BMO Conference February 2011
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
BMO Conference ‐ February 2011
1
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
ncertainties and contingencies.
contingencies The Company
Compan cautions
ca tions the reader that such
s ch forward-looking
for ard looking statements involve
in ol e known
kno n and unknown
nkno n risks,
risks uncertainties
ncertainties and other factors that may
ma
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, 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
it capital;
it l litigation;
liti ti titl disputes
title di t related
l t d to
t our interests
i t t or any off the
th properties;
ti operating
ti or technical
t h i l difficulties
diffi lti on any off the
th properties;
ti risks
i k and
d hazards
h d associated
i t d with
ith the
th
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; completion of acquisition of Gold Wheaton Gold Corp, including approval of the listing of the Franco-Nevada shares by the Toronto Stock Exchange; and necessary
security holder and court approvals; integration of the assets following completion of the 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 www.sedar.com, as well as our 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.
Non-GAAP Measures
Net 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.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 Net Revenue is defined by Franco-Nevada as cash received or receivable from operating royalty and stream assets, net of any cash outlays required to purchase stream production.
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 Net 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
Dow vs Gold:
45
32 40
35
16
30
Logarithmic Scale
DOW/Gold
25
8
20
4
15
10
2
Arithmetic Scale 5
1 0
Financial vs hard assets
3
Franco-Nevada
A gold focused royalty & streaming company generating growing cash
flow and dividends from a diversified portfolio of quality assets
Gold ETF Franco-Nevada Operators
Yield 0% 1%
~1% 0 1%
0-1%
Leverage to Gold Price 1 >1 >1
Exploration & Expansion Upside 0% 100% 100%
Exposure to Opex, Capex &
0% 0% 100%
Environmental Costs (NSR)
Franco-Nevada provides yield and more upside
than a gold ETF with less risk than an operator
4
Franco-Nevada
Dec. 2007 IPO of new Franco-Nevada for $1.26B (C$15.20/sh.)
Since IPO,, Franco-Nevada has delivered:
>100% share price increase
>$435m of Free Cash Flow(2)* 250%
>$86m in dividends p
paid FNV
>300 royalty interests 200%
$3.6B in market cap**
150%
GLW announced Dec
Dec. 2010:
• Acquisition of 37% GLW 100%
• Purchase of $100m GLW notes S&P / TSX
• Bid for balance of GLW 50%
• Expect March 14th close
• Expect ~$200m cash post close 0%
* Actual Free Cash Flow up to September 30, 2010 and Q4 2010 estimated at 90% of public guidance. 5
** As at February 23, 2011
Growing Pipeline of Mineral Royalties
135 oil & gas royalties and 156 undeveloped oil & gas interests not shown
Over 300 mineral and oil & gas royalties
6
Quality Operators:
Core Operators: Up and Comers:
Goldstrike Palmarejo
j
B ld Mountain
Bald M t i
Hemlo
Mesquite
Cerro San Pedro
Gold Quarry
S bik
Subika Holloway
Hollo a
Hislop
Holt
Marigold
Musselwhite
Stillwater D t
Detour L
Lake
k
East Boulder
Duketon
Tasiast Garden Well
Goldstrike ‐ Barrick Marigold ‐ Goldcorp Tasiast ‐ Kinross Detour – Detour Gold
7
Secure & Diverse Revenue*
By Country By Asset
Australia
Other 3% Midale
2% 2%
O&G
Other
Edson 5%
8%
Palmarejo
Mexico Weyburn 23%
Base Metals
25% US 6%
& Other
45% 2%
Stillwater Goldstrike -
7% NPI
17%
Canada
C d G
Gold
25% Other
13%
Goldstrike
- NSR
9%
Gold Quarry
3% Marigold
5%
95% off revenue ffrom N
North
th A
America
i
80% precious metals**
* Net Revenue(1) - 9 Months to September 30, 2010 8
** November guidance for 2010.
Net Revenue(1) by Commodity
80
70
60
50
($ millions)
40
Oil + Gas
30
& Other
20 PGM
10 Gold
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4*
2008 2009 2010
Diversified Portfolio with Growing Precious Metals
9
* Represents top end of November guidance reflecting Q4 commodity prices and guidance on Gold Quarry minimum.
