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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

 

For the month of May 2020

 

Commission File Number 001-35286

 

FRANCO-NEVADA CORPORATION

(Translation of registrant’s name into English)

 

199 Bay Street, Suite 2000, P.O. Box 285, Commerce Court Postal Station, Toronto, Ontario, Canada M5L 1G9

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F

 

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

 

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

 

 

The information contained in Exhibits 99.2 and 99.3 of this Form 6-K is hereby incorporated by reference into the registrant’s registration statements on Form F-3 (file no. 333-225687), on Form S-8 (file no. 333-176856) and on Form F-10 (file no. 333-237671).

 

 

 

 

INDEX TO EXHIBITS

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

NEWS RELEASE

Toronto, May 6, 2020

(in U.S. dollars unless otherwise noted)

Franco-Nevada Reports Strong Q1 Results

Dividend Increased for 13th Consecutive Year

David Harquail appointed Chair

Paul Brink appointed CEO

“Franco-Nevada’s diversified portfolio performed very well in the first quarter adding strong free cash flow to our debt-free balance sheet,” stated David Harquail, CEO. “Going forward, we are seeing COVID-19 related production curtailments to a portion of our mining portfolio which will temporarily defer some of our mining revenues. In our energy portfolio, we have seen a sharp drop in commodity prices and drilling activity and an impairment has been taken to reflect our reduced expectations for those assets. Energy is expected to be less than 10% of our revenues this year and weakness in this sector is expected to be more than offset by strength in our gold equivalent assets. It is a testament to our ongoing confidence in both the portfolio and business model that today the Board has increased the dividend for the 13th consecutive year adding to the over $1.2 billion of dividends already paid.”

At today’s AGM, Pierre Lassonde gave his last address as Chair before taking on the title of Chair Emeritus. The Board thanked Mr. Lassonde for his great leadership to both the industry and for his contribution in creating tremendous value for Franco-Nevada shareholders over the past 12.5 years.

“After 35 years with Franco-Nevada, in one incarnation or another, I would like to thank all of the analysts, brokers, portfolio managers and shareholders who have believed in us and helped us build this great company,” stated Pierre Lassonde, Chair. “At a time when financial markets are racked by uncertainty, volatility and violent losses in the face of COVID-19, there is nothing that gives me greater pleasure than to see our share price reach new highs and give our thousands of shareholders that extra support and comfort they deserve by having invested in Franco-Nevada. That, more than anything else, is reward enough for me. Thank you.”

Following the meeting, David Harquail was appointed Chair and Paul Brink as President and CEO. Mr. Brink has also joined the Board as a director along with Maureen Jensen who is the former Chair and CEO of the Ontario Securities Commission and a geoscientist. 

Q1/2020 Financial Highlights

 

For Q1/2020, revenue was sourced  89.0%  from gold and gold equivalents (69.4% gold, 9.2% silver, 9.4% PGM and 1.0% other mining assets) and 11.0% from energy (oil, gas and NGLs). The portfolio’s objective is to maintain a focus on precious metals (gold, silver and PGM) with a target of no more than 20% in revenue from energy. Geographically, revenue was sourced 86.9% from the Americas (48.9% Latin America, 18.7% U.S. and 19.3% Canada).

Corporate Updates

COVID-19 Updates

Franco-Nevada supports measures to address the COVID-19 pandemic. All of our employees continue to work remotely and there are no known cases in the Company. The Company is closely monitoring the impact of the COVID-19 pandemic on its portfolio of assets.

Q1/2020 Portfolio Updates

Gold Equivalent Ounces Sold:    GEOs sold for the quarter were 134,941,  an increase of 10.6% from the 122,049 sold in Q1/2019.  Cobre Panama,  Guadalupe-Palmarejo and Hemlo contributed to the quarter-over-quarter increase, partly offset by lower contributions from Candelaria, Antapaccay and Sabodala. 

Latin America:

U.S.:

Canada:

Rest of World:

Energy:   Revenue from the energy assets increased to $26.5 million in Q1/2020 compared to $20.8 million in Q1/2019,  reflecting contributions from new investments in the Marcellus and in the SCOOP/STACK by the Royalty Acquisition Venture with Continental but offset by lower commodity prices compared to Q1/2019.

