Kevin McElligott, Managing Director Australia, FRANCO NEVADA: Update on the State of Royalty Finance


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Kevin McElligott, Managing Director Australia, FRANCO NEVADA: Update on the State of Royalty Finance, presented at Mines and Money Australia 2013

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Kevin McElligott, Managing Director Australia, FRANCO NEVADA: Update on the State of Royalty Finance

  1. 1. FNV 1
  2. 2. Forw ard-Looking Statements This presentation contains c ertain “forward looking information” and “for ward l ooking statements” withi n the meani ng of applicabl e Canadian s ecurities l aws and the United States Private Securities Litigation Reform Act 1995, r especti vel y, which may incl ude, but are not limited to, s tatements with res pec t to future events or future performanc e, management’s expectations regarding Franco-Nevada’s growth, r esults of operati ons, esti mated futur e revenues, requirements for additional c apital, miner al reser ve and mineral res ource esti mates, produc tion esti mates, production cos ts and revenue, future demand for and prices of c ommodities , expected mini ng sequences , business pros pects and opportunities . In addition, statements (includi ng data in tabl es) relating to res erves and res ources together with rel ated royalty equivalent unit c alculations are forwar d looking statements, as they invol ve i mplied assess ment, bas ed on c ertain estimates and assumptions, and no assurance can be given that the estimates will be realized. Such for ward looki ng statements reflect management’s c urrent beliefs and are based on information currentl y available to management. Often, but not al ways , for ward l ooking statements c an be i dentified by the use of words s uch as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “for ecasts”, “predicts”, “projects”, “intends”, “targets”, “ aims”, “anticipates” or “believes” or variati ons (includi ng negati ve variations) of s uch words and phr ases or may be identified by statements to the effect that certain ac tions “may”, “could”, “should”, “would”, “might” or “ will” be taken, occ ur or be ac hieved. Forward looking statements invol ve known and unknown risks , unc ertai nties and other factors, which may cause the actual results, perfor mance or ac hievements of Franc o-Nevada to be materiall y different from any futur e results, perfor mance or ac hievements express ed or implied by the for ward looking statements. A number of factors could c aus e actual events or results to differ materially from any forward looking statement, incl uding, without limitation, fluctuations in the prices of the primar y c ommodities that dri ve royalty and s tream revenue (gold, plati num group metals, c opper, nic kel, uranium, sil ver, iron-ore and oil & gas), fluctuati ons i n the value of the Canadian and Australian dollar, Mexic an pes o, and any other currenc y in which revenue is generated, relative to the US dollar, changes in national and l ocal government l egislation, including permitti ng and licensing regimes and taxation policies, regul ations and political or ec onomic developments i n any of the c ountries where properties in which Franc o-Nevada holds a royalty, stream or other interest are located or thr ough which they are held, risks related to the operators of the properties i n which Franc o-Nevada holds a royalty, s tream or other interest, including changes in the ownershi p and c ontrol of suc h operators, infl uence of macroec onomic developments , business opportunities that become available to, or are pursued by Franco-Nevada, reduc ed acc ess to debt and equity c apital, litigation, title, permit or licens e dis putes related to interests on any of the properties i n which Franco-Nevada holds a royalty, stream or other interest, whether or not the Company is determined to have PFIC s tatus, excessi ve c ost escal ation as well as devel opment, permitti ng, infrastructure, operati ng or technical difficulti es on any of the properties in which Franco-Nevada holds a royalty, stream or other interes t, rate and timing of producti on differenc es from resource estimates, risks and hazar ds ass ociated with the business of development and mining on any of the properties in which Franco-Nevada holds a royalty, stream or other interest, including, but not limited to unus ual or unexpected geological and metallurgical conditi ons, slope failures or cave-ins, flooding and other natural disasters or civil unr est, and the i ntegration of acquired assets. T he for ward looki ng statements c ontained in this pres entation are bas ed upon assumptions management believes to be reas onabl e, incl uding, without limitati on, the ongoing operation of the properties in which Franco-Nevada holds a royalty, str eam or other interest by the owners or operators of s uch properties i n a manner c onsistent with past practic e, the accurac y of public statements and disclosures made by the owners or operators of s uch underlying properties, no material adverse change i n the market price of the commoditi es that underlie the asset