Form 6-K FRANCO NEVADA Corp For: May 04

May 4, 2022 5:31 PM EDT

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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 2022

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

Form 20-F   

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).



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.

FRANCO-NEVADA CORPORATION

/s/ Lloyd Hong

Date: May 4, 2022

Lloyd Hong

Chief Legal Officer & Corporate Secretary

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Exhibit 99.1

Graphic

NEWS RELEASE

Toronto, May 4, 2022

(in U.S. dollars unless otherwise noted)

Franco-Nevada Reports Strong Q1 Results

Hedge Against Inflation

“I am pleased to announce another strong quarter demonstrating our high margin business”, stated Paul Brink, President & CEO. “The portfolio benefited from strong precious metal, energy and iron ore prices. The Energy contribution was particularly strong, offset somewhat by lower precious metal deliveries. Total GEOs are on track to meet annual guidance. Our NSR and stream interests are inflation-proof and our G&A expenses are less than 3% of revenue. This allows revenue growth to translate directly into expanded earnings. Franco-Nevada is debt-free and is growing its cash balances. Our recent Asset Handbook highlighted good resource growth at our assets and we have a strong pipeline of precious metal opportunities.”

Q1 2022

Strong Q1 results

vs

Q1 2021

Total GEOs1 sold (including Energy)

178,614 GEOs

+2%

Revenue

$338.8 million

+10%

Net income

$182.0 million ($0.95/share)

+6%

Adjusted Net Income2

$177.2 million ($0.93/share)

+10%

Adjusted EBITDA2

$286.6 million ($1.50/share)

+9%

Margin2

84.6%

-1%

Strong Financial Position

No debt and $1.7 billion in available capital as at March 31, 2022
Generated $230.6 million in operating cash flow for the quarter
Quarterly dividend of $0.32/share

Sector-Leading ESG

Ranked #1 gold company by Sustainalytics, AA by MSCI and Prime by ISS ESG
Committed to the World Gold Council’s “Responsible Gold Mining Principles”
Partnering with our operators on community and ESG initiatives
Goal of 40% diverse representation at the Board and top leadership levels as a group by 2025

Diverse, Long-Life Portfolio

Most diverse royalty and streaming portfolio by asset, operator and country
Core assets outperforming since time of acquisition
Long-life reserves and resources

Growth and Optionality

Acquisitions, mine expansions and new mines driving long-term growth
Long-term optionality in gold, copper and nickel
Strong pipeline of precious metal opportunities


Quarterly revenue and GEOs sold by commodity

Q1 2022

Q1 2021

    

GEOs Sold

    

Revenue

    

GEOs Sold

 

Revenue

    

#

(in millions)

#

 

(in millions)

PRECIOUS METALS

Gold

99,831

$

187.5

 

107,005

$

190.0

Silver

21,401

41.1

 

27,466

47.7

 

PGMs

7,395

14.2

 

11,498

19.5

 

128,627

$

242.8

 

145,969

$

257.2

 

DIVERSIFIED

Iron ore

10,493

$

19.3

 

2,801

$

5.0

 

Other mining assets

563

1.1

 

805

1.6

 

Oil

20,176

39.0

 

14,926

26.0

 

Gas

15,142

29.5

 

8,477

14.4

 

NGL

3,613

7.1

 

2,759

4.7

 

49,987

$

96.0

 

29,768

$

51.7

 

178,614

$

338.8

 

175,737

$

308.9

 

For Q1 2022, we earned $338.8 million in revenue, up 9.7% from Q1 2021. The growth was primarily driven by higher realized oil and gas prices from our Energy assets and revenue from our Vale Royalty. These more than offset the decrease in Precious Metal revenue and resulted in 71.7% of our revenue being sourced from Precious Metal assets (55.4% gold, 12.1% silver, 4.2% PGM). Revenue was sourced 90.4% from the Americas (30.2% South America, 23.4% Central America & Mexico, 21.6% U.S. and 15.2% Canada).

Environmental, Social and Governance (ESG) Updates

During the quarter, we made further progress on our diversity goals with additional diverse representation through recruitment at the senior management level. We also published our fourth annual ESG report providing comprehensive emissions disclosure for our producing mining assets and our second year of TCFD and SASB-aligned disclosure. We continue to work with our partners on expanding our community contributions.

Portfolio Additions

Acquisition of Caserones Royalty: Subsequent to quarter-end, on April 14, 2022, we agreed to acquire an effective 0.4582% NSR royalty on JX Nippon Mining and Metals Group’s producing Caserones copper-molybdenum mine located in the Atacama Region of northern Chile for an aggregate purchase price of approximately $37.4 million. In connection with the royalty acquisition, we completed a $10.0 million private placement with EMX Royalty Corporation (“EMX”). EMX used the proceeds from the private placement to acquire an NSR on the Caserones mine on similar terms as Franco-Nevada.
Acquisition of Additional Castle Mountain Royalty: Subsequent to quarter-end, on May 2, 2022, we acquired an existing 2% NSR on gold and silver produced from the Pacific Clay claims, which comprise a portion of the JSLA pit of Equinox Gold’s Castle Mountain project in San Bernardino County, California, for $6.0 million. When combined with our 2.65% NSR on the broader Castle Mountain land position, we now have a 4.65% NSR on the Pacific Clay claims.

Q1 2022 Portfolio Updates

Precious Metal assets: GEOs from our Precious Metal assets were 128,627, compared to 145,969 GEOs sold in Q1 2021. Higher contributions from Guadalupe-Palmarejo and Candelaria were more than offset by lower deliveries from Hemlo, Antamina and Antapaccay.

