Franco ®Nevada
PRESS RELEASE
www.franco-nevada.com
Franco-Nevada Reports Strong Q3 2014 Results and
Declares Quarterly Dividend
TORONTO, November 5, 2014 - Franco-Nevada Corporation (TSX: FNV; NYSE: FNV) today reported third quarter
2014 results with 70,071 Gold Equivalent Ouncesl1l ("GEOs") being earned, an increase of 23.6% over the third quarter of 2013. In addition, the Company recorded revenue of $107.6 million, Net lncome of $33.2 million, or
$0.22 per share, Adjusted Net lncomei2 l of $34.5 million, or $0.23 per share and Adjusted EBITDAI3l of $88.7 million,
or $0.59 per share.
"Franco-Nevada's diversified portfolio continues to perform very well which has resulted in an increase in our
GEO guidance," said David Harquail, CEO. "lt is worth noting that this is before the expected added contribution from our $648 million Candelaria acquisition which closed earlier this week. We will begin recording revenues from the sale of ounces from this new cornerstone asset in the fourth quarter which should make it a particularly strong quarter. In August, Franco-Nevada successfully raised $500 million in new equity capitai which has allowed Franco-Nevada to remain financially strong and debt free even after committing to over $900 million in new investments in 2014. We expect to continue to make further investments."
Financial Results
For the third quarter of 2014, production attributable to our portfolio increased to 70,071 GEOs from 56,683 GEOs in third quarter of 2013, with revenue up 8.9% to $107.6 million. The Company saw growth in GEOs and revenue from recent acquisitions such as Sabodala, Fire Creek!Midas, Kirkland Lake and Osborne, and organic growth
from Detour Lake and the Goldstrike and Hemlo net profits interest ("NPI") royalties. Oil & gas assets generated
$20.5 million in revenue with the Weyburn Unit representing 81% of oil & gas revenue. Revenue diversification is high with 47 producing assets, 78% from precious metals (66% gold and 12% PGM) and 79% from North America and Australia (37% Canada, 21% U.S., 16% Mexico and 5% Australia).
The breakdown of GEOs and revenue for the quarter is as follows:
For the three months ended
September 30, 2014
GEOs111 Revenue
# (in millions)
Gold - United States 13,442 $ 15.9
Gold - Canada 10,083 12.8
Gold -Australia 1,758 2.3
Gold - Rest of World 31,460 40.2
Gold- Total 56,743 $ 71.2
PGM 10,761 12.7
Other minerals 2,567 3.2
Oil & gas 20.5
70,071 $ 107.6
2014 Third Quarter Report FRANCO-NEVADA CORPORATION
Press Release
2014 Guidance
Franco-Nevada realized 70,071 GEOs from its mineral assets and $20.5 million in revenue from its oil & gas assets for the third quarter of 2014. For the first nine months ended September 30, 2014, Franco-Nevada realized
200,641 GEOs and $62.9 million in revenue from its oil & gas assets. Based upon the anticipated performance of the existing asset portfolio for the remainder of 2014, the Company is increasing its guidance to 260,000 to
270,000 GEOs for fiscal 2014 which does not include any contributions from Candelaria. Candelaria is expected to contribute 35,000 to 40,000 attributable GEOs with the Company expecting to be able to sell, and record as revenue, 20,000 to 30,000 GEOs prior to the end of 2014. With contributions from Candelaria, the Company expects 280,000 to 300,000 GEOs in aggregate for fiscal 2014. With respect to the oil & gas assets, the Company expects to earn $70.0 million to $80.0 million in revenue for fiscal 2014. Of the 280,000 to 300,000 GEOs,
Franco-Nevada expects to receive 145,000 to 165,000 GEOs under various stream agreements, including Candelaria. For our guidance for the remainder of 2014, platinum and palladium metals have been converted to GEOs using commodity prices of $1,225/oz Au, $1,275/oz Pt and $775/oz Pd. For the remainder of 2014, the WTI oil price
is assumed to average $80 per barrel with similar discounts for Canadian oil as experienced in 2013.
