EX-99.2 3 fnv-20180831ex99280cc24.htm EX-99.2

Exhibit 99.2

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Management’s Discussion and Analysis

This Management’s Discussion and Analysis (“MD&A”) of financial position and results of operations of Franco-Nevada Corporation (“Franco-Nevada”, the “Company”, “we” or “our”) has been prepared based upon information available to Franco-Nevada as at August 8, 2018 and should be read in conjunction with Franco-Nevada’s unaudited condensed consolidated interim financial statements and related notes as at and for the three and six months ended June 30, 2018 and 2017. The unaudited condensed consolidated interim financial statements and MD&A are presented in U.S. dollars and 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 in accordance with IAS 34 Interim Financial Reporting.

Readers are cautioned that the MD&A contains forward-looking statements and that actual events may vary from management’s expectations. Readers are encouraged to read the “Cautionary Statement on Forward-Looking Information” at the end of this MD&A and to consult Franco-Nevada’s audited consolidated financial statements for the years ended December 31, 2017 and 2016 and the corresponding notes to the financial statements which are available on our website at www.franco-nevada.com, on SEDAR at www.sedar.com and in our most recent Form 40-F filed with the United States Securities and Exchange Commission on EDGAR at www.sec.gov.

Additional information related to Franco-Nevada, including our Annual Information Form, is available on SEDAR at www.sedar.com, and our Form 40-F is available on EDGAR at www.sec.gov. These documents contain descriptions of certain of Franco-Nevada’s producing and advanced royalty and stream assets, as well as a description of risk factors affecting the Company. For additional information, our website can be found at www.franco-nevada.com.

2 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Table of Contents

4 | BUSINESS OVERVIEW AND STRATEGY
5 | HIGHLIGHTS
7 | GUIDANCE
8 | MARKET OVERVIEW
9 | SELECTED FINANCIAL INFORMATION
10 | REVENUE BY ASSET
11 | OVERVIEW OF FINANCIAL PERFORMANCE – Q2/2018 TO Q2/2017
17 | OVERVIEW OF FINANCIAL PERFORMANCE – H1/2018 TO H1/2017
23 | SUMMARY OF QUARTERLY INFORMATION
24 | BALANCE SHEET REVIEW
24 | LIQUIDITY AND CAPITAL RESOURCES
27 | CRITICAL ACCOUNTING ESTIMATES
30 | OUTSTANDING SHARE DATA
30 | INTERNAL CONTROL OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS AND PROCEDURES
31 | NON-IFRS FINANCIAL MEASURES
33 | CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

Abbreviations used in this report

The following abbreviations may be used throughout this MD&A:

Abbreviated Definitions |  |  |
Periods under review |  |  |
"H1/2018" | The six-month period ended June 30, 2018
"H1/2017" | The six-month period ended June 30, 2017
"Q2/2018" | The three-month period ended June 30, 2018
"Q1/2018" | The three-month period ended March 31, 2018
"Q4/2017" | The three-month period ended December 31, 2017
"Q3/2017" | The three-month period ended September 30, 2017
"Q2/2017" | The three-month period ended June 30, 2017
"Q1/2017" | The three-month period ended March 31, 2017
Places and currencies |  | Measurement
"U.S." | United States |  | "GEO" | Gold equivalent ounces
"$" or "USD" | United States dollars |  | "PGM" | Platinum group metals
"C$" or "CAD" | Canadian dollars |  | "oz" | Ounce
"A$" or "AUD" | Australian dollars |  | "oz Au" | Ounce of gold
|  |  | "oz Ag" | Ounce of silver
Interest types |  | "oz Pt" | Ounce of platinum
"NSR" | Net smelter return royalty |  | "oz Pd" | Ounce of palladium
"GR" | Gross royalty |  | "LBMA" | London Bullion Market Association
"ORR" | Overriding royalty |  | "bbl" | Barrel
"GORR" | Gross overriding royalty |  | "boe" | Barrels of oil equivalent
"FH" | Freehold or lessor royalty |  | "WTI" | West Texas Intermediate
"NPI" | Net profits interest |  |  |
"NRI" | Net royalty interest |  |  |
"WI" | Working interest |  |  |

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Business Overview and Strategy

Franco-Nevada is the leading gold-focused royalty and stream company by both gold revenue and number of gold assets. The Company has the largest and most diversified portfolio of royalties and streams by commodity, geography, revenue type and stage of project. The portfolio is actively managed with the aim to maintain over 80% of revenue from precious metals (gold, silver & PGM).

Franco-Nevada Asset Count at August 8, 2018
|  | Precious Metals |  | Other Mining Assets |  | Oil & Gas(1) |  |  | TOTAL
Producing |  | 44 |  | 7 |  | 57 |  |  | 108
Advanced |  | 28 |  | 7 |  | — |  |  | 35
Exploration |  | 139 |  | 70 |  | 25 |  |  | 234
TOTAL |  | 211 |  | 84 |  | 82 |  |  | 377

| 1 |  | Does not include the acquisition of mineral rights from Continental Resources, Inc., which is expected to close in the fourth quarter of 2018.

The Company does not operate mines, develop projects or conduct exploration. Franco-Nevada’s business model is focused on managing and growing its portfolio of royalties and streams. The advantages of this business model are:

| · |  | Exposure to precious metals price optionality;

| · |  | A perpetual discovery option over large areas of geologically prospective lands. No additional costs other than the initial investment;

| · |  | Limited exposure to many of the risks associated with operating companies;

| · |  | A free cash-flow business with limited cash calls;

| · |  | A high-margin business that can generate cash through the entire commodity cycle;

| · |  | A scalable and diversified business in which a large number of assets can be managed with a small stable overhead; and

| · |  | A forward-looking business in which management focuses on growth opportunities rather than operational or development issues.

Franco-Nevada’s financial results in the short-term are primarily tied to the price of commodities and the amount of production from its portfolio of producing assets. Financial results have also been supplemented by acquisitions of new producing assets. Over the longer-term, results are impacted by the availability of exploration and development capital applied by other companies to expand or extend Franco-Nevada’s producing assets or to advance Franco-Nevada’s advanced and exploration assets into production.

Franco-Nevada has a long-term investment outlook and recognizes the cyclical nature of the industry. Franco-Nevada has historically operated by maintaining a strong balance sheet so that it can make investments during commodity cycle downturns.

Franco-Nevada’s shares are listed on the Toronto and New York stock exchanges under the symbol FNV. An investment in Franco-Nevada’s shares is expected to provide investors with yield and exposure to commodity price and exploration optionality while limiting exposure to many of the risks of operating companies. Since its Initial Public Offering over ten years ago, Franco-Nevada has increased its dividend annually and its share price has outperformed the gold price and all relevant gold equity benchmarks.

Franco-Nevada’s revenue is generated from various forms of agreements, ranging from net smelter return royalties, streams, net profits interests, net royalty interests, working interests and other. For definitions of the various types of agreements, please refer to our most recent Annual Information Form filed on SEDAR at www.sedar.com or our Form 40‑F filed on EDGAR at www.sec.gov.

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Highlights

Financial Update – Q2/2018

| · |  | GEOs(1): 107,333 GEOs sold in Q2/2018, a decrease of 12.4% from 122,541 GEOs in Q2/2017, primarily due to lower than expected gold and silver deliveries from the Company’s stream on the Candelaria mine;

| · |  | Revenue: Higher revenues from the Company’s Oil & Gas assets have mostly offset the impact of lower GEO production, resulting in revenue of $161.3 million in Q2/2018, compared to $163.6 million in Q2/2017;

| · |  | Guidance: For 2018, Franco-Nevada currently expects attributable royalty and stream production to total 440,000 to 470,000 GEOs from its mining assets mainly due to reduced deliveries from the Candelaria mine. This revision is partly offset by the positive performance of the Oil & Gas portfolio. For 2018, Franco-Nevada now expects to generate $65 million to $75 million in revenue from its Oil & Gas assets due to the contribution of newly acquired assets and the stronger oil price.

| · |  | Adjusted EBITDA(2): $126.3 million, or $0.68 per share in Q2/2018, a slight increase from $125.5 million, or $0.69 per share, in Q2/2017;

| · |  | Margin(2): 78.3% in Q2/2018, compared to 76.7% in Q2/2017;

| · |  | Net income: $53.6 million, or $0.29 per share, for Q2/2018, an increase of 17.5% compared to $45.6 million, or $0.25 per share, in Q2/2017;

| · |  | Adjusted Net Income(2): $53.7 million, or $0.29 per share in Q2/2018, an increase of 16.5% compared to $46.1 million, or $0.25 per share, in Q2/2017;

| · |  | Net cash provided by operating activities: $111.3 million in Q2/2018, a decrease of 12.0% compared to $126.5 million in Q2/2017;

| · |  | Available capital: $1.4 billion available as at June 30, 2018, comprising $158.4 million of working capital, $142.9 million in marketable equity securities, and $1.1 billion available under the Company’s credit facilities.

1GEOs include our gold, silver, platinum, palladium and other mining assets, and do not include Oil & Gas assets. GEOs are estimated on a gross basis for NSR royalties and, in the case of stream ounces, before the payment of the per ounce contractual price paid by the Company. For NPI royalties, GEOs are calculated taking into account the NPI economics. Silver, platinum, palladium and other mining commodities are converted to GEOs by dividing associated revenue, which includes settlement adjustments, by the relevant gold price. The gold price used in the computation of GEOs earned from a particular asset varies depending on the royalty or stream agreement, which may make reference to the market price realized by the operator, or the average price for the month, quarter, or year in which the mining commodity was produced or sold. For illustrative purposes, please refer to the average commodity price table on pages 11 and 17 of this MD&A for indicative prices which may be used in the calculation of GEOs for the three and six months ended June 30, 2018, respectively.

2Adjusted Net Income, Adjusted EBITDA and Margin are non-IFRS financial measures with no standardized meaning under IFRS. For further information and a detailed reconciliation, please see the “Non-IFRS Financial Measures” section of this MD&A.

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Financial Update – H1/2018

| · |  | GEOs: 223,004 GEOs recognized in revenue in H1/2018, a decrease of 12.2% from 254,119 GEOs in H1/2017;

| · |  | Revenue: $334.4 million in H1/2018, a slight decrease of 0.6% from revenue of $336.3 million in H1/2017;

| · |  | Adjusted EBITDA: $266.2 million, or $1.43 per share, in H1/2018, an increase of 4.8% from $254.0 million or $1.41 per share, in H1/2017;

| · |  | Margin: 79.6% in H1/2018, compared to 75.5% in H1/2017;

| · |  | Net income: $118.2 million, or $0.64 per share, in H1/2018, an increase of 29.6% compared to $91.2 million, or $0.51 per share, in H1/2017;

| · |  | Adjusted Net Income: $117.6 million, or $0.63 per share, in H1/2018, an increase of 29.4% compared to $90.9 million, or $0.50 per share, in H1/2017;

| · |  | Net cash provided by operating activities: $248.8 million in H1/2018, an increase of 1.0% compared to $246.3 million in H1/2017.

Corporate Development

Acquisition of U.S. Oil & Gas Mineral Rights and Strategic Relationship with Continental Resources, Inc. – SCOOP and STACK, Oklahoma

On August 6, 2018, the Company announced that it had entered, through a wholly-owned subsidiary, into a strategic relationship with Continental Resources, Inc. (“Continental”) to jointly acquire, through a newly-formed entity, mineral rights in the South Central Oklahoma Oil Province (“SCOOP”) and Sooner Trend Anadarko Basin Canadian and Kingfisher Counties (“STACK”) plays of Oklahoma. Franco-Nevada is contributing $220 million for the acquisition of existing mineral rights owned by Continental and has committed, subject to satisfaction of agreed upon development thresholds, to spend up to $100 million per year over the next three years to acquire additional mineral rights. Continental has committed to spend up to $25 million per year over the same period through the newly-formed acquisition vehicle. Revenue distribution from the acquisition vehicle will vary depending on production volumes, with Franco‑Nevada entitled to a minimum of 50% of revenue and up to 75% of revenue at certain production volumes.

Revenue from the initial $220 million investment is expected to begin in 2019, increasing over the following 10 years, with revenue of $30-35 million per year expected in 5-10 years. The assets subject to the initial investment have an anticipated life of 30+ years.

Subsidiaries of both parties have executed definitive agreements, with funding of the initial $220 million expected in the fourth quarter of 2018, subject to customary closing conditions.

Additional acquisition and funding of Cobre Panama, Panama

On January 19, 2018, the Company, through a wholly-owned subsidiary, entered into an amended and restated stream agreement with First Quantum Minerals Ltd. (“First Quantum”) and Korea Resources Corp. (“KORES”). The amended and restated stream agreement covers 100% of the Cobre Panama project (“Cobre Panama”). Cobre Panama, which is in the construction phase and is located in Panama, is 90% owned by First Quantum and 10% by KORES.

The amended and restated agreement comprises two distinct precious metals streams: the original stream covering First Quantum’s initial 80% interest in the project (the “Fixed Payment Stream”) and a new stream covering First Quantum’s additional 10% interest in the project acquired from LS-Nikko Copper Inc. in Q4/2017 and KORES’ 10% interest in the project (the “Floating Payment Stream”).

Fixed Payment Stream

Under the terms of the Fixed Payment Stream, Franco-Nevada is funding a deposit of $1.0 billion against future deliveries of gold and silver from Cobre Panama. The deposit is funded on a pro-rata basis of 1:3 to First Quantum’s share of the capital costs for Cobre Panama in excess of $1.0 billion. As at June 30, 2018, the Company funded a cumulative total of $886.0 million towards the Fixed Payment Stream. Franco-Nevada expects to contribute the balance of the $1.0 billion deposit in the second half of 2018.

Under the terms of the amended and restated stream agreement, the fixed price for the Fixed Payment Stream is $418 per ounce of gold and $6.27 per ounce of silver (each increased by a 1.5% annual inflation factor), until 1,341,000 ounces of gold and 21,500,000 ounces of silver have been delivered. Thereafter, the ongoing payment will be the greater of 50% of the fixed price and 50% of the spot price.

Floating Payment Stream

The purchase price of the Floating Payment Stream was $356.0 million and was funded upfront upon closing on March 16, 2018. The terms of the Floating Payment Stream, other than the ongoing price, will be similar to the Fixed Payment Stream, including initially linking precious metals deliveries to copper in concentrate shipped. Under the Floating Payment Stream, the ongoing price per ounce for deliveries is 20% of the spot price until 604,000 ounces of gold and 9,618,000 ounces of silver have been delivered. Thereafter, the ongoing payment will be 50% of the spot price.

First Quantum reported that as of the end of Q2/2018, Cobre Panama is 76% complete, with project capital expenditure for H1/2018 totaling $781.0 million against full year guidance of $1,180.0 million. Cobre Panama remains scheduled for phased commissioning during 2018, with continued ramp-up over 2019.

6 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Acquisition of Bowen Basin Coal Royalties, Australia

On February 28, 2018, Franco-Nevada, through a wholly-owned subsidiary, acquired a portfolio of metallurgical coal royalties located in the Bowen Basin of Queensland, Australia for a cash consideration of A$4.2 million. The portfolio includes certain claims that comprise the producing Moorvale mine, the Olive Downs project which has filed permitting applications, and another 33 exploration tenements. The Bowen Basin Coal royalty is a production payment of A$0.10 per tonne, adjusted for consumer price index changes since December 31, 1997.

