EX-99.3 4 a12-25943_1ex99d3.htm EX-99.3

Exhibit 99.3

 

Franco-Nevada Corporation

CONSOLIDATED BALANCE SHEETS

(unaudited, in millions of US dollars)

 

 

 

September 30,

 

December 31,

 

 

 

2012

 

2011

 

ASSETS

 

 

 

 

 

Cash and cash equivalents (Note 4)

 

$

951.2

 

$

794.1

 

Short-term investments (Note 5)

 

179.4

 

16.7

 

Receivables

 

77.8

 

79.1

 

Prepaid expenses and other

 

21.8

 

4.5

 

Current assets

 

1,230.2

 

894.4

 

 

 

 

 

 

 

Royalty, stream and working interests, net

 

1,925.2

 

1,912.1

 

Investments (Note 5)

 

121.8

 

74.4

 

Deferred income tax assets

 

8.9

 

10.6

 

Other

 

22.8

 

9.5

 

Total assets

 

$

3,308.9

 

$

2,901.0

 

LIABILITIES

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

38.1

 

$

35.9

 

Current income tax liabilities

 

10.5

 

7.4

 

 

 

48.6

 

43.3

 

Deferred income tax liabilities

 

39.1

 

23.5

 

Total liabilities

 

87.7

 

66.8

 

SHAREHOLDERS’ EQUITY (Note 10)

 

 

 

 

 

Common shares

 

3,112.3

 

2,803.6

 

Contributed surplus

 

48.9

 

99.5

 

Deficit

 

(60.8

)

(135.5

)

Accumulated other comprehensive income

 

120.8

 

66.6

 

Total shareholders’ equity

 

3,221.2

 

2,834.2

 

Total liabilities and shareholders’ equity

 

$

3,308.9

 

$

2,901.0

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

Approved by the Board of Directors and authorized for issue on November 6, 2012

 

 

/s/ Pierre Lassonde

 

/s/ Randall Oliphant

Pierre Lassonde

 

Randall Oliphant

Director

 

Director

 

1



 

Franco-Nevada Corporation

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

(unaudited, in millions of US dollars, except per share amounts)

 

 

 

For the three months ended

 

For the nine months ended

 

 

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Revenue (Note 6)

 

$

105.2

 

$

113.3

 

$

312.9

 

$

292.7

 

Costs and expenses

 

 

 

 

 

 

 

 

 

Cost of sales (Note 7)

 

14.3

 

16.2

 

45.5

 

45.9

 

Depletion and depreciation

 

31.2

 

34.7

 

93.9

 

97.4

 

Corporate administration (Notes 8 & 10(c))

 

4.2

 

4.4

 

11.6

 

12.4

 

Business development

 

0.5

 

0.5

 

1.7

 

1.3

 

 

 

50.2

 

55.8

 

152.7

 

157.0

 

Operating income

 

55.0

 

57.5

 

160.2

 

135.7

 

Foreign exchange gain/(loss) and other income/(expenses)

 

8.3

 

(1.2

)

9.6

 

(6.7

)

Loss from equity investee

 

 

 

 

(1.7

)

Gain on sale/acquisition of investments/Gold Wheaton

 

 

6.2

 

 

11.9

 

Income before finance items and income taxes

 

63.3

 

62.5

 

169.8

 

139.2

 

Finance items

 

 

 

 

 

 

 

 

 

Finance income

 

3.5

 

1.3

 

8.2

 

2.9

 

Finance expenses

 

(0.3

)

(0.2

)

(0.9

)

(2.1

)

Net income before income taxes

 

$

66.5

 

$

63.6

 

$

177.1

 

$

140.0

 

Income tax expense (Note 9)

 

14.5

 

19.5

 

41.4

 

41.4

 

Net income

 

$

52.0

 

$

44.1

 

$

135.7

 

$

98.6

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Other comprehensive loss from equity investee

 

 

 

 

(0.9

)

Unrealized change in market value of available-for-sale investments, net of income tax (Note 5)

 

15.0

 

(1.0

)

16.2

 

(5.2

)

Realized change in market value of available-for-sale investments

 

 

(6.2

)

 

(16.8

)

Currency translation adjustment

 

45.2

 

(55.6

)

38.0

 

(21.5

)

Total comprehensive income (loss)

 