Corporate Updates
• On October 6, 2014, Franco-Nevada announced the acquisition of a gold and silver stream on the Candelaria project located in Chile for $648.0 million in connection with Lundin Mining Corporation's acquisition
of Candelaria from Freeport McMoRan Inc. The Company also subscribed for C$25.0 million in Lundin's subscription receipts offering. Closing of the transaction occurred on November 3, 2014.
• On October 2, 2014, Franco-Nevada and Coeur Mining Inc. agreed to terminate the existing Palmarejo gold stream following the completion of the minimum ounce obligation and entered into a new gold stream agreement under which Franco-Nevada will invest $22.0 million for the development of the Guadalupe deposit on the Palmarejo property.
• On August 21, 2014, Franco-Nevada closed a public offering of 8,375,000 common2s0h0a9res for net proceeds
of $479.8 million.
• On August 11, 2014, Franco-Nevada acquired the Karma gold stream committing up to $90.0 million for
the development of True Gold Mining inc.'s ("True Gold") Karma project located in Burkino Faso. Following
2
2011
announcement of the transaction, True Gold announced on Octob2e0r 0281, 2014 a positive Preliminary Economic
Assessment for development of the North Kao deposit on the property which estimated average annual
production of 118,000 ounces over 2.5 years sequenced at the end of Karma's mine life.
• For the Cobre Panama precious metals stream agreement, First Quantum Minerals Ltd. ("First Quantum") has requested changes related to the security and reporting requirements. The companies are engaged in discussions with the objective of achieving a mutually beneficial outcome. Franco-Nevada expects to begin to provide funding for the project in the next few months.
Portfolio Updates
• Gold - U.S.: GEOs from Barrick Gold Corporation's ("Barrick") Goldstrike mine increased by 971 GEOs quarter over quarter ("QoQ") due to lower capital being allocated to the Company's net profits interest ("NPI") royalty with associated revenue increasing by $1.1 million to $4.5 million for the quarter. Capital spending at Goldstrike is expected to continue to decrease through the end of 2014 with the NPI benefitting in 2015. The newly acquired Fire Creek/Midas royalty contributed 3,858 GEOs and $4.9 million in revenue in the third quarter of 2014.
• Gold - Canada: Overall GEOs from Canadian gold assets increased by 41% QoQ with the largest increases coming from Hemlo due to lower capital attributable to the NPI and Detour Lake, as ramp-up activities continued. Higher GEOs came from Kirkland Lake, a recent acquisition, and Timmins West due to higher production. Rubicon Minerals Corporation stated that its Phoenix project remains on budget and on schedule for production in mid-2015. Franco-Nevada holds an effective 1.5% NSR royalty on the majority of known mineral resources at the Phoenix project.
• Gold - Australia: Unity Mining Inc. announced plans to put Henty on care and maintenance following the mining of the remaining reserves, which is expected to be within the next 18 months.
• Gold - Rest of World: GEOs from international gold assets saw growth with the addition of the Sabodala gold stream in Q1 2014. First Quantum completed its acquisition of Lumina Copper Corp. which holds the Taca Taca property in Argentina which is subject to a 1.08% NSR royalty payable to Franco-Nevada. The Environmental
2 The Gold Investment that Works
Press Release
Impact Assessment for Alamos' Agi Dagi project in Turkey received its final signatures on August 20, 2014 which represents a positive step forward for development of the property on which Franco-Nevada has a 2.0% NSR.
• PGM Assets: PGM assets saw a 22% increase in GEOs QoQ due to higher production from Stillwater.
• Oil & Gas: Revenue from oil & gas assets for the quarter was $20.5 million, a decrease of 8% QoQ. The decrease is due to lower realized oil and gas prices.
Dividend Information
The Board of Directors of Franco-Nevada is pleased to announce that today it has declared a dividend for the fourth quarter of $0.20 per share. The dividend will be paid on December 18, 2014 to shareholders of record on December 4, 2014. The Canadian dollar equivalent is determined based on the noon rate posted by the Bank
of Canada on November 4, 2014. Under Canadian tax legislation, Canadian resident individuals who receive
"eligible dividends" are entitled to an enhanced gross-up and dividend tax credit on such dividends.
