AGM 2020

May 6, 2020

Welcome, ladies and gentlemen. And I would like to introduce Mr. Pierre Lassonde, Chair of the Board of Directors, who will chair this meeting. Please go ahead. Thank you, and good afternoon, ladies and gentlemen. I would like to welcome you to the 2020 Annual and Special Meeting of the Shareholders of Franco Nevada Corporation. Thank you for joining us today by teleconference and webcast. Of course, we wish we could have done the meeting in person, but as we all know, this is not feasible under the circumstances. I would like to thank our shareholders for voting in advance and hope that everyone is keeping well and staying safe. First, I'd like to introduce our leadership team who are with me today And they are and of course, we are at social distancing, so you know, and very safe. First, I'd like to introduce David Arcweil. David has been the Chief Executive Officer since our IPO in 2000 and 7, and he will be my successor as Chair of the Board following this meeting. We have also Paul Brink, the incoming President and Chief Executive Officer of the company Sandeep Rana, our Chief Financial Officer of the company and Lloyd Hong, our Chief Legal Officer and Corporate Secretary of the company. We will now move on to the formal part of the meeting. All of the lines are currently muted. As we go through the items of business requiring approval, I will provide instructions on how to vote. I would ask that Lloyd Hong act as Secretary of the meeting and Paul Allen as a representative of Computershare act as scrutineer. The scrutineer will report on the number of shares represented at this meeting in person or by proxy. The proof of service of the notice calling the meeting has been filed. I direct that a copy of the notice and affidavit proving service thereof be annexed to the minutes of this meeting. I have been advised that there is a quorum present and request that the scrutineers report be annexed to the minutes of this meeting. And I therefore declare that this meeting is regularly called and properly constituted for the transaction of business. The first matter of business is to confirm the receipt of the financial statements and the auditor's report. The consolidated financial statements of the company and its subsidiaries for the year ended December 31, 2019, and the reports of the directors and auditors thereon have been mailed to all shareholders who requested them together with the notice of meeting. The financial statements are also available on our website or you can request paper copies by phone or by email. The next matter of business is the election of directors. The nominees of management of the company were identified in the information circular mailed to each shareholder of the company. Will someone please nominate the directors? 11 directors are required to be nominated. Mr. Chairman, my name is Lloyd Hong, and I'm the shareholder of the company. I nominate David Harquell, Paul Brink, Tom Albanese, Eric Evans, Doctor. Catherine Ferro, Louis Zignac, Maureen Jensen, Jennifer Mackie, Randall Oliphant, the Honorable David Peterson and Elliott Pugh as directors of the company to hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed. Thank you. Can I have a secondary, please? Mr. Chairman, my name is Sandeep Rana, and I'm a shareholder of the company. I second the nominations. I will now call for a vote. For those on the telephone, please press star 1 to vote if you're in favor And for those in person, please say a if you're in favor and nay if you're against. Aye. Aye. Aye. Thank you. I declare the nominations closed. Since only the required number of persons have been nominated, I declare the persons nominated have been duly elected as Directors of Franco Nevada Corporation. I guess congratulations to all of the Directors. The next matter of business is the appointment of the company's auditors. Will someone please move a resolution for the appointment of auditors and to authorize the directors to fix the remuneration of such auditors? Mr. Chairman, my name is Paul Brink, and I'm a shareholder of the company. I move that PricewaterhouseCoopers LLP chartered accountants be appointed auditors of the company until the next annual meeting and such remuneration as may be fixed by the directors of the company. The directors being hereby authorized to fix such remuneration. Thank you, Mr. Brink. Can I have a seconder? Mr. Chairman, I second the motion. Thank you. I will now call for a vote. Again, for those on the telephone, please press star 1 to vote in favor or star 2 against. For those on the webcast, vote yes. If you're in favor or no. If you're against, then press submit. For those in person, we have the yay or the nay. Please The next matter of business is the Ce Am Pay Advisory Resolution. Since the vote is advisory, it will not be binding on the Board. However, the Board will consider the outcome of the vote as part of its ongoing review of executive