$

112.2

 

$

(18.7

)

$

189.9

 

$

54.2

 

Basic earnings per share (Note 11)

 

$

0.36

 

$

0.35

 

$

0.95

 

$

0.80

 

Diluted earnings per share (Note 11)

 

$

0.35

 

$

0.34

 

$

0.94

 

$

0.79

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

2



 

Franco-Nevada Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions of US dollars, except share amounts)

 

 

 

For the three months ended

 

For the nine months ended

 

 

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Net income

 

$

52.0

 

$

44.1

 

$

135.7

 

$

98.6

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

Depletion and depreciation

 

31.2

 

34.7

 

93.9

 

97.4

 

Loss from equity investee

 

 

 

 

1.7

 

Other non-cash items

 

0.1

 

(0.6

)

0.2

 

1.1

 

Deferred income tax expense (Note 9)

 

8.8

 

7.6

 

14.5

 

9.2

 

Share-based payments (Note 10(c))

 

0.6

 

0.9

 

2.3

 

3.7

 

Unrealized foreign exchange (gain) loss

 

(0.4

)

(3.7

)

0.1

 

1.3

 

Mark-to-market on investments

 

(7.3

)

(6.2

)

(9.9

)

(6.2

)

Mark-to-market on conversion feature of note receivable

 

 

2.4

 

 

2.9

 

Mark-to-market gain on Gold Wheaton shares

 

 

 

 

(13.4

)

Changes in non-cash assets and liabilities:

 

 

 

 

 

 

 

 

 

Decrease (increase) in receivables

 

(5.1

)

6.8

 

1.2

 

16.8

 

Increase in prepaid expenses and other

 

(6.2

)

0.9

 

(18.7

)

(0.6

)

(Decrease) increase in accounts payable and accrued liabilities

 

(4.7

)

1.1

 

(0.2

)

(7.3

)

Net cash provided by operating activities

 

69.0

 

88.0

 

219.1

 

205.2

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

Proceeds on sale of short-term investments

 

28.2

 

14.4

 

184.2

 

237.9

 

Purchase of short-term investments

 

(175.9

)

(6.1

)

(343.0

)

(77.7

)

Acquisition of interest in oil & gas properties

 

 

 

(2.0

)

 

Proceeds on sale of investments

 

 

15.0

 

 

15.0

 

Acquisition of working interest in oil & gas properties

 

 

 

(43.9

)

 

Acquisition of interests in mineral properties

 

(0.2

)

 

(40.2

)

(35.0

)

Purchase of investments

 

 

 

(18.6

)

(4.2

)

Purchase of oil & gas well equipment

 

(0.9

)

(0.5

)

(13.9

)

(1.7

)

Acquisition of Gold Wheaton, net of cash acquired

 

 

 

 

(379.0

)

Net cash (used in) provided by investing activities

 

(148.8

)

22.8

 

(277.4

)

(244.7

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

Credit facility amendment costs

 

 

(0.2

)

 

(0.6

)

Proceeds from drawn credit facility

 

 

 

 

164.6

 

Repayment of credit facility and secured notes

 

 

 

 

(172.7

)

Payment of dividends

 

(21.7

)

(15.1

)

(55.8

)

(33.8

)

Proceeds from exercise of warrants

 

62.1

 

1.0

 

241.4

 

1.0

 

Proceeds from exercise of stock options

 

13.2

 

7.9

 

14.4

 

12.7

 

Net cash (used in) provided by financing activities

 

53.6

 

(6.4

)

200.0

 

(28.8

)

Effect of exchange rate changes on cash and cash equivalents

 

16.4

 

(21.0

)

15.4

 

(12.0

)

Net increase (decrease) in cash and cash equivalents

 

(9.8

)

83.5

 

157.1

 

(80.3

)

Cash and cash equivalents, beginning of period

 

961.0

 

250.2

 

794.1

 

413.9

 

Cash and cash equivalents, end of period

 

$

951.2

 

$

333.6

 

$

951.2

 

$

333.6

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

 

Cash paid for interest expense and loan standby fees during the period

 

$

0.1

 

$

0.1

 

$

0.6

 

$

0.8

 

Income taxes paid during the period

 

$

13.9

 

$

7.7

 

$

36.7

 

$

37.2

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

3



 

