Franco-Nevada Corporationis a Toronto, Ontario, Canada-based, gold-focusedroyaltyandstreamingcompany with a diversified portfolio of cash-flow producing assets. It is traded on theToronto Stock ExchangeandNew York Stock Exchange.

Franco-Nevada Corporation
Company typePublic
TSX:FNV(2007)
NYSE:FNV(2011)
S&P/TSX 60 component
IndustryMining
Oil & gas
PredecessorNewmont Mining Corporation
Headquarters,
Key people
David Harquail (Chair), Paul Brink (President & CEO), Sandip Rana (CFO)
ProductsGoldRoyaltiesandStreams
RevenueIncreaseUS$1.300 billion(2021)[1]
IncreaseUS$861 million(2021)[1]
IncreaseUS$734 million(2021)[1]
Total assets$6.210 bil.(2021)[1]
Total equity$6.025 bil. (2021)[1]
Websitewww.franco-nevada

TheOld Franco-Nevadawas a publicly listed company on the Toronto Stock Exchange from 1983 to 2002. In 1986, Old Franco-Nevada made its first royalty acquisition, and acquired or created additional royalties and resource investments from 1986 to 2002. Following several royalty acquisitions in the 1980s and 1990s, Old Franco-Nevada sold its only mining property toNormandy Miningin exchange for 19.9% of the company's shares.

In 2002,Newmontacquired 100% of Franco-Nevada as part of a three-way combination of Newmont, Normandy and Old Franco-Nevada. Newmont maintained Franco-Nevada as a royalty holding division, transferring numerous other royalties to it over the five-year period following the acquisition, building its portfolio of royalties to include investments in almost 300 royalties (two-thirds inbaseandprecious metalminers, and one-third inoilandnatural gas) at the time.

In 2007 Newmontspun offFranco-Nevada in aninitial public offering(IPO). Franco-Nevada has grown substantially since the IPO through the acquisition of existing royalties but also by acquiring precious metal streams directly from mine operators. The largest acquisitions have been by-product gold and silver streams from some of the world’s largestcopper minesincludingCobre Panama(Panama),Candelaria(Chile), Antapaccay (Peru) and theAntamina mine(Peru). Franco-Nevada has also continued to add to its oil and gas royalty interests, particularly in the major US oil and gas fracking basins.

Early history

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Franco-Nevada initially began trading as a public gold exploration company in 1983 and was led by executivesSeymour SchulichandPierre Lassonde.At the time, oil and gas royalty ownership—but not gold royalty ownership—was an established business strategy. In 1985 Franco-Nevada raised $930,000 to purchase gold royalties in a follow-on offering. The company made its first royalty investment in 1986, spending half the corporate treasury ($2 million) to acquire 4% of revenues from a mine inNevadaowned by Western States Minerals, later calledGoldstrike mine.Franco-Nevada assumed that known reserves would allow the royalty to pay for itself regardless of additional exploration results.Barrick GoldCorp. acquired the Goldstrike property in 1986 and started production in 1987. The Goldstrike deposit is the largestCarlin-style depositdiscovered globally and up until 2018, the mine had produced 44 Moz of gold.

In 1988 Franco-Nevada purchased a royalty on theCastle Mountain mineinCalifornia.Despite the Castle Mountain mine being unsuccessful, losing money and eventually closing, Franco-Nevada collected triple its investment of $2.8 million.

Franco-Nevada further went on to purchase royalties in various other commodities, but continued its focus on gold.[2]

In the early 1990s, consulting geologist Ken Snyder convinced the management of Franco-Nevada to stake a play at the intersection of the Carlin and Getchell trends in Nevada, leading to the high-grade gold and silver discovery of what became theKen Snyder Mine.Franco-Nevada concluded that the mine had a high enough silver credit to carry all operating costs, therebycreating an effective 100% gold royalty.Construction of the $84 million project was completed and first gold was produced in December 1998.[3]

Seymour Schulich and Pierre Lassonde created a sister company to Franco-Nevada, namedEuro-Nevada.Euro-Nevada had a gold-only focus while Franco-Nevada was more diversified. In June 1999, they merged Franco-Nevada and Euro-Nevada to increase liquidity and financial capacity and improve clarity for shareholders. The combined companies had a market value of $3.5 billion at the time.[4]

Newmont take over

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In April 2001, Franco-Nevada sold theNevada Midas mine(previously named theKen Snyder mine), its only wholly owned mine, to Normandy Mining in exchange for 20% of Normandy and a five-percent royalty on the mine. That September,Anglo Goldmade a bid for Normandy at a valuation 60% greater than Franco-Nevada's acquisition cost. Seeing the potential to take advantage of Newmont's rivalry with Anglo, Schulich and Lassonde approached Newmont Mining Corporation to discuss purchasing Franco-Nevada and Normandy, striking a deal richer than Anglo's offer, and ultimately valuing Franco-Nevada at $2.5 billion.[5]

