Good morning, everyone, and welcome to Franco-Nevada Corporation's Third Quarter 2022 Results Conference Call and Webcast. This call is being recorded on November 7, 2022. I would now like to turn the conference over to your host, Bonavie Tek, Vice President of Finance. Please proceed.

Thank you, Michelle. Good morning, everyone. Thank you for joining us today to discuss Franco-Nevada's third quarter 2022 results. Accompanying this call is a presentation, which is available on our website at franco-nevada.com, where you will also find our full financial results. The presentation is also available to view on the webcast. During our call this morning, Paul Brink, President and CEO of Franco-Nevada, will provide introductory remarks; Sandip Rana, Chief Financial Officer, will provide a brief review of our results; and Eaun Gray, Senior Vice President, Business Development, will provide an overview of our Magino transaction. This will be followed by a Q&A period. Our full executive team is available to answer any questions. Participants may submit questions by telephone or via the webcast. We would like to remind participants that some of today's commentary may contain forward-looking information, and we refer you to our detailed cautionary note on Slide 3 of this presentation. I will now turn the call over to Paul Brink, President and CEO of Franco-Nevada.

Thanks, Bonavie, and good morning. I'd like to start by announcing that Jacques Perron will be joining our Board of Directors. We pride ourselves on the technical capabilities of our Board, and Jacques will certainly add in that area amongst others. Jacques had a very successful career in the industry and has led a number of companies, and I'm sure is well known to most of you. We got to know Jacques through his running companies where we have royalty interest, in particular while he was CEO of Pretium operating Brucejack, and as the CEO of St Andrew Goldfields running Holt and Holloway. Jacques, welcome to the Board of Franco-Nevada. Turning to our Q3 results. We saw good underlying production from our diversified portfolio of assets in the quarter. While precious metal prices declined, the impact on our revenue in the quarter was partially offset by higher energy prices. Our Q3 GEOs are lower than Q2 with two main items. While Cobre Panama had record production for the quarter, the strong performance isn't fully reflected in our Q3 GEO sales due to the timing of shipments. We also had a lower contribution from our Vale iron ore royalty. Despite these items, Franco-Nevada has earned record GEOs revenue, adjusted net income, and adjusted EBITDA for the three quarters through September. We're on track to meet our 2022 guidance. We expect to be at the higher end of our overall GEO guidance range and at the lower end of our precious metal range. The weaker gold price environment has led to an increase in demand for royalty and stream financing and in our business development activity. We're pleased to have acquired a royalty on Argonaut’s Magino project in Ontario, currently advancing through construction. The project has had its issues with cost overruns, made only tougher in this inflationary environment, although we believe Argonaut now has a good line of sight on completing construction as planned. The asset has great upside. The current mine plan is a small portion of the total resource and we believe far more ore will be recovered over the life of the mine. Last quarter, we announced the financing package we provided to G Mining for the construction of the Tocantinzinho project in Brazil. Since then, the company has received its license extensions and has commenced construction. Magino and Tocantinzinho add to the growing list of mine builds in our portfolio. Most advanced are Salares Norte and Séguéla, which are scheduled to start production next year along with Magino. We expect to see the first gold ounces from Greenstone, Mara Rosa, and Tocantinzinho in 2024, and Valentine Lake is scheduled to start in 2025. Our other growth driver is mine expansions. The Cobre Panama expansion is on track to reach 100 million tonnes per annum of throughput by late 2023. First Quantum commented this quarter that the mill has performed at the 95 million tonne per annum rate and expects by year-end it'll operate sustainably at the 90 million tonne per annum rate. At Detour Lake, Agnico has discussed their plans to produce greater than 1 million ounces per year. The expansion work was ongoing through the quarter and they hope to meet their near-term throughput target of 28 million tonnes per annum, ahead of schedule. On the other hand, Stillwater has reduced their growth plans to 700,000 PGM ounces by 2027, down from 850,000 PGM ounces previously expected. The other mine expansions, Tasiast, Macassa, Odyssey, and Island Gold are all progressing well. We continue to advance our ESG efforts on a number of fronts. During the quarter, we awarded four scholarships to diverse mining students at McGill, UofT, and Queens. We committed $225,000 of funding for community programs as part of the Magino transaction. A number of programs we're funding are also currently being implemented, including community water infrastructure at Antapaccay and education initiatives in partnership with Antamina and community waste management at Cascabel. In summary, we're blessed with a business model with high margin, largely immune to cost inflation and exposes our shareholders to tremendous long-term optionality. With a prospective global recession, it's a great comfort to have no debt, $2 billion in available capital, and to be generating operating cash flow at a rate that's close to $1 billion per year. You'll recall that last year the Board moved the annual dividend review earlier in the year and we expect the same timing in 2023 with a dividend declaration in January for the first quarter dividend that's paid in March. With that, I'll hand the call over to Sandip.

