Franco-Nevada Reports Solid Second Quarter Results and Strong Financial Position



    
    /NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR DISSEMINATION IN THE
    UNITED STATES./

    This press release contains forward-looking statements. Reference
       should be made to the "Cautionary Statement on Forward-looking
               Information" at the end of this press release.

    -------------------------------------------------------------------------
    Highlights for Q2 2009 (US dollars unless otherwise noted)
    -------------------------------------------------------------------------

    -   Royalty Revenue(1) was $32.9 million compared to $29.2 million in
        Q1 2009 and $40.9 million in Q2 2008.

    -   Gold Royalty Revenue of $23.6 million was a new record high. The
        overall contribution from precious metals increased to 80% of Royalty
        Revenue.

    -   Free Cash Flow(2) was $27.9 million ($0.27 per share) representing a
        margin of 85% of Royalty Revenue. This compares to $24.9 million
        ($0.25 per share) in Q1 2009 and $35.3 million ($0.35 per share) in
        Q2 2008.

    -   First gold revenue received from start-up of Coeur d'Alene Mines'
        Palmarejo project in Mexico. This revenue is expected to be
        materially higher beginning in Q3 2009. Guidance increased in Q2 for
        the Gold Quarry royalty.

    -   Successfully closed a Cdn$370 million unit financing.

    -   At June 30, 2009 Franco-Nevada had a strong financial position with
        no debt or hedges and working capital of $512.9 million, marketable
        securities of $54.3 million and an undrawn $150 million revolving
        credit facility.

    -   Semi-annual dividend of C$15.7 million was paid in the quarter
        reflecting an increase in the dividend from Cdn$0.12 per share to
        Cdn$0.14 per share.
    

    TORONTO, Aug. 11 /CNW/ - Franco-Nevada Corporation (TSX: FNV) today
reported its financial results for the three and six months ended June 30,
2009. All figures are in US dollars unless otherwise noted. The complete
Financial Statements and Management's Discussion and Analysis can be found
today on Franco-Nevada's website at www.franco-nevada.com and by tomorrow on
www.sedar.com.

    
    Selected Quarterly Financial Information:
    (Thousands of US dollars, except per share amounts)

                                              Q2            Q1            Q2
                                            2009          2009          2008
    -------------------------------------------------------------------------
    Royalty Revenue(1)               $    32,887   $    29,217   $    40,896
    Total revenue                       45,079(3)     33,116(3)       40,987
    Net income                            25,089         3,797         9,876
    Basic earnings (loss) per share  $      0.25   $      0.04   $      0.10

    -------------------------------------------------------------------------
    Free cash flow(2)                $    27,919   $    24,885   $    35,334
    Free cash flow(2)per share       $      0.27   $      0.25   $      0.35
    -------------------------------------------------------------------------

    Total assets                     $ 1,877,235   $ 1,491,921   $ 1,591,763
    Total shareholders' equity       $ 1,790,068   $ 1,423,078   $ 1,537,078
    -------------------------------------------------------------------------

    (1)  Royalty Revenue is defined by the Company as cash received or
         receivable from operating royalty assets earned during the period.
    (2)  Free Cash Flow is defined by the Company as operating income
         excluding any changes in fair value of derivative assets, plus
         depletion and depreciation, non-cash charges and any impairment of
         investments and royalty interests.
    (3)  Includes changes in fair value of derivative assets.

    Revenues

    Key aspects of the Company's revenue for the quarter are as follows:

    -   Royalty Revenue increased 13% from $29.2 million in the first quarter
        of 2009 to $32.9 million in the second quarter of 2009 and decreased
        20% from $40.9 million in the second quarter of 2008.

        -  Q2 2009 vs. Q1 2009: The increase in Royalty Revenue was
           attributable primarily to the initial receipts from Palmarejo and
           a stronger performance from the Goldstrike NSR due to higher
           production levels.

        -  Q2 2009 vs. Q2 2008: Despite a significant decline in non-gold
           commodity prices over the same quarter last year, the Company
           benefited from a diverse commodity portfolio with strong
           performance from the underlying assets. Average spot prices for
           oil, gas, platinum and palladium in Q2 2009 were down 48%, 66%,
           42% and 47%, respectively, compared to the average spot prices
           realized in Q2 2008. However, overall Royalty Revenue decreased by
           only 20%. This reflected strong performance from the operating
           gold royalties, the addition of contributions from Gold Quarry and
           Palmarejo, and a 3% increase in the average gold price compared to
           Q2 2008.

    -   Royalty Revenue for the second quarter of 2009 was earned 80% from
        precious metals (72% gold and 8% platinum group metals), 19% from oil
        and gas (15% oil and 4% gas) and 1% base metals and other. Gold
        Royalty Revenue of $23.6 million was at a new record level in the
        second quarter.

