Good morning, and welcome to Franco-Nevada Corporation's First Quarter 2024 Results Conference Call and Webcast. This call is being recorded on May 2, 2024. I would now like to turn the conference over to your host, Candida Hayden, Senior Analyst, Investor Relations.

Thank you, Julie. Good morning, everyone. Thank you for joining us today to discuss Franco-Nevada's first quarter 2024 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 followed by Sandip Rana, Chief Financial Officer, who will provide a brief review of our results. 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 2 of this presentation. I will now turn over the call to Paul Brink, President and CEO of Franco-Nevada.

Thank you, Candida, and good morning. Yesterday, we held our AGM here in Toronto, and we're pleased to have Hugo Dryland join our Board. Hugo has, for many years, led Rothschild's Metal and Mining Advisory business and amongst other areas, has extensive experience in project finance and international arbitration. Hugo fills the seat left empty as Randall Oliphant sadly passed away last year. Our diversified portfolio performed well, and production for the quarter met our expectations. The Kaio sales were above and Candelaria gold sales slightly below our expectations. Elevated gold prices boosted our revenue and translated directly into some of our highest several margins. Adjusted EBITDA margin was 84.2% and adjusted net income margin was 56.9%. Royalties and new mines continue to contribute to our growth during the quarter; Goldfields reported the first gold at Salares Norte and Rothschild's Myerosa. Equinox and G Mining are on track for first production at Greenstone and Taca Tazino, respectively, in the coming months. Alamos' planned acquisition of Argano will help realize the full potential of the Magino and the Island deposits, including a potential expansion of the Magino mill facility. Alberta reported good progress on the construction of Valentine Gold, and production there is expected to start in the first half of 2025. While Cobre Panama remains in preservation and safe management, we're hopeful that the issues can be resolved. The Panamanian election takes place this Sunday, May 5. On the business development front, we closed the previously announced acquisition of natural gas royalties in the Haynesville and added a number of smaller interests, an incremental royalty on Pasqua-Lama, a royalty on Scotty Resources property in the Golden Triangle BC, an increase to the Condustablay gold stream in Peru, and a silver royalty on Perpetua's Calico property in Idaho. Our organic growth typically accelerates on the back of high gold prices. A highlight for the quarter is the success that Agnico Eagle continues to have expanding the detailed to Lake coal body and also the East Goldie body at Canadian Malartic. We have no debt, $2.3 billion in available capital and an active deal pipeline. I'll hand the call over to Sandip.

