Q3 2012 Financial Results Conference Call November 7, 2012 1
Cautionary Statement Forward-Looking Statements This presentation may contain certain information that may constitute forward looking information and forward-looking statements within the meaning of applicable Canadian securities laws and United States Private Securities Litigation Reform Act 1995, respectively. Forward-looking statements 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, future demand for and prices of commodities, expected mining sequences, business prospects and opportunities. 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, budget, 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 be taken, occur or be achieved. 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: closing of announced acquisitions; fluctuations in the prices of the primary commodities that drive Franco-Nevada s royalty and stream revenue (gold, platinum group metals, copper, nickel, uranium, silver and oil and gas); fluctuations in the value of the Canadian and Australian dollar, Mexican peso, and any other currency in which Franco-Nevada generates revenue, 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; influence of macro-economic 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 Franco-Nevada s interests or any of the properties in which Franco-Nevada holds a royalty, stream or other interest; 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 unrest; and the integration of acquired assets. The forward looking statements contained in this presentation are based upon assumptions management believes to be reasonable, including, without limitation assumptions relating to: the closing of announced acquisitions, 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; closing of announced transactions 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 the underlying properties that are not yet in production; integration of acquired assets; 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. Readers are cautioned that forward-looking statements are not guarantees of future performance. Franco-Nevada cannot assure readers that actual results will be consistent with these forward looking statements. Accordingly, readers 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 also refer to the Risk Factors section of our most recent Annual Information Form filed with the Canadian securities regulatory authorities on SEDAR at www.sedar.com, our most recent Form 40-F filed with the U.S. Securities and Exchange Commission on EDGAR at www.sec.gov, as well as our most recent annual and interim MD&As. 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. Advisory Regarding Oil and Gas Reserves Reserves are the estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, from a given date forward, based on: analysis of drilling, geological, geophysical and engineering data, the use of established technology, and specified economic conditions, which are generally accepted as being reasonable. Proved reserves are those reserves which can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. Franco-Nevada retains Independent Qualified Reserves Evaluators (IQREs) to conduct a full evaluation of the company s reserves. All production and reserves quantities included in this presentation have been prepared in accordance with Canadian practices and specifically in accordance with NI 51-101. These practices are different from the practices used to report production and to estimate reserves in reports and other materials filed with the SEC by United States companies. Non-IFRS Measures Adjusted Net Income and Adjusted EBITDA are intended to provide additional information only and do not have any standardized meaning under International Financial Reporting Standards ( IFRS ) and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently. For a reconciliation of these measures to various IFRS measures, please see the end of this presentation or the Company s current MD&A disclosurefound on the Company s website and filed with Canadian securities regulatory authorities on SEDAR at www.sedar.com and with the Securities and Exchange Commission on EDGAR at www.sec.gov. 1 Adjusted EBITDA is defined by the Company as net income excluding income tax expense, finance income and costs, foreign exchange gains/losses and other income/expenses, gains/losses on the sale of investments, income/losses from equity investees, depletion and depreciation and impairment charges related to royalty, stream and working interests and investments. See Non-IFRS Measures and Reconciliation at the end of this presentation. 