2016 second quarter reports21.q4cdn.com/700333554/files/doc_financials/2016/q2/v5...2016 second...

2016

Second Quarter Reportfor the three and six months ended

June 30, 2016

Franco-Nevada Corporation

Press Release

Franco-Nevada Reports Record Q2 2016 ResultsTORONTO, August 8, 2016 - Franco-Nevada Corporation (TSX: FNV; NYSE: FNV) is pleased to report its financial results for the second quarter of 2016. All figures are in U.S. dollars unless noted and highlights include:

• 112,787GoldEquivalentOunces1(“GEOs”)–anewrecord • $150.9millioninrevenue–anewrecord • $118.9millionofAdjustedEBITDA3or$0.67pershare • $42.3millionofNetIncomeor$0.24pershare • $40.0millionofAdjustedNetIncome2or$0.22pershare • $37.7millionoffundingprovidedtotheCobrePanamaprojectduringthequarter • $225.8millionincashatquarterendandnodebt

“Franco-Nevada’sdiversifiedportfoliocontinuestoperformverywell.WithrecordGEOandrevenueresults,wearenowexpectingtobeclosetothetopendofourpreviouslyprovidedguidancerangesfor2016,”statedDavidHarquail,CEO.“Evenmoreexcitingforthefuture,weareseeingrenewedactivityandgoodnewsatmanyofournon-producingadvancedandexplorationassets.Inaddition,ourinvestmentopportunitypipelineremainsveryfull.”

Revenues and GEOs by Asset Categories

For the three months For the three months ended June 30, 2016 ended June 30, 2015

Revenue GEOs 1 Revenue GEOs 1 (in millions) # (in millions) #

Precious Metals Gold $ 108.2 85,724 $ 81.5 68,302 Silver 23.6 18,523 6.2 5,117 PGM 9.4 7,053 8.7 7,323 Precious Metals Total $ 141.2 111,300 $ 96.4 80,742 Other Minerals 1.9 1,487 2.7 2,298 Oil & Gas 7.8 – 10.3 – $ 150.9 112,787 $ 109.4 83,040

Forthesecondquarterof2016,revenuewassourced94%frompreciousmetals(72%gold,16%silverand6%PGM)and84%fromtheAmericas(14%U.S.,19%Canadaand51%LatinAmerica).CostsandexpensesincreasedduetohigherdepletionandcostofsalesasaresultoftherecentAntaminaandAntapaccaystreamacquisitions.Oil&gasproductionlevelswerestablebutloweroilpricesresultedinlowerrevenueyear-over-year.Cashprovidedbyoperatingactivitiesbeforechangestoworkingcapitalwas$109.9million.

Portfolio Updates• PreciousMetals-U.S.:GEOsfromU.S.preciousmetalsassetswereflatyear-over-yearwithincreasesfromGoldstrike

largelyoffsettingdecreasesatStillwaterandBaldMountain.GEOsreceivedfromtheU.S.assetswere16,707GEOs.• Bald Mountain (0.875-5% NSR/GR)-Kinrossreportedthatfirsthalf2016productionwasweakduetohigherthan

anticipatedstripping.Itexpectstoalmostdoubleproductionfor2017and2018andseesfurtherreserveupside.• South Arturo (4-9% GR with AMR)-TheprojectcurrentlybeingadvancedbyBarrickGoldandPremierGold

MinesisexpectedtocontributerevenuetoFranco-Nevadainthesecondhalfof2016.

2016 Second Quarter Report 3

• Hollister (3-5% NSR)-KlondexMines,Franco-Nevada’spartneratFireCreek/Midas,announceditisacquiringtheHollisterMineinNevadaonwhichFranco-Nevadahasuptoa5%NSRroyalty.

• Castle Mountain (2.65% NSR)-NewCastleGoldhasraisedadditionalfundingtoadvancetheCastleMountainprojectinCalifornia.Franco-Nevadarenegotiateditsroyaltycoveringtheassetduringthesecondquarter2016andnowcoversallconcessionswitha2.65%NSR.

• PreciousMetals-Canada:GEOsfromCanadianpreciousmetalsassetsincreasedbyapproximately25%comparedwiththesecondquarter2015to14,919GEOs.ThemaincontributortotheincreasewastheSudburyoperationwhichbenefittedfromstrongerproduction.• Musselwhite (5% NPI)-Goldcorphasannouncedapprovalforamaterialshandlingprojectwhichitexpects

willincreaseproductionby20%over2016-2018.• Brucejack (1.2% NSR)-PretiumResourcesreportedanincreasedresourceestimatefortheBrucejackproject

andthatitstillexpectstobegincommissioningoftheundergroundmineinmid-2017.• Timmins West (2.25% NSR) and East Timmins (0.25-15% NSR)-OperatorshipofseveralCanadianroyalties

movedintostrongerhandswithLakeShoreGoldbeingacquiredbyTahoeResourcesandStAndrewGoldfieldsbyKirklandLakeGold.

• Hardrock (3% NSR)-AfeasibilitystudyfortheHardrockprojectinOntario,whichisbeingadvancedbyjointventurepartnersPremierGoldMinesandCenterraGold,isexpectedinthethirdquarter.

• PreciousMetals-LatinAmerica:GEOsfromLatinAmericanpreciousmetalsassetsrepresentedthelargestyear-over-yearincreaseduetotheadditionoftheAntaminaandAntapaccaystreams.GEOsdeliveredfromLatinAmerica were60,899GEOs.• Antamina (22.5% silver stream)-Antaminadelivered11,898GEOsduringthequarterand29,679GEOsyear-to-

date.Withtheyear-to-dateproductionresultsfromAntamina,GEOsreceivedarenowexpectedtobehigherthanFranco-Nevada’soriginalAntaminaguidancefor2016of40,000GEOs.

• Antapaccay (gold and silver stream)-Antapaccaydelivered19,581GEOsduringthequarterwithfullyeardeliveriesstillanticipatedwithintheoriginal60,000to70,000GEOsguidancerange.

• Candelaria (gold and silver stream) - As Franco-Nevada expected, Candelaria deliveries decreased year-over-year to16,247GEOsfrom24,192GEOsinthesecondquarter2015mainlyduetominesequencing.

• Palmarejo & Guadalupe (50% gold stream)-Inthethirdquarter,the400,000ounceminimumatPalmarejowasmetresultingintheterminationoftheoriginalPalmarejostreamagreementandthecommencementoftheGuadalupestreamagreement.Underthenewagreement,deliveriesarebasedon50%ofthegoldproducedfromthePalmarejoproperty(includingthenewGuadalupemine)withongoingpaymentsequaltothelesserof$800per ounce and the then prevailing spot price for gold.

• Cobre Panama (gold and silver stream)-Duringthequarter,Franco-Nevadacontributed$37.7millionofitsshareofconstructioncapitalfortheCobrePanamaprojectandnowestimatestotalfundingbetween$120-$140millionin2016,downslightlyfromthe$130-$150millionpreviouslyestimated.Franco-Nevadahasnowcontributed$376millionofitstotal$1billioncommitmenttofundtheconstructionofCobrePanama.

• PreciousMetals-RestofWorld:GEOsfromRestofWorldpreciousmetalsassetsincreasedyear-over-yearmainlydueto

deliveriesfromtheKarmafixedounceobligation.GEOsfromtheRestofWorldwere18,775GEOsduringthequarter.• Karma (fixed gold deliveries & 4.875% gold stream)-TrueGold,theoperatorofKarma,hasbeenacquiredby

EndeavourMining.2,500GEOsweredeliveredinthequarterwithonemonthofdeliveriestobecarriedinto thethirdquarter2016.Theadditional1,250GEOswillcontributetorevenueinthethirdquarter2016.

• Ity (1.5% capped NSR)-EndeavourMiningalsonowownstheItymineinCoted’Ivoireandreportedanexpansion of reserves.

• Sissingué (0.5% NSR)-AlsoinCoted’Ivoire,PerseusMiningannouncedplansforthefull-scaledevelopment ofitsSissinguéprojectwithfirstproductionexpectedinlate2017.

• Duketon (2% NSR)-RegisResourceshasannouncedreserveincreasesatitsDuketonbeltprojects.• Tasiast (2% NSR) - Kinross announced that the suspension of mining and processing operations at the Tasiast

minehasbeenresolvedandthatoperationswillresumeinAugust.Kinrosscontinuestoadvancedevelopment oftheTasiastPhaseOneexpansion.

• Subika (2% NSR)-NewmontMiningisexpectedtomakeadecisioninthesecondhalfof2016regardinganAhafomillexpansionandtheundergrounddevelopmentofSubika.

• Oil&gas:Revenuefromoil&gasassetswas$7.8millioninthesecondquarter2016comparedwith$10.3million inthesecondquarter2015.Productionremainsrelativelystable.

The Gold Investment thatWORKS FNV TSX NYSE4

2016 Second Quarter Report 5Franco-Nevada Corporation

Dividend DeclarationFranco-NevadaispleasedtoannouncethatitsBoardofDirectorshasdeclaredaquarterlydividendof$0.22pershare.ThedividendwillbepaidonSeptember29,2016toshareholdersofrecordonSeptember15,2016.TheCanadiandollarequivalentisdeterminedbasedonthenoonratepostedbytheBankofCanadaonAugust5,2016.UnderCanadiantaxlegislation,Canadianresidentindividualswhoreceive“eligibledividends”areentitledtoanenhanced gross-up and dividend tax credit on such dividends. TheCompanyadoptedaDividendReinvestmentPlan(“DRIP”)commencingwiththeOctober2013dividend.ParticipationintheDRIPisoptional.TheCompanywillissuetheadditionalcommonsharesthroughtreasuryata3%discounttotheAverageMarketPrice,asdefinedintheDRIP.However,theCompanymay,fromtimetotime,initsdiscretion,changeoreliminatethediscountapplicabletotreasuryacquisitionsordirectthatsuchcommonsharesbepurchasedinmarketacquisitionsattheprevailingmarketprice,anyofwhichwouldbepubliclyannounced.TheDRIPandenrollmentformsareavailableontheCompany’swebsiteatwww.franco-nevada.com.RegisteredshareholdersmayalsoenrollintheDRIPonlinethroughtheplanagent’sself-servicewebportalatwww.investorcentre.com/franco-nevada.Beneficialshareholdersshouldcontacttheirfinancialintermediarytoarrangeenrollment. This press release is not an offer to sell or a solicitation of an offer of securities. A registration statement relating totheDRIPhasbeenfiledwiththeU.S.SecuritiesandExchangeCommissionandmaybeobtainedundertheCompany’sprofileontheU.S.SecuritiesandExchangeCommission’swebsiteatwww.sec.gov.

ShareholderInformationThecompleteCondensedInterimConsolidatedFinancialStatementsandManagement’sDiscussionandAnalysiscanbefoundtodayonFranco-Nevada’swebsiteatwww.franco-nevada.com,onSEDARatwww.sedar.comandonEDGARatwww.sec.gov.

Managementwillhostaconferencecalltomorrow,Tuesday,August9,2016at10:00a.m.EasternTimetoreviewFranco-Nevada’ssecondquarter2016results.Interestedinvestorsareinvitedtoparticipateasfollows:

Interestedinvestorsareinvitedtoparticipateasfollows:• Via Conference Call: Toll-Free: (888) 231-8191; International: (647) 427-7450• Conference Call Replay until August 16: Toll-Free (855) 859-2056; International (416) 849-0833; Pass code 46496274• Webcast: A live audio webcast will be accessible at www.franco-nevada.com.

CorporateSummaryFranco-NevadaCorporationistheleadinggold-focusedroyaltyandstreamcompanywiththelargestandmostdiversifiedportfolioofcash-flowproducingassets.Itsbusinessmodelprovidesinvestorswithgoldpriceandexplorationoptionalitywhilelimitingexposuretomanyoftherisksofoperatingcompanies.Franco-Nevadaisdebtfreeandusesitsfreecashflowtoexpanditsportfolioandpaydividends.IttradesunderthesymbolFNVonboththeTorontoandNewYorkstockexchanges.Franco-Nevadaisthegoldinvestmentthatworks.

For more information, please go to our website at www.franco-nevada.com or contact:

Stefan Axell Sandip Rana Director,CorporateAffairs ChiefFinancialOfficer416306-6328 [email protected]

Please refer to Cautionary Statement on Forward Looking Information on page 37 of this Quarterly Report.


Non-IFRSMeasures:AdjustedNetIncomeandAdjustedEBITDAareintendedtoprovideadditionalinformationonlyanddonothaveanystandardizedmeaningprescribedunderIFRSandshouldnotbeconsideredinisolationorasasubstituteformeasuresofperformancepreparedinaccordancewithIFRS.ThesemeasuresarenotnecessarilyindicativeofoperatingprofitorcashflowfromoperationsasdeterminedunderIFRS.Othercompaniesmaycalculatethesemeasuresdifferently.ForareconciliationofthesemeasurestovariousIFRSmeasures,pleaseseebelowortheCompany’scurrentMD&AdisclosurefoundontheCompany’swebsite,onSEDARandonEDGAR.

1 GEOsincludeourgold,silver,platinum,palladiumandothermineralassets.GEOsareestimatedonagrossbasisforNSRroyaltiesand,inthecaseofstreamounces,beforethepaymentoftheperouncecontractualpricepaidbytheCompany.ForNPIroyalties,GEOsarecalculatedtakingintoaccounttheNPIeconomics.Platinum,palladium,silverandothermineralswereconvertedtoGEOsbydividingassociatedrevenue,whichincludessettlementadjustments,bytheaveragegoldpricefortheperiod.ForQ22016,theaveragecommoditypriceswereasfollows:$1,259/ozgold(2015-$1,193/oz);$17.17/ozsilver(2015-$16.41/oz);$1,004/ozplatinum(2015-$1,127/oz)and$568/ozpalladium(2015-$760/oz).

2 Adjusted Net Income and Adjusted Net Income per share arenon-IFRSfinancialmeasures,whichexcludethefollowingfromnetincomeandearningspershare(“EPS”):foreignexchangegains/lossesandotherincome/expenses;gains/lossesonthesaleofinvestments;impairmentchargesrelatedtoroyalty,streamandworkinginterestsandinvestments;unusualnon-recurringitemsand;impactofincometaxesontheseitems.

3 Adjusted EBITDA and Adjusted EBITDA per sharearenon-IFRSfinancialmeasures,whichexcludethefollowingfromnetincomeandEPS:incometaxexpense/recovery;financeexpenses;financeincome;depletionanddepreciation;non-cashcostsofsales;impairmentchargesrelated toroyalty,streamandworkinginterestsandinvestments;gains/lossesonthesaleofinvestmentsand;foreignexchangegains/lossesandotherincome/expenses.

ReconciliationtoNon-IFRSMeasures Three months ended June 30,

(expressed in millions, except per share amounts) 2016 2015

NetIncome(Loss) $ 42.3 $ 21.6 Income tax expense (recovery) 11.3 11.3 Finance expenses 0.8 0.5 Finance income (1.0) (1.1 ) Depletion and depreciation 68.2 49.1 Non-cash costs of sales 1.7 2.2 Impairment charges – – Gains/losses on sale of investments (2.8) (0.9 ) Foreign exchange (gains)/losses and other (income)/expenses (1.6) (0.5 )

AdjustedEBITDA $ 118.9 $ 82.2 Basic Weighted Average Shares Outstanding 177.8 156.7 AdjustedEBITDApershare $ 0.67 $ 0.53

Three months ended June 30,

(expressed in millions, except per share amounts) 2016 2015

NetIncome(Loss) $ 42.3 $ 21.6 Foreign exchange (gains)/losses and other (income)/expenses, net of income tax 0.5 (0.4 ) Mark-to-market changes on derivatives, net of income tax – 0.1 Gain on sale of investments, net of income tax (2.5) (0.6 ) Impairment charges, net of income tax – – Indexation adjustment – – Valuation allowance (0.6) – Impact of tax increases 0.3 2.2

AdjustedNetIncome $ 40.0 $ 22.9 Basic Weighted Average Shares Outstanding 177.8 156.7 AdjustedNetIncomepershare $ 0.22 $ 0.15

Franco-Nevada Corporation 2016 Second Quarter Report 7

MD&A

Management’sDiscussionandAnalysis

ThisManagement’sDiscussionandAnalysis(“MD&A”)offinancialpositionandresultsofoperationsofFranco-NevadaCorporation(“Franco-Nevada”,the“Company”,“we”or“our”)hasbeenpreparedbaseduponinformationavailabletoFranco-NevadaasatAugust8,2016andshouldbereadinconjunctionwithFranco-Nevada’sunauditedconsolidatedfinancialstatementsandrelatednotesasatandforthesixmonthsendedJune30,2016and2015.TheunauditedcondensedinterimconsolidatedfinancialstatementsandMD&AarepresentedinU.S.dollarsandhavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”)asissuedbytheInternationalAccountingStandardsBoard(“IASB”)applicabletothepreparationofinterimfinancialstatementsinaccordancewithIAS34,InterimFinancialReporting.

