Creation of The Royalty Model: Franco-Nevada Mining Corporation Limited
The history of our business starts with our predecessor company, Franco-Nevada Mining Corporation Limited, founded by Seymour Schulich and Pierre Lassonde. Pierre bought Franco-Nevada’s first royalty in 1986 on the Goldstrike mine in the Carlin Trend. At the time, it was a small heap-leach mine operated by Western States Mining. Shortly thereafter, American Barrick (now Barrick Gold Corporation) purchased Goldstrike and did the deep level exploration that would ultimately reveal a 50 million ounce orebody that drove the success of both Barrick and Franco-Nevada.
Pierre and Seymour, assisted by David Harquail, began acquiring royalties in the more prolific gold camps in the world including the Carlin and Getchell trends in Nevada, Timmins and Kirkland Lake camps in Ontario and the Kalgoorlie belt in Australia. They also expanded into PGMs including a royalty on Stillwater in Montana which, along with Goldstrike, stands out as one of their most successful royalty purchases.
In the early 1990s as part of their prospect generation model, Franco‑Nevada discovered the high-grade Ken Snyder deposit in Nevada. They determined that the deposit had a high enough silver credit to carry all operating costs, creating an effective 100% gold royalty and proceeded to construct the mine. In early 2001, Franco-Nevada sold the mine to Normandy Mining in exchange for 20% of Normandy and a royalty on the mine.
Later in 2001, AngloGold made a bid for Normandy. Seeing the potential for a better alternative transaction, Seymour and Pierre struck a deal with Newmont to acquire both Franco-Nevada and Normandy. When the transaction closed in 2002, Franco-Nevada was valued at close to US$3 billion.
The IPO: Franco-Nevada Corporation (FNV)
In 2007, Newmont made the decision to divest its portfolio of royalty assets. Pierre Lassonde, David Harquail and a small team led by management of the original Franco-Nevada, launched an initial public offering on the Toronto Stock Exchange and acquired the royalty portfolio from Newmont for US$1.2 billion. The offering remains the largest mining IPO completed in North America and was the birth of Franco-Nevada Corporation (FNV).
The performance of the portfolio of royalties acquired from Newmont has more than justified the price of the IPO. In the past 15 years, the IPO portfolio has paid out over US$2.1 billion in revenue. At the same time, the reserve ounces associated with those same properties has tripled. Key contributors, including Detour Lake and Tasiast, have once again proven the power of the royalty business model and the exploration optionality of being exposed to great geology.
Streaming: The New Engine of Growth
At the end of 2008, in the depth of the financial crisis, we entered into our first gold streaming agreement with Coeur Mining to complete the construction of the Palmarejo mine in Mexico. Our largest stream transaction to date was a US$1 billion gold and silver streaming commitment to support Inmet’s construction of the giant Cobre Panama project in 2012. A few years later the commitment was expanded to US$1.35 billion with the development of Cobre Panama then in the hands of First Quantum. First Quantum demonstrated its industry-leading project development skill bringing the asset to production in 2019.
Our Unique Approach
We avoid having long-term debt, preferring to have capital to invest when others don’t. The commodity downturn of 2014-2016 forced even the largest global mining companies to repair their balance sheets. We invested US$1.8 billion in those years, creating precious metals streams at some of the world’s largest copper mines – Candelaria, Antamina and Antapaccay – and gaining exposure to longer duration assets than can typically be found in the gold industry.
We have not forgotten our roots and continue to invest in smaller development-stage assets which over time have tremendous resource optionality. Our total mining asset count has grown from 190 at IPO to 419 today, including exploration assets on some of the world’s best gold belts. We have invested outside of precious metals when good opportunities have come to market, adding cash flow growth and exposure to the exploration upside on a broad range of worldclass resources.
In 2011, we acquired royalties on a suite of large copper development projects by acquiring Lumina Royalty. Following the oil price collapse in 2014, we added to our long held Canadian oil and gas royalty interests, investing in the major U.S. basins including the the Permian, SCOOP/STACK, Marcellus, and Haynesville. Most recently, we added royalty exposure to high grade iron ore at Vale’s Northern and Southeastern systems in Brazil. We believe the depth of our portfolio gives us the latitude to patiently search for exposure to good geology. Our desire is to build the most diverse portfolio of royalties and streams exposed to precious metal prices, but also to exploration success across the world’s greatest mineral belts. Our prospects to put more capital to work in the capital intensive and cyclical resource sector have never been better.