The Company adopted a Dividend Reinvestment Plan ("DRIP") commencing with the October 2013 dividend. Participation in the DRIP is optional. The Company will issue the additional common shares through treasury at a 3% discount to the Average Market Price, as defined in the DRIP. However, the Company may, from time
to time, in its discretion, change or eliminate the discount applicable to treasury acquisitions or direct that such
common shares be purchased in market acquisitions at the prevailing market price, any of which would be publicly
012
announced. The DRIP and enrollment forms are available on the Company's website at www.franco-nevada.com.
Registered shareholders may also enroll in the DRIP online through the plan agent's self-service web portal at
www.investorcentre.com/franco-nevada. Beneficial shareholders should contact their financial intermediary to arrange enrollment.
This press release is not an offer to sell or a solicitation of an offer of securities. A registration statement relating to the DRIP has been filed with the U.S. Securities and Exchange Commission and may be obtained under the Company's profile on the U.S. Securities and Exchange Commission's website at http://www.sec.gov.
Shareholder Information
The complete Condensed Interim Consolidated Financial Statements and Management's Discussion and Analysis can be found today on Franco-Nevada's website at www.franco-nevada.com, on SEDAR at www.sedar.com
and on EDGAR at www.sec.gov.
Management will host a conference call tomorrow, Thursday, November 6, 2014 at 9:00 a.m. Eastern Time to review the results. Interested investors are invited to participate as follows:
• Via Conference Call: Toll-Free: (888) 231-8191; International: (647) 427-7450
• Webcast: A live audio webcast will be accessible at www.franco-nevada.com.
• Conference Call Replay: Available until November 13, 2014 at the following numbers: Toll-Free (855) 859-2056; International (416) 849-0833; Pass code 19871877.
Corporate Summary
Franco-Nevada is a gold-focused royalty and stream company. The Company has a diversified portfolio of
cash-flow producing assets and interests in some of the largest development projects in the world. Its business model provides investors with exploration optionality while limiting exposure to operating and capital cost risks. Franco-Nevada has substantial cash with no debt and is generating cash flow from its portfolio that is being
used to expand its portfolio and pay dividends. Franco-Nevada's common shares trade under the symbol FNV
on both the Toronto and New York stock exchanges.
For more information, please go to our website at www.franco-nevada.com or contact: Sandip Rana Stefan Axell
Chief Financial Officer Director, Corporate Affairs
(416) 306-6303 (416) 306-6328 [email protected]
Prepared in accordance with IFRS and presented in U.S. dollars (unless otherwise noted).
2014 Third Quarter Report
Franco-Nevada Corporation 3
Press se ////////////////////////
Forward looking Statements
This press release contains "forward looking information" and "forward looking statements" within the meaning of applicable
Canadian securities laws and the U.S. Private Securities Litigation Reform Act of 1995, respectively, which may include, but are not limited to, statements with respect to future events or future performance, management's expectations regarding Franco-Nevada's growth, results of operations, estimated future revenues, requirements for additional capitai, minerai reserve and minerai resource estimates, production estimates, production costs and revenue, future demand for and prices
of commodities, expected mining sequences,business prospects and opportunities. In addition, statements (including data in tables) relating to reserves and resources and gold equivalent ounces are forward looking statements, as they involve implied assessment, based o n certa in estimates and assumptions, and no assurance can be given that the estimates will be realized. Such forward looking statements reflect management's current beliefs andare based on information currently available
to management. Often, but no t always,forward looking statements can be identified by the use of words sueh as "plans",
"expects", "is expected", "budgets", "scheduled", "estimates", "forecasts", "predicts", "projects", "intends", "targets",
"aims", "anticipates" or"believes" or variations (including negative variations) of sueh words and phrases or may be identified by statements to the effect that certain actions "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Forward looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Franco-Nevada to be materially different from any future results,performance or achievements expressed or implied by the forward looking statements. A number of factors could cause actual events or results to differ materially from any forward looking statement,including, without limitation: fluctuations in the prices of the