ReadersarecautionedthattheMD&Acontainsforwardlookingstatementsandthatactualeventsmayvaryfrommanagement’sexpectations.Readersareencouragedtoreadthe“CautionaryStatementonForward-LookingInformation”attheendofthisMD&AandtoconsultFranco-Nevada’sauditedconsolidatedfinancialstatementsfortheyearsendedDecember31,2015and2014andthecorrespondingnotestothefinancialstatementswhichareavailableonourwebsiteatwww.franco-nevada.com,onSEDARatwww.sedar.comandinourmostrecentForm40-FfiledwiththeSecuritiesandExchangeCommissiononEDGARatwww.sec.gov.

AdditionalinformationrelatedtoFranco-Nevada,includingourAnnualInformationForm,isavailableonSEDARatwww.sedar.com,andourForm40-FisavailableonEDGARatwww.sec.gov.Thesedocumentscontaindescriptionsandmaps of certain of Franco-Nevada’s producing and advanced royalty and stream assets. For additional information, ourwebsitecanbefoundatwww.franco-nevada.com.

Table of Contents8 Overview

9 Highlights

10 Guidance

11 Selected Financial Information

12 Overview of Financial Performance - Q2 2016 To Q2 2015

22 Overview of Financial Performance - Six Months 2016 To Six Months 2015

30 Financial Condition Review

30 Balance Sheet Review

30 Financial Position, Liquidity and Capital Resources

32 Capital Resources

33 Critical Accounting Estimates

33 New Accounting Standards Issued But Not Yet Effective

33 Outstanding Share Data

34 Internal Control Over Financial Reporting and Disclosure Controls and Procedures

34 Non-IFRS Financial Measures

37 Cautionary Statement on Forward-Looking Information


OvERvIEWFranco-Nevadaistheleadinggold-focussedroyaltyandstreamcompanybybothgoldrevenueandnumberofgoldassets.TheCompanyhasthelargestandmostdiversifiedportfolioofroyaltiesandstreamsbycommodity,geography,revenuetypeandstageofproject.Theportfolioisactivelymanagedwiththeaimtomaintainover80%ofrevenuefrompreciousmetals(gold,silver&PGMs).

Franco-Nevada Asset Counts at August 8, 2016 Precious Metals Other Minerals Oil & Gas TOTAL

Producing 38 5 59 102Advanced 35 7 – 42Exploration 139 38 19 196

TOTAL 212 50 78 340

TheCompanydoesnotoperatemines,developprojectsorconductexploration.Franco-Nevada’sbusinessmodelisfocusedonmanagingandgrowingitsportfolioofroyaltiesandstreams.Theadvantagesofthisbusinessmodelare:

• Exposuretopreciousmetalspriceoptionality;• Aperpetualdiscoveryoptionoverlargeareasofgeologicallyprospectivelandswithnoadditionalcostotherthantheinitial

investment;• Limitedexposuretomanyoftherisksassociatedwithoperatingcompanies;• Afreecash-flowbusinesswithlimitedcashcalls;• Ahigh-marginbusinessthatcangeneratecashthroughtheentirecommoditycycle;• Ascalableanddiversifiedbusinessinwhichalargenumberofassetscanbemanagedwithasmallstableoverhead;and• Aforward-lookingbusinessinwhichmanagementfocusesongrowthopportunitiesratherthanoperationalordevelopment

issues.

Franco-Nevada’s financial results in the short-term are primarily tied to the price of commodities and the amount of productionfromitsportfolioofproducingassets.Fromtimetotime,financialresultsarealsosupplementedbyacquisitionsofnewproducingassets.Overthelonger-term,resultsareimpactedbytheavailabilityofexplorationanddevelopmentcapitalappliedbyothercompaniestoexpandorextendFranco-Nevada’sproducingassetsortoadvanceFranco-Nevada’sadvanced and exploration assets into production.

Franco-Nevadahasalong-termfocusinmakingitsinvestmentsandrecognizesitisinacyclicalindustry.Franco-Nevadahashistoricallyoperatedbymaintainingastrongbalancesheetsothatitcanmakeinvestmentsduringcommoditycycledownturns.

Franco-Nevada’ssharesarelistedontheTorontoandNewYorkstockexchangesunderthesymbolFNV.AninvestmentinFranco-Nevada’ssharesisexpectedtoprovideinvestorswithyieldandexposuretogoldpriceandexplorationoptionalitywhilelimitingexposuretomanyoftherisksofoperatingcompanies.SinceitsIPOovereightyearsago,Franco-Nevadahasincreaseditsdividendannuallyanditssharepricehasoutperformedthegoldpriceandallrelevantgoldequitybenchmarks.


Franco-Nevada’sRelativeSharePricePerformance

HIgHLIgHTSFinancial-ThreeMonths

• TheCompanyearned112,787GoldEquivalentOunces(“GEOs”)1comparedto83,040GEOsinsecondquarter2015, anincreaseof35.8%;

• Revenueof$150.9millionwasgenerated,anincreaseof37.9%fromthe$109.4milliongeneratedinsecondquarter2015;• AdjustedEBITDA2increased44.7%to$118.9million,or$0.67persharefrom$82.2millionor$0.53pershareinsecond

quarter2015;• TheCompanycontinuedtomaintainastrongMargin2of78.8%comparedto75.1%insecondquarter2015;• Netincomeearnedwas$42.3million,or$0.24persharecomparedtonetincomeof$21.6millionor$0.14persharein

secondquarter2015;• AdjustedNetIncome2earnedwas$40.0million,or$0.22persharecomparedto$22.9millionor$0.15persharein

secondquarter2015;• Operatingcash-flowbeforechangesinnon-cashassetsandliabilitiesof$109.9millionwasgeneratedinthesecond

quartercomparedto$78.0millioninsecondquarter2015;and• Dividendspaidtotaled$39.3millioninthequarterwhichisacombinationofcashandsharesissuedundertheCompany’s

dividend reinvestment plan.

1 GEOsincludeourgold,silver,platinum,palladiumandothermineralassets.GEOsareestimatedonagrossbasisforNSRroyaltiesand,inthecaseofstream ounces,beforethepaymentoftheperouncecontractualpricepaidbytheCompany.ForNPIroyalties,GEOsarecalculatedtakingintoaccounttheNPIeconomics.Silver,platinum,palladiumandothermineralswereconvertedtoGEOsbydividingassociatedrevenue,whichincludessettlementadjustments,bytheaveragegold1GEOsincludeourgold,silver,platinum,palladiumandothermineralassets.GEOsareestimatedonagrossbasisforNSRroyaltiesand,inthecaseofstream ounces,beforethepaymentoftheperouncecontractualpricepaidbytheCompany.ForNPIroyalties,GEOsarecalculatedtakingintoaccounttheNPIeconomics.Silver,platinum,palladiumandothermineralswereconvertedtoGEOsbydividingassociatedrevenue,whichincludessettlementadjustments,bytheaveragegoldpricefortheperiod.ForaveragecommoditypricesusedinthecalculationofGEOs,pleaserefertoaveragecommoditypricetablesonpages12and22ofthisMD&A.

2 AdjustedNetIncome,AdjustedEBITDAandMarginarenon-IFRSfinancialmeasureswithnostandardizedmeaningunderIFRS.Forfurtherinformationand adetailedreconciliation,pleaseseepages34-36ofthisMD&A.

450%

400%

350%

300%

250%

200%

150%

100%

50%

0%

-50%

-100%

FNV IPO:Dec 2007

2008 2009 2010 2011 2012 2013 2014

FNV

Gold Price

2015 2016

S&P/TSX GlobalGold Index

Chart to June 30, 2016. FNV and S&P/TSX Global Gold Index converted to USD

Outperforming bothGold Equitiesand Gold Itself(Chart to June 30, 2016)


Financial-SixMonths

• TheCompanyearned219,408GEOscomparedto168,121GEOsinthesameperiodin2015,anincreaseof30.5%;• Revenueof$282.9millionwasgenerated,anincreaseof29.4%fromthe$218.6milliongeneratedinfirstsixmonths

of2015;• AdjustedEBITDA2increased34.5%to$222.6million,or$1.27persharefrom$165.5millionor$1.06persharein

thesameperiodin2015;• TheCompanycontinuedtomaintainastrongMargin2of78.7%comparedto75.9%in2015;• Netincomeearnedwas$72.3million,or$0.41persharecomparedtonetincomeof$40.8millionor$0.26pershare

infirstsixmonthsof2015;• AdjustedNetIncome2earnedwas$68.0million,or$0.39persharecomparedto$45.8millionor$0.30persharein

sameperiodin2015;• Operatingcash-flowbeforechangesinnon-cashassetsandliabilitiesof$209.3millionwasgeneratedinthefirst

twoquartersof2016comparedto$155.9millioninthesameperiodin2015;and• Dividendstotaled$77.8millionforthesixmonthsendedJune30,2016whichincludedcashdividendsof$57.5million

and$20.3millioninissuedcommonsharesundertheCompany’sdividendreinvestmentplan.

Corporate Castle Mountain

OnJune16,2016,Franco-NevadaandNewCastleGoldLtd.completedtherestructuringofFranco-Nevada’sexisting royaltiesattheCastleMountaingoldprojectinCalifornia,U.S.intoasingle2.65%royaltycoveringalargerproperty.

Antapaccay Precious Metals Stream

OnFebruary26,2016,Franco-Nevadacompletedtheacquisitionofa$500.0millionpreciousmetalsstreamfromGlencoreplcwithreferencetoproductionfromtheAntapaccayminelocatedinPeru.Underthestreamagreement,goldandsilverdeliveriesareinitiallyreferencedtocopperinconcentrateshipped.TheCompanywillreceive300ouncesofgoldand4,700ouncesofsilverforeach1,000tonnesofcopperinconcentrateshipped,until630,000ouncesofgoldand10.0millionouncesofsilverhavebeendelivered.Thereafter,theCompanywillreceive30%ofthegoldandsilvershipped.TheCompanywillpayanon-goingpriceof20%ofthespotpriceofgoldandsilveruntil750,000ouncesofrefinedgoldand12.8millionouncesofrefinedsilverhavebeendelivered.Thereafter,theon-goingpricewillincreaseto30%ofthespotpriceofgoldand silver.

Equity Financing

OnFebruary19,2016,theCompanycompletedabought-dealfinancingwithasyndicateofunderwritersfor19.2millioncommonsharesat$47.85percommonshare.ThenetproceedstotheCompanywere$883.5millionafterdeductingshareissuecostsandexpensesof$36.6million.

gUIDANCE Thefollowingcontainsforward-lookingstatementsaboutourguidancefor2016.Referenceshouldbemadetothe“CautionaryStatementonForwardLookingInformation”sectionattheendofthisMD&A.Foradescriptionofmaterialfactorsthatcouldcauseouractualresultstodiffermateriallyfromtheforward-lookingstatementsbelow,pleaseseetheCautionaryStatementandthe“RiskFactors”sectionofourmostrecentAnnualInformationFormfiledwiththeCanadiansecuritiesregulatoryauthoritiesonwww.sedar.comandourmostrecentForm40-FfiledwiththeSecuritiesandExchangeCommissiononwww.sec.gov.

Franco-Nevadarealizedrecordgrowthfromitsmineralassetsforthefirstsixmonthsof2016.Mineralassetscontributed219,408GEOswith$11.4millioninrevenuefromFranco-Nevada’soil&gasassetsforthefirsttwoquartersof2016.Forfiscal2016,Franco-NevadaexpectstoreceiveGEOsfromitsmineralassetsinthehigherendofthepreviouslyannouncedguidancerangeof425,000to445,000GEOs.Inaddition,theCompanyconfirmsitspreviousrevenueguidancerangeforOil&Gasof$15.0millionto$25.0million.Ofthe425,000to445,000GEOs,Franco-Nevadaexpectstoreceive295,000to305,000GEOsunderitsvariousstreamagreementscomparedto222,670GEOsreceivedforfullyear2015.

InforecastingGEOsfortheremainderof2016,gold,silver,platinumandpalladiummetalshavebeenconvertedtoGEOsusingcommoditypricesof$1,325/ozAu,$19.50/ozAg,$1,050/ozPtand$600/ozPd.For2016,theWTIoilpriceisassumedtoaverage$35perbarrelwitha$3.50perbarrelpricedifferentialforCanadianoil.2016guidanceassumesthe continued steady state of operations from our assets.

2 AdjustedNetIncome,AdjustedEBITDAandMarginarenon-IFRSfinancialmeasureswithnostandardizedmeaningunderIFRS.Forfurtherinformationand adetailedreconciliation,pleaseseepages34-36ofthisMD&A.


TheCompanyfunded$37.7milliontowardstheCobrePanamapreciousmetalsstreaminsecondquarter2016andhasnowfunded$376millionofthe$1billioncommitment.TheCompanyexpectstofundapproximately$120.0millionto$140.0millionin2016ofwhich$35-$45millionwillbefundedinthirdquarter2016.

Inaddition,for2016,theCompanyestimatesdepletionanddepreciationexpensetobeapproximately$250.0million to$275.0million.

SelectedFinancialInformation For the For the For the For the ThreeMonths Three Months SixMonths Six Months Ended Ended Ended Ended(in millions, except Average Gold Price, June 30, June 30, June 30, June 30,GEOs, Margin and per share amounts) 2016 2015 2016 2015

StatementofIncomeandOther ComprehensiveIncome(Loss) Revenue $ 150.9 $ 109.4 $ 282.9 $ 218.6Depletion and depreciation 68.2 49.1 133.7 100.8Impairments1 – – – 0.1Operating income 49.0 30.9 85.4 61.3Net income 42.3 21.6 72.3 40.8Basic earnings per share $ 0.24 $ 0.14 $ 0.41 $ 0.26Diluted earnings per share $ 0.24 $ 0.14 $ 0.41 $ 0.26

Dividends declared per share $ 0.22 $ 0.21 $ 0.43 $ 0.41Dividends paid (including DRIP) $ 39.3 $ 32.5 $ 77.8 $ 63.6Weighted average shares outstanding 177.8 156.7 175.2 156.7

Non-IFRSMeasures Average Gold Price $ 1,259 $ 1,193 $ 1,220 $ 1,206GEOs2 112,787 83,040 219,408 168,121Adjusted EBITDA3 $ 118.9 $ 82.2 $ 222.6 $ 165.5Adjusted EBITDA3 per share $ 0.67 $ 0.53 $ 1.27 $ 1.06Margin3 78.8% 75.1% 78.7% 75.9%Adjusted Net Income3 $ 40.0 $ 22.9 $ 68.0 $ 45.8Adjusted Net Income3 per share $ 0.22 $ 0.15 $ 0.39 $ 0.30

StatementofCashFlows Net cash provided by operating activities, before changes in non-cash assets and liabilities $ 109.9 78.0 $ 209.3 155.9Net cash used in investing activities $ (6.9) (25.8 ) $ (488.9) (46.9 )Net cash provided by (used in) financing activities $ (23.8) (24.3 ) $ 381.6 (47.9 ) As at As at June 30, December 31, 2016 2015

StatementofFinancialPosition Cash and cash equivalents $ 225.8 $ 149.2Short-term investments – 18.8Total assets 4,209.9 3,674.3Deferred income tax liabilities 29.8 33.2Total shareholders’ equity 4,157.9 3,163.0

Working capital $ 296.2 $ 253.9Debt $ – $ 457.3

1 Impairments include impairment charges on investments, royalties, streams and working interests.2 For average commodity prices used in calculation of GEOs, please refer to average commodity price tables on pages 12 and 22 of this MD&A. 3 Adjusted EBITDA, Margin and Adjusted Net Income are non-IFRS financial measures with no standardized meaning under IFRS. For further information and a detailed reconciliation,

please see pages 34-36 of this MD&A.


OvERvIEWOFFINANCIALPERFORMANCE-Q22016TOQ22015

Thepricesofpreciousmetals,oil&gasandtheactualproductionfrommineralandoil&gasassetsarethelargestfactorsindeterminingprofitabilityandcashflowfromoperationsforFranco-Nevada.

AverageCommodityPricesandExchangeRate

Q2 Q1 Q2 QOQ YOY QuarterlyAverages 2016 2016 2015 (Q2’16-Q1’16) (Q2’16-Q2’15)

Gold1 ($/oz) $ 1,259 $ 1,181 $ 1,193 6.6% 5.5% Silver2 ($/oz) 17.17 14.83 16.41 15.8% 4.6% Platinum3 ($/oz) 1,004 914 1,127 9.8% (10.9% ) Palladium3 ($/oz) 568 524 760 8.4% (25.3% )

Edmonton Light C$bbl 55.09 41.17 69.07 33.8% (20.2% ) Quality Differential C$bbl (8.08 ) (8.86 ) (6.74 ) (8.8% ) 19.9% Realized oil price C$bbl 47.01 32.31 62.33 45.5% (24.6% )

ExchangeRate4 CAD/US 0.7761 0.7282 0.8135 6.6% (4.6% )

1 Based on London Bullion Market Association (“LBMA”) Gold Price PM2 Based on LBMA Silver Price3 Based on London PM Fix4 Based on Bank of Canada noon rates

Preciousmetalscommoditypriceshavebeeninavolatileanddecliningstateforanextendedperiodoftimewithpricesonlyrecentlybeginningtorecover.Thegoldpricehasincreasedapproximately25%sincethebeginningoftheyear.