Acquisition of U.S. Oil & Gas Royalties – Delaware Basin, Texas

On February 20, 2018, the Company, through a wholly-owned subsidiary, closed the acquisition of a royalty portfolio in the Delaware Basin, which represents the western portion of the Permian Basin, for $101.3 million. The royalties are derived principally from mineral title which provides a perpetual interest in royalty lands. The transaction entitles the Company to royalties effective October 1, 2017. Prior to year-end, the Company advanced $11.0 million into escrow in respect of this transaction which was included in royalty, stream and working interests on the statement of financial position as at December 31, 2017.

Financing

Credit Facilities

On March 7, 2018, the Company extended the maturity of its two credit facilities. The Company’s $1.0 billion unsecured revolving term credit facility (the “Credit Facility”) was amended to extend its maturity from March 22, 2022 to March 22, 2023. Franco-Nevada’s subsidiary, Franco-Nevada (Barbados) Corporation (“FNBC”), extended the maturity of its existing unsecured revolving credit facility (the “FNBC Credit Facility”), from March 20, 2018 to March 20, 2019. Refer to “Liquidity and Capital Resources” for details.

Dividend Increase

In Q2/2018, the Company increased its quarterly dividend by 4.3% from the previous $0.23 per share quarterly dividend to $0.24 per share, marking the 11 th consecutive annual dividend increase for Franco-Nevada shareholders.

The total dividend declared in Q2/2018 was $44.6 million in dividends, of which $35.0 million was paid in cash and $9.6 million was paid in common shares issued under the Company’s Dividend Reinvestment Plan (“DRIP”). For the six months ended June 30, 2018, dividends declared totaled $87.9 million, of which $70.6 million was paid in cash and $17.3 million was paid in common shares.

Guidance

The following contains forward-looking statements. Reference should be made to the “Cautionary Statement on Forward-Looking Information” section at the end of this MD&A. For a description of material factors that could cause our actual results to differ materially from the forward-looking statements below, please see the “Cautionary Statement” and the “Risk Factors” section of our most recent Annual Information Form filed with the Canadian securities regulatory authorities on www.sedar.com and our most recent Form 40-F filed with the United States Securities and Exchange Commission on www.sec.gov. 2018 guidance is based on assumptions including the forecasted state of operations from our assets based on the public statements and other disclosures by the third-party owners and operators of the underlying properties (subject to our assessment thereof).

GEO production in the first half of the year was lower than anticipated, primarily from the Company’s stream on the Candelaria mine. In November 2017, Lundin Mining Corporation announced an updated mine plan in part to address localized pit wall instability. While decreased grades were expected in 2018, the impact on gold and silver production was greater than anticipated. Consequently, Franco-Nevada has revised its GEO production for 2018 as noted below. The processing of lower grade material is expected to continue for the remainder of 2018, but production is expected to recover in 2019 and outlook remains positive in the long-term.

The impact of the downward revision in GEO production from mining assets is expected to be partly mitigated by the positive performance of the Company’s Oil & Gas assets, due to the contribution of recently acquired assets and stronger oil prices. This reflects the benefits of Franco-Nevada’s large portfolio of assets and its diversification across commodities.

|  |  |  |  | 2018 Guidance
|  |  | H1/2018 Actual |  |  | Revised |  |  | Previously Announced |
Mining assets - GEO production(1),(2) |  |  | 223,004 GEOs |  |  | 440,000 - 470,000 GEOs |  |  | 460,000 - 490,000 GEOs |
Oil & Gas assets - Revenue(3) |  |  | $41.7 million |  |  | $65 - $75 million |  |  | $50 - $60 million |

1Of the 440,000 to 470,000 GEOs, Franco-Nevada expects to receive 290,000 to 320,000 GEOs under its various streams. For the six months ended June 30, 2018, the Company has earned 148,347 GEOs from its streams.

2In forecasting GEOs for 2018, gold, silver, platinum and palladium metals have been converted to GEOs using commodity prices of $1,250/oz Au, $16.00/oz Ag, $850/oz Pt and $950/oz Pd.

3In forecasting revenue from Oil & Gas assets for 2018, the WTI oil price is assumed to average $65 per barrel with a $4.80 per barrel price differential between the Edmonton Light price and realized prices for Canadian oil.

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We expect to fund the balance of the $1.0 billion deposit towards the Cobre Panama precious metals stream in the second half of 2018. In Q2/2018, the Company funded $89.2 million towards the Fixed Payment Stream, for a cumulative total as of June 30, 2018 of $886.0 million of its $1 billion maximum commitment.

In addition, the Company estimates depletion and depreciation expense to be $250.0 million to $280.0 million for the full year 2018. For H1/2018, depletion and depreciation expense totaled $120.2 million.

Market Overview

The prices of precious metals, gold in particular, are the largest factors in determining profitability and cash-flow from operations for Franco-Nevada. Historically, the price of gold has been subject to volatile price movements and is affected by numerous macroeconomic and industry factors that are beyond the Company’s control. Major influences on the gold price include macroeconomic factors such as the level of interest rates, inflation expectations, currency exchange rate fluctuations including the relative strength of the U.S. dollar, and the supply of and demand for gold.

Commodity price volatility also impacts the number of GEOs contributed by non-gold mining assets when converting silver, platinum, palladium and other mining commodities to GEOs. Silver, platinum, palladium and other mining commodities are converted to GEOs by dividing associated revenue, which includes settlement adjustments, by the relevant gold price. The gold price used in the computation of GEOs earned from a particular asset varies depending on the royalty or stream agreement, which may make reference to the market price realized by the operator, or the average price for the month, quarter, or year in which the mining commodity was produced or sold.

The gold price ended Q2/2018 at $1,250/oz, approximately 5.6% lower than at the end of Q1/2018. During Q2/2018, gold traded between $1,250/oz and $1,351/oz with an average price of $1,306/oz. This compares to an average gold price of $1,257/oz for Q2/2017, an increase of 3.9%.

Silver prices averaged $16.57/oz in Q2/2018, a decrease of 4.0% compared to $17.26/oz in Q2/2017. Platinum and palladium prices averaged $904/oz and $979/oz, respectively in Q2/2018, compared to $940/oz and $819/oz, respectively, for Q2/2017, a decrease of 3.8% and an increase of 19.5% year-over-year, respectively.

One of the strengths of the Franco-Nevada business model is that our business is not generally impacted when producer costs increase as long as the producer continues to operate. Royalty and stream payments/deliveries are based on production levels with no adjustments for the operator’s operating costs, with the exception of NPI and NRI royalties, which are based on the profit of the underlying mining operation. Profit-based royalties accounted for approximately 7.4% of total revenue in Q2/2018.

Another attribute of the Franco-Nevada model is the diversification of its portfolio across commodities. In Q2/2018, 14.1% of the Company’s revenue was generated from its Oil & Gas assets. During the quarter, Edmonton Light prices averaged C$78.41/bbl, up 27.1% compared to Q2/2017, while the WTI averaged $67.88/bbl, a 40.7% increase from Q2/2017.

Franco-Nevada strives to generate 80% of revenue from precious metals over a long-term horizon which includes gold, silver and PGM. In the short-term, we may diverge from the long-term target based on opportunities available. With 85.9% of revenue earned from precious metals in H1/2018, the Company has the flexibility to consider diversification opportunities outside of the precious metals’ space and increase its exposure to other commodities while maintaining its long-term target.

8 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Selected Financial Information

|  |  | For the three months ended |  |  | For the six months ended |
(in millions, except Average Gold Price, |  |  | June 30, |  |  | June 30, |
GEOs, Margin, per share and per GEO amounts) |  |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Statistical Measures |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Average Gold Price |  |  | $ | 1,306 |  |  | $ | 1,257 |  |  | $ | 1,318 |  |  | $ | 1,238 |
GEOs sold(1) |  |  |  | 107,333 |  |  |  | 122,541 |  |  |  | 223,004 |  |  |  | 254,119 |
Statement of Income and Comprehensive Income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue |  |  | $ | 161.3 |  |  | $ | 163.6 |  |  | $ | 334.4 |  |  | $ | 336.3 |
Depletion and depreciation |  |  |  | 59.6 |  |  |  | 67.2 |  |  |  | 120.2 |  |  |  | 138.7 |
Cost of sales |  |  |  | 29.8 |  |  |  | 33.9 |  |  |  | 60.0 |  |  |  | 73.8 |
Operating income |  |  |  | 64.9 |  |  |  | 56.0 |  |  |  | 142.3 |  |  |  | 111.2 |
Net income |  |  |  | 53.6 |  |  |  | 45.6 |  |  |  | 118.2 |  |  |  | 91.2 |
Basic earnings per share |  |  | $ | 0.29 |  |  | $ | 0.25 |  |  | $ | 0.64 |  |  | $ | 0.51 |
Diluted earnings per share |  |  | $ | 0.29 |  |  | $ | 0.25 |  |  | $ | 0.63 |  |  | $ | 0.51 |
Dividends declared per share |  |  | $ | 0.24 |  |  | $ | 0.23 |  |  | $ | 0.47 |  |  | $ | 0.45 |
Dividends declared (including DRIP) |  |  | $ | 44.6 |  |  | $ | 42.5 |  |  | $ | 87.9 |  |  | $ | 81.9 |
Weighted average shares outstanding |  |  |  | 186.0 |  |  |  | 181.6 |  |  |  | 186.0 |  |  |  | 180.1 |
Non-IFRS Measures |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Adjusted EBITDA(2) |  |  | $ | 126.3 |  |  | $ | 125.5 |  |  | $ | 266.2 |  |  | $ | 254.0 |
Adjusted EBITDA(2) per share |  |  | $ | 0.68 |  |  | $ | 0.69 |  |  | $ | 1.43 |  |  | $ | 1.41 |
Margin(2) |  |  |  | 78.3 | % |  |  | 76.7 | % |  |  | 79.6 | % |  |  | 75.5 | %
Adjusted Net Income(2) |  |  | $ | 53.7 |  |  | $ | 46.1 |  |  | $ | 117.6 |  |  | $ | 90.9 |
Adjusted Net Income(2) per share |  |  | $ | 0.29 |  |  | $ | 0.25 |  |  | $ | 0.63 |  |  | $ | 0.50 |
Statement of Cash Flows |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net cash provided by operating activities |  |  | $ | 111.3 |  |  | $ | 126.5 |  |  | $ | 248.8 |  |  | $ | 246.3 |
Net cash used in investing activities |  |  | $ | (90.8) |  |  | $ | (137.2) |  |  | $ | (614.0) |  |  | $ | (199.1) |
Net cash (used in) provided by financing activities |  |  | $ | (35.0) |  |  | $ | 332.0 |  |  | $ | (71.1) |  |  | $ | 301.0 |

|  |  | As at |  |  | As at |
|  |  | June 30, |  |  | December 31, |
|  |  | 2018 |  |  | 2017 |
Statement of Financial Position |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | $ | 72.1 |  |  | $ | 511.1 |
Total assets |  |  |  | 4,782.0 |  |  |  | 4,788.4 |
Deferred income tax liabilities |  |  |  | 60.3 |  |  |  | 60.3 |
Total shareholders’ equity |  |  |  | 4,700.2 |  |  |  | 4,705.5 |
Working capital |  |  |  | 158.4 |  |  |  | 593.8 |

| 1 |  | Refer to Note 1 at the bottom of page 5 of this MD&A for the methodology for calculating GEOs, and, f or illustrative purposes, to the average commodity price table on pages 11 and 17 of this MD&A for indicative prices which may be used in the calculations of GEOs for the three and six months ended June 30, 2018, respectively.

| 2 |  | Adjusted EBITDA, Margin and Adjusted Net Income are non-IFRS financial measures with no standardized meaning under IFRS. For further information and a detailed reconciliation, please see the “Non-IFRS Financial Measures” section of this MD&A.

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Revenue by Asset

Our portfolio is well-diversified with GEOs and revenue being earned from 51(1) mining assets and 57 Oil & Gas assets in various jurisdictions. The following table details revenue earned from our various royalty, stream and working interests for the three and six months ended June 30, 2018 and 2017:

|  |  |  |  | For the three months ended |  |  | For the six months ended |
(expressed in millions) |  |  |  |  | June 30, |  |  | June 30, |
Property |  | Interest |  |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
PRECIOUS METALS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Latin America |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Antapaccay |  | Stream (indexed) |  |  | $ | 20.3 |  |  | $ | 21.9 |  |  | $ | 49.3 |  |  | $ | 40.4 |
Candelaria |  | Stream 68% |  |  |  | 18.8 |  |  |  | 27.6 |  |  |  | 37.6 |  |  |  | 55.2 |
Antamina |  | Stream 22.5% |  |  |  | 11.6 |  |  |  | 13.9 |  |  |  | 27.3 |  |  |  | 30.2 |
Guadalupe-Palmarejo |  | Stream 50% |  |  |  | 12.6 |  |  |  | 12.2 |  |  |  | 25.8 |  |  |  | 35.9 |
Other |  |  |  |  |  | 0.6 |  |  |  | 0.5 |  |  |  | 1.0 |  |  |  | 1.1 |
United States |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goldstrike |  | NSR 2-4%, NPI 2.4-6% |  |  | $ | 4.4 |  |  | $ | 4.4 |  |  | $ | 7.7 |  |  | $ | 8.0 |
Stillwater |  | NSR 5% |  |  |  | 5.1 |  |  |  | 4.0 |  |  |  | 11.0 |  |  |  | 9.7 |
Gold Quarry |  | NSR 7.29% |  |  |  | 3.6 |  |  |  | 4.7 |  |  |  | 8.0 |  |  |  | 7.0 |
Marigold |  | NSR 1.75-5%, GR 0.5-4% |  |  |  | 2.5 |  |  |  | 2.8 |  |  |  | 4.7 |  |  |  | 5.5 |
Fire Creek/Midas |  | Fixed to 2018 / NSR 2.5% (2) |  |  |  | 2.5 |  |  |  | 3.5 |  |  |  | 5.4 |  |  |  | 5.9 |
Bald Mountain |  | NSR/GR 0.875-5% |  |  |  | 6.2 |  |  |  | 1.1 |  |  |  | 7.7 |  |  |  | 2.2 |
South Arturo |  | GR 4-9% |  |  |  | 0.5 |  |  |  | 3.0 |  |  |  | 3.6 |  |  |  | 8.3 |
Other |  |  |  |  |  | 1.2 |  |  |  | 0.9 |  |  |  | 2.3 |  |  |  | 1.5 |
Canada |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sudbury |  | Stream 50% |  |  | $ | 6.0 |  |  | $ | 8.8 |  |  | $ | 10.6 |  |  | $ | 15.3 |
Detour Lake |  | NSR 2% |  |  |  | 3.8 |  |  |  | 3.8 |  |  |  | 7.9 |  |  |  | 7.0 |
Golden Highway |  | NSR 2-15% |  |  |  | 1.9 |  |  |  | 2.1 |  |  |  | 4.3 |  |  |  | 4.2 |
Hemlo |  | NSR 3%, NPI 50% |  |  |  | 2.5 |  |  |  | 2.9 |  |  |  | 5.1 |  |  |  | 3.9 |
Musselwhite |  | NPI 5% |  |  |  | (0.3) |  |  |  | 1.2 |  |  |  | 0.7 |  |  |  | 2.1 |
Kirkland Lake |  | NSR 1.5-5.5%, NPI 20% |  |  |  | 1.2 |  |  |  | 1.0 |  |  |  | 2.3 |  |  |  | 2.1 |
Timmins West |  | NSR 2.25% |  |  |  | 0.7 |  |  |  | 1.0 |  |  |  | 1.3 |  |  |  | 1.9 |
Canadian Malartic |  | GR 1.5% |  |  |  | 0.7 |  |  |  | 0.6 |  |  |  | 1.3 |  |  |  | 1.0 |
Rest of World |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
MWS |  | Stream 25% |  |  | $ | 8.4 |  |  | $ | 8.6 |  |  | $ | 17.4 |  |  | $ | 17.2 |
Sabodala |  | Stream 6%, Fixed to 2019 |  |  |  | 7.3 |  |  |  | 7.1 |  |  |  | 14.8 |  |  |  | 16.2 |
Karma |  | Stream 4.875%, Fixed to 80,625 oz |  |  |  | 5.7 |  |  |  | 5.6 |  |  |  | 11.6 |  |  |  | 11.6 |
Subika |  | NSR 2% |  |  |  | 2.2 |  |  |  | 1.4 |  |  |  | 4.3 |  |  |  | 3.4 |
Tasiast |  | NSR 2% |  |  |  | 1.3 |  |  |  | 1.3 |  |  |  | 2.9 |  |  |  | 3.0 |
Duketon |  | NSR 2% |  |  |  | 1.5 |  |  |  | 1.8 |  |  |  | 3.6 |  |  |  | 3.3 |
Edikan |  | NSR 1.5% |  |  |  | 1.2 |  |  |  | 0.8 |  |  |  | 2.3 |  |  |  | 1.7 |
Other |  |  |  |  |  | 2.3 |  |  |  | 1.8 |  |  |  | 5.6 |  |  |  | 3.5 |
|  |  |  |  | $ | 136.3 |  |  | $ | 150.3 |  |  | $ | 287.4 |  |  | $ | 308.3 |
OTHER MINING ASSETS |  |  |  |  | $ | 2.3 |  |  | $ | 3.7 |  |  | $ | 5.3 |  |  | $ | 7.5 |
OIL & GAS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weyburn |  | NRI 11.71%, ORR 0.44%, WI 2.56% |  |  | $ | 10.2 |  |  | $ | 6.5 |  |  | $ | 20.3 |  |  | $ | 14.8 |
Midale |  | ORR 1.14%, WI 1.59% |  |  |  | 0.5 |  |  |  | 0.4 |  |  |  | 1.0 |  |  |  | 0.8 |
Edson |  | ORR 15% |  |  |  | 0.4 |  |  |  | 0.5 |  |  |  | 0.9 |  |  |  | 1.1 |
SCOOP/STACK |  | Various Royalty Rates |  |  |  | 3.3 |  |  |  | 0.7 |  |  |  | 5.5 |  |  |  | 1.3 |
Midland/Delaware |  | Various Royalty Rates |  |  |  | 6.2 |  |  |  | 0.7 |  |  |  | 9.9 |  |  |  | 0.7 |
Orion |  | GORR 4% |  |  |  | 0.9 |  |  |  | — |  |  |  | 1.7 |  |  |  | — |
Other |  |  |  |  |  | 1.2 |  |  |  | 0.8 |  |  |  | 2.4 |  |  |  | 1.8 |
|  |  |  |  | $ | 22.7 |  |  | $ | 9.6 |  |  | $ | 41.7 |  |  | $ | 20.5 |
Revenue |  |  |  |  | $ | 161.3 |  |  | $ | 163.6 |  |  | $ | 334.4 |  |  | $ | 336.3 |

| 1 |  | New revenue-generating assets in 2018 include the Cerro Moro and Sissingué mines, both of which have started contributing revenue to the Company in Q2/2018, as well as the Brucejack mine which is expected to begin generating revenue for the Company in the next twelve months.

| 2 |  | 2.5% NSR commencing in 2019.

10 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Overview of Financial Performance – Q2/2018 to Q2/2017

The prices of precious metals, oil and gas and the actual production from mining and Oil & Gas assets are the largest factors in determining profitability and cash flow from operations for Franco-Nevada. The following table summarizes average commodity prices and average exchange rates during the periods presented.

|  |  |  |  |  |  |  |  |  |  |  | QOQ |  | YOY
Quarterly average prices and rates |  |  |  |  | Q2/2018 |  |  | Q1/2018 |  | Q2/2017 |  | (Q2/2018-Q1/2018) |  | (Q2/2018-Q2/2017)
Gold(1) |  | ($/oz) |  |  | $ | 1,306 |  |  | $ | 1,329 |  | $ | 1,257 |  | (1.7) | % |  | 3.9 | %
Silver(2) |  | ($/oz) |  |  |  | 16.57 |  |  |  | 16.77 |  |  | 17.26 |  | (1.2) | % |  | (4.0) | %
Platinum(3) |  | ($/oz) |  |  |  | 904 |  |  |  | 978 |  |  | 940 |  | (7.6) | % |  | (3.8) | %
Palladium(3) |  | ($/oz) |  |  |  | 979 |  |  |  | 1,035 |  |  | 819 |  | (5.4) | % |  | 19.5 | %
Edmonton Light |  | (C$/bbl) |  |  |  | 78.41 |  |  |  | 72.45 |  |  | 61.71 |  | 8.2 | % |  | 27.1 | %
Quality differential |  | (C$/bbl) |  |  |  | (6.67) |  |  |  | (9.20) |  |  | (5.70) |  | (27.5) | % |  | 17.0 | %
Canadian oil realized price |  | (C$/bbl) |  |  |  | 71.74 |  |  |  | 63.25 |  |  | 56.01 |  | 13.4 | % |  | 28.1 | %
CAD/USD exchange rate(4) |  |  |  |  |  | 0.7747 |  |  |  | 0.7910 |  |  | 0.7437 |  | (2.1) | % |  | 4.2 | %

| 1 |  | Based on LBMA Gold Price PM Fix.

| 2 |  | Based on LBMA Silver Price.

| 3 |  | Based on London PM Fix.

| 4 |  | Based on Bank of Canada daily average rates.

Revenue and Gold Equivalent Ounces

Revenue for Q2/2018 was $161.3 million, a slight decrease from $163.6 million earned in Q2/2017. GEOs sold in Q2/2018 decreased to 107,333 compared to 122,541 in Q2/2017. The financial impact of the decrease in GEOs sold was primarily offset by the increase in revenue from the Company’s Oil & Gas assets, as well as higher gold prices.

Of this $161.3 million in revenue, precious metals revenue comprised 84.5% in Q2/2018, compared to 91.9% in Q2/2017, while revenue from the Americas was 80.9% in Q2/2018, compared to 82.2% in Q2/2017.

| 11

The following table outlines GEOs and revenue attributable to Franco-Nevada for the three months ended June 30, 2018 and 2017 by commodity, geographical location and type of interest:

|  |  | Gold Equivalent Ounces(1) |  |  | Revenue (in millions) |
For the three months ended June 30, |  |  | 2018 |  |  | 2017 |  | Variance |  |  | 2018 |  |  | 2017 |  | Variance |
Commodity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Precious Metals |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gold |  |  | 83,870 |  |  | 92,706 |  | (8,836) |  |  | $ | 108.6 |  |  | $ | 116.5 |  | $ | (7.9) |
Silver |  |  | 14,147 |  |  | 18,139 |  | (3,992) |  |  |  | 18.1 |  |  |  | 22.8 |  |  | (4.7) |
PGM |  |  | 7,546 |  |  | 8,801 |  | (1,255) |  |  |  | 9.6 |  |  |  | 11.0 |  |  | (1.4) |
Precious Metals - Total |  |  | 105,563 |  |  | 119,646 |  | (14,083) |  |  |  | 136.3 |  |  |  | 150.3 |  |  | (14.0) |
Other mining assets |  |  | 1,770 |  |  | 2,895 |  | (1,125) |  |  |  | 2.3 |  |  |  | 3.7 |  |  | (1.4) |
Oil & Gas |  |  | - |  |  | - |  | - |  |  |  | 22.7 |  |  |  | 9.6 |  |  | 13.1 |
|  |  | 107,333 |  |  | 122,541 |  | (15,208) |  |  | $ | 161.3 |  |  | $ | 163.6 |  | $ | (2.3) |
Geography |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Latin America |  |  | 49,606 |  |  | 60,548 |  | (10,942) |  |  | $ | 63.9 |  |  | $ | 76.1 |  | $ | (12.2) |
United States |  |  | 20,077 |  |  | 19,463 |  | 614 |  |  |  | 35.6 |  |  |  | 25.9 |  |  | 9.7 |
Canada |  |  | 13,788 |  |  | 19,388 |  | (5,600) |  |  |  | 30.9 |  |  |  | 32.6 |  |  | (1.7) |
Rest of World |  |  | 23,862 |  |  | 23,142 |  | 720 |  |  |  | 30.9 |  |  |  | 29.0 |  |  | 1.9 |
|  |  | 107,333 |  |  | 122,541 |  | (15,208) |  |  | $ | 161.3 |  |  | $ | 163.6 |  | $ | (2.3) |
Type |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue-based royalties |  |  | 29,603 |  |  | 28,004 |  | 1,599 |  |  | $ | 50.5 |  |  | $ | 38.3 |  | $ | 12.2 |
Streams |  |  | 70,623 |  |  | 84,159 |  | (13,536) |  |  |  | 90.7 |  |  |  | 105.7 |  |  | (15.0) |
Profit-based royalties |  |  | 3,867 |  |  | 5,144 |  | (1,277) |  |  |  | 11.9 |  |  |  | 10.1 |  |  | 1.8 |
Other |  |  | 3,240 |  |  | 5,234 |  | (1,994) |  |  |  | 8.2 |  |  |  | 9.5 |  |  | (1.3) |
|  |  | 107,333 |  |  | 122,541 |  | (15,208) |  |  | $ | 161.3 |  |  | $ | 163.6 |  | $ | (2.3) |

| 1 |  | Refer to Note 1 at the bottom of page 5 of this MD&A for the methodology for calculating GEOs, and, f or illustrative purposes, to the average commodity price table on page 11 of this MD&A for indicative prices which may be used in the calculations of GEOs.

GEOs and revenue from precious metals were earned from the following geographical locations:

|  |  | Gold Equivalent Ounces(1) |  |  | Revenue (in millions) |
For the three months ended June 30, |  |  | 2018 |  |  | 2017 |  | Variance |  |  | 2018 |  |  | 2017 |  | Variance |
Geography for Precious Metals |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Precious Metals |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Latin America |  |  | 49,606 |  |  | 60,548 |  | (10,942) |  |  | $ | 63.9 |  |  | $ | 76.1 |  | $ | (12.2) |
United States |  |  | 19,930 |  |  | 19,350 |  | 580 |  |  |  | 26.0 |  |  |  | 24.4 |  |  | 1.6 |
Canada |  |  | 12,868 |  |  | 17,097 |  | (4,229) |  |  |  | 16.5 |  |  |  | 21.4 |  |  | (4.9) |
Rest of World |  |  | 23,159 |  |  | 22,651 |  | 508 |  |  |  | 29.9 |  |  |  | 28.4 |  |  | 1.5 |
Precious Metals - Total |  |  | 105,563 |  |  | 119,646 |  | (14,083) |  |  | $ | 136.3 |  |  | $ | 150.3 |  | $ | (14.0) |

| 1 |  | Refer to Note 1 at the bottom of page 5 of this MD&A for the methodology for calculating GEOs, and, f or illustrative purposes, to the average commodity price table on page 11 of this MD&A for indicative prices which may be used in the calculations of GEOs.

12 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Precious Metals

Revenue from precious metals assets was $136.3 million in Q2/2018 compared to $150.3 million in Q2/2017, reflecting a decrease in GEOs sold to 105,563 GEOs in Q2/2018, down 11.8% from 119,646 GEOs in Q2/2017. The impact of the decrease in GEOs was partly offset by a year-over-year increase in gold prices.

The decrease in GEOs during the quarter was primarily due to the following assets:

| · |  | Candelaria - The Company sold 14,472 GEOs from its Candelaria stream, compared to 21,981 GEOs in Q2/2017. Although a decrease in production due to planned lower grades was expected, the impact on gold and silver production was greater than anticipated.

| · |  | Antamina - The Company sold 9,151 GEOs from its Antamina silver stream in Q2/2018, compared to 11,081 GEOs in Q2/2017, in-line with the 2018 life of mine plan.

| · |  | Sudbury – Sudbury assets generated 4,880 GEOs in Q2/2018 compared to 7,103 GEOs in Q2/2017, reflecting lower grades and production at the mines.

The above decreases were partly offset by the following:

| · |  | Bald Mountain - The Company received 4,768 GEOs compared to 923 GEOs in Q2/2017, reflecting caps expiring on a specific royalty as well as a strong performance for the mine, with more tonnes being placed on the heap leach pads in the 2018 period.

During Q2/2018, 1,096,738 ounces of silver were received from our Antamina, Antapaccay, Candelaria and Cerro San Pedro interests and 1,091,678 ounces were sold in the quarter. Ounces of silver sold were converted to 14,147 GEOs in Q1/2018.

Other Mining Assets

Other mining assets generated 1,770 GEOs and $2.3 million in revenue in Q2/2018, compared to 2,895 GEOs and $3.7 million in revenue in Q2/2017.

| 13

Oil & Gas

Oil & Gas assets generated revenue of $22.7 million for the quarter (96% oil and 4% gas), compared to $9.6 million for Q2/2017 (94% oil and 6% gas). Q2/2018 reflects the recent addition of the Company’s interests in the SCOOP/STACK, Midland, Delaware and Orion assets, higher oil prices, as well as an increase in revenue from the Company’s existing Canadian assets, particularly from its Weyburn interests.

Revenue from the Weyburn Unit for the quarter increased to $10.2 million (Q2/2017 - $6.5 million) with $6.7 million earned from the NRI (Q2/2017 - $3.7 million), $3.0 million earned from the WI (Q2/2017 - $2.4 million) and $0.5 million earned from the ORRs (Q2/2017 - $0.5 million). The Weyburn NRI benefitted from higher average realized prices and lower capital costs. Although capital expenditures were 47.4% lower in Q2/2018 than in Q2/2017, the benefits were partly offset by an increase of 17.3% in operating costs in Q2/2018 compared to Q2/2017. The actual realized price from the NRI was 28% higher in Q2/2018, at C$73.56/boe, compared to C$57.48/boe for Q2/2017.

Revenue from the Company’s U.S. Oil & Gas assets is ramping up, with Midland, Delaware and SCOOP/STACK contributing 42% of the Company’s Oil & Gas revenue, or $9.5 million for Q2/2018 (Q2/2017 - $1.4 million). In particular, revenue comprised $4.3 million from Delaware (Q2/2017 – nil), $1.9 million from Midland (Q2/2017 - $0.7 million), and $3.3 million from SCOOP/STACK (Q2/2017 - $0.7 million).