2 Adjusted Net Income is defined by the Company as net income excluding foreign exchange gains/losses and other income/expenses, gains/losses on the sale of investments, impairment charges related to royalties, streams, working interests and investments, unusual non-recurring items, and the impact of taxes on all these items. See Non-IFRS Measures and Reconciliation at the end of this presentation. 2
Q3 2012 Results Discussion Sandip Rana CFO 3
2012 Financial Results US $ millions (except per share and %) Q3 2012 Q3 2011 Nine Months 2012 Nine Months 2011 IFRS MEASURES Revenue $105.2 $113.3 $312.9 $292.7 Net Income $52.0 $44.1 $135.7 $98.6 Net Earnings Per Share $0.36 $0.35 $0.95 $0.80 KEY NON IFRS MEASURES Gold Revenue $79.9 $87.0 $236.2 $211.7 Adjusted EBITDA 1 $86.2 $92.2 $254.1 $233.1 Adjusted EBITDA 1 Per Share $0.59 $0.73 $1.78 $1.89 Adjusted Net Income 2 $45.3 $39.8 $124.0 $94.3 Adjusted Net Income 2 Per Share $0.31 $0.31 $0.87 $0.76 1 Adjusted EBITDA is defined by the Company as net income excluding income tax expense, finance income and costs, foreign exchange gains/losses and other income/expenses, gains/losses on the sale of investments, income/losses from equity investees, depletion and depreciation and impairment charges related to royalty, stream and working interests and investments. See Non-IFRS Measures and Reconciliation at the end of this presentation. 2 Adjusted Net Income is defined by the Company as net income excluding foreign exchange gains/losses and other income/expenses, gains/losses on the sale of investments, impairment charges related to royalties, streams, working interests and investments, unusual non-recurring items, and the impact of taxes on all these items. See Non-IFRS Measures and Reconciliation at the end of this presentation. 4
Revenue by Commodity 120 2011 $411 M 100 2010 $227 M (US$ Million ns) 80 60 40 2009 $156 M Other 91% precious metals in Q3 2012 20 Gold PGM 0 Diversified Portfolio with 45 Producing Mineral Assets 5
Continued Annual Growth Revenue US$ Millions s) ( 450 400 350 300 250 200 150 100 50 - $227 M $151 M $156 M $411 M Q4 Q3 Q2 Q1 OTHER $313 M Q3 Q2 GOLD Q1 2008 2009 2010 2011 2012 6
Scalable Business Model 140 120 100 $871/oz $960/oz $1,227/oz $1,700/oz $1,655/oz Avg Quarterly Gold price 1 (US$ Million ns) 80 60 40 20 20 40 Q3/08 Q3/09 Q3/10 Q3/11 Q3/12 Revenue G&A Proceedstaxes + Oil & Gas costs Streamcosts 1 Based on London PM Fix 7
Q3 2012 Revenue Sources By Commodity By Geography Australia 4% PGMs 15% Other 9% Other 15% US 28% Gold 76% Mexico 22% Canada 31% 91% Precious Metals 81% from North America 8
Net Income: Q3/11 to Q3/12 (US$M) 3.5 2.3 1.9 5.0 9.5 8.1 52.0 44.1 6.2 9
Weyburn NRI Acquisition Geoff Waterman COO 10
Weyburn Oil Unit 11.7136% Net Royalty Interest ( NRI ) on the Weyburn Unit - 3rd largest conventional oil pool in the Western Canadian Sedimentary Basin; operated by Cenovus Energy C$400 million purchase price Adds to s existing 0.44% overriding royalty and 2.26% working interest Similar to a mineral Net Profit Interest ( NPI ) - royalty payments are net of deductions for operating and capital costs Production currently 26,000 bbls/d Cenovous, the operator, estimates investment in undeveloped reserves is projected to continue for well over 40 years 1 2 Weyburn Unit Plant 1 Cenovus Annual Information Form dated Feb 21, 2012 11
