Good morning. My name is Stephanie and I will be your conference operator today. At this time, I would like to welcome everyone to the Franco-Nevada Corporation Second Quarter 2015 Results Conference Call. [Operator Instructions] Thank you. Mr. Stefan Axell, you may begin your conference.

Thank you, Stephanie. Good morning, everyone. We are pleased that you have joined us today for the Franco-Nevada second quarter 2015 results conference call. Accompanying our call today is a presentation which is available on our Web site at franco-nevada.com, where you’ll also find our full financial results. Sandip Rana, CFO of Franco-Nevada, will provide a review of our results and Paul Brink, Senior Vice President, Business Development, will discuss updates to our asset portfolio which will be followed by a Q&A period. Before we begin formal remarks, we would like to remind participants that some of today’s commentary may contain forward-looking information and refer you to our detailed cautionary note on Slide 2 of our presentation. I’ll now turn the call over to Sandip Rana, CFO of Franco-Nevada.

Thank you, Stefan. Good morning everyone. As you all have seen from the press release issued yesterday, our overall royalty and stream operations continued to perform well, despite the volatile commodity markets. This continues to illustrate the strength the diversity of our portfolio. The portfolio continues to deliver and has been further enhanced by the addition of the Candelaria stream, which again performed very well during the quarter. Overall, the operational and financial results for the quarter were in line with our expectations. There were some assets which may not have performed as expected, but then there were others that performed better than expectation, this being one of the key benefits of having such a diverse group of assets. Overall, it was another solid quarter for Franco-Nevada. As you turn to Slide 3, you will see two charts on the page. The first chart highlights the average gold prices for each of the last five quarters. For second quarter 2015, you can see that the gold price was down about 7.4% to $1,193 per ounce from Q2 2014. The gold price for the quarter was also down versus Q1 2015. In fact the last time the gold price averaged below $1,200 per ounce for a quarter was five years ago in Q2 2010. So, we are still in this downturn market. With respect to platinum-palladium, these prices have also pulled back significantly versus prior year, which did have an impact on our PGM/GEO's and PGM revenues earned. Platinum prices averaged 22% lower in Q3 2014 and palladium prices averaged 7% lower for the same period. The second chart on Slide 3 highlights the gold equivalent ounces received by the company over the last five quarters. Gold equivalent ounces earned increased 28.3% year-over-year to 83,000 GEOs compared to 64,700 GEOs in…

Thanks, Sandip. 2015 has been a very good year for Candelaria and that’s both been production has been very strong at the asset but also Lundin has been very successful with their exploration program. They put up updated reserves in April this year and those were both open pit and underground. The open pit reserve in particular was increased by 24% from the time that we did the transaction. The drilling has been ongoing there. They have had more success and so Lundin is excepting to put out a further increase to reserves and resources later on this year. The other good news was they received environmental approval for the expansion of the property, principally that’s been able to build the Los Diques tailings facility. So expect construction on that to start in 2016 with the completion in 2019. Just recently, Lundin have put out a new mine plan, incorporating in particular more underground material which is higher grade into the mine plan and so that material helps increase the production profile. So Lundin is now expecting over the next four years both the copper production but also the precious metal production will be about 26% higher than the mine plan again at the time that we do the transaction. Turning to Slide 11. It's been a good year for growth across the portfolio. And I will put that really into four different categories where we have seen the growth. The one is being producing assets where we have seen good exploration success and top of the list there is Candelaria that we have just spoken of. But other assets with great exploration success have been Timmins West, Duketon, Guadalupe, Macassa, Fire Creek/Midas and also Sabodala. We have seen first gold coming out of Phoenix and Rubicon and Barrick is also ramping up the project they have at Goldstrike for the TCM. In the third category, really our new construction decisions, and there we have seen decisions to go ahead and build South Arturo, Brucejack, Cerro Moro and Sissingue. And then also at Karma where construction has started earlier in the year, it was halted but we have just seen the restart of construction at Karma. The last category there is really assets that have received sponsorship or moved into stronger hands and the two there are Centerra investing $300 million in Hardrock and Yamana acquiring Monument Bay. Slide 12. We still have a good amount of capacity to add new assets. Taking into account our undrawn credit facility and our corporate commitments this year, we have in excess of $1.1 billion to invest in new acquisitions. So that will end my comments. Stephanie, you can open the line for questions.