Franco-Nevada Corporation

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited, in millions of US dollars)

 

 

 

Share capital

 

Contributed
Surplus

 

Accumulated
other
comprehensive
income

 

Deficit

 

Total
Equity

 

 

 

(Note 10)

 

 

 

 

 

 

 

 

 

Balance at January 1, 2012

 

2,803.6

 

99.5

 

66.6

 

(135.5

)

2,834.2

 

Net income

 

 

 

 

135.7

 

135.7

 

Other comprehensive income

 

 

 

54.2

 

 

54.2

 

Total comprehensive income

 

 

 

 

 

189.9

 

Exercise of stock options

 

18.8

 

(4.4

)

 

 

14.4

 

Exercise of warrants

 

289.6

 

(48.2

)

 

 

241.4

 

Share-based payments

 

 

2.3

 

 

 

2.3

 

Vesting of retricted share units

 

0.3

 

(0.3

)

 

 

 

Dividends declared

 

 

 

 

(61.0

)

(61.0

)

Balance at September 30, 2012

 

3,112.3

 

48.9

 

120.8

 

(60.8

)

3,221.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2011

 

1,913.2

 

59.0

 

79.9

 

(71.5

)

1,980.6

 

Net income

 

 

 

 

98.6

 

98.6

 

Other comprehensive loss

 

 

 

(44.4

)

 

(44.4

)

Total comprehensive income

 

 

 

 

 

54.2

 

Issuance of common shares on Gold Wheaton acquisition

 

402.4

 

 

 

 

402.4

 

Acquisition of royalty interests

 

33.7

 

 

 

 

33.7

 

Exercise of stock options

 

21.8

 

(9.1

)

 

 

12.7

 

Share-based payments

 

 

3.7

 

 

 

3.7

 

Exercise of warrants

 

1.1

 

(0.1

)

 

 

1.0

 

Value of Gold Wheaton warrants and stock options upon acquisition

 

 

40.5

 

 

 

40.5

 

Vesting of retricted share units

 

0.3

 

(0.3

)

 

 

 

Equity financing

 

0.2

 

 

 

 

0.2

 

Dividends declared

 

 

 

 

(40.5

)

(40.5

)

Balance at September 30, 2011

 

2,372.7

 

93.7

 

35.5

 

(13.4

)

2,488.5

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

4



 

Franco-Nevada Corporation

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2012 and 2011 (Unaudited, in millions of US dollars, except share amounts)

 

Note 1 - Corporate Information

 

Franco-Nevada Corporation (“Franco-Nevada” or the “Company”) is incorporated under the Canada Business Corporations Act. The Company is a gold-focused royalty and stream company with additional interests in platinum group metals, oil & gas and other resource assets. The majority of revenues are generated from a diversified portfolio of properties in North America and South Africa. The portfolio includes over 300 royalties and streams covering properties at various stages from production to early stage exploration.

 

The Company’s shares are listed on theToronto Stock Exchange and the NewYork Stock Exchange and the Company is domiciled in Canada.The Company’s head and registered office is located at 130 King Street West, Suite 740,Toronto, Ontario, Canada.

 

Note 2 - Basis of preparation

 

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including IAS 34 “Interim Financial Reporting”. These condensed interim consolidated financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2011 and were prepared using the same accounting policies, method of computation and presentation as were applied in the annual financial statements for the year ended December 31, 2011.

 

These condensed interim consolidated financial statements were approved for issuance on November 6, 2012, the date the Board of Directors approved these financial statements.

 

The financial information included herein reflects all adjustments, consisting only of normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented.The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year. Seasonality is not considered to have a significant impact over the interim consolidated financial statements.

 

Taxes on income in the interim period have been accrued using the tax rates that would be applicable to expected total annual income.

 

Note 3 - Acquisitions

 

a)             Cobre Panama Precious Metals Stream

 

On August 20, 2012, the Company announced the acquisition of a precious metals stream on Inmet Mining Corporation’s (“Inmet”) Cobre Panama copper project in Panama (“Cobre Panama”). Franco-Nevada has committed to fund a $1.0 billion deposit for development of the Cobre Panama project, to be drawn down on a 1:3 ratio with Inmet’s funding after Inmet’s aggregate funding for the project has exceeded $1 billion.The capital required for the development of Cobre Panama is estimated to be $6.2 billion, with Inmet’s portion being $4.8 billion. Franco-Nevada expects to fund the $1 billion in stages with the first draw expected in mid 2013.