Thank you, Paul. Good morning, everyone. As Paul mentioned, the company saw strong underlying production from our diverse portfolio of assets during the quarter. The majority of the mining assets performed in line with expectations. Revenue and earnings were impacted by weaker precious metal commodity prices and timing of deliveries for certain assets. The one area of the business that continued to deliver strong financial results was the Energy division. On Slide 4, we've highlighted the gold and gold equivalent ounces sold for the three and nine months ended September 30, 2022 and 2021. Overall, GEOs sold were relatively flat when compared to the prior year with third quarter GEOs sold being 176,408 compared to 177,578 in third quarter 2021, of which precious metal GEOs were 120,542, down 7,150 GEOs from the prior year. The largest contributors to the lower precious metal GEOs were Stillwater, Antamina, and Cobre Panama. The lower contribution of GEOs from Stillwater was the result of mine production being temporarily suspended due to flooding in the area in late June. The mine resumed operations in late July. Also, the amount of GEOs sold from Stillwater was lower due to the impact of lower platinum and palladium prices on the conversion to GEOs. For Antamina, we expect that 2022 will be a more normalized year with silver ounce deliveries being in the range of 2.8 million to 3.2 million ounces. This is what has transpired for the first nine months of the year. However, we've recorded less GEOs sold than expected as the gold-to-silver ratio has weakened this year, resulting in fewer GEOs sold on conversion of silver ounces. At Cobre Panama, First Quantum achieved record production during the third quarter. However, due to timing of shipments, gold and silver deliveries and ounces sold were lower than expected for Franco-Nevada during the quarter. We expect higher deliveries from Cobre Panama in the fourth quarter. Offsetting the lower GEOs sold from the assets mentioned, we had strong third-quarter performance from Candelaria and Tasiast compared to the prior year. For diversified GEOs, our Vale Royalty resulted in just over 3,600 GEOs for the quarter. This was lower than the prior year due to lower production and lower iron ore prices. Also, this quarter, the true-up recorded related to the period January 1st to June 30, 2022, resulted in a revenue reversal of approximately $1.6 million. As you know, each quarter we make an estimate of what the royalty will be, with the actual amount being announced by Vale in late March and September each year. As a result, you will see these types of adjustments to our accruals twice a year, Q1 and Q3. Energy GEOs increased by 54% year-over-year as we benefited from continued higher energy prices. Slide 5 highlights our total revenue and adjusted EBITDA amounts for the three and nine months ended September 30, 2022 and 2021. As you can see from the bar charts, revenue and adjusted EBITDA have decreased year-over-year for the three months. The company recorded $304.2 million in revenue in the third quarter and $256.7 million in adjusted EBITDA, achieving a margin of 84.4%. Partially offsetting the lower contribution from precious metals in the quarter was a continued strong contribution from the energy assets, as revenue increased from $55.1 million a year ago to $83.8 million this quarter. The West Texas