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) 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 & 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 14 years, the IPO portfolio has paid out over US$1.8 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
With an increase in energy prices, oil and gas made up more than 40% of Franco-Nevada’s revenues in 2008. We set out
to add gold revenue adding royalties on Newmont's Gold Quarry operation in Nevada and Subika mine in Ghana. At the
end of 2008, in the depth of the financial crisis, we entered into our first gold streaming agreement with Coeur
Mining. The financing assisted Coeur Mining to complete the construction of the Palmarejo mine in Mexico. As
Franco-Nevada’s revenues became more weighted to precious metals, its share price was rerated upwards.
In 2012, we made a US$1 billion gold and silver streaming commitment to support Inmet's construction of the giant
Cobre Panama project. A few years later the commitment was expanded to US$1.4 billion with the development of Cobre
Panama then in the hands of First Quantum. First Quantum expanded the size of the planned mine and demonstrated its
industry-leading project development skill bringing the asset to production in 2019. Cobre Panama is a cornerstone
asset for Franco-Nevada today and First Quantum’s plans to expand the mine will be our major growth driver through
2023.
Our Unique Approach
In our view, there is enough cyclicality in the commodity sector without adding leverage and there is option value to
having liquidity to do deals when others cannot. Our conservative balance sheet approach was vindicated with the
commodity downturn of 2014-2016. It forced even the largest global mining companies to repair their balance sheets.
We were able to invest US$1.8 billion in those years creating precious metals streams at Candelaria, Antamina and
Antapaccay. These large assets, along with Cobre Panama, have further diversified our portfolio with longer duration
assets than can be typically found in the gold industry.
We have not forgotten our roots and continue to also invest in smaller development-stage assets. It takes a long-term
perspective to plant these acorns for Franco-Nevada’s future. Our total mining asset count has grown from 190 at IPO
to 322 today including exploration assets on some of the world’s best gold belts and royalties on a suite of copper
and nickel development projects.
We have also invested in recourses outside of precious metals when good opportunities have come to market. This has
added cash flow growth and exposure to the exploration upside on a broader range of world-class resources. With oil
prices falling sharply in 2014, we set about adding to our oil and gas royalty interests, particularly in the major
U.S. basins including the Permian and the Marcellus. We have also been attracted to the long reserve life of
high-quality iron ore deposits and, in 2021, added royalty exposure to Vale’s Northern and Southeastern Iron Ore
systems in Brazil.
In Search of Good Geology
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.