Operating Costs and Expenses

The following table provides a list of operating costs and expenses incurred in the periods presented:

|  |  | For the three months ended June 30, |
(expressed in millions) |  |  | 2018 |  |  | 2017 |  | Variance |
Costs of sales |  |  | $ | 29.8 |  |  | $ | 33.9 |  | $ | (4.1) |
Depletion and depreciation |  |  |  | 59.6 |  |  |  | 67.2 |  |  | (7.6) |
General and administrative |  |  |  | 7.0 |  |  |  | 6.6 |  |  | 0.4 |
(Gain) on sale of gold bullion |  |  |  | — |  |  |  | (0.1) |  |  | 0.1 |
|  |  | $ | 96.4 |  |  | $ | 107.6 |  | $ | (11.2) |

Costs of Sales

The following table provides a breakdown of cost of sales incurred in the periods presented:

|  |  | For the three months ended June 30, |
(expressed in millions) |  |  | 2018 |  |  | 2017 |  | Variance |
Cost of stream sales |  |  | $ | 25.7 |  |  | $ | 29.7 |  | $ | (4.0) |
Cost of prepaid ounces |  |  |  | 1.8 |  |  |  | 2.3 |  |  | (0.5) |
Mineral production taxes |  |  |  | 0.8 |  |  |  | 0.7 |  |  | 0.1 |
Oil & Gas operating costs |  |  |  | 1.5 |  |  |  | 1.2 |  |  | 0.3 |
|  |  | $ | 29.8 |  |  | $ | 33.9 |  | $ | (4.1) |

The decrease in costs of sales of $4.1 million reflects the decrease in stream ounces sold of 70,623 GEOs in Q2/2018 compared to 84,159 GEOs in Q2/2017, primarily from the Company’s streams on Candelaria and Sudbury.

14 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Depletion and Depreciation

Depletion and depreciation expense totaled $59.6 million in Q2/2018 compared to $67.2 million in Q2/2017. The decrease in depletion and depreciation expense reflects fewer GEOs earned from Candelaria and South Arturo, as well as a lower depletion rate per ounce on South Arturo which completed its Phase 2 mining.

General and Administrative Expenses

The following table provides a breakdown of general and administrative expenses incurred for the periods presented:

|  |  | For the three months ended June 30, |
(expressed in millions) |  |  | 2018 |  |  | 2017 |  | Variance |
Salaries and benefits |  |  | $ | 1.5 |  |  | $ | 1.5 |  | $ | — |
Professional fees |  |  |  | 1.4 |  |  |  | 0.9 |  |  | 0.5 |
Office costs |  |  |  | 0.2 |  |  |  | 0.2 |  |  | — |
Board of Directors' cost |  |  |  | 0.8 |  |  |  | 0.9 |  |  | (0.1) |
Share-based compensation |  |  |  | 1.4 |  |  |  | 1.5 |  |  | (0.1) |
Other |  |  |  | 1.7 |  |  |  | 1.6 |  |  | 0.1 |
|  |  | $ | 7.0 |  |  | $ | 6.6 |  | $ | 0.4 |

General and administrative expenses, representing 4.3% of revenue for Q2/2018, increased by $0.4 million compared to Q2/2017, as a result of higher professional fees in connection with various filings undertaken by the Company during the quarter. Board of Directors’ fees vary according to the mark-to-market of the value of deferred share units that are granted to the directors of the Company. As the Company’s share price increased during the quarter, the Company recognized an increase in the value of

| 15

the deferred share unit liability. Also included in general and administrative expenses are business development costs, which vary depending upon the level of business development related activity and the timing of completing transactions. Business development expenses related to completed transactions are capitalized to the relevant asset.

Foreign Exchange and Other Income/Expenses

The following table provides a list of foreign exchange and other income/expenses incurred for the periods presented:

|  |  | For the three months ended June 30, |
(expressed in millions) |  |  | 2018 |  |  | 2017 |  | Variance |
Foreign exchange (loss) gain |  |  | $ | (0.3) |  |  | $ | 0.2 |  | $ | (0.5) |
Other income |  |  |  | 0.2 |  |  |  | 0.2 |  |  | — |
|  |  | $ | (0.1) |  |  | $ | 0.4 |  | $ | (0.5) |

Foreign exchange gain and other income/expenses in Q2/2018 comprised a foreign exchange loss of $0.3 million (Q2/2017 – gain of $0.2 million) and other income of $0.2 million (Q2/2017 - $0.2 million). The foreign exchange loss for the quarter reflects a weakening of the U.S. dollar relative to the Canadian dollar. Under IFRS, all foreign exchange gains or losses related to monetary assets and liabilities held in a currency other than the functional currency are recorded in net income as opposed to other comprehensive income. The parent company’s functional currency is the Canadian dollar, while the functional currency of certain of the Company’s subsidiaries is the U.S. dollar.

Finance Income and Finance Expenses

The following table provides a breakdown of finance income and expenses incurred for the periods presented:

|  |  | For the three months ended June 30, |
(expressed in millions) |  |  | 2018 |  |  | 2017 |  | Variance |
Finance income |  |  |  |  |  |  |  |  |  |  |  |
Interest |  |  | $ | 0.7 |  |  | $ | 1.1 |  | $ | (0.4) |
|  |  | $ | 0.7 |  |  | $ | 1.1 |  | $ | (0.4) |
Finance expenses |  |  |  |  |  |  |  |  |  |  |  |
Standby charges |  |  | $ | 0.5 |  |  | $ | 0.6 |  | $ | (0.1) |
Amortization |  |  |  | 0.3 |  |  |  | 0.2 |  |  | 0.1 |
|  |  | $ | 0.8 |  |  | $ | 0.8 |  | $ | — |

Finance income is earned on our cash equivalents and/or short-term investments. Finance income also includes interest income in the amount of $0.5 million accrued on the Noront Resources Ltd. loan during Q2/2018 (Q2/2017 – $0.5 million). Finance expenses consist of the costs of standby charges, which represent the costs of maintaining our credit facilities and amortization of the costs incurred with respect to the initial set-up or subsequent amendments of the facilities.

Income Taxes

Income tax expense for the quarter was flat compared to the same period in 2017, totaling $11.1 million in Q2/2018 and Q2/2017. Income tax expense in Q2/2018 comprised of a current income tax expense of $5.4 million (Q2/2017 – $7.7 million) and a deferred income tax expense of $5.7 million (Q2/2017 – $3.4 million).

Net Income

Net income for Q2/2018 was $53.6 million, or $0.29 per share, compared to $45.6 million, or $0.25 per share, for the same period in 2017. Adjusted Net Income was $53.7 million, or $0.29 per share, compared to $46.1 million, or $0.25 per share, earned in Q2/2017. Costs of sales and depletion expense were lower as fewer ounces, particularly from streams, were sold in the quarter, while revenue remained relatively flat due to higher average realized prices and increased oil & gas revenue. Depletion expense also reflects lower depletion rates per ounce, as reserves for certain of the Company’s assets have increased year-over-year.

16 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Overview of Financial Performance – H1/2018 to H1/2017

The prices of precious metals, oil and gas and the actual production from mining and Oil & Gas assets are the largest factors in determining profitability and cash flow from operations for Franco-Nevada. The following table summarizes average commodity prices and average exchange rates during the periods presented.

Year-to-date average prices and rates |  |  |  |  | H1/2018 |  |  | H1/2017 |  | Variance |
Gold(1) |  | ($/oz) |  |  | $ | 1,318 |  |  | $ | 1,238 |  | 6.5 | %
Silver(2) |  | ($/oz) |  |  |  | 16.65 |  |  |  | 17.34 |  | (4.0) | %
Platinum(3) |  | ($/oz) |  |  |  | 941 |  |  |  | 960 |  | (2.0) | %
Palladium(3) |  | ($/oz) |  |  |  | 1,008 |  |  |  | 793 |  | 27.1 | %
Edmonton Light |  | (C$/bbl) |  |  |  | 75.43 |  |  |  | 63.26 |  | 19.2 | %
Quality differential |  | (C$/bbl) |  |  |  | (8.00) |  |  |  | (6.65) |  | 20.3 | %
Canadian oil realized price |  | (C$/bbl) |  |  |  | 67.43 |  |  |  | 56.61 |  | 19.1 | %
CAD/USD exchange rate(4) |  |  |  |  |  | 0.7828 |  |  |  | 0.7496 |  | 4.4 | %

| 1 |  | Based on LBMA Gold Price PM Fix.

| 2 |  | Based on LBMA Silver Price.

| 3 |  | Based on London PM Fix.

| 4 |  | Based on Bank of Canada noon and daily average rates.

Revenue and Gold Equivalent Ounces

Revenue in H1/2018 was $334.4 million compared with $336.3 million for the same period in 2017, a decrease of 0.6%. GEOs sold decreased 12.2% to 223,004 GEOs in H1/2018 from 254,119 GEOs in H1/2017. The financial impact of the decrease in GEO production was mostly offset by revenue from the Company’s Oil & Gas assets.

Of this $334.4 million in revenue, precious metals revenue comprised 85.9% of total revenue, compared to 91.7% in H1/2017, while revenue from the Americas was 80.7%, compared to 81.6% in H1/2017.

| 17

The following table outlines GEOs and revenue attributable to Franco-Nevada for the six months ended June 30, 2018 and 2017 by commodity, geographical location and type of interest:

|  |  | Gold Equivalent Ounces(1) |  |  | Revenue (in millions) |
For the six months ended June 30, |  |  | 2018 |  |  | 2017 |  | Variance |  |  | 2018 |  |  | 2017 |  | Variance |
Commodity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Precious Metals |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gold |  |  | 172,664 |  |  | 193,246 |  | (20,582) |  |  | $ | 226.9 |  |  | $ | 239.4 |  | $ | (12.5) |
Silver |  |  | 31,819 |  |  | 37,885 |  | (6,066) |  |  |  | 41.6 |  |  |  | 47.2 |  |  | (5.6) |
PGM |  |  | 14,481 |  |  | 17,025 |  | (2,544) |  |  |  | 18.9 |  |  |  | 21.7 |  |  | (2.8) |
Precious Metals - Total |  |  | 218,964 |  |  | 248,156 |  | (29,192) |  |  |  | 287.4 |  |  |  | 308.3 |  |  | (20.9) |
Other mining assets |  |  | 4,040 |  |  | 5,963 |  | (1,923) |  |  |  | 5.3 |  |  |  | 7.5 |  |  | (2.2) |
Oil & Gas |  |  | - |  |  | - |  | - |  |  |  | 41.7 |  |  |  | 20.5 |  |  | 21.2 |
|  |  | 223,004 |  |  | 254,119 |  | (31,115) |  |  | $ | 334.4 |  |  | $ | 336.3 |  | $ | (1.9) |
Geography |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Latin America |  |  | 107,460 |  |  | 130,977 |  | (23,517) |  |  | $ | 141.0 |  |  | $ | 162.8 |  | $ | (21.8) |
United States |  |  | 38,563 |  |  | 39,097 |  | (534) |  |  |  | 66.2 |  |  |  | 50.4 |  |  | 15.8 |
Canada |  |  | 27,837 |  |  | 33,989 |  | (6,152) |  |  |  | 62.7 |  |  |  | 61.3 |  |  | 1.4 |
Rest of World |  |  | 49,144 |  |  | 50,056 |  | (912) |  |  |  | 64.5 |  |  |  | 61.8 |  |  | 2.7 |
|  |  | 223,004 |  |  | 254,119 |  | (31,115) |  |  | $ | 334.4 |  |  | $ | 336.3 |  | $ | (1.9) |
Type |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenue-based royalties |  |  | 59,881 |  |  | 58,310 |  | 1,571 |  |  | $ | 98.9 |  |  | $ | 76.7 |  | $ | 22.2 |
Streams |  |  | 148,347 |  |  | 178,384 |  | (30,037) |  |  |  | 194.4 |  |  |  | 222.0 |  |  | (27.6) |
Profit-based royalties |  |  | 7,661 |  |  | 7,953 |  | (292) |  |  |  | 23.7 |  |  |  | 19.0 |  |  | 4.7 |
Other |  |  | 7,115 |  |  | 9,472 |  | (2,357) |  |  |  | 17.4 |  |  |  | 18.6 |  |  | (1.2) |
|  |  | 223,004 |  |  | 254,119 |  | (31,115) |  |  | $ | 334.4 |  |  | $ | 336.3 |  | $ | (1.9) |

| 1 |  | Refer to Note 1 at the bottom of page 5 of this MD&A for the methodology for calculating GEOs, and, f or illustrative purposes, to the average commodity price table on page 17 of this MD&A for indicative prices which may be used in the calculations of GEOs.

GEOs and revenue from precious metals were earned from the following geographical locations:

|  |  | Gold Equivalent Ounces(1) |  |  | Revenue (in millions) |
For the six months ended June 30, |  |  | 2018 |  |  | 2017 |  | Variance |  |  | 2018 |  |  | 2017 |  | Variance |
Geography for Precious Metals |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Precious Metals |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Latin America |  |  | 107,460 |  |  | 130,977 |  | (23,517) |  |  | $ | 141.0 |  |  | $ | 162.8 |  | $ | (21.8) |
United States |  |  | 38,294 |  |  | 38,879 |  | (585) |  |  |  | 50.4 |  |  |  | 48.1 |  |  | 2.3 |
Canada |  |  | 25,624 |  |  | 29,749 |  | (4,125) |  |  |  | 33.5 |  |  |  | 37.5 |  |  | (4.0) |
Rest of World |  |  | 47,586 |  |  | 48,551 |  | (965) |  |  |  | 62.5 |  |  |  | 59.9 |  |  | 2.6 |
Precious Metals - Total |  |  | 218,964 |  |  | 248,156 |  | (29,192) |  |  | $ | 287.4 |  |  | $ | 308.3 |  | $ | (20.9) |

| 1 |  | Refer to Note 1 at the bottom of page 5 of this MD&A for the methodology for calculating GEOs, and, f or illustrative purposes, to the average commodity price table on page 17 of this MD&A for indicative prices which may be used in the calculations of GEOs.

18 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Precious Metals

Revenue from precious metals assets was $287.4 million in H1/2018 compared to $308.3 million in H1/2017, reflecting a decrease of 11.8% in GEOs from precious metals assets. The impact of the decrease in GEOs was partly offset by a year-over-year increase in gold prices.

The decrease in GEOs during the quarter was primarily due to the following assets:

| · |  | Candelaria - The Company sold 28,547 GEOs from its Candelaria stream in H1/2018, compared to 44,464 in H1/2017. Although a decrease in production was expected based on planned processing of lower grade material, the impact on gold and silver production was greater than expected. H1/2017 also included 2,032 GEOs which had been delivered in 2016, but sold in Q1/2017.

| · |  | Guadalupe - The Guadalupe stream delivered 19,739 GEOs in H1/2018, compared to 28,983 GEOs under the Palmarejo agreement in H1/2017, with 2017 being an exceptionally strong year of production for Guadalupe-Palmarejo.

| · |  | South Arturo - The South Arturo mine generated payments of 2,684 GEOs in H1/2018, compared to 6,758 GEOs in H1/2017 due to the end of mining in Phase 2, with processing of ore stockpiled from Phase 2 continuing on a limited scale.

