Franco-Nevada(FNV) - 2024 Q2 - Quarterly Report

Condensed Consolidated Statements of Financial Position The company's financial position shows an increase in total assets and liabilities from December 2023 to June 2024 Condensed Consolidated Statements of Financial Position (June 30, 2024 vs. December 31, 2023) | Metric | June 30, 2024 ($M) | December 31, 2023 ($M) | | :--------------------------- | :----------------- | :--------------------- | | ASSETS | | | | Cash and cash equivalents | 1,439.0 | 1,421.9 | | Current assets | 1,668.3 | 1,615.3 | | Royalty, stream & working interests, net | 4,031.1 | 4,027.1 | | Investments | 278.0 | 254.5 | | Total assets | 6,141.2 | 5,994.1 | | LIABILITIES | | | | Current liabilities | 57.3 | 39.2 | | Total liabilities | 296.0 | 225.0 | | SHAREHOLDERS' EQUITY | | | | Total shareholders' equity | 5,845.2 | 5,769.1 | | Total liabilities and shareholders' equity | 6,141.2 | 5,994.1 | - Total assets increased by $147.1 million (2.45%) from December 31, 2023, to June 30, 2024, primarily driven by increases in Cash and cash equivalents, investments, and royalty, stream and working interests[1] - Total liabilities increased by $71.0 million (31.56%) over the six-month period, mainly due to a rise in current income tax liabilities[1] Condensed Consolidated Statements of Income and Comprehensive Income The company experienced a decline in total revenue and a significant decrease in net income for both Q2 and H1 2024 compared to prior year periods Condensed Consolidated Statements of Income and Comprehensive Income (Q2 2024 vs. Q2 2023 and H1 2024 vs. H1 2023) | Metric | Q2 2024 ($M) | Q2 2023 ($M) | H1 2024 ($M) | H1 2023 ($M) | | :--------------------------- | :----------- | :----------- | :----------- | :----------- | | Total revenue | 260.1 | 329.9 | 516.9 | 606.2 | | Total costs of sales | 82.0 | 122.2 | 173.8 | 221.4 | | Gross profit | 178.1 | 207.7 | 343.1 | 384.8 | | Operating income | 169.0 | 200.5 | 327.2 | 372.6 | | Net income before income taxes | 174.8 | 211.5 | 346.8 | 395.6 | | Income tax expense | 95.3 | 27.0 | 122.8 | 54.6 | | Net income | 79.5 | 184.5 | 224.0 | 341.0 | | Comprehensive income | 82.6 | 209.0 | 189.7 | 371.9 | | Basic EPS | 0.41 | 0.96 | 1.17 | 1.78 | | Diluted EPS | 0.41 | 0.96 | 1.16 | 1.77 | - Total revenue decreased by 21.2% in Q2 2024 and 14.8% in H1 2024 compared to the prior year periods, primarily driven by lower revenue from royalty, streams, and working interests[3] - Net income significantly decreased by 56.9% in Q2 2024 and 34.3% in H1 2024, largely due to a substantial increase in income tax expense[3] Condensed Consolidated Statements of Cash Flows Operating cash flow decreased in H1 2024 due to lower net income, while investing activities saw reduced cash usage Condensed Consolidated Statements of Cash Flows (H1 2024 vs. H1 2023) | Metric | H1 2024 ($M) | H1 2023 ($M) | | :---------------------------------------- | :----------- | :----------- | | Net cash provided by operating activities | 372.9 | 471.7 | | Net cash used in investing activities | (227.2) | (263.2) | | Net cash used in financing activities | (117.3) | (113.5) | | Net change in cash and cash equivalents | 17.1 | 98.6 | | Cash and cash equivalents at end of period | 1,439.0 | 1,295.1 | - Net cash provided by operating activities decreased by 20.9% in H1 2024 compared to H1 2023, primarily due to lower net income[4] - Net cash used in investing activities decreased by 13.7% in H1 2024, driven by lower acquisition of royalty, stream, and working interests[4] Condensed Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased in H1 2024, primarily from net income and dividend reinvestment, despite higher dividends declared Condensed Consolidated Statements of Changes in Shareholders' Equity (H1 2024 vs. H1 2023) | Metric | June 30, 2024 ($M) | June 30, 2023 ($M) | | :----------------------------------- | :----------------- | :----------------- | | Balance at January 1 | 5,769.1 | 6,417.6 | | Net income | 224.0 | 341.0 | | Other comprehensive income (loss) | (34.3) | 30.9 | | Total comprehensive income | 189.7 | 371.9 | | Exercise of stock options | 2.7 | 2.9 | | Share-based payments | 2.9 | 3.5 | | Dividend reinvestment plan | 19.8 | 14.5 | | Dividends declared | (139.0) | (130.9) | | Balance at June 30 | 5,845.2 | 6,679.5 | - Total shareholders' equity increased by $76.1 million in H1 2024, primarily due to net income and dividend reinvestment plan, partially offset by dividends declared and other comprehensive