Weyburn NRI Attributes to Increased exposure to one of the largest conventional oil pools in Canada Provides immediate cash flow from proven operation Profit margins have historically been 40-50% 1 Adds approximately 1,400 of net margin barrels per day to s current production 2 s proved plus probable oil equivalent reserves increased by approximately 24 MMbbl (20.4 MMbbl after crown royalty) Significant opportunity for expansion with the use of enhanced recovery techniques Proved plus probable reserves added at a cost of C$16.53/barrel Weyburn Margin History A long life, high margin asset in Canada 100% 90% 80% 70% 100% 90% 80% 70% Profit 60% 60% Capex The right balance to Franco-Nevada s portfolio 50% 40% 30% 20% 50% 40% 30% 20% OpEx Royalties Margin 10% 10% 1 Actual data from Weyburn WI. Different applicable royalties and taxes may not correlate exactly to NRI 2 attributable net margin production estimate based on current production of 26,000 bbls/d and historic margins of ~50%. 0% 2005 2006 2007 2008 2009 2010 2011 2012 0% 12
Continued Financial Strength David Harquail President & CEO 13
Capital for Future Acquisitions Capital Resources ($ Millions) Working Capital (Sept 30, 2012) $1,182 Marketable Securities (Sept 30, 2012) $87 Credit Facility (Sept 30, 2012) $175 Weyburn Acquisition ($400) Total Available Capital >$1.0 billion More investment opportunities due to: Tight equity and project lending markets Commodity price volatility Precious and non-precious opportunities 14
Q&A 15
Appendix Non IFRS Measures Three months ended Nine months ended (Expressed in millions except per share amounts) Sep 30, 2012 Sep 30, 2011 Sep 30, 2012 Sep 30, 2011 Net Income $52.0 $44.1 $135.7 $98.6 Income tax expense 14.5 19.5 41.44 41.44 Finance costs 0.3 0.2 0.9 2.1 Finance income (3.5) (1.3) (8.2) (2.9) Depletion and depreciation 31.2 34.7 93.9 97.4 Foreign exchange (gains)/losses and other expenses (8.3) 1.2 (9.6) 6.7 Loss from equity investee - - - 1.7 Gain on investments - (6.2) - (11.9) Adjusted EBITDA $86.2 $92.2 $254.1 $233.1 Basic Weighted Average Shares Outstanding 145.3 127.1 143.1 123.4 Adjusted EBITDA per share $0.59 $0.73 $1.78 $1.89 Net Income $52.0 $44.1 $135.7 $98.6 Foreign exchange (gain)/loss and other (income)/expenses, net of income tax (0.4) (0.6) 0.4 3.2 Gain on acquisition of Gold Wheaton/sale of investments, net of income tax - (5.4) - (17.0) Mark-to-market changes on derivative (6.3) 17 1.7 (8.6) 21 2.1 Loss from equity investee, net of income tax - - - 1.2 Transaction costs of Gold Wheaton, net of income tax - - - 5.6 Credit facility costs written off, net of income tax - - - 0.6 Withholding taxes reversal - - (3.5) - Adjusted Net Income $45.3 $39.8 $124.0 $94.3 Adjusted Net Income per share $0.31 $0.31 $0.87 $0.76 16
Franco Nevada Corporation Capital Structure (Q3 2012) Shares Outstanding ( on TSX & NYSE) 146.5m 2013 Warrants (1) (C$64.27 exercise price) 4.1m 2014 Warrants (1) (C$32.14 exercise price) 0.1m 2017 Warrants (C$75 exercise price) 8.5m Options & other 2.3m 161.5m Share Price Range (2) C$60.62 - $37.68 Market Capitalization $8.3B Working Capital + Marketable Investments (4) $1.3B Available Credit Facilities $175m Analyst Coverage BMO Capital Markets BOA/Merrill Lynch CIBC Capital Markets Credit Suisse GMP Securities National Bank Paradigm Capital RBC Capital Markets Scotia Bank TD Securities UBS Securities David Haughton Mike Jalonen Cosmos Chiu Anita Soni Craig West Paolo Lostritto Don MacLean Stephen Walker Tanya Jakusconek Greg Barnes Brian MacArthur Debt or Hedges Monthly Dividend Annualized (3) Management Ownership Nil US$0.60/share 3.1% (4.0% diluted) Major Shareholders Fidelity US BlackRock Europe T. Rowe Price US (1) Warrants now of Franco-Nevada GLW Holdings Corp. that upon exercise will entitle the holder thereof, at its election, to receive either 0.1556 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 share, approximately 6.43 warrants need to be exercised (i.e. $64.27/ share). Former $5 GLW warrants each still exercisable at $5/warrant. To acquire one whole share, approximately 6.43 warrants need to be exercised (i.e. $32.14/ share). (2) Previous 52 weeks as of Nov 5, 2012 (3) Based on US$0.05 monthly divided starting July 1, 2012 (4) As of September 30, 2012 17