Key Long Life Assets*
- Major Net Revenue ~10 years
Goldstrike - Stock pile revenue potential ~20 years
Gold Quarry - New layback potential ~ 20 years
Palmarejo - Guadalupe development > 10 years
Stillwater - Existing reserves > 25 years
- Existing reserves 11 years
Oil & Gas - Weyburn potential > 40 years
Falcondo - Existing resources > 20 years
Tasiast - Expanding reserves > 20 years
Detour - Expanding reserves > 15 years
2010 2015 2020 2025 2030 2035 2040+
Most key asset lives > 20 years
* Management expectation based on current public information provided by operators. 10
** See Appendix for references & assumptions.A Long Life Portfolio with Growing Value
11Near Term Growth
Tasiast Mine 2% NSR - Mauritania
Kinross acquisition of Red Back valued at
$7.1 B
Scoping
p g studyy indicates expansion
p up
p to
1.5 Moz in future years*
Study based on 16 year mine life
Potential incremental annual revenue of
$36m*
Royalty becomes payable this year
Undiscounted
U di t d in-situ
i it royalty
lt value
l ~$0.5
$0 5 billion**
billi **
* Based on Kinross Q4/10 press release dated February 16, 2011. Incremental revenue based on 1.5moz at $1,200/oz.
** Based on Kinross Q4/10 press release dated February 16, 2011 total resources of 18.3 million ounces at $1,200/oz. 12
In-situ value has no recovery rate applied.Near Term Growth
Detour Lake 2% NSR- Canada
Detour Gold has started construction with
$1.0 billion of funding in place
Total M+I p
project
j resources >20 Moz*
(plus additional 2 Moz on adjacent Trade Winds Block A JV)
Production of 660,000 oz/yr with potential for
1m oz/yr**
Potential incremental annual revenue of $17m
to $24m***
Royalty expected to start 2013
Undiscounted in
in-situ
situ royalty value >$0.5
$0.5 billion
billion***
* Based on press release dated January 31, 2011 from Detour Gold and February 3, 2011 from Trade Winds Block A.
** Based on February 2, 2011 BMO analyst projections. 13
*** Based on $1,200/oz. No recovery rate applied.The Next 20 Projects
Category Royalty* Operator
New mines: • Duketon (2%) • Regis Resources
• Lounge
g Lizard ((2%)
%) • Kagara
g Ltd
• Peculiar Knob (production payment) • WPG Resources
• Red October (1.75%) • Saracen
Project restarts: • Falcondo (4.1% equity) • Xstrata
• Holt (up to 10%) • St Andrew Goldfields
Royalties reaching hurdles: • Subika (2%) • Newmont Mining
• Ity (1 – 1.5%) • La Mancha
NPI’s pending payout: • Hemlo (50%) • Barrick Gold
• Musselwhite (5%) • Goldcorp
Permitting projects: • Rosemont (1.5%)
(1 5%) • Augusta Resources
• Perama Hill (2%) • Eldorado Gold
Pre-feasibility stage: • Sandman (0.5 – 5%) • Newmont/Fronteer Gold
• Garden Well (2%) • Regis Resources
• Goldfields (2%) • Brigus Gold
• C
Courageous L
Lake
k (1%) • S b id G
Seabridge Gold
ld
• Gurupi (1%) • Jaguar Mining
• HBJ Superpit (1.75%) • Alacer Gold
• Agi Dagi (2%) • Alamos Gold
• Kiziltepe (1.5 – 2.5%) • Ariana Resources
Potential royalty value > $1.0 billion**
* Note: Certain royalties do not cover the entire property or are rounded. See Annual Information Form for further details.