Duringthesecondquarterof2016,averagegoldpricestradedbetween$1,213/ozand$1,325/ozwithanaverageprice of$1,259/oz.Thiscomparestoanaveragegoldpriceof$1,193/ozforthesecondquarterof2015,anincreaseof5.5%, and$1,181/ozforthefirstquarterof2016.Historically,thepriceofgoldhasbeensubjecttovolatilepricemovements overshortperiodsoftimeandisaffectedbynumerousmacroeconomicandindustryfactorsthatarebeyondtheCompany’scontrol.MajorinfluencesonthegoldpriceincludemacroeconomicfactorssuchasthelevelofinterestratesandinflationexpectationsaswellascurrencyexchangeratefluctuationsandtherelativestrengthoftheU.S.dollarandthesupplyofand demand for gold.

Duringsecondquarter2016,platinumandpalladiumpricesaveraged$1,004/ozand$568/ozcomparedto$1,127/oz and$760/ozforthesecondquarterof2015,decreasesof10.9%and25.3%,respectively.Silverpricesaveraged$17.17/oz forsecondquartercomparedto$16.41/ozinsecondquarter2015.

CommoditypricevolatilitynotonlyimpactsoverallrevenuesbutalsoimpactsthenumberofGEOscontributedbynon-goldassetswhenconvertingfromsilver,platinum,palladiumandothermineralstogoldequivalentounces.

Despitethevolatilecommodityprices,ourmineralassetscontinuedtodeliverstrongresultsasthemineralassetsperformedwelldeliveringasignificantincreaseinGEOsovertheprioryear.OneofthestrengthsoftheFranco-Nevadabusinessmodelisthatourbusinessisnotimpactedwhenproducercostsincrease.Royaltyandstreampayments/deliveriesarebasedonproductionlevelsoftheunderlyingoperationswithnoadjustmentsfortheoperator’soperatingcosts,withtheexceptionofNPIroyaltieswhicharebasedontheprofitoftheunderlyingminingoperation.Duringthequarter,NPIroyaltiesaccountedforapproximately4%oftotalrevenues.


gEOProductiongrowth

Gold Equivalent Ounces and Revenue Franco-Nevada’srevenueisgeneratedfromvariousformsofagreements,rangingfromNSRroyalties,streams,NPIroyalties,netroyaltyinterests(“NRI”),workinginterestsandother.For definitions of the various types of agreements, please refer to our most recent Annual Information Form filed on SEDAR at www.sedar.com or our Form 40-F filed on EDGAR at www.sec.gov.

Franco-NevadacontinuedtoseesignificantgrowthinGEOswithmineralassetscontributing112,787GEOsinthesecondquarterof2016,anincreaseof35.8%overthesecondquarterof2015.Revenueforthequarterwas$150.9millioncomparedwith$109.4millionforthesameperiodof2015,anincreaseof37.9%.

TheimpactonrevenueearnedbythegrowthinthenumberofGEOsreceivedwasfurtherenhancedbyhigheraveragegoldand silver prices in second quarter 2016 compared to prior year.

106,621112,787

83,040 85,637

106,312

125,000

105,000

85,000

65,000

45,000

25,000

0Go

ld E

quiv

alen

t Oun

ces

Q1 2016 Q2 2016Q2 2015 Q3 2015 Q4 2015

Other Minerals

PGM

Silver

Gold

OtherMineralsPGM

Silver

Gold


ThefollowingtableoutlinesGEOsandrevenueattributabletoFranco-NevadaforthethreemonthsendedJune30,2016and2015bycommodity,geographicallocationandtypeofinterest:

Gold Equivalent Ounces1 Revenue (in millions)For the three months ended June 30, 2016 2015 Variance 2016 2015 Variance

Commodity Precious Metals Gold 85,724 68,303 17,421 $ 108.2 $ 81.6 $ 26.6 Silver 18,523 5,116 13,407 23.6 6.1 17.5 PGM 7,053 7,323 (270 ) 9.4 8.7 0.7

Precious Metals - Total 111,300 80,742 30,558 141.2 96.4 44.8Other Minerals 1,487 2,298 (811 ) 1.9 2.7 (0.8 )Oil & Gas – 7.8 10.3 (2.5 )

112,787 83,040 29,747 $ 150.9 $ 109.4 $ 41.5

Geography United States 16,816 15,543 1,273 $ 21.2 $ 18.5 $ 2.7Canada 15,898 12,961 2,937 28.4 25.8 2.6Latin America 60,898 37,602 23,296 76.9 44.9 32.0Rest of World 19,175 16,934 2,241 24.4 20.2 4.2

112,787 83,040 29,747 $ 150.9 $ 109.4 $ 41.5

Type Revenue-based 24,018 24,584 (566 ) $ 30.9 $ 31.5 $ (0.6 )Streams 81,180 52,905 28,275 103.2 63.1 40.1Profit-based 4,225 1,352 2,873 9.9 7.0 2.9Other 3,364 4,199 (835 ) 6.9 7.8 (0.9 )

112,787 83,040 29,747 $ 150.9 $ 109.4 $ 41.5

1 For average commodity prices used in the calculation of GEOs, please refer to average commodity price tables on pages 12 and 22 of this MD&A.

GEOsandrevenuewereearnedfromthefollowingassetclasses:

Gold Equivalent Ounces1 Revenue (in millions)For the three months ended June 30, 2016 2015 Variance 2016 2015 Variance

Commodity Precious Metals United States 16,707 15,389 1,318 $ 21.1 $ 18.4 $ 2.7 Canada 14,919 11,854 3,065 19.5 14.1 5.4 Latin America 60,899 37,602 23,297 76.8 45.0 31.8 Rest of World 18,775 15,897 2,878 23.8 18.9 4.9

Precious Metals - Total 111,300 80,742 30,558 $ 141.2 $ 96.4 $ 44.8Other Minerals 1,487 2,298 (811 ) 1.9 2.7 (0.8 )Oil & Gas 7.8 10.3 (2.5 )

112,787 83,040 29,747 $ 150.9 $ 109.4 $ 41.5

1 For average commodity prices used in calculation of GEOs, please refer to average commodity price tables on pages 12 and 22 of this MD&A.

Ourportfolioiswell-diversifiedwithGEOsandrevenuebeingearnedfrom43mineralassetsand59oil&gasinterests invariousjurisdictions.


GEO Reconciliation - Q2 2015 to Q2 2016

GEOsearnedfrompreciousmetalassetsincreasedby37.8%to111,300GEOsinthesecondquarterof2016from80,742GEOsinthesecondquarterof2015.Revenuefrompreciousmetalassetswas$141.2millioninthesecondquarterof2016comparedwith$96.4millionforthesameperiodas2015.ThelargestcomponentoftheseincreaseswascontributedfromourLatinAmericaassetswhichrealizeda62.0%increaseinGEOsand71.3%increaseinrevenuecomparedtotheprioryear as a result of the acquisitions of the Antamina and Antapaccay streams.

QuarterlyRevenueBreakdown(expressed in millions)

$121.3

$132.0

$150.9

$109.4$103.7

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

Reve

nue

Q1 2016 Q2 2016Q2 2015 Q3 2015 Q4 2015

Oil & Gas

Other

PGM

Silver

Gold

Oil & Gas

Gold

Silver

OtherPGM

GEO Reconciliation – Q2 2015 to Q2 2016

GEOs -

Q2 201

5

PGM asse

ts

Acquis

itions

Gold NPIs

Silver

asse

ts

Gold as

sets

Other m

ineral

s

GEOs -

Q2 201

6

112,787

4,131 1,894 811 270

2,873

33,980

83,040


Overall,GEOsandrevenueincreasesforthequarterareattributabletothefollowing:

• TheCompanyreceived19,581GEOdeliveriesfromAntapaccay,astreamaddedinfirstquarter2016.Secondquarter2016 represented the first full quarter of deliveries from the asset.

• TheCompanyreceived11,898GEOdeliveriesfromAntamina,anassetaddedtotheportfolioinfourthquarter2015.• TheCompanyreceiveditsfirstfullquarterofdeliveriesfromKarmawith2,500goldouncesbeingreceived.Deliveries

fromKarmaarefixedintheinitialyearsatarateof1,250ouncespermonth.Duetotimingofdeliveries,theCompanyexpectstoreceive5,000goldouncesinthirdquarter2016.

• OurSudburypreciousmetalsassetsdeliveredanadditional1,979GEOscomparedtosecondquarter2015.Thisincreaseisduetohigherplatinumandpalladiumproductionattheminespartiallyoffsetbylowergold,platinumandpalladiumpricesontheconversiontoGEOs.

• Goldstrikedeliveredanadditional3,211GEOscomparedtosecondquarter2015whichconsistsofbothhigherNSRandNPIounces.

• TheabovesignificantincreaseinGEOswerepartiallyoffsetbylowerGEOdeliveriesfromCandelaria(-7,945GEOs)wherelowerdeliverieswereexpectedin2016,BaldMountain(-1,391GEOs)andStillwater(-1,077GEOs)inthequarter.

• Duringthesecondquarterof2016,1,385,191ouncesofsilverweredeliveredfromourCandelaria,Antapaccay,AntaminaandCerroSanPedrointerestswhichwereconvertedtoGEOs.

OtherMineralsgenerated1,487GEOsand$1.9millioninrevenue.

Oil&gasassetsgeneratedrevenueof$7.8millionforthequarter(99%oiland1%gas)comparedwith$10.3millionforthesameperiodof2015(97%oiland3%gas),adecreaseof24.3%.Thedecreaseislargelyduetoloweraverageoilpricesrealizedinthesecondquarterof2016.Productionforthequarterwas3.2%lowerthanthesecondquarterof2015.

RevenuefromtheWeyburnUnitforthequarterdecreasedto$6.7million(2015-$8.3million)with$4.4millionearnedfromtheNRI(2015-$5.3million),$2.0millionearnedfromtheworkinginterest(2015-$2.5million)and$0.3millionearnedfromtheoverridingroyalties(2015-$0.5million).RevenuefromtheWeyburnNRIwaslowerduetothedecreaseintheaverageoilprice.ActualrealizedpricefromtheNRIwasC$46.48/boeforthequarter,down22.8%fromtherealizedpriceofC$60.17/boeforthesecondquarterof2015.


RevenueforthethreeandsixmonthsendedJune30,2016was$150.9million(2015-$109.4million)and$282.9million(2015-$218.6million),respectively,andwascomprisedofthefollowing:

Revenue

Forthethreemonthsended Forthesixmonthsended(expressed in millions) June 30, June 30,

Property Interest 2016 2015 2016 2015

PreciousMetals

UnitedStates Goldstrike NSR 2-4%, NPI 2.4-6% $ 7.4 $ 3.2 $ 13.2 $ 6.0 Stillwater NSR 5% 3.2 4.4 6.4 9.1 Gold Quarry NSR 7.29% 3.7 3.3 6.6 7.7 Marigold NSR 1.75-5%, GR 0.5-4% 2.9 2.0 4.5 3.2 Fire Creek/Midas Fixed to 2018 / NSR 2.5% 2.6 2.9 5.0 4.5 Bald Mountain NSR/GR 0.875-5% 0.5 2.2 0.8 4.4 Mesquite NSR 0.5-2% 0.7 0.3 1.2 0.6 Other 0.1 0.1 0.2 0.2

Canada Sudbury Stream 50% 8.6 5.2 14.4 12.0 Detour Lake NSR 2% 3.4 3.0 6.4 5.5 East Timmins NSR 2-15% 2.6 2.6 4.8 5.6 Musselwhite NPI 5% 1.1 0.8 2.1 1.6 Hemlo NSR 3%, NPI 50% 0.7 0.3 2.5 0.5 Kirkland Lake NSR 2.5-5.5%, NPI 20% 1.3 1.0 2.5 2.3 Timmins West NSR 2.25% 0.8 0.9 1.6 2.0 Canadian Malartic GR 1.5% 0.9 0.3 1.1 0.7 Other 0.1 – 0.1 –

LatinAmerica Antapaccay Stream (indexed) 24.7 – 35.9 –Antamina Stream 22.5% Silver 15.3 – 36.3 –Candelaria Stream 68% 20.3 29.0 42.3 55.7 Palmarejo Stream 50% 15.7 14.9 30.5 30.1 Cerro San Pedro GR 1.95% 0.5 0.8 1.0 1.4 Other 0.3 0.3 0.6 0.6

RestofWorld MWS Stream 25% 7.4 6.4 14.5 13.7 Sabodala Stream 6%, Fixed to 2019 7.2 6.7 13.9 15.8 Subika NSR 2% 1.1 1.0 2.1 2.6 Tasiast NSR 2% 0.7 1.3 2.2 2.6 Karma Stream 4.875%, Fixed to 75koz 3.2 – 4.7 –Duketon NSR 2% 1.5 1.2 3.2 3.2 Edikan NSR 1.5% 0.7 0.5 1.6 1.5 Cooke 4 Stream 7% 0.9 0.9 2.2 1.8 Other 1.1 0.9 2.8 2.9

$ 141.2 $ 96.4 $ 267.2 $ 197.8

OtherMinerals $ 1.9 $ 2.7 $ 4.3 $ 5.0

Oil&gas Weyburn NRI 11.71%, ORR 0.44%, Wl 2.56% 6.7 8.3 9.0 11.7 Midale ORR 1.14%, Wl 1.59% 0.4 0.5 0.7 1.0 Edson ORR 15% 0.2 0.4 0.5 0.9 Other 0.5 1.1 1.2 2.2

$ 7.8 $ 10.3 $ 11.4 $ 15.8

Revenue $ 150.9 $ 109.4 $ 282.9 $ 218.6


80%

70%

60%

50%

40%

30%

20%

10%

0%

60%

50%

40%

30%

20%

10%

0%

2016 2015 2016 2015

Gold Silver PGM Other Minerals Oil & Gas United States Canada Latin America Rest of World

16%

6%

72%74%

6%8%

1%3%

5%9%

14%17%

19%24%

51%

41%

16%18%

Asstatedearlier,twooftheCompany’sprimaryobjectivesaretobuildadiversifiedportfolioofroyaltiesandstreamsbycommodity,geography,revenuetypeandstageofprojectandmaintainpreciousmetalsrevenueabove80%oftotalrevenue.Forthesecondquarterof2016,preciousmetalsrevenuecomprised94%oftotalrevenuecomparedto88%insecondquarter2015.Inaddition,theCompanygenerated84%ofrevenuefromjurisdictionsintheAmericas,with a long history of mining.

RevenuebyCommodity-ThreeMonthsendingJune30th

Revenuebygeography-ThreeMonthsendingJune30th

80%

70%

60%

50%

40%

30%

20%

10%

0%

60%

50%

40%

30%

20%

10%

0%

2016 2015 2016 2015


16%

6%

72%74%

6%8%

1%3%

5%9%

14%17%

19%24%

51%

41%

16%18%


CostsandExpensesCostsandexpensesforthesecondquarterwere$101.9millioncomparedto$78.5millioninthesameperiodin2015.ThefollowingtableprovidesalistofthecostsandexpensesincurredforthethreemonthsendedendedJune30,2016and2015. Three months ended June 30, (expressed in millions) 2016 2015 Variance

Costs of sales $ 27.7 $ 24.0 $ 3.7Depletion and depreciation 68.2 49.1 19.1Corporate administration 5.7 4.1 1.6Business development 0.3 1.3 (1.0 )

Subtotal $ 101.9 $ 78.5 $ 23.4

Impairment charges – – –

$ 101.9 $ 78.5 $ 23.4

CostsofSales

Costsofsales,whicharecomprisedofthecostofGEOspurchasedunderstreamagreements,costofprepaidgoldounces,netproceedstaxesonmineralinterests,oil&gasproductiontaxesandoperatingcostsonoil&gasworkinginterestswere$27.7millionforthesecondquarterof2016comparedwith$24.0millionforthesecondquarterof2015. Three months ended June 30, (expressed in millions) 2016 2015 Variance

Cost of stream sales $ 24.5 $ 20.0 $ 4.5Cost of prepaid ounces 1.7 2.2 (0.5 )Mineral production taxes 0.7 0.5 0.2Oil & gas operating costs 0.8 1.3 (0.5 )

$ 27.7 $ 24.0 $ 3.7

Theincreaseof$3.7millionisattributabletomorestreamouncesdeliveredpursuanttothevariousstreamagreementsinthesecondquarterof2016whencomparedto2015.Theongoingstreamcostperouncesareeitherafixedamountperouncedelivered(adjustedforinflationeachyear)oranamountbasedasapercentageofspotpriceofgoldorsilver.TheCompanywasdelivered81,180GEOsunderitsstreamagreementsduringsecondquarter2016comparedto52,905GEOsdeliveredinsecondquarter2015.Oil&gasoperatingcostswerelowerduetoproductionandcostefficienciesimplementedbytheoperators.