loss[5] - Dividends declared increased to $139.0 million in H1 2024 from $130.9 million in H1 2023[5] Notes to the Condensed Consolidated Financial Statements This section provides detailed disclosures and explanations supporting the condensed consolidated financial statements, covering accounting policies, acquisitions, and key financial components Note 1 - Corporate Information Franco-Nevada Corporation is a royalty and stream company focused on precious metals, holding a diverse portfolio of interests across various stages of development and global locations - Franco-Nevada Corporation is a royalty and stream company specializing in precious metals (gold, silver, platinum group metals) with a diversified revenue base[6] - The Company holds a portfolio of royalty, stream, and working interests on properties ranging from production to early exploration, located in South America, Central America & Mexico, United States, Canada, Australia, Europe, and Africa[6] Note 2 - Material Accounting Policy Information This section outlines the basis of presentation for the unaudited condensed consolidated interim financial statements, prepared in accordance with IFRS Accounting Standards Basis of Presentation The condensed consolidated interim financial statements are prepared in accordance with IFRS Accounting Standards, detailing accounting treatment for loans receivable - The condensed consolidated interim financial statements are prepared in accordance with IFRS Accounting Standards, specifically IAS 34 Interim Financial Reporting[7] - Loans receivable are classified either at amortized cost (for contractual cash flows representing solely principal and interest) or at fair value through profit or loss (FVTPL) for other contractual cash flows[7] Significant Judgments, Estimates and Assumptions The preparation of financial statements requires management to make judgments, estimates, and assumptions consistent with those reported in the annual consolidated financial statements - The preparation of financial statements requires management to make judgments, estimates, and assumptions consistent with those reported in the annual consolidated financial statements for December 31, 2023[7] New and Amended Accounting Standards Adopted by the Company Amendments to IAS 1 regarding liability classification were adopted as of January 1, 2024, with no significant impact on the Company's financial statements - Amendments to IAS 1 – Classification of Liabilities as Current or Non-current were adopted as of January 1, 2024, with no significant impact on the Company's financial statements[8] New Accounting Standards Issued But Not Yet Effective New accounting standards like IFRS 18 and amendments to IFRS 9 and IFRS 7 are being assessed for their potential impact on future financial statements - IFRS 18 – Presentation and Disclosure in Financial Statements, effective January 1, 2027, will require new categories of income and expense presentation; the Company is currently assessing its impact[8] - Amendments to IFRS 9 and IFRS 7, effective January 1, 2026, clarify classification and measurement of financial instruments; the Company is currently assessing their impact[8] Note 3 - Acquisitions and Other Transactions Franco-Nevada engaged in several significant acquisitions and financing activities during and subsequent to Q2 2024 Acquisition of Royalty on Newmont Corporation's Yanacocha Operations – Peru Subsequent to quarter-end, Franco-Nevada acquired a 1.8% NSR on Newmont's Yanacocha mine in Peru for $210.0 million cash - Subsequent to quarter-end (August 13, 2024), Franco-Nevada acquired a 1.8% NSR on Newmont's Yanacocha mine and adjacent properties in Peru for $210.0 million cash, plus a contingent payment of $15.0 million in common shares[9] Acquisition of Gold Stream on SolGold plc's Cascabel Copper-Gold Project – Ecuador Subsequent to quarter-end, the Company acquired a gold stream on SolGold's Cascabel project in Ecuador, committing $525.0 million as part of a syndicated financing package - Subsequent to quarter-end (July 15, 2024), the Company acquired a gold stream on SolGold's Cascabel project in Ecuador, committing $525.0 million as part of a $750.0 million syndicated financing package (70% FNB, 30% Osisko)[9] - Stream deliveries for FNB are 14.0% of gold produced until 525,000 ounces, then 8.4% for the remaining life of mine, with SolGold receiving 20% of the spot gold price[10] Private Placement with G Mining Ventures Corp. Subsequent to quarter-end, the Company