South America:

Candelaria (gold and silver stream) – GEOs delivered and sold increased in Q1 2022 compared to Q1 2021. Copper and gold production were higher than in the prior year quarter primarily due to better grades. Deliveries in Q1 2021 were also relatively low due to the timing of shipments.
Antapaccay (gold and silver stream) – GEOs delivered and sold were lower in Q1 2022 compared to Q1 2021, due to anticipated lower than normal grades in 2022, as well as lower recoveries reflecting a temporarily elevated strip ratio.
Antamina (22.5% silver stream) – GEOs delivered and sold were lower in Q1 2022 compared to Q1 2021. In the prior year period, we benefited from particularly strong silver production as well as a more favourable GEO conversion ratio. In mid-April 2022, Antamina applied for an amendment to its currently approved environment impact study. The primary scope is to extend mine life from 2028 to 2036 by increasing storage capacities for waste and tailings in their current locations.
Cascabel (1% royalty) – In April 2022, SolGold released a prefeasibility study on the Cascabel project. The prefeasibility study mine plan targets the high grade core of the Alpala deposit with an initial Mineral Reserve of 558 million tonnes containing 3.3 million tonnes of copper at 0.58%, 9.4 million ounces of gold at 0.52 g/t and 30

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million ounces of silver at 1.65 g/t over an initial 26-year mine life. SolGold plans to release a prefeasibility study addendum to include the Tandayama-America deposit in H2 2022 and a feasibility study in H2 2023.
Posse (Mara Rosa) (1% royalty) – In April 2022, Hochschild Mining announced the completion of the acquisition of Amarillo Gold, including Amarillo’s flagship Posse gold project, located in Brazil. Hochschild is targeting for construction to start in 2022, with production commencing in 2024.

Central America & Mexico:

Cobre Panama (gold and silver stream) – GEOs sold were relatively consistent with those sold in Q1 2021. For Q1 2022, Cobre Panama delivered copper production of 78,337 tonnes and achieved a record mill throughput of 7.6 million tonnes in March. Copper production was marginally down from Q4 2021 on slightly lower throughput due to planned SAG mill relines. Lower head grade compared to the same period in Q1 2021 accounted for 5% lower copper production, but full-year grades are expected to be consistent with full year 2021.
Guadalupe-Palmarejo (50% gold stream) – GEOs sold from Guadalupe-Palmarejo increased in Q1 2022 compared to the same quarter in 2021, owing to higher production from ground covered by the stream and higher mill throughput.

U.S.:

Stillwater (5% royalty) – GEOs from Stillwater decreased compared to Q1 2021. Production has been impacted by operational challenges and restrictions following a fatality in June 2021. Sibanye-Stillwater is assessing the operational output to optimise for operational constraints and market conditions.
Castle Mountain (2.65-4.65% royalties) – In 2021, Equinox Gold completed a feasibility study for a proposed Phase 2 expansion that is expected to increase average production to more than 200,000 ounces of gold annually, from 25,300 ounces produced in 2021. Equinox Gold submitted the Phase 2 permit amendment application in March 2022.
Rosemont/Copper World (2.085% royalty) – Hudbay Minerals is expecting to complete a preliminary economic assessment contemplating the development of the Copper World deposits in conjunction with the Rosemont deposit in the first half of 2022.
Stibnite (1.7% royalty) – Perpetua Resources announced that permitting continues to progress at its Stibnite Gold project and that it expects the U.S. Forest Service to publish a Supplemental Draft Environmental Impact Statement for public review and comment in early Q3 2022.

Canada:

Detour Lake (2% royalty) – In Q1 2022, Agnico Eagle reported new high-grade intersections at Detour Lake confirming the existence of a broad and continuous corridor of mineralization with the system remaining open at depth. An updated life of mine plan is expected in H2 2022. Agnico Eagle is also evaluating the potential to expand operations to 32 million tonnes per year and develop an underground mining operation.
Hemlo (3% royalty & 50% NPI) – Revenue from Hemlo was significantly lower than in Q1 2021 reflecting a decrease in production from ground where Franco-Nevada has royalty interests and higher operating costs which affected royalties under the NPI. Barrick expects improved underground activity in 2022.
Brucejack (1.2% royalty) – In March 2022, Newcrest Mining completed the acquisition of Pretium and the Brucejack mine. Newcrest Mining is focused on exploring the near-mine, extensional and district scale opportunity across the Brucejack district.
Kirkland Lake (1.5-5.5% royalty & 50% NPI) – Agnico Eagle reported that the focus at Macassa is on completing Shaft #4 infrastructure and ramping up production. Agnico Eagle is also evaluating the potential integration of the Amalgamated Kirkland (“AK”) deposit with production potentially starting in 2024. Franco-Nevada has an effective 3.5% NSR on the AK claims.
Canadian Malartic (1.5% royalty) – Production continues to transition from the Malartic pit to the Barnat pit. The Odyssey underground project, which is expected to extend the life of the complex to at least 2039, is progressing as planned with shaft sinking expected to begin in the fourth quarter of 2022. Infill and step-out drilling at the East Gouldie zone, where Franco-Nevada’s royalty claims cover a portion of the deposit, support continuity and point to increased scale.
Island Gold (0.62% royalty) – In April 2022, Alamos Gold reported that the Ontario Government had approved the Closure Plan Amendment for the Phase III Expansion which allows for the commencement of construction activities. An optimized mine plan is expected to be released mid-2022 and completion of the Phase III expansion is expected in 2025.
Ring of Fire (1-3% royalties) – In April 2022, Wyloo completed its acquisition of Noront. In addition to owning several royalties over Wyloo’s property, Franco-Nevada also has a loan receivable from Noront that had a contractual maturity date of September 30, 2022. Subsequent to Q1 2022, following the change of control, we elected for repayment of the loan and received $42.7 million on May 4, 2022.

3


Valentine Lake (2% royalty) – In April 2022, Marathon Gold reported that, upon receipt of final regulatory approvals and site permits, it intends to start early works activities in Q3 2022, supporting a schedule for first gold production in late 2024. A new technical report is also being prepared for Q4 2022. Marathon Gold continues to report positive exploration results at the Berry and Victory deposits.
Eskay Creek (1% royalty) – In March 2022, Skeena Resources announced further drilling results from the 2021 regional and near mine exploration programs at Eskay Creek including the 21A West Zone expansion discovery.

Rest of World:

Karma (4.875% gold stream) – In March 2022, Endeavour Mining sold its 90% interest in Karma to Néré Mining.
Duketon (2% royalty) – Development of the Garden Well South underground mine continues to progress, with commissioning of the primary pump station and first ore delivered during Q1 2022 and stoping in late Q2 2022.
Aphrodite (2.5% royalty) – In April 2022, St Barbara announced the completion of its acquisition of Bardoc Gold. The acquisition is expected to advance the development of the Bardoc Gold project, which encompasses the Aphrodite underground deposit, located in Western Australia.
Séguéla (1.2% royalty) - In March 2022, Fortuna Silver Mines announced a maiden Inferred Mineral Resource estimate for the satellite Sunbird discovery of 3.4 million tonnes at an average grade of 3.16 g/t gold containing 350,000 gold ounces.