** Undiscounted value reflecting total in-situ resources disclosed by operators on or before January 18, 2011. Values are calculated 14
at $1,200/oz Au, $4/lb Cu, $28/oz Ag and $15/lb Mo. No recovery rates are applied.Gold Wheaton Combination
December 11, 2010 – FNV agrees to purchase 34% of GLW from Quadra FNX
December 13, 2010 – FNV & GLW agreed to friendly business combination
December 31, 2010 – Purchased GLW secured notes from Sprott for C$110m
January 5, 2011 – Closed acquisition of Quadra FNX block for C$262m
J
January 5,
5 2011 – Entered
E t d into
i t ad
definitive
fi iti agreementt tto acquire
i GLW ffor C$830
C$830m
Transaction expected to close in March, 2011
FNV deploys
p y $475m cash and increases shares outstanding
g by
y 8.4%
Accretive on all measures
FNV post transaction with no debt and ~$200m in cash
15Potential Net Revenue Growth
450
Precious Metal
400
Non‐Precious
N P i Metal
M t l
350
> $200m potential
300
incremental
revenue**
($ Millions)
250
200
150
100
50
0
2008A 2009A 2010E GLW Tasiast Detour Other 2015+
23% CAGR in precious metal revenue**
* Asset estimates reflect potential revenue for upcoming advanced assets and assumes top ranges for operator or analyst
projections and $1,200/oz gold. Gold Wheaton estimate represents broker consensus estimate for 2011.
16
** Estimate of Compounded Annual Growth Rate from 2008 to 2015.Franco-Nevada
strike
23% Annual Gold Growth (IPO to 2015)
Golds
Major New Discoveries (Tasiast, Detour)
arry
G ld Wh
Gold Wheaton
t Catalyst
C t l t ffor Re-rating
R ti
Gold Qua
>90% Free Cash Flow Margins
Palmarejo
>$375m in Capital for Further Deals
Record of Annual Dividend Increases
GLW
Gold Leverage at Lower Risk
The strongest business model in gold
17Appendices
Goldstrike ‐ Barrick Weyburn
Bald ‐ Cenovus
Mountain ‐ Barrick East Boulder ‐ Stillwater
Palmarejo ‐ Coeur
Cerro San Pedro ‐ New Gold Mesquite – New Gold
Marigold ‐ Goldcorp
Robinson – Quadra FNX Tasiast ‐ Kinross
Marigold ‐ Goldcorp
18Gold Wheaton Combination
A New Catalyst for Growth
Enhances FNV position as the leading gold-focused royalty company
Accelerated cash flow growth – continued industry leading free cash flow margin
Increases near-term annual Net Revenue (1) by approximately $100 million*
Pro forma contribution of precious metals to Net Revenue (1) greater than 85%
Increases leverage to gold prices via stream structure
Additi off significant
Addition i ifi t assets
t – Sudbury
S db F
Footwall
t ll and
d MWS
Acquiring 2 of top 5 assets pro forma*
Long life production profiles with near-term growth prospects
Diversified portfolio
No asset greater than 15% of pro forma NAV*
Adds further platinum and palladium exposure
Capital available for growth
Pro forma cash balance of US$200 million plus undrawn credit facility of US$175 million available for
further acquisitions**
A
Accretive
ti tot Franco-Nevada
F N d on allll per share
h metrics
ti
* Based on broker estimates
** Includes broker estimated cash flow for Q4/2010 and Q1/2011 cash flow to a mid-March, 2011 closing; includes purchase of GLW 19
senior secured notes from Sprott and excludes proceeds from ITM options and warrantsGold Wheaton Combination
Increased Diversification
Pro‐forma NPV Breakdown Pro‐forma NPV Breakdown
Ezulwini
Detour 5%
5%
Gold Quarry
5% Other FNV
Oil & Gas/
Assets
Other
Stillwater 18% 14%
8%
Sudbury
PGM
Tasiast 12% 19%
8%
Gold
67%
MWS Palmarejo