completed a $25 million private placement with G Mining Ventures Corp - Subsequent to quarter-end (July 12, 2024), the Company completed a $25 million private placement with G Mining Ventures Corp. at C$2.279 per share[10] Term Loan with EMX Royalty Corporation The Company entered into a $35.0 million term loan agreement with EMX Royalty Corporation, fully advanced subsequent to quarter-end - On June 19, 2024, the Company entered into a $35.0 million term loan agreement with EMX Royalty Corporation, fully advanced subsequent to quarter-end on August 9, 2024[10] Term Loan with SolGold The Company provided a $10.0 million term loan to SolGold, which was repaid in full subsequent to quarter-end - On May 13, 2024, the Company provided a $10.0 million term loan to SolGold, which was repaid in full on July 17, 2024, subsequent to quarter-end[11] Funding of G Mining Ventures Term Loan for the Tocantinzinho Project – Brazil The Company completed its $75.0 million commitment to G Mining Ventures for the Tocantinzinho gold project with a final advance of $33.0 million - On April 19, 2024, the Company completed its $75.0 million commitment to G Mining Ventures for the Tocantinzinho gold project with a final advance of $33.0 million[11] Acquisition of Royalty on Claims in the Stewart Mining Camp and Private Placement with Scottie Resources Corp. – British Columbia, Canada Franco-Nevada acquired a 2.0% gross production royalty on Scottie Resources Corp.'s claims for $5.9 million and invested in common shares - On April 15, 2024, Franco-Nevada acquired a 2.0% gross production royalty on Scottie Resources Corp.'s claims in British Columbia for $5.9 million and invested an additional $0.7 million in Scottie common shares[12] Receipt of Séguéla Royalty Buy-Back – Cote d'Ivoire Fortuna Mining Corp. exercised its option to buy back 0.6% of the Séguéla mine NSR for $6.5 million, reducing Franco-Nevada's interest - On March 30, 2024, Fortuna Mining Corp. exercised its option to buy back 0.6% of the Séguéla mine NSR for $6.5 million, reducing Franco-Nevada's interest to 0.6%[12] Amendments to Condestable Gold and Silver Stream – Peru The Company amended its Condestable stream agreement, advancing an additional $10.0 million and increasing its variable phase gold and silver deliveries - On March 27, 2024, the Company amended its Condestable stream agreement in Peru, advancing an additional $10.0 million and increasing its variable phase gold and silver deliveries from 25% to 37.5%[12] Acquisition of Silver Royalty on Stibnite Gold Project – U.S. Franco-Nevada acquired a NSR interest on all payable silver production from the Stibnite Gold project in Idaho, U.S., for $8.5 million - On March 21, 2024, Franco-Nevada acquired a NSR interest on all payable silver production from the Stibnite Gold project in Idaho, U.S., for $8.5 million[12] Exercise of Option by EMX for an Effective NSR Interest on Caserones – Chile EMX exercised an option to acquire a portion of Franco-Nevada's effective NSR on the Caserones mine for $4.7 million, reducing Franco-Nevada's interest - On January 19, 2024, EMX exercised an option to acquire a portion of Franco-Nevada's effective NSR on the Caserones mine for $4.7 million, reducing Franco-Nevada's interest to 0.517%[12] Acquisition of Royalties on Pascua-Lama Project – Chile The Company acquired an additional interest in the Chilean portion of Barrick Gold Corporation's Pascua-Lama project for $6.7 million - On January 3, 2024, the Company acquired an additional interest in the Chilean portion of Barrick Gold Corporation's Pascua-Lama project for $6.7 million, increasing its NSR to 2.941% (gold) and 0.588% (copper) at gold prices exceeding $800/ounce[12] Acquisition of Additional Natural Gas Royalty Interests in Haynesville – U.S. The Company completed the acquisition of a royalty portfolio in the Haynesville gas play for $125.0 million - On January 2, 2024, the Company completed the acquisition of a royalty portfolio in the Haynesville gas play for $125.0 million[14] Acquisition of Mineral Rights with Continental Resources, Inc. – U.S. Franco-Nevada contributed $19.1 million to the Royalty Acquisition Venture with Continental Resources Inc. in H1 2024 - Franco-Nevada contributed $19.1 million to the Royalty Acquisition Venture with Continental Resources Inc. in H1 2024, bringing its cumulative investment to $469.3 million with remaining commitments of up to $50.7 million[14] Note 4 - Cash and Cash Equivalents Cash and cash equivalents primarily