Diversified assets: Our Diversified assets, primarily comprising our Iron Ore and Energy interests, generated $96.0 million in revenue, up from $51.7 million in Q1 2021. The increase is primarily due to higher realized oil and gas prices and the addition of the Vale Royalty in April 2021.

Iron Ore:

Vale Royalty (iron ore royalty) – We recorded $16.8 million in revenue from our Vale Royalty. Revenue recorded in Q1 2022 included $4.5 million of royalty payments related to the H2 2021 production period, reflecting retroactive volume adjustments and higher realized prices. As the royalty was acquired in April 2021, there is no revenue in the comparative period.
LIORC – LIORC declared a cash dividend of C$0.50 per common share, compared to C$1.00 per common share in Q1 2021, reflecting lower iron ore prices. Iron Ore Company of Canada (“IOC”) reported increased capital expenditures to upgrade existing infrastructure at the Carol Lake mine.

Energy:

Marcellus (1% royalty) – Revenue from the Marcellus asset increased compared to Q1 2021. Production was relatively consistent compared to the prior-year period, but revenues benefited from significantly higher NGL and natural gas prices.
Haynesville (various royalty rates) – Revenue from the Haynesville portfolio increased compared to Q1 2021, reflecting current high NGL and natural gas prices.
SCOOP/STACK (various royalty rates) Revenue from the SCOOP/STACK increased compared to Q1 2021 due to slightly higher production from our royalties acquired through the Royalty Acquisition Venture with Continental, as well as higher prices.
Permian Basin (various royalty rates) – Revenue from the Permian basin increased compared to Q1 2021. The increase in revenue in the current period reflects higher realized prices, while volumes were relatively consistent with those produced in the prior year period.
Weyburn (NRI, ORR, WI) – Revenue from the Weyburn Unit was significantly higher compared to Q1 2021, reflecting the increase in commodity prices and the operating leverage of our NRI.

Dividend Declaration

Franco-Nevada is pleased to announce that its Board of Directors has declared a quarterly dividend of $0.32 per share. The dividend will be paid on June 30, 2022 to shareholders of record on June 16, 2022 (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,

4


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 for 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 unaudited Condensed Consolidated Financial Statements and Management’s Discussion and Analysis can be found on our 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 5, 2022 at 10:00 a.m. Eastern Time to review Franco-Nevada’s Q1 2022 results.

Interested investors are invited to participate as follows:

Via Conference Call: Toll-Free: (888) 390-0546; International: (416) 764-8688
Conference Call Replay until May 12, 2022: Toll-Free (888) 390-0541; International (416) 764-8677; Code 255229 #
Webcast: A live audio webcast will be accessible at www.franco-nevada.com

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 cost inflation. 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:

Sandip Rana

Chief Financial Officer

(416) 306-6303

[email protected]

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, performance guidance, 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, the performance and plans of third party operators, 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 Company’s at-the-market equity program (the “ATM Program”), and the Company’s expected use of the net proceeds of the ATM Program, if any. In addition, statements (including data in tables) relating to reserves and resources including reserves and resources covered by a royalty, stream or other interest, GEOs or mine lives 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, mine lives 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”, “potential for”, “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; the adoption of a global minimum tax on corporations; 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; relinquishment or sale of mineral properties; 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

5


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 disease; 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.

ENDNOTES:

1GEOs: Starting in Q4 2021, revenue from Franco-Nevada’s Energy assets is included in the calculation of GEOs. GEOs for comparative periods have been recalculated to conform with the current presentation. GEOs include Franco-Nevada’s attributable share of production from our Mining and Energy assets after applicable recovery and payability factors. 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, iron ore, oil, gas and other 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 commodity was produced or sold. For Q1 2022, the average commodity prices were as follows: $1,874/oz gold (Q1 2021 - $1,794), $24.00/oz silver (Q1 2021 - $26.26), $1,041/oz platinum (Q1 2021 - $1,161) and $2,423/oz palladium (Q1 2021 - $2,405), $142/t Fe 62% CFR China (Q1 2021 - $166), $94.29/bbl WTI oil (Q1 2021 - $57.84) and $4.57/mcf Henry Hub natural gas (Q1 2021 - $2.73).
2NON-GAAP FINANCIAL MEASURES: Adjusted Net Income and Adjusted Net Income per share, Adjusted EBITDA and Adjusted EBIDA per share, and Margin are non-GAAP financial measures with no standardized meaning under International Financial Reporting Standards (“IFRS”) and might not be comparable to similar financial measures disclosed by other issuers. For a quantitative reconciliation of each non-GAAP financial measure to the most directly comparable IFRS financial measure, refer to the following tables. Further information relating to these Non-GAAP financial measures is incorporated by reference from the “Non-GAAP Financial Measures” section of Franco-Nevada’s MD&A for the the three months ended March 31, 2022 dated May 4, 2022 filed with the Canadian securities regulatory authorities on SEDAR available at www.sedar.com and with the U.S. Securities and Exchange Commission available on EDGAR at www.sec.gov.
Adjusted Net Income and Adjusted Net Income per share are non-GAAP financial measures, which exclude the following from net income and earnings per share (“EPS”): impairment charges and reversal related to royalty, stream and working interests and investments; gains/losses on the sale of royalty, stream and working interests and investments; foreign exchange gains/losses and other income/expenses; unusual non-recurring items; and the impact of income taxes on these items.
Adjusted EBITDA and Adjusted EBITDA per share are non-GAAP financial measures, which exclude the following from net income and EPS: income tax expense/recovery; finance expenses and finance income; depletion and depreciation; non-cash costs of sales; impairment charges and reversals related to royalty, stream and working interests and investments; gains/losses on the sale of royalty, stream and working interests and investments; foreign exchange gains/losses and other income/expenses; and unusual non-recurring items.
Margin is a non-GAAP financial measure which is defined by the Company as Adjusted EBITDA divided by revenue.

