmarejo $75m Financing $313m 250% 200% Ahafo Marigold Mt. Keith $100m Offer For IRC $675m Prosperity $350m 150% 100% December 20, 2007 IPO issue price C$15.20/sh 50% 0% FNV S&P 35

36 Franco-Nevada Corporation Capital Structure (2) Shares Outstanding m C$32/sh March m C$75/sh June m Options (Avg C$16.00/sh) 2.43m Other 0.43m m Share Price Range (1) C$32.64-C$24.64 Market Capitalization (2) $3.3B Working Capital + Marketable Investments (3) $650.3m Analyst Coverage BMO Capital Markets BOA/Merrill Lynch CIBC Capital Markets GMP Securities National Bank Financial Paradigm Capital RBC Capital Markets UBS Securities Wellington West David Haughton Mike Jalonen Cosmos Chiu Craig West Tanya Jakusconek Don MacLean Stephen Walker Brian MacArthur Paolo Lostritto Available Credit Facilities $175m Debt or Hedges 2010 Dividends (Indicative) (4) $34.21m (C$0.30/share) Management Ownership (3) 5.0% (6.3% diluted) Nil Major Shareholders Fidelity US Invesco Ti Trimark Canada T. Rowe Price US Blackrock Europe Oppenheimer US (1) Previous 52 weeks (2) As at April 30, 2010 (3) As at March 31, 2010 $CAN/$US =