consist of interest-bearing deposits, showing a slight increase from December 31, 2023, to June 30, 2024 Cash and Cash Equivalents (June 30, 2024 vs. December 31, 2023) | Metric | June 30, 2024 ($M) | December 31, 2023 ($M) | | :-------------- | :----------------- | :--------------------- | | Cash deposits | 519.0 | 571.4 | | Term deposits | 920.0 | 850.5 | | Total | 1,439.0 | 1,421.9 | - Cash and cash equivalents increased by $17.1 million to $1,439.0 million as of June 30, 2024, from $1,421.9 million at December 31, 2023[16] Note 5 - Investments The Company's investments primarily comprise equity investments at FVTOCI and warrants, showing an increase from December 31, 2023, to June 30, 2024 Investments (June 30, 2024 vs. December 31, 2023) | Metric | June 30, 2024 ($M) | December 31, 2023 ($M) | | :--------------------------- | :----------------- | :--------------------- | | Equity investments at FVTOCI | 267.5 | 246.4 | | Warrants | 10.5 | 8.1 | | Total Investments | 278.0 | 254.5 | Equity Investments at FVTOCI Breakdown (June 30, 2024 vs. December 31, 2023) | Company | June 30, 2024 ($M) | December 31, 2023 ($M) | | :--------------------------- | :----------------- | :--------------------- | | Labrador Iron Ore Royalty Corporation | 134.6 | 152.7 | | G Mining Ventures | 77.1 | 47.6 |\n| Other | 55.8 | 46.1 | | Total | 267.5 | 246.4 | - Total investments increased by $23.5 million to $278.0 million as of June 30, 2024[17] - The Company disposed of equity investments with a cost of $12.3 million for gross proceeds of $8.5 million during H1 2024[17] - Gain on changes in fair value of equity investments at FVTOCI, net of income tax, was $17.2 million in H1 2024, compared to $1.0 million in H1 2023[18] Note 6 – Loans Receivable Loans receivable increased significantly from December 31, 2023, to June 30, 2024, primarily due to the G Mining Ventures Term Loan G Mining Ventures Term Loan The Company funded a total of $75.0 million to G Mining Ventures in H1 2024, bearing interest at 3-Month SOFR +5.75% - The Company funded a total of $75.0 million to G Mining Ventures in H1 2024, bearing interest at 3-Month SOFR +5.75% (reducing to +4.75% after completion tests)[19] - Interest revenue recognized from this loan was $2.9 million for H1 2024[19] SolGold Loan Facility A $10.0 million term loan was provided to SolGold on May 13, 2024, at 12% interest, and was fully repaid on July 17, 2024 - A $10.0 million term loan was provided to SolGold on May 13, 2024, at 12% interest, and was fully repaid on July 17, 2024[20] - Interest revenue of $0.2 million was recognized from the SolGold Term Loan for Q2 2024[20] Skeena Convertible Debenture The $18.7 million Skeena Convertible Debenture matured on June 26, 2024, and was fully repaid for $18.9 million - The $18.7 million Skeena Convertible Debenture matured on June 26, 2024, and was fully repaid for $18.9 million[21] - A loss of $5.7 million related to the change in fair value of the debenture was recognized in H1 2024, with other interest income of $0.6 million[21] EMX Term Loan A $35.0 million term loan agreement with EMX was entered into on June 19, 2024, with the full amount advanced subsequent to quarter-end - A $35.0 million term loan agreement with EMX was entered into on June 19, 2024, with the full amount advanced subsequent to quarter-end on August 9, 2024[22] Note 7 – Gold Bullion, Prepaid Expenses and Other Current Assets This section details the composition of gold bullion, prepaid expenses, and other current assets, showing an increase in gold bullion holdings Gold Bullion, Prepaid Expenses and Other Current Assets (June 30, 2024 vs. December 31, 2023) | Metric | June 30, 2024 ($M) | December 31, 2023 ($M) | | :------------------------ | :----------------- | :--------------------- | | Gold bullion | 69.9 | 51.3 | | Prepaid expenses | 27.4 | 30.0 | | Stream ounces inventory | 0.5 | 0.5 | | Debt issue costs | 0.4 | 0.6 | | Total | 98.2 | 82.4 | - Gold bullion increased by $18.6 million to $69.9 million as of June 30, 2024[23] Note 8 - Royalty, Stream and Working Interests The carrying value of royalty, stream, and working interests remained relatively stable, with additions and disposals impacting the balance in H1 2024 Royalty, Stream and Working Interests Overview The carrying value of royalty, stream, and working interests remained relatively stable, with additions and disposals impacting the balance in H1 2024 Royalty, Stream and Working Interests Carrying Value (June 30, 2024) | Category | Carrying