6


Reconciliation of Non-GAAP Financial Measures:

For the three months ended

March 31, 

(expressed in millions, except per share amounts)

    

2022

    

    

2021

  

Net income

$

182.0

$

171.5

Foreign exchange (gain) loss and other (income) expenses

(6.2)

0.1

Tax effect of adjustments

1.4

(0.1)

Other tax related adjustments:

Recognition of previously unrecognized deferred tax assets

(10.6)

Adjusted Net Income

$

177.2

$

160.9

Basic weighted average shares outstanding

191.3

191.0

Adjusted Net Income per share

$

0.93

$

0.84

For the three months ended

 

March 31, 

(expressed in millions, except per share amounts)

    

    

    

2022

    

    

2021

  

Net income

$

182.0

$

171.5

Income tax expense

36.0

19.8

Finance expenses

0.9

0.8

Finance income

(0.7)

(0.7)

Depletion and depreciation

74.6

71.2

Foreign exchange (gain) loss and other (income) expenses

(6.2)

0.1

Adjusted EBITDA

$

286.6

$

262.7

Basic weighted average shares outstanding

191.3

191.0

Adjusted EBITDA per share

$

1.50

$

1.37

For the three months ended

March 31, 

(expressed in millions, except Margin)

    

  

2022

  

  

2021

  

Adjusted EBITDA

$

286.6

$

262.7

Revenue

 

338.8

 

308.9

Margin

 

84.6

%

 

85.0

%

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FRANCO-NEVADA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions of U.S. dollars)

At March 31, 

At December 31, 

2022

  

    

2021

  

ASSETS

Cash and cash equivalents (Note 4)

$

722.7

$

539.3

Receivables

 

144.5

 

119.8

Loan receivable (Note 5)

 

40.4

 

39.7

Prepaid expenses and other (Note 6)

 

42.0

 

52.6

Current assets

$

949.6

$

751.4

Royalty, stream and working interests, net (Note 7)

$

5,095.1

$

5,149.3

Investments (Note 5)

 

260.6

 

235.9

Deferred income tax assets

 

48.2

 

49.4

Other assets (Note 8)

 

46.9

 

23.9

Total assets

$

6,400.4

$

6,209.9

LIABILITIES

Accounts payable and accrued liabilities

$

36.8

$

33.6

Current income tax liabilities

 

6.9

 

9.6

Current liabilities

$

43.7

$

43.2

Deferred income tax liabilities

$

145.1

$

135.4

Other liabilities

5.9

6.1

Total liabilities

$

194.7

$

184.7

SHAREHOLDERS’ EQUITY

Share capital (Note 16)

$

5,647.2

$

5,628.5

Contributed surplus

 

16.2

 

16.1

Retained earnings

 

605.3

 

484.9

Accumulated other comprehensive loss

 

(63.0)

 

(104.3)

Total shareholders’ equity

$

6,205.7

$

6,025.2

Total liabilities and shareholders’ equity

$

6,400.4

$

6,209.9

The condensed consolidated financial statements and accompanying notes can be found in our Q1 2022 Quarterly Report available on our website

8


FRANCO-NEVADA CORPORATION

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

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

For the three months ended

March 31, 

2022

    

    

2021

Revenue (Note 10)

$

338.8

$

308.9

Costs of sales

Costs of sales (Note 11)

 

$

43.6

$

40.6

Depletion and depreciation

 

74.6

 

71.2

Total costs of sales

$

118.2

$

111.8

Gross profit

$

220.6

$

197.1

Other operating expenses (income)

General and administrative expenses

 

$

5.6

$

4.2

Share-based compensation expenses (Note 12)

4.3

2.0

Gain on sale of gold bullion

 

(1.3)

(0.6)

Total other operating expenses (income)

 

$

8.6

$

5.6

Operating income

 

$

212.0

$

191.5

Foreign exchange gain (loss) and other income (expenses)

 

$

6.2

$

(0.1)

Income before finance items and income taxes

 

$

218.2

$

191.4

Finance items (Note 14)

Finance income

 

$

0.7

$

0.7

Finance expenses

 

(0.9)

 

(0.8)

Net income before income taxes

 

$

218.0

$

191.3

Income tax expense (Note 15)

 

36.0

 

19.8

Net income

$

182.0

$

171.5

Other comprehensive income

Items that may be reclassified subsequently to profit and loss:

Currency translation adjustment

 

$

22.2

$

9.4

Items that will not be reclassified subsequently to profit and loss:

Gain on changes in the fair value of equity investments

 

 

at fair value through other comprehensive income ("FVTOCI"),

net of income tax (Note 5)

19.7

18.6

Other comprehensive income

 

$

41.9

$

28.0

Comprehensive income

$

223.9

$

199.5

Earnings per share (Note 17)

Basic

$

0.95

$

0.90

Diluted

$

0.95

$

0.90

Weighted average number of shares outstanding (Note 17)

Basic

191.3

191.0

Diluted

191.7

191.3

The condensed consolidated financial statements and accompanying notes can be found in our Q1 2022 Quarterly Report available on our website

9


FRANCO-NEVADA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions of U.S. dollars)

For the three months ended

March 31, 

    

2022

  

    

2021

  

Cash flows from operating activities

Net income

$

182.0

$

171.5

Adjustments to reconcile net income to net cash provided by operating activities:

Depletion and depreciation

 

74.6

 

71.2

Share-based compensation expenses

 

1.6

 

1.4

Unrealized foreign exchange (gain) loss

 

(6.2)

 

0.1

Deferred income tax expense (recovery)

7.0

 

(2.3)

Other non-cash items

 

(1.7)

 

(1.2)

Acquisition of gold bullion

(9.5)

(10.5)

Proceeds from sale of gold bullion

 

16.1

 

7.5

Changes in other assets

 

(23.4)

 

(5.6)

Operating cash flows before changes in non-cash working capital

$

240.5

$

232.1

Changes in non-cash working capital:

Increase in receivables

$

(16.8)

$

(8.9)

Decrease in prepaid expenses and other

 

5.3

 

3.4

Increase (decrease) in current liabilities

 

1.6

 

(2.3)

Net cash provided by operating activities

$

230.6

$

224.3

Cash flows used in investing activities

Acquisition of royalty, stream and working interests

$

(2.8)

$

(190.3)

Acquisition of energy well equipment

 

(0.3)

 

(0.3)

Proceeds from sale of investments

 

1.5

 

12.2

Net cash used in investing activities

$

(1.6)

$

(178.4)

Cash flows used in financing activities

Payment of dividends

$

(50.1)

$

(41.8)

Credit facility amendment costs

 

(0.1)

Proceeds from exercise of stock options

 

2.5

 

Net cash used in financing activities

$

(47.6)

$

(41.9)