compensation matters. Will someone please move a resolution for the Ceylon The shareholders accept the approach to executive compensation as disclosed in the company's management information circular dated March 20, 2020. Thank you. Mr. Rana, can I have a seconder? Mr. Chairman, I second the motion. Thank you. Mr. Brink, I will now call for a vote. Or star 2 if you're against. For those in the webcast, please vote yes if you're in favor and no and again press submit. And for those in person, well, please say aye or nay if you're against. Aye. Thank you, Maisieu. I declare the motion carried. The formal business of the meeting has now been completed. If there are no other items of business that our shareholder wishes to raise, May I have a resolution for the conclusion of the formal part of the meeting? Mr. Chairman, I move that the meeting now be concluded. Thank you, Mr. Hong. Can I have a seconder? Mr. Chairman, I second the motion. Thank you, Mr. Frink. All in favor, please say aye. Aye. And I declare the motion carried. The meeting will then conclude. Not too bad, under 10 minutes. We've done quite well. Now before I turn the meeting over to David Harkwell, I would like just to say a few words. And very short, I would say proper goodbyes. Franco Nevada started 35 years ago as one of those thousands of junior exploration companies in a $2,000,000 equity raise at $0.35 a share, September 1985. Seymour Schulich, my partner and I had high hopes, but truly little experience in this field. Out of desperation, we ended up creating a business model that was not only unique at the time, but truly one of the most robust business model I have ever seen. By 2,001, Franco was absorbed by Newmont Mining in a $3,200,000,000 deal that saw David, Hartwell and myself moving to Denver to be part of the continuing adventure. In late 2007, we had the incredible chance, the unique opportunity to get another kick at the can by taking Franco Nevada public again at the time at $15.20 a share for a market cap of US1.2 billion dollars These are opportunities that rarely happen twice in your lifetime. 12 years later, the stock just crested the $200 a share mark. I think it's a celebration of my departure, but I'll leave that to the market to decide. What I can say is that the 2nd ride has been just as wild and spectacular as the first one. And I'd like to 1st and foremost thank David Hartwell for it. David has been the heart and soul of Franco 2. He's been the leader, the inspiration and the doer and I owe him a great deal of gratitude. But then I look at the team that he surrounded himself with and the incredible talent of Paul Brink, Sandeep Rana and Lloyd Hong. And it's because of them that we are where we are today. So I'd like to thank you to the whole team and the organization up and down who have made it all happen. And finally, I'd like to thank the analysts, the brokers, the portfolio managers and the thousands of shareholders and stakeholders who have believed in us and help us build this great company. At a time when financial markets are wracked by uncertainties, volatility, losses in the face of COVID-nineteen, there's nothing that gives me greater pleasure than to see our share price reach new highs and give our 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. And with that, I'd like to thank David, it's all yours, Matt. Pierre, thank you for those very kind remarks. I've been working with you for over 33 years now. So it's been longer than my marriage. So it's been as you said, it's been a couple of wonderful rides, the original Franco, the Newmont ride and now the new Franco ride and all of them have been incredible successes and a lot of fun. At our Board meeting today, we were taking stock and because it's the Board for the new Franco, we were just looking at how has Franco done in the last 12.5 years since it's gone public. And as Pierre mentioned, we hit all time highs yesterday, which is pretty incredible timing your transition and you actually do it at an all time high. I think most Chairs and CEOs leave their companies usually in more suspect circumstances. But our market cap in Canadian dollars reached almost $39,000,000,000 yesterday and U. S. Almost $28,000,000,000 Our total shareholder return for Canadian investors is 1485 percent, something you can say is almost a 15 bagger. You wouldn't brag about 10 baggers. This almost hit the 15 baggers. It's definitely been more than a 10 bagger in U. S. Dollar terms. And in terms of CAGR, so I have all these numbers for you, Pierre. The compounded annual growth rate, Canadian dollars was over 25% and in U. S. Dollars 21.6%. So I think we spend a lot of time talking to portfolio managers. They often lecture us in how to run our company, but I think we've been able to run our portfolio better than just about any of our portfolio managers that have taken positions. I couldn't be more pleased. So one of the things that the Board did