Intermediate oil price averaged just over $91 per barrel during the quarter, a 30% increase from the prior year. Natural gas prices were also higher with Henry Hub averaging $7.91 per Mcf during the quarter compared to $4.32 per Mcf a year ago. For the nine months year-to-date, both revenue and adjusted EBITDA are higher than the prior year and set new records for the company. As you turn to Slide 6, you'll see the key financial results for the company. Although GEOs were relatively flat, revenue, as mentioned, declined because of lower commodity prices. On the cost side, our cost of sales was flat, which is consistent with the flat year-over-year GEOs sold. Cost of sales is dependent on which assets deliver stream ounces, as not all fixed payments per stream ounces are equal. As well, the cash cost per GEO, which was $238 this quarter, will fluctuate depending on the mix of royalty versus stream GEOs, including mining and energy. However, at current average gold prices, the company continues to generate significant margins. Depletion decreased to 68.5 million versus 73 million a year ago. Depletion is based on actual mining GEOs sold and barrels of oil equipment received on the energy side of the business. As we received fewer GEOs from Antamina, Vale, and Cobre Panama, this impacted depletion as those assets are higher-per-ounce depletion assets. With respect to taxes, the effective tax rate for the quarter was 16.2%, which is higher than the 15% we have trended to previously. This was due to higher income generated in Canada and the United States from our energy assets. Adjusted net income was $159.7 million or $0.83 per share for the quarter. Slide 7 highlights the continued diversification of the portfolio, which we consider one of the strengths and differentiators of Franco-Nevada. As shown, just over 70% of our Q3 2022 revenue was generated by precious metals. The geographic revenue profile has revenue being sourced 90% from the Americas, with Canada and the U.S. accounting for 42%. With respect to asset diversification, Cobre Panama was our largest revenue generator at 15% of total revenue for the quarter, followed by Candelaria and Antapaccay. Cobre Panama continues to be the only asset contributing more than 10% of revenue. The other cost component for the company, besides the cost of sales, is our corporate administration costs. The chart on Slide 8 highlights our quarterly revenues and our quarterly corporate administration and share-based compensation expense since our IPO. As you can see, revenues have grown significantly over the period shown, while corporate costs have remained fairly stable. For Q3 2022, corporate administration, including share-based compensation, was $5.1 million or less than 2% of revenue. Management believes we can continue to add to the portfolio and grow our business without adding significant cash overhead to the company. On Slide 9, we reiterate our guidance for the year based upon updated commodity prices as highlighted on the slide and our expectations of production from our royalty and stream interests for the fourth quarter. We are forecasting that we’ll be at the high end of the total GEOs sold guidance of 680,000 to 740,000. Also, we expect a higher contribution of GEOs sold from our diversified assets than originally planned. I will now turn it over to Eaun, who will speak to our recent Magino transaction.