 

Under the terms of the precious metals stream agreement, Franco-Nevada will pay $400 per ounce for gold and $6 per ounce for silver (subject to an annual adjustment for inflation) for the first 1,341,000 ounces of gold and 21,510,000 ounces of silver, respectively, delivered to Franco-Nevada under the agreement. Thereafter, Franco-Nevada will pay the greater of $400 per ounce for gold and $6 per ounce for silver (subject to an annual adjustment for inflation), respectively, and one half of the then prevailing market price.The gold and silver delivered under the precious metals stream agreement is indexed to the copper in concentrate produced from the Cobre Panama project.

 

b)             Timmins West Royalty and Equity Investment

 

On February 29, 2012, the Company acquired a 2.25% net smelter return (“NSR”) royalty from Lake Shore Gold Corp. (“Lake Shore”) on theTimmins West Complex located in Ontario for $35.0 million in cash. In addition, the Company acquired 10,050,591 common shares of Lake Shore for C$15.0 million.

 

c)              Weyburn Unit

 

On February 23, 2012, the Company acquired an additional 1.15% Weyburn Unit working interest for C$55.5 million, increasing its total working interest in the Weyburn Unit to approximately 2.26%.

 

Both the Timmins West and Weyburn Unit acquisitions have been accounted for as asset acquisitions.

 

5



 

Note 4 - Cash and cash equivalents

 

As at September 30, 2012, cash and cash equivalents were primarily held in Canadian and US denominated treasury bills, interest bearing cash deposits and highly-liquid corporate bonds.

 

 

 

At September 30,

 

At December 31,

 

 

 

2012

 

2011

 

Cash deposits

 

$

155.5

 

$

122.2

 

Term deposits

 

500.4

 

253.4

 

Treasury bills

 

68.3

 

353.5

 

Canadian federal and provincial government bonds

 

60.3

 

44.4

 

Corporate bonds

 

166.7

 

20.6

 

 

 

$

951.2

 

$

794.1

 

 

Note 5 - Investments

 

 

 

At September 30,

 

At December 31,

 

 

 

2012

 

2011

 

Short-term investments:

 

 

 

 

 

Canadian dollar denominated treasury bills

 

$

106.6

 

$

0.1

 

Term deposits

 

45.0

 

 

Government bonds

 

27.8

 

 

Corporate bonds

 

 

16.6

 

Total short-term investments

 

$

179.4

 

$

16.7

 

Non-current investments:

 

 

 

 

 

Equity investments

 

103.1

 

67.3

 

Convertible debentures

 

3.6

 

1.9

 

Warrants

 

15.1

 

5.2

 

 

 

$

121.8

 

$

74.4

 

 

Short-term investments

 

These investments have been designated as available-for-sale and, as a result, have been recorded at fair value with unrealized gains and losses recognized in other comprehensive income.

 

Non-current investments

 

These investments have been designated as available-for-sale and, as a result, have been recorded at fair value with unrealized gains and losses recognized in other comprehensive income with the exception of warrants which are recorded in other income/expense. The Company owns equity interests in various publicly-listed and private companies which the Company purchased through the open market.

 

As at September 30, 2012, the market value of these investments, excluding the warrants, increased compared to their market values at June 30, 2012 and the Company recorded a net unrealized gain of $15.0 million (2011 - loss of $1.0 million), net of an income tax expense of $2.3 million (2011 - income tax recovery of $2.3 million) in the consolidated statement of income and comprehensive income for the three months ended September 30, 2012.

 

As at September 30, 2012, the market value of these investments, excluding the warrants, increased compared to their market values at December 31, 2011 and the Company recorded a net unrealized gain of $16.2 million (2011 - loss of $5.2 million), net of an income tax expense of $2.6 million (2011 - income tax recovery of $4.9 million) in the consolidated statement of income and comprehensive income for the nine months ended September 30, 2012.