Effect of exchange rate changes on cash and cash equivalents

$

2.0

$

0.3

Net change in cash and cash equivalents

$

183.4

$

4.3

Cash and cash equivalents at beginning of period

$

539.3

$

534.2

Cash and cash equivalents at end of period

$

722.7

$

538.5

Supplemental cash flow information:

Dividend income received

$

2.5

$

5.0

Interest and standby fees paid

$

0.6

$

0.6

Income taxes paid

$

22.5

$

21.6

The condensed consolidated financial statements and accompanying notes can be found in our Q1 2022 Quarterly Report available on our website

10


Exhibit 99.2

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Management’s Discussion and Analysis

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 4, 2022 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, 2022 and 2021 (the “financial statements”). The 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 financial statements for the three months ended March 31, 2022 and 2021 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 on Form 6-K furnished to the United States Securities and Exchange Commission (“SEC”) 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

Abbreviations Used in this Report

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

Abbreviated Definitions

Periods under review

Measurement

Interest types

"Q4"

The three-month period ended December 31

"GEO"

Gold equivalent ounces

"NSR"

Net smelter return royalty

"Q3"

The three-month period ended September 30

"PGM"

Platinum group metals

"GR"

Gross royalty

"Q2"

The three-month period ended June 30

"oz"

Ounce

"ORR"

Overriding royalty

"Q1"

The three-month period ended March 31

"oz Au"

Ounce of gold

"GORR"

Gross overriding royalty

"H2"

The six-month period ended December 31

"oz Ag"

Ounce of silver

"FH"

Freehold or lessor royalty

"H1"

The six-month period ended June 30

"oz Pt"

Ounce of platinum

"NPI"

Net profits interest

"oz Pd"

Ounce of palladium

"NRI"

Net royalty interest

Places and currencies

"62% Fe"

62% Fe iron ore fines, dry metric

"WI"

Working interest

"U.S."

United States

tonnes CFR China

"$" or "USD"

United States dollars

"LBMA"

London Bullion Market Association

"C$" or "CAD"

Canadian dollars

"bbl"

Barrel

"R$" or "BRL"

Brazilian reais

"mcf"

Thousand cubic feet

"A$" or "AUD"

Australian dollars

"WTI"

West Texas Intermediate

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.

2022 First Quarter Management’s Discussion and Analysis

2


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, operator, revenue type and stage of project.

Our Portfolio (at May 4, 2022)

    

Precious Metals

    

Other Mining

Energy

        

TOTAL

Producing

45

13

55

113

Advanced

35

7

42

Exploration

141

82

27

250

TOTAL

221

102

82

405

Our shares are listed on the Toronto and New York stock exchanges under the symbol FNV. An investment in our shares is expected to provide investors with yield and exposure to commodity price and exploration optionality while limiting exposure to cost inflation and other operating risks.

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Strategy

Our tag-line is “Franco-Nevada is the gold investment that works” and we are committed to ensuring it does work, for our shareholders, our operating partners and our communities:

We believe that combining lower risk gold investments with a strong balance sheet, progressively growing dividends and exposure to exploration optionality is the right mix to appeal to investors seeking to hedge market instability. Since our Initial Public Offering over 14 years ago, we have increased our dividend annually and our share price has outperformed the gold price and all relevant gold equity benchmarks.
We build long-term alignment with our operating partners. This alignment and the natural flexibility of our royalties and streams is an effective financing tool for the cyclical resource sector.
We work to be a positive force in all our communities, promoting responsible mining, providing a safe and diverse workplace and contributing to build community support for the operations in which we invest.

Our 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. We do not operate mines, develop projects or conduct exploration. Franco-Nevada has a free cash flow generating business with limited future capital commitments and management is focused on managing and growing its portfolio of royalties and streams. We recognize the cyclical nature of the industry and have a long-term investment outlook. We maintain a strong balance sheet to minimize financial risk and so that we can make investments during commodity cycle downturns.

2022 First Quarter Management’s Discussion and Analysis

3


The advantages of this business model are:

Exposure to commodity price optionality;
A perpetual discovery option over large areas of geologically prospective lands;
No additional capital requirements other than the initial investment;
Limited exposure to cost inflation; 
A free cash-flow business with limited cash calls;
A high-margin business that can generate cash through the entire commodity cycle;
A scalable and diversified business in which a large number of assets can be managed with a small stable overhead; and
Management that focuses on forward-looking growth opportunities rather than operational or development issues.

Our short-term financial results are primarily tied to the price of commodities and the amount of production from our portfolio of assets. Our attributable production has typically been supplemented by acquisitions of new assets. Over the longer term, our results are impacted by the amount of exploration and development capital available to operators to expand or extend our producing assets or to progress our advanced and exploration assets into production.

The focus of our business is to create exposure to gold and precious metal resource optionality. This principally involves investments in gold mines and providing financing to copper and other base metal mines to obtain exposure to by-product gold, silver and platinum group metals production. We also invest in other metals and energy to expose our shareholders to additional resource optionality. In Q1 2022, 71.7% of our revenue was earned from precious metals and 77.7% was earned from mining assets.

One of the strengths of Franco-Nevada’s business model is that our margins are not generally impacted when producer costs increase. The majority of our interests are royalty and streams with payments/deliveries that are based on production levels with no adjustments for the operator’s operating costs. In Q1 2022, these interests accounted for 91.2% of our revenue. We also have a small number of NPI and NRI royalties which are based on the profit of the underlying operations.

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A Note on our GEOs(1)

To provide a more comprehensive measure of the performance of our business, we now include revenue from our Energy assets in the calculation of our GEOs. We believe this approach is useful to our investors to evaluate the full scale of our portfolio. GEOs for comparative periods have been recalculated to conform with the current presentation.

________________________

1

Starting in Q4 2021, revenue from Franco-Nevada’s Energy assets is included in the calculation of GEOs. In this MD&A, GEOs for comparative periods have been recalculated to conform with the current presentation. GEOs include Franco-Nevada’s attributable share of production from our Mining and Energy assets, after applicable recovery and payability factors. 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, iron ore, oil, gas and other 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 commodity was produced or sold. For illustrative purposes, please refer to the average commodity price table on page 10 of this MD&A for indicative prices which may be used in the calculation of GEOs for the three-months ended March 31, 2022 and 2021.