Thank you, Paul. Good morning, everyone. As mentioned by Paul, our portfolio of assets continued to perform well and were in line with expectations for the first quarter of 2024. With respect to performance in the quarter, on Slide 4, we highlight the gold equivalent ounces sold for the last five quarters. As you are aware, Cobre Panama has not contributed any geo or revenue for 2024 as it is under preservation and safe management. On the slide, we've highlighted Cobre Panama separately for prior periods. Total GEOs sold were 122,897 for Q1 2024. This compares to 145,331 for the same period in 2023. Of this, precious metal GEOs were 93,018 compared to 111,238 in the prior year. However, Cobre Panama is excluded from prior year comparatives. Precious metals GEOs were actually higher year-over-year at 93,018 versus 82,575 GEOs. This increase was due to strong contributions from Hanaka, Guadalupe, and Sabeco, all of which had strong production in the first quarter of 2024. This increase was partially offset by lower GEO sold for Sudbury due to lower production and lower water, which was due to the impact of converting weaker platinum pricing revenue to GEOs. In addition, we delivered approximately 3,000 GEOs for Condasablay, which remain in inventory at the end of the quarter. These ounces were not sold during the first quarter and have subsequently been sold post-quarter end. Precious metal GEOs represented approximately 76% of total GEOs for the quarter. For diversified GEOs, our Vale royalty contributed an increase in GEOs for the quarter compared to the prior year due to a higher-than-anticipated royalty payment, reflecting higher iron ore sales during the second half of 2023. 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 of each year. As a result, you will see adjustments to revenue twice a year in the first and third quarters of each year. Energy GEOs were lower at 21,082 for Q1 compared to 25,952 a year ago. The decrease in GEOs is a combination of lower revenue due to weaker natural gas prices, but also the impact of converting energy revenue to GEOs using higher gold prices. Q1 2024 saw continued movement in average commodity prices. As you see on Slide 5, gold and silver prices were higher for the quarter when compared to the prior year. However, platinum and in particular, palladium prices were significantly lower year-over-year, which did negatively impact the conversion of PGM revenue to GEOs. Oil prices were relatively flat, with natural gas being sharply lower. Slide 6 highlights our total revenue and adjusted EBITDA amounts for the last five quarters. As you can see from the bar charts, revenue and adjusted EBITDA are lower in Q1 2024 compared to prior quarters. The company recorded $256.8 million in revenue in the first quarter and $216.1 million adjusted EBITDA, with a margin of 84.2% achieved for the quarter. The lower revenue and adjusted EBITDA are due to less GEOs sold during the quarter compared to the prior year. The impact on both revenue and adjusted EBITDA of the lower GEOs was partially offset by higher gold and silver prices. In fact, while GEOs sold are lower by 15% year-over-year, total revenue was lower by 7%. As you turn to Slide 7, you'll see the key financial results for the company. As mentioned, total GEOs were 122,897, generating $256.8 million in revenue and $216.1 million in adjusted EBITDA. On the cost side, we did have a decrease in the cost of sales compared to the prior year as we did not incur the ongoing fixed cost for ounces delivered by Cobre Panama. Also, cost of sales is dependent on which assets deliver stream ounces, as not all fixed payments per stream are equal. Depletion decreased to $58.2 million versus $61 million a year ago. The decrease in depletion was a combination of no depletion being recorded for Cobre Panama, being partially offset by higher depletion for Anteci and the new Haynesville Matias acquisition. Adjusted net income was $146 million compared to $152.2 million in Q1 2023, and adjusted EPS of $0.76 per share for the quarter, lower by 3.8% versus the prior year. Slide 8 highlights the continued diversification of the portfolio. From the chart, you can see that 76% of our first quarter 2024 revenue was generated by precious metals, with revenue being sourced 83% from the Americas. Slide 9 illustrates the strength of our business model to generate high margins. For Q1 2024, the cash cost per GEO, which is essentially cost of sales divided by gold equivalent ounces sold, was $273 per GEO. This compares to $263 per TO in Q1 2023. Margin was approximately $1,800 per ounce in the first quarter. The average gold price was higher by $183 per ounce for Q1 2024 compared to Q1 2023. At the same time, Franco Nevada's margin was higher by $173 per ounce or 95% of the global price increase in the same period. In a rising commodity price environment, we expect to benefit fully as the cost per GEO sold should not increase significantly. The other cost component for the company besides cost of sales is our corporate administration costs. The royalty streaming business model is a scalable model. Our corporate admin costs have increased at a much slower rate than our revenue. Revenues increased ninefold from Q1 2008, while corporate equity costs have increased by 2.5 times for the same period. Management believes we can continue to add to our portfolio and grow our business without adding significant overhead to the company. Earlier this year, we had guided to $10 million to $15 million in estimated costs for Cobre Panama arbitration. For the first quarter, we incurred $1.4 million in costs. We expect the cost to be weighted more towards the second half of the year. And lastly, Slide 11 summarizes the financial resources available to the company. When including our credit facility of $1 billion, total available capital as of March 31, 2024, was $2.3 billion. And now I'll pass it over to Julie, and we're happy to answer any questions.

Your first question comes from Brian MacArthur from Raymond James.

You've left guidance of GEOs unchanged, but there are a lot of different assumptions, which you sort of talked about commodity prices moving in the first quarter. I mean, now you're much higher gold price assumptions going forward, much lower gas prices. My question really is, is there anything on a volume basis that significantly changed that you're seeing in your portfolio since the beginning of the year? And maybe it's oil and gas because gas prices have gone down? And secondly, it looked like anticapi versus what you give on a gold GEO basis, had a pretty good first quarter. Is that sustainable? Or does it fall off through the year? It kind of goes into the overall volume question?

Thanks for the question, Brian. On a production basis, as we said, the assets, both mining and energy from a production volume basis are in line with expectations. So right now, from a production standpoint, they are in line; obviously, commodity prices are moving around, but we are within our guidance range at this point. With respect to the volumes, we do expect or we do expect them to fall off towards the rest of the year and still be within that guidance range we provided as part of our year-end results.

My second question pertains to Condastable and the increase to 37.5% and 25%. I assume that everything else, including the thresholds for these percentages, remains the same, aiming for the mid-2030s. Could you please provide guidance on when the transition from 25% to 37.5% is expected to occur?