The above decreases were partly offset by the following:

| · |  | Bald Mountain - The Company received 5,926 GEOs in H1/2018, compared to 1,803 GEOs in H1/2017, reflecting caps expiring on a specific royalty as well as a strong performance for the mine in 2018 compared to the same period in 2017.

| · |  | Antapaccay – The Company sold 37,483 GEOs from its Antapaccay stream, an increase compared to 32,383 GEOs in H1/2017, in-line with the 2018 life of mine plan as the mine sequencing moves to a new phase of production with higher grades.

During H1/2018, 2,546,727 ounces of silver were received from our Candelaria, Antapaccay, Antamina and Cerro San Pedro interests and 2,511,522 ounces were sold during the period. Ounces of silver sold converted to 31,819 GEOs.

Other Mining Assets

Other mining assets generated 4,040 GEOs and $5.3 million in revenue in H1/2018, compared to 5,963 GEOs and $7.5 million in revenue in H1/2017.

Oil & Gas

Oil & Gas assets generated revenue of $41.7 million in H1/2018 (96% oil and 4% gas), compared to $20.5 million in H1/2017 (94% oil and 6% gas). Production for H1/2018 was 37.8% higher than in the same period in 2017.

Revenue from the Weyburn Unit in H1/2018 increased to $20.3 million (H1/2017 - $14.8 million) with $13.5 million earned from the NRI (H1/2017 - $9.2 million), $5.7 million earned from the WI (H1/2017 - $4.7 million) and $1.1 million earned from the ORRs (H1/2017 - $0.9 million). Revenue from the Weyburn NRI was higher due to the higher average realized prices and lower capital costs. Although operating expenses were 6.9% higher than in H1/2017, capital expenses were 29% lower in H1/2018

| 19

compared to H1/2017. The actual realized price from the NRI was 19% higher in H1/2018, at C$68.88/boe compared to C$57.65/boe in H1/2017.

The Company’s recently acquired U.S. assets generated 36.9% of the Company’s Oil & Gas revenue, or $15.4 million for H1/2018 (H1/2017 - $2.0 million), with rig activity ahead of original expectations. In particular, revenue comprised $5.2 million from Delaware (H1/2017 – nil), $4.7 million from Midland (H1/2017 - $0.7 million), and $5.5 million from SCOOP/STACK (H1/2017 - $1.3 million). Included in the H1/2018 revenue for Delaware is a true-up of $1.9 million as the transaction closed in February 2018, but had an effective date of October 1, 2017.

Operating Costs and Expenses

The following table provides a list of operating costs and expenses incurred in the periods presented:

|  |  | For the six months ended June 30, |
(expressed in millions) |  |  | 2018 |  |  | 2017 |  | Variance |
Costs of sales |  |  | $ | 60.0 |  |  | $ | 73.8 |  | $ | (13.8) |
Depletion and depreciation |  |  |  | 120.2 |  |  |  | 138.7 |  |  | (18.5) |
General and administrative |  |  |  | 12.2 |  |  |  | 12.7 |  |  | (0.5) |
Gain on sale of gold bullion |  |  |  | (0.3) |  |  |  | (0.1) |  |  | (0.2) |
|  |  | $ | 192.1 |  |  | $ | 225.1 |  | $ | (33.0) |

Costs of Sales

The following table provides a breakdown of cost of sales incurred in the periods presented:

|  |  | For the six months ended June 30, |
(expressed in millions) |  |  | 2018 |  |  | 2017 |  | Variance |
Cost of stream sales |  |  | $ | 52.7 |  |  | $ | 66.1 |  | $ | (13.4) |
Cost of prepaid ounces |  |  |  | 3.7 |  |  |  | 4.1 |  |  | (0.4) |
Mineral production taxes |  |  |  | 1.1 |  |  |  | 1.3 |  |  | (0.2) |
Oil & Gas operating costs |  |  |  | 2.5 |  |  |  | 2.3 |  |  | 0.2 |
|  |  | $ | 60.0 |  |  | $ | 73.8 |  | $ | (13.8) |

The decrease in costs of sales of $13.8 million is largely due to fewer stream ounces sold being 148,347 GEOs in H1/2018 compared to 178,384 GEOs in H1/2017.

20 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Depletion and Depreciation

Depletion and depreciation expense totaled $120.2 million in H1/2018 compared to $138.7 million in H1/2017. The decrease of $18.5 million is largely due to lower royalty payments and stream deliveries from Candelaria, South Arturo and Guadalupe, partly offset by an increase in the depletion of the Antapaccay and Oil & Gas assets.

General and Administrative Expenses

The following table provides a breakdown of general and administrative expenses incurred for the periods presented:

|  |  | For the six months ended June 30, |
(expressed in millions) |  |  | 2018 |  |  | 2017 |  | Variance |
Salaries and benefits |  |  | $ | 3.1 |  |  | $ | 2.9 |  | $ | 0.2 |
Professional fees |  |  |  | 2.0 |  |  |  | 1.5 |  |  | 0.5 |
Office costs |  |  |  | 0.4 |  |  |  | 0.4 |  |  | — |
Board of Directors' cost |  |  |  | 0.2 |  |  |  | 1.6 |  |  | (1.4) |
Share-based compensation |  |  |  | 2.6 |  |  |  | 3.1 |  |  | (0.5) |
Other |  |  |  | 3.9 |  |  |  | 3.2 |  |  | 0.7 |
|  |  | $ | 12.2 |  |  | $ | 12.7 |  | $ | (0.5) |

General and administrative expenses, representing 3.6% of revenue for H1/2018, decreased by $0.5 million compared to H1/2017. Board of Directors’ fees vary according to the mark-to-market of the value of deferred share units that are granted to the directors of the Company. As the Company’s share price decreased during the first half of the year, the Company recognized a decrease in the value of the deferred share unit liability. Expenses associated with the Company’s share based compensation plan were also lower in H1/2018 than in H1/2017, due to fewer employee grants.

Also included in general and administrative expenses are business development costs, which vary depending upon the level of business development related activity and the timing of completing transactions. Business development expenses related to completed transactions are capitalized to the relevant asset.

Gain or Loss on Sale of Gold Bullion

The Company recognized a gain on the sale of gold bullion of $0.3 million in H1/2018, compared to a gain of $0.1 million in H1/2017. Gold bullion is physical ounces of gold which the Company receives as settlement from certain of its royalty interests, and is presented as other current assets on the statement of financial position.

| 21

Foreign Exchange and Other Income/Expenses

The following table provides a list of foreign exchange and other income/expenses incurred for the periods presented:

|  |  | For the six months ended June 30, |
(expressed in millions) |  |  | 2018 |  |  | 2017 |  | Variance |
Foreign exchange gain |  |  | $ | 0.2 |  |  | $ | 0.7 |  | $ | (0.5) |
Other income |  |  |  | 0.3 |  |  |  | 0.4 |  |  | (0.1) |
|  |  | $ | 0.5 |  |  | $ | 1.1 |  | $ | (0.6) |

The foreign exchange gain recognized in H1/2018 reflects a strengthening of the U.S. dollar relative to the Canadian dollar. Under IFRS, all foreign exchange gains or losses related to monetary assets and liabilities held in a currency other than the functional currency are recorded in net income as opposed to other comprehensive income. The parent company’s functional currency is the Canadian dollar, while the functional currency of certain of the Company’s subsidiaries is the U.S. dollar.

Other income also includes dividend income on certain of the Company’s equity investments.

Finance Income and Finance Expenses

The following table provides a breakdown of finance income and expenses incurred for the periods presented:

|  |  | For the six months ended June 30, |
(expressed in millions) |  |  | 2018 |  |  | 2017 |  | Variance |
Finance income |  |  |  |  |  |  |  |  |  |  |  |
Interest |  |  | $ | 1.7 |  |  | $ | 2.0 |  | $ | (0.3) |
|  |  | $ | 1.7 |  |  | $ | 2.0 |  | $ | (0.3) |
Finance expenses |  |  |  |  |  |  |  |  |  |  |  |
Standby charges |  |  | $ | 1.2 |  |  | $ | 1.2 |  | $ | — |
Amortization |  |  |  | 0.5 |  |  |  | 0.4 |  |  | 0.1 |
|  |  | $ | 1.7 |  |  | $ | 1.6 |  | $ | 0.1 |

Finance income is earned on our cash equivalents and/or short-term investments. Finance income also includes interest income in the amount of $1.1 million accrued on the Noront Resources Ltd. loan during H1/2018 (H1/2017 - $1.0 million). Finance expenses consist of the costs of standby charges, which represent the costs of maintaining our credit facilities and amortization of the costs incurred with respect to the initial set-up or subsequent amendments of the facilities.

In the first quarter of 2018, the Company incurred $30,000 in interest expense, as FNBC drew down $20.0 million on the FNBC Credit Facility during the quarter to fund the Cobre Panama Floating Payment Stream acquisition. The amount drawn down was repaid in Q1/2018, and no amount has been drawn down since then.

Income Taxes

Income tax expense in H1/2018 totaled $24.6 million (H1/2017 – $21.5 million), comprised of a current income tax expense of $12.8 million (H1/2017 - $15.5 million) and a deferred income tax expense of $11.8 million (H1/2017 –$6.0 million). The increase in income tax expense year-over-year reflects higher income earned during the quarter compared to H1/2017.

Net Income

Net income in H1/2018 was $118.2 million, or $0.64 per share, compared to $91.2 million, or $0.51 per share, for the same period in 2017. Adjusted Net Income was $117.6 million, or $0.63 per share, compared to $90.0 million, or $0.50 per share, earned in H1/2017. While revenue in H1/2018 remained relatively flat compared to H1/2017 due to higher average realized prices and increased oil & gas revenue, the Company benefitted from lower depletion rates per ounce, reflecting increases in reserves for certain of the Company’s assets. Depletion expense and costs of sales were also lower due to fewer GEOs earned, particularly from streams.

22 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Summary of Quarterly Information

Selected quarterly financial and statistical information for the most recent eight quarters(1),(2) is set out below:

(in millions, except Margin, |  | Q2 |  |  | Q1 |  |  | Q4 |  |  | Q3 |  |  | Q2 |  |  | Q1 |  |  | Q4 |  |  | Q3 |
per ounce and per share amounts) |  | 2018 |  |  | 2018 |  |  | 2017 |  |  | 2017 |  |  | 2017 |  |  | 2017 |  |  | 2016 |  |  | 2016 |
Revenue |  | $ | 161.3 |  |  | $ | 173.1 |  |  | $ | 167.2 |  |  | $ | 171.5 |  |  | $ | 163.6 |  |  | $ | 172.7 |  |  | $ | 155.3 |  |  | $ | 172.0 |
Costs and expenses(3) |  |  | 96.4 |  |  |  | 95.7 |  |  |  | 106.0 |  |  |  | 108.5 |  |  |  | 107.6 |  |  |  | 117.5 |  |  |  | 154.9 |  |  |  | 104.5 |
Operating income |  |  | 64.9 |  |  |  | 77.4 |  |  |  | 61.2 |  |  |  | 63.0 |  |  |  | 56.0 |  |  |  | 55.2 |  |  |  | 0.4 |  |  |  | 67.5 |
Other income (expenses) |  |  | (0.2) |  |  |  | 0.7 |  |  |  | (0.8) |  |  |  | (0.1) |  |  |  | 0.7 |  |  |  | 0.8 |  |  |  | 8.5 |  |  |  | (0.2) |
Income tax expense |  |  | 11.1 |  |  |  | 13.5 |  |  |  | 16.9 |  |  |  | 2.9 |  |  |  | 11.1 |  |  |  | 10.4 |  |  |  | 13.4 |  |  |  | 12.9 |
Net income (loss) |  |  | 53.6 |  |  |  | 64.6 |  |  |  | 43.5 |  |  |  | 60.0 |  |  |  | 45.6 |  |  |  | 45.6 |  |  |  | (4.5) |  |  |  | 54.4 |
Basic earnings (loss) per share |  | $ | 0.29 |  |  | $ | 0.35 |  |  | $ | 0.23 |  |  | $ | 0.32 |  |  | $ | 0.25 |  |  | $ | 0.26 |  |  | $ | (0.03) |  |  | $ | 0.31 |
Diluted earnings (loss) per share |  | $ | 0.29 |  |  | $ | 0.35 |  |  | $ | 0.23 |  |  | $ | 0.32 |  |  | $ | 0.25 |  |  | $ | 0.25 |  |  | $ | (0.03) |  |  | $ | 0.30 |
Net cash provided by operating activities |  | $ | 111.3 |  |  | $ | 137.5 |  |  | $ | 126.3 |  |  | $ | 116.0 |  |  | $ | 126.5 |  |  | $ | 119.8 |  |  | $ | 121.9 |  |  | $ | 121.6 |
Net cash used in investing activities |  |  | (90.8) |  |  |  | (523.2) |  |  |  | (116.2) |  |  |  | (185.6) |  |  |  | (137.2) |  |  |  | (61.9) |  |  |  | (113.3) |  |  |  | (41.5) |
Net cash used in financing activities |  |  | (35.0) |  |  |  | (36.1) |  |  |  | (32.0) |  |  |  | (29.3) |  |  |  | 332.0 |  |  |  | (31.0) |  |  |  | (30.5) |  |  |  | (29.4) |
Average Gold Price(4) |  | $ | 1,306 |  |  | $ | 1,329 |  |  | $ | 1,274 |  |  | $ | 1,278 |  |  | $ | 1,257 |  |  | $ | 1,219 |  |  | $ | 1,218 |  |  | $ | 1,335 |
GEOs sold(5) |  |  | 107,333 |  |  |  | 115,671 |  |  |  | 119,839 |  |  |  | 123,787 |  |  |  | 122,541 |  |  |  | 131,578 |  |  |  | 121,910 |  |  |  | 123,065 |
Adjusted EBITDA(6) |  | $ | 126.3 |  |  | $ | 139.9 |  |  | $ | 128.0 |  |  | $ | 134.1 |  |  | $ | 125.5 |  |  | $ | 128.5 |  |  | $ | 122.2 |  |  | $ | 142.2 |
Adjusted EBITDA(6) per share |  | $ | 0.68 |  |  | $ | 0.75 |  |  | $ | 0.69 |  |  | $ | 0.72 |  |  | $ | 0.69 |  |  | $ | 0.72 |  |  | $ | 0.69 |  |  | $ | 0.80 |
Margin(6) |  |  | 78.3 | % |  |  | 80.8 | % |  |  | 76.6 | % |  |  | 78.2 | % |  |  | 76.7 | % |  |  | 74.4 | % |  |  | 78.7 | % |  |  | 82.7 | %
Adjusted Net Income(6) |  | $ | 53.7 |  |  | $ | 63.9 |  |  | $ | 52.1 |  |  | $ | 55.3 |  |  | $ | 46.1 |  |  | $ | 44.8 |  |  | $ | 42.9 |  |  | $ | 53.5 |
Adjusted Net Income(6) per share |  | $ | 0.29 |  |  | $ | 0.34 |  |  | $ | 0.28 |  |  | $ | 0.30 |  |  | $ | 0.25 |  |  | $ | 0.25 |  |  | $ | 0.24 |  |  | $ | 0.30 |

| 1 |  | Sum of the quarters may not add up to yearly total due to rounding.