 

Note 6 - Revenue

 

Revenue is comprised of the following:

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Mineral Royalties

 

$

51.0

 

$

43.6

 

$

137.2

 

$

111.9

 

Mineral Streams

 

45.8

 

61.2

 

147.8

 

154.2

 

Oil & Gas Interests

 

8.4

 

8.5

 

27.9

 

26.6

 

Total

 

$

105.2

 

$

113.3

 

$

312.9

 

$

292.7

 

 

Included in receivables is $18.3 million (December 31, 2011 - $18.4 million) subject to provisional price adjustments which are marked-to-market at each reporting period with the change being recorded in revenue in the period. These contracts relate to gold and platinum group metal sales which settle at a future date.

 

6



 

Note 7 - Cost of sales

 

Cost of sales comprises:

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Cost of stream sales

 

$

10.7

 

$

13.7

 

$

35.4

 

$

38.5

 

Production taxes

 

2.5

 

2.1

 

7.6

 

6.2

 

Oil & gas operating costs

 

1.1

 

0.4

 

2.5

 

1.2

 

Total

 

$

14.3

 

$

16.2

 

$

45.5

 

$

45.9

 

 

Note 8 - Related party disclosures

 

Key management personnel include the executive management team. Compensation for key management personnel of the Company was as follows:

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Short-term benefits(1)

 

$

0.6

 

$

0.6

 

$

1.8

 

$

1.7

 

Share-based payments(2)

 

0.4

 

0.5

 

1.5

 

2.2

 

Total

 

$

1.0

 

$

1.1

 

$

3.3

 

$

3.9

 

 


(1)         Includes salary, benefits and short-term accrued incentives/other bonuses earned in the period.

(2)         Represents the vesting of stock options and RSUs earned during the period.

 

Note 9 - Income taxes

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Current income tax expense

 

$

5.7

 

$

11.9

 

$

26.9

 

$

32.2

 

Deferred income tax expense

 

8.8

 

7.6

 

14.5

 

9.2

 

Total

 

$

14.5

 

$

19.5

 

$

41.4

 

$

41.4

 

 

A reconciliation of the provision for income tax taxes computed at the combined Canadian federal and provincial statutory rate to the provision for income taxes as shown in the consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2012 and 2011, are as follows:

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net income before income taxes

 

$

66.5

 

$

63.6

 

$

177.1

 

$

140.0

 

Statutory tax rate

 

24.40

%

26.22

%

24.40

%

26.22

%

Tax expense at statutory rate

 

16.2

 

16.7

 

43.2

 

36.7

 

Reconciling items:

 

 

 

 

 

 

 

 

 

Recognition of previously unrecognized tax benefit

 

 

 

(0.8

)

 

Income/expenses not taxed/deductible

 

(2.2

)

(1.0

)

(2.5

)

1.0

 

Differences in foreign statutory tax rates

 

2.8

 

1.3

 

7.4

 

2.3

 

Differences due to changing future tax rates

 

(0.2

)

0.2

 

0.6

 

(0.8

)

Foreign withholding tax

 

0.2

 

0.1

 

(2.7

)

1.8

 

Temporary differences subject to initial recognition exemption

 

0.4

 

0.3

 

0.9

 

1.3

 

Gain on Gold Wheaton shares

 

 

 

 

(1.4

)

Indexation of mineral properties in foreign jurisdiction

 

(0.2

)

(0.2

)

(1.3

)

(0.3

)

Unrealized foreign exchange on translation

 

(1.1

)

 

(1.5

)

 

Other

 

(1.4

)

2.1

 

(1.9

)

0.8

 

Income tax expense

 

$

14.5

 

$

19.5

 

$

41.4

 

$

41.4

 

 

Note 10 - Shareholders’ equity

 

a)             Common shares

 

The Company’s authorized capital stock includes an unlimited number of common shares (issued 146,547,402 common shares) having no par value and preferred shares issuable in series (issued nil).

 

During the nine months ended September 30, 2012, the Company issued 8,183,710 common shares upon the exercise of warrants and stock options and the vesting of restricted share units for proceeds of $255.6 million.

 

7



 

b)             Dividends

 

During the three months ended September 30, 2012, the Company declared dividends in the amount of $22.1 million (2011 - $15.2 million), or $0.15 per share (2011 - $0.12 per share). During the three months ended September 30, 2012, the Company paid dividends in the amount of $21.7 million (2011 - $15.1 million), or $0.15 per share (2011 - $0.12 per share).