CostsofSalesReconciliation-Q22015toQ22016(expressed in millions)

27.7

2.9 0.5 0.5

0.71.2

0.6 0.1

5.0

24.0

Costs of Sales Reconciliation – Q2 2015 to Q2 2016

COS - Q2 2

015

COS - Q2 2

016

Fire C

reek/M

idas

Palmare

jo

Karma

Cande

laria

Antamina

Other, N

et

Antapa

ccay

Oil & Gas

Expe

nses


Depletion Reconciliation – Q2 2015 to Q2 2016

Deplet

ion -

Q2 201

5

Cande

laria

Sabod

ala

Karma

Antapa

ccay

Antamina

Bald M

ounta

in

Oil & Gas

Other, n

et

Deplet

ion -

Q2 201

6

68.2

4.9 1.5 0.2 1.2

4.92.1

11.9

8.0

49.1

Depletion and DepreciationDepletionanddepreciationtotaled$68.2millionforthequartercomparedto$49.1millionin2015.Themajorityoftheincreaseof$19.1millionisduetotheincreaseddepletionassociatedwiththetwosignificantstreamacquisitionscompletedbytheCompanyinthelast12months.Duringthequarter,theCompanyrecorded$11.9millionindepletionforAntapaccayand$8.0millionforAntamina.Inaddition,$1.7millionincrementaldepletionforGoldstrikewasrecordedduetohigherproductionandtheCompanyrecorded$2.1millionindepletionforKarmawhereinitialdeliverieswerereceived.TheseincreaseswerepartiallyoffsetbylowerdepletiononCandelariaandBaldMountainduetolowerproductionandOil&gasduetotheimpactofaweakerCanadiandollarrelativetotheU.S.dollar.

Depletion Reconciliation - Q2 2015 to Q2 2016(expressed in millions)

Corporate Administration

Corporateadministrationexpensesincreasedto$5.7millioninthequarter,representing3.8%ofrevenue,comparedto$4.1millionin2015.Theincreaseisprimarilyduetohigherboardofdirectors’costsasthedeferredshareunitsearnedbyboardmembersincreasedinvalueduringthequarter.

Three months ended June 30, (expressed in millions) 2016 2015 Variance

Salaries and benefits $ 1.3 $ 1.1 $ 0.2Professional fees 0.5 0.3 0.2Office costs 0.4 0.5 (0.1 )Board of Directors cost 1.1 0.1 1.0Share based compensation 1.3 1.4 (0.1 )Other 1.1 0.7 0.4

$ 5.7 $ 4.1 $ 1.6

BusinessDevelopmentExpenses

Businessdevelopmentexpensesreflectedanexpenseof$0.3millionduetothecapitalizationofexpensestothemineralinterestfollowingtheclosingoftransactions.Timingofincurringthesecoststypicallyvariesdependinguponthelevelofactivityofthebusinessdevelopmentteamandthetimingofcompletingtransactions.


ForeignExchangeandOtherIncome/ExpensesForeignexchangegainsandotherincome/expenseswereanincomeof$4.4millionforQ22016comparedtoanincomeof$1.4millionforQ22015.Thefollowingtableprovidesalistofforeignexchangeincomeandotherincome/expensesincurredforthethreemonthsendedJune30,2016and2015.


Foreign exchange gain $ – $ 0.7 $ (0.7 )Mark-to-market loss on warrants – (0.1 ) 0.1Gain (Loss) on sale of gold 1.6 (0.1 ) 1.7Gain on sale of investments 2.8 0.9 1.9

$ 4.4 $ 1.4 $ 3.0

Foreign exchange gains and losses include foreign exchange movements related to cash and cash equivalents and investmentsindebtsecurities,suchastreasurybillsandintercompanyloans,heldintheparentcompany,whicharedenominatedineitherU.S.dollarsorMexicanpesos.Theparentcompany’sfunctionalcurrencyistheCanadiandollar.UnderIFRS,allforeignexchangechangesrelatedtomonetaryassetsdenominatedinacurrencyotherthanthefunctionalcurrency are recorded in net income as opposed to other comprehensive income. The gain on sale of gold relates to physical ounces of gold sold from royalty interests.

FinanceIncomeandFinanceExpensesFinanceincomewas$1.0million(2015-$1.1million)forthequarterwhilefinanceexpenseswere$0.8million(2015-$0.5million).


Finance Income Interest $ 0.9 $ 1.1 $ (0.2 ) Finance Fees 0.1 – 0.1

$ 1.0 $ 1.1 $ (0.1 )

Finance Expenses Standby Charges $ 0.6 $ 0.4 $ 0.2 Amortization 0.2 0.1 0.1

$ 0.8 $ 0.5 $ 0.3

Financeincomeisearnedonourcashequivalentsand/orshort-terminvestments.Interestincomeintheamountof$0.5millionwasaccruedfromtheNorontloanduringQ22016.

IncomeTaxesFranco-Nevadahadanincometaxexpenseof$11.3million(2015-$11.3million)forthequartercomprisedofacurrentincometaxexpenseof$11.6million(2015-$6.1million)andadeferredincometaxrecoveryof$0.3million(2015-deferredincometaxexpenseof$5.2million)relatedtoourCanadianandMexicanentities.

NetIncomeNetincomeforthequarterwas$42.3million,or$0.24pershare,comparedwithanetincomeof$21.6million,or$0.14pershare,forthesameperiodin2015.AdjustedNetIncomewas$40.0million,or$0.22pershare,comparedwith$22.9million,or$0.15pershare,forQ22015.TheincreaseinAdjustedNetIncomewasdrivenprimarilybyhigher revenue due to the recent asset acquisitions.


QuarterlyFinancialInformation

Selectedquarterlyfinancialinformationfromourfinancialstatementsissetoutbelow:

Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 2016 2016 2015 2015 2015 2015 2014 2014

Revenue $ 150.9 $ 132.0 $ 121.3 $ 103.7 $ 109.4 $ 109.2 $ 123.0 $ 107.6

Costs and expenses1 101.9 95.6 155.7 77.1 78.5 78.8 109.2 61.0Operating income (loss) 49.0 36.4 (34.4 ) 26.6 30.9 30.4 13.8 46.6Other income (expenses) 4.6 1.7 (1.9 ) (2.9 ) 2.0 (2.2 ) (2.0 ) (0.4 )Income tax expense (recovery) 11.3 8.1 (4.9 ) 8.5 11.3 9.0 10.2 13.0Net income (loss) 42.3 30.0 (31.4 ) 15.2 21.6 19.2 1.2 33.2

Basic earnings (loss) per share $ 0.24 $ 0.18 $ (0.20 ) $ 0.10 $ 0.14 $ 0.12 $ 0.00 $ 0.22Diluted earnings (loss) per share $ 0.24 $ 0.18 $ (0.20 ) $ 0.10 $ 0.14 $ 0.12 $ (0.01 ) $ 0.22

Average Gold Price $ 1,259 $ 1,181 $ 1,104 $ 1,124 $ 1,193 $ 1,219 $ 1,200 $ 1,282GEOs2 112,787 106,621 106,312 85,637 83,040 85,081 92,774 70,071Adjusted EBITDA2 118.9 103.7 95.8 78.0 82.2 83.3 96.2 88.7Adjusted EBITDA2 per share $ 0.67 $ 0.62 $ 0.61 $ 0.50 $ 0.53 $ 0.53 $ 0.62 $ 0.59Margin2 78.9% 78.6% 79.0% 75.2% 75.1% 76.3% 78.2% 82.4%Adjusted Net Income2 $ 40.0 $ 28.0 $ 23.7 $ 19.4 $ 22.9 $ 22.9 $ 31.6 $ 34.5Adjusted Net Income2

per share $ 0.22 $ 0.17 $ 0.15 $ 0.12 $ 0.15 $ 0.15 $ 0.20 $ 0.23

1 Includes impairment charges on royalty, stream and working interests.2 GEOs, Adjusted EBITDA, Margin and Adjusted Net Income are non-IFRS measures with no standardized meaning under IFRS. For further information and a detailed

reconciliation, please refer to pages 34-36 of this MD&A.

OvERvIEWOFFINANCIALPERFORMANCE-SIXMONTHS2016TOSIXMONTHS2015Thepricesofpreciousmetals,oilandgasandtheactualproductionfrommineralandoil&gasassetsarethelargestfactorsindeterminingprofitabilityandcashflowfromoperationsforFranco-Nevada.

AverageCommodityPricesandExchangeRate

SixmonthsendedJune30, (expressed in millions) 2016 2015 Variance

Gold1 ($/oz) $ 1,220 $ 1,206 1.2%Silver2 ($/oz) 16.00 16.56 (3.4% )Platinum3 ($/oz) 959 1,160 (17.3% )Palladium3 ($/oz) 546 773 (29.4% )

Edmonton Light C$/bbl 48.13 61.19 (21.3% )Quality Differential C$/bbl (8.58) (8.76 ) (2.1% )Realized oil price C$/bbl 39.55 52.43 (24.6% )

ExchangeRate4 CAD/US 0.7518 0.8097 7.2%

1 Based on London Bullion Market Association (“LBMA”) Gold Price PM2 Based on LBMA Silver Price3 Based on London PM Fix4 Based on Bank of Canada noon rates

Precious metals commodity prices have largely declined in recent years and have only recently started to recover.

Duringthefirstsixmonthsof2016,averagegoldpricestradedbetween$1,077/ozand$1,366/ozwithanaveragepriceof$1,220/oz.Thiscomparestoanaveragegoldpriceof$1,206/ozforthesixmonthsendedJune30,2015.


Gold Equivalent Ounces and Revenue

Franco-NevadacontinuedtoseesignificantgrowthinGEOscontributedwithmineralassetscontributing219,408GEOs inthefirsthalfof2016,anincreaseof30.5%overthefirsthalfof2015.Revenuefortheperiodwas$282.9millioncomparedwith$218.6millionforthesameperiodof2015,anincreaseof29.4%.AlthoughthenumberofGEOscontributedgrew,loweraveragesilver,platinumandpalladiumpricesreducedtheoverallpositiveimpactofthisincreaseonrevenue.

ThefollowingtableoutlinesGEOsandrevenueattributabletoFranco-NevadaforthesixmonthsendedJune30,2016and2015bycommodity,geographicallocationandtypeofinterest:

Gold Equivalent Ounces1 Revenue (in millions)ForthesixmonthsendedJune30, 2016 2015 Variance 2016 2015 Variance

Commodity Precious Metals Gold 162,477 138,813 23,664 $ 199.7 $ 167.5 $ 32.2Silver 41,150 9,793 31,357 50.4 11.9 38.5PGM 12,249 15,306 (3,057 ) 17.0 18.4 (1.4 )

Precious Metals - Total 215,876 163,912 51,964 267.1 197.8 69.3Other Minerals 3,532 4,209 (677 ) 4.4 5.0 (0.6 )Oil & Gas – – – 11.4 15.8 (4.4 )

219,408 168,121 51,287 $ 282.9 $ 218.6 $ 64.3

Geography United States 31,091 29,950 1,141 $ 38.1 $ 36.0 $ 2.1Canada 29,182 26,251 2,931 49.3 47.4 1.9Latin America 119,408 72,561 46,847 146.7 87.8 58.9Rest of World 39,727 39,359 368 48.8 47.4 1.4

219,408 168,121 51,287 $ 282.9 $ 218.6 $ 64.3

Type Revenue-based 47,163 52,279 (5,116 ) $ 59.6 $ 67.2 $ (7.6 )Streams 156,474 106,841 49,633 194.6 129.1 65.5Profit-based 8,891 2,206 6,685 16.2 9.4 6.8Other 6,880 6,795 85 12.5 12.9 (0.4 )

219,408 168,121 51,287 $ 282.9 $ 218.6 $ 64.3

1 For average commodity prices used in the calculation of GEOs, please refer to average commodity price tables on pages 8 and 22 of this MD&A.

GEOsandrevenuewereearnedfromthefollowingassetclasses:

Gold Equivalent Ounces1 Revenue (in millions)ForthesixmonthsendedJune30, 2016 2015 Variance 2016 2015 Variance

Commodity Precious Metals United States 30,873 29,677 1,196 $ 37.7 $ 35.7 $ 2.0Canada 27,171 25,060 2,111 35.5 30.2 5.3Latin America 119,408 72,561 46,847 146.7 87.8 58.9Rest of World 38,424 36,614 1,810 47.2 44.1 3.1

Precious Metals - Total 215,876 163,912 51,964 $ 267.1 $ 197.8 $ 69.3Other Minerals 3,532 4,209 (677 ) 4.4 5.0 (0.6 )Oil & Gas 11.4 15.8 (4.4 )

219,408 168,121 51,287 $ 282.9 $ 218.6 $ 64.3

1 For average commodity prices used in calculation of GEOs, please refer to average commodity price tables on pages 8 and 22 of this MD&A.


gEOReconciliation-SixMonths2015toSixMonths2016

GEOsearnedfrompreciousmetalassetsincreasedby31.7%to215,876GEOsin2016from163,912GEOsin2015.Revenuefrompreciousmetalassetswas$267.1millionin2016comparedwith$197.8millionforthesameperiodas2015.ThelargestincreasecamefromourLatinAmericanassets.

Overall,GEOsandrevenueincreasesareattributabletothefollowing:

• TheCompanyreceived28,499GEOdeliveriesfromAntapaccay.Thisincludes371,000silverouncesdeliveredandsold bytheCompany.Thisisanewassetfor2016.

• TheCompanyreceived29,679GEOdeliveriesfromAntaminaforthefirstsixmonthsof2016.• ThenewstreamKarmahasdeliveredthreemonthsoffixedouncesthusfarin2016accountingfor3,750GEOs.• TheCompanybenefittedfromtheHemloNPIcontributinganadditional1,559GEOsin2016comparedto2015due

to higher gold prices and stronger production.• Goldstrikedeliveredanadditional5,752GEOscomparedtothefirstsixmonthsof2015whichconsistsofbothhigher

NSRandNPIounces.• TheabovesignificantincreasesinGEOswerepartiallyoffsetbylowerGEOdeliveriesfromCandelaria(-11,024GEOs)

wherelowerdeliverieswereexpectedin2016,BaldMountain(-2,941GEOs)andStillwater(-2,344GEOs)inthefirst six months of 2016.

• DuringthesixmonthsendedJune30,2016,3,132,933ouncesofsilverweredeliveredfromCandelaria,Antapaccay,AntaminaandCerroSanPedrointerestswhichwereconvertedtoGEOs.

OtherMineralsgenerated3,532GEOsand$4.4millioninrevenue.

Oil&gasassetsgeneratedrevenueof$11.4millionforthefirstsixmonthsof2016(98%oiland2%gas)comparedwith$15.8millionfor2015(95%oiland5%gas),adecreaseof27.8%.Thedecreaseisduetoloweraverageoilpricesrealized in2016.Productionforthesixmonthswas3.7%lowerthanforthesameperiodin2015.

RevenuefromtheWeyburnUnitfortheperioddecreasedto$9.0million(2015-$11.7million)with$5.3millionearnedfromtheNRI(2015-$6.8million),$3.2millionearnedfromtheworkinginterest(2015-$4.2million)and$0.5millionearnedfromtheoverridingroyalties(2015-$0.7million).RevenuefromtheWeyburnNRIwaslowerduetothedecrease intheaverageoilprice.ActualrealizedpricefromtheNRIwasC$40.18/boefortheperiod,down23.5%fromtherealizedpriceofC$52.53/boeforthefirsthalfof2015.

ForthesixmonthsendedJune30,2016,preciousmetalsrevenuewas94%oftotalrevenuecomparedto91%in2015. Inaddition,theCompanygenerated83%ofrevenuefromtheAmericas.

GEO Reconciliation – Six Months 2015 to Six Months 2016

GEOs -

Six Mon

ths 20

15

PGM asse

ts

Acquis

itions

Gold NPIs

Silver

asse

ts

Gold as

sets

Other m

ineral

s

GEOs -

Six Mon

ths YTD

2016

219,408

10,401 3,191 3,057 677

6,685

61,928

168,121


RevenuebyCommodity-SixMonthsendingJune30th

Revenuebygeography-SixMonthsendingJune30th

80%

70%

60%

50%

40%

30%

20%

10%

0%

60%

50%

40%

30%

20%

10%

0%

2016 2015 2016 2015


18%

5%

70%

77%

6%9%

2% 2%4%

7%

14%16% 17%

22%

52%

40%

17%

22%

80%

70%

60%

50%

40%

30%

20%

10%

0%

60%

50%

40%

30%

20%

10%

0%

2016 2015 2016 2015


18%

5%

70%

77%

6%9%

2% 2%4%

7%

14%16% 17%

22%

52%

40%

17%

22%


CostsandExpensesCostsandexpensesforthesixmonthsendedJune30,2016were$197.5millioncomparedto$157.3millioninthesameperiodin2015.ThefollowingtableprovidesalistofthecostsandexpensesincurredforthesixmonthsendedJune30,2016and2015. SixmonthsendedJune30, (expressed in millions) 2016 2015 Variance

Costs of sales $ 52.1 $ 46.4 $ 5.7Depletion and depreciation 133.7 100.8 32.9Corporate administration 11.1 8.2 2.9Business development 0.6 1.8 (1.2 )

Subtotal $ 197.5 $ 157.2 $ 40.3

Impairment charges – 0.1 (0.1 )

$ 197.5 $ 157.3 $ 40.2

CostsofSales

Costsofsales,whicharecomprisedofthecostofGEOspurchasedunderstreamagreements,costofprepaidgoldounces,netproceedstaxesonmineralinterests,oil&gasproductiontaxesandoperatingcostsonoil&gasworkinginterestswere$52.1millionforthefirstsixmonthsof2016comparedwith$46.4millionforthesecondquarterof2015. SixmonthsendedJune30, (expressed in millions) 2016 2015 Variance

Cost of stream sales $ 46.2 $ 40.2 $ 6.0Cost of prepaid ounces 3.5 3.3 0.2Production taxes 1.3 1.1 0.2Oil & gas operating costs 1.1 1.8 (0.7 )

$ 52.1 $ 46.4 $ 5.7

Theincreaseof$5.7millionisattributabletomorestreamouncesdeliveredpursuanttothevariousstreamagreementsinthefirstsixmonthsof2016whencomparedto2015.TheCompanywasdelivered156,474GEOsunderitsstreamagreementsduringfirstsixmonthsof2016comparedto106,841GEOsdeliveredinthefirstsixmonthsof2015.Oil&Gasoperatingcostswerelowerduetoproductionandcostefficienciesimplementedbytheoperators.