Value ($M) | | :---------------- | :------------------ | | Mining royalties | 942.2 | | Streams | 1,310.8 | | Energy | 1,238.0 | | Advanced | 359.5 | | Exploration | 180.6 | | Total | 4,031.1 | Changes in Royalty, Stream and Working Interests (H1 2024) | Metric | Amount ($M) | | :------------------------- | :---------- | | Balance at January 1, 2024 | 4,027.1 | | Additions | 165.5 | | Disposals | (10.8) | | Depletion | (109.9) | | Impact of foreign exchange | (40.8) | | Balance at June 30, 2024 | 4,031.1 | Disposals of Royalty Interests Disposals in H1 2024 included the buy-back of 0.6% NSR on the Séguéla mine and the exercise of an option by EMX on the Caserones mine - Disposals in H1 2024 included the buy-back of 0.6% NSR on the Séguéla mine by Fortuna for $6.5 million and the exercise of an option by EMX on the Caserones mine for $4.7 million[27] Note 9 - Other Assets Other assets primarily consist of deposits related to CRA audits, which significantly increased in H1 2024 Other Assets (June 30, 2024 vs. December 31, 2023) | Metric | June 30, 2024 ($M) | December 31, 2023 ($M) | | :--------------------------- | :----------------- | :--------------------- | | Deposits related to CRA audits | 44.7 | 27.7 | | Energy well equipment, net | 5.7 | 5.8 | | Right-of-use assets, net | 0.3 | 0.6 | | Debt issue costs | 1.7 | 1.1 | | Furniture and fixtures, net | 0.3 | 0.2 | | Total | 52.7 | 35.4 | - Deposits related to CRA audits increased by $17.0 million to $44.7 million as of June 30, 2024, due to an additional cash deposit of $18.2 million[27] Note 10 - Debt The Company maintains a $1.0 billion unsecured revolving term credit facility, which was extended to June 3, 2029, with no amounts drawn - The Company has a $1.0 billion unsecured revolving term credit facility, extended to June 3, 2029, with a $250.0 million accordion[28] - As of June 30, 2024, no amounts were drawn from the Corporate Revolver, but $18.6 million in standby letters of credit reduce the available balance[29] Note 11 - Revenue Total revenue decreased in Q2 and H1 2024 compared to the prior year, primarily driven by lower revenue from royalty, streams, and working interests Total Revenue (Q2 2024 vs. Q2 2023 and H1 2024 vs. H1 2023) | Metric | Q2 2024 ($M) | Q2 2023 ($M) | H1 2024 ($M) | H1 2023 ($M) | | :------------ | :----------- | :----------- | :----------- | :----------- | | Total Revenue | 260.1 | 329.9 | 516.9 | 606.2 | Revenue by Commodity (Q2 2024 vs. Q2 2023) | Commodity | Q2 2024 ($M) | Q2 2023 ($M) | Change ($M) | Change (%) | | :------------------ | :----------- | :----------- | :---------- | :--------- | | Gold | 156.9 | 213.9 | (57.0) | -26.6% | | Silver | 28.1 | 35.4 | (7.3) | -20.6% | | Platinum group metals | 8.0 | 9.9 | (1.9) | -19.2% | | Iron ore | 12.0 | 10.1 | 1.9 | 18.8% | | Other mining assets | 1.7 | 5.1 | (3.4) | -66.7% | | Mining Total | 206.7 | 274.4 | (67.7) | -24.7% | | Oil | 35.9 | 36.9 | (1.0) | -2.7% | | Gas | 10.8 | 14.2 | (3.4) | -23.9% | | Natural gas liquids | 4.2 | 4.4 | (0.2) | -4.5% | | Energy Total | 50.9 | 55.5 | (4.6) | -8.3% | Revenue by Geography (Q2 2024 vs. Q2 2023) | Geography | Q2 2024 ($M) | Q2 2023 ($M) | Change ($M) | Change (%) | | :--------------------- | :----------- | :----------- | :---------- | :--------- | | South America | 93.6 | 106.0 | (12.4) | -11.7% | | Central America & Mexico | 16.8 | 86.3 | (69.5) | -80.5% | | United States | 51.2 | 57.8 | (6.6) | -11.4% | | Canada | 51.3 | 43.1 | 8.2 | 19.0% | | Rest of World | 47.2 | 36.7 | 10.5 | 28.6% | Note 12 - Costs of Sales Costs of sales, excluding depletion and depreciation, decreased in Q2 and H1 2024 compared to the prior year periods, driven by lower costs of stream sales Costs of Sales (Q2 2024 vs. Q2 2023 and H1 2024 vs. H1 2023) | Metric | Q2 2024 ($M) | Q2 2023 ($M) | H1 2024 ($M) | H1 2023 ($M) | | :----------------------- | :----------- | :----------- | :----------- | :----------- | | Costs of stream sales | 25.9 | 43.2 | 56.0 | 78.2 | | Mineral production taxes | 0.7 | 0.6 | 1.2 | 1.0 | | Mining costs of sales | 26.6 | 43.8 | 57.2 | 79.2 | | Energy costs of sales | 2.5 | 3.3 | 5.5 | 6.1 | | Total | 29.1 | 47.1 | 62.7 | 85.3 | - Total costs of sales decreased by $18.0 million (38.2%) in Q2 2024 and $22.6 million (26.5%) in H1 2024[32] Note 13 – General and Administrative Expenses General and administrative expenses increased in Q2 and H1 2024, primarily due to higher professional fees and the inclusion of Cobre Panama arbitration expenses General and Administrative