primary commodities that drive royalty and stream revenue (gold, platinum group metals, copper, nickel,uranium, silver, iron-ore and oil and gas); fluctuations in the value of the Canadian and Australian dollar,Mexican peso and any other currency in which revenue is generated, relative to the U.S. dollar; changes in national and local government legislation, including permitting
and licensing regimes and taxation policies; regulations and politica! or economie developments in any of the countries where properties in which Franco-Nevada holds a royalty, stream or other interest are located or through which they are held; risks related to the operators of the properties in which Franco-Nevada holds a royalty, stream or other interest,including changes in the ownership and control of such operators; influence of macroeconomic developments; business opportunities that become available to, or are pursued by Franco-Nevada; reduced access to debt and equity capitai; litigation; title, permit or license disputes related to interests on any of the properties in which Franco-Nevada holds a royalty, stream or other interest;
whether or not the Corporation is determined to have PFIC status; excessive cost escalation as well as development, permitting, infrastructure, operating or technical difficulties on any of the properties in which Franco-Nevada holds a royalty, stream or other interest; rate and timing of production differences from resource estimates; risks and hazards associated 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 unusual or unexpected geologica! and metallurgica! conditions, slope failures or cave-ins,flooding and
other natura l disasters, terrorism, civil unrest or an outbreak of contagious disease; and the integration of acquired assets. The forward looking statements contained in this press release are based upon assumptions management believes to be reasonable, including, without limitation: the ongoing operation of the properties in which Franco-Nevada holds a royalty, stream or other interest by the owners or operators of such properties in a manner consistent with past practice; the accuracy
of public statements and disclosures made by the owners or operators of such underlying properties; no materia l adverse change in the market price of the commodities that underlie the asset portfolio; the Corporation's ongoing ineome and assets relating
to determinatio n of its PFIC status; no adverse development in respect of any significant property in which Franco-Nevada holds a royalty, stream or other interest; the accuracy of publicly disclosed expectations for the development of underlying properties that are not yet in production; integration of acquired assets; and the absence of any other factors that could cause actions, events or results to differ from those anticipated, estimated or intended. However, there ca n be no assurance that forward looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated
in sueh statements and investors are cautioned that forward looking statements are not guarantees of future performance.
Franco-Nevada cannot assure investors that actual results will be consistent with these forward looking statements. Accordingly, investors should not piace undue reliance on forward looking statements due to the inherent uncertainty therein. For additional information with respect to risks,uncertainties and assumptions,please referto the "Risk Factors" section of Franco-Nevada's most recent Annual lnformation Form as well as Franco-Nevada's most recent annual Management's Discussion and Analysis filed
with the Canadian securities regulatory authorities on www.sedar.com and Franco-Nevada's most recent Annual Report filed on Form 40-F fil ed with the SEC on www.sec.gov. The forward looking statements herein are made as of the date of this press release 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.
4 THE GOLD INVESTMENT THAT WORKS
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Press Release
NON-IFRS MEASURES: Adjusted Net lncome and Adjusted EBITDA are intended to provide additional information only and do not have any standardized meaning prescribed under IFRS and should not be considered in isolation or as a substitute far measures of performance prepared in accordance with lFRS. These measures are not necessarily
indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently. Far a reconciliation of these measures to various lFRS measures, piease see below or the Company's current MD&A disclosure found on the Company's website, on SE DAR and on EDGAR.
(1) GEOs include our gol d, platinum,palladium and other minerai assets. GEOs are estimated on a gross basis for NSR royalties and,in the case of stream ounces,before the payment of the per ounce contractual price paid by the Company. For NPI royalties, GEOs are calculated taking into account the NPI economics. Platinum, palladium and other minerals were converted to GEOs by dividing associated revenue, excluding settlement adjustments, by the average gold price for the period. For 03 2014,the average commodity prices were as follows: $1,282/oz gold (2013 - $1,328/oz);
$1,434/oz platinum (2013 - $1,451/oz) and $863/oz pallad ium (2013 - $723/oz).