    -   64% of Royalty Revenue was from revenue-based royalties, 22% was from
        profit-based royalties with the balance of revenues from working
        interests and other.

    -   The Company recorded a $12.0 million gain in the fair value of the
        Palmarejo Gold Royalty Stream due to an increase in forward gold
        prices. It is anticipated that fluctuations in the fair value of the
        minimum royalty associated with the Palmarejo Gold Royalty Stream
        will become a recurring item on the Company's statement of
        operations. The gain is excluded from Royalty Revenue.

    -   For the second half of 2009, the Company expects Royalty Revenue from
        gold to further increase both in dollar and relative terms. Increased
        production at Gold Quarry and further contribution from Palmarejo, as
        the operation continues through the ramp-up phase, are expected to
        make stronger contributions to Royalty Revenue.
    

    Costs, Expenses, Taxes and Capital

    An advantage of Franco-Nevada's royalty portfolio is that it requires
relatively limited capital and incurs only minor direct operating costs.
    Costs of operations were $1.8 million in Q2 2009, a decrease of 24% over
the Q2 2008 level of $2.3 million. The reduction was driven primarily by lower
oil and gas production taxes and lower operating costs on working interests.
General and administrative costs in the quarter were $2.9 million and business
development costs were an additional $0.5 million, on par with Q2 2008 levels.

    Net Income

    Net income for Q2 2009 of $25.1 million or $0.25 per share included a
$12.0 million fair value gain for Palmarejo in addition to a foreign exchange
gain of $18.0 million.
    The Company believes the best measures of its business are Royalty
Revenue and Free Cash Flow. Free Cash Flow for the quarter was $27.9 million
($0.27 per share) representing a margin of 85% of Royalty Revenue. Free Cash
Flow decreased from the Q2 2008 level of $35.3 million, due to substantially
lower prices for oil and gas and lower revenues from Stillwater. Our
definitions of these non-GAAP financial measures can be found in the Company's
interim Management's Discussion and Analysis.

    Balance Sheet and Capital Structure

    At June 30, 2009, Franco-Nevada had a strong financial position with no
debt or hedges, working capital of $512.9 million, and marketable securities
valued at $54.3 million. Included in working capital was Cdn$370.3 million
from a public offering of 11,500,000 units, including the full exercise of the
over-allotment option, at a price of Cdn$32.20 per unit, which closed on June
16, 2009. In addition, the Company has available an undrawn $150 million
revolving term credit facility. The marketable securities are held in highly
liquid investments.
    As at August 11, 2009, Franco-Nevada has 112.0 million common shares,
11.5 million warrants, 2.78 million options and 316,436 special warrants
outstanding.

    Dividend Declaration

    On June 30, Franco-Nevada paid a semi-annual dividend of Cdn$0.14 per
share or C$15.7 million to shareholders. This dividend was a 17% increase from
the two Cdn$0.12 per share dividends declared and paid in 2008.

    
    Recent Royalty Portfolio Highlights

    -   Palmarejo - Construction and start-up of the project continues. The
        first dore was poured on March 30 and Franco-Nevada received its
        first royalty payment from Palmarejo of $2.5 million.

    -   Gold Quarry - In April, Franco-Nevada was able to increase its 2009
        guidance to 14,400 oz per annum attributable to this royalty interest
        - an increase of 29% from its earlier guidance. This reflects an
        increase in the stockpile portion of Minimum Annual Royalty
        obligation of Newmont Mining.

    -   Goldstrike - Mining of higher grade ore in the second quarter has
        resulted in production in excess of forecasted levels, and has
        contributed to a very strong performance in 2009 to-date. Barrick
        expects production will move in and out of extended waste stripping
        phases, which will cause fluctuations in our royalty revenues over
        time.

    -   Stillwater - In July as part of its financial restructuring, General
        Motors cancelled a supply agreement under which it paid Stillwater
        Mining premium prices for its production. As Franco-Nevada's
        royalties are calculated on spot prices and not contracted prices,
        there is no immediate direct impact on royalty payments. Franco-
        Nevada's carrying value for this royalty would be reviewed should the
        operator change its production levels or reserves. At this time,
        there is no indication of any accounting implications.

    -   Robinson - Quadra's guidance for copper production was reduced
        slightly in Q2 due to difficulty in accessing hypogene ore. Robinson
        is now expected to produce approximately 130 million pounds of
        copper, equal to the Franco-Nevada annual royalty hurdle rate. Gold
        production guidance of 100,000 ounces remains unchanged for the year
        and is in excess of the annual royalty hurdle of 60,000 ounces.

    -   Tasiast - In April, Red Back announced the discovery of a new zone of
        gold mineralization at the Tasiast mine, where the company has
        successfully expanded the resource in recent years. Red Back is
        expanding production through increased plant capacity and the
        introduction of dump leach processing for oxide ore. Franco-Nevada's
        royalty on Tasiast will begin after 600,000 oz of gold has been
        produced from the property. To date, almost 200,000 oz has been
        produced and the royalty is expected to become payable in early in
        2011.