Thank you, Sandip. In October, we were very pleased to complete the Magino royalty and equity finance. We were delighted to work with the Argonaut team and its bank syndicate to provide a financing solution for the project, which is expected to go into production next year. The project design is conventional from a technical standpoint and is located in an excellent mining jurisdiction, Ontario. We believe that there is good potential in the broader land package over time in this exciting district next to Island Gold, where we also have a royalty. We've included key project parameters on this slide and highlight the recent quarterly update where Argonaut noted the Magino project is now 70% complete. Moving to the next, Slide 11, we highlight our available capital of $2 billion. Equity valuations of mine developers remain particularly depressed in this high-inflation environment, and we believe we can put capital to work partnering with some of the best development projects and help them differentiate themselves. With that, I'll hand it back to the operator for any questions. Thank you.

Your first question on the phone line comes from Heiko Ihle of H.C. Wainwright.

And just want to extend my congratulations to Jacques. I had the pleasure of working with him when he was at Pretium and it was a pleasure. So congratulations to all of you. I hear more and more about four sellers in the market. I mean, that's just one example, and I understand this is not a perfect comp. A $50 million deal happened today where the seller specifically stated that the deal removed a financing overhang. Obviously, this is sort of a special situation thing. But can you provide some insights on what you're seeing with pricing of distressed sales in the market? And also the sizing and the development stage that these potential streams might be in? I mean, you've hinted at some of this in your release when you go, weaker gold price environment has led to the increase in demand for royalty and stream financing. But maybe if you could just provide some more data points if you could?

Sure. Heiko, it's Eaun speaking here and thank you for the question. It's an excellent observation. I think what we see at the moment is a number of companies, specifically in the precious metal space where there's an acute need for capital. I think our transaction that we announced with Argonaut and Magino is a good case in point for the type of financings that we're looking at at the moment. We see good potential within the precious metal space to continue to do more of these medium-sized transactions. So hopefully, going forward, there will be more like that. Size, the guidance I think is more towards the intermediate overall size.

And pricing wise.

Pricing, I think the market remains relatively competitive, but where we try to differentiate ourselves is to work with partners that value what we do and the solutions that we provide. We try to be nimble in that respect and provide value to our counterparties. And hopefully, as a result, also offer our shareholders attractive returns on the deals that we do.

This was a great segue into my follow-up question, especially since I haven't seen it presented like this during a call or earnings release before. With the increasing focus on ESG and your detailed breakdown of long-term ESG goals in the release today, are you intentionally steering clear of investments with operators that don't meet your long-term ESG standards? Specifically, I'm curious whether, beyond requiring a social license to operate, you would choose not to invest in something due to Board composition or other shortcomings in ESG.

Heiko, it’s Paul. Yes, ESG is very important and the way we think of ourselves is we are allocating capital on behalf of our shareholders. We want to make sure that we do and we want to make sure that they're comfortable. But when we’re allocating capital, it is into good projects. So a lot of our due diligence is focused on environmental and community impacts and absolutely, there are projects that we look at where there's either an existing environmental condition or maybe something in their planning that we're not comfortable with, perhaps it's the community relationship. There are deals that we've turned down for all those reasons in the past to ensure that we are supporting good projects.

Interesting. Appreciate the insight. I'll get back in queue. Thank you so much.

Thank you. The next question comes from John Tumazos of John Tumazos Very Independent Research. Please go ahead.

Thank you. Is it fair to say that your investment criteria automatically get a little more rigorous with lower metals prices because you use the spot gold price rather than an estimated future gold price in making investments and you seek the bottom quarter of the cost curve? And in addition, in the current period of rapidly rising interest rates where we're at 4% and getting higher, would you raise your hurdle rate of return to reflect current market conditions?

John, it’s Paul again. The best way to characterize it is, we want to be a consistent source of capital throughout the cycle, and we try to be as consistent through the cycle in terms of what that cost of capital is. What tends to happen is when things get overheated in the sector, nobody hits our term sheets because they can get cheaper capital, particularly from the equity markets. When the markets are weak and when the costs of other capital become higher, that’s when we see that people tend to hit our term sheets. So it's less so that we try and change the way we price deals; we just try to be consistent throughout the cycle.

So you're using the same numbers today as you would've used on March 1st when gold was at 2,000?

No. When we assess situations, we always consider current prices along with our expectations for long-term prices. We evaluate every deal using both perspectives. The challenge lies in finding a balance between the two, but we aim to ensure that the deal is viable for us in terms of both current and long-term pricing.

Do you worry that it's too hard to do deals and do large deals because of the capital and competition in the sector? Or is it better to just sit on the sidelines and let other people pay too much?

There is more competition in the sector, no doubt about it. But our view is that this is a very capital-intensive sector. It's a very volatile sector. And if you’re patient, the good assets will come available and there will be good opportunities to grow a company.

Next question comes from Tanya Jakusconek of Scotiabank. Please proceed.