(2) Adjusted Net lncome is defined by the Company as net income (loss) excluding foreig n exchange gains/losses, gains/ losses on the sale of investments, impairment charges related to royalties, streams,working interests and investments, unusual non-recurring items, and the impact of taxes on ali these items.
(3) Adjusted EBITDA is defined by the Company as net income (loss) excl uding income tax expense/recovery, fina nce income a nd expenses, foreign exchange ga ins/losses, gains/losses on the sale of investments, depletion and depreciation,
non-cash costs of sales and impairment charges related to royalties, streams,working interests and investments.
Reconciliation to IFRS measures:
Three rnonths ended
Septernber 30,
2014 2013
Net incorne $ 33.2 $ 35.3
Incarne tax expense 13.0 13.4
Finance casts 0.4 0.2
Finance incarne (1.2) (0.8) Depletian and depreciatian 38.5 32.3 lrnpairrnent af rayalties 0.2
Nan-cash casts af sales 3.4
Fareign exchange (gains)/lasses and ather (incarne)/expenses 1.2 (0.1)
Adjusted EBITDA $ 88.7 $ 80.3
Basic Weighted Average Shares Outstanding 151.1 146.9
Adjusted EBITDA per share $ 0.59 $ 0.55
Net lncorne $ 33.2 $ 35.3
lrnpairrnent af rayalties, net af incarne tax 0.1
Fareign exchange (gains)/lasses and ather (incarne)/expenses, net af incarne tax 1.2
Adjusted Net lncorne $ 34.5 $ 35.3
Adjusted Net lncorne per share $ 0.23 $ 0.24
2014 Third Quarter Report FRANCO-NEVADA CORPORATION 5
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Franco-Nevada Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited, in millions of U.S. dollars)
ASSETS
Septernber 30, Decernber 31,
2014 2013
Cash and cash equivalents (Notes 4 & 6) $ 1,221.9 $ 770.0
Short-term investments (Notes 5 & 6) 18.0
Receivables (Note 6) 69.1 78.0
Prepaid expenses and other (Note 7) 44.3 46.3
Current assets 1,335.3 912.3
|
Royalty,strearn an d working interests,n et
|
2,081.7
|
2,050.2
|
|
lnvestrnents (Notes 5 & 6)
|
43.1
|
38.2
|
|
Deferred incarne tax assets
|
13.8
|
15.8
|
|
Other (Note 8)
|
52.2
|
28.4
|
|
Total assets $ 3,526.1 $ 3,044.9
|
|
LIABILITIES
Accounts payable and accrued liabilities (Note 13(b))
|
20.5
|
$ 46.1
|
|
Current incarne tax liabilities
|
2.5
|
5.0
|
Current liabilities 23.0 51.1
Deferred income tax liabilities 37.8 30.0
Totalliabilities 60.8 81.1
SHAREHOLDERS' EQUITY (Note 13)
Cornrnon shares 3,641.9 3,133.0
Contributed surplus 47.1 45.8
Deficit (166.9) (212.5) Accurnulated other cornprehensive incarne (loss) (56.8) (2.5)
Total shareholders' equity 3,465.3 2,963.8
Totalliabilities and shareholders' equity $ 3,526.1 $ 3,044.9
The notes are an integrai part of these interim consolidated finandal statements and can be found in our 2014 Q3 Report available on our website.