| 2 |  | Quarterly results for the periods ended after January 1, 2018 have been prepared in accordance with IFRS 9 Financial Instruments, and IFRS 15 Revenue from Contracts with Customers. Comparative information for the quarters ended prior to January 1, 2018 has not been restated and is accounted for under IAS 39 Financial Instruments: Recognition and Measurement, and IAS 18 Revenue.

| 3 |  | Includes impairment charges on royalty, stream and working interests.

| 4 |  | Based on LBMA Gold Price PM Fix.

| 5 |  | GEOs include our gold, silver, platinum, palladium and other mining assets, and do not include Oil & Gas assets. GEOs are estimated on a gross basis for NSR royalties and, in the case of stream ounces, before the payment of the per ounce contractual price paid by the Company. For NPI royalties, GEOs are calculated taking into account the NPI economics. Silver, platinum, palladium and other mining commodities are converted to GEOs by dividing associated revenue, which includes settlement adjustments, by the relevant gold price. The gold price used in the computation of GEOs earned from a particular asset varies depending on the royalty or stream agreement, which may make reference to the market price realized by the operator, or the average price for the month, quarter, or year in which the mining commodity was produced or sold. For illustrative purposes, please refer to the average commodity price table on pages 11 and 17 of this MD&A for indicative prices which may be used in the calculation of GEOs for the three and six months ended June 30, 2018, respectively.

| 6 |  | Adjusted EBITDA, Margin and Adjusted Net Income are non-IFRS measures with no standardized meaning under IFRS. For further information and a detailed reconciliation, please refer to the “Non-IFRS Financial Measures” section of this MD&A.

| 23

Balance Sheet Review

Summary Balance Sheet and Key Financial Metrics

|  | At June 30, |  |  | At December 31,
(expressed in millions, except debt to equity ratio) |  | 2018 |  | 2017 |
Cash and cash equivalents |  | $ | 72.1 |  | $ | 511.1 |
Current assets |  |  | 179.9 |  |  | 616.4 |
Non-current assets |  |  | 4,602.1 |  |  | 4,172.0 |
Total assets |  | $ | 4,782.0 |  | $ | 4,788.4 |
Current liabilities |  |  | 21.5 |  |  | 22.6 |
Non-current liabilities |  |  | 60.3 |  |  | 60.3 |
Total liabilities |  | $ | 81.8 |  | $ | 82.9 |
Total shareholders’ equity |  | $ | 4,700.2 |  | $ | 4,705.5 |
Total common shares outstanding |  |  | 186.1 |  |  | 185.9 |
Key Financial Metrics |  |  |  |  |  |  |
Working Capital |  | $ | 158.4 |  | $ | 593.8 |
Debt to equity |  |  | — |  |  | — |

Assets

Total assets were $4,782.0 million at June 30, 2018 compared to $4,788.4 million at December 31, 2017. Our asset base is primarily comprised of non-current assets such as our royalty, stream and working interests, and current assets of cash and cash equivalents. The decrease of $436.5 million in current assets as at June 30, 2018 is due to the funding of the Cobre Panama Floating Payment Stream and Delaware Basin asset acquisitions in Q1/2018, as well as the Company’s contributions in H1/2018 of $159.4 million towards the Cobre Panama Fixed Payment Stream. The increase in non-current assets from these capital expenditures was partly offset by the depletion of royalty, stream and working interests.

Liabilities

Total liabilities at June 30, 2018 were $81.8 million including current and deferred income tax liabilities, relatively consistent compared to December 31, 2017.

Our business strategy of growing a diversified portfolio requires the availability of capital to fund future acquisitions and dividends. The Company has $1.1 billion of capital available through its two credit facilities. As at June 30, 2018, there was no amount outstanding under either facility.

Shareholders’ Equity

Shareholders’ equity decreased by $5.3 million as at June 30, 2018 compared to December 31, 2017, reflecting net income of $118.2 million in H1/2018, offset by a loss of $15.3 million on the Company’s equity investments, a loss $40.5 million in currency translation adjustment, and declared dividends of $87.9 million. The dividends of $87.9 million were partly settled through the issuance of $17.3 million in common shares pursuant to the Company’s DRIP. Contributed surplus also increased by $2.9 million, reflecting the amortization of share-based payments.

Liquidity and Capital Resources

Cash flow for the three and six months ended June 30, 2018 and 2017 was as follows:

|  | For the three months ended |  | For the six months ended |
|  | June 30, |  | June 30, |
(expressed in millions) |  | 2018 |  | 2017 |  | 2018 |  | 2017 |
Net cash provided by operating activities |  | $ | 111.3 |  | $ | 126.5 |  | $ | 248.8 |  | $ | 246.3 |
Net cash used in investing activities |  |  | (90.8) |  |  | (137.2) |  |  | (614.0) |  |  | (199.1) |
Net cash (used in) provided by financing activities |  |  | (35.0) |  |  | 332.0 |  |  | (71.1) |  |  | 301.0 |
Effect of exchange rate changes on cash and cash equivalents |  |  | (1.1) |  |  | 10.0 |  |  | (2.7) |  |  | 13.1 |
Net change in cash and cash equivalents |  | $ | (15.6) |  | $ | 331.3 |  | $ | (439.0) |  | $ | 361.3 |

24 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Operating Cash Flow

Net cash generated by operating activities was $111.3 million and $126.5 million in Q2/2018 and Q2/2017, respectively. For the six months ended June 30, 2018 and 2017, operating cash flows were $248.8 million and $246.3 million, respectively. Although GEO ounces produced were lower in 2018 than in the 2017 periods, the Company benefitted from higher commodity prices and an increase in revenue from the Company’s Oil & Gas portfolio.

Investing Activities

Net cash used in investing activities was $90.8 million in Q2/2018 compared to $137.2 million in Q2/2017. For the six months ended June 30, 2018 and 2017, cash used in investing activities was $614.0 million and $199.1 million, respectively. Investing activities in H1/2018 included the funding of $159.4 million towards the Cobre Panama Fixed Payment Stream, the purchase of the Cobre Panama Floating Payment Stream for $356.0 million, and the acquisition of $101.3 million of the Delaware Basin oil & gas royalties. Comparatively, investing activities in H1/2017 were limited to the funding of the Cobre Panama Fixed Payment Stream deposit, as well as the purchase of the Midland Basin portfolio of royalties.

Financing Activities

Net cash from financing activities was an outflow of $35.0 million in Q2/2018 and an inflow of $332.0 million in Q2/2017. For the six months ended June 30, 2018 and 2017, financing activities resulted in an outflow of $71.1 million and in inflow of $301.0 million, respectively. In 2017, the Company received proceeds of $356.4 million from the exercise of share purchase warrants which were due to expire in June 2017. Comparatively, in the relevant 2018 periods, financing activities consisted primarily of the payment of cash dividends.

Capital Resources

As at June 30, 2018, our cash and cash equivalents totaled $72.1 million (December 31, 2017 - $511.1 million). In addition, we held long-term investments at June 30, 2018 of $178.9 million (December 31, 2017 - $203.1 million), of which $142.9 million was held in publicly-traded equity instruments (December 31, 2017 - $168.1 million).

Further, an amount of $1.0 billion, or its Canadian dollar equivalent, is available under the Company’s unsecured credit facility. On March 7, 2018, Franco-Nevada further extended the term of the Credit Facility from March 22, 2022 to March 22, 2023. Advances under the Credit Facility bear interest depending upon the currency of the advance and the Company’s leverage ratio. At June 30, 2018, U.S. and Canadian dollar advances would bear interest at a rate of 5.60% and 3.55%, respectively. Funds can also be drawn using LIBOR 30-day rates plus 110 basis points.

An additional amount of $100.0 million is available under the FNBC Credit Facility, which is an unsecured revolving credit facility of the Company’s subsidiary, FNBC. On February 21, 2018, the FNBC Credit Facility maturity date was extended from March 20, 2018 to March 20, 2019. FNBC has the option of requesting an additional one-year extension of the maturity term during a period of time surrounding the anniversary date. At June 30, 2018, advances under the FNBC Credit Facility would bear interest at a rate of 5.85%. Funds can also be drawn using LIBOR rates plus 135 basis points.

As at August 8, 2018, the full amount of $1.1 billion is available.

Management’s objectives when managing capital are to:

| (a) |  | ensure the preservation and availability of capital not being used for long-term investments by investing in low risk investments with high liquidity; and

| (b) |  | ensure that adequate levels of capital are maintained to meet the Company’s operating requirements and other current liabilities.

As at June 30, 2018, the majority of funds were held in cash deposits with several financial institutions. Franco-Nevada invests its excess funds in term deposits. Certain investments with maturities upon acquisition of three months, or 92 days or less, were classified as term deposits with cash and cash equivalents on the statement of financial position.

Our performance is impacted by foreign currency fluctuations of the Canadian dollar and Australian dollar relative to the U.S. dollar. The largest exposure is with respect to the Canadian/U.S. dollar exchange rates as we hold a significant amount of our assets in Canada and report our results in U.S. dollars. The effect of volatility in these currencies against the U.S. dollar impacts our corporate administration, business development expenses and depletion on Mining and Oil & Gas interests incurred in our Canadian and Australian entities due to their respective functional currencies. During Q2/2018, the Canadian dollar traded in a range of $0.7513 to $0.7967, closing the quarter at $0.7594, and the Australian dollar traded between $0.7349 and $0.7778, closing the quarter at $0.7411.

Our near-term cash requirements include funding of the acquisitions of our commitments under the Cobre Panama Fixed Payment Stream agreement, corporate administration costs, certain costs of operations, payment of dividends and income taxes directly related to the recognition of royalty and stream revenues. As a royalty/stream company, there are limited requirements for capital expenditures other than for the acquisition of additional royalties/streams and working interests’ capital commitments. Such

| 25

acquisitions are entirely discretionary and will be consummated through the use of cash, as available, or through the issuance of common shares or other equity or debt securities or use of our credit facilities. We believe that our current cash resources, our available credit facilities and future cash flows will be sufficient to cover the cost of our commitments under the various stream agreements, administrative expenses, costs of operations and dividend payments for the foreseeable future.

Purchase Commitments

The following table summarizes Franco-Nevada’s commitments to pay for gold, silver and PGM pursuant to the associated precious metals agreements:

|  | Attributable Payable |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Production to be Purchased |  | Per Ounce Cash Payment (1),(2) |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Term of |  | Date of |
Interest |  | Gold |  | Silver |  | PGM |  | Gold |  | Silver |  | PGM |  | Agreement(3) |  | Contract |
Antamina |  | 0 | % | 22.5 | % (4) | 0 | % |  | n/a |  |  | 5 | % (5) |  | n/a |  | 40 years |  | 7-Oct-15 |
Antapaccay |  | — | % (6) | — | % (7) | 0 | % |  | 20 | % (8) |  | 20 | % (9) |  | n/a |  | 40 years |  | 10-Feb-16 |
Candelaria |  | 68 | % (10) | 68 | % (10) | 0 | % | $ | 400 |  | $ | 4.00 |  |  | n/a |  | 40 years |  | 6-Oct-14 |
Cobre Panama Fixed Payment Stream |  | — | % (11) | — | % (12) | 0 | % | $ | 418 | (13) | $ | 6.27 | (14) |  | n/a |  | 40 years |  | 19-Jan-18 |
Cobre Panama Floating Payment Stream |  | — | % (15) | — | % (16) | 0 | % |  | 20 | % (17) |  | 20 | % (18) |  | n/a |  | 40 years |  | 19-Jan-18 |
Karma |  | 4.875 | % (19) | 0 | % | 0 | % |  | 20 | % (20) |  | n/a |  |  | n/a |  | 40 years |  | 11-Aug-14 |
Guadalupe-Palmarejo |  | 50 | % | 0 | % | 0 | % | $ | 800 |  |  | n/a |  |  | n/a |  | 40 years |  | 2-Oct-14 |
Sabodala |  | 6 | % (21) | 0 | % | 0 | % |  | 20 | % (22) |  | n/a |  |  | n/a |  | 40 years |  | 12-Dec-13 |
MWS |  | 25 | % | 0 | % | 0 | % | $ | 400 |  |  | n/a |  |  | n/a |  | 40 years | (23) | 2-Mar-12 |
Cooke 4 |  | 7 | % | 0 | % | 0 | % | $ | 400 |  |  | n/a |  |  | n/a |  | 40 years |  | 5-Nov-09 |
Sudbury(24) |  | 50 | % | 0 | % | 50 | % | $ | 400 |  |  | n/a |  | $ | 400 |  | 40 years |  | 15-Jul-08 |

| 1 |  | Subject to an annual inflationary adjustment except for Antamina, Antapaccay, Karma, Guadalupe-Palmarejo, and Sabodala.

| 2 |  | Should the prevailing market price for gold be lower than this amount, the per ounce cash payment will be reduced to the prevailing market price.

| 3 |  | Subject to successive extensions.

| 4 |  | Subject to a fixed payability of 90%. Percentage decreases to 15% after 86 million ounces of silver has been delivered under the agreement.

| 5 |  | Purchase price is 5% of the average silver price at the time of delivery.

| 6 |  | Gold deliveries are referenced to copper in concentrate shipped with 300 ounces of gold delivered for each 1,000 tonnes of copper in concentrate shipped, until 630,000 ounces of gold has been delivered. Thereafter, percentage is 30% of gold shipped.

| 7 |  | Silver deliveries are referenced to copper in concentrate shipped with 4,700 ounces of silver delivered for each 1,000 tonnes of copper in concentrate shipped, until 10.0 million ounces of silver has been delivered. Thereafter, percentage is 30% of silver shipped.

| 8 |  | Purchase price is 20% of the spot price of gold until 750,000 ounces of gold have been delivered, thereafter the purchase price is 30% of the spot price of gold.

| 9 |  | Purchase price is 20% of the spot price of silver until 12.8 million ounces of silver have been delivered, thereafter the purchase price is 30% of the spot price of silver.

| 10 |  | Percentage decreases to 40% after 720,000 ounces of gold and 12.0 million ounces of silver have been delivered under the agreement.

| 11 |  | Gold deliveries are indexed to copper in concentrate produced from the project. 120 ounces of gold per every 1 million pounds of copper produced until 808,000 ounces of gold delivered. Thereafter, 81 ounces of gold per 1 million pounds of copper produced to 1,716,188 ounces of gold delivered. Thereafter, 63.4% of the gold in concentrate.

| 12 |  | Silver deliveries are indexed to copper in concentrate produced from the project. 1,376 ounces of silver per every 1 million pounds of copper produced until 9,842,000 ounces of silver delivered. Thereafter 1,776 ounces of silver per 1 million pounds of copper produced to 29,731,000 ounces of silver delivered. Thereafter, 62.1% of the silver.

| 13 |  | In accordance with the terms of the agreement, the purchase price was adjusted from $406 per ounce to $418.27 per ounce after November 2017 on the initial gold deliveries. After 1,341,000 ounces of gold delivered, purchase price is the greater of 50% of spot and $418.27 per ounce.

| 14 |  | In accordance with the terms of the agreement, the purchase price was adjusted from $6.09 per ounce to $6.27 per ounce after November 2017 on the initial silver deliveries. After 21,510,000 ounces of silver delivered, purchase price is the greater of 50% of spot and $6.27 per ounce.

| 15 |  | Gold deliveries are indexed to copper in concentrate produced from the project. 30 ounces of gold per every 1 million pounds of copper produced until 202,000 ounces of gold delivered. Thereafter 20.25 ounces of gold per 1 million pounds of copper produced to 429,047 ounces of gold delivered. Thereafter, 15.85% of the gold in concentrate.

| 16 |  | Silver deliveries are indexed to copper in concentrate produced from the project. 344 ounces of silver per every 1 million pounds of copper produced until 2,460,500 ounces of silver delivered. Thereafter, 444 ounces of silver per 1 million pounds of copper produced to 7,432,750 ounces of silver delivered. Thereafter, 15.53% of the silver in concentrate.

| 17 |  | Purchase price is 20% of the spot price of gold until 604,000 ounces of gold have been delivered. Thereafter, purchase price is 50% of the spot price of gold.

| 18 |  | Purchase price is 20% of the spot price of silver until 9,618,000 ounces of silver have been delivered. Thereafter, purchase price is 50% of the spot price of silver.

| 19 |  | Gold deliveries are fixed at 15,000 ounces per annum from March 31, 2016 until February 28, 2021 (exclusive of an aggregate 5,625 gold ounces, or 703 gold ounces per quarter, to be delivered as a result of the exercise by the operator of its option to increase the upfront deposit). Thereafter, percentage is 4.875%.

| 20 |  | Purchase price is 20% of the average gold price at the time of delivery.

| 21 |  | Gold deliveries are fixed at 1,875 ounces per month until December 31, 2019. Thereafter, percentage is 6% of gold produced.

| 22 |  | Purchase price is 20% of prevailing market price at the time of delivery.

| 23 |  | Agreement is capped at 312,500 ounces of gold.

| 24 |  | The Company is committed to purchase 50% of the precious metals contained in ore from the properties. Cash payment is based on gold equivalent ounces.

