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Acquisitions and other transactions | 9 Months Ended
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Sep. 30, 2018
Acquisitions and other transactions |
Acquisitions and other transactions | Note 3 – Acquisitions and other transactions
| (a) |  | Acquisition of U.S. Oil & Gas Mineral Rights with Continental Resources, Inc. – SCOOP and STACK, Oklahoma
As previously announced, on August 6, 2018, the Company entered, through a wholly-owned subsidiary, into a strategic relationship with Continental Resources, Inc. (“Continental”) to jointly acquire, through a newly-formed entity (the “Continental Minerals Venture”), mineral rights in the South Central Oklahoma Oil Province (“SCOOP”) and Sooner Trend Anadarko Basin Canadian and Kingfisher Counties (“STACK”) plays of Oklahoma. Subsequent to September 30, 2018, on October 23, 2018, the Company closed this transaction, and contributed $218.5 million for its stake in the Continental Minerals Venture. The contribution was funded net of $3.7 million in royalties generated by the acquired assets between March 1, 2018, the effective date of the transaction, and October 23, 2018, the date of closing, for a net disbursement of $214.8 million. In addition to the initial net contribution of $214.8 million, Franco-Nevada is committed, subject to satisfaction of agreed upon development thresholds, to spend up to $300 million over the next three years to acquire additional mineral rights, subject to satisfaction of agreed upon development thresholds. Continental has committed to spend up to $75 million over the same period through the Continental Minerals Venture. Acquisition of mineral rights by the Continental Minerals Venture is moving ahead at a pace faster than initially expected, and Franco-Nevada expects to fund additional capital contributions of between $35 million and $55 million in 2018. These accelerated contributions will reduce Franco-Nevada’s commitment in the last of the three years, such that the total commitment remains $300 million. Upon closing, the newly-formed entity will be accounted for in accordance with IFRS 11 Joint Arrangements.
| (b) |  | Acquisition of Additional Stream and Update on the Cobre Panama Project, 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 Panama, is 90% owned by First Quantum and 10% by KORES. The amended and restated stream 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 (i) First Quantum’s additional 10% interest in the project First Quantum acquired from LS-Nikko Copper Inc. in Q4/2017 and (ii) KORES’ 10% interest in the project (the “Floating Payment Stream”). Fixed Payment Stream Under the terms of the Fixed Payment Stream, Franco-Nevada has funding a deposit of $1.0 billion against future deliveries of gold and silver from Cobre Panama. The deposit was 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. For the three and nine months ended September 30, 2018, the Company funded $88.4 million and $247.8 million, respectively, towards the Fixed Payment Stream, for a cumulative total of $974.4 million of its maximum $1.0 billion commitment. Subsequent to September 30, 2018, the Company fulfilled its $1.0 billion commitment under the terms of the Fixed Payment Stream. Refer to Note 16 (b) – Subsequent events. 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, are 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. The acquisition of the Floating Payment Stream for $356.0 million has been accounted for as an asset acquisition. As September 30, 2018 , total capitalized costs for the Cobre Panama project of $1,337.8 million are included in royalty, stream and working interests on the statement of financial position.
| (c) |  | 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 cash consideration of A$4.2 million. The portfolio includes certain claims that comprise the producing Moorvale mine, the Olive Downs project which had permitting applications, and another 33 exploration tenements. The Bowen Basin Coal royalties are production payments of A$0.10 per tonne, adjusted for consumer price index changes since December 31, 1997. The acquisition of the Bowen Basin Coal royalties has been accounted for as a business combination.
| (d) |  | 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 the December 31, 2017 year-end, the Company had advanced $11.0 million into escrow in respect to this transaction and this amount was included in royalty, stream and working interests, net in the statement of financial position as at December 31, 2017. The acquisition of the