is we passed a special Board resolution today, and I'd like to just take the liberty of reading it to our shareholders. Whereas, Pierre Lassonde has demonstrated community service, philanthropy and industry leadership for many decades and has served as Chair of the Board of Franco Nevada since 2007. Whereas, under Pierre's leadership, substantial value has been created for Franco Nevada shareholders whereas Pierre has significantly contributed to the success of Franco Nevada whereas the Board of Directors of Franco Nevada wishes to express its gratitude to Pierre for his service to the company. Be it resolved that the Board of Directors of Franco Nevada hereby expresses his deep appreciation and a heartfelt thanks to Pierre for his leadership and convey its sincere gratitude for his many years of service that the Board of Directors of Franco Nevada wishes to formally recognize Pierre's invaluable contributions by bestowing him with the honorific title of Chair Emeritus and that the very best wishes are extended to Pierre for many years of good health, happiness and continued community service. That will be in our board resolution, which I expect will be approved at our next board meeting. Thank you. Thank you very much. Yes. In terms of It's just going to go on my Instagram. Yes. In terms of my role, I've been trying to focus people that I don't really see it as a retirement, but more of a change of role. I'm looking very forward to being continue to be involved with Franco Nevada as Chair of the Board, and I'm honored to be given that opportunity. And I hope to be associated with Franco Nevada for some years to come. And I feel very confident that we're putting it in very good hands. I've worked now with Paul Brink for over 15 years. He's been indoctrinated in the philosophy and the modes of creating value for shareholders. He's demonstrated all the attributes that we think are important in terms of putting the interest of shareholders of Franco Nevada first before personal interest. So I believe we've got a very good future CEO and he's going to be supported by a terrific team, especially Lloyd Hong and Sandy Brana that are his key lieutenants in this company going forward. So I'm going to ask Paul to make a few remarks as he is about to become CEO of the company. And I'm going to ask him to handle any questions from shareholders that we might have in the Q and A that follows. So Paul, it's all yours. Thank you. Pierre and David, first of all, thank you for your confidence in me in this new role. Franco Nevada is held in very high regard. It's an honor, a big responsibility and a terrific opportunity to carry the Franco torch. Franco has always had incredibly good luck, but what has made its success repeatable is staying true to its business principles and its culture. A big part of my role will be to sustain those. These are what I think are the 3 key principles: create exposure to exploration success invest in good resources rather than betting on commodity prices and debt aversion, the value of financial flexibility ahead of the cost of capital. The second element is our culture. The core of the culture is to think like owners, not like managers. The objective is to create shareholder value, not just a bigger company. Lastly, our outlook. We're a far larger company than 12 years ago and there's more competition in our business. But mining remains a cyclical, capital intensive and risky business. There's a large amount of capital looking for a low risk way to invest in mining assets. With our ability to identify good ore bodies, I believe we can be the capital allocator of choice, and there's a long runway of growth ahead for Frank and Bonner. With that, I will hand it to the operator and take any questions. Thank you, sir. And we will hear first from Howard Roberts. Please go ahead, sir. What about these can you make comments on the mine closures that are taking place owing to the coronavirus problem? Sure. I'd be happy to. Many mines across the industry that have been impacted, 2 of our larger mines have been, Copre Panama and Antamina. Both of them are taking steps to identify how they can operate safely in a COVID environment. And once they've established that, working in concert with the various authorities, we expect that they'll be reopening, although we don't have time yet on either of those two operations. Amongst our other assets, and there are we have 2 large assets, Candelaria and Anapakay. They continue to operate normally. We have more than 50 other assets. Of those other assets, 11 of them have had temporary closures, although we're now at the stage where a number of them are opening up. I believe we have now 5 of those operations that have announced that they are reopening. So hopefully, we have seen the worst of that. The one element that is always worth remembering, frankly, is we don't have any fixed costs related to the investments. So to the extent we do have