franco-nevada 2010 year-end final · capital structure – march 24, 2011 capital structure sh o t...

2010 YEAR‐END FINANCIAL RESULTS2010 YEAR END FINANCIAL RESULTSCONFERENCE CALL

D id H il CEO

1

David Harquail – CEOSandip Rana – CFO

March 25, 2011 Paul Brink – SVP

Cautionary Statement

Forward-Looking StatementsCertain information contained in this presentation, including any information as to future financial or operating performance and other statements that express management'sexpectations or estimates of future performance, constitute "forward-looking statements". All statements, other than statements of historical fact, are forward-looking statements. Thewords “anticipate”, “plans”, “estimate", "expect", "expects", "expected" and similar expressions identify forward-looking statements. Forward-looking statements are necessarilybased upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive

ncertainties and contingencies The Compan ca tions the reader that s ch for ard looking statements in ol e kno n and nkno n risks ncertainties and other factors that mauncertainties and contingencies. The Company cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors that maycause actual financial results, performance or achievements of Franco-Nevada to be materially different from the Company's estimated future results, performance or achievementsexpressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factorsinclude, but are not limited to: fluctuations in the prices of the primary commodities that drive the Company’s Net Revenue (gold, platinum group metals, copper, nickel, uranium, oiland gas); fluctuations in the value of the Canadian and Australian dollar, Mexican peso, and any other currency in which the Company generates revenue, relative to the US dollar;changes in national and local government legislation, including taxation policies; regulations and political or economic developments in any of the countries where the Companyholds interests in mineral and oil and gas properties; influence of macroeconomic developments; business opportunities that become available to, or are pursued by us; reduced

t d bt d it it l liti ti titl di t l t d t i t t f th ti d l t itti i f t t ti t h i l diffi ltiaccess to debt and equity capital; litigation; title disputes related to our interests or any of the properties; development, permitting, infrastructure operating or technical difficulties onany of the properties; rate and timing of production differences from resource estimates; risks and hazards associated with the business of development and mining on any of theproperties, including, but not limited to unusual or unexpected geological formations, cave-ins, flooding and other natural disasters or civil unrest; integration of acquired assetsfollowing completion of the acquisition. The forward-looking statements contained in this presentation are based upon assumptions management believes to be reasonable,including, without limitation, the ongoing operation of the properties by the owners or operators of such properties in a manner consistent with past practice, the accuracy of publicstatements and disclosures made by the owners or operators of such underlying properties, no material adverse change in the market price of the commodities, and any otherfactors that cause actions, events or results to differ from those anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-lookingstatements because of the inherent uncertainty. For additional information with respect to risks, uncertainties and assumptions, please also refer to the “Risk Factors” section of ourmost recent Annual Information Form filed with the Canadian securities regulatory authorities on www.sedar.com, as well as our annual and interim MD&As. The forward-lookingstatements herein are made as of the date of this presentation only and Franco-Nevada does not assume any obligation to update or revise them to reflect new information,estimates or opinions, future events or results or otherwise, except as required by applicable law.Non-GAAP MeasuresRoyalty Revenue, Free Cash-Flow, EBITDA, Margin, Adjusted Net Income and Net Revenue are intended to provide additional information only and do not have any standardizedmeaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP Definitions andmeaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Definitions andreconciliations to GAAP can be found in our financial disclosures. These measures are not necessarily indicative of operating profit or cash flow from operations as determinedunder GAAP. Other companies may calculate these measures differently. The following notes are standardized for the attached presentation.

1 Royalty Revenue is defined by the Company as cash received or receivable from operating royalty assets earned during the period.2 Free Cash Flow is defined by the Company as operating income plus depletion and depreciation, non-cash charges, and any impairment of investments and royalty interests.3 Margin is defined as Free Cash Flow as a percentage of Royalty Revenue.4 Adjusted Net Income is defined by the Company as net income excluding impairment charges related to royalties working interests and investments; fair value changes for royalties

2

4 Adjusted Net Income is defined by the Company as net income excluding impairment charges related to royalties, working interests and investments; fair value changes for royalties accounted for as derivative assets; foreign currency gains/losses; gains/losses on sale of investments; and the impact of taxes on all these items. See Reconciliation of Non-GAAP Measures in the Appendix for calculation.

5 Net Revenue is defined by the Company as cash received or receivable from operating royalty and stream assets, net of any: (i) cash outlays required to purchase stream production, (ii) state and provincial commodity taxes; and (iii) cash outlays associated with working interests.