CostsofSalesReconciliation-SixMonths2015toSixMonths2016(expressed in millions)

Depletion and DepreciationDepletionanddepreciationtotaled$133.7millionforthesixmonthscomparedto$100.8millionin2015.Theincreaseof$32.9millionisdueinparttotheAntaminaacquisition($20.2million),theAntapaccayacquisition($17.3million),andinitialdepletionfortheKarmastreamcostduetotheinitialdeliveriesreceived($3.2million).TheseincreaseswerepartiallyoffsetbylowerdepletiononCandelariaandBaldMountainduetolowerproductionandonOil&GasduetotheimpactofaweakerCanadiandollarrelativetotheU.S.dollar.

DepletionReconciliation-SixMonths2015toSixMonths2016(expressed in millions)

COS - Six

Months

2015

Fire C

reek/M

Idas

Palmare

jo

Antapa

ccay

Antamina

Other, N

et

Oil & Gas

Expe

nses

Cande

laria

Karma

COS - Six

Months

2016

52.1

3.9 0.6

1.70.90.20.10.1

7.2

46.4

Depletion Reconciliation – Six Months 2015 to Six Months 2016

Deplet

ion -

Six mon

ths 20

15

Cande

laria

Sabod

ala

Karma

Antapa

ccay

Antamina

Bald M

ounta

in

Oil & Gas

Other, n

et

Deplet

ion -

Six mon

ths 20

16

133.7

6.73.1 2.0 1.7

3.25.7

17.3

20.2

100.8


Corporate Administration

Corporateadministrationexpensesincreasedto$11.1millioninthefirstsixmonthsof2016,from$8.2millionin2015.Theincreaseisprimarilyduetohigherboardofdirectors’costsasthedeferredshareunitsearnedbyboardmembersincreasedin value during the quarter.


Salaries and benefits $ 2.8 $ 2.3 $ 0.5Professional fees 0.7 0.3 0.4Office costs 0.7 0.4 0.3Board of Directors costs 2.2 0.1 2.1Share based compensation 2.4 2.7 (0.3 )Other 2.3 2.4 (0.1 )

$ 11.1 $ 8.2 $ 2.9

BusinessDevelopmentExpenses

Businessdevelopmentexpensesreflectanexpenseof$0.6millionduetothecapitalizationofexpensestothemineralinterestfollowingtheclosingoftransactions.Timingofincurringthesecoststypicallyvariesdependinguponthelevelofactivityofthebusinessdevelopmentteamandthetimingofcompletingtransactions.

ForeignExchangeandOtherIncome/ExpensesForeignexchangelossesandotherincome/expenseswereanincomeof$6.3millionfor2016andalossof$1.2millionfor2015.Thefollowingtableprovidesalistofforeignexchangeincome/lossesandotherexpensesincurredforthesixmonthsendedJune30,2016and2015.


Foreign exchange loss $ (0.1) $ (1.8 ) $ 1.7Mark-to-market loss on warrants – (0.3 ) 0.3Gain on sale of gold 2.1 – 2.1Gain on sale of investments 4.3 0.9 3.4

$ 6.3 $ (1.2 ) $ 7.5

Foreign exchange gains and losses include foreign exchange movements related to cash and cash equivalents and investmentsindebtsecurities,suchastreasurybillsandintercompanyloans,heldintheparentcompany,whicharedenominatedineitherU.S.dollarsorMexicanpesos.Theparentcompany’sfunctionalcurrencyistheCanadiandollar.UnderIFRS,allforeignexchangechangesrelatedtomonetaryassetsdenominatedinacurrencyotherthanthefunctionalcurrency are recorded in net income as opposed to other comprehensive income.


FinanceIncomeandFinanceExpensesFinanceincomewas$2.1million(2015-$1.9million)forthesixmonthswhilefinanceexpenseswere$2.1million(2015-$0.9million).


Finance Income Interest $ 1.8 $ 1.9 $ (0.1 ) Finance Fees 0.3 – 0.3

$ 2.1 $ 1.9 $ 0.2

Finance Expenses Standby Charges $ 1.0 $ 0.7 $ 0.3 Interest 0.8 – 0.8 Amortization 0.3 0.2 0.1

$ 2.1 $ 0.9 $ 1.2

Financeincomeisearnedonourcashequivalentsand/orshort-terminvestments.TheincreaseinfinanceincomeisduetofinanceincomeearnedfromtheTrueGoldadditionalfinancingoptionundertheKarmastreamagreement.Interestincomeintheamountof$1.0millionhasbeenaccruedin2016fromtheNorontloan.

Financeexpensesincreasedduetointerestexpenseassociatedwiththe$460.0milliondrawdownofthecreditfacilityin Q42015.Inadditiontothe$0.8millioninterestexpensed,$0.7millionwascapitalizedtotheCobrePanamastreaminterestproject.Theamortizationexpenserelatestoamortizationoftheinitialset-upcostsincurredwithrespecttothecreditfacility.

IncomeTaxesFranco-Nevadahadanincometaxexpenseof$19.4million(2015-$20.3million)forthesixmonthsendedJune30,2016comprisedofacurrentincometaxexpenseof$17.1million(2015-$13.4million)andadeferredincometaxexpenseof $2.3million(2015-$6.9million)relatedtoourCanadianandMexicanentities.

NetIncomeNetincomeforthefirstsixmonthswas$72.3million,or$0.41pershare,comparedwithanetincomeof$40.8million,or$0.26pershare,forthesameperiodin2015.AdjustedNetIncomewas$68.0million,or$0.39pershare,comparedwith$45.8million,or$0.30pershare,for2015.TheincreaseinAdjustedNetIncomewasdrivenprimarilybyhigherrevenue due to recent asset acquisitions.


FINANCIALCONDITIONREvIEW

SummaryBalanceSheetandKeyFinancialMetrics

As at As at June 30, December 31, (expressed in millions, except ratios) 2016 2015

Total cash and cash equivalents $ 225.8 $ 149.2Current assets 318.4 274.7Non-current assets 3,891.5 3,399.6

Total assets $ 4,209.9 $ 3,674.3

Current liabilities 22.2 20.8Non-current liabilities 29.8 490.5

Total liabilities $ 52.0 $ 511.3

Total shareholders’ equity $ 4,157.9 $ 3,163.0Dividends paid (including DRIP) 77.8 129.0Debt – 457.3Total common shares outstanding 178.1 156.9

Key Financial Ratios Working Capital $ 296.2 $ 253.9Debt to equity – 0.14:1

BalanceSheetReviewTotalassetswere$4,209.9millionatJune30,2016comparedto$3,674.3millionatDecember31,2015.Ourassetbaseisprimarilycomprisedofnon-currentassetssuchasourroyalty,streamandworkinginterests,andcurrentassetsofcashandcashequivalents.Thisreflectsourbusinessstrategyofgrowingadiversifiedportfolioandensuringcashisavailableforfutureacquisitionsanddividends.TotalliabilitiesatJune30,2016were$52.0millionincludingcurrentanddeferredincometaxliabilities.

FINANCIALPOSITION,LIQUIDITyANDCAPITALRESOURCESCashflowgeneratedforthethreeandsixmonthsendedJune30wasasfollows:

ThreemonthsendedJune30, SixmonthsendedJune30,(expressed in millions) 2016 2015 2016 2015

Cash generated from operating activities $ 82.3 $ 60.1 $ 181.4 $ 129.5Cash used in investing activities (6.9) (25.8 ) (488.9) (46.9 )Cash provided by (used in) financing activities (23.8) (24.3 ) 381.6 (47.9 )Effect of exchange rate changes on cash and cash equivalents $ (2.1) $ 2.3 $ 2.5 $ (16.4 )

Change in cash and cash equivalents $ 49.5 $ 12.3 $ 76.6 $ 18.3

OperatingCashFlow

Cashprovidedbyoperatingactivitiesafterchangesinnon-cashassetsandliabilities,relatingtooperatingactivities,was$82.3millionand$60.1millionforthethreemonthsendedJune30,2016and2015,respectively.Cashprovidedbyoperatingactivitiesafterchangesinnon-cashassetsandliabilities,relatingtooperatingactivities,was$181.4millionand$129.5millionforthesixmonthsendedJune30,2016and2015,respectively.Theincreasesareattributabletohigherrevenuesgeneratedinthe quarter as a result of recent Antamina and Antapaccay mineral stream acquisitions.


InvestingActivities

Cashusedininvestingactivitieswas$6.9millionforthequartercomparedto$25.8millioninthesameperiodof2015.ThedecreasewasduetothefundingoftheCobrePanamastreamof$37.7millionbeingmorethanoffsetbyproceedsfromthedispositionofinvestmentsandgoldbullion.

Cashusedininvestingactivitieswas$488.9millionforthesixmonthsendedJune30,2016comparedto$46.9million inthesameperiodof2015.Theincreasewasduetotheacquisitionsofinterestsinmineralpropertiesin2016comparedto2015,inparticulartheAntapaccayacquisitionof$500.0million.

Financing Activities

Netcashusedinfinancingactivitieswas$23.8millionforthequartercomparedtoauseof$24.3millionfor2015.

Netcashprovidedbyfinancingactivitieswas$381.6millionforthefirstsixmonthsof2016comparedtoauseof$47.9millionfor2015.Theincreaseincashprovidedisattributabletothefundsraisedfromtheequityissuanceof19.2millionsharesresultingin$883.5millionnetproceedstotheCompany.Thisinflowoffundswaspartiallyusedtorepaythe$460.0millionthendrawnonthecreditfacility.

CashResourcesandLiquidity

OurperformanceisimpactedbyforeigncurrencyfluctuationsoftheCanadiandollarandAustraliandollarrelativetotheU.S.dollar.ThelargestexposureiswithrespecttotheCanadian/U.S.dollarexchangerateasweholdasignificantamount of our assets in Canada and report our results in U.S. dollars. The effect of this volatility in these currencies against theU.S.dollarimpactsourcorporateadministration,businessdevelopmentexpensesanddepletiononmineralandoil&gasinterests incurred in our Canadian and Australian entities due to their respective functional currencies. The Canadian dollar tradedinarangeof$0.7593to$0.7972,closingthequarterat$0.7687,andtheAustraliandollartradedbetween$0.7176and$0.7801.

AsatJune30,2016,ourcash,cashequivalentsandshort-terminvestmentstotaled$225.8million(December31,2015-$168.0million).Inaddition,weheldinvestmentsatJune30,2016withacombinedvalueof$123.4million(December31,2015-$94.8million),ofwhich$91.4millionwasheldinpubliclytradedequityinstruments(December31,2015-$64.6million).

Management’sobjectiveswhenmanagingcapitalareto:

(a) ensurethepreservationandavailabilityofcapitalbyinvestinginlowriskinvestmentswithhighliquidity;and

(b) ensure that adequate levels of capital are maintained to meet requirements.

Franco-Nevadainvestsitsexcessfundsintermdeposits,treasurybillsoftheU.S.government,Canadianfederalandprovincialgovernmentsandhighqualitycorporatebonds.AsatJune30,2016,themajorityoffundswereheldincashdepositswithseveralfinancialinstitutions.AsatJune30,2016,investmentshadmaturitiesuponacquisitionof92days.Accordingly,asatJune30,2016,theinvestmentswereclassifiedasshort-terminvestments.

Ournear-termcashrequirementsincludefundingoftheCobrePanamacommitments,corporateadministrationcosts,certain costs of operations, payment of dividends and income taxes directly related to the recognition of royalty and stream revenues.Asaroyalty/streamcompany,therearelimitedrequirementsforcapitalexpendituresotherthanfortheacquisitionofadditionalroyalties/streamsandworkinginterests’capitalcommitments.Suchacquisitionsareentirelydiscretionaryandwillbeconsummatedthroughtheuseofcash,asavailable,orthroughtheissuanceofcommonsharesorotherequityordebtsecuritiesoruseofourcreditfacility.Webelievethatourcurrentcashresources,ouravailablecreditfacilityandfuturecashflowswillbesufficienttocoverthecostofourcommitmentsunderthevariousstreamagreements,administrativeexpenses,costsofoperationsanddividendpaymentsfortheforeseeablefuture.


Ore and Refined Gold Purchase Commitments

ThefollowingtablesummarizesFranco-Nevada’scommitmentstopayforgold,silverandPGMstowhichithasthecontractual right pursuant to the associated precious metals agreements:

Attributable Payable Production to be Purchased Per Ounce Cash Payment 1,2

Term of Date of Interest gold Silver PgM gold Silver PgM Agreement 3 Contract

Antamina 0% 22.5% 4 0% n/a 5% 5 n/a 40 years 7-Oct-15Candelaria 68% 6 68% 6 0% $ 400 $ 4.00 n/a 40 years 6-Oct-14Cobre Panama –% 7 –% 8 0% $ 406 $ 6.09 n/a 45 years 2-Nov-15Karma 4.875% 9 0% 0% 20% 10 n/a n/a 40 years 11-Aug-14Palmarejo 50% 0% 0% $ 400 n/a n/a Life-of-Mine 11 20-Jan-09Guadalupe 50% 0% 0% $ 800 n/a n/a 40 years 2-Oct-14Sabodala 6% 12 0% 0% 20% 13 n/a n/a 40 years 12-Dec-13MWS 25% 0% 0% $ 400 n/a n/a 40 years 14 2-Mar-12Cooke 4 7% 0% 0% $ 400 n/a n/a 40 years 5-Nov-09Sudbury15 50% 0% 50% $ 400 n/a $ 400 40 years 15-Jul-08Antapaccay –% 16 –% 17 0% 20% 18 20% 19 n/a 40 years 10-Feb-16 1 Subject to an annual inflationary adjustment except for Antamina, Karma, Guadalupe, Sabodala and Antapaccay.2 Should the prevailing market price for gold be lower than this amount, the per ounce cash payment will be reduced to the prevailing market price, with the exception of Palmarejo.3 Subject to successive extensions.4 Subject to a fixed payability of 90%. Percentage decreases to 15.0% after 86,000,000 ounces of silver has been delivered under the agreement.5 Purchase price is 5% of the average silver price at the time of delivery.6 Percentage decreases to 40% after 720,000 ounces of gold and 12.0 million ounces of silver have been delivered under the agreement. 7 Gold deliveries are indexed to copper in concentrate produced from the project. 120 ounces of gold per every 1 million pounds of copper produced until 808,000 ounces of gold

delivered. Thereafter 81 ounces of gold per 1 million pounds of copper produced to 1,716,188 ounces of gold delivered, thereafter 63.4% of the gold in concentrate.8 Silver deliveries are indexed to copper in concentrate produced from the project. 1,376 ounces of silver per every 1 million pounds of copper produced until 9,842,000 ounces

of silver delivered. Thereafter 1,776 ounces of silver per 1 million pounds of copper produced to 29,731,000 ounces of silver delivered, thereafter 62.1% of the silver.9 Gold deliveries are fixed at 15,000 ounces per annum from June 30, 2016 until February 28, 2021. Thereafter, percentage is 4.875%.10 Purchase price is 20% of the average gold price at the time of delivery.11 Agreement is capped at 400,000 ounces of gold.12 Gold deliveries are fixed at 1,875 ounces per month until December 31, 2019. Thereafter, percentage is 6% of gold produced.13 Purchase price is 20% of prevailing market price at the time of delivery.14 Agreement is capped at 312,500 ounces of gold.15 The Company is committed to purchase 50% of the precious metals contained in ore from the properties. Cash payment is based on gold equivalent ounces.16 Gold deliveries are referenced to copper in concentrate shipped with 300 ounces of gold delivered for each 1,000 tonnes of copper in concentrate shipped, until 630,000 ounces

of gold has been delivered. Thereafter, percentage is 30% of gold shipped.17 Silver deliveries are referenced to copper in concentrate shipped with 4,700 ounces of silver delivered for each 1,000 tonnes of copper in concentrate shipped, until 10.0 million

ounces of silver has been delivered. Thereafter, percentage is 30% of silver shipped.18 Purchase price is 20% of the spot price of gold until 750,000 ounces of gold has been delivered, thereafter the purchase price is 30% of the spot price of gold.19 Purchase price is 20% of the spot price of silver until 12.8 million ounces of silver has been delivered, thereafter the purchase price is 30% of the spot price of silver.