mine closures, there is no loss associated if the mine doesn't get there is no loss associated if the mine doesn't get if the ore doesn't get mined today, it does get mined in the future. So effectively, it's just a deferral of revenues for the company. Thank you. Thank you. And at this time, it appears we have no other questions on the phone. Please proceed. Sylvie, we have a few questions on the webcast here. So I will just go ahead and read those and Paul can provide his responses. So the first one is from Sandy Ryan from Alexander Capital. Question is, where do your financial contracts rank on a borrower's balance sheet in the event of an unexpected bankruptcy of 1 of your borrowers? Have you ever had to collect under such a circumstance? And did you achieve full recovery? Thanks for the question, Sandy. We have 2 types of instrument, royalties and streams. Royalties in places like Canada and the U. S. And Australia are fantastic in that you can register them against title, which means that they're permanently attached to the title. If an operator does go through insolvency, the royalty suffices. There have been a few insolvencies in our portfolio and those royalties have survived and so have probably the best tenure that you can get for any instrument. The other types of investments we have are streams. With a stream, it's a contract. So where you rank in the capital structure is a matter of negotiation. We like to structure our streams so that we are first in line in our claim against the assets. We're fortunate that all our assets have performed well and so have never had any issues for insolvencies. The next question comes from Dave Soroka. Is there any plans to split the common stock? We have considered in the past. It's not something we have considered recently. And they but must say with the stock cresting above CAD200 perhaps it's something that we should consider again. The next question comes from Egan Turner. How does the Board feel about the current PE multiple looking forward? It's David Hartwell here. It's coming down because our earnings are growing. So I think it's just a question of can we grow our earnings faster than our share price. It's been quite gratifying to see the share price move so high, but I think it's a reflection of the assets that are in place. But you just have to look at the track record over 33 years. I think we're trying to keep the ingredients to keep managing that track record going forward. I think we always have appeared expensive, but that's because I think we've always managed this company so it doesn't get into trouble and that it can be positioned to take advantage of good opportunities. I think we're positioned for exactly that and this current liquidity down drought. So I feel very good about where we are. The next question comes from Bill Ring. How will the current closures affect this quarter's revenue? So Bill, a couple of things just in terms of timing of the closures. We are fortunate that the timing of most of these closures was post the Q1. So shouldn't be expected to because of that impact that quarter. As we go forward, we don't know how long those closures will last. So it is potential there is good potential that the second quarter revenues will be affected by a number of those closures. Looks like the last question here comes from Rishi Gosalia. What do you think about gold ownership within central banks over the next 5 to 10 years? Does the global macro situation give you any thoughts about a change in their thinking over longer term? David, Hark will hear. Both Pierre Lassonde and myself have had the pleasure of being in, former Chairs of the World Gold Council. And the World Gold Council is association that works very actively with about 148 of the world's central banks. There's only 193 of them, so we're working with the vast majority. We actually do regular surveys of the banks. And the survey is really to see what is the tone and thinking of Central Bank Managers. And if anything, we're seeing increasing interest by Central Banks in terms of appetite for gold. Most of them don't want to be too specific in terms of how much they're going to buy going forward. But most of them are saying that gold is an asset they want to hold within their Central Bank Holdings. And I can tell you that there's an increasing number that have been communicated to the World Gold Council that they're willing to increase their holdings in gold over the time that they're looking for some diversity from their U. S. Holdings. So I think in terms of you last year was a record year for Central Bank Purchases. This year, well, it looks a little more steady. It may perhaps might not be a record year, but we've had record ETF buying. So that's the supplement for the marketplace. But we're very positive about the attitudes of Central Bankers for GOL going forward. Okay. We have another question from Deacon Turner. Have you revised your long term outlook