U.S.:

Canada:

Dividend Declaration

Franco-Nevada is pleased to announce that its Board of Directors has declared a quarterly dividend of $0.26 per share.  The dividend is a 4.0% increase from the previous $0.25 per share quarterly dividend and marks the 13th consecutive annual dividend increase for Franco-Nevada shareholders.  Canadian investors in Franco-Nevada’s IPO in December 2007 are now receiving an effective 9.6% yield on their cost base.  The dividend will be paid on June 25, 2020 to shareholders of record on June 11, 2020 (the “Record Date”).  The Canadian dollar equivalent is to be determined based on the daily average rate posted by the Bank of Canada on the Record Date.  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 has a Dividend Reinvestment Plan (the “DRIP”). Participation in the DRIP is optional. The Company will issue 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 announced. The DRIP and enrollment forms are available on the Company’s website at www.franco-nevada.com. Canadian and U.S. registered shareholders may also enroll in the DRIP online through the plan agent’s self-service web portal at www.investorcentre.com/franco-nevada. Canadian and U.S. beneficial shareholders should contact their financial intermediary to arrange enrollment.  Non-Canadian and non-U.S. shareholders may potentially participate in the DRIP, subject to the satisfaction of certain conditions.  Non-Canadian and non-U.S. shareholders should contact the Company to determine whether they satisfy the necessary conditions to participate in the DRIP.

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 www.sec.gov.

Shareholder Information

The complete Consolidated Interim 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,  May 7, 2020 at 10:00 a.m. Eastern Time to review Franco‑Nevada’s Q1/2020 results.

Interested investors are invited to participate as follows:

Corporate Summary

Franco-Nevada Corporation is the leading gold-focused royalty and streaming company with the largest and most diversified portfolio of cash-flow producing assets.  Its business model provides investors with gold price and exploration optionality while limiting exposure to many of the risks of operating companies.  Franco-Nevada is debt free and uses its free cash flow to expand its portfolio and pay dividends.  It trades under the symbol FNV on both the Toronto and New York stock exchanges.  Franco-Nevada is the gold investment that works.

For more information, please go to our website at www.franco-nevada.com or contact:

 

Forward-Looking Statements

This press release contains “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian securities laws and the United States 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, carrying value of assets, future dividends and requirements for additional capital, mineral reserve and mineral resource estimates, production estimates, production costs and revenue, future demand for and prices of commodities, expected mining sequences, business prospects and opportunities, audits being conducted by the Canada Revenue Agency, the expected exposure for current and future assessments and available remedies, the remedies relating to and consequences of the ruling of the Supreme Court of Panama in relation to the Cobre Panama project, the aggregate value of Common Shares which may be issued pursuant to the at-the-market (“ATM”) program, and the Company’s expected use of the net proceeds of the ATM program. In addition, statements (including data in tables) relating to reserves and resources and gold equivalent ounces (“GEOs”) are forward-looking statements, as they involve implied assessment, based on certain estimates and assumptions, and no assurance can be given that the estimates and assumptions are accurate and that such reserves and resources and GEOs will be realized. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budgets”, “scheduled”, “estimates”, “forecasts”, “predicts”, “projects”, “intends”, “targets”, “aims”, “anticipates” or “believes” or variations (including negative variations) of such 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: the price at which Common Shares are sold in the ATM program and the aggregate net proceeds received by the Company as a result of the ATM program; 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 and the enforcement thereof; regulatory, political or economic 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 capital; 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 Company is determined to have “passive foreign investment company” (“PFIC”) status as defined in Section 1297 of the United States Internal Revenue Code of 1986, as amended; potential changes in Canadian tax treatment of offshore streams; 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; access to sufficient pipeline capacity; actual mineral content may differ from the reserves and resources contained in technical reports; rate and timing of production differences from resource estimates, other technical reports and mine plans; 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 geological and metallurgical conditions, slope failures or cave-ins, flooding and other natural disasters, terrorism, civil unrest or an outbreak of contagious diseases; the impact of the COVID-19 (coronavirus) pandemic; 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 material adverse change in the market price of the commodities that underlie the asset portfolio; the Company’s ongoing income and assets relating to determination of its PFIC status; no material changes to existing tax treatment; the expected application of tax laws and regulations by taxation authorities; the expected assessment and outcome of any audit by any taxation authority; 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 can 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 such statements. Investors are cautioned that forward-looking statements are not guarantees of future performance. In addition, there can be no assurance as to the outcome of the ongoing audit by the CRA or the Company’s exposure as a result thereof. Franco-Nevada cannot assure investors that actual results will be consistent with these forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements due to the inherent uncertainty therein.