2022 First Quarter Management’s Discussion and Analysis

4


Highlights

Financial Update – Q1 2022 vs Q1 2021

178,614 GEOs(1) sold in Q1 2022, an increase of 1.6%;
$338.8 million in revenue, an increase of 9.7%;
$43.6 million, or $244 per GEO sold, in Cash Costs(2)(3), compared to $40.6 million, or $231 per GEO sold;
$286.6 million, or $1.50 per share, of Adjusted EBITDA(2), an increase of 9.1% and 9.5%, respectively;
84.6% in Margin(2), compared to 85.0%;
$182.0 million, or $0.95 per share, in net income, an increase of 6.1% and 5.6%, respectively;
$177.2 million, or $0.93 per share in Adjusted Net Income(2), an increase of 10.1% and 10.7%, respectively;
$230.6 million in net cash provided by operating activities, an increase of 2.8%;
$722.7 million in cash and cash equivalents as at March 31, 2022 (December 31, 2021 - $539.3 million);
$1.7 billion in available capital as at March 31, 2022 (December 31, 2021 - $1.6 billion), comprising cash and cash equivalents and amounts available to borrow under our revolving credit facility.

Corporate Developments

Acquisition of Caserones Royalty – Chile

Subsequent to Q1 2022, on April 14, 2022, we agreed to acquire, through a wholly-owned subsidiary, an effective 0.4582% NSR on JX Nippon Mining & Metals Group’s producing Caserones copper-molybdenum mine located in the Atacama Region of northern Chile for an aggregate purchase price of approximately $37.4 million. Franco-Nevada is entitled to royalty payments in respect of the period commencing January 1, 2022.

In connection with the royalty acquisition, we completed a private placement with EMX Royalty Corporation (“EMX”), acquiring 3,812,121 units of EMX at C$3.30 per unit for total proceeds of $10.0 million (C$12.6 million). Each unit consists of one common share of EMX and one warrant to purchase one common share of EMX over five years at an exercise price of C$4.45. EMX used the proceeds from the private placement to acquire an NSR on the Caserones mine on similar terms as Franco-Nevada.

Acquisition of Additional Castle Mountain Royalty – California, U.S.

Subsequent to Q1 2022, on May 2, 2022, we acquired, through a wholly-owned subsidiary, an existing 2% NSR on gold and silver produced from the Pacific Clay claims, which comprise a portion of the JSLA pit of Equinox Gold Corp.’s Castle Mountain project in San Bernardino County, California, for $6.0 million. When combined with our 2.65% NSR on the broader Castle Mountain land position, we now have an effective 4.65% NSR on the Pacific Clay claims.

Acquisition of U.S. Oil & Gas Royalty Rights with Continental Resources, Inc. – U.S.

Through a wholly-owned subsidiary, we have a strategic relationship with Continental Resources, Inc. (“Continental”) to acquire, through a jointly-owned entity (the “Royalty Acquisition Venture”), royalty rights within Continental’s areas of operation. In Q1 2022, Franco-Nevada recorded contributions to the Royalty Acquisition Venture of $1.8 million (Q1 2021 –$1.2 million). As at March 31, 2022, Franco-Nevada’s cumulative investment in the Royalty Acquisition Venture totaled $430.2 million and Franco-Nevada has remaining commitments of up to $89.8 million.

_________________________

1Starting in Q4 2021, revenue from Franco-Nevada’s Energy assets is included in the calculation of GEOs. In this MD&A, GEOs for comparative periods have been recalculated to conform with the current presentation. GEOs include Franco-Nevada’s attributable share of production from our Mining and Energy assets, after applicable recovery and payability factors. 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, iron ore, oil, gas and other 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 commodity was produced or sold. For illustrative purposes, please refer to the average commodity price table on page 10 of this MD&A for indicative prices which may be used in the calculation of GEOs for the three months ended March 31, 2022 and 2021.
2Cash Costs, Cash Costs per GEO sold, Adjusted EBITDA, Adjusted EBITDA per share, Margin, Adjusted Net Income and Adjusted Net Income per share are non-GAAP financial measures with no standardized meaning under IFRS and might not be comparable to similar financial measures disclosed by other issuers. Refer to the “Non-GAAP financial measures” section of this MD&A for more information on each non-GAAP financial measure.
3Starting in Q4 2021, revenue from Franco-Nevada’s Energy assets is included in the calculation of GEOs. Similarly, the composition of Cash Costs and Cash Costs per GEO has been amended to include costs and GEOs related to Franco-Nevada’s Energy assets. Cash Costs and Cash Costs per GEOs for comparative periods have been recalculated to conform with current presentation.

2022 First Quarter Management’s Discussion and Analysis

5


Significant Portfolio Updates

Additional updates related to our portfolio of assets are available in our News Release issued on May 4, 2022, available on SEDAR at www.sedar.com and EDGAR at www.sec.gov.

Loan Receivable from Noront Resources Ltd.

We had a loan receivable from Noront Resources Ltd. (“Noront”), which we extended to Noront as part of our acquisition of royalty rights in the Ring of Fire mining district of Ontario, Canada, in April 2015 that had a contractual maturity date of September 30, 2022. Subsequent to Q1 2022, following the change of control due to the acquisition of Noront by Wyloo Metals Pty Ltd. (“Wyloo Metals”) on April 7, 2022, we elected for repayment of the loan and received $42.7 million on May 4, 2022.

Cobre Panama Constitutional Proceedings

In relation to the ongoing constitutional proceedings in connection with Minera Panama SA’s (“MPSA”) mining concession contract, First Quantum Minerals Ltd. (“First Quantum”) reported that, in July 2021, the Government of Panama announced the appointment of a high-level commission of senior government ministers and officials, chaired by the Minister of Commerce, to discuss MPSA’s concession contract. In September 2021, the Supreme Court upheld its ruling in respect of the clarification motions presented by First Quantum to the Court in relation to its Law 9 decision announced in September 2018 and the ruling was gazetted in Q4 2021. First Quantum’s understanding is that the upholding of the unconstitutionality ruling against Law 9 of 1997 does not have retroactive effects, pursuant to article 2573 of the Code of Judicial Proceedings of Panama, therefore the approval of the mining concession contract which occurred in 1997 with the enactment of Law 9, remains unaltered, providing operational continuity as per the status quo. In September 2021, the Ministry of Commerce publicly announced the culmination of the high-level formal discussions with First Quantum on two topics being environmental and labour matters. Subsequently, discussion on the economic and tax aspects was ensued and the Government of Panama presented proposals which were unacceptable to First Quantum. On December 22, 2021, the unconstitutionality ruling was gazetted, after the requests for clarification submitted by MPSA had been deemed inadmissible in July 2021.