Yes, the change really just relates to the final rate. So you wouldn't expect the rest to change meaningfully in the near term.

And is mid-2030 sort of where you see that now kicking up? I just don't have the data on how that's developed since the original deal.

Yes, I don't have that information readily available. We have fixed deliveries for the first five years. After that, it transitions to a variable percentage based on when the second variable percentage starts. I don't have that detail at the moment. Unfortunately, we can discuss this further offline.

Great. And maybe my final question. Just, Sandip, on the accounting for the taxes on a global basis, can you just review how you're going to do that given when it technically gets enacted?

So right now, it's not an active matter in Barbados or Canada. So for the foreseeable future, our effective tax rate will be roughly 15%. But when it is enacted, assuming it's retroactive, there will be an adjustment in that quarter, which we did highlight, it will be an adjustment to taxes of about $47 million. And as guided at the end of the year, we expect our effective tax rate to be about 19% going forward.

Your next question comes from Heiko Ihle from HC Range.

You've made quite a meaningful number of acquisitions here in the last few months. In your intro on the earnings release, you also state that you still have an active deal pipeline. Conceptually, are you seeing pricing improvement from sellers of streams that are more willing to negotiate right now? And if so, are you seeing this phenomenon more in mining or more in energy?

I'd say, in this environment, probably the main impact is with gold prices moving up, players that have got precious metal byproducts. It's a very attractive environment for them to raise capital through the sale of a precious metal stream. That's the predominant trend right now, and that's making for an active deal pipeline.

Building on that last question, given the current gold prices and inflation levels, have you noticed any changes in how sellers are approaching cash payments? Are they seeking fixed fees instead of a percentage of spot pricing, or is it fairly consistent, and they are generally willing to accept whatever offers come their way?

I would say, really, the market has shifted towards the percentage in terms of the fee we pay to the seller. Fixed is far less common these days. And I haven't seen any trend there recently other than to kind of maintain that.

Your next question comes from Cosmos Chiu from CIBC.

Maybe my first question is on Panama. As you know, the election is coming up this weekend on May 5. Is this something that you're watching closely? Any variables that you might be watching for? And do you see a potential outcome that could impact Franco-Nevada in the near term? Or is it really a longer-term sort of event too?

Cosmos, yes. We're working closely leading up to the election and no surprise. Given what happened in the country and the public sentiment against mining and against the mine, I'd say all the candidates have been quite circumspect in terms of commenting on what their approach might be, so we're hopeful that with the new government in place, there can be a new dialogue. And I'm sure that First Quantum will be engaging with whoever that is to see if there is a route to find a way to reopen the mine.

Of course. And going to your financial statements here, I noticed that your finance income, $16 million has increased quite a bit year-over-year and quarter-over-quarter as well. I just want to make sure, is that just due to the G-mining term loan? And if that's the case, what else is more?

So Cosmos, the interest income is in two places on the financials this quarter up in revenue. You'll see interest income that relates to actual interest on the G-mining loan as well as the tenant note that we did at the end of last year. So any loans we've made, that interest is coming up in revenue now, and there was about $1.2 million for the quarter. The finance income you're referring to, the $16 million, that is the interest we're earning on our cash balance.

Okay. Okay. And is there a reason why you separate those two or just really accounting?

It's all accounting, technical related. The loan interest because it's related to mining assets and up in revenue, and we intend to do more debt-like structures going forward. So we've included that uptown.

Okay. Sounds good. And then maybe one last question again on the accounting side as well. I know Brian asked it earlier in terms of the global minimum taxes. But it sounds like now Barbados has their own legislation and Canada also has their own sort of legislation that's going through. Is there a situation where in terms of timing, when legislation from two countries is being enacted? Is there a chance that things can get really complicated later on if they're enacted at different times, different quarters? Or is that something that we don't really need to worry?

So our understanding right now, neither one has been active in laws. Barbados' effective tax rate will be 15% going forward once the law is enacted. But our understanding is contingent on Canada implementing the GMT. So they should both come into play at the same time. But obviously, we'll have to wait and see.

Your next question comes from Tanya Jakusconek from Scotiabank.

Some of my questions have been answered. But I've got to come back to just Hemlo, Sandy. How should we be thinking of this royalty because this one is always quite variable. What guidance can you give us for the year?

It was lower than I expected in Q1, considering where commodity prices were. And I think Per Barrick's release yesterday, they had higher costs. So going forward, I think we stick with what we had guided to as part of our year-end guidance. It's probably going to be at this stage similar to last year, but we'll have to see how the year unfolds.