For additional information with respect to risks, uncertainties and assumptions, please refer to Franco-Nevada’s most recent Annual Information Form filed with the Canadian securities regulatory authorities on www.sedar.com and Franco-Nevada’s most recent Annual Report filed on Form 40-F filed 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.

NON-IFRS MEASURES:  Cash Costs, Adjusted EBITDA, and Adjusted Net Income 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 for measures of performance prepared in accordance with IFRS.  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. For a reconciliation of these measures to various IFRS measures, please see below or the Company’s current MD&A disclosure found on the Company’s website, on SEDAR and on EDGAR. Comparative information has been recalculated to conform to current presentation.

 

Reconciliation to IFRS measures:

 

 

 

 

 

 

FRANCO-NEVADA CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(unaudited, in millions of U.S. dollars)

 

 

 

The accompanying notes are an integral part of these consolidated financial statements and can be found in our  Q1/2020  Report available on our website

 

FRANCO-NEVADA CORPORATION

CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME

(unaudited, in millions of U.S. dollars and shares, except per share amounts)

 

 

 

The accompanying notes are an integral part of these consolidated financial statements and can be found in our  Q1/2020  Report available on our website

FRANCO-NEVADA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions of U.S. dollars)

 

 

 

The accompanying notes are an integral part of these consolidated financial statements and can be found in our  Q1/2020  Report available on our website

 

 Exhibit 99.2

 

 

 

This Management’s Discussion and Analysis (“MD&A”) of financial position and results of operations of Franco-Nevada Corporation (“Franco-Nevada”, the “Company”, “we” or “our”) has been prepared based upon information available to Franco-Nevada as at May 6, 2020 and should be read in conjunction with Franco-Nevada’s unaudited condensed consolidated financial statements and related notes as at and for the three months ended March 31, 2020 and 2019.  The unaudited condensed consolidated financial statements and this MD&A are presented in U.S. dollars and have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of condensed interim financial statements, including IAS 34, Interim Financial Reporting.

Readers are cautioned that the MD&A contains forward-looking statements and that actual events may vary from management’s expectations. Readers are encouraged to read the “Cautionary Statement on Forward-Looking Information” at the end of this MD&A and to consult Franco-Nevada’s unaudited consolidated financial statements for the three months ended March 31, 2020 and 2019 and the corresponding notes to the financial statements which are available on our website at www.franco-nevada.com, on SEDAR at www.sedar.com and in Form 6-K filed with the United States Securities and Exchange Commission on EDGAR at www.sec.gov. 

Additional information related to Franco-Nevada, including our Annual Information Form and Form 40-F,  are available on SEDAR at www.sedar.com, and on EDGAR at www.sec.gov, respectively. These documents contain descriptions of certain of Franco-Nevada’s producing and advanced royalty and stream assets, as well as a description of risk factors affecting the Company.  For additional information, please see our website at www.franco-nevada.com.

Table of Contents

The following abbreviations may be used throughout this MD&A:

For definitions of the various types of agreements, please refer to our most recent Annual Information Form filed on SEDAR at www.sedar.com or our Form 40‑F filed on EDGAR at www.sec.gov.

 

 

Overview

Franco-Nevada is the leading gold-focused royalty and streaming company with the largest and most diversified portfolio of royalties and streams by commodity, geography, revenue type and stage of project.  The portfolio is actively managed to maintain a focus on precious metals (gold, silver and PGM) and a diversity of revenue sources with a target of not more than 20% of revenue from Energy (oil, gas and NGLs). 

Franco-Nevada’s shares are listed on the Toronto and New York stock exchanges under the symbol FNV.  An investment in Franco-Nevada’s shares is expected to provide investors with yield and exposure to commodity price and exploration optionality while limiting exposure to many of the risks of operating companies. Since its initial public offering over twelve years ago, Franco-Nevada has increased its dividend annually and its share price has outperformed the gold price and all relevant gold equity benchmarks.

Our aspiration is to make Franco-Nevada the “go to” gold stock for the generalist investor.  We believe that our emphasis on minimizing risk, paying dividends and maintaining a strong balance sheet along with high governance standards is attractive to generalist investors.  In a world confronted by political volatility and financial market instability, we believe making Franco-Nevada a lower risk gold investment that pays dividends and has leverage to gold is the right strategy.