During January 2022, the Government of Panama tabled a new proposal, namely that the Government should receive $375 million in benefits per year from Cobre Panama and that the existing revenue royalty payable to the Government will be replaced by a gross profit royalty. The parties continue to finalize the details behind these proposed principles, including the appropriate mechanics that would achieve the desired outcome, the necessary protections to First Quantum’s business for downside copper price impact and production scenarios and ensuring that the new contract and legislation are both durable and sustainable.

Once an agreement is concluded and the full contract is documented, it is expected that newly drafted legislation would be put to the National Assembly. First Quantum noted that it welcomes the transparency of the robust ministerial commission process and it is hopeful that this matter can be concluded shortly.

Franco-Nevada does not expect the current proposal to have a material impact on future deliveries pursuant to our stream agreement.

Dividends

As previously announced, Franco-Nevada’s Board of Directors raised the Company’s quarterly dividend and declared a quarterly dividend of US$0.32 per share payable on March 31, 2022. The increase was effective with the first quarter of the year rather than in the second quarter in prior years. Total dividends in Q1 2022 were $62.2 million, of which $50.1 million was paid in cash and $12.1 million was paid in common shares under our Dividend Reinvestment Plan (“DRIP”).

Credit Facilities

The Company has a $1.0 billion unsecured revolving term credit facility (the “Corporate Revolver”). As at March 31, 2022, there were no amounts borrowed against our revolving credit facility. However, we have posted security in the form of standby letters of credit in the amount of $18.5 million (C$23.1 million) in connection with the audit by the Canada Revenue Agency (“CRA”). These standby letters of credit reduce the available balance under the Corporate Revolver.

Franco-Nevada (Barbados) Corporation’s $100.0 million unsecured revolving credit facility (the “FNBC Revolver”) had a maturity date of March 20, 2022. As we did not renew the FNBC Revolver, the facility expired and is no longer available.

2022 First Quarter Management’s Discussion and Analysis

6


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 2022 guidance is based on assumptions including the forecasted state of operations from our assets based on the public statements and other disclosures by the third-party owners and operators of the underlying properties and our assessment thereof.

We remain on track to meet our previously announced 2022 GEO guidance:

  

 

2022 guidance

 

 

Q1 2022 actual

 

 

Q1 2021 actual

 

Total GEO sales

680,000 - 740,000

178,614

175,737

Precious Metal GEO sales

510,000 - 550,000

128,627

145,969

1We expect our streams to contribute between 385,000 and 425,000 of our GEO sales for 2022. For the three months ended March 31, 2022, 96,740 of our GEOs sold were from streams.
2For our 2022 guidance, when reflecting revenue earned from gold, silver, platinum, palladium, iron ore, oil and gas commodities as GEOs, we assumed the following prices: $1,800/oz Au, $23.00/oz Ag, $1,000/oz Pt, $2,100/oz Pd, $125/tonne Fe 62% CFR China, $85/bbl WTI oil and $3.75/mcf Henry Hub natural gas.
3Our 2022 guidance does not assume any other acquisitions and does not reflect any incremental revenue from additional contributions we may make to the Royalty Acquisition Venture with Continental as part of our remaining commitment of $89.8 million.

We estimate depletion and depreciation expense in 2022 to be between $270.0 million and $300.0 million. In Q1 2022, depletion expense was $74.6 million.

As of March 31, 2022, our remaining capital commitment to the Royalty Acquisition Venture with Continental is $89.8 million. We anticipate our funding for the full year 2022 to be between $20.0 million and $40.0 million.

Market Overview

The prices of gold and other precious metals are the largest factors in determining profitability and cash flow from operations for Franco-Nevada. The price of gold can be volatile and is affected by macroeconomic and industry factors that are beyond our control. Major influences on the gold price include interest rates, fiscal and monetary stimulus, inflation expectations, currency exchange rate fluctuations including the relative strength of the U.S. dollar and supply and demand for gold.

Commodity price volatility also impacts the number of GEOs when reflecting non-gold commodities as GEOs. Silver, platinum, palladium, iron ore, other mining commodities and oil and gas are reflected as 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 commodity was produced or sold.

The current inflationary environment and ongoing political tensions and uncertainties, including those related to developments in Russia and Ukraine, partly offset by rising interest rates, have generally contributed to increases in commodity prices in Q1 2022. Gold prices increased 4.5%, averaging $1,874/oz in Q1 2022, compared to $1,794/oz in Q1 2021, and ended the quarter at $1,942/oz. Silver prices averaged $24.00/oz in Q1 2022, a decrease of 8.6% compared to $26.26/oz in Q1 2021. Platinum and palladium prices averaged $1,041/oz and $2,423/oz, respectively, in Q1 2022, compared to $1,161/oz and $2,405/oz, respectively, in Q1 2021, a decrease of 10.3% for platinum and a slight increase of 0.7% for palladium.

In Q1 2022, WTI prices averaged $94.29/bbl, a 63.0% increase from Q1 2021. Edmonton Light prices averaged C$117.66/bbl in Q1 2022, up 71.3% compared to Q1 2021. Henry Hub natural gas prices averaged $4.57/mcf in Q1 2022 compared to $2.73/mcf in Q1 2021, up 67.4%. Prices for 62% iron ore fines averaged $142/tonne in Q1 2022 compared to $166/tonne in Q1 2021, a decrease of 14.5%.