Cobre Panama Fixed Payment Stream

The Company has funding commitments under the Cobre Panama Fixed Payment Stream agreement as described in the Guidanc e section above.

Acquisition of Mineral Rights with Continental Resources, Inc.

As described in the Corporate Developments section above, the Company has entered into a strategic relationship with a subsidiary of Continental to jointly acquire mineral rights in the SCOOP and STACK plays of Oklahoma. Subject to customary conditions, Franco-Nevada is expecting to fund the initial $220 million in the fourth quarter of 2018, and, subject to satisfaction of agreed upon development thresholds, to spend up to $100 million per year over the next three years to acquire additional mineral rights through a newly-formed company.

26 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Other

The Canada Revenue Agency (“CRA”) is currently conducting an audit of Franco-Nevada’s 2012, 2013, 2014 and 2015 taxation years. The audit is in its preliminary stages and the Company has not been informed of any issues by the CRA. Management believes that Franco-Nevada and its foreign subsidiaries are in full compliance with Canadian and foreign tax laws. However, there can be no assurance that the CRA will not challenge the manner in which Franco-Nevada and its foreign subsidiaries has filed its income tax returns and reported its income. In the event that the CRA successfully challenges the manner in which Franco-Nevada has filed its tax returns and reported its income, this could potentially result in additional income taxes, penalties and interest, which could have a material adverse effect on Franco-Nevada.

Critical Accounting Estimates

The preparation of consolidated financial statements in accordance with IFRS requires the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s best knowledge of the relevant facts and circumstances, having regard to previous experience. However, actual outcomes may differ from the amounts included in the consolidated financial statements.

Our significant accounting policies and estimates are disclosed in Notes 2 and 3 of our most recent annual consolidated financial statements.

New and Amended Standards Adopted by the Company

The following accounting standards were adopted by the Company as of January 1, 2018. The impact of the adoption of these standards and the new accounting policies are disclosed below.

IFRS 9 Financial Instruments

IFRS 9 Financial Instruments (“IFRS 9”), replaces the provisions of IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”) that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting.

The adoption of IFRS 9 on January 1, 2018 resulted in changes in accounting policies and adjustments to the amounts recognized in the financial statements. The Company has applied the changes in accounting policies retrospectively; however in accordance with the transitional provisions in IFRS 9, comparative figures have not been restated. The reclassifications and adjustments are recognized in the opening balance sheet as at January 1, 2018 as summarized below.

| · |  | The Company has made an irrevocable election available under IFRS 9 to continue to classify its long-term investments in equity securities at fair value through other comprehensive income (“FVTOCI”) because these investments are held as long-term strategic investments that are not expected to be sold in the short term. This election is available on an instrument-by-instrument basis. Previously these investments were classified as available-for-sale under IAS 39. Changes in the fair value of these investments are recognized in other comprehensive income (loss). On adoption of IFRS 9, the Company recorded an adjustment of $27.1 million to reduce opening deficit with a corresponding adjustment to increase accumulated other comprehensive loss to reclassify the accumulated impairment losses on these investments to accumulated other comprehensive loss. There was no impact on net income or other comprehensive loss for the three and six months ended June 30, 2018.

| · |  | Under IAS 39, investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured can be measured at cost. This cost exemption is not available under IFRS 9. At the date of adoption, the Company held one equity investment at cost, which had a carrying value of $4.0 million as at January 1, 2018. The Company assessed the fair value of the instrument based on valuation techniques that include inputs that are not based on observable market data and determined that the fair value approximates the carrying value of the instrument as of the date of adoption and as such the Company concluded no adjustment is required. The Company has determined that there was no change in the fair value of this investment during the three and six months ended June 30, 2018.

| · |  | IFRS 9 applies an expected credit loss model to evaluate financial assets for impairment, rather than an incurred loss model previously applied under IAS 39. The Company’s financial assets which are subject to credit risk include cash and cash equivalents, receivables and loan receivable. The Company holds one loan receivable from Noront Resources Ltd. The loan receivable is carried at amortized cost and had a carrying value of $30.1 million as at January 1, 2018. Application of the expected credit loss model at the date of adoption did not have a significant impact on the Company’s financial assets because the Company determined that the expected credit losses on its financial assets were nominal. There were no impairment losses recorded on financial assets during the three and six months ended June 30, 2018.

| 27

On the date of the initial application, January 1, 2018, the financial instruments of the Company were as follows, with any reclassifications noted:

|  | Measurement category |  | Carrying amount
|  | Original |  | New |  | Original |  |  | New |  |  |  |
|  | (IAS 39) |  | (IFRS 9) |  | (IAS 39) |  |  | (IFRS 9) |  |  | Difference |
Current financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | Available-for-sale |  |  | Amortized cost |  | $ | 511.1 |  |  | $ | 511.1 |  |  | $ | — |
Receivables |  |  | Amortized cost |  |  | Amortized cost |  |  | 54.6 |  |  |  | 54.6 |  |  |  | — |
Receivables from provisional gold equivalent sales |  |  | FVTPL(1) |  |  | FVTPL |  |  | 11.3 |  |  |  | 11.3 |  |  |  | — |
Non-current financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity investments |  |  | Available-for-sale |  |  | FVTOCI(2) |  | $ | 172.2 |  |  | $ | 172.2 |  |  | $ | — |
Warrants |  |  | FVTPL |  |  | FVTPL |  |  | 0.8 |  |  |  | 0.8 |  |  |  | — |
Loan receivable |  |  | Amortized cost |  |  | Amortized cost |  |  | 30.1 |  |  |  | 30.1 |  |  |  | — |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accrued liabilities |  |  | Amortized cost |  |  | Amortized cost |  | $ | 21.5 |  |  | $ | 21.5 |  |  | $ | — |
Debt |  |  | Amortized cost |  |  | Amortized cost |  |  | — |  |  |  | — |  |  |  | — |

| 1 |  | Fair value through profit or loss.

| 2 |  | Fair value through other comprehensive income or loss.

Except as noted above, the adoption of IFRS 9 did not result in changes in the carrying values of the Company’s financial instruments on January 1, 2018.

Financial assets and financial liabilities are recognized on the Company’s statement of financial position when the Company has become a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. The Company’s financial instruments consist of cash and cash equivalents, receivables, accounts payable, accrued liabilities, debt, and investments, including equity investments, loans receivable, and warrants. Financial instruments are recognized initially at fair value.

IFRS 9 includes a revised model for classifying financial assets, which results in classification according to a financial instrument’s contractual cash flow characteristics and the business models under which they are held. Under the IFRS 9 model for classification the Company has classified its financial assets as described below.

| (i) |  | Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits held with banks and other short-term highly liquid investments with original maturities of three months or less. Cash and cash equivalents are recorded at amortized cost using the effective interest method. Previously under IAS 39 these amounts were classified as available-for-sale. The change in classification did not impact the measurement of cash and cash equivalents.

(ii)Receivables

Receivables, other than those related to stream agreements with provisional pricing mechanisms, are classified as financial assets at amortized cost and measured using the effective interest method less any impairment loss allowance. The loss allowance for receivables is measured based on lifetime expected credit losses.

(iii)Investments

Investments comprise equity interests in publicly-traded and privately-held entities, warrants, marketable securities with original maturities at the date of the purchase of more than three months and a loan receivable.

The Company’s equity investments are held for strategic purposes and not for trading. Upon adoption of IFRS 9, the Company made an irrevocable election to designate these investments in common shares at FVTOCI. FVTOCI investments are recognized initially at fair value plus transaction costs. Subsequent to initial recognition, FVTOCI investments are measured at fair value and changes in the fair value are recognized directly in other comprehensive income (loss). When an equity investment at FVTOCI is sold, the accumulated gains or losses are reclassified from accumulated other comprehensive income (loss) directly to deficit. Previously under IAS 39, these equity investments were classified as available-for-sale financial assets.

Translation differences on equity securities classified as FVTOCI are included in other comprehensive income (loss).

Derivative instruments, such as warrants and receivables related to stream agreements with provisional pricing mechanisms, are classified as fair value through profit and loss and are recognized initially at fair value. Subsequent to initial recognition, derivatives are measured at fair value. In the case of receivables related to stream agreements with provisional pricing, once the final settlement price is determined the financial instrument is no longer a derivative and is classified as a financial asset at amortized cost. Changes in the fair value of receivables related to stream agreements with provisional pricing mechanisms

28 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

are recognized in revenue in the statement of income and other comprehensive income (loss). Changes in fair value of warrants are recognized as other income (expenses) in the statement of income and comprehensive income (loss).

Loans receivable are classified as financial assets at amortized cost because these instruments are held for collection of contractual cash flows and those cash flows represent solely payments of principal and interest. Loans are measured at amortized cost using the effective interest method, less any impairment loss allowance. The impairment loss allowance for the loan receivable is measured based on expected credit losses. Interest income is recognized by applying the effective interest rate method and presented as finance income in the statement of income and comprehensive income (loss).

(iv)Financial liabilities

Financial liabilities, including accounts payable, accrued liabilities and debt, are classified as financial liabilities to be subsequently measured at amortized cost using the effective interest method.

IFRS 15 Revenue from Contracts with Customers

Effective January 1, 2018, the Company has adopted IFRS 15 Revenue from Contracts with Customers (“IFRS 15”). This new standard was applied using a modified retrospective approach whereby the effects of the change in accounting policies for revenue as at January 1, 2018 are presented together as a single adjustment to the opening balance of deficit. Therefore, the comparative information has not been restated and continues to be reported under IAS 18 Revenue. The adoption of IFRS 15 did not have a significant impact on the timing or measurement of the Company’s revenue and no adjustment to the opening balance of deficit as at January 1, 2018 has been recorded as result of adopting IFRS 15.

The following policies applied in accounting for revenue for the three and six months ended June 30, 2018. In the comparative period, revenue was accounted for in accordance with the revenue recognition policies disclosed in the Company’s annual consolidated financial statements for the year ended December 31, 2017.

The Company generates revenue from contracts with customers under each of its royalty, stream and working interests. The Company has determined that each unit of a commodity that is delivered to a customer under a royalty, stream, or working interest arrangement is a performance obligation for the delivery of a good that is separate from each other unit of the commodity to be delivered under the same arrangement.

| (i) |  | Stream arrangements

Under its stream arrangements, the Company acquires commodities from operators of mining properties on which the Company has stream interests. The Company sells the commodities received under these arrangements to its customers under separate sales contracts.

For those stream arrangements where the Company acquires refined metal from the operator, the Company sells the refined metal to third party financial institutions or brokers. The Company transfers control over the commodity on the date the commodity is credited to the customer’s metal account, which is the date that title to the commodity and the risks and rewards of ownership transfer to the customer and the customer is able to direct the use of and obtain substantially all of the benefits from the commodity. The transaction price for these sales is fixed at the delivery date based on the spot price for the commodity and payment of the transaction price is generally due immediately when control has been transferred.

For those stream arrangements where the Company acquires the commodities in concentrate form from the operator, the Company sells the concentrate under sales contracts with independent smelting companies. The Company transfers control over the concentrate at the time of shipment, which is when the risks and rewards of ownership and title pass to the independent smelting company. The final prices for metals contained in the concentrate are determined based on the market price for the metals on a specified future date after shipment. Upon transfer of control at shipment, the Company records revenue and a corresponding receivable from these sales based on forward commodity prices at the time of shipment.

Variations between the price recorded at the transfer of control and the actual final price set under the contracts with the smelting companies are caused by changes in market commodity prices, and result in an embedded derivative in the receivable. The embedded derivative is recorded at fair value each period until final settlement occurs, with changes in fair value classified as provisional price adjustments and included as a component of stream revenue. IFRS 15 does not consider provisional price adjustments associated with concentrate sales to be revenue from contracts with customers as they arise from changes in market commodity prices. As such, provisional price adjustments are presented separately in Note 10 of these condensed consolidated financial statements.

| (ii) |  | Royalty arrangements

For royalty interests, the Company sells commodities to customers under contracts that are established by the operator of each mining or oil & gas property on which the royalty interest is held. The Company recognizes revenue from these sales when control over the commodity transfers to the customer. This transfer of control generally occurs when the operator of the mining or oil & gas property on which the royalty interest is held physically delivers the commodity to the customer. At this point in time, the risks and rewards of ownership have transferred to the customer and the Company has an unconditional right to payment.

Revenue from royalty arrangements is measured at the transaction price agreed in the royalty arrangement with the operator of each mining or oil & gas property. The transaction price will reflect the gross value of the commodity sold less deductions that vary based on the terms of the royalty arrangement.

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| (iii) |  | Working interest arrangements

The Company sells its proportionate share of the crude oil, natural gas and natural gas liquids to third-party customers using the services of a third-party marketing agent. The Company transfers control over the oil & gas at the time it enters the pipeline system, which is when title and the risks and rewards of ownership are transferred to customers and the Company has an unconditional right to payment. Revenue is measured at the transaction price set by reference to monthly market commodity prices plus certain price adjustments. Price adjustments include product quality and transportation adjustments and market differentials.

Outstanding Share Data

Franco-Nevada is authorized to issue an unlimited number of common and preferred shares. A detailed description of the rights, privileges, restrictions and conditions attached to each class of authorized shares is included in our Annual Information Form for the year ended December 31, 2017, a copy of which can be found on SEDAR at www.sedar.com and in our Form 40-F, a copy of which can be found on EDGAR at www.sec.gov.