6 THE GOLD INVESTMENT THAT WORKS
Franco-Nevada Corporation
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(unaudited, in millions of U.S. dollars, except per share amounts)
For the three months ended
September 3O,
2014 2013
For the nine months ended
September 30,
2014 2013
Revenue (Note 9) $ 107.6
$ 98.8 $ 319.4 $ 300.9
Costs and expenses
Costs of sales (Note 10)
Depletion and depreciation (Note 2(d)) Corporate administration (Notes 11 and 13(c)) Business development
lmpairment of royalty interests
lmpairment of investments
18.4
38.5
3.3
0.6
0.2
13.9
32.3
4.1
0.5
48.2
114.2
12.0
1.9
0.2
42.3
94.9
11.4
2.0
5.9
61.0
50.8
176.5 156.5
Operating income 46.6 48.0 142.9
Foreign exchange gain (loss) and other income (expenses)
(Note 5) (1.2) 0.1 0.9
144.4
(13.9)
Income before finance items and income taxes 45.4 48.1 143.8
130.5
Finance items Finance income Finance expenses
1.2 (0.4)
0.8 (0.2)
3.0 (1.2)
2.5 (1.3)
Net income before income taxes 46.2 48.7 145.6
131.7
Income tax expense (Note 12)
13.0 13.4
40.1 39.4
Net income $ 33.2
$ 35.3 $ 105.5
$ 92.3
Other comprehensive income (loss):
ltems that may be reclassified subsequently to profit and loss:
Unrealized gain (loss) in market value of
available-for-sale investments,net of income recovery of $1.3 (2013-income tax expense of $0.2), income tax expense of $0.8 (2013-income tax recovery of $2.5) (Note 5)
Currency translation adjustment
(8.1) (59.2)
1.1
26.9
4.0 (58.3)
(16.2) (46.5)
Other comprehensive ineome (loss) (67.3) 28.0 (54.3)
(62.7)
Total comprehensive ineome (loss) $ (34.1)
$ 63.3 $ 51.2
$ 29.6
Basic earnings per share (Note 14)
Diluted earnings per share (Note 14)
$ 0.22
$ 0.22
$ 0.24
$ 0.24
$ 0.71
$ 0.71
$ 0.63
$ 0.62
The notes are an integrai part of these interi m consolidated financial statements and ca n be found in our 2014 Q3 Report available on our website.
2014Third Quarter Report FRANCO-NEVADA CORPORATION 7
Financia tatement ////////////////////////
Franco-Nevada Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions of U.S. dollars)
Cash flows from operating activities
For the nine months ended
September 30,
2014 2013
Net income $ 105.5 $ 92.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion and depreciation 114.2 94.9 lmpairment of investments 5.9 lmpairment of royalty interests 0.2
Other non-cash items 0.2 2.6
Deferred income tax expense (Note 12) 15.3 8.4
Share-based payments (Note 13(c)) 3.7 3.4
Unrealized foreign exchange loss 0.5 2.4
Mark-to-market on warrants (Note 5) (1.5) 9.5
Changes in non-cash assets and liabilities:
Decrease in receivables 8.9 17.5 lncrease in prepaid expenses and other (48.8) (18.4) Decrease in accounts payable and accrued liabilities (3.1) (1 0.1)
Net cash provided by operating activities 195.1 208.4
Cash flows from investing activities
Proceeds on sale of investments 45.2 201.9
Purchase of investments (26.9) (108.0) Proceeds from the sale of gold bullion 62.6
Acquisition of working interest in oil & gas properties (0.8) Acquisition of interests in minerai properties (189.0) (62.1) Acquisition of other assets (33.8)
Return of capitai on investments 1.8
Purchase of property and equipment (0.1) (1.3) Purchase of oil & gas well equipment (3.1) (4.5)
Net cash (used in) provided by investing activities (145.1) 27.0
Cash flows from financing activities
Proceeds from equity offering (Note 13(a)) 479.8
Credit facility amendment costs (0.7) (1.5) Payment of dividends (Note 13(b)) (67.6) (78.2) Proceeds from exercise of warrants (Note 13(a)) 1.8 2.3
Proceeds from exercise of stock options (Note 13(a)) 1.4 5.5
Net cash provided by (used in) financing activities 414.7 (71.9) Effect of exchange rate changes on cash and cash equivalents (12.8) (5.7) Net change in cash and cash equivalents 451.9 157.8
Cash and cash equivalents at beginning of period 770.0 631.7
Cash and cash equivalents at end of period $ 1,221.9 $ 789.5
Supplemental cash flow information:
Cash paid for interest expense and loan standby fees during the period $ 0.9 $ 0.7 lncome taxes paid during the period $ 21.5 $ 36.0
The notes are an integrai part of these interim consolidated finandal statements and can be found in our 2014 Q3 Report available on our website.
8 THE GOLD INVESTMENT THAT WORKS