Okay. And then for Mine Waste Solution that we're getting to the cap, so that would imply the rest of the year a bit lower, would that seem fair?

Yes. So we do anticipate to reach the cap in Q4 this year; depending upon how the next two quarters play out, it could be early in Q4.

Okay. No, that's what we have as well. And then as we look at the year with everything said and done, and I appreciate a lot of variability, but should we be thinking that a slightly better second half with some of the new mines coming in? And can you just remind me for Q2 and Q3 when the new contributions are coming in. So first stronger second half, should we be thinking like 52%, 53% of GEOs and then the new mines, if you can remind me what who's coming in Q2, Q3?

Sure. Yes. So we do expect a stronger second half and not just because, as you said, the new mines will be online. In Q2, Greenstone is pouring first gold; sorry, Equinox is pouring first gold for Greenstone, and in the second quarter, Solaris Norte with G-mining is Q3. I don't have the specific split as to whether it's 52, 48 or what have you, but definitely a stronger second half.

I just want to make sure because production, I mean, you get paid exactly when they start producing. There's no deferral from my understanding, even if they're noncommercial.

Yes. So on the royalties, we accrue the revenue if ounces have been produced; we're entitled to it. So we will accrue even if we haven't been paid, but we will accrue.

Perfect. And then just on the environment, I think, Paul, you mentioned that what you're seeing right now is mainly streams on non-gold assets for precious metals, so base metal producers. Can you just come back and verify that we're looking at that sort of like $100 million to $300 million range? Is that still the range that you're thinking about for the stream?

Yes. Good question. As Paul noted, it's an active pipeline. It's been evolving over the course of the year so far. I'd say, generally, the size has scaled up a bit, Tanya, beyond 300, you're seeing more potential for larger transactions as well. So we're quite encouraged by that.

And when you say larger transaction, are we talking in over $500 million or still under $500 million?

There are transactions at the $500 million and above level that are possible. So that's perhaps the change versus the last time we spoke. There still are smaller transactions. And as Paul said, byproduct transactions are more common than they were. That said, with the capital still constrained to the gold space with gold producers, I think there's still decent opportunity to transact.

I would assume, Eaun, with the higher gold price for gold producers that would want to put some sort of royalty or stream on our gold assets with this higher gold price, their overall view on their valuation has gone up. Would that be a fair statement to say?

Yes, I think so. Byproducts from producers are probably also a similar elevated view. They take a balanced view on gold price, but certainly constructive on that as well.

Okay. Ian, during your Investor Day, Paul mentioned that you are exploring potential transactions in lithium and other non-gold areas. Can you update us on that? Are those transactions still in the pipeline, and might we see them in 2024? Or are you primarily focused on gold for now?

I would say that the focus still is on gold. I think that's where we spend the majority of our time. That said, there are a lot of opportunities in many different commodities right now. Lithium is one that is interesting to us, just given where we are in the price cycle. There's obviously been a significant pullback in the lithium price, which has created a bit of a balance for developers looking to finance new mines. And so there is, as a consequence, potentially a role there for us to play a part. And so it's something that we're spending time on, and we may be active this year, just depends on the opportunities that are in front of us.

And what size would those opportunities be in Jason?

It's a range. I think probably the sweet spot for us would be maybe up to $50 million to $300 million, $400 million if we did something very sizable.

Okay. And my last question, if I could, just on uranium, we've seen volatility in that space as well. Anything in terms of looking at uranium for you guys?

We do look at uranium from time to time. There aren't as many assets available for us to participate in. There are a couple that we keep our eye on, but it's not something that we're spending a lot of time on despite the change in commodity price.

Your next question comes from John Tumazos from John Tumazos' Independent Research.

It's always challenging to determine how to value things. Franco likely assesses new transactions at the current gold price, around 2,300, and then applies a capitalization rate based on mine life and quality, potentially around 8 or 10 times revenue for a straightforward royalty, or adjusts for how much a stream is in the money. However, gold stocks are currently a bit lower in value, despite strong gold prices. Additionally, the minimum tax rate impacts your returns. So, can we assume that, considering the valuation of gold stocks and the PAC status for both Franco and your peers, you'd be capitalizing revenue at a lower rate now compared to a couple of years ago? Also, with interest rates being higher, that's another factor to consider.