Cobre Panama Stream Agreement

TheCompanyhasfundingcommitmentsundertheCobrePanamastreamagreementasdescribedintheGuidancesectionabove.

CAPITALRESOURCESAsofAugust8,2016,anamountof$1.0billion,oritsCanadiandollarequivalent,isavailableunderourunsecuredcreditfacility.Advancesunderthefacilitybearinterestdependinguponthecurrencyoftheadvanceandleverageratio.In2015,Franco-Nevadaincreaseditscreditfacilityfrom$500.0millionto$1.0billionandextendedthematuritytoNovember12,2020.AsofAugust8,2016,U.S.andCanadiandollaradvancesunderthefacilitywouldbearinterestratesof3.95%and2.90%,respectively.WecanalsodrawfundsusingLIBOR30-dayratesplus120basispointsunderourcreditfacility.

Standbyfeesof$1.0million(2015-$0.7million),interestof$0.8million(2015-$Nil)andamortizationofissuancecosts of$0.3million(2015-$0.2million)wereincurredandpaidforthesixmonthsendedJune30,2016.


CRITICALACCOUNTINgESTIMATESThepreparationofconsolidatedfinancialstatementsinaccordancewithIFRSrequirestheCompanytomakejudgments,estimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosuresofcontingentassetsandliabilitiesatthedateoftheconsolidatedfinancialstatementsandthereportedamountsofrevenuesandexpensesduringthereportingperiod.Estimatesandassumptionsarecontinuouslyevaluatedandarebasedonmanagement’sbestknowledgeoftherelevantfactsandcircumstances,havingregardtopreviousexperience.However,actualoutcomesmaydifferfromtheamounts included in the consolidated financial statements.

Oursignificantaccountingpoliciesandestimatesaredisclosedinnotes2and3ofourmostrecentannualconsolidatedfinancial statements.

NEWACCOUNTINgSTANDARDSISSUEDBUTNOTyETEFFECTIvE

IAS 12 Income Taxes

IAS12,“Incometaxes”(“IAS12”)providesguidanceontherecognitionofdeferredtaxassets.InJanuary2016,theInternationalAccountingStandardsboardissuedamendmentstoclarifytherequirementsforrecognizingdeferredtaxassetsonunrealizedlosses.Theamendmentsclarifytheaccountingfordeferredtaxwhereanassetismeasuredatfairvalueandthatfairvalueisbelowtheasset’staxbase.Theyalsoclarifycertainotheraspectsofaccountingfordeferredtaxassets.TheamendmentsareeffectiveforannualperiodsbeginningonorafterJanuary1,2017.

TheCompanyiscurrentlyassessingtheimpactofIAS12ontheconsolidatedfinancialstatements.

OUTSTANDINgSHAREDATAFranco-Nevadaisauthorizedtoissueanunlimitednumberofcommonandpreferredshares.Adetaileddescriptionofthe rights, privileges, restrictions and conditions attached to each class of authorized shares is included in our Annual InformationFormfortheyearendedDecember31,2015,acopyofwhichcanbefoundonSEDARatwww.sedar.comand inour40-F,acopyofwhichcanbefoundonEDGARatwww.sec.gov.

AsofAugust8,2016,thenumberofcommonsharesoutstandingorissuablepursuanttootheroutstandingsecuritiesisasfollows:

CommonShares Number

Outstanding 178,099,774Issuable upon exercise of Franco-Nevada warrants1 6,510,538Issuable upon exercise of Franco-Nevada options2 1,071,131Issuable upon exercise of special warrant3 2,000,000Issuable upon vesting of Franco-Nevada RSUs 154,013

Diluted common shares 187,835,456

1 The warrants have an exercise price of C$75.00 per share and an expiry date of June 16, 2017.2 There were 1,071,131 stock options under our share compensation plan outstanding to directors, officers, employees and others with exercise prices ranging from C$15.20

to C$65.76 per share.3 In connection with the transaction with Taseko Mines Limited, one special warrant was granted to Taseko which will be exchangeable into 2,000,000 purchase share warrants

once Taseko’s New Prosperity project gets fully permitted and financed. Each purchase share warrant will entitle Taseko to purchase one Franco-Nevada common share at a price of C$75.00 per share before June 16, 2017. New Prosperity’s most recent permit application was denied in 2014.

Franco-Nevada has not issued any preferred shares.


INTERNALCONTROLOvERFINANCIALREPORTINgANDDISCLOSURECONTROLSANDPROCEDURESOurChiefExecutiveOfficerandChiefFinancialOfficerareresponsibleforestablishingandmaintainingFranco-Nevada’sinternal control over financial reporting and other financial disclosure and our disclosure controls and procedures.

InternalcontroloverfinancialreportingisaprocessdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithIFRS.Franco-Nevada’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthetransactionsanddispositionsoftheassetsofFranco-Nevada;(ii)providereasonableassurancethattransactionsarerecordedasnecessarytopermitpreparationoffinancialstatementsinaccordancewithIFRS,andthatreceiptsandexpendituresofFranco-NevadaarebeingmadeonlyinaccordancewithauthorizationsofmanagementanddirectorsofFranco-Nevada;and(iii)providereasonableassuranceregarding prevention or timely detection of unauthorized acquisition, use or disposition of Franco-Nevada’s assets that could haveamaterialeffectonFranco-Nevada’sfinancialstatements.InternalcontroloverotherfinancialdisclosureisaprocessdesignedtoensurethatotherfinancialinformationincludedinthisMD&A,fairlyrepresentsinallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsofFranco-NevadafortheperiodspresentedinthisMD&A.

Franco-Nevada’sdisclosurecontrolsandproceduresaredesignedtoprovidereasonableassurancethatmaterialinformationrelatingtoFranco-Nevada,includingitsconsolidatedsubsidiaries,ismadeknowntomanagementbyotherswithinthoseentities,particularlyduringtheperiodinwhichthisreportispreparedandthatinformationrequiredtobedisclosedbyFranco-Nevadainitsannualfilings,interimfilingsorotherreportsfiledorsubmittedbyitundersecuritieslegislationisrecorded,processed,summarizedandreportedwithinthetimeperiodsspecifiedinsecuritieslegislation.

Duetoitsinherentlimitations,internalcontroloverfinancialreportinganddisclosuremaynotpreventordetectallmisstatements.Also,projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmay change.

ForthesixmonthsendedJune30,2016,therehasbeennochangeinFranco-Nevada’sinternalcontroloverfinancialreportingthathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,Franco-Nevada’sinternalcontroloverfinancial reporting.

NON-IFRSFINANCIALMEASURESAdjustedEBITDAandAdjustedEBITDApershare

AdjustedEBITDAandAdjustedEBITDApersharearenon-IFRSfinancialmeasures,whichexcludethefollowingfromnetincomeandearningspershare(“EPS”):

• Incometaxexpense/recovery;• Financeexpenses;• Financeincome;• Depletionanddepreciation;• Non-cashcostsofsales• Impairmentchargesrelatedtoroyalty,streamandworkinginterestsandinvestments;• Gains/lossesonthesaleofinvestmentsand;• Foreignexchangegains/lossesandotherincome/expenses;

ManagementusesAdjustedEBITDAandAdjustedEBITDApersharetoevaluatetheunderlyingoperatingperformanceoftheCompanyasawholeforthereportingperiodspresented,andtoassistwiththeplanningandforecastingoffutureoperatingresults.ManagementbelievesthatAdjustedEBITDAandAdjustedEBITDApershareallowinvestorsandanalyststobetterevaluatetheresultsoftheunderlyingbusinessoftheCompany.WhiletheadjustmentstonetincomeandEPSinthesemeasuresincludeitemsthatarebothrecurringandnon-recurring,managementbelievesthatAdjustedEBITDAandAdjustedEBITDApershareareusefulmeasuresoftheCompany’sperformancebecauseforeignexchange,gains/lossesonsaleofinvestmentsandimpairmentchargesdonotreflecttheunderlyingoperatingperformanceofourbusinessandarenotnecessarilyindicativeoffutureoperatingresults.AdjustedEBITDAandAdjustedEBITDApershareareintendedtoprovideadditionalinformationtoinvestorsandanalysts,donothaveanystandardizedmeaningunderIFRSandshouldnotbeconsideredinisolationorasasubstituteformeasuresofperformancepreparedinaccordancewithIFRS.


ReconciliationofNetIncometoAdjustedEBITDA:

ThreemonthsendedJune30, SixmonthsendedJune30,expressed in millions, except per share amounts) 2016 2015 2016 2015

NetIncome(Loss) $ 42.3 $ 21.6 $ 72.3 $ 40.8Income tax expense (recovery) 11.3 11.3 19.4 20.3Finance expenses 0.8 0.5 2.1 0.9Finance income (1.0) (1.1 ) (2.1) (1.9 )Depletion and depreciation 68.2 49.1 133.7 100.8Non-cash costs of sales 1.7 2.2 3.5 3.3Impairment charges – – – 0.1

Gains/losses on sale of investments (2.8) (0.9 ) (4.3) (0.9 )Foreign exchange (gains)/losses and other (income)/expenses (1.6) (0.5 ) (2.0) 2.1

AdjustedEBITDA $ 118.9 $ 82.2 $ 222.6 $ 165.5Basic Weighted Average Shares Outstanding 177.8 156.7 175.2 156.7

BasicEPS $ 0.24 $ 0.14 $ 0.41 0.26Income tax expense (recovery) 0.07 0.07 0.11 0.13Finance expenses – – 0.01 0.01Finance income – – (0.01) (0.01 )Depletion and depreciation 0.38 0.31 0.76 0.64Non-cash costs of sales 0.01 0.01 0.02 0.02Impairment charges – – – –

Gain/Losses on sale of investments (0.02) – (0.03) –Foreign exchange (gains)/losses and other (income)/expenses (0.01) – – 0.01

AdjustedEBITDApershare $ 0.67 $ 0.53 $ 1.27 $ 1.06

Margin

Marginisanon-IFRSfinancialmeasurewhichisdefinedbytheCompanyasAdjustedEBITDAdividedbyrevenue.ManagementusesMargintoevaluatetheperformanceoftheCompany’sportfolioandwebelieveMarginprovidesameaningfulmeasureforinvestorsandanalyststoevaluateouroverallabilitytogeneratecashflowfromourroyalty,streamandworkinginterests.Marginisintendedtoprovideadditionalinformation,doesnothaveanystandardizeddefinitionunderIFRSandshouldnotbeconsideredinisolationorasasubstituteforameasureofperformanceinaccordancewithIFRS.

ReconciliationofNetIncometoMargin:

ThreemonthsendedJune30, SixmonthsendedJune30,(expressed in millions, except Margin) 2016 2015 2016 2015

NetIncome(Loss) $ 42.3 $ 21.6 $ 72.3 $ 40.8Income tax expense (recovery) 11.3 11.3 19.4 20.3Finance expenses 0.8 0.5 2.1 0.9Finance income (1.0) (1.1 ) (2.1) (1.9 )Depletion and depreciation 68.2 49.1 133.7 100.8Non-cash costs of sales 1.7 2.2 3.5 3.3Impairment charges – – – 0.1

Gains/losses on sale of investments (2.8) (0.9 ) (4.3) (0.9 )Foreign exchange (gains)/losses and other (income)/expenses (1.6) (0.5 ) (2.0) $ 2.1

AdjustedEBITDA $ 118.9 $ 82.2 $ 222.6 $ 165.5Revenue 150.9 109.4 282.9 218.6Margin 78.8% 75.1% 78.7% 75.9%


AdjustedNetIncomeandAdjustedNetIncomepershare

AdjustedNetIncomeandAdjustedNetIncomepersharearenon-IFRSfinancialmeasures,whichexcludethefollowingfrom net income and EPS:

• Foreignexchangegains/lossesandotherincome/expenses;• Gains/lossesonthesaleofinvestments;• Impairmentchargesrelatedtoroyalty,streamandworkinginterestsandinvestments;• Unusualnon-recurringitems;• Impactofincometaxesontheseitems.

ManagementusesAdjustedNetIncomeandAdjustedNetIncomepersharetoevaluatetheunderlyingoperatingperformanceoftheCompanyasawholeforthereportingperiodspresented,andtoassistwiththeplanningandforecastingoffutureoperatingresults.ManagementbelievesthatAdjustedNetIncomeandAdjustedNetIncomepershareallowinvestorsandanalyststobetterevaluatetheresultsoftheunderlyingbusinessoftheCompany.WhiletheadjustmentstonetincomeandEPSinthesemeasuresincludeitemsthatarebothrecurringandnon-recurring,managementbelievesthatAdjustedNetIncomeandAdjustedNetIncomepershareareusefulmeasuresoftheCompany’sperformancebecauseforeignexchange,gains/lossesonsaleofinvestmentsandimpairmentchargesdonotreflecttheunderlyingoperatingperformanceofourbusinessandarenotnecessarilyindicativeoffutureoperatingresults.AdjustedNetIncomeandAdjustedNetIncomepershare are intended to provide additional information to investors and analysts, do not have any standardized meaning under IFRSandshouldnotbeconsideredinisolationorasasubstituteformeasuresofperformancepreparedinaccordancewithIFRS.

ReconciliationofNetIncometoAdjustedNetIncome:

ThreemonthsendedJune30, SixmonthsendedJune30,expressed in millions, except per share amounts) 2016 2015 2016 2015

NetIncome(Loss) $ 42.3 $ 21.6 $ 72.3 $ 40.8Foreign exchange (gains)/losses and other (Income)/expenses, net of income tax 0.5 (0.4 ) – –Mark to market change on derivatives, net of income tax – 0.1 0.1 2.7Gain on sale of investments, net of income tax (2.5) (0.6 ) (3.7) 0.2 Impairment charges, net of income tax – – – (0.6 )

Indexation adjustment – – – (0.4 )Valuation allowance (0.6) – (0.7) 0.9Impact of tax increases 0.3 2.2 – 2.2

AdjustedNetIncome $ 40.0 $ 22.9 $ 68.0 $ 45.8Basic Weighted Average Shares Outstanding 177.8 156.7 175.2 156.7

BasicEPS $ 0.24 $ 0.14 $ 0.41 $ 0.26Foreign exchange(gains)/losses and other (income)/expenses, net of income tax – – – 0.02Mark to market change on derivatives, net of income tax – – – –Gain on sale of investments, net of income tax (0.01) (0.01 ) (0.02) (0.01 )

Impairment charges, net of income tax – – – –Indexation adjustment – – – –Valuation allowance (0.01) – – 0.01Impact of tax increases – 0.02 – 0.02

