Good morning, ladies and gentlemen, and welcome to the Franco-Nevada Corporation 2021 Year-End Results Conference Call and Webcast. This call is being recorded on March 10, 2022. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session where you may ask questions through the phone line or webcast. If joined by webcast, you may submit written questions for the Q&A session at any time during this call. [Operator Instructions] And I would now like to turn the conference call over to your host, Ms. Bonavie Tek, Vice President of Finance. Please go ahead.

Thank you, Pam. Good morning everyone. Thank you for joining us today to discuss Franco-Nevada's 2021 year-end results. Accompanying this call is a presentation, which is available on our website at franco-nevada.com, where you will also find our full financial results. The presentation is also available to view on the webcast. Paul Brink, President and CEO of Franco-Nevada, will provide some introductory remarks; followed by Sandip Rana, Chief Financial Officer of Franco-Nevada, who will provide a brief review of our results. This will be followed by a Q&A period. Our full executive team is available to answer any questions. Participants may submit questions by telephone or via the webcast. We would like to remind participants that some of today's comments may contain forward-looking information and we refer you to our detailed cautionary note on Slide 2 of this presentation. I will now turn the call over to Paul Brink, President and CEO of Franco-Nevada.

Thanks, Bonavie, and good morning. I'm delighted to be reporting Franco-Nevada's best-ever annual results, both top line and bottom line. Our diversified portfolio served us well with good contributions across precious metals, energy and iron ore, driving a 27% increase in revenue to $1.3 billion. Precious metal growth was driven by an increased contribution from Cobre Panama performance by Antamina and the first year contribution from the Condestable acquisition. And oil prices spiked during the year and we generate strong revenues from our iron ore holdings. Energy prices recovered from their pandemic lows in 2020 that along with the newly acquired Haynesville natural gas royalties saw our energy revenue more than double. The benefit of our top line business is most apparent during periods of cost inflation. Our revenue growth translated directly into expanded margins and record earnings. Our efforts on ESG continue to be well received. We recently had our top rating reaffirmed by Sustainalytics, and we're once again highly ranked in the Global Mail Annual Governance ratings. We also made progress on our diversity goals in 2021 and through promotion of increased the diversity of our senior management. The growth in our business prompted our 15th consecutive annual dividend increase announced this January. The 6.7% increase takes our quarterly dividend to $0.32 per share in U.S. dollar terms. Our Board also moved their annual dividend review earlier in the year. So, the increase will for the first time apply for each of our full quarterly dividends this year, an effective 10% annual dividend increase. Turning to outlook. It goes without saying with the terrible war in Ukraine, markets and commodity prices are very volatile, and there's a wide range of revenue outcomes. After the 27% growth in 2021, we expect a slightly lower production profile in 2022. The…

Thanks, Paul. Good morning, everyone. As mentioned by Paul, Franco-Nevada ended 2021 with a strong fourth quarter, resulting in record financial results for the full year. Our royalty and streaming portfolio continued to perform well with the Company benefiting from its asset and commodity diversification during the year. As you turn to Slide 3, you can see how the Company performed against the guidance that was issued for 2021. The initial guidance provided by the Company for the year was 555,000 to 585,000 GEOs for the mining assets. The range was increased and then narrowed as the year progressed with our guidance in November being 590,000 to 615,000 GEOs sold. I'm proud to say that the Company achieved near the top end of this range with 610,981 GEOs sold for 2021. With respect to our energy assets, the Company had guided to revenue of $115 million to $135 million for the year using a $55 per barrel WTI oil price. As you know, energy prices rebounded strongly in 2021 from the lows of 2020. We increased our guidance a number of times during the year with the most recent paying $195 million to $205 million. We are pleased to report that our actual energy revenue for the year was $210 million, exceeding the top end of the revenue range. As you will have seen with our press release issued yesterday beginning in Q4 2021 and going forward, we will be including energy revenues and our gold equivalent ounce total. We believe this provides a more comprehensive measure of our business and would be useful to investors to evaluate the full scale of our portfolio. On Slide 4, we highlight the gold equivalent ounces sold, which does include energy GEOs for the last five quarters as well as the previous five…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Adam Josephson with KeyBanc. Please go ahead.