Strategy

Franco-Nevada’s revenue is generated from various forms of agreements, ranging from net smelter return royalties, streams, net profits interests, net royalty interests, working interests and other types of arrangements.

The Company does not operate mines, develop projects or conduct exploration.  Franco-Nevada’s business model is focused on managing and growing its portfolio of royalties and streams. The advantages of this business model are:

 

Franco-Nevada’s financial results in the short term are primarily tied to the price of commodities and the amount of production from its portfolio of producing assets. Financial results have also been supplemented by acquisitions of new producing assets.  Over the longer term, results are impacted by the availability of exploration and development capital applied by other companies to expand or extend Franco-Nevada’s producing assets or to advance Franco-Nevada’s advanced and exploration assets into production.

Franco-Nevada has a long-term investment outlook and recognizes the cyclical nature of the industry. Franco-Nevada has operated by maintaining a strong balance sheet so that it can make investments during commodity cycle downturns. 

Franco-Nevada manages its portfolio to maintain a focus on precious metals (gold, silver and PGM) and a diversity of revenue sources with a target of not more than 20% of revenue from Energy (oil, gas and NGLs). In the short term, we may temporarily diverge from the long-term target based on opportunities available. In Q1/2020,  89.0% of revenue was earned from gold and gold equivalents and 11.0% from Energy assets.

One of the strengths of the Franco-Nevada business model is that our business is not generally impacted when producer costs increase as long as the producer continues to operate the underlying asset. Royalty and stream payments/deliveries are based on production levels with no adjustments for the operator’s operating costs, with the exception of NPI and NRI royalties, which are based on the profit of the underlying operation. Profit-based royalties accounted for approximately 6.7% of total revenue in Q1/2020.

 

Highlights

Financial Update – Q1/2020

Impact of the COVID-19 Pandemic

Franco-Nevada supports measures to address the COVID-19 pandemic. All of our employees are working remotely, and there are no known cases in the Company. Our business development team has developed work-arounds for various due diligence processes.

The Company is closely monitoring the impact of the COVID-19 pandemic on its portfolio of assets. We remain in close contact with many of our operators who are facing increased challenges due to COVID-19. Further details are provided below in the “Significant Portfolio Updates” section of this MD&A.

In addition, a number of geopolitical and market factors impacting global energy markets (including those related to the COVID-19 pandemic) have contributed to extreme volatility and a significant decrease in the price of oil and gas. As a result of reduced production and capital spend by the operators of the Company’s Energy assets due to lower market expectations for oil and gas prices,  the Company has undertaken a review of the carrying value of its Energy assets, and recorded after-tax impairments of $207.4 million ($271.7 million pre-tax) related to its interests in the SCOOP/STACK and Weyburn. Further details are provided in the “Impairment Charges” section of this MD&A.

As previously announced on April 7, 2020, in response to increased uncertainty and volatility as compared to March 9, 2020 when the Company’s original guidance was provided, the Company withdrew its GEO sales guidance and energy revenue guidance for 2020. The Company will provide new guidance once operations in the mining industry and energy markets stabilize.

Franco-Nevada is financially strong, debt-free, and well-positioned to make further investments to grow its diversified portfolio of assets. At March 31, 2020, the Company had working capital of $299.5 million, including cash and cash equivalents of $209.8 million, marketable securities of $89.0 million, and credit facilities of $1.1 billion.

Significant Portfolio Updates

Additional updates related to our portfolio of assets are available in our News Release issued on May 6, 2020, available on SEDAR at www.sedar.com, and EDGAR at www.sec.gov.

As a result of the COVID-19 pandemic, temporarily reduced or curtailed production has been announced by the respective operators for the following Mining assets:

__________________________

1GEOs include production from our Mining assets and do not include Energy 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. Silver, platinum, palladium and other mining commodities are converted to GEOs by dividing associated revenue, which includes settlement adjustments, by the relevant gold price. The price used in the computation of GEOs earned from a particular asset varies depending on the royalty or stream agreement, which may make reference to the market price realized by the operator, or the average price for the month, quarter, or year in which the mining commodity was produced or sold. For illustrative purposes, please refer to the average commodity price table on page 11 of this MD&A for indicative prices which may be used in the calculation of GEOs for the three months ended March 31, 2020 and 2019, respectively.