Expenses (Q2 2024 vs. Q2 2023 and H1 2024 vs. H1 2023) | Metric | Q2 2024 ($M) | Q2 2023 ($M) | H1 2024 ($M) | H1 2023 ($M) | | :--------------------------- | :----------- | :----------- | :----------- | :----------- | | Salaries and benefits | 2.5 | 2.7 | 5.0 | 5.3 | | Professional fees | 2.3 | 1.5 | 3.7 | 3.1 | | Cobre Panama arbitration expenses | 0.8 | — | 2.3 | — | | Community contributions | 0.3 | — | 0.4 | 0.1 | | Board of Directors' costs | 0.1 | 0.2 | 0.2 | 0.3 | | Office, insurance and other expenses | 2.4 | 1.8 | 2.5 | 3.6 | | Total | 8.4 | 6.2 | 14.1 | 12.4 | - General and administrative expenses increased by $2.2 million (35.5%) in Q2 2024 and $1.7 million (13.7%) in H1 2024[33] - Cobre Panama arbitration expenses accounted for $2.3 million in H1 2024[33] Note 14 - Share-Based Compensation Expenses Share-based compensation expenses decreased in Q2 and H1 2024, primarily due to lower expenses related to deferred share units Share-Based Compensation Expenses (Q2 2024 vs. Q2 2023 and H1 2024 vs. H1 2023) | Metric | Q2 2024 ($M) | Q2 2023 ($M) | H1 2024 ($M) | H1 2023 ($M) | | :------------------------------- | :----------- | :----------- | :----------- | :----------- | | Stock options and restricted share units | 1.5 | 1.7 | 2.9 | 3.2 | | Deferred share units | 0.3 | 0.7 | 1.7 | 2.4 | | Total | 1.8 | 2.4 | 4.6 | 5.6 | - Total share-based compensation expenses decreased by $0.6 million (25.0%) in Q2 2024 and $1.0 million (17.9%) in H1 2024[34] Note 15 - Related Party Disclosures Compensation for key management personnel, including the Board of Directors and executive management, increased slightly in H1 2024 Key Management Personnel Compensation (Q2 2024 vs. Q2 2023 and H1 2024 vs. H1 2023) | Metric | Q2 2024 ($M) | Q2 2023 ($M) | H1 2024 ($M) | H1 2023 ($M) | | :--------------------- | :----------- | :----------- | :----------- | :----------- | | Short-term benefits | 0.9 | 0.9 | 1.9 | 1.8 | | Share-based payments | 1.5 | 1.3 | 4.1 | 3.9 | | Total | 2.4 | 2.2 | 6.0 | 5.7 | - Total compensation for key management personnel increased by $0.3 million (5.3%) in H1 2024[36] Note 16 - Finance Income and Expenses Finance income increased significantly in Q2 and H1 2024, primarily due to higher interest earned on cash and cash equivalents Finance Income and Expenses (Q2 2024 vs. Q2 2023 and H1 2024 vs. H1 2023) | Metric | Q2 2024 ($M) | Q2 2023 ($M) | H1 2024 ($M) | H1 2023 ($M) | | :------------------------------- | :----------- | :----------- | :----------- | :----------- | | Finance income (Interest) | 16.2 | 10.0 | 32.2 | 20.5 | | Finance expenses (Standby charges) | 0.5 | 0.6 | 1.0 | 1.2 | | Finance expenses (Amortization of debt issue costs) | 0.1 | 0.1 | 0.2 | 0.2 | | Total Finance expenses | 0.6 | 0.7 | 1.2 | 1.4 | - Finance income increased by $6.2 million (62.0%) in Q2 2024 and $11.7 million (57.1%) in H1 2024[37] Note 17 - Income Taxes Income tax expense significantly increased in Q2 and H1 2024, primarily due to the Barbados corporate tax reform and deferred tax expense Income Tax Expense Overview Total income tax expense significantly increased in Q2 and H1 2024, primarily due to current and deferred income tax expenses Income Tax Expense (Q2 2024 vs. Q2 2023 and H1 2024 vs. H1 2023) | Metric | Q2 2024 ($M) | Q2 2023 ($M) | H1 2024 ($M) | H1 2023 ($M) | | :------------------------- | :----------- | :----------- | :----------- | :----------- | | Current income tax expense | 44.4 | 20.0 | 66.5 | 39.5 | | Deferred income tax expense | 50.9 | 7.0 | 56.3 | 15.1 | | Total Income tax expense | 95.3 | 27.0 | 122.8 | 54.6 | - Total income tax expense increased by $68.3 million (253.0%) in Q2 2024 and $68.2 million (124.9%) in H1 2024[38] Global Minimum Tax Canada enacted the Global Minimum Tax Act (GMTA) effective January 1, 2024, imposing a 15% global minimum tax on large multinational enterprise groups - Canada enacted the Global Minimum Tax Act (GMTA) on June 20, 2024, effective January 1, 2024, imposing a 15% global minimum tax on large multinational enterprise groups[39] - No current tax expense was recognized for GMTA in H1 2024 as all entities in the Franco-Nevada group had an effective tax rate of at least 15%[39] Barbados Corporate Tax Reform Barbados increased its corporate tax rate to 9% effective January 1, 2024, resulting in a $49.1 million deferred tax expense from remeasurement - Barbados increased its corporate tax rate to 9% effective January 1, 2024, resulting in a $49.1 million deferred tax expense from remeasurement of deferred