Sandip, you mentioned you're expecting a slight increase in energy production over the next five years as part of your '26 guidance. Can you talk about just the conversations you're having with U.S. oil and gas companies and whether you sense that there's the impetus and ability to meaningfully change their production plans in the near term and longer term just have been political constraints considerations, supply chain constraints, investors' willingness to set off on large CapEx programs, et cetera? Jason O’Connell: It's Jason O'Connell here. We're keeping an eye on what's happening with the operators, particularly in the U.S. that are running our shale assets. To date, they have been fairly disciplined in how they're allocating capital into their assets. We've seen, I guess, from the low point in 2020 after commodity prices crash, we've seen a pretty good rebound in drilling rigs drilling rates across our acreage. Despite that fact, operators are under pressure from their shareholders to maintain a fair amount of discipline in how they allocate capital. They're returning capital to the shareholders rather than putting it back in the ground. And so what's set to possibly change is given the large jump in energy prices here. There is some talk and some pressure from the government in the U.S. to increase production. So, we could see a situation here where production volumes increase under the strong price environment that we're seeing right now.

Just a follow-up on that. So, what are you -- what is embedded in your five-year guidance along those lines? What impact, if any, do you think that increased governmental pressure to have? Jason O’Connell: So when we put together our five-year guidance, we sort of take a view on go-forward rig activity levels across our shale assets. So our Canadian assets are fairly and consistent. They're easier to model going forward. The U.S. has what we do is we look at where rig counts were historically, how they sort of bottomed out in and what the trajectory is of that rebound, and we make a go-forward estimate of activity levels going forward, which drives our volumes. Those activity levels are different depending on the base on where the asset is located. Some basins perform -- or are performing stronger than others. The Permian, for example, is outperforming the SCOOP STACK. And so, we have an internal forecast for activity levels across all of those basins, which drive our volume profiles. There is some growth in some of our assets. Some are sort of flat where we expect to see growth is within the Continental joint venture that we have that's expected to grow over time, without any additional spending. And if we do spend part of our additional commitment on top of that, we'd expect even more volume increases with that asset. The other assets have some growth, but it's mostly flat out to 2026.

Got it. Paul, you've talked on previous calls about the 80% threshold, under which you wouldn't want your precious metals exposure to go, although I think your comments on the last call were a bit more nuanced. Obviously, your investments in the energy sector and other non-precious metals have been paying off for you. How, if at all, is that influencing your thinking about what the right threshold is and why?

Thanks, Adam. As always, with our business, our number one priority is adding precious metals to the portfolio. But the industry is more competitive. And so, you're right in saying we were indicating keeping all the avenues open to us in terms of adding good diversified assets if they do come available as well, so that we've got the maximum opportunities to grow the Company. On the energy side, we have indicated, we're not looking to add more assets at this stage. We think the level of contribution is good in the portfolio. In due course, if the portfolio is much bigger, we may get back to adding energy assets. In the short term, obviously, with the constraints on the amount of capital available in that industry, I think energy prices will do particularly well. If we do get a larger contribution from them, I'd say that would be all upside.

I appreciate that. And just one follow-up to that, Paul. Is there constraint on, obviously, production growth in many industries these days, not just energy but also metals, of course. So how is that influencing your thinking about which royalties and streams on the metal side, you'd be most interested in doing just when you look at long-term production forecast for copper, gold, silver, you name it, they're all, the expected growth rates were all pretty low for reasons you're well aware of. So can you just walk me through that issue a bit?

It's a double-edged sword in a lot of senses in that, yes, if there are fewer new mines getting built, it gives us fewer opportunities to acquire new assets. But on the other hand, if you're not building new mines, the only place to get the ore is from existing mines and so you get expansions at brownfield assets. And really, our business is one of the prime beneficiaries of that. And we've got such a deep portfolio if that's where the capital goes, we do tremendously well. So how does that influence? How we think about projects? It obviously puts a premium on operating projects. It puts a premium on shovel-ready and permitted projects, as opposed to things that are longer dated and have more risk.

And just lastly, Paul, along those lines, any change in your views on jurisdictional risks in recent months? Just given developments in South America and elsewhere?