 

During the nine months ended September 30, 2012, the Company declared dividends in the amount of $61.0 million (2011 - $40.5 million), or $0.42 per share (2011 - $0.32 per share). During the nine months ended September 30, 2012, the Company paid dividends in the amount of $55.8 million (2011 - $33.8 million), or $0.39 per share (2011 - $0.27 per share).

 

At September 30, 2012, included in accounts payable is an amount of $22.1 million related to declared dividends for the months of October, November and December 2012 (December 31, 2011 - $16.5 million).

 

c)              Stock-based payments

 

During the three months ended September 30, 2012, no stock options were granted (2011 - Nil). During the nine months ended September 30, 2012, 25,000 stock options were granted (2011 - Nil).These ten-year term options vest over three years in equal portions on the anniversary of the grant date.

 

The fair value of the stock options granted during the nine months ended September 30, 2012 has been determined to be $0.2 million (2011 - Nil). The fair value of the options was calculated using the Black-Scholes option pricing model and utilized the following weighted average assumptions:

 

 

 

2012

 

Risk-free interest rate

 

0.98

%

Expected dividend yield

 

1.131

%

Expected price volatility of the Company’s common shares

 

28.08

%

Expected life of the option

 

2.0 years

 

 

This resulted in a weighted average fair value of C$6.67 per stock option.

 

During the three months ended September 30, 2012, an expense of $0.3 million (2011 - $0.6 million) related to stock options has been included in the consolidated statement of income and comprehensive income. For the nine months ended September 30, 2012, an expense of $1.2 million (2011 - $2.6 million) related to stock options has been included in the consolidated statement of income and comprehensive income. In addition, included in share-based compensation expense for the three and nine months ended September 30, 2012 were amounts of $0.3 million and $1.1 million (2011 - $0.3 million and $1.1 million) related to restricted share units.

 

d)             Share purchase warrants

 

During the nine months ended September 30, 2012, 7,492,400 share purchase warrants were exercised for proceeds of $241.4 million and 169,337 warrants expired unexercised.

 

Outstanding share purchase warrants, at September 30, 2012 and December 31, 2011, are as follows:

 

 

 

September 30,

 

December 31,

 

 

 

2012

 

2011

 

2012 Warrants(1)

 

 

5,716,749

 

2017 Warrants(2)

 

6,510,769

 

6,510,769

 

Gold Wheaton Warrants(3)

 

4,181,750

 

6,126,750

 

Special Warrant(4)

 

2,000,000

 

2,000,000

 

Total

 

12,692,519

 

20,354,268

 

 


(1)         2012 Warrants expired on March 13, 2012.

(2)         2017 Warrants have an exercise price of C$75.00 per warrant and expire on June 16, 2017.

(3)         Gold Wheaton Warrants were assumed as part of the acquisition of Gold Wheaton Gold Corp. (“Gold Wheaton”) in March 2011.The Company reserved for issuance 6,126,750 common shares in connection with Gold Wheaton warrants that were outstanding upon closing. 25,999,998 warrants (4,045,600 equivalent Franco-Nevada common shares) have an expiry date of July 8, 2013 and an exercise price of C$10.00 and 875,000 warrants (136,150 equivalent Franco-Nevada common shares) have an expiry date of May 26, 2014 and an exercise price of C$5.00.To-date 12,500,000 warrants have been exercised into 1,944,988 Franco-Nevada common shares. Holders of these warrants, which are now warrants of the Company’s wholly-owned subsidiary Franco-Nevada GLW Holdings Corp., are entitled to receive, at each warrant holder’s election at the time of exercise, either (i) 0.1556 of a Franco-Nevada common share; or (ii) C$5.20 in cash.The following are outstanding as at September 30, 2012:

 

 

 

Exercise

 

Number of Gold

 

Equivalent Franco-Nevada

 

Equivalent Exercise

 

Expiry Dates

 

Price

 

Wheaton Warrants

 

Common Shares

 

Price

 

July 8, 2013

 

C$

10.00

 

25,999,998

 

4,045,600

 

C$

64.26

 

May 26, 2014

 

C$

5.00

 

875,000

 

136,150

 

C$

32.13

 

Total

 

 

 

26,874,998

 

4,181,750

 

 

 

 

(4)         The Special Warrants are exerciseable, without any further consideration, into 2,000,000 2017 Warrants, subject to the New Prosperity project achieving certain conditions.