Spin-off from Newmont

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In 2007, Newmont made the decision to divest its portfolio of royalty assets. Pierre Lassonde, David Harquail and a small team led by management of the original Franco-Nevada, launched an initial public offering on the Toronto Stock Exchange raising CA$1.1 billion[6]which helped fund the US$1.2 billion acquisition of a portfolio of royalties from Newmont.[7]The listing was one of the largest in Canadian history, second only to the 2000Sun LifeIPO, and the largest mining IPO in North American History.[6][8][9]

Major Assets

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Cobre Panama

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In August 2012, Franco-Nevada partnered withInmet Miningto invest $1 billion in various metal streams from theCobre Panama Copper Project.[10]In 2013,First Quantum Mineralstook over Inmet Mining. At the end of January 2018, the subsidiary Franco-Nevada (Barbados) acquired an additional precious metals stream on Korea Resources Corporation’s interest in Cobre Panama and provided a second tranche of funding to First Quantum to assist it with acquiring a further 10% interest in the project. After this transaction, FNB has precious metal stream interests covering 100% of the ownership of Cobre Panama.[11]FNB has funded a total of $1.356 billion funding commitment of the more than $6 billion capital cost for the project.[12]In June 2019, Cobre Panama started shipping ore concentrate. An announcement of a Panamanian Supreme Court ruling in connection to the constitutionality of Law 9 of 1997 is raising questions concerningMinera Panama S. A..,the holder of the Cobre Panama concession.[13]In April 2019, First Quantum indicated its plan to invest a further US$327 million to expand Cobre Panama’s throughput from 85 Mtpa to 100 Mtpa starting in 2023.[14]

In January 2022, negotiations between the Government of Panama and First Quantum Minerals started to define a new contract concerning the Cobre Panama mine.[15]First Quantums subsidiary Minera Panamá S. A. made proposals favorable to the Government of Panamá including yearly payments of US$375 million in tax and royalty revenue. These payments were offered under the conditions that metal prices and profitability of this mine would not drop significantly. However, the Government of Panamá halted discussions in December 2022 and announced plans to order suspension of operations at this mine.[16]After a closure of the mine during two weeks, operations resumed and the terms and conditions of arefreshed concession contractbetween Minera Panamá S. A. and the Government of Panama have been announced on March 8, 2023.[17]In October 2023, the Panamaniancongressapproved the controversial bill 1100 approving the refreshed concession contract in its third debate, which has led to multiple protests in the country.[18]These protests led to a moratorium on metallic mining throughout the country, "for an indefinite term", through Bill 1110, excluding already granted concessions and approved with 59 votes in favor by the National Assembly (AN), on November 3, 2023.[19]However, the constitutionality of the already approved new concession between the Government of Panana and Minera Panamá S. A. was questioned, leading to more uncertainty.[20]

Candelaria

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In October 2014, Lundin Mining agreed to acquire an 80% interest in theCandelaria mining complexin theAtacama Regionof Chile fromFreeport-McMoRanfor $1.8 billion. To help fund the acquisition cost, Franco-Nevada paid $648 million to acquire a gold and silver stream on the Candelaria mine.[21]

At the time, the mine had reserves supporting a 14 year mine life. Lundin Mining had great exploration success expanding the underground extensions of the orebody and in its reserve update in September 2020 stated reserves supporting a 25 year mine life.[22]

Antamina

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In October 2015, Franco-Nevada agreed to payTeck ResourcesUS$610 million for a stream on Teck’s 22.5% share of the silver production on the giantAntamina minein Peru. Teck owns its stake in Antamina along withBHP,GlencoreandMitsubishiCorp. Antamina is the world’s eighth-largest copper mine. A possible future underground expansion at Antamina could extend the mine life beyond 40 years.[23]

Antapaccay

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In February 2016, Franco-Nevada (Barbados) acquired a gold and silver steam related to theAntapaccay minein Peru from Glencore for $500 million. The deal was part of a $10 billion debt reduction plan announced by Glencore in September 2015. Glencore invested more than $1.5 billion to build and commission the Antapaccay open-pit mine and plant, which started operations in 2012.[24]Glencore received approval from Peruvian authorities in January 2020 for the development of theCoroccohuayco projecton the Antapaccay property. The integrated project would have a 34 year life.[25]

Continental Joint Venture

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In August 2018, Franco-Nevada andContinental Resourcesentered into a strategic relationship to jointly acquire royalty rights in theSCOOP and STACK oil and gas playsofOklahoma.Franco-Nevada committed $520 million to the venture to be invested through 2021. The venture was established to acquire royalty rights at the grass-roots level in areas primarily within acreage operated by Continental.[26]

