Franco Nevada

Our Business

Franco-Nevada is a gold-focused royalty company with additional interests in platinum group metals, oil and gas and other assets. We are the leading gold royalty company with the largest gold royalty revenues. The majority of our revenues are derived from a diversified portfolio of high-quality royalty properties located in North America. The Company also holds a pipeline of assets which have the potential to generate future royalty revenues but which are currently under development or in the exploration phase.  As of mid 2010, the royalty portfolio consists of approximately 311 royalty interests diversified over a range of commodities and stages from exploration through to operating. 

Our royalty portfolio generates high-margin free cash-flow with lower exposure to operating and capital costs than operating companies.  The portfolio also provides us with direct leverage to commodity prices and the exploration potential of world-class ore deposits and mineral exploration trends where we have existing royalty interests.  Management has proven successful in both acquiring and creating new royalties along with managing our growing portfolio of assets. We intend to utilize our free cash-flow to grow the portfolio and to pay dividends. We believe that a portfolio of royalty interests provides our shareholders with a higher risk-adjusted return through the commodity cycle than direct operating interests. 

Our History

The royalty portfolio was assembled starting in 1985 by Franco-Nevada Mining Corporation Limited ("Old-Franco") and predecessor companies. In 2002, Old Franco was acquired by Newmont Mining Corporation ("Newmont"). A number of Old Franco employees remained with Newmont and managed the royalty portfolio as well as created additional royalties on the property portfolio of Newmont and Normandy Mining. In late 2007, a team including some Old Franco employees formed Franco-Nevada Corporation and on December 20, 2007, acquired a portfolio of Newmont royalties and other intrests, completed an initial public offering ("IPO"), completed a bank debt facility and listed on the Toronto Stock Exchange.  In 2008 and 2009, the company raised additional equity in order to grow the royalty portfolio and continues to actively acquire and pursue new royalty assets.  

Our Company and How We Operate

Franco-Nevada is a Canadian company headquartered in Toronto with additional offices in Denver, Reno and Perth, all of which are used to manage our royalty portfolio and pursue new investment opportunities.  Franco-Nevada shares trade on the Toronto Stock Exchange under the symbol "FNV" and are part of the S&P/TSX Composite Index.   Warrants trade under the symbols "FNV.WT" and “FNV.WT.A”.  Our shareholders consist of mostly large generalist institutional funds in Canada, the United States, Europe and Australia. Management and directors are significant shareholders, and are dedicated to the sustainable maximization of the Company's share price, holding 5.0% of the common shares, or 6.5% on a fully diluted basis, as at March 25, 2010. 

We currently operate with a small organization of up to twenty full-time employees and contractors.  Our management team is made up of experienced and proven professionals some of whom have been continuously associated with our royalty and investment portfolio for over 20 years. We operate with a flat management structure similar to that of a small merchant bank.  As we do not have any material operational responsibilities, our focus is on new investments and our flat management structure allows many of our team members to take multidisciplinary roles for corporate development opportunities. Our board of directors includes directors associated with Old Franco and the board has significant experience in mining, oil and gas and corporate finance. 

Our Vision and Business Model

Our vision is to be the leading gold-focused royalty company while remaining dedicated to the maximization of shareholder value. We believe we can achieve this through sound management of our current portfolio and through accretive transactions using a long-term perspective. Our business model is to grow the royalty portfolio with acquisitions of high quality, high margin assets limiting our downside exposure but retaining the full upside potential of higher commodity prices and/or new exploration discoveries. Our growth strategy is predicated on increasing net asset value ("NAV") on a per share basis, as we strongly believe that sustainable growth in per share NAV will be reflected in growth in our share price. Accordingly, NAV accretion per share is one of our key acquisition metrics. We are firm believers that maintaining a strong precious metals focus will allow us to preserve our premium valuation. However, we will remain vigilant for opportunities in all resources. Maintaining and managing a diversified, high-margin portfolio with low overheads provides the strong free cash flow required to fuel organic growth. We believe in maintaining a strong balance sheet to allow us to be opportunistic in any environment. We do not hedge any of our commodity revenue exposures.

Growth

We continue to remain focused on growing our gold royalty business. Since our IPO, we have been very successful in both acquiring existing royalties (Gold Quarry, Subika) and creating new royalties to help finance mines into production (Palmarejo, Hislop, Prosperity). Over 95% of our investments to date have been for new gold royalties. As of mid 2010, we have a total of approximately 311 royalty interests in all commodities at all stages of development. For our gold division, we have 165 gold royalties of which 19 are in operation, 15 are advanced with the potential of production in the next five years and 131 are exploration stage royalties.

Our gold Royalty Revenue continues to expand rapidly aided by our new gold royalty investments, organic growth from our portfolio and higher gold prices. Our gold Royalty Revenue was $70.7 million in 2008 and grew by 42% to $100.5 million in 2009.  We expect further growth from 2010 to 2014 with the potential for 15 new sources of gold Royalty Revenue, that collectively have the potential to generate more than $150 million in new gold Royalty Revenue at recent gold prices.