No doubt, particularly post-COVID where governments, we have a real need to address their treasuries that there is more pressure in a number of countries, mostly to increased tax rates. It is a concern. Fortunately, on most of the transactions, they're structured so that we're not directly impacted by those increases in tax rates. So it's -- it has some impact. We certainly think about it when you're thinking about the concentration of assets that we have in any one country. But at the heart of it in our business, we think diversification is such a key thing to minimize risk. Because we've got such a diverse portfolio, we feel that we can take on some risk perhaps that others can't. But if we do it in a modest dollar size, I think that we can add good return and mitigate the risks within the portfolio.

Your next question comes from Cosmos Chiu with CIBC. Please go ahead.

Paul, Sandeep and team, maybe my first question is on what's happening in the overseas the war in Russia and Ukraine. Just to confirm, I've gone through your asset hand, but quite a few times. Just to confirm, you have no exposure to Russia. Is that correct?

We have no direct exposure, Cosmos.

Okay. And then how about the Eastern Europe?

Look, we have no assets in Eastern Europe. We have some small assets in Turkey, which is probably the closest.

Okay. Great. And then maybe switching gears a little bit in terms of oil and gas. As you mentioned, Continental, the relationship here, there's still about $61.6 million to be spent, only about $22 million was spent in 2021, which was surprising to me. I would have thought given the robust sort of energy environment, more money, there's more opportunities out there. Maybe I'm incorrect. Maybe can you talk about the timing in terms of what still needs to be spent, the opportunities? And is there also the opportunity to potentially maybe expand its relationship, just given how well sort of energy prices have gone in 2021 and into 2022? Jason O’Connell: Thanks, Cosmos. It's Jason. We have -- we have about a little over $91 million left with our commitment with Continental. You're right in that spending has slowed from the initial years. It's largely a consequence of the fact that prices dropped a lot in 2020, although they've rebounded, it's hard in a volatile price environment for buyers and sellers to agree on price. And when things are changing rapidly, it's difficult to agree and do transactions. So the level of spending or the rate of spending slowed in 2021 to around that $22 million level. We'd expect in '22, given the rate of change of commodity prices here, it may be difficult again to meet our eye between buyers and sellers. So I'd expect that rate will likely be similar, but there is some volatility as well. Sometimes the partnership is buying small royalties. Other times, bigger opportunities come available, which could move the dial a little bit more significantly. There is potential to expand the relationship there. As Paul mentioned earlier, we're currently happy with our oil and gas balance. So it's not something we would look to do in the near term, but we do have a great relationship with Continental and think they're great operators. So if ever we would want to increase our oil and gas exposure that could be an option in the future.

Great. And maybe one last question. Paul, as you mentioned, good organic growth from the portfolio, 10% -- over 10% in the next five years. But as you talked about, the other leg of growth is through acquisitions. You kind of touched on it, but could you talk about the market in terms of new acquisitions. I saw that you did Skeena last year, Copper World, smaller scale last year -- at the end of last year. Are you looking at potentially slightly larger size-- is this still as competitive? Any comments what I think would be helpful, Paul?

Cosmos, I'm going to hand that question to Eaun.

Well, thanks. In terms of the markets, we see a pretty healthy pipeline at the moment, a variety of sizes, potential transactions. And as Paul pointed out, the focus of the team and what we're working on really is focused on precious metals at the moment. We do see good opportunity. And when we have existing assets, we will do smaller transactions like you saw on Rosemont, Eskay Creek assets that we really like.

Your next question comes from Mike Jalonen with Bank of America. Please go ahead.

Paul and Sandeep and everyone there, just had a question on the 2026 GOE guidance from precious metals. For Candeleria and Antapaccay, is that your full contribution from those assets before the reductions when the minimum hit the threshold of production?

Yes. Mike, yes, that's correct. In 2026, we're still under the current terms. And then subsequent to that, I believe, in 2027, Antapaccay steps down and then Candelaria right thereafter.

Okay. I guess I was close to that. So that was my only question.