[Operator Instructions] Your first question comes from Stephen Walker with RBC Capital Markets. Please go ahead.

Just wanted to ask a question here on Cobre Panama, if I could. You've given the capital cash call commitment to mid-year 2015 as $275 million. With such a specific number, this sounds like there has been progress with respect to negotiations with First Quantum. Could you comment on that progress? And also, could you comment on your, I guess, commitment to the project? I believe that there has been visits to the site and sort of what your expectations are for that project? And maybe some expectations for cash cost for the balance of the year and 2016 as well?

Stephen, thanks for that. It's David Harquail here. And, yes, there is progress we are having. We have a constructive relationship with First Quantum. It's taking long because there is a moving target and First Quantum is trying to see what works with all their respective bankers. Franco-Nevada is absolutely committed to the original deal, and we are working to accommodate First Quantum's needs. But we have to do that with a reasonable risk trade-off to Franco-Nevada. And so, we think we are proud of always having good relationships with our operators. We are going to be supportive here. And I think the 275 was kind of a reflection of, we recognize that effectively they have been carrying our contributions to date, and so we wanted to give them some benefit as a result of that. And so agreeing on that catch up amount to June 30, I think it is an illustration of the progress that we have made. So really I can't say a lot more. I really expect we will be funding this project this year but it's a dynamic market.

Thanks, David. And maybe just a question, if I could, on debt. You've increased the credit facility significantly. It's clear that you're going to need to draw down debt particularly with future payments from Cobre Panama expected. Could you give us a sense of the level of debt you're prepared to take on within the capital structure, debt to total capital, or how you would manage or drawdown credit facility as far as paying back or rolling it into a longer fixed-term debt structure?

Steve, we disagree. Actually, we don’t see, in terms of our existing commitments, even though we have a commitment to Cobre Panama, we believe we will be also generating cashflow from our existing assets. And we have been stress testing and I guess that our best projections going forward is we believe we can meet all our commitments without actually having to tap on our credit facilities. I think we would only be using our credit facilities if we do more material acquisitions going forward. So we wanted to have that flexibility because there has been -- as you see, there has been a lot of opportunities in the marketplace. We have been active in many of the transactions. What's important for us is how each deal or opportunity fits into our overall portfolio. And I can say right now there is no shortage and so we just thought it was prudent to both expand and extend our credit facility. But if we didn’t buy anything new, I don’t think we need to touch our credit facility.

I would agree. I'm just thinking maybe you could define for us what a material acquisition would be?

See, material is $500 million plus.

Your next question comes from Josh Wolfson with Dundee Capital Markets. Please go ahead.

Just following up on Stephen's question on the debt. When I look historically at the company, which I guess has never been operating in a net debt position in your commentary on the potential using debt for future transactions. Looking at your cost of capital and so forth, how would you factor utilizing debt for future transactions and how would that change things going forward in terms of what your required IRRs would be?

You want to handle that Sandip?

Sure. With respect to the debt, our cost of debt is actually not that significant. It's LIBOR plus 120 basis points for us right now, and based upon our EBITDA level, it would be quite cheap for us. We don’t have the intention of having long-term debt on our books. If we did draw down on the credit facility, it would be with the objective to pay that down as fast as possible. The deals that we do enter into are long-term deals, so in adjusting our IRRs, I don’t think it would have a material impact.

But, Josh, as you know our philosophy is not to use debt. We think there is enough leverage in a very cyclical industry such as we are in. But if we are ever going to use debt, we use it when the great opportunities are available at the bottom of the cycle. And so, we just think there is opportunities coming our way. We just want to be prepared. But if we do use debt facilities, I expect we wouldn’t be there very long.

[Operator Instructions] And your next question comes from Cosmos Chiu with CIBC. Please go ahead.

