The New Normal David Harquail Oct. 16 ,2014 1 My Mining Roots Thayer Lindsley James Harquail • Falconbridge • Redstone Res. • Ventures • Nufort Res. • Sherritt Gordon • More Mines • Giant Yellowknife • Nahanni Mines • Canadian Malartic • Cumont Ltd. • United Keno Hill • Fort Reliance • Lake Dufault • Gortdrum Mine • Opemiska Copper • Nahanni 60’s • Connemara • Whim Creek 2 The Midas Brothers Pierre Lassonde Seymour Schulich 3 1980’s Writedowns 4 Lack of X-Ray Vision Hypothetical 10 Moz open-pit (1g/t) drilled with a 4.4 cm DDH Spacing (m2) Holes Drilled Metres Drilled Cost ($mm) Knowledge Density 100 75 41,000 $6 1/5.5 million 50 300 207,000 $31 1/1.4 million 25 1120 880,000 $132 1/345,388 Source: RBC Capital Markets 5 Mining Investment Outcomes Mediocre Frauds + promotions Write-offs Better than average Negative capital returns Positive capital returns World class company makers Real returns 6 Successive Investor Themes Maximize: 1. Ounces 2. NPV 3. Growth 4. Free cash flow 7 Alternate Investments Are Taking Over SILVER EQUITY UNIVERSE Source: Silver Wheaton 8 Gold Equity Universe Market Capitalization Average Daily Trade Value ~$ 22 B ~$ 310 M ~$ 65 B ~$ 820 M ~$ 140 B ~$ 1775 M Gold Equities Gold ETFs Royalty & Stream Companies Gold Equities Gold ETFs Royalty & Stream Companies 9 Franco-Nevada’s Royalty Business Duketon Palmarejo Goldstrike Maximize Minimize Exploration upside Cost exposures Security of tenure Potential for encroachments Management time on new deals Involvement in operations Long term optionality 10 “A Gold ETF on Steroids” Gold ETF FNV Operators Capital Costs 0% 0%* 100% Operating & Other Costs 0% 0%* 100% Leverage to Gold Price 1 >1 >1 Exploration & Expansion 0% 100% 100% (0.4%)2 ~1.5% 0 - 3% Risk of: Benefit of: Dividend Yield FNV provides yield and more upside than a gold ETF with less risk than an operator 1. Revenue royalties & streams 2. Source: SPDR® Gold Trust 11 “The Gold Investment that Works” 300% CAGR1: 23% FNV 250% 200% 150% 100% GOLD 50% 0% -50% S&P/TSX Global Gold Index FNV IPO: Dec 2007 -100% 2008 2009 2010 2011 FNV and S&P/TSX Global Gold Index converted to USD. Chart to October 14, 2014 1. From IPO to October 14, 2014 – includes dividends 2012 2013 2014 12 The Next New Thing? • • • • Long term capital partnerships? First Nations partnerships? Production sharing? …….. 13 The New Normal 14