 

8



 

Note 11 - Earnings per share (“EPS”)

 

 

 

For the three months ended September 30, 2012

 

 

 

Income

 

Shares

 

Per Share

 

 

 

(Numerator)

 

(Denominator)

 

Amount

 

Basic EPS

 

$

52.0

 

145.3

 

$

0.36

 

Effect of dilutive securities

 

 

1.3

 

(0.01

)

Diluted EPS

 

$

52.0

 

146.6

 

$

0.35

 

 

 

 

For the three months ended September 30, 2011

 

 

 

Income

 

Shares

 

Per Share

 

 

 

(Numerator)

 

(Denominator)

 

Amount

 

Basic EPS

 

$

44.1

 

127.1

 

$

0.35

 

Effect of dilutive securities

 

 

3.1

 

(0.01

)

Diluted EPS

 

$

44.1

 

130.2

 

$

0.34

 

 

 

 

For the nine months ended September 30, 2012

 

 

 

Income

 

Shares

 

Per Share

 

 

 

(Numerator)

 

(Denominator)

 

Amount

 

Basic EPS

 

$

135.7

 

143.1

 

$

0.95

 

Effect of dilutive securities

 

 

1.2

 

(0.01

)

Diluted EPS

 

$

135.7

 

144.3

 

$

0.94

 

 

 

 

For the nine months ended September 30, 2011

 

 

 

Income

 

Shares

 

Per Share

 

 

 

(Numerator)

 

(Denominator)

 

Amount

 

Basic EPS

 

$

98.6

 

123.4

 

$

0.80

 

Effect of dilutive securities

 

 

2.1

 

(0.01

)

Diluted EPS

 

$

98.6

 

125.5

 

$

0.79

 

 

As at September 30, 2012, the following were excluded in the computation of diluted EPS (i) stock options to purchase nil common shares (2011 - 229,666); (ii) warrants to purchase 10,556,369 common shares (2011 - 9,795,600); and (iii) 92,138 restricted share units (2011 - 68,458). These were excluded due to exercise prices of the warrants being greater than the weighted average price of the common shares for the quarter ended September 30, 2012 and also due to the performance criteria for the vesting of the RSUs having not been attained prior to September 30, 2012.

 

Note 12 - Subsequent event

 

On November 6, 2012, the Company announced its intention to acquire a 11.7% net royalty interest in the Weyburn Unit for C$400 million. The acquisition will have an effective date of October 1, 2012 and is expected to close before December 31, 2012.

 

9



 

CORPORATE INFORMATION

 

Directors

Listings

 

 

Pierre Lassonde, Chairman

Toronto Stock Exchange

 

Common shares: FNV

David Harquail, President & CEO

2017 Warrants: FNV.WT.A

 

1 warrant + C$75.00 = 1 common share

Derek Evans

Expiry: June 16, 2017

 

2013 Warrants: FNV.WT.B

Graham Farquharson

1 warrant + C$10.00 = 0.1556 common share

 

Expiry: July 8, 2013

Louis Gignac

 

 

NewYork Stock Exchange

Randall Oliphant

Common shares: FNV

 

 

Hon. David R. Peterson

Investor Information

 

 

Executive Management

Stefan Axell, Manager, Investor Relations

 

 

David Harquail

info@franco-nevada.com

President & CEO

 

 

www.franco-nevada.com

Sandip Rana

 

Chief Financial Officer

Tel:

(416) 306-6328

 

Toll Free:

(877) 401-3833

Paul Brink

 

Senior Vice President, Business Development

Transfer Agent

 

 

Jacqueline Jones

Computershare Investor Services Inc.

Chief Legal Officer & Corporate Secretary

100 University Avenue, 9th Floor

 

Toronto, Canada M5J 2Y1

GeoffWaterman

Toll Free:

(800) 564-6253

Chief Operating Officer

Tel:

(514) 982-7555

 

service@computershare.com

Head Office

 

 

Auditors

ExchangeTower

 

130 King Street West

PricewaterhouseCoopers LLP

Suite 740, P.O. Box 467

Toronto, Canada

Toronto, Canada M5X 1E4

 

 

 

Tel: (416) 306-6300

 

Fax:(416) 306-6330