As of August 8, 2018, the number of common shares outstanding or issuable pursuant to other outstanding securities is as follows:

Common Shares |  | Number |
Outstanding |  | 186,178,516 |
Issuable upon exercise of Franco-Nevada options(1) |  | 955,603 |
Issuable upon vesting of Franco-Nevada RSUs |  | 119,471 |
Diluted common shares |  | 187,253,590 |

| 1 |  | There were 955,603 stock options under our share compensation plan outstanding to directors, officers, employees and others with exercise prices ranging from C$15.41 to C$100.10 per share.

Franco-Nevada has not issued any preferred shares.

Internal Control Over Financial Reporting and Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining Franco-Nevada’s internal control over financial reporting and other financial disclosure and our disclosure controls and procedures.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Franco-Nevada’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Franco-Nevada; (ii) are designed to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of Franco-Nevada are being made only in accordance with authorizations of management and directors of Franco-Nevada; and (iii) are designed to provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Franco-Nevada’s assets that could have a material effect on Franco-Nevada’s financial statements. Internal control over other financial disclosure is a process designed to ensure that other financial information included in this MD&A, fairly represents in all material respects the financial condition, results of operations and cash flows of Franco-Nevada for the periods presented in this MD&A.

Franco-Nevada’s disclosure controls and procedures are designed to provide reasonable assurance that material information relating to Franco-Nevada, including its consolidated subsidiaries, is made known to management by others within those entities, particularly during the period in which this report is prepared and that information required to be disclosed by Franco-Nevada in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.

Due to its inherent limitations, internal control over financial reporting and other financial disclosure may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may change.

For the three and six months ended June 30, 2018, there has been no change in Franco-Nevada’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, Franco-Nevada’s internal control over financial reporting.

30 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Non-IFRS Financial Measures

Adjusted EBITDA and Adjusted EBITDA per share

A djusted EBITDA and Adjusted EBITDA per share are non-IFRS financial measures, which exclude the following from net income and earnings per share (“EPS”):

| · |  | Income tax expense/recovery;

| · |  | Finance expenses;

| · |  | Finance income;

| · |  | Depletion and depreciation;

| · |  | Non-cash costs of sales;

| · |  | Impairment charges related to royalty, stream and working interests;

| · |  | Impairment of investments;

| · |  | Gains/losses on sale of royalty, stream and working interests;

| · |  | Gains/losses on investments;

| · |  | Foreign exchange gains/losses and other income/expenses; and

| · |  | Unusual non-recurring items.

Management uses Adjusted EBITDA and Adjusted EBITDA per share to evaluate the underlying operating performance of the Company as a whole for the reporting periods presented, to assist with the planning and forecasting of future operating results, and to supplement information in its financial statements. Management believes that in addition to measures prepared in accordance with IFRS such as Net Income and Earnings per Share, our investors and analysts use Adjusted EBITDA and Adjusted EBITDA per share to evaluate the results of the underlying business of the Company, particularly since the excluded items are typically not included in our guidance, with the exception of depletion and depreciation expense. While the adjustments to net income and EPS in these measures include items that are both recurring and non-recurring, management believes that Adjusted EBITDA and Adjusted EBITDA per share are useful measures of the Company’s performance because they adjust for items which may not relate to or have a disproportionate effect on the period in which they are recognized, impact the comparability of our core operating results from period to period, are not always reflective of the underlying operating performance of our business and/or are not necessarily indicative of future operating results. Adjusted EBITDA and Adjusted EBITDA per share are only intended to provide additional information to investors and analysts, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. They do not have any standardized meaning under IFRS, and may not be comparable to similar measures presented by other issuers.

Reconciliation of Net Income to Adjusted EBITDA:

|  | For the three months ended |  | For the six months ended |
|  | June 30, |  | June 30, |
(expressed in millions, except per share amounts) |  | 2018 |  | 2017 |  | 2018 |  | 2017 |
Net Income |  | $ | 53.6 |  | $ | 45.6 |  | $ | 118.2 |  | $ | 91.2 |
Income tax expense |  |  | 11.1 |  |  | 11.1 |  |  | 24.6 |  |  | 21.5 |
Finance expenses |  |  | 0.8 |  |  | 0.8 |  |  | 1.7 |  |  | 1.6 |
Finance income |  |  | (0.7) |  |  | (1.1) |  |  | (1.7) |  |  | (2.0) |
Depletion and depreciation |  |  | 59.6 |  |  | 67.2 |  |  | 120.2 |  |  | 138.7 |
Non-cash costs of sales |  |  | 1.8 |  |  | 2.3 |  |  | 3.7 |  |  | 4.1 |
Foreign exchange (gains)/losses and other (income)/expenses |  |  | 0.1 |  |  | (0.4) |  |  | (0.5) |  |  | (1.1) |
Adjusted EBITDA |  | $ | 126.3 |  | $ | 125.5 |  | $ | 266.2 |  | $ | 254.0 |
Basic weighted average shares outstanding |  |  | 186.0 |  |  | 181.6 |  |  | 186.0 |  |  | 180.1 |
Basic EPS |  | $ | 0.29 |  | $ | 0.25 |  | $ | 0.64 |  | $ | 0.51 |
Income tax expense |  |  | 0.06 |  |  | 0.06 |  |  | 0.13 |  |  | 0.12 |
Finance expenses |  |  | — |  |  | 0.01 |  |  | 0.01 |  |  | 0.01 |
Finance income |  |  | — |  |  | (0.01) |  |  | (0.01) |  |  | (0.01) |
Depletion and depreciation |  |  | 0.32 |  |  | 0.37 |  |  | 0.65 |  |  | 0.77 |
Non-cash costs of sales |  |  | 0.01 |  |  | 0.01 |  |  | 0.02 |  |  | 0.02 |
Foreign exchange (gains)/losses and other (income)/expenses |  |  | — |  |  | — |  |  | (0.01) |  |  | (0.01) |
Adjusted EBITDA per share |  | $ | 0.68 |  | $ | 0.69 |  | $ | 1.43 |  | $ | 1.41 |

Margin

Margin is a non-IFRS financial measure which is defined by the Company as Adjusted EBITDA divided by revenue. The Company uses Margin in its annual incentive compensation process to evaluate management’s performance in increasing revenue and containing costs. Margin is intended to provide additional information, does not have any standardized definition under IFRS and should not be considered in isolation or as a substitute for a measure of performance in accordance with IFRS.

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Reconciliation of Net Income to Margin:

|  | For the three months ended |  |  | For the six months ended |
|  | June 30, |  |  | June 30, |
(expressed in millions, except Margin) |  | 2018 |  |  | 2017 |  |  | 2018 |  | 2017 |
Net Income |  | $ | 53.6 |  |  | $ | 45.6 |  |  | $ | 118.2 |  |  | 91.2 |
Income tax expense |  |  | 11.1 |  |  |  | 11.1 |  |  |  | 24.6 |  |  | 21.5 |
Finance expenses |  |  | 0.8 |  |  |  | 0.8 |  |  |  | 1.7 |  |  | 1.6 |
Finance income |  |  | (0.7) |  |  |  | (1.1) |  |  |  | (1.7) |  |  | (2.0) |
Depletion and depreciation |  |  | 59.6 |  |  |  | 67.2 |  |  |  | 120.2 |  |  | 138.7 |
Non-cash costs of sales |  |  | 1.8 |  |  |  | 2.3 |  |  |  | 3.7 |  |  | 4.1 |
Foreign exchange (gains)/losses and other (income)/expenses |  |  | 0.1 |  |  |  | (0.4) |  |  |  | (0.5) |  |  | (1.1) |
Adjusted EBITDA |  | $ | 126.3 |  |  | $ | 125.5 |  |  | $ | 266.2 |  | $ | 254.0 |
Revenue |  |  | 161.3 |  |  |  | 163.6 |  |  |  | 334.4 |  |  | 336.3 |
Margin |  |  | 78.3 | % |  |  | 76.7 | % |  |  | 79.6 | % |  | 75.5 | %

Adjusted Net Income and Adjusted Net Income per share

Adjusted Net Income and Adjusted Net Income per share are non-IFRS financial measures, which exclude the following from net income and EPS:

| · |  | Foreign exchange gains/losses and other income/expenses;

| · |  | Impairment charges related to royalty, stream and working interests;

| · |  | Impairment of investments;

| · |  | Gains/losses on sale of royalty, stream and working interests;

| · |  | Gains/losses on investments;

| · |  | Unusual non-recurring items; and

| · |  | Impact of income taxes on these items.

Management uses Adjusted Net Income and Adjusted Net Income per share to evaluate the underlying operating performance of the Company as a whole for the reporting periods presented, to assist with the planning and forecasting of future operating results, and to supplement information in its financial statements. Management believes that in addition to measures prepared in accordance with IFRS such as Net Income and Earnings per Share, our investors and analysts use Adjusted Net Income and Adjusted Net Income per share to evaluate the results of the underlying business of the Company, particularly since the excluded items are typically not included in our guidance. While the adjustments to net income and EPS in these measures include items that are both recurring and non-recurring, management believes that Adjusted Net Income and Adjusted Net Income per share are useful measures of the Company’s performance because they adjust for items which may not relate to or have a disproportionate effect on the period in which they are recognized, impact the comparability of our core operating results from period to period, are not always reflective of the underlying operating performance of our business and/or are not necessarily indicative of future operating results. Adjusted Net Income and Adjusted Net Income per share are intended to provide additional information to investors and analysts and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. They do not have any standardized meaning under IFRS, and may not be comparable to similar measures presented by other issuers.

Reconciliation of Net Income to Adjusted Net Income:

|  | For the three months ended | For the six months ended |
|  | June 30, |  | June 30, |
(expressed in millions, except per share amounts) |  | 2018 |  | 2017 |  | 2018 |  | 2017 |
Net Income |  | $ | 53.6 |  | $ | 45.6 |  | $ | 118.2 |  | $ | 91.2 |
Foreign exchange (gains)/losses and other (income)/expenses |  |  | 0.1 |  |  | (0.4) |  |  | (0.5) |  |  | (1.1) |
Tax effect of adjustments |  |  | — |  |  | 0.1 |  |  | (0.1) |  |  | — |
Other tax related adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |
Valuation allowance |  |  | — |  |  | 0.8 |  |  | — |  |  | 0.8 |
Adjusted Net Income |  | $ | 53.7 |  | $ | 46.1 |  | $ | 117.6 |  | $ | 90.9 |
Basic weighted average shares outstanding |  |  | 186.0 |  |  | 181.6 |  |  | 186.0 |  |  | 180.1 |
Basic EPS |  | $ | 0.29 |  | $ | 0.25 |  | $ | 0.64 |  | $ | 0.51 |
Foreign exchange (gains)/losses and other (income)/expenses |  |  | — |  |  | — |  |  | (0.01) |  |  | (0.01) |
Tax effect of adjustments |  |  | — |  |  | — |  |  | — |  |  | — |
Other tax related adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |
Valuation allowance |  |  | — |  |  | — |  |  | — |  |  | — |
Adjusted Net Income per share |  | $ | 0.29 |  | $ | 0.25 |  | $ | 0.63 |  | $ | 0.50 |

32 | FNV TSX NYSE |  | 2018 Second Quarter Management’s Discussion and Analysis

Cautionary Statement on Forward-Looking Information

This MD&A contains “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian securities laws and the United States Private Securities Litigation Reform Act of 1995, respectively, which may include, but are not limited to, statements with respect to future events or future performance, management’s expectations regarding Franco-Nevada’s growth, results of operations, estimated future revenues, carrying value of assets, future dividends and requirements for additional capital, mineral reserve and mineral resource estimates, production estimates, production costs and revenue, future demand for and prices of commodities, expected mining sequences, business prospects and opportunities, and the completion of the transaction with Continental Resources, Inc. and its expected impact on future performance and results of the operations. In addition, statements (including data in tables) relating to reserves and resources and gold equivalent ounces are forward-looking statements, as they involve implied assessment, based on certain estimates and assumptions, and no assurance can be given that the estimates and assumptions are accurate and that such reserves and resources and GEOs will be realized. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budgets”, “scheduled”, “estimates”, “forecasts”, “predicts”, “projects”, “intends”, “targets”, “aims”, “anticipates” or “believes” or variations (including negative variations) of such words and phrases or may be identified by statements to the effect that certain actions “may”, “could”, “should”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Franco-Nevada to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. A number of factors could cause actual events or results to differ materially from any forward-looking statements, including, without limitation: fluctuations in the prices of the primary commodities that drive royalty and stream revenue (gold, platinum group metals, copper, nickel, uranium, silver, iron-ore and oil & gas); fluctuations in the value of the Canadian and Australian dollar and Mexican Peso and any other currency in which revenue is generated, relative to the U.S. dollar; changes in national and local government legislation, including permitting and licensing regimes and taxation policies and the enforcement thereof; regulatory, political or economic developments in any of the countries where properties in which Franco-Nevada holds a royalty, stream or other interest are located or through which they are held; risks related to the operators of the properties in which Franco-Nevada holds a royalty, stream or other interest, including changes in the ownership and control of such operators; influence of macroeconomic developments; business opportunities that become available to, or are pursued by Franco-Nevada; reduced access to debt and equity capital; litigation; title, permit or license disputes related to interests on any of the properties in which Franco-Nevada holds a royalty, stream or other interest; whether or not the Company is determined to have “passive foreign investment company” (“PFIC”) status as defined in Section 1297 of the United States Internal Revenue Code of 1986, as amended; potential changes in Canadian tax treatment of offshore streams; excessive cost escalation as well as development, permitting, infrastructure, operating or technical difficulties on any of the properties in which Franco-Nevada holds a royalty, stream or other interest; actual mineral content may differ from the reserves and resources contained in technical reports; rate and timing of production differences from resource estimates, other technical reports and mine plans; risks and hazards associated with the business of development and mining on any of the properties in which Franco-Nevada holds a royalty, stream or other interest, including, but not limited to unusual or unexpected geological and metallurgical conditions, slope failures or cave-ins, flooding and other natural disasters, terrorism, civil unrest or an outbreak of contagious disease; and the integration of acquired assets. The forward-looking statements contained in this MD&A are based upon assumptions management believes to be reasonable, including, without limitation: the ongoing operation of the properties in which Franco-Nevada holds a royalty, stream or other interest 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 that underlie the asset portfolio; the Company’s ongoing income and assets relating to determination of its PFIC status; no material changes to existing tax treatment; the expected application of tax laws and regulations by taxation authorities; the expected assessment and outcome of any audit by any taxation authority; no adverse development in respect of any significant property in which Franco-Nevada holds a royalty, stream or other interest; the accuracy of publicly disclosed expectations for the development of underlying properties that are not yet in production; integration of acquired assets; risks related to the completion of the transaction with Continental Resources, Inc.; and the absence of any other factors that could cause actions, events or results to differ from those anticipated, estimated or intended. However, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Investors are cautioned that forward-looking statements are not guarantees of future performance. Franco-Nevada cannot assure investors that actual results will be consistent with these forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements due to the inherent uncertainty therein. For additional information with respect to risks, uncertainties and assumptions, please refer to Franco-Nevada’s most recent Annual Information Form filed with the Canadian securities regulatory authorities on www.sedar.com and Franco-Nevada’s most recent Annual Report filed on Form 40-F filed with the SEC on www.sec.gov. The forward-looking statements herein are made as of the date of this MD&A 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.)

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