2010 Year-End Results Agenda

1. Review of 2010 Results - Sandip Rana1. Review of 2010 Results

2. IFRS in 2011

Sandip Rana

- Sandip Rana

3. Gold Wheaton Assets

4 Outlook

- Paul Brink

David Harquail4. Outlook - David Harquail

3

2010 Financial Highlights

(US $ millions except per share and %) Q4 ’10 Q4 ’09

% Change FY ‘10 FY ‘09

% Change

Royalty Revenue(1) $69.4 $44.3 57% $205.4 $142.8 44%y y

Gold Royalty Revenue(1) 56.5 32.3 75% 150.9 100.5 50%

Total Revenue(5) 76.2 80.4 (5%) 233.3 199.7 17%

Net Income 21.0 39.7 (47%) 74.2 80.9 (8%)( ) ( )

Earnings Per Share $0.18 $0.36 (50%) $0.65 $0.76 (14%)

Free Cash Flow(2) 62.9 39.0 61% 184.8 124.3 49%

Free Cash Flow (2) per share $0.55 $0.35 57% $1.62 $1.16 40%Free Cash Flow per share $0.55 $0.35 57% $1.62 $1.16 40%

Margin(3) 91% 88% 90% 87%

Adjusted Net Income(4) 24.8 22.8 9% 58.9 32.2 83%

Adjusted Net Income(4) per share $0.22 $0.20 10% $0.52 $0.30 73%

Working Capital 573 531

Total Shareholders’ Equity $2,102 $1,930

4

Record Results

Royalty Revenue(1) by Commodity

70

80$205.4 million = 44% growth

year over year

50

60

30

40

($ millions)

Oil + Gas& O h

81% precious metals in

10

20

Gold

& Other

PGM

metals in 2010

0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q420102008 2009

5

Diversified Portfolio with Growing Precious Metals

Compared to Guidance

Royalty Revenue(1)

March 2010 guidance

November 2010 guidance

$155 – $170m

$190 – $205mNovember 2010 guidance

Final 2010

$190 – $205m

$205.4m

Track record of exceeding guidance

6

Continue To Deliver Results

70

80

50

60

70

ns)

30

40

50

US $ (M

illion

10

20

G + AG + A

0

Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10

G + AG + A

Shares Outstanding 100.3 112.0 112.1 113.9 114.0 114.1 114.5 114.5

7Significant Growth on a Per Share Basis

g

2010 Royalty Revenue(1) Sources

OtherAustralia

4%

By Country By AssetMidale

2%

Mexico

2%%

Palmarejo22%

Base Metals & Other

2%

Weyburn5% Edson

6%

2%

O&G Other

5%

US49%

Mexico24%

Goldstrike -NPI16%

Gold Other13%

Stillwater6%

Canada21%

Goldstrike - NSR

9%Gold Quarry10%

Goldstrike -NSR8%

13%

94% f R lt R (1) f N th A i

8* Royalty Revenue(1) - 12 Months to December 31, 2010

94% of Royalty Revenue(1) from North America81% precious metals

Net Income – 2009 to 2010 (000’s)

2 394

25,7508,066

80,879

27,394

35,793

16,103 5,366 3,667 2,916 2 602 1 398

74,244, , , 2,602 1,398

9

Continued Financial Strength

Capital Resources March 24, 2011Pro Forma(US Millions)

December 31, 2010(US Millions)

Working Capital $260 $573

Marketable Securities $70 $40

Available Credit Facility $175 $175

Total Available Capital $505 $788

• $505M in available capital at March 24 2011$505M in available capital at March 24, 2011

• $250M per year in Free Cash Flow(2)

10Note: Cash flow estimate based on consensus commodity prices ($1,400 Au, $1,750 Pt, $575 Pd, $80 Oil) and operator’s production guidance.

Capital Structure – March 24, 2011

Capital Structure

Sh O t t di 126 3 Sh P i R (2) C$36 85 C$25 37Shares Outstanding 126.3m

2012 Warrants (C$32 exercise price) 5.75m

2013 Warrants(1) (C$64.27 exercise price) 4.05m

Share Price Range(2) C$36.85-C$25.37

Market Capitalization $4.5B

Working Capital + Marketable Investments $330m

2014 Warrants(1) (C$32.14 exercise price) 2.08m

2017 Warrants (C$75 exercise price) 5.75m

Options & other 3.53m

Available Credit Facilities $175m

Debt or Hedges Nil

Annual Dividends (Indicative)(3) $61m147.46m

Annual Dividends (Indicative)(3) $61m

Management Ownership 4.6%(6.2% diluted)