8% 12%
Gold
Oil & Gas Strike
9% 10%
Contributes two of the top five assets Increases precious metal contribution
to 86%
No asset greater than 15% by value
PGM division to become larger than oil
Increases precious metal value & gas
Source: Broker consensus estimates 20Gold Wheaton Transaction
Summary
Consideration:
C$5.20 per Gold Wheaton common share
23% premium based on the 20-day volume-weighted average price
Transaction value of C$830 million
Structure:
Plan of Arrangement supported by both Boards of Directors and management
Consideration payable approx. 60% in stock and 40% in cash with proration flexibility
Shareholders can elect to receive either 0.1556 of a FNV share or C$5.20 in cash subjects to caps and
p
proration
Capped at approximately 9.66 million FNV shares and C$215 million in cash
Purchase of 34.5% of Gold Wheaton shares from Quadra FNX for C$4.65 per share for 100% cash
(subject to top-up provision)
C t
Customary d
deall protections
t ti ffor Franco-Nevada
F N d ((right
i ht tto match,
t h C$25 million
illi b break
k ffee))
Conditions:
662/3% shareholder approval by Gold Wheaton shareholders
No shareholder vote is required by Franco-Nevada shareholders
Closing of the proposed transaction is expected in March 2011
21Gold Wheaton Assets
Sudbury Footwall
Attributable Production (k Au Eq. oz)
Operator: Quadra FNX (First 5 years)
67 67
Location: Sudbury, Canada 60
64
58
Stream: 50% of Au, Pt, Pd contained in mined ore
above $400/oz Au Eq
Purchased byy GLW: C$400 million in June, 2008
Net Revenue (9 Months to Sep 2010): $31 million 2011 2012 2013 2014 2015
Source: Broker Estimates
Description:
World class mining district
3 separate operations exploiting 5 deposits
High grade Cu-PGM assets
Significant resource upside at Morrison
Production Guidance for 2011: 60-80 koz TPM*
Source: Quadra FNX Website
22
* Quadra FNX 2011 guidance for payable TPM from January 24, 2011 Press ReleaseGold Wheaton Assets
MWS
Attributable Production (k Au oz)
Operator: First Uranium
33 34 32 32 33 33 33 32
Location: South Africa 29 29 30 30 28 29
Stream: 25% of Au produced above $400/oz 18
Purchased by GLW: US$125 million in Nov, 2008
N t Revenue
Net R (9 M
Months
th tto S
Sep 2010)
2010): $12 million
illi
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Mine Life: 15 years * Source: First Uranium Feb, 2011 Investor Presentation (March 31 Year End)
Description:
Uranium & gold tailings recovery operation
3rd gold plant to be commissioned in 2011
Low cost and low technical risk
Annual production of ~120 koz/yr**
Source: First Uranium Website
23
* First Uranium Technical Report dated January 1, 2010
** FIU forecast when all three gold plants are operationalGold Wheaton Assets
Ezulwini
Attributable Production (k Au oz)
Operator: First Uranium 24 24 24 24 24 24 24
21 23 23
Location: South Africa 17 18 19 18
15 16
14
12
Stream: 7% of Au produced above $400/oz Au Eq 7
Purchased by GLW: US$50 million in Nov, 2009
2011
2012
2013
2014
4
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
4
2025
2026
2027
2028
2029
Net Revenue (9 Months to Sep 2010): $10
$ million
Source: First Uranium Feb, 2011 Investor Presentation (March 31 Year End)
Mine life: 20 years*
Description:
p
Rehabilitation of past producing mine
Gold and uranium plants complete
Shaft rehabilitation complete & ramping up
Ramping up production over next 8 years
Capacity to produce >300,000 oz/yr.