portfolio, the Company’s ongoing income and assets rel ating to deter mination of its PF IC status, no adverse devel opment in res pec t of any significant property in whic h Franc oNevada holds a royalty, stream or other interes t, accurac y of publicl y disclosed expec tati ons for the development of underlying properties that are not yet in pr oduction, integration of acquired assets and the absence of any other factors that could c aus e ac tions , events or res ults to differ from thos e anticipated, esti mated or intended. H owever, there can be no assur anc e that forward looking statements will prove to be accurate, as actual res ults and future events c oul d differ materially from thos e anticipated in suc h statements and readers are cautioned that forward looking statements are not guarantees of future performance. Franc o-Nevada c annot ass ure investors that ac tual results will be c onsistent with thes e forward looking statements. Accordingl y, readers s hould not plac e undue r elianc e on forwar d looking s tatements due to the inherent unc ertai nty therein. For additional information with res pect to ris ks, uncertai nties and assumpti ons, pleas e refer to the “Risk F actors” s ection of our AIF, as well as Franc o-Nevada’s most recent Management’s Discussi on and Anal ysis filed with the Canadian s ecurities regulator y authorities on www.s and contai ned i n Franco-Nevada’s For m 40-F filed with the SEC on www.s The forward looki ng statements herein ar e made as of the dates set out in this pres entati on onl y and Franc o-Nevada does not ass ume any obligation to update or revis e them to reflect new information, estimates or opinions, futur e events or results or otherwise, except as required by applicable law. Non-IFRS Measures Adjusted N et Income, Adj usted EBITDA and Margin are i ntended to pr ovide additional information only and do not have any s tandardized meaning under Inter nati onal Financi al Reporting Standards (“IFRS”) and should not be c onsidered in isolation or as a substitute for meas ures of performanc e prepared in acc ordanc e with IFRS. T hes e meas ures are not nec essarily indicati ve of oper ating profit or cash flow from operations as deter mined under IFRS. Other companies may c alculate these measur es differentl y. F or a reconciliation of thes e meas ures to various IFRS measures , pleas e s ee the end of this pres entation or the Company’s MD&A disclos ure found on the C ompany’s website and filed with Canadi an sec urities regulator y authorities on SEDAR at and with the Securities and Exchange Commission on EDGAR at FNV 2
  3. 3. A gold focused royalty & stream company FNV 3
  4. 4. GOLD ASSETS Other See our Annual Information Form filed on on March 19, 2013 and 2013 Asset Handbook for further detail 1 As at June 30, 2013 FNV 4
  5. 5. Oil & Gas Assets 1. As at October 22, 2013 FNV 5
  6. 6. Rest of World 19% Other 23% Gold 67% PGMs 10% US 21% Australia 5% Mexico 22% Canada 33% FNV 6
  7. 7. One in three investors have chosen new gold investment options FNV 7
  8. 8. 400% 360% FNV 320% 280% 240% 200% 160% GOLD 120% 80% S&P/TSX Global Gold Index FNV IPO: Dec 2007 40% FN V and S&P/TSX G lobal G old I ndex c onverted to USD. C hart to O ctober 17, 2 013 0% 2007 2008 2009 2010 2011 2012 FNV 8
  9. 9. Gold ETF FNV Operators 0% 0%* 100% 0% 0%* 100% 1 >1 >1 0% 100% 100% >1.5% 0-4% -0.4% *Revenue royalties & streams FNV 9
  10. 10. Revenue Royalties Streams Profit Royalties FNV 10
  11. 11. Capital Resources (June 30, 2013) ($) FNV 11
  12. 12. FNV 12
  13. 13. FNV 14
  14. 14. FNV 15
  15. 15. FNV 16
  16. 16. FNV 17
  17. 17. 2,000 US$ Millions 1,500 Franco-Nevada* Other 1,000 500 0 * Including Gold Wheaton transactions acquired by Franco-Nevada FNV 18
  18. 18. * 2,500 2,000 1,500 1,000 500 0 * Sudbury: FNV * 2008 MWS: FNV Campo Morado: SLW Mineral Park: SLW Palmarejo: FNV * Ezulwini: FNV Aurizona: SSL Mt. Milligan: RGLD 2010 New Prosperity: FNV 2011 Mt. Milligan: RGLD Black Fox: SSL Rosemont: SLW Tulsequah Chief: RGLD Cobre Panama: FNV 2012 Mt. Milligan: RGLD 777 + Constancia: SLW Colossus: SSL Mutiny Gold: SSL 2013 FNV Salobo + Sudbury: SLW Gold Pascua-Lama: SLW Silver Mixed (Gold, SIlver, PGM) Keno Hill: SLW 2009 Gold Wheaton transactions acquired by Franco-Nevada US$ Millions 19
  19. 19. *Revenue royalties such as NSR’s. Profit royalties are a small part of FNV’s portfolio FNV 20
  20. 20. Royalty Gold Stream FNV 21
  21. 21. Purchase of Existing Royalties Existing Royalties Exploration or Land Financing Exploration Financing Mine Financing Mine Financing FNV 22
  22. 22. Dilution of Shareholder’s interest Return Cash Burden Risk Financing Instrument FNV 23
  23. 23. Versus Equity Versus Debt FNV 24
  24. 24. FNV 25
  25. 25. FNV 26
  26. 26. FNV 27
  27. 27. 1 Adjustment after certain production thresholds are met – see our press release dated Aug 20, 2012 for additional detail FNV 28
  28. 28. 400% FNV 360% 320% Why Own a Gold ETF? 280% 240% 200% GOLD 160% 120% 80% S&P/TSX Global Gold Index FNV IPO: Dec 2007 2007 1 2008 2009 2010 At October 22, 2013; FNV and S&P/TSX Global Gold Index converted to USD 2011 2012 40% 0% FNV 29
  29. 29. FNV 30