John, it's Paul. A lot of things in there. One thing, anytime we're looking at a property, it's less so commodity prices; it's more figuring out what are we comfortable will get produced and then want to participate in the upside. It really is getting the calls right and being able to participate in the upside that generally has the greatest impact on our returns. So the vast majority of our work, though, is figuring out what we are comfortable will get produced. Particularly when you're looking at development projects, sometimes our view is less than what you can see in reserves. Sometimes it's far more. That's by far the biggest determinant. In terms of commodity prices, we're trying to price deals in the context of the market. The trick is you don't want to get caught when prices run up sharply, paying peak prices. And on the other hand, when the market turns down, that's really where you want to get your deals done. You don't want to get caught up using bear market prices because you undervalue everything. So it's, in a sense, it's trying to take a longer-term view of prices regardless of where the market has moved at the time. On your last comment in terms of rates and how do we think about rates, we think of it as a bit of a competitive advantage, and the competitive advantage is we don't have much debt. So with so many parties, their cost of capital is moving up and down with their cost of debt. We don't really have that. So we think it's an advantage. We can do deals in the market; we can extend capital to people at a more consistent rate than other players over time. So particularly when other folks are forced to use a higher cost of capital, we don't have to. And I think that's a bit of a competitive advantage.

Your next question comes from Tanya Jakusconek from Scotiabank.

Sorry, I forgot to ask how Cobre Panama. I know Cosmos asked about it with the election happening on May 5. But can you just review for us when do the parties actually then get into office? Are we talking like July or thereabouts? And once they get into office, are we expecting more clarity? So maybe just a bit of a time frame for us on getting some news out on Cobre Panama.

Tanya, you're exactly right. The election is coming up now, but the actual official change of government will only happen in July. So that's the first time that they could get in a position of power. It doesn't mean that you can't have dialogue with them before that. But to your point, I don't expect any news, any direction on Cobre until later in the summer.

Okay. No, that's very helpful because we may all be waiting Saturday, Sunday night, and then Monday morning thinking something might be said. But probably realistically, it's probably not until the end of the summer.

There are no further questions on the phone line. I will now hand the Q&A session over to Candida Hayden. We will take questions from the webcast.

Our first question comes from Dipan Nayak. Do you plan to do any share buybacks in 2024?

We do have a large cash balance on our balance sheet. But our number one priority is to add assets to the portfolio. It comes down to what's the best use of a dollar and for us to continue to add assets. So no, we don't intend to do a share buyback.

Your second question also comes from Dipan Nayak. Do you have any option of storing physical gold, assuming price would go up in the medium term?

We do have the option. It comes down to streams versus royalties. Streams we do get physical credits of precious metals to Franco-Nevada. But for accounting to book revenue, we have to sell that metal. So that's what we do on a quarterly basis. There are some royalties that we actually do receive in kind. And so at any given time, we have roughly 20,000 to 25,000 ounces of gold to our account held in various refineries around the world. But there is no plan to increase that level at this stage.

Next question comes from Diego Termite from Oster Capital Management. What are the next steps to consider in the Cobre Panama arbitration? And can the election have any impact on the process of arbitration?

Thanks for the question, Diego. In terms of the next steps, as we previously disclosed, we have filed a notice of intent to initiate arbitration. And the next step following that would be to file a request for arbitration to formally kick that off. In terms of the election process, as Paul had mentioned, we hope First Quantum will be able to engage in constructive dialogue with the new government once it's elected, which should lead to the potential restart of the mine. And obviously, that would impact whether the arbitration proceeds or not.

Your next question comes from Bernie Picchi at Palisade Capital. BHP's interest in Anglo makes me wonder if Franco-Nevada has opportunities in the current mining industry M&A environment, knowing this has not been your traditional area of opportunity.

Thanks for the question. I would say when I saw that potential acquisition, my first thought is that's a huge positive for the copper price. If BHP is acquiring assets rather than building assets, it doesn't add to the world's copper supply. So I'm not surprised to see that the copper price is running up on the back of it. Could there be assets that come out of that, that would create some deal activity for us? Possibly, more actionable though is a transaction that's already happened, and that's Newmont acquiring Newcrest. They've announced that they are asset sales that they are doing. So I think there should be some opportunities that come out of that M&A process.

Thank you. There are no further questions from the webcast. This concludes our first quarter results conference call and webcast. We expect to release our second quarter 2024 results after market close on August 13, with the conference call held the following morning. Thank you for your interest in Franco-Nevada. Goodbye.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.