AdjustedNetIncomepershare $ 0.22 $ 0.15 $ 0.39 $ 0.30


CAUTIONARySTATEMENTONFORWARD-LOOKINgINFORMATIONThisMD&Acontains“forward-lookinginformation”and“forward-lookingstatements”withinthemeaningofapplicableCanadiansecuritieslawsandtheUnitedStatesPrivateSecuritiesLitigationReformActof1995,respectively,whichmayinclude,butarenotlimitedto,statementswithrespecttofutureeventsorfutureperformance,management’sexpectationsregardingFranco-Nevada’sgrowth,resultsofoperations,estimatedfuturerevenues,carryingvalueofassets,futuredividends and requirements for additional capital, mineral reserve and mineral resource estimates, production estimates, productioncostsandrevenue,futuredemandforandpricesofcommodities,expectedminingsequences,businessprospectsandopportunities.Inaddition,statements(includingdataintables)relatingtoreservesandresourcesandgoldequivalentouncesareforward-lookingstatements,astheyinvolveimpliedassessment,basedoncertainestimatesandassumptions,andnoassurancecanbegiventhattheestimatesandassumptionsareaccurateandthatsuchreservesandresourcesandgoldequivalentounces(“GEOs”)willberealized.Suchforward-lookingstatementsreflectmanagement’scurrentbeliefsandarebasedoninformationcurrentlyavailabletomanagement.Often,butnotalways,forward-lookingstatementscanbeidentifiedbytheuseofwordssuchas“plans”,“expects”,“isexpected”,“budgets”,“scheduled”,“estimates”,“forecasts”,“predicts”,“projects”,“intends”,“targets”,“aims”,“anticipates”or“believes”orvariations(includingnegativevariations)ofsuchwordsandphrasesormaybeidentifiedbystatementstotheeffectthatcertainactions“may”,“could”,“should”,“would”,“might”or“will”betaken,occurorbeachieved.Forward-lookingstatementsinvolveknownandunknownrisks,uncertaintiesandotherfactors,whichmaycausetheactualresults,performanceorachievementsofFranco-Nevadatobemateriallydifferentfromanyfutureresults,performanceorachievementsexpressedorimpliedbytheforward-lookingstatements.Anumberoffactorscouldcauseactualeventsorresultstodiffermateriallyfromanyforward-lookingstatements,including,withoutlimitation:fluctuationsinthepricesoftheprimarycommoditiesthatdriveroyaltyandstreamrevenue(gold,platinumgroupmetals,copper,nickel,uranium,silver,iron-oreandoil&gas);fluctuationsinthevalueoftheCanadianandAustraliandollarandanyothercurrencyinwhichrevenueisgenerated,relativetotheU.S.dollar; changes in national and local government legislation, including permitting and licensing regimes and taxation policiesandtheenforcementthereof;regulatory,politicaloreconomicdevelopmentsinanyofthecountrieswherepropertiesinwhichFranco-Nevadaholdsaroyalty,streamorotherinterestarelocatedorthroughwhichtheyareheld;risksrelatedtotheoperatorsofthepropertiesinwhichFranco-Nevadaholdsaroyalty,streamorotherinterest,includingchangesintheownershipandcontrolofsuchoperators;influenceofmacroeconomicdevelopments;businessopportunitiesthatbecomeavailableto,orarepursuedbyFranco-Nevada;reducedaccesstodebtandequitycapital;litigation;title,permitorlicensedisputesrelatedtointerestsonanyofthepropertiesinwhichFranco-Nevadaholdsaroyalty,streamorotherinterest;whetherornottheCompanyisdeterminedtohave“passiveforeigninvestmentcompany”(“PFIC”)statusasdefinedinSection1297oftheUnitedStatesInternalRevenueCodeof1986,asamended;potentialchangesinCanadiantaxtreatmentofoffshorestreams;excessivecostescalationaswellasdevelopment,permitting,infrastructure,operatingortechnicaldifficultiesonanyofthepropertiesinwhichFranco-Nevadaholdsaroyalty,streamorotherinterest;actualmineral content may differ from the reserves and resources contained in technical reports; rate and timing of production differencesfromresourceestimates,othertechnicalreportsandmineplans;risksandhazardsassociatedwiththebusinessofdevelopmentandminingonanyofthepropertiesinwhichFranco-Nevadaholdsaroyalty,streamorotherinterest,including,butnotlimitedtounusualorunexpectedgeologicalandmetallurgicalconditions,slopefailuresorcave-ins,floodingandothernaturaldisasters,terrorism,civilunrestoranoutbreakofcontagiousdiseases;andtheintegrationofacquiredassets.Theforward-lookingstatementscontainedinthisMD&Aarebaseduponassumptionsmanagementbelievestobereasonable,including,withoutlimitation:theongoingoperationofthepropertiesinwhichFranco-Nevadaholdsaroyalty,streamorotherinterestbytheownersoroperatorsofsuchpropertiesinamannerconsistentwithpastpractice;theaccuracyofpublicstatementsanddisclosuresmadebytheownersoroperatorsofsuchunderlyingproperties;nomaterialadversechangeinthemarketpriceofthecommoditiesthatunderlietheassetportfolio;theCompany’songoingincomeandassetsrelatingtodeterminationofitsPFICstatus;nomaterialchangestoexistingtaxtreatment;noadversedevelopmentinrespectofanysignificantpropertyinwhichFranco-Nevadaholdsaroyalty,streamorotherinterest;theaccuracyofpubliclydisclosedexpectationsforthedevelopmentofunderlyingpropertiesthatarenotyetinproduction;integrationofacquiredassets;andtheabsenceofanyotherfactorsthatcouldcauseactions,eventsorresultstodifferfromthoseanticipated,estimatedorintended.However,therecanbenoassurancethatforward-lookingstatementswillprovetobeaccurate,asactualresultsandfutureeventscoulddiffermateriallyfromthoseanticipatedinsuchstatements.Investorsarecautionedthatforward-lookingstatementsarenotguaranteesoffutureperformance.Franco-Nevadacannotassureinvestorsthatactualresultswillbeconsistentwiththeseforward-lookingstatementsandinvestorsshouldnotplaceunduerelianceonforward-lookingstatementsduetotheinherentuncertaintytherein.Foradditionalinformationwithrespecttorisks,uncertaintiesandassumptions,pleaserefertoFranco-Nevada’smostrecentAnnualInformationFormfiledwiththeCanadiansecuritiesregulatoryauthoritiesonwww.sedar.comandFranco-Nevada’smostrecentAnnualReportfiledonForm40-FfiledwiththeSEConwww.sec.gov.Theforward-lookingstatementshereinaremadeasofthedateofthisMD&AonlyandFranco-Nevadadoesnotassumeanyobligationtoupdateorrevisethemtoreflectnewinformation,estimatesoropinions,futureeventsorresultsorotherwise,exceptasrequiredbyapplicablelaw.reflectnewinformation,estimatesoropinions,futureeventsorresultsorotherwise,exceptasrequiredbyapplicablelaw.


Financial StatementsFranco-Nevada Corporation

ConsolidatedStatementsofFinancialPosition(unaudited, in millions of U.S. dollars)

June 30, December 31, 2016 2015

ASSETS Cash and cash equivalents (Note 4) $ 225.8 $ 149.2 Short-term investments (Notes 5 & 8) – 18.8 Receivables (Note 8) 56.4 65.1 Prepaid expenses and other (Note 6) 36.2 41.6

Current assets 318.4 274.7 Royalty, stream and working interests, net 3,720.0 3,257.5 Investments (Notes 5 & 8) 123.4 94.8 Deferred income tax assets 18.8 16.1 Other assets (Note 7) 29.3 31.2

Total assets $ 4,209.9 $ 3,674.3

LIABILITIES Accounts payable and accrued liabilities $ 19.3 $ 18.0 Current income tax liabilities 2.9 2.8

Current liabilities 22.2 20.8 Debt (Note 13) – 457.3 Deferred income tax liabilities 29.8 33.2

Total liabilities 52.0 511.3

SHAREHOLDERS’EQUITy (Note 14) Common shares 4,643.9 3,709.0 Contributed surplus 42.0 44.3 Deficit (307.7) (302.2 )Accumulated other comprehensive loss (220.3) (288.1 )

Total shareholders’ equity 4,157.9 3,163.0

Total liabilities and shareholders’ equity $ 4,209.9 $ 3,674.3

The accompanying notes are an integral part of these interim consolidated financial statements.



ConsolidatedStatementsofIncomeandComprehensiveIncome(Loss)(unaudited, in millions of U.S. dollars, except per share amounts)

Forthethreemonths Forthesixmonths ended June 30 ended June 30 2016 2015 2016 2015

Revenue (Note 9) $ 150.9 $ 109.4 $ 282.9 $ 218.6

Costsandexpenses Costs of sales (Note 10) 27.7 24.0 52.1 46.4 Depletion and depreciation 68.2 49.1 133.7 100.8 Impairment of royalty, stream and working interests – – – 0.1 Corporate administration (Notes 11 & 14(c)) 5.7 4.1 11.1 8.2 Business development 0.3 1.3 0.6 1.8

101.9 78.5 197.5 157.3

Operating income 49.0 30.9 85.4 61.3

Foreign exchange gain (loss) and other income (expenses) (Note 5) 4.4 1.4 6.3 (1.2 )

Income before finance items and income taxes 53.4 32.3 91.7 60.1

Finance items Finance income 1.0 1.1 2.1 1.9 Finance expenses (0.8) (0.5 ) (2.1) (0.9 )

Netincomebeforeincometaxes 53.6 32.9 91.7 61.1

Income tax expense (Note 12) 11.3 11.3 19.4 20.3

Net income $ 42.3 $ 21.6 $ 72.3 $ 40.8

Othercomprehensiveincome(loss): Itemsthatmaybereclassifiedsubsequentlytoprofitandloss: Unrealized gain (loss) in the market value of available-for-sale investments, net of income tax expense of $0.3 (2015 - income tax expense of $0.4), income tax expense of $0.5 (2015 - income tax recovery of $0.7) (Note 5) 10.8 2.3 26.6 (4.4 ) Realized change in market value of available-for-sale investments (2.8) (0.9 ) (4.3) (0.9 ) Currency translation adjustment (4.0) 14.7 45.5 (74.5 )

Other comprehensive income (loss) 4.0 16.1 67.8 (79.8 )

Totalcomprehensiveincome(loss) $ 46.3 $ 37.7 $ 140.1 $ (39.0 )

Basic earnings per share (Note 15) $ 0.24 $ 0.14 $ 0.41 $ 0.26 Diluted earnings per share (Note 15) $ 0.24 $ 0.14 $ 0.41 $ 0.26 The accompanying notes are an integral part of these interim consolidated financial statements.



ConsolidatedStatementsofCashFlows(unaudited, in millions of U.S. dollars)

Forthesixmonthsended June 30 2016 2015 Cashflowsfromoperatingactivities Net income $ 72.3 $ 40.8 Adjustments to reconcile net income to net cash provided by operating activities: Depletion and depreciation 133.7 100.8 Other non-cash items (0.8) 0.2 Gain on sale of investments (Note 5) (4.3) (0.9 ) Non-cash costs of sales (Note 10) 3.5 3.3 Deferred income tax expense (Note 12) 2.3 6.9 Share-based payments (Note 14(c)) 2.4 2.7 Unrealized foreign exchange loss 0.2 1.8 Mark-to-market on warrants (Note 5) – 0.3

209.3 155.9 Changes in non-cash assets and liabilities: Decrease in receivables 8.7 20.9 Increase in prepaid expenses and other (38.0) (43.0 ) Increase (decrease) in current liabilities 1.4 (4.3 )

Net cash provided by operating activities 181.4 129.5

Cashflowsfrominvestingactivities Proceeds from sale of investments 23.6 24.7 Acquisition of investments (1.6) (76.3 ) Proceeds from sale of gold bullion 46.1 26.9 Acquisition of royalty, stream and working interests (555.7) (20.7 ) Purchase of oil & gas well equipment (1.3) (1.5 )

Net cash used in investing activities (488.9) (46.9 )

Cashflowsfromfinancingactivities Net proceeds from issuance of common shares (Note 14) 883.5 – Repayment of Credit Facility (Note 13) (460.0) – Credit facility amendment costs – (1.2 ) Payment of dividends (Note 14(b)) (57.5) (47.2 ) Proceeds from exercise of stock options (Note 14(a)) 15.6 0.5

Net cash provided by (used in) financing activities 381.6 (47.9 )

Effect of exchange rate changes on cash and cash equivalents 2.5 (16.4 )

Net change in cash and cash equivalents 76.6 18.3

Cash and cash equivalents at beginning of period 149.2 592.5

Cash and cash equivalents at end of period $ 225.8 $ 610.8

Supplementalcashflowinformation: Cash paid for interest expense and loan standby fees during the period $ 1.8 $ 0.7 Income taxes paid during the period $ 21.4 $ 20.9

The accompanying notes are an integral part of these interim consolidated financial statements.



ConsolidatedStatementsofChangesinShareholders’Equity(in millions of U.S. dollars)

Accumulated other Sharecapital Contributed comprehensive Total (Note 14) Surplus income(loss) Deficit Equity

Balance at January 1, 2016 $ 3,709.0 $ 44.3 $ (288.1 ) $ (302.2 ) $ 3,163.0 Net income – – – 72.3 72.3 Other comprehensive income – – 67.8 – 67.8 Total comprehensive income – – – – 140.1 Equity offering 893.9 – – – 893.9 Exercise of stock options 20.7 (5.1 ) – – 15.6 Share-based payments – 2.8 – – 2.8 Dividend reinvestment plan 20.3 – – – 20.3 Dividends declared – – – (77.8 ) (77.8 ) BalanceatJune30,2016 $ 4,643.9 $ 42.0 $ (220.3) $ (307.7) $ 4,157.9

Balance at January 1, 2015 $ 3,656.6 $ 45.5 $ (98.8 ) $ (197.8 ) $ 3,405.5 Net income – – – 40.8 40.8 Other comprehensive loss – – (79.8 ) – (79.8 ) Total comprehensive loss – – – – (39.0 ) Exercise of stock options 1.0 (0.5 ) – – 0.5 Share-based payments – 2.7 – – 2.7 Dividend reinvestment plan 16.5 – – – 16.5 Adjustment to finance costs 0.3 – – – 0.3 Dividends declared – – – (63.6 ) (63.6 ) Balance at June 30, 2015 $ 3,674.4 $ 47.7 $ (178.6 ) $ (220.6 ) $ 3,322.9 The accompanying notes are an integral part of these interim consolidated financial statements.


Notes to Financial Statements

Note1-CorporateInformation

Franco-NevadaCorporation(“Franco-Nevada”orthe“Company”)isincorporatedundertheCanadaBusinessCorporationsAct.TheCompanyisagold-focusedroyaltyandstreamcompanywithadditionalinterestsinsilver,platinumgroupmetals,oil&gasandotherresourceassets.ThemajorityofrevenuesaregeneratedfromadiversifiedportfolioofpropertiesintheUnitedStates,Canada,Mexico,Peru,ChileandAfrica.Theportfolioincludesapproximately340assetscoveringproperties at various stages from production to early stage exploration.

TheCompany’ssharesarelistedontheTorontoStockExchangeandtheNewYorkStockExchangeandtheCompanyisdomiciledinCanada.TheCompany’sheadandregisteredofficeislocatedat199BayStreet,Suite2000,Toronto,Ontario,Canada.

Note2-SignificantAccountingPolicies

(a) Basis of presentation

ThesecondensedinterimconsolidatedfinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”)asissuedbytheInternationalAccountingStandardsBoard(“IASB”)applicabletothepreparationofinterimfinancialstatements,includingIAS34“InterimFinancialReporting”.ThesecondensedinterimconsolidatedfinancialstatementsshouldbereadinconjunctionwiththeCompany’sannualfinancialstatementsfortheyearendedDecember31,2015andwerepreparedusingthesameaccountingpolicies,methodofcomputationandpresentationaswereappliedintheannualfinancialstatementsfortheyearendedDecember31,2015.ThesecondensedinterimconsolidatedfinancialstatementswereauthorizedforissuancebytheBoardofDirectorson August8,2016.

Thefinancialinformationincludedhereinreflectsalladjustments,consistingonlyofnormalrecurringadjustmentswhich,intheopinionofmanagement,arenecessaryforafairpresentationoftheresultsfortheinterimperiodspresented. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of theresultstobeexpectedforthefullyear.Seasonalityisnotconsideredtohaveasignificantimpactoverthecondensedinterimconsolidatedfinancialstatements.Taxesonincomeintheinterimperiodhavebeenaccruedusingthetaxratesthatwouldbeapplicabletoexpectedtotalannualincome.

(b) New Accounting Standards Issued But Not Yet Effective

IAS12,“Incometaxes”(“IAS12”)providesguidanceontherecognitionofdeferredtaxassets.InJanuary2016theInternationalAccountingStandardsboardissuedamendmentstoclarifytherequirementsforrecognizingdeferredtaxassetsonunrealizedlosses.Theamendmentsclarifytheaccountingfordeferredtaxwhereanassetismeasuredatfairvalueandthatfairvalueisbelowtheasset’staxbase.Theyalsoclarifycertainotheraspectsofaccountingfordeferred taxassets.TheamendmentsareeffectiveforannualperiodsbeginningonorafterJanuary1,2017.

TheCompanyiscurrentlyassessingtheimpactoftheamendmenttoIAS12ontheconsolidatedfinancialstatements.


CondensedNotestoConsolidatedFinancialStatementsForthethreeandsixmonthsendedJune30,2016and2015(unaudited, expressed in millions of U.S. dollars except share and per share amounts)


Note 3 - Acquisitions

(a) Castle Mountain

OnJune16,2016,Franco-NevadaandNewCastleGoldLtd.completedtherestructuringofFranco-Nevada’sexistingroyaltiesattheCastleMountaingoldprojectinCalifornia,U.S.intoasingle2.65%royaltycoveringalargerpropertyforC$2.2millionincash.

InadditiontheCompanypurchased3,636,364commonsharesofNewCastleand1,818,182commonsharepurchasewarrantsforC$1.2million.EachcommonsharepurchasewarrantisexercisabletoacquireonecommonshareatapriceofC$0.64foraperiodoffiveyears,expiringonMay9,2021.

(b) Antapaccay

OnFebruary26,2016,theCompanyacquireda$500.0millionpreciousmetalsstreamfromGlencoreplcwithreferenceto production from the Antapaccay mine located in Peru. Under the stream agreement, gold and silver deliveries are initiallyreferencedtocopperinconcentrateshipped.TheCompanywillreceive300ouncesofgoldand4,700ounces of silver for each 1,000 tonnes of copper in concentrate shipped, until 630,000 ounces of gold and 10.0 million ounces ofsilverhavebeendelivered.Thereafter,theCompanywillreceive30%ofthegoldandsilvershipped.TheCompanywillpayanon-goingpriceof20%ofthespotpriceofgoldandsilveruntil750,000ouncesofrefinedgoldand12.8millionouncesofrefinedsilverhavebeendelivered.Thereafter,theon-goingpricewillincreaseto30%ofthespotpriceof gold and silver.