Vale Royalty Debentures and Labrador Iron Ore

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In April 2021, Franco-Nevada acquired 57 million Royalty Debentures for $538 million from theBrazilian Development Bankand theFederal government of Brazil,representing 14.7% of the total issued Royalty Debentures. The Royalty Debentures provide holders with life of mine net sales royalties onVale'sNorthern Iron Ore system, Southeastern Iron Ore system and on certain copper and gold operations. Franco-Nevada also accumulated a 9.9% equity investment in Labrador Iron Ore Royalty Corporation, acquired over a number of years for a total investment of C$93 million. The mines associated with both investments produce high gradeIron oreproducts that allow steelmakers to reduce CO2and other emissions from their operations.[27]

Succession

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In May 2020, after more than twelve years in the role, Pierre Lassonde stepped down as Chair of Franco-Nevada, taking the role of Chair Emeritus. David Harquail, who had been President and CEO since the 2007 IPO, was appointed Chair and Paul Brink as President and CEO.[28]

References

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  1. ^abcde2021 Results.franco-nevada. Retrieved 11 March 2022
  2. ^Condon, Bernard (February 18, 2002)."Kings of royalty".Forbes.Retrieved2009-11-02.
  3. ^Ken Snyder mine nears completion.The Northern Miner, October 26, 1998.
  4. ^Gold firms Franco-Nevada and Euro-Nevada to merge.CBC News, June 24, 1999.
  5. ^Allen Robinson:Newmont makes move for gold mega-merger.The Globe and Mail, November 14, 2001.
  6. ^abBailey, Stewart; Doug Alexander (December 3, 2007)."Franco-Nevada Unchanged in Stock Debut After IPO".Bloomberg.Retrieved2009-11-02.
  7. ^French, Cameron (November 21, 2007)."Newmont's Franco-Nevada launches Canada IPO".Reuters.Retrieved2009-11-02.
  8. ^Koven, Peter (January 31, 2008)."Franco-Nevada swelled 2007 IPO statistics".Financial Post. Archived fromthe originalon June 28, 2007.Retrieved2009-11-02.
  9. ^Vlastelica, Ryan (December 20, 2007)."Newmont Mining sells $1.3 billion in assets to Franco-Nevada".Thomas Financial. Archived fromthe originalon July 22, 2011.RetrievedNovember 2,2009.
  10. ^"Franco-Nevada and Inmet Agree to a $1 Billion Precious Metals Stream Financing for the Cobre mine, Panama".Prnewswire.20 August 2012.Retrieved29 April2019.
  11. ^Franco-Nevada acquires an additional precious metals stream on Cobre Panama from KORES for US$178 million.News Release, Franco-Nevada, 22 January 2018. Retrieved 29 April 2019
  12. ^Franco-Nevada Cobre Panama Update.News Release, Franco-Nevada, 25 September 2018. Retrieved 29 April 2019
  13. ^Cecilia Jarnasmie:First Quantum, Panama Gov’t study ruling that casts doubts on giant copper mine.mining, September 26, 2018.
  14. ^Olivia da Silva:First Quantum to Expand Cobre Panama for US$327 Million.Investing News, April 1, 2019.
  15. ^First Quantum Minerals Consolidated Financial Statement 2021.FQM, 15 February 2022, pp. 51-52. Retrieved 26 March 2022.
  16. ^Cobre Panama Update.First Quantum Minerals, 16 December 2022. Retrieved 2022-12-28.
  17. ^Q1-2023 Financial statements.First Quantum Minerals, p. 20. Retrieved 2023-05-17.
  18. ^"Protesters march in Panama against the contract extension for a huge copper mine".AP News.2023-10-24.Retrieved2023-10-25.
  19. ^"La Asamblea aprobó en tercer debate el proyecto que propone la moratoria minera".Prensa(in Spanish). 2023-11-03.Retrieved2023-11-03.
  20. ^Valentine Hilaire and Divya Rajagopal:Explainer-Why might Panama cancel a copper mine contract?Reuters, 2023-11-03. Retrieved 2023-11-04.
  21. ^"Franco-Nevada to Acquire a Gold & Silver Stream on Candelaria from Lundin Mining for US$648 million".Prnewswire.6 October 2014.Retrieved29 April2019.
  22. ^Lundin Mining Announces 2020 Mineral Resource and Reserve Estimates.Ludin Mining, September 8, 2020.
  23. ^Peter Koven:Franco-Nevada Corp, Teck Resources Ltd reach $610 million streaming deal to fund Antamina mine in Peru.financialpost, October 7, 2015.
  24. ^Franco-Nevada to buy gold and silver from Glencore’s Antapaccay mine Peru for $500m,Mining Technology, February 10, 2016.
  25. ^Antapaccay’s Coroccohuayco Project Gets Approval.E&MJ, January 16, 2020.
  26. ^Franco-Nevada enters into a strategic relationship with Continental Resources, Inc.Franco-Nevada Press Release, August 6, 2018.
  27. ^Franco-Nevada Adds Iron Ore Royalty Exposure.PR Newswire, April 19, 2021.
  28. ^Franco-Nevada reports strong Q1 results.Franco-Nevada, Press Release, May 6, 2020.