tax liability in H1 2024[39] - The Barbados subsidiary recognized a total income tax expense of $70.7 million in H1 2024, including $25.1 million current tax and $45.6 million deferred tax, due to the reform and a Qualified Domestic Minimum Top-Up Tax[40] Canada Revenue Agency Audit The Company is undergoing an audit by the Canada Revenue Agency for its 2013-2020 taxation years, as detailed in Note 23 (b) - The Company is undergoing an audit by the Canada Revenue Agency for its 2013-2020 taxation years, as detailed in Note 23 (b)[40] Note 18 - Shareholders' Equity Shareholders' equity increased in H1 2024, driven by share issuances from stock option exercises and the dividend reinvestment plan Share Capital Share capital increased by $25.7 million in H1 2024, primarily from the dividend reinvestment plan and stock option exercises Share Capital Changes (H1 2024) | Metric | Number of shares | Amount ($M) | | :------------------------------- | :--------------- | :---------- | | Balance at January 1, 2024 | 192,175,042 | 5,728.2 | | Exercise of stock options | 69,432 | 3.5 | | Vesting of restricted share units | 16,640 | 2.4 | | Dividend reinvestment plan | 165,583 | 19.8 | | Balance at June 30, 2024 | 192,426,697 | 5,753.9 | - Share capital increased by $25.7 million in H1 2024, primarily from the dividend reinvestment plan[41] Dividends Dividends declared increased to $0.36 per common share in Q2 2024 and $0.72 per common share in H1 2024 Dividends Declared and Paid (Q2 2024 vs. Q2 2023 and H1 2024 vs. H1 2023) | Metric | Q2 2024 ($M) | Q2 2023 ($M) | H1 2024 ($M) | H1 2023 ($M) | | :------------- | :----------- | :----------- | :----------- | :----------- | | Dividends per common share | 0.36 | 0.34 | 0.72 | 0.68 | | Cash dividends | 60.3 | 58.6 | 119.2 | 116.4 | | DRIP dividends | 9.3 | 6.9 | 19.8 | 14.5 | | Total | 69.6 | 65.5 | 139.0 | 130.9 | - Dividends declared increased to $0.36 per common share in Q2 2024 (from $0.34 in Q2 2023) and $0.72 per common share in H1 2024 (from $0.68 in H1 2023)[42] Note 19 - Earnings per Share ("EPS") Basic and diluted EPS decreased significantly in Q2 and H1 2024, reflecting the lower net income during these periods Earnings per Share (Q2 2024 vs. Q2 2023 and H1 2024 vs. H1 2023) | Metric | Q2 2024 ($) | Q2 2023 ($) | H1 2024 ($) | H1 2023 ($) | | :----------------------------------- | :---------- | :---------- | :---------- | :---------- | | Basic EPS | 0.41 | 0.96 | 1.17 | 1.78 | | Diluted EPS | 0.41 | 0.96 | 1.16 | 1.77 | | Weighted average shares outstanding (Basic, millions) | 192.3 | 191.9 | 192.2 | 191.9 | | Weighted average shares outstanding (Diluted, millions) | 192.5 | 192.2 | 192.4 | 192.2 | - Basic EPS decreased by 57.3% in Q2 2024 and 34.3% in H1 2024[43][45] Note 20 - Segment Reporting Both the Mining and Energy segments experienced a decrease in total revenue and segment gross profit in Q2 and H1 2024 compared to the prior year Segment Revenue and Gross Profit (Q2 2024 vs. Q2 2023) | Metric | Q2 2024 Mining ($M) | Q2 2024 Energy ($M) | Q2 2023 Mining ($M) | Q2 2023 Energy ($M) | | :----------------- | :------------------ | :------------------ | :------------------ | :------------------ | | Total Revenue | 209.2 | 50.9 | 274.4 | 55.5 | | Segment gross profit | 144.4 | 34.7 | 174.0 | 33.9 | Segment Revenue and Gross Profit (H1 2024 vs. H1 2023) | Metric | H1 2024 Mining ($M) | H1 2024 Energy ($M) | H1 2023 Mining ($M) | H1 2023 Energy ($M) | | :----------------- | :------------------ | :------------------ | :------------------ | :------------------ | | Total Revenue | 422.2 | 94.7 | 501.7 | 104.5 | | Segment gross profit | 285.5 | 58.8 | 319.1 | 66.0 | - Mining segment revenue decreased by 23.8% in Q2 2024 and 15.8% in H1 2024[46] - Energy segment revenue decreased by 8.3% in Q2 2024 and 9.4% in H1 2024[46] Note 21 - Fair Value Measurements The company classifies its financial instruments into a three-level fair value hierarchy, with most equity investments as Level 1 and warrants as Level 2 Assets Measured at Fair Value (June 30, 2024) | Metric | Level 1 ($M) | Level 2 ($M) | Level 3 ($M) | Aggregate Fair Value ($M) | | :----------------------------------- | :----------- | :----------- | :----------- | :------------------------ | | Equity investments | 263.0 | — | 4.5 | 267.5 | | Warrants | — | 10.5 | — | 10.5 | | Receivables from provisional concentrate sales | — | 4.6 | — | 4.6 | | Total | 263.0 | 15.1 | 4.5 | 282.6 | - The fair values of publicly-traded investments are classified as Level 