2Cash Costs, Adjusted Net Income, Adjusted EBITDA, and Margin are non-IFRS financial measures with no standardized meaning under IFRS. For further information and a detailed reconciliation, please see the “Non-IFRS Financial Measures” section of this MD&A.

With respect to the Company’s Energy assets, several operators of the Company’s Energy assets have announced significant reductions in planned capital expenditures and curtailed production due to lower market expectations for oil and gas prices, including as a result of the COVID-19 pandemic. As a result, the Company has undertaken a review of the carrying value of its Energy assets, and recorded after-tax impairments of  $207.4 million ($271.7 million pre-tax) related to its interest in the SCOOP/STACK and Weyburn. Further details are provided in the “Impairment Charges” section of this MD&A.

Corporate Developments

Acquisition of Island Gold Royalty Interest – Ontario, Canada

On March 20, 2020, Franco-Nevada acquired an existing 0.62% NSR on Alamos Gold Inc.’s Island Gold project in Finan Township in the Province of Ontario for $13.4 million  (C$19.0 million).  

Acquisition of U.S. Oil & Gas Royalty Rights with Continental Resources, Inc. – SCOOP and STACK, Oklahoma, U.S.A.

In the three months ended March 31, 2020, the Company recorded contributions to the Royalty Acquisition Venture of $16.8 million (Q1/2019 - $51.4 million), which includes $1.3 million included in accrued liabilities funded after quarter-end. As at March 31, 2020, the total cumulative investment in the Royalty Acquisition Venture by the Company totalled $393.0 million and Franco-Nevada has remaining commitments of up to $127.0 million to be funded in future periods. For 2020, in order to account for recent weakness in the commodity price environment,  Franco-Nevada and Continental have collectively agreed to reduce their capital funding commitments to the Royalty Acquisition Venture by approximately half, with Franco-Nevada’s share being approximately $35 million for the remainder of 2020. The reduced funding level will target lower prices for acquiring acreage, which will allow the Royalty Acquisition Venture to bolster the land base and provide a stronger platform for a potential future rebound in commodity prices and a  resumption of development activity by Continental.

Financing

Credit Facilities

As at March 31, 2020, the Company had no amounts outstanding against its $1.0 billion unsecured revolving term credit facility (the “Corporate Revolver”).  However, the Company has posted security in the form of standby letters of credit in the amount of $16.3 million  (C$23.1 million) in connection with the audit by the Canada Revenue Agency (“CRA”) of its 2013–2015 taxation years. The standby letters of credit reduce the available balance under the Corporate Revolver.

On March 10, 2020, Franco-Nevada (Barbados) Corporation amended its $100.0 million unsecured revolving credit facility (the “FNBC Revolver”) to extend the term by an additional year to March 20, 2021. The amendment also provided a  reduction in the applicable margins and standby fees, which depend on the Company’s leverage ratio. As at March 31, 2020, the Company had no amounts outstanding against the FNBC Revolver.

On February 14, 2020, the Company made full repayment of the $80.0 million it had outstanding at December 31, 2019 under its non-revolving credit facility (the “Corporate Term Loan”). The Corporate Term Loan is a non-revolving facility, and is therefore no longer available to draw.

At-the-Market Equity Program

On July 19, 2019, the Company established an at-the-market equity program (the “ATM Program”) permitting the Company to issue up to an aggregate of $200 million worth of common shares from treasury at prevailing market prices to the public through the Toronto Stock Exchange, the New York Stock Exchange or any other marketplace on which the common shares are listed, quoted or otherwise trade.

In the first quarter of 2020, the Company issued 435,000 common shares under the ATM Program at an average price per common share of $105.84. The gross proceeds to the Company from these issuances were $46.1 million, and the net proceeds were $45.5 million after deducting agent commission costs of $0.5 million and other share issuance costs of $0.1 million.

On April 28, 2020, the Company renewed its base shelf prospectus. As a result, the old base shelf prospectus and associated ATM Program was terminated.  The Company intends to establish a $300 million at-the-market program under the new base shelf prospectus subject to regulatory and stock exchange approval.

Dividend Declaration

Franco-Nevada is pleased to announce that its Board of Directors has declared a quarterly dividend of $0.26 per share to be payable on June 25, 2020 to shareholders of record on June 11, 2020. The dividend is a 4.0% increase from the previous $0.25 per share quarterly dividend and marks the 13th consecutive annual dividend increase for Franco-Nevada shareholders.