11

(1) Warrants now of Franco-Nevada GLW Holdings Corp. that upon exercise will entitle the holder thereof, at its election, to receive either 0.1556 of a Franco-Nevada common share or C$5.20 in cash, per warrant. Former $10 GLW warrants each still exercisable at $10/warrant. To acquire one whole FNV share, approximately 6.43 warrants need to be exercised (i.e. $64.27/FNV share). Former $5 GLW warrants each still exercisable at $5/warrant. To acquire one whole FNV share, approximately 6.43 warrants need to be exercised (i.e. $32.14/FNV share).

(2) Previous 52 weeks.(3) Year starting July 1. 2011 with current shares outstanding.

IFRS in 2011

No longer treat royalty interests with minimum amounts as derivative assets→ no need for “Royalty Revenue” (1)

Future GAAP Revenue to include payments made on Gold and PGM streamsstreams

Future guidance to be provided on:

GAAP R– GAAP Revenue

– “Net Revenue”(6)

12

GAAP Revenue & Net Revenue(6)

GAAP Revenue “Net Revenue”

Revenue from Royalties Reported before deductions Net of state or provincialRevenue from Royalties Reported before deductionsof state or provincial commodity taxes

Net of state or provincial commodity taxes

Revenue from Streams Reported inclusive of Net of payment of gold payment for gold equivalentounce

equivalent ounces ($400/oz)

Revenue from Working Interests

Reported before deductions of WI costs

Net of WI costInterests of WI costs

N R (6) ll i f l i h ib iNet Revenue(6) allows true comparison of relative cash contribution by asset, commodity, geography and form of interest

13

Gold Wheaton – Five New Stream Assets

Sudbury Operations South African Operations

MWS

Podolsky

Levack(Morrison)

Ezulwini ProjectEzulwini Project

MWSMWSMcCreedyWest

50% of Au and PGM’s contained in ore from:

25% of Au from MWS7% of Au from Ezulwini

14

ore from:Levack (Morrison)McCreedyPodolsky

7% of Au from Ezulwini

Sudbury Operations – Levack (Morrison)

Ramping up production13-16 koz AuEq* attributable to qstream in 2011 Resource expansion potential at depthpShaft access options to increase production rates

15* Based on Quadra FNX 2011 full year guidance of 20-25 koz of payable TPM (Total Precious Metals). Attributable stream ounces calculated at

$1,400/oz Au, $1,750/oz Pt, $575/oz Pd. (AuEq = gold equivalent).

Sudbury Operations - McCreedy

Steady state operation18-22 koz AuEq* attributable to stream in 2011Increased exploration spending



Sudbury Operations - Podolsky

Steady state operation15-18 koz AuEq* attributable to15 18 koz AuEq attributable to stream in 2011Grey Gabbro potential



South African Operations: MWS

>$450 million invested3rd gold module physically constructed & starting commissioningFIU guidance for MWS in 2011:

Increase from 1.2 mtpm to 1.8 mtpm by May128 k A i FY 2012*128 koz Au in FY 2012*

Attributable to stream: 32 koz Au

New gold and uranium plant* April, 2011 to March, 2012

18Tailings storage facilityTailings reclamation facility

Ezulwini – “A Good Address”

Mines same reef as South Deep

>$275 million invested, including new gold and uranium plantsHistorical production of 12 mozRamping up productionFIU guidance in FY 2012* of 132 koz

19

2011 minimum payment of 19.5 kozProduction to more than double over 6-8 years

* April, 2011 to March, 2012

Growing Pipeline of Assets

135 oil & gas assets and 157 undeveloped oil & gas interests not shown

20

135 oil & gas assets and 157 undeveloped oil & gas interests not shown

Over 340 mineral and oil & gas assets

Portfolio with Exploration & Organic Growth

21Now more diversified and PGM rich

Value Creation through Exploration

Tasiast (2% royalty)Potential 20 moz resource*Potential 1.5 moz/yr by 2015**Revenue begins 2011

Detour (2% royalty)>25 moz resource*Potential 660 koz/yr starting 2013Potential 660 koz/yr starting 2013Potential expansion beyond that

Potential for >$60m/yr for >20 years

22

* Based on press release dated January 31, 2011 from Detour Gold and February 3, 2011 from Trade Winds Block A. Tasiast potential based on BMO Research (Feb 17, 2011)

** Tasiast potential based on Kinross scoping study. Detour potential based on February 2, 2011 BMO analyst projections.*** Calculated at full operation at Tasiast by 2015, and 660 koz/yr at Detour Lake, and assuming $1400/oz gold price.