Congrats on a solid quarter once again. A few questions here. Maybe if I can first start off with a question on taxes. I just want to get a deeper understanding in terms of the tax structure that is currently residing within Franco-Nevada. Certainly there is a lot of questions out there these days in terms of what's happened to one of your competitors and the comparability of that tax structure compared to say some streams within Franco-Nevada. But, again, looking at how much taxes you pay, if I worked it out correctly, you've paid 18.5% cash taxes in the current quarter, 22% cash taxes so far in first half of 2015. So certainly it looks like you're doing all the right things, but I just wanted to get a quick, maybe a deeper understanding in terms of potential impact.

Sure. Cosmos, Sandip here. With respect to our tax structure, we enter into deals in Canada, are done through Canada. Deals in United States are done through the United States. And we typically do deals in the jurisdiction that the operations are in. The one difference is for our international streams which we do through our Barbados subsidiary. So our international streams, not our royalties but just our streams of our 380 assets, only seven assets are held in that subsidiary. So in terms of total number, it's not significant. So at this time, we don’t think there is any material impact to us with respect to having that structure in place.

And Sandip, could that change once, say, Cobre Panama kind of comes in? Or is it kind of like a fluid situation at this point in time, seeing how the structure plays out in terms of how you're going to react to it?

We are always looking at the structure to enhance it. And as we add deals, say through our offshore structure, we are also adding deals in Canada, United States and elsewhere. So I can't forecast what our portfolio will look like in four years time but it's always evolving.

And then maybe switching gears a little bit. On Cobre Panama, certainly David and maybe Paul as well, you've talked about stress testing the model, protecting Franco-Nevada's interests. Have you looked at -- certainly at this point in time it's not the gold price that's been under pressure in 2015, the copper price has been under pressure as well. Have you sort of looked at how that could impact the project, Cobre Panama, and indeed even the bigger picture, First Quantum? And is there any risk in terms of production curtailments, CapEx? First Quantum has talked about CapEx decreases, however, without impacting production. How have you looked at it from the perspective of Franco-Nevada in terms of stress testing and the risk to Franco-Nevada?

As I said earlier, Cosmos, it's been a bit of a moving target and so all those factors that you mentioned are things that we are taking into consideration when we are talking to First Quantum. We are trying to be supportive. We believe this project is going to get built and we want to be part of it.

For sure. And then maybe moving on to Candelaria. Paul, you mentioned certainly that's a net positive to Franco-Nevada with a 26% increase in average production. I just want to make sure, because I know in the Lundin press release they had talked about CapEx increases to accommodate that improvement in the production. From the Franco-Nevada perspective you've paid $7.5 million in the current quarter, or in Q2. Are there any more needs in terms of payments from the perspective of Franco?

No, Cosmos. At the time we did the transaction, there was some reserves that we are expecting to be published and just weren't out yet, and so that was the reason for that onetime adjustment. There is nothing on a go forward basis other than receiving and paying for the stream ounces.

Perfect. Maybe one last question in terms of oil and gas. I see that for the rest of the year you're looking at -- using the assumption for your guidance of $50 per barrel WTI. I think I've asked you this question in the past but just trying to figure out what's the sensitivity in terms of, if right now the spot price for WTI is $43 per barrel, how does that change the picture? Would that just mean that you would still meet the guidance for the year but you come in at the lower end?

Yes, Cosmos. That’s essentially correct.

And then Geoff, how would I -- I think I've asked you this in the past as well, how would I convert WTI into Edmonton Light? I know it's a different demand supply structure, but at least in Q2 it looked like I could have just applied the exchange, U.S. dollar-Canadian exchange rate to WTI and I was able to get pretty close to what Edmonton Light was in Q2. Is that one way to do it?

It's one way to do it. There is also further differential in there, so it's not an exact conversion.

But it would get you close enough?

It's close. It's close.

Our next question comes from Don MacLean with Paradigm Capital. Please go ahead.

This is maybe a bit of a, more of a big picture business about the business climate. We've seen Royal Gold do a couple of pretty big deals, one of which you would obviously be quite close to with. At least from my perspective, remarkably low rates of return. I guess on one hand it suggests there's a lot of competition. We know there is competition that's been added. But this is also something that's a bit of a function of what happens at the bottom of a market too. So just wondering if you guys could put those transactions and the general business climate into a bit more context, because, Dave, you had said there was lots, and Paul you indicated that there was business to be had. But it sure sounds like it's an awful lot more competitive or at least we need to set our sights lower in terms of the rate of return at this stage of the market.