    -   Detour Lake - Detour Gold continues to expand resources and advance
        the Detour Lake project, with a pre-feasibility study expected in the
        second quarter of 2009 followed by a feasibility study later in the
        year.

    Shareholder Information

    The complete Financial Statements and Management's Discussion and Analysis
can be found today on Franco-Nevada's website at www.franco-nevada.com and by
tomorrow on www.sedar.com. Management will host a conference call on
Wednesday, August 12th at 10:00am Toronto time to review the results.
Interested investors are invited to participate as follows:

    -   Conference Call: Local: 416 644 3426; Toll-Free: 800 591 7539;
        Conference call title: Franco-Nevada Q2 2009 Results

    -   Conference Call Replay: A recording of the conference call will be
        available until August 19, 2009 at the following numbers: Local: 416-
        640-1917; Toll-Free: 877-289-8525; Pass code: 21312565 followed by
        the number sign.

    -   Webcast: A live audio webcast of the conference call will be
        accessible on the Company's website

    -   Slides: A presentation to accompany the conference call will be
        available on the Company's website
    

    Corporate Summary

    Franco-Nevada Corporation (TSX: FNV) is a gold-focused royalty company
with additional interests in platinum group metals, oil & gas and other
assets. It is the leading gold royalty company as measured by gold revenues,
number of gold royalties and Free Cash Flow margins. Its portfolio of
high-margin cash flow producing assets is located principally in the United
States, Canada and Australia. The Company also holds a pipeline of potential
future cash flowing assets that are under development or being explored.

    CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
    Certain information contained in this Press Release, including any
information as to future financial or operating performance and other
statements that express management's expectations or estimates of future
performance, constitute "forward-looking statements". All statements, other
than statements of historical fact, are forward-looking statements. The words
"estimate", "expect", "expects", "expected" and similar expressions identify
forward-looking statements. Forward-looking statements are necessarily based
upon a number of estimates and assumptions that, while considered reasonable
by management, are inherently subject to significant business, economic and
competitive uncertainties and contingencies. The Company cautions the reader
that such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual financial results,
performance or achievements of Franco-Nevada to be materially different from
the Company's estimated future results, performance or achievements expressed
or implied by those forward-looking statements and the forward-looking
statements are not guarantees of future performance. These risks,
uncertainties and other factors include, but are not limited to: fluctuations
in the prices of the primary commodities that drive the Company's royalty
revenue (gold, platinum group metals, copper, nickel, oil and gas);
fluctuations in the value of the Canadian and Australian dollar, and any other
currency in which the Company generates revenue, relative to the US dollar;
changes in national and local government legislation, including taxation
policies; regulations and political or economic developments in any of the
countries where the Company holds interests in mineral and oil and gas
properties; influence of macroeconomic developments; business opportunities
that become available to, or are pursued by us; reduced access to debt and
equity capital; litigation; title disputes related to our interests or any of
the properties; operating or technical difficulties on any of the properties
underlying; risks and hazards associated with the business of development and
mining on any of the properties, including, but not limited to unusual or
unexpected geological formations, cave-ins, flooding and other natural
disasters or civil unrest. The forward-looking statements contained in this
Press Release are based upon assumptions management believes to be reasonable,
including, without limitation, the ongoing operation of the properties by the
owners or operators of such properties in a manner consistent with past
practice, the accuracy of public statements and disclosures made by the owners
or operators of such underlying properties, no material adverse change in the
market price of the commodities, and any other factors that cause actions,
events or results to differ from those anticipated, estimated or intended.
Accordingly, readers should not place undue reliance on forward-looking
statements because of the inherent uncertainty. For additional information
with respect to risks, uncertainties and assumptions, please also refer to the
"Risk Factors" section of our most recent Annual Information Form filed with
the Canadian securities regulatory authorities on www.sedar.com, as well as
our annual and interim MD&A. The forward-looking statements herein are made as
of the date of this Press Release only and Franco-Nevada does not assume any
obligation to update or revise them to reflect new information, estimates or
opinions, future events or results or otherwise, except as required by
applicable law. Free Cash Flow, EBITDA and Royalty Revenue are non-GAAP
financial measures which management believes are valuable indicators of the
Company. These measures do not have any standardized meanings and are unlikely
to be comparable to similar measures of other companies. For a reconciliation
of these measures to various GAAP measures please see the Company's current
and historical annual and interim MDA disclosure found on the Company's
website and on SEDAR.





For further information:

For further information: please go to our web site at
www.franco-nevada.com or contact: David Harquail, President & CEO, (416)
306-6300; Alex Morrison, Chief Financial Officer, (720) 622-8603


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