Alloftheaboveacquisitionshavebeenclassifiedasassetacquisitions.

Note 4 - Cash and Cash Equivalents

AsatJune30,2016andDecember31,2015,cashandcashequivalentswereprimarilyheldininterest-bearingdeposits

At June 30, At December 31, 2016 2015 Cash deposits $ 194.7 $ 137.9 Term deposits 31.1 11.3

$ 225.8 $ 149.2

Note5-Investments

At June 30, At December 31, 2016 2015 Short-term investments Term deposits $ – $ 18.8 Total short-term investments $ – $ 18.8 Non-current investments Equity investments $ 95.4 $ 68.3 Warrants 0.5 0.1 Loan Receivable 27.5 26.4 Total Investments $ 123.4 $ 94.8


Non-current investments

Theseinvestmentscomprise:(i)equityinterestsinvariouspublicandnon-publicentitieswhichtheCompanyacquiredthroughtheopenmarketorthroughtransactions;(ii)warrantsinvariouspublicly-listedcompanies;and(iii)aloanreceivablefromNorontacquiredthroughtheRingofFiretransactionin2015.Equityinvestmentshavebeendesignatedasavailable-for-saleand,asaresult,havebeenrecordedatfairvalue.Oneequityinvestmentofanon-publicentity,havingacarryingvalueof$4.0million,hasbeendesignatedasanequityinvestmentheldatcostasnoreliableestimateoffairvaluecanbedeterminedbecausethereisnopubliclyavailableinformationwithwhichtoestimatefuturecashflows,associatedoperatingcostsorcapitalexpendituresandnoalternativeactivemarket.Managementdoesnotintendtodisposeoftheinvestment and expects to recover the carrying value through the payment of dividends.

TheloanreceivablehasbeendesignatedasloansandreceivablesunderIFRSandiscarriedatamortizedcostusingtheeffective interest rate method.

Theunrealizedgains(losses)onavailable-for-saleinvestmentsrecognizedinothercomprehensiveincome(loss)forthe threemonthsandsixmonthsendingJune30,2016and2015wereasfollows:

Threemonthsended Sixmonthsended June 30, June 30, 2016 2015 2016 2015

Mark-to market gain (loss) on equity investments $ 11.1 $ 2.7 $ 27.1 $ (5.1 ) Deferred tax recovery (expense) in other

comprehensive income (loss) (0.3) (0.4 ) (0.5) 0.7

Unrealized gain (loss) on available-for-sale securities, net of tax 10.8 2.3 26.6 (4.4 ) Reclassification for realized gain recognized

in net income (2.8) (0.9 ) (4.3) (0.9 )

$ 8.0 $ 1.4 $ 22.3 $ (5.3 )

TheincreaseinthemarketvalueofthewarrantsasatJune30,2016comparedtotheirvaluesatMarch31,2016andDecember31,2015wasaresultofanacquisitionofnewwarrantsof$0.4million(2015$Nil).

Note6-PrepaidExpensesandOther

Prepaidexpensesandothercomprisethefollowing:

At June 30, At December 31, 2016 2015 Gold bullion $ 10.7 $ 21.0 Prepaid gold 7.0 7.0 Prepaid expenses 17.9 13.6 Debt issue costs 0.6 – $ 36.2 $ 41.6

Note 7 - Other Assets

Otherassetscomprisethefollowing:

At June 30, At December 31, 2016 2015 Prepaid gold $ 10.6 $ 14.1 Oil & gas well equipment, net 16.0 16.4 Furniture and fixtures, net 0.7 0.7 Debt issue costs 2.0 – $ 29.3 $ 31.2


Note8-FairvalueMeasurements

TherewerenotransfersbetweenthelevelsofthefairvaluehierarchyinthesixmonthstoJune30,2016.TherewerealsonochangesmadetoanyofthevaluationtechniquesappliedasofDecember31,2015.Fairvalueisamarket-basedmeasurement,notanentity-specificmeasurement.Forsomeassetsandliabilities,observablemarkettransactionsormarketinformationmightbeavailable.Forotherassetsandliabilities,observablemarkettransactionsandmarketinformationmightnotbeavailable.However,theobjectiveofafairvaluemeasurementinbothcasesisthesame–toestimatetheprice atwhichanorderlytransactiontoselltheassetortotransfertheliabilitywouldtakeplacebetweenmarketparticipantsatthemeasurementdateundercurrentmarketconditions(i.e.anexitpriceatthemeasurementdatefromtheperspective ofamarketparticipantthatholdstheassetorowestheliability).

Thefairvaluehierarchyestablishesthreelevelstoclassifytheinputstovaluationtechniquesusedtomeasurefairvalue.Level1inputsarequotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.

Level2inputsarequotedpricesinmarketsthatarenotactive,quotedpricesforsimilarassetsorliabilitiesinactivemarkets,inputsotherthanquotedpricesobservablefortheassetorliability(forexample,interestrateandyieldcurvesobservableatcommonlyquotedintervals,forwardpricingcurvesusedtovaluecurrencyandcommoditycontractsandvolatilitymeasurementsusedtovalueoptioncontracts),orinputsthatarederivedprincipallyfromorcorroboratedbyobservablemarketdataorothermeans.

Level3inputsareunobservable(supportedbylittleornomarketactivity).ThefairvaluehierarchygivesthehighestprioritytoLevel1inputsandthelowestprioritytoLevel3inputs.

Assets and Liabilities Measured at Fair Value on a Recurring Basis:

QuotedPrices Significant inActive Other Significant Marketsfor Observable Unobservable IdenticalAssets Inputs Inputs Aggregate

AsatJune30,2016 (Level1) (Level2) (Level3) Fairvalue

Cash and cash equivalents $ 225.8 $ – $ – $ 225.8 Receivables from provisional gold equivalent sales – 9.3 – 9.3 Available-for-sale equity investments 91.4 – – 91.4 Warrants – 0.5 – 0.5

$ 317.2 $ 9.8 $ – $ 327.0

Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs Aggregate

As at December 31, 2015 (Level 1) (Level 2) (Level 3) Fair Value

Cash and cash equivalents $ 149.2 $ – $ – $ 149.2 Short-term investments 18.8 – – 18.8 Receivables from provisional gold equivalent sales – 9.3 – 9.3 Available-for-sale equity investments 64.5 – – 64.5 Warrants – 0.1 – 0.1

$ 232.5 $ 9.4 $ – $ 241.9


Fair Values of Financial Assets and Liabilities

ThefairvaluesoftheCompany’sremainingfinancialassetsandliabilitieswhichincludereceivables,loanreceivables,accountspayableandaccruedliabilitiesapproximatetheircarryingvaluesduetotheirshort-termnatureandhistoricallynegligiblecreditlossesand/orfairvalueofcollateral.

TheCompanyhasnotoffsetfinancialassetswithfinancialliabilities.

Assets Measured at Fair Value on a Non-Recurring Basis:

Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs Aggregate

As at December 31, 2015 (Level 1) (Level 2) (Level 3) Fair Value

Royalty, stream and working interests $ – $ – $ 302.0 $ 302.0 Oil well equipment – – 16.3 16.3

$ – $ – $ 318.3 $ 318.3

Thevaluationtechniquesthatareusedtomeasurefairvalueareasfollows:

(a) Cash and cash equivalents

Thefairvaluesofcashandcashequivalents,includinginterestbearingdeposits,areclassifiedwithinLevel1ofthe fairvaluehierarchybecausetheyarevaluedusingquotedmarketpricesinactivemarkets.

(b) Receivables

Thefairvaluesofreceivablesarisingfromgoldandplatinumgroupmetalsalescontractsthatcontainprovisionalpricingmechanismsaredeterminedusingtheappropriatequotedforwardpricesfromtheexchangethatistheprincipalactivemarketfortheparticularmetal.Assuch,thesereceivablesareclassifiedwithinLevel2ofthefairvaluehierarchy.

(c) Investments

Thefairvaluesofpublicly-tradedinvestments,includingavailable-for-saleequityinvestments,aredeterminedbasedon amarketapproachreflectingtheclosingpricesofeachparticularsecurityatthestatementoffinancialpositiondate. Theclosingpricesarequotedmarketpricesobtainedfromtheexchangethatistheprincipalactivemarketfortheparticularsecurity,andthereforeareclassifiedwithinLevel1ofthefairvaluehierarchy.Warrantsareclassifiedas Level2ofthefairvaluehierarchy.

(d) Royalty, stream, working interests and oil well equipment

Thefairvaluesofroyalty,stream,workinginterestsandoilwellequipmentaredeterminedprimarilyusingamarketapproachusingunobservablediscountedfuturecash-flowsandcash-flowandrevenuemultiples.Asaresult,thefair valuesareclassifiedwithinLevel3ofthefairvaluehierarchy.


Note 9 - Revenue

Revenueiscomprisedofthefollowing:


Mineral royalties $ 37.3 $ 33.1 $ 71.9 $ 69.2 Mineral streams 103.2 63.1 194.6 129.1 Sale of prepaid gold 2.6 2.9 5.0 4.5 Oil & gas interests 7.8 10.3 11.4 15.8

Total $ 150.9 $ 109.4 $ 282.9 $ 218.6

Note10-CostsofSales

Costs of sales comprise:


Per ounce stream purchase cost $ 24.5 $ 20.0 $ 46.2 $ 40.2 Cost of prepaid ounces 1.7 2.2 3.5 3.3

Oil & gas operating costs 0.8 1.3 1.1 1.8 Mineral production taxes 0.7 0.5 1.3 1.1

Total $ 27.7 $ 24.0 $ 52.1 $ 46.4

Note 11 - Related Party Disclosures

KeymanagementpersonnelincludetheBoardofDirectorsandexecutivemanagementteam.CompensationforkeymanagementpersonneloftheCompanywasasfollows:


Short-term benefits1 $ 0.7 $ 0.9 $ 1.4 $ 1.7 Share-based payments2 2.1 0.8 3.8 1.8

Total $ 2.8 $ 1.7 $ 5.2 $ 3.5

1 Includes salary, benefits and short-term accrued incentives/other bonuses earned in the period. 2 Represents the expense of stock options, restricted share units earned and mark-to-market charges on deferred share units during the period.

Note12-Incometaxes

Forthethreemonths Forthesixmonths ended June 30, ended June 30, 2016 2015 2016 2015

Current income tax expense $ 11.6 $ 6.1 $ 17.1 $ 13.4 Deferred income tax expense (recovery) (0.3) 5.2 2.3 6.9

Total $ 11.3 $ 11.3 $ 19.4 $ 20.3


Note 13 - Revolving Term Credit Facility

TheCompanyhasafiveyear$1.0billionunsecuredrevolvingtermcreditfacility(“CreditFacility”).During2015,theCompanyamendeditsCreditFacilitybyincreasingtheavailablecreditfrom$500.0millionto$1.0billionandextendingthetermtoNovember12,2020.Thefundsweredrawnas30-dayLIBORloanswiththeassociatedinterestratebasedon30-dayLIBORratesplus1.20%.

OnMarch7,2016andMarch21,2016,theCompanyrepaid$230.0millionand$230.0million,respectively,onthecreditfacility(2015-$NIL).SinceMarch21,2016,noamountremainswithdrawnunderthecreditfacilityandtheentire $1.0billionfacilityremainsavailable.

Theunamortizeddebtissuecostsassociatedwiththecreditfacilityareshownunderprepaidexpensesandotherintheamountof$0.6millionandotherassetsintheamountof$2.0million.

Note14-Shareholders’equity

(a) Common shares

TheCompany’sauthorizedcapitalstockincludesanunlimitednumberofcommonshares(issued178,099,774commonshares)havingnoparvalueandpreferredsharesissuableinseries(issuednil).

OnFebruary19,2016,theCompanycompletedaboughtdealfinancingwithasyndicateofunderwritersfor19.2millioncommonsharesat$47.85percommonshare.ThenetproceedstotheCompanywere$883.5millionafterdeductingshareissuecostsandexpensesof$36.6million.TheCompanyrecordedadeferredtaxassetof$10.4millionrelatingtothe share issue costs.

DuringthethreeandsixmonthsendedJune30,2016,theCompanyissued205,892commonshares(2015-5,000commonshares)and517,934commonshares(2015-29,840commonshares),respectively,upontheexerciseofwarrantsandstockoptionsandthevestingofrestrictedshareunitsforproceedsof$5.4million(2015-$0.2million)and$15.6million(2015-$0.5million),respectively.Inaddition,133,416commonshares(2015-190,952)and299,491commonshares(2015-335,893)wereissuedpursuanttothetermsoftheCompany’sDividendReinvestmentPlan(“DRIP”)forthethreeandsixmonthsendedJune30,2016.

(b) Dividends TheCompanydeclareddividendsintheamountof$39.3million(2015-$32.5million),or$0.22pershare(2015-$0.21pershare)and$77.8million(2015-$63.6million),or$0.43pershare(2015-$0.41pershare),inthethree andsixmonthsendedJune30,3016,respectively.TheCompanypaidcashdividendsintheamountof$29.2million(2015-$23.3million)and$57.5million(2015-$47.2million)andissuedcommonsharespursuantititsDRIPvaluedat$10.1million(2015-$9.3million)and$20.3million(2015-$16.5million),inthethreeandsixmonthsended June 30, 2016, respectively.

(c) Stock-based payments DuringthethreeandsixmonthsendedJune30,2016,anexpenseof$1.1million(2015-$1.3million)and$2.4million(2015-$2.7million)relatedtostockoptionsandrestrictedshareunitshasbeenincludedincorporateadministration ontheconsolidatedstatementsofincome.TheCompanycapitalitalized$0.2million(2015-$NIL)and$0.4million(2015-$NIL)toroyalty,stream,andworkinginterest,net,inthethreeandsixmonthsendingJune30,2016,respectively.

2016 Second Quarter Report 49

Note15-EarningsperShare(“EPS”)

For the three months ended June 30, 2016

Earnings Shares PerShare (Numerator) (Denominator) Amount

Basic EPS $ 42.3 177.8 $ 0.24 Effect of dilutive securities – 1.5 –

Diluted EPS $ 42.3 179.3 $ 0.24

For the three months ended June 30, 2015

Earnings Shares Per Share (Numerator) (Denominator) Amount


Diluted EPS $ 21.6 157.8 $ 0.14

ForthesixmonthsendedJune30,2016

Earnings Shares PerShare (Numerator) (Denominator) Amount


Diluted EPS $ 72.3 176.3 $ 0.41

For the six months ended June 30, 2015

Earnings Shares Per Share (Numerator) (Denominator) Amount


Diluted EPS $ 40.8 157.8 $ 0.26

AsatJune30,2016,nostockoptions(2015-NIL)andnowarrants(2015-6,510,769)wereexcludedinthecomputation ofdilutedEPS.Restrictedshareunitstotaling93,955(2015-85,147)wereexcludedfromthecomputationofdilutedEPS for the three and six months ended June 30, 2016 due to the performance criteria for the vesting of the RSUs having not beenmeasurablepriortoJune30,2016.


CorporateInformation

ExecutiveManagement

David Harquail, President & CEO

Sandip Rana, Chief Financial Officer

Paul Brink, Senior Vice President, Business Development

Lloyd Hong, Chief Legal Officer & Corporate Secretary

Directors

Pierre Lassonde, Chair

David Harquail, President & CEO

Tom Albanese

Derek Evans

Graham Farquharson

Dr. Catharine Farrow

Louis Gignac

Randall Oliphant

Hon. David R. Peterson

InvestorInformation

Stefan Axell, Director, Corporate Affairs

[email protected] www.franco-nevada.com

Tel:(416)306-6328 TollFree:(877)401-3833

Auditors

PricewaterhouseCoopers LLP Toronto, Canada

HeadOffice

199BayStreet,Suite2000,P.O.Box285Commerce Court Postal StationToronto,CanadaM5L1G9Tel:(416)306-6300

BarbadosOffice

GroundFloor,BalmoralHall,BalmoralGap,Hastings,ChristChurch,Barbados,BB14034Tel:(246)434-8200

U.S.Office

1745SheaCenterDrive,Suite400HighlandsRanch,Colorado,USA80129Tel:(720)344-4986

AustraliaOffice

44KingsParkRoad,Suite41WestPerth,WA6005,AustraliaTel:61-8-6263-4425

Listings

TorontoStockExchange - Common shares: FNV

2017Warrants:FNV.WT.AExerciseprice:C$75.00Expiry:June16,2017

NewYorkStockExchange - Common shares: FNV

ShareCapital

AsatAugust8,2016

Commonsharesoutstanding 178,099,774Reserved for: 2017Warrants: 8,510,538 Options&other: 1,225,144 Fullydiluted: 187,835,456

Transfer Agent

Computershare Investor Services Inc.100UniversityAvenue,8thFloorToronto,CanadaM5J2Y1

TollFree:(800)564-6253 Tel:(514)982-7555

[email protected]

TSX/NYSE

FNV

www.franco-nevada.com

2016 second quarter reports21.q4cdn.com/700333554/files/doc_financials/2016/q2/v5...2016 second...

Documents