Don, I think I would take a different take on it. Because really there's barbell transactions out there. And I think, if you think you look at the really long dated assets that have mine lives of 30 plus years. They have a different valuation than you would have, just looking at the IRRs and NPVs of those assets. I think they are key building blocks of any portfolio and something you would want an overall balanced portfolio. I think if you look at the other types of smaller type transactions with the shorter mine lives, I don’t think the returns have ever been better. And for ourselves, we were very active in last year. We did over $930 million of commitments to new deals. I always see these transactions as kind of coming in waves. But I think the fact that you have seen so many streaming and royalty transactions in the marketplace right now, I think it really demonstrates -- and this has become preferred financing mechanism, there is a lot of opportunities still out there. It's one of the reasons why we have increased our credit lines. And for us it's a question of -- because we have got some choices right now, we are just waiting to get the right fit in terms of what fits into our portfolio between the risk and the upside of those asset spreads. So I couldn’t be more upbeat about the marketplace. I think in some IR presentations earlier, I was telling the market the range of opportunities is expanding for the streamers. We have gone from just buying third party royalties to byproduct streams, to be doing mine development and the M&A. And now we are doing debt reductions for the majors. And so I really have been seeing an expanding universe of investment opportunities. When your universe gets bigger, you get more investment opportunities, you get better deals. So I don’t want to comment on the returns on the other deals. I just think we are looking at better returns then we have seen historically on our deals going forward and I am optimistic we will be booking those.

So that's sort of the shorter life, or I guess the more normal end of the spectrum?

No, I see the opportunities across the board. I think one of things is, we have been active in the oil and gas bids as well, earlier this year. I think there has still been too much optimism in some of the bids that we would have a very rapid recovery in oil and gas. So I think in some of these transactions, I think it's going to serve us to be patients till we get the right pricing environment for certain transactions. We have got some capital to spend but we don’t have unlimited capital and we are very reluctant to issue debt in this company. So we want to make sure we use our bullets in the right direction.

And I guess touching on that, you have had a history of no debt in the company and yet the opportunities, as you say, are numerous and the equity market is not exactly very friendly these days. You have had also a history of progressively higher equity prices, when you wish...

That’s right.

So there may be a tradeoff required there if you see real opportunities. Which is more important, no net debt or issuing equity at a higher price?

Most important is when the major opportunities are there that we grasp them and then how we finance them. You know we have the credit facilities, our first stop, to use that. And then after that, we would have to look at what's the best way to do it. I think we are not preempting any options but I would say we wouldn’t do an equity issue without a specific use of proceeds at the discount that we are trading at today. So I think what's important for us is that we have got the flexibility to buy the opportunities that come in front of us. We have that flexibility today.

Right. So you're a bit more philosophical about the opportunities that present themselves as opposed to the fact that the equity market, including your own, is at depressed levels?

Right now we don’t need the equity market.

Your next question comes from Brian MacArthur with UBS. Please go ahead.

I want to go back to Cobre Panama for a minute. Maybe I'm reading too much in this but you talk about $275 million being paid on when the revised deal is signed, and in your available capital flood you have $325 million for the year. I mean originally you were guiding $300 million to $350 million. Has anything changed there with that $325 million or should I be reading that as a different timing of expenditures or should I be reading that as a revised deal? Or am I just reading too much into this and that's just an estimate of where you'll sync up at end of the day?

We are still estimating $325 million for the year. The $275 million was just sort of finalizing our understanding of what First Quantum would spent on the project and on our behalf up to June 30. So we expect there will be further capital incurred in the project to year-end. So we still think $325 million is a valid number for the year.

Right. So that extra $50 million is just a ratio of how you see it spending under the original deal going forward or did percentages or something change, or can you comment?

No, no. No, just going forward, same percentages.

[Operator Instructions] There are no further questions at this time.

Thank you, Stephanie. We expect to release our third quarter 2015 results on November 11 with a conference call held the following morning. I want to thank you for your interest in Franco-Nevada.

Thank you. This concludes today's conference call and you may now disconnect.