I just want to clarify with Eaun. When you mentioned that you're seeing deals more in the mid-range for pricing, are you referring to the 100 million to 300 million range we discussed in Q2?

Hi, Tanya. Yes, I think that's a reasonably fair way to characterize it. I wouldn't put hard bounds on that. There's potential for both bigger and smaller as we negotiate and look at transactions. But that is generally where we're seeing the majority of the opportunities at the moment. And it is pretty active.

And the ones under 100 million are more these royalty sort of deals that you're seeing and sort of streams would be greater than 100 million, would that be fair or?

Not necessarily. We see both types of opportunities, bigger royalties as well are also out there. The royalties like Magino in Ontario, 2% NSR, it's pretty much bread and butter type of business. We like to do those, even if they are a little bit under 100 million as you point out.

And still as you mentioned in the precious metal space is your focus and just project financing continues to be the main opportunities?

Yes. Project financing, that's a fair assumption; that is the majority of the opportunities. But we see others as well. There are also kind of byproduct base metals deals out there that we look at.

Okay. So those are back on the radar again.

I don't know if they ever went off, but yes, there are some of those out there.

That's fair. Thank you, Eaun, for that. If I could ask a bit of guidance from Sandip for just looking out for the remainder of the year? Appreciate you telling us some insights on Cobre Panama. So expecting a stronger Q4. Hemlo looked like it came in as per guidance and I think it was that CAD5 million to CAD6 million per quarter or thereabout. And I think you had mentioned, distributed Q3, Q4. Just wondered about Vale because we were quite off on that contribution, any guidance for Q4 on that one? I know we don't have the accrual happening, but anything you can give there would be appreciative or any other asset for a stronger Q4 performance?

Sure. So Tanya, I guess, Hemlo, I would expect similar to Q3 in the fourth quarter. And then specifically on Vale, obviously iron ore prices have come down. So I would expect something similar to the third quarter, obviously, backing out the revenue reversal of $1.6 million, that was part of the number.

Okay. Any other assets in Q4 that you think you should flag for us?

No, as I said, I think underlying production at most assets was good. In the quarter, it was just timing of deliveries in Cobre Panama specifically. So I think it's just business as usual. Most assets will come in similar.

Thank you so much. And look forward to the dividend in January.

There are no further questions on the phone lines. I will now turn the Q&A session over to Bonavie Tek, who will take questions from the webcast.

Thank you, Michelle. We have two questions from Bernie Picchi, Palisade Capital. The first one is, can you quantify the miss that occurred because of shipment delays at Cobre Panama and will that miss be picked up in Q4?

So, the delivery that was delayed into Q4 for Cobre was about 7,000 to 8,000 GEOs. So we have received that and that will be sold off in this quarter. Obviously, you can't predict on the timing of shipments. So there's nothing to say that there's a delivery that could have potentially been received at the end of December that doesn't get pushed into January, but that is the quantum of the shipping delay for Q3.

And the second question from Bernie is, it would appear that acquisitions of non-precious metals are not front and center at this time. Any comments?

We continue to look outside the precious metal space as well. I think what we would note however, is there's a preponderance of deals to do in the precious metal space. In the current pricing environment, that's where we're focusing a great deal of our attention.

Our last question is from Vincent Ventini of Ventini Capital. Does Franco-Nevada hold any physical gold on its balance sheet?

We do. So we have three royalties that pay us in coins, Tasiast, Detour, and Kirkland Lake. It's roughly 6,000 ounces per quarter. We do hold that on the balance sheet and we sell that on a regular basis.

And that was our last question. There are no further questions from the webcast. So this concludes our third quarter 2022 results conference call and webcast. We expect to release our year-end 2022 results after the market close on March 16, with the conference call held the following morning. Thank you for your interest in Franco-Nevada.

Ladies and gentlemen, this does conclude our conference call for today. We thank you for your participation and ask that you please disconnect your lines.