Organic Value Creation

Category Royalty* OperatorNew mines: • Duketon (2%)

• Lounge Lizard (2%)• Peculiar Knob (production payment)

• Regis Resources• Kagara Ltd• WPG Resources• Peculiar Knob (production payment)

• Red October (1.75%)• WPG Resources• Saracen

Project restarts: • Falcondo (4.1% equity)• Holt (up to 10%)

• Xstrata• St Andrew Goldfields

Royalties reaching hurdles: • Subika (2%) • Newmont Miningy g ( )• Ity (1 – 1.5%)

g• La Mancha

NPI’s pending payout: • Hemlo (50%)• Musselwhite (5%)

• Barrick Gold• Goldcorp

Permitting projects: • Prosperity (22% Au Stream) • Taseko• Rosemont (1.5%)• Perama Hill (2%)

• Augusta Resources• Eldorado Gold

Pre-feasibility stage: • Sandman (0.5 – 5%)• Garden Well (2%)• Goldfields (2%)

• Newmont/Fronteer Gold• Regis Resources• Brigus Gold

• Courageous Lake (1%)• Gurupi (1%)• HBJ Superpit (1.75%)• Agi Dagi (2%)• Kiziltepe (1.5 – 2.5%)

• Seabridge Gold• Jaguar Mining• Alacer Gold• Alamos Gold• Ariana Resources

23* Note: Certain royalties do not cover the entire property or are rounded. See Annual Information Form for further details.** Risk adjusted undiscounted value reflecting total in-situ resources disclosed by operators on or before March 24, 2011.

Values are calculated at $1,400/oz Au, $4.25/lb Cu, $35/oz Ag and $15/lb Mo. No recovery rates are applied.

Risk adjusted potential value > $1 billion**

2011 Outlook

9 months of Sudbury, MWS & EzulwiniHigher Au PGM and oil pricesHigher Au, PGM and oil pricesHigher Palmarejo productionSmaller asset startups & expansionsFalcondo re-startTemporarily lower on GoldstrikeLower minimum at Gold Quarry

$325m to $350m

Lower minimum at Gold Quarry

2011 GAAP Revenue guidance

$227m

135,000 to 155,000 stream ounces

2010 GAAP Revenue on same basis

Net stream ounces

24* Note: Revenue for 2011 is calculated as gross revenue and includes gross stream revenue before payments of 400/oz (See MD&A for

further details). Revenue calculated using consensus commodity prices for 2011; $1,400/oz Au, $1,750/oz Pt, $575/oz Pt and $80/bbl oil.

stream ounces

GAAP Revenue Outlook ($1,400/oz Au)

450

500Includes:• Full year GLW assets• Tasiast & Detour expansions• Organic growth risk adjusted72%

300

350

400g g j

Excludes:• Prosperity stream until permitted

72%

200

250

300

($ M

illio

ns) 49%

48%

100

150

48%

0

50

2008A 2009A 2010A 2011E* 2012 2015**

25

2008A 2009A 2010A 2011E* 2012‐2015**

* Represents mid-range of 2011 revenue guidance at consensus prices.** Potential Compounded Annual Growth Rate 2008-2015 based on potential incremental revenue to 2015. Incremental revenue

calculation based on operator guidance and consensus prices, including $1,400/oz Au.

CAGR of 18% over 8 years**

2010 Pro Forma Net Revenue with GLW

By CommodityBy GeographyWorking Interest

By Asset Type

Base Metals2%

O&G12%

Interest 3%

Australia3% South Africa

11%

Gold66%

PGM20%

Revenue Based

37%Stream

46%

US35%Mexico

17%

66%

Profit Based 14%

Canada34%

• 86% North America revenues• 86% precious metals• 20% PGMs vs 12% Oil & Gas

Key notes:

26

• 20% PGMs vs. 12% Oil & Gas• 60% from leveraged profit & stream assets

Dividend

60% increase in monthly dividend from C$0.025 to US$0.04 per share starting with July 2011 dividendshare starting with July 2011 dividend

1.3% yield on current share price

3.2% yield on cost for our IPO shareholders

F N d id f h hi h i ldFranco-Nevada provides one of the highest yields in the gold sector to institutional investors

27

Franco-Nevada

49% Expected Revenue Growth in 2011

arej

o

60% Dividend Increase in 2011

W ld Cl Di i (T i t D t )

Palm

aar

ry

World Class Discoveries (Tasiast, Detour)

Diversified & Secure Portfolio Gol

dQ

ua

>$500m for Further Growth

Growth and Yield for Gold Investors

Tasi

ast

Growth and Yield for Gold Investors

Sudb

ury

28

SWhy own an ETF?