for unconventional shale, especially in the SCOOP and STACK, given the changing dynamics of the space? The in terms of our outlook overall and spoke about it in terms of one of our core principles is our objective is investing in good resources and investing in the space. We focused in the U. S. In the shale basins on the very best basins, the Permian and the SCOOPSTACK and also from a gas perspective in the Marsalis. So we're very confident in the geology of those plays. There's no doubt this downturn has impacted prices and because of that it's impacted capital. And so, yes, in terms of the level of activity over the next period on those plays, obviously, that will change and we'll take that into account. But we remain absolutely confident in the geology of those plays their long term ability to pay us a good return. The next question is from James DiCenzo. Hats off and thank you, Mr. Lassonde, you, David, Sandeep, all on the Board for all your great work. Question for Paul, David or Pierre, where do you see Franco Nevada as the future in the coming decade for global mining? You're the new guy. Paul, you're the new guy. You're delivering on that, yes. I think there is a tremendous role to play. As I said earlier on, mining is a tremendously risky business and it takes some very deep skill sets in determining what are the good ore bodies and what aren't. We've been so fortunate to have a tremendously strong technical team, both in management but also on our board. I think that is a core competence, and I've got to think that investors in the mining space will be looking for those skills and I think we can put them to good use helping people for many years going forward to allocate their capital in the mining space. Okay. I think we'll take one last question here and it's from Sandeep Capadia. Can you please express what's the growth prospects for the company over the next 3 to 5 years? What kind of earnings growth can we expect? The growth prospects of the company are very good over the next number of years. We have built in growth and that is the biggest driver of that growth is Cobre Panama. First Quantum plans to expand the output of that and that will drive our yields over the next 4 to 5 years. That growth will be complemented with growth from a number of assets across the portfolio. So there's a baseline of growth that we've got good visibility on, but the history of the company has also shown that we've been able to supplement that with acquisitions. And I expect in this environment in particular, we should be able to add assets in addition to that. Our business, as you well know, is a very high margin business. We typically run at about an 80% EBITDA margin, don't have a lot of costs. And so you get a fairly direct drive as we grow our revenues. You've got to expect that our earnings will move up in lockstep with those. It's David Harko here. As you'll see on the wires right now, we've just put out our first quarter numbers. They're our 2nd best quarter in our history, only second to the 4th quarter that we had at the end of last year. Also, we've just announced that we're going to increase our dividend for the 13th consecutive year by another to US1.04 dollars on a per annum basis. And so that will be with the upcoming quarterly payment in June. So it's kind of a continuing progression in terms of the numbers we'll be able to deliver. We believe we're slightly ahead of Street consensus on adjusted earnings and revenues. So it's the track record is continuing going forward. There's a conference call tomorrow to discuss these results at 10 o'clock tomorrow morning. So we'll have a lot more details. There'll be also a new presentation up tomorrow morning on the website. And you're welcome to join our conference call at 10 tomorrow morning. But I think in the spirit of the of an annual meeting and the Board of Directors here as we very much appreciate the support we've had from investors, from the brokerage houses, the banks here in Canada and the U. S, it's just your trust in us has been we take very seriously. It's a big responsibility. One of the things we want to do is properly celebrate in person Pierre's track record with us. So we're going to invite him for our annual meeting next year. We even give him an opportunity to speak again, and I think we can probably then get a proper round of applause. It's hard to do on these teleconferences, but we hope you can join us next year. Pierre is Chair Emeritus. He has to do some work. And so we'll very much hope you can be part of that. And we're going to try to keep as much of the continuity and the culture in this company together for as long as possible. So, Troy, I'll hand it back to you. Beth, thank you, everyone, for participating. We'll have our call tomorrow. Thank you. Thanks, operator. Thank you, sir. Ladies and gentlemen, this does indeed conclude your meeting for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.