1, while warrants and receivables from provisional concentrate sales are classified as Level 2[50] - The carrying values of the G Mining Ventures Term Loan and SolGold Term Loan approximated their fair values as of June 30, 2024[50] Note 22 - Commitments Franco-Nevada has various commodity purchase commitments under its stream agreements and capital commitments for loan advances and mineral rights acquisitions Commodity Purchase Commitments The Company has commodity purchase commitments for various precious metals streams, with terms typically extending for 40 years - The Company has commodity purchase commitments for various precious metals streams, with terms typically extending for 40 years[51] - Purchase prices for gold and silver streams vary, often including fixed payments (e.g., $400/ounce for Candelaria gold) or a percentage of spot prices (e.g., 20% for Condestable gold/silver)[51][52] Capital Commitments Franco-Nevada has capital commitments totaling $91.2 million as of June 30, 2024, for loan advances and mineral rights acquisitions Capital Commitments (June 30, 2024) | Commitment | Amount ($M) | | :--------------------------------------- | :---------- | | EMX Term Loan | 35.0 | | Royalty Acquisition Venture (Continental) | 50.7 | | Joint acquisition of royalties (EMX) | 5.5 | | Total Capital Commitments | 91.2 | - Contingent payments include $12.5 million for Copper World royalty, $8.0 million for Rio Baker (Salares Norte) royalty, $3.4 million for Eskay Creek royalty, and $1.3 million for Rebecca royalty[53] - Subsequent to quarter-end, additional capital commitments arose from the Yanacocha Royalty and Cascabel Stream acquisitions[53] Note 23 - Contingencies The Company is actively pursuing legal avenues to protect its investment in Cobre Panama and is engaged in ongoing CRA audits regarding transfer pricing Cobre Panama Arbitration Proceedings Cobre Panama production has been halted since November 2023, leading to a full impairment of Franco-Nevada's Cobre Panama streams and arbitration proceedings - Cobre Panama production has been halted since November 2023, leading to a full impairment of Franco-Nevada's Cobre Panama streams of $1,169.2 million in 2023[54][55] - The Company filed a request for arbitration with the International Centre for Settlement of Investment Disputes on June 27, 2024, estimating damages of at least $5 billion[55] Canada Revenue Agency Audit The Company is engaged in ongoing audits and reassessments by the Canada Revenue Agency regarding transfer pricing for its Mexican and Barbadian subsidiaries Transfer Pricing Reassessments (Mexico) The CRA reassessed Franco-Nevada for 2013-2016 taxation years regarding its Mexican subsidiary, asserting additional taxes, penalties, and interest - The CRA reassessed Franco-Nevada for 2013-2016 taxation years regarding its Mexican subsidiary, asserting $21.8 million in additional taxes, $8.8 million in transfer pricing penalties, and $15.9 million in interest and other penalties[58] - The Company has filed formal Notices of Objection and commenced an appeal in the Tax Court of Canada, posting security for 50% of reassessed amounts[58] Transfer Pricing Reassessments (Barbados) The CRA reassessed Franco-Nevada for 2014-2017 taxation years regarding its Barbadian subsidiary, asserting additional taxes, penalties, and interest, with further proposed reassessments - The CRA reassessed Franco-Nevada for 2014-2017 taxation years regarding its Barbadian subsidiary, asserting $34.0 million in additional taxes, $12.8 million in transfer pricing penalties, and $15.8 million in interest and other penalties[59] - The CRA proposed reassessments for 2018 and 2019, with estimated additional taxes of $46.9 million and potential transfer pricing penalties of $17.8 million[59] - If the CRA reassesses 2020-2023 on the same basis, the Company estimates potential additional Canadian tax of $234.6 million, transfer pricing penalties of $88.7 million, and interest/other penalties of $44.3 million[59] Note 24 – Subsequent Events Subsequent to June 30, 2024, Franco-Nevada completed several significant transactions, including the acquisition of the Yanacocha Royalty and Cascabel Stream - Acquired the Yanacocha Royalty on August 13, 2024[60] - Funded the EMX Term Loan on August 9, 2024[60] - Acquired the Cascabel Stream on July 15, 2024[60] - Received full repayment of the SolGold Term Loan on July 17, 2024[60] - Acquired additional common shares of G Mining Ventures for $25.0 million on July 12, 2024[60]