Total Resource: 25.5 Moz (Dec, 2009)
Minimum Payment: 19.5 koz in 2011 Source: First Uranium 2010 Annual Report
24
* First Uranium Technical Report dated March 22, 2010Strong Financial Position
Pre-GLW Transaction Post-GLW Transaction
(September 30,
30 2010) (est at closing)
(est.
Cash US$610 million US$200 million (1)
Debt None None (2)
Revolver Available US$175
$ million US$175
$ million
Total Available
US$785 million US$375 million
Capital
Franco-Nevada has capital for further acquisitions
1. Includes broker estimated cash flow for Q4/2010 and Q1/2011 cash flow to a mid‐March, 2011 closing; includes purchase of
GLW senior secured notes from Sprott and excludes proceeds from ITM options and warrants 25
2. Assumes remaining GLW debt called by the debt holder at 110% of face valueAsset 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 2035.
(www.barrick.com)
Gold Quarry – Newmont Investor Day Presentation from May 27, 2010. Gold Quarry West Wall Layback has potential to add
10 years of additional mine life beginning in 2019. (www.newmont.com)
Palmarejo ‐ Coeur d’Alene Mines, Palmarejo Technical Report, February 2011. States mine life of 8 years from 2011.
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.
(
(www.coeur.com) )
Stillwater – Stillwater press release dating February 25, 2010. Reserve of 20.6 moz at December 31, 2009 and 2009
production rate of 530 koz. Implies mine life >25 yrs. (www.stillwatermining.com)
Oil & Gas – Oil & Gas Reserve Report by GLJ Petroleum Consultants Ltd.. (www.franco‐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
p 22,, 2010 Denver Gold Forum Presentation byy Kinross. Estimate 425m tonnes of ore and p
processingg of
60ktpd. Implies mine life of +19 years. (www.kinross.com)
Detour ‐ May 25, 2010 Feasibility Study for Detour Lake describes16 year mine plan. (www.detourgold.com).
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,
others decisions on which it has little or no influence.
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.
26Franco-Nevada Directors & Management
Directors
Pierre Lassonde Director, Chairman
David Harquail Director, President & CEO
Derek Evans(1) Director
Graham Farquharson(2) Director
Louis Gignac
g (1) Director
Randall Oliphant(1) Director
Hon. David R. Peterson(2) Director
Management
David Harquail President & CEO
Sandip Rana Chief Financial Officer
Jacqueline Jones Chief Legal Officer & Corporate Secretary
Geoff Waterman Chief Operating Officer
Paul Brink SVP, Business Development
Steve Alfers Chief of U.S.
U S Operations
(1) Member of the Audit and Risk Committee
27
(2) Member of the Compensation and Corporate Governance CommitteeFranco-Nevada Corporation
Capital Structure(2) Analyst Coverage
Shares Outstanding 114.56m BMO Capital Markets David Haughton
Warrants @ C$32/sh March 2012 5 75m
5.75m BOA/Merrill Lynch
y Mike Jalonen
CIBC Capital Markets Cosmos Chiu
Warrants @ C$75/sh June 2017 5.75m
Credit Suisse Anita Soni
Options & other 2.84m
GMP Securities Craig West
128.90m Paradigm Capital Don MacLean
RBC Capital Markets Stephen Walker
Scotia Capital David Christie
Share Price Range(1) C$35.79-C$25.37
TD Securities Greg Barnes
Market Capitalization(2) $3.6B
UBS Securities Brian MacArthur
Working Capital + Marketable
$670.4m Wellington West Paolo Lostritto
Investments(3)
Available Credit Facilities $175m Major Shareholders
Debt or Hedges Nil Fidelity US
2011 Dividends (Indicative) (4) $35m Invesco Trimark Canada
T. Rowe Price US
Management Ownership (3) 5.0%
(6.6% diluted) Blackrock Europe
Oppenheimer US
(1) Previous 52 weeks
(2) As at February 23, 2011 28
(3) As at September 30, 2010
(4) @ $CAN/$US = 1.00You can also read