Your next question comes from John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Concerning the timing of deliveries, I noticed that in the first, second and fourth quarters of this year, the gold revenues were between $190 million and $195 -- $196.5 million for the current quarter. But in the third quarter, the gold revenues were only $169.2 million that seems to affect the percentage of precious metals versus other, but was there some underlying project that had a lower grade or the shipment of the gold moved into the -- out of the third quarter into the fourth? Or why was the third quarter so low particularly?

To check there, John, but it might have been deliveries from Cobre Panama. But there are times where you do get delays in deliveries, but it shouldn't be overly material quarter-to-quarter.

[Operator Instructions] Your next question comes from Tanya Jakuskonk with Scotiabank. Please go ahead.

I have three. I just wanted to start with sensitivities, if I could to commodity prices. And thank you very much for giving us your commodity price assumptions for your GEOs. Just wanted to start with just Jason, on the last guidance on the energy prices was a 10% move would impact revenues by 13%. Is that still a viable number for us to use? Jason O’Connell: It's close, Tanya, though as prices go higher, there's less leverage in the portfolio just because the costs are not moving up as quickly. I think about the portfolio in terms of gas and oil separately. Oil is about 50% or so of the revenue, and gas is about 50%. So, on the gas side, we have slightly better than 1:1 leverage, just because there are some minor processing costs that are applicable. On the oil side, the overall leverage right now is about 1.25:1. And that's mostly driven by leverage with the Weyburn NRI. So the Weburn NRI at current prices is -- has leverage of about 1.7:1, which is about -- and that's about 30% of our oil revenue. So to answer your question, on gas, it's about 1.1:1 right now. And on oil, it's about 1.25:1.

Okay. That's helpful. And then could we have some guidance on the iron ore. The iron ore prices are quite different for a 10% move in iron ore? Do we have a sensitivity there?

Yes. So we did look at it, Tanya. It's basically a 1:1 on the iron ore. And on the gold, it's for a 10% increase. It's about a 12% increase in cash flow, just because of the streams and the leverage there.

Okay. And the 1:1 on iron ore, is that revenue?

Yes.

Perfect. That's great. And then that's my first question with sensitivity. The second one was just coming back to your 2026 guidance. And thank you very much for giving us guidance on the expansions and what you include in the 2026. So we have all of those. Just a couple of ones I wanted to check with you is just what do you look like gold strike should -- is it something similar to what we have in 2021? Or does that start to decline? We have it declining in 2026.

Yes. So gold strike, we're sort of looking at it to be pretty consistent going forward. We don't think the production profile will change too much. So, for now, it's -- it's slightly lower, but in general, it's in line with 2021.

Okay. And what about gold quarry that go on for a while?

Yes. So gold quarry going forward, we are forecasting 1,350 ounces a year. So that's the number that will go on for the next number of years, including 2026.

And maybe on Duketon, do we still have production in 2026 in your numbers?

We do. I just don't know what the amount is off the top of my head, but we still have production from Duketon.

That's helpful. And then maybe just coming back to actions that you're seeing, and we talked about some of them in the last quarter conference call, and you are seeing on the gold side, financing for development assets or projects. You talked about sort of the $100 million to $300 million range. Is that still what you're seeing?

Tanya, we're seeing a variety of deal sizes really at the moment, right across the spectrum. So I would be hesitant to give you a size. What I would say is though that you're right, still really focused on precious metals and development projects.

Okay. And your non-gold or bulk commodities transactions were up to $500 million in your last call. Is that still what you're seeing? I guess I'm asking, are you seeing larger size transaction in other commodities versus gold?

I'd say, as Eaun mentioned, a good range of sizes. I don't think a difference between precious metal and diversified now is some in the small, some of the midsize range.

Okay. And just to make sure that on the bulk commodity side that you're looking at, your focus is really still base and battery metals?

No. On the diversified side, it's good deposits. And there's some in the book and the base, but we're always open, just looking for good geology, good often long-dated cash flow if we can. It's more of the assets that were driven by than the particular commodities.

I guess I should just ask one last one is uranium is something that you would look at?

It is. And same criteria, if it's a great ore body and we can get it at what we think is an attractive long-term price, we're always interested.

Appreciate the insights. Thank you so much.

There are no further questions on the phone.

Thank you. There are no questions from the webcast.

So, operator, I think we can wrap it up then.

Great. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.

Thank you.