For the three months ended March 31, 2020, dividends declared of $0.25 per share totaled $47.1 million, of which $36.2 million was paid in cash and $10.9 million was paid in common shares issued under the Company’s Dividend Reinvestment Plan (the “DRIP”).

Guidance

The following contains forward-looking statements. Reference should be made to the “Cautionary Statement on Forward-Looking Information” section at the end of this MD&A. For a description of material factors that could cause our actual results to differ materially from the forward-looking statements below, please see the “Cautionary Statement” and the “Risk Factors” section of our most recent Annual Information Form filed with the Canadian securities regulatory authorities on www.sedar.com and our most recent Form 40-F filed with the United States Securities and Exchange Commission on www.sec.gov.  

The current COVID-19 global health pandemic is significantly impacting the global economy and commodity and financial markets. The full extent and impact of the COVID-19 pandemic is unknown and to date has included extreme volatility in financial markets, a slowdown in economic activity, extreme volatility in commodity prices (including gold, silver, palladium and oil and gas) and has raised the prospect of an extended global recession. As well, as efforts are undertaken to slow the spread of the COVID-19 pandemic, the operation and development of mining projects may be impacted. To date, a number of mining projects have been suspended as cases of COVID-19 have been confirmed, for precautionary purposes or as governments have declared a state of emergency or taken other actions. Please see “Significant Portfolio Updates” for further information on the status of the mining operations underlying certain of the Company’s assets.

In addition, a number of geopolitical and market factors impacting global energy markets, including those related to the COVID-19 pandemic, have contributed to extreme volatility and a significant decrease in the price of oil and gas. Excess supply relative to current demand and a lack of available storage have created significant downward pressure on global energy markets, with oil prices and futures contracts having reached historic lows.

In response to the increased uncertainty and volatility as compared to March 9, 2020 when the Company’s original guidance was provided, the Company has withdrawn its GEO sales guidance and energy revenue guidance for 2020. The Company will consider providing new guidance once operations in the mining industry and energy markets stabilize.

Market Overview

The prices of precious metals, gold in particular, are the largest factors in determining profitability and cash-flow from operations for Franco-Nevada. Historically, the price of gold has been subject to volatile price movements and is affected by numerous macroeconomic and industry factors that are beyond the Company’s control. Major influences on the gold price include the level of interest rates, inflation expectations, currency exchange rate fluctuations including the relative strength of the U.S. dollar, and the supply of and demand for gold.

Commodity price volatility also impacts the number of GEOs when converting non-gold commodities to GEOs. Silver, platinum, palladium and other mining commodities are converted to GEOs by dividing associated revenue, which includes settlement adjustments, by the relevant gold price. The price used in the computation of GEOs earned from a particular asset varies depending on the royalty or stream agreement, which may make reference to the market price realized by the operator, or the average price for the month, quarter, or year in which the mining commodity was produced or sold.

Gold prices increased 21.4%,  averaging  $1,583/oz, compared to $1,304/oz in Q1/2019,  reflecting improved sentiment toward gold as a safe haven in uncertain times. Gold prices ended Q1/2020 at $1,609/oz, approximately 5.6% higher than at the end of Q4/2019.  

Silver prices averaged $16.90/oz in 2020, an increase of 8.5% compared to $15.57/oz in Q1/2019. Platinum and palladium prices averaged $903/oz and $2,284/oz, respectively, in Q1/2020, compared to $823/oz and $1,435/oz, respectively, in Q1/2019, an increase of 9.7% and 59.2%, respectively.

During the quarter, a number of geopolitical and market factors outside of the Company’s control have contributed to extreme volatility and a significant decrease in the price of oil and gas. WTI prices averaged $45.99/bbl, a 16.2% decrease from Q1/2019,  Edmonton Light prices averaged C$52.18/bbl, down 22.7% compared to Q1/2019. Henry Hub natural gas prices averaged $1.87/mcf in Q1/2020 compared to $2.87/mcf in Q1/2019. Volatility in the oil and gas prices continued subsequent to the quarter-end, with Edmonton Light averaging C$12.64/bbl, WTI at $16.52/bbl and Henry Hub natural gas at $1.76/mcf in April 2020.

Selected Financial Information