2022 First Quarter Management’s Discussion and Analysis

7


Selected Financial Information

For the three months ended

(in millions, except Average Gold Price, GEOs sold,

March 31, 

Margin, per ounce amounts and per share amounts)

    

  

2022

  

  

2021

  

  

 

Statistical Measures

Average Gold Price

$

1,874

$

1,794

GEOs sold(1)

 

178,614

 

175,737

Statement of Comprehensive Income

Revenue

$

338.8

$

308.9

Depletion and depreciation

 

74.6

 

71.2

Costs of sales

 

43.6

 

40.6

Operating income

 

212.0

 

191.5

Net income

 

182.0

 

171.5

Basic earnings per share

$

0.95

$

0.90

Diluted earnings per share

$

0.95

$

0.90

Dividends declared per share

$

0.32

$

0.26

Dividends declared (including DRIP)

$

62.2

$

49.9

Weighted average shares outstanding

 

191.3

 

191.0

Non-GAAP Measures

Cash Costs(2) (3)

$

43.6

$

40.6

Cash Costs(2) (3) per GEO sold

$

244

$

231

Adjusted EBITDA(2)

$

286.6

$

262.7

Adjusted EBITDA(2) per share

$

1.50

$

1.37

Margin(2)

 

84.6

%  

 

85.0

%

Adjusted Net Income(2)

$

177.2

$

160.9

Adjusted Net Income(2) per share

$

0.93

$

0.84

Statement of Cash Flows

Net cash provided by operating activities

$

230.6

$

224.3

Net cash used in investing activities

$

(1.6)

$

(178.4)

Net cash used in financing activities

$

(47.6)

$

(41.9)

As at 

As at 

March 31, 

December 31, 

(expressed in millions)

    

  

2022

    

  

2021

  

Statement of Financial Position

Cash and cash equivalents

$

722.7

$

539.3

Short-term investments

 

40.4

 

39.7

Total assets

 

6,400.4

 

6,209.9

Deferred income tax liabilities

145.1

135.4

Total shareholders’ equity

6,205.7

6,025.2

Available Capital

1,704.2

1,621.1

1Starting in Q4 2021, revenue from Franco-Nevada’s Energy assets is included in the calculation of GEOs. In this MD&A, GEOs for comparative periods have been recalculated to conform with the current presentation. Refer to Note 1 at the bottom of page 4 of this MD&A for the methodology for calculating GEOs and, for illustrative purposes, to the average commodity price table on page 10 of this MD&A for indicative prices which may be used in the calculations of GEOs for the three months ended March 31, 2022 and 2021.
2Cash costs, Cash costs per GEO sold, Adjusted EBITDA, Adjusted EBITDA per share, Margin, Adjusted Net Income and Adjusted Net Income per share are non-GAAP financial measures with no standardized meaning under IFRS and might not be comparable to similar financial measures disclosed by other issuers. Refer to the “Non-GAAP financial measures” section of this MD&A for more information on each non-GAAP financial measure.
3Starting in Q4 2021, revenue from Franco-Nevada’s Energy assets is included in the calculation of GEOs. Similarly, the composition of Cash Costs and Cash Costs per GEO has been amended to include costs and GEOs related to Franco-Nevada’s Energy assets. Cash Costs and Cash Costs per GEO for comparative periods have been recalculated to conform with current presentation.

2022 First Quarter Management’s Discussion and Analysis

8


Revenue by Asset

Our portfolio is well-diversified with GEOs and revenue being earned from assets in various jurisdictions, of which 45 are Precious Metal assets. The following table details revenue earned from our various royalty, stream and working interests for the three months ended March 31, 2022 and 2021:

For the three months ended

 

(expressed in millions)

Interest and %

March 31, 

 

Property

    

(Gold unless otherwise indicated)

    

2022

    

2021

 

PRECIOUS METALS

  

  

South America

Candelaria

 

Stream 68% Gold & Silver

$

27.4

$

20.8

Antapaccay

 

Stream (indexed) Gold & Silver

28.3

32.6

Antamina

 

Stream 22.5% Silver

 

22.0

 

28.4

Condestable

Stream Gold & Silver, Fixed through 2025 then %

6.0

5.6

Other

1.7

1.5

Central America & Mexico

Cobre Panama

 

Stream (indexed) Gold & Silver

$

56.2

$

52.6

Guadalupe-Palmarejo

 

Stream 50%

 

23.0

 

15.5

Other

 

 

0.1

United States

Stillwater

 

NSR 5% PGM

$

10.0

$

14.6

Goldstrike

 

NSR 2-4%, NPI 2.4-6%

5.2

4.4

Gold Quarry

 

NSR 7.29%

 

3.0

 

7.5

Marigold

 

NSR 1.75-5%, GR 0.5-4%

 

1.2

 

2.3

Bald Mountain

 

NSR/GR 0.875-5%

 

(0.4)

 

3.1

Other

 

1.8

 

2.8

Canada

Detour Lake

 

NSR 2%

$

7.0

$

4.9

Sudbury

 

Stream 50% PGM & Gold

4.4

5.6

Hemlo

 

NSR 3%, NPI 50%

 

9.4

 

21.0

Brucejack

 

NSR 1.2%

1.3

1.7

Kirkland Lake

 

NSR 1.5-5.5%, NPI 20%

 

1.3

 

1.4

Other

 

2.2

 

2.4

Rest of World

MWS

 

Stream 25%

$

10.3

$

7.3

Sabodala

 

Stream 6%, Fixed to 105,750 oz

 

4.4

 

4.1

Tasiast

 

NSR 2%

 

5.0

 

3.4

Subika (Ahafo)

 

NSR 2%

 

3.0

 

2.2

Karma

 

Stream 4.875%

 

1.9

 

4.4

Duketon

 

NSR 2%

 

3.1

 

3.5

Other

 

4.1

 

3.5

$

242.8

$

257.2

DIVERSIFIED

  

  

Vale

0.264% Iron Ore, 0.367% Copper/Gold, 0.147% Other

$

16.8

$

LIORC

GORR 0.7% Iron Ore, IOC Equity 1.5%(1)

2.5

5.0

Other mining assets

 

1.1

 

1.6

United States (Energy)

Marcellus

GORR 1%

$

13.3

$

7.6

Haynesville

Various Royalty Rates

13.4

7.2

SCOOP/STACK

Various Royalty Rates

13.2

8.3

Permian Basin

Various Royalty Rates

12.0

8.2

Other

 

0.1

 

0.1

Canada (Energy)

Weyburn

 

NRI 11.71%, ORR 0.44%, WI 2.56%

$

16.4

$

9.1

Orion

GORR 4%

4.0

2.4

Other

 

3.2

 

2.2

$

96.0

$

51.7

Revenue

$

338.8

$

308.9

1 Interest attributable to Franco-Nevada’s 9.9% equity ownership of Labrador Iron Ore Royalty Corporation.

2022 First Quarter Management’s Discussion and Analysis

9


Review of Quarterly Financial Performance

The prices of precious metals, iron ore, and oil and gas and production from our assets are the largest factors in determining our profitability and cash flow from operations. The following table summarizes average commodity prices and average exchange rates during the periods presented.

Quarterly average prices and rates

    

  

  

Q1 2022

  

  

Q1 2021

    

Variance

Gold(1)

 

($/oz)

$