Appendices

Bald Mountain ‐ BarrickGoldstrike ‐ Barrick East Boulder ‐ StillwaterWeyburn ‐ Cenovus

Cerro San Pedro ‐ New Gold Mesquite – New GoldPalmarejo ‐ Coeur

Marigold GoldcorpRobinson – Quadra FNX Tasiast ‐ Kinross

Marigold ‐ Goldcorp

29

Marigold ‐ Goldcorp

Appendix – EBITDA

EBITDA Three Months Ended Year Ended

D b 31 D b 31 D b 31 D b 31

(US $ millions except per share)

December 31,2010

December 31,2009

December 31,2010

December 31,2009

Net income $21.0 $39.7 $74.2 $80.9

Interest income (1.0) (0.6) (3.9) (1.9)

Interest expense 0.6 0.3 2.3 1.1

Other income, net of income tax - - - -

Income tax provision 9.1 2.2 33.9 17.8

Depletion and depreciation 27.2 22.2 92.6 88.9

Change in fair value – derivative assets (6.7) (36.1) (27.7) (56.1)

Write-down on mineral royalty interests 4.1 - 4.1 -

Write-down on investments 1.5 - 1.5 0.2

EBITDA $55 8 $27 7 $177 0 $130 9EBITDA $55.8 $27.7 $177.0 $130.9

EBITDA per share $0.49 $0.25 $1.55 $1.23

30

Appendix – Free Cash Flow

Free Cash Flow Three Months Ended Year Ended

D b 31 D b 31 D b 31 D b 31


December 31,2010

December 31,2009

December 31,2010

December 31,2009

Operating Income $35.2 $51.7 $108.7 $87.1

Depletion and depreciation 27.2 22.2 92.6 88.9

St k b d ti 1 6 1 1 5 6 4 3Stock based compensation 1.6 1.1 5.6 4.3

Write-down on mineral royalty interest 4.1 - 4.1 -

Write-down on investments 1.5 - 1.5 0.2

Change in fair value – Derivative assets (6.7) (36.0) (27.7) (56.2)

Free Cash Flow $62.9 $39.0 $184.8 $124.3

Margin (Free Cash Flow as a % of Royalty Revenue) 91% 88% 90% 87%

Basic Weighted Average Share Outstanding 114.5 112.0 114.0 106.7

Free Cash Flow per share $0.55 $0.35 $1.62 $1.16

31

Appendix – Reconciliations

Adjusted Net Income


Three Months Ended Year Ended

December 31, 2010

December 31, 2009

December 31, 2010

December 31, 2009

Net income $20.9 $39.7 $74.2 $80.9Write-down on investments, net of income tax 1.3 - 1.3 0.2

Write-down or mineral royalty interest 2.9 - 2.9 -

Foreign exchange loss (gain), net of income tax 5.5 9.0 21.9 (6.6)

(Gain) on sale of investment, net of income tax (1.1) - (22.0) (0.4)(Gain) on sale of investment, net of income tax (1.1) (22.0) (0.4)

Other income net of income tax - - - (1.7)

Change in fair value of assets accounted for as derivative assets,net of income tax

(4.7) (25.9) (19.4) (40.4)

Adjusted Net Income $24.8 $22.8 $58.9 $32.0

Adj t d N t I h $0 22 $0 20 $0 52 $0 30Adjusted Net Income per share $0.22 $0.20 $0.52 $0.30

Royalty Revenue


Three Months Ended Year Ended

December 31,2010

December 31,2009

December 31,2010

December 31,2009

Total Revenue $76 2 $80 4 $233 3 $199 7Total Revenue $76.2 $80.4 $233.3 $199.7

Change in fair value – Palmarejo (6.3) (35.1) (26.8) (54.5)

Change in fair value – Other (0.5) (1.0) (0.9) (1.6)

Dividends - - (0.2) (0.8)

Royalty Revenue $69 4 $44 3 $205 4 $142 8

32

Royalty Revenue $69.4 $44.3 $205.4 $142.8

franco-nevada 2010 year-end final · capital structure – march 24, 2011 capital structure sh o t...

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