Good morning, ladies and gentlemen, and welcome to Franco-Nevada Corporation Q3 2019 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we'll conduct a question-and-answer session. [Operator Instructions]. Note that this conference is being recorded on Tuesday, November 12, 2019. I now would like to turn the conference over to Mr. David Harquail. Please go ahead, sir.

Yes, thank you, Sylvia. Good morning, everyone. Welcome to Franco-Nevada's third quarter financial results call. Accompanying this call is a presentation which is available on our website at franco-nevada.com. You will also find post in our website the full financial disclosure supporting our -- material supporting our disclosure. Before we begin formal remarks, we would like to remind participants as some of today’s commentary may contain forward-looking information and we refer you to our detailed cautionary note on Slide 2 of this presentation. This is David Harquail and I’m the current CEO of Franco-Nevada and a board member. In Slide number 3, is an outline of the current Directors and Executive Management of Franco-Nevada. Almost all the faces you see are here today and will be available for questions. We have highlighted on the slide steps that are being taken to renew both our board and executive team. Jennifer Maki and Elliott Pew have joined the Franco-Nevada board in just the last six months. Also in September, we announced our intention that effective May 6 at our Annual Meeting in 2020, I will transition to a non-executive role, Chair role and Pierre Lassonde will transition to Chair Emeritus. On the same day, our intention is for Paul Brink to become our new President and Chief Executive Officer and if so approved by the shareholders join the board. All these changes have been part of a long-term, well communicated process that has had the unanimous support of our board, executives, and major shareholders. We believe that transition will be seamless, while at the same time preserving the D&A and discipline of what makes Franco-Nevada successful. I will now call on Sandip Rana, our CFO, to provide a few -- a brief review of our results. He will then be followed by Paul Brink, currently our President and Chief Operating Officer to provide some corporate updates. We will then be happy to take any of your questions. Sandip, the floor is yours.

Thank you, David. Good morning everyone. As you will have seen from the press release issued yesterday, the company delivered another quarter of strong financial results. In fact, third quarter was a quarter* of milestones for the company. We received the first delivery of gold and silver ounces from Cobre, Panama in third quarter. This is a precious metal stream that was originally entered into in August 2012. It has been a long time coming but it was worth the wait. First Quantum Minerals has built a world class operation and we look forward to receiving gold and silver ounces from the mine for years to come. The second milestone for the company was financial. Q3 2019 is the first quarter of the company has exceeded $200 million in revenue. In fact revenue for the quarter was $235.7 million, a 38% increase over Q3 2018 and Q2 2019. As you turn to Slide 4, you will see the key financial results for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018. The company had a strong quarter with increases across all financial metrics when comparing to the periods mentioned. A number of new financial records have been achieved for the quarter, these are all highlighted. With the increase in revenue and due to the lower cost nature of our business model, adjusted EBITDA and adjusted net income were also significantly higher in Q3 2019 versus prior period shown on the slide. Adjusted EBITDA was $192.9 million or $1.03 per share and adjusted net income for Q3 2019 was $101.6 million or $0.54 per share. These strong financial results continue to showcase the strength of the Franco-Nevada business model. Increases in commodity prices flow directly to EBITDA and earnings for our company. From an operational standpoint,…

Thank you, Sandip. The ramp-up at Cobre Panama continues to go well. First Quantum declared commercial production on September 1, a month ahead of schedule. The three mill trains made up of seven mills are now operational, and 72 million tonnes per annum throughput is expected by year-end. Throughput is expected to increase to 85 million tonnes per annum with the addition of the eighth ball mill. First Quantum has confirmed that 2019 guidance for Cobre of 140,000 to 175,000 tonnes per annum of copper production. As we indicated on our last call, we expect GEOs delivered to Franco to be at the high-end of our guidance for Cobre that is close to 40,000 GEOs in 2019. Q3 was the first quarter that we received deliveries from Cobre. Total GEOs delivered were 22,942 ounces and the GEOs sold were slightly less at 21,526 ounces. We did benefit from fast payment terms on the initial short-term concentrated sales contracts during the quarter as the contracts move to longer-term, timing of deliveries will be a bit slower and to our conservative estimate for Q4 deliveries. Turning to Slide 13, in July, we invested $300 million to acquire 1% overriding royalty from Range Resources, covering their operated position in the core of the Marcellus Play in Pennsylvania. The effective date of the transaction was March 1. During the seven-month period from the effective date until the end of Q3, we recorded $13.1 million in revenue for an average of approximately $1.9 million per month. We continue to expect the royalty to generate approximately $25 million in 2020 assuming a $2.50 per Mcf prior to natural gas. The ongoing revenue growth rate will depend on Range’s capital plans over the next few years. Turning to our guidance on Slide 14, we expect that our…

Thank you, sir. [Operator Instructions]. And your first question will be from Cosmos Chiu at CIBC. Please go ahead.

Great. Thanks, David, Paul, and Sandip. Congratulations on a very strong Q3 and congratulations, David and Paul. Maybe my first question is on Cobre Panama here. Paul, as you mentioned your -- it seems like the deliveries are moving into more long-term contracts in Q4. Could you maybe again walk us through how that changes in terms of the deliveries to Franco-Nevada? Just wondering when does Franco-Nevada get paid on these contracts? Is it when a concentrate gets shipped out or is it when smelter gets to concentrate or is it when First Quantum actually gets paid and again, how does the switching over to long-term contracts impact that?

It’s just a small timing impact overall, Cosmos. In terms of how we get paid, when the concentrate ships, we get the bulk of our payment as a provisional payment. And then at a later date, once the concentrate is actually being processed, you get a final settlement that is an adjustment. But economically it's really that provisional payment, which is the major driver. For the initial contracts that we entered into, we were getting those payments in anything 20 to 30 days after the concentrate shipped. More typical longer-term contracts, that'll move out to maybe 30 to 40 days, on average. So just as you transition -- it's a couple of weeks to a month’s difference in terms of the timing -- with no major impact.

So it’s going to really just impact Q4?

Yes.

As you transition to those other contracts.

Exactly.

Okay. And then I don't know if this is related to Cobre Panama as well. But, Sandip, I realize I noticed that your taxes as a percentage of earnings into Q3 is slightly lower than previous quarters. I somewhat remember that I believe that Cobre Panama stream is a bit more tax efficient. Again, is the lower percentage in taxes a result of the Cobre Panama deliveries in Q3 and -- and what should we expect in terms of a tax rate on a go-forward basis?

Hi, Cosmos, yes. You’re right --

Hi Sandip.

Hi, Cobre Panama is in a tax efficient structure. It is just due to the number of stream outages we did receive and sell in Q3. It did impact the tax rate. So it is slightly lower. Going forward, I think a reasonable, estimated between 15% and 16% as the long-term tax rate for the company.

Great. And then, maybe switching gears a little bit here at Marcellus. Certainly there was a catch-up payment in Q3 given it started in March, or it got rolled back or started the contract was retroactive since March. I just want to make sure I think you highlighted the 15.9% of your revenue in Q3 coming from energy. Just want to make sure that, I guess what I'm trying to get to, is that number seems a bit inflated. I guess that includes your payment -- your one-time payment from Marcellus to confirm that number one? And number two, what would be a more normalized number, if I was to take out that Marcellus contribution, and if you can also talk about that 20% target, you're still trying to get or not trying to get to but the 20% cap and if that's still the case?

Hi Cosmos, Sandip here. You are right in that percentage for energy it is the $9 million catch-up payment for the stuff period is included. If you were to pull that out going forward, obviously it'll depend upon how the other commodities do in gold and silver and the stream ounces from those assets. But I think around 14%, 13% to 14%, I think is a reasonable number for energy.

Good. And Cosmos in terms of the outlook -- the -- you’ll recall the -- we think of that 80:20 as a rough guide to the 20% being the maximum amount of vanishing or non-gold that we would want over the longer-term. And look at any deals where it’s asset quality that is number one for us. So as we look at them, we’re obviously that’s what drives any individual deal. Right now, we are most active, as I mentioned on the precious metal side. And so that's the most likely area in terms of incremental additions.

Sure. And again, on energy as well, I noticed that your contribution to Continental $19.6 million in Q3, slightly lower than what you did in Q2, is that just a function of you had contributed a lot in the first half. And so now just kind of rounding it out in the second half. And then from that perspective, I believe there's still some contributions needed in year 2020 like how should we look at it? Is it going to be more front-end loaded once again or is it going to be based on activity, acquisition activity on Continental or is it more kind of like evenly spread out in the quarters in 2020?

Hi Cosmos, this is Jason O'Connell.

Hi, Jason.

Just in thinking about how those contributions are made. They have been fairly regular in terms of monthly payments, historically. We're seeing a bit of a slow-up towards the end of the year here. It's a function of how Continental ultimately is able to buy acreage on the ground. And so we expect that number probably be a little bit lower towards the end of the year as Continental has, I guess approaches their $120 million cap for the year. Going forward in 2020, we still have in place a contribution limit of $100 million. So we expect them to be pretty close to that, that amount. It could be more or less again, depending on just pace their acquisitions throughout the year. And then following that, there's about $50 million or so remaining that would come in, in 2021 before the end of our commitment.

Okay. And now maybe one last question, if I may. Congrats on getting very good scores on ESG. But my question is as a royalty streaming company here; your ESG score will be in part dependent on the actions and reactions of some of your partners, the producers, the operators. How do you manage that risk? And how do you make sure that, you can maintain that good standing the high standing in the ESG surveys?

Cosmos it’s David here.

Hi David.

As you know, we're very active on the World Gold Council right now. And I'm quite proud that as an industry now we've had 26 gold companies now agree to a common set of standards on ESG. And these are now going to be in the next two years where all the companies are being to implement. It’s an audit process in terms of third-party verification that we're fulfilling the functions on ESG. So I've talked to my colleagues in the oil and gas industry, and they're quite jealous of what we're doing right now in the gold industry. In terms of what we can do, we don't control the operations, that's absolutely clear, but we can absolutely control how we allocate capital. So we've institutionalized in our due diligence a process where we do look at all community issues, we look at tailings risk, we look at environmental risk with every one of our assets. It's something that's integral now in business development. And it's integral in terms of the board review of these assets, as well as, we -- on our more significant assets we visit a number of them actually several times a year. We try to touch at least our major assets at least once a year, and sort of our second tier assets, every second year we will review as part of those visit any ESG issues that we’re concerned with and it's something that we will bring up with the company if there's an issue, although look at trying to isolate that risk of our company and sell those assets. We have not yet gotten to a circumstance where we needed to sell an asset. I think we're lucky that most of our operators are either members of the World Gold Council or at the ICMM and they're following very high standards, and they're working hard to improve those. So we did have a Slide on number 16. So I'm happy you brought up the question. We're very proud that at least we've been able to be proactive on this business. And I think we've now got the rating agencies recognizing what we're doing. And so we just found out a few weeks ago that we're now ranked number one by Sustainalytics out of 104 precious metals companies. So it is something I'm going to tout* as long as we're number one. And MSCI has now appreciated the form of business that we're doing. And we're now ranked AA. I understand that there's no other company in the mining business that’s ranked higher than that. So we're ranked at that level for 2019. So very pleased to be where we are and we will continue to be proactive and try to stay ahead of the curve.

Great, thanks again, David, Paul, Sandip and Jason, that’s all the questions I have. Thank you.

Thank you. Next question will be from Carey MacRury at Canaccord Genuity. Please go ahead.

Hi, good morning. Question for Paul, you mentioned some of the business development opportunities. So I'm just wondering if you can give a little bit more color are those on producing assets, development assets, maybe M&A related.

Carey, we're seeing opportunities across the board. So some of the themes that we spoken off before asset sales coming out of some of the major companies, we're seeing some project builds in the precious metal space and also seeing some byproduct opportunities. So it really is across the spectrum of the types of opportunities that we typically see.

And in terms of development assets, do you think the market is there for equity and debt or how do you think about that in terms of obviously a stream can be difficult to fund the project on 100% basis?

As we're all aware, there's not a lot of equity available, there is some debt and there are streams. So I think there are a few assets that are able to move ahead in this market, obviously with good assets with good sponsors.

Thank you. Next question will be from Mike Jalonen at Bank of America. Please go ahead.

Hi, David, Paul, Sandip. Just had a question on Hemlo, you may have seen Barrick’s presentation was a five-year guidance from a week ago where had a great slide on exploration at Hemlo showing a 500 meters of down pledge extent of the sea zone. Just wondering how that impacts your NPI in the future?

Hi, Mike, Sandip here. Yes, so those results are on our property and we're very excited. Obviously, it's because it's an NPI, there'll be development costs associated with it. So it is hard to know exactly what the impact will be. But Hemlo as you can see from this quarter, the leverage to the gold price is quite significant. So we're actually quite encouraged with what Hemlo will provide to us going forward.

Where they're working, is that all on Franco NPI ground?

Yes, its David here, its, yes, if you look at the down plunge is going to the Northwest, that's on what was called the Interlake claims and that's on the ground. There is some work that Barrick has done on what's called the Golden Sector further to the West, but the majority of what they focus and highlighted, that was all on Franco-Nevada’s Interlake claims.

Thank you. [Operator Instructions]. And your next question will be from Tanya Jakusconek at Scotiabank. Please go ahead.

Great, good morning, everybody and congrats on a great quarter. Question for Sandip first, just coming back to Cobre Panama, Sandip, can you talk a little bit about the fact that we didn't reach the 58 million tonnes per annum until after Jan 1st, 2019. And just getting the $100 discount on your gold delivery prices, was that the case that you saw in Q3?

Yes. So because they didn't reach the 58 million tonnes, we do get the $100 deduction per ounce, gold ounce going forward until the return is achieved by Franco the 5%. And so that will go on for probably three to four years.

Okay. Three to four years from now. And it is showing up in your comp.

Yes, correct.

Okay, that's helpful. Thank you very much. And what is the remaining balance that we can --

I have to get back to you on that one.

Okay.

Off the top of my head it’s approximately $40 million.

Okay, that's helpful. Thank you so much for that. And then maybe for Paul, just coming back on your M&A opportunities that you see out there. You mentioned the greater than $1 billion. I mean is that from a last conference call, I think we were seeing more smaller type opportunities sort of under $500 million, or thereabout. So clearly we've had a change in landscape, are those opportunities of over a $1 billion are those project builds or byproduct opportunities?

So those would be byproduct opportunities, Tanya and I guess the shift has been with a weakness with base metal prices and with strong precious metal prices. We're back to a stage where you've got a good arbitrage on byproduct costs.

Yes. I guess wanted to see whether it was the byproducts or the project builds. Okay. So it's back to byproducts, well, it’s good to see. I mean, not on the base metal side but good to see the opportunities there. Great, thank you.

Thank you. [Operator Instructions]. And at this time, Mr. Harquail, we now have no further questions; I would like to turn the call back to you.

Thank you, Sylvia. Thank you for participating on the call. We expect to release our year-end 2019 results after market close on March 9th. And we'll have a conference call similar to this one, the following morning. Again, thank you for your interest in Franco-Nevada, and we'll talk then.

Thank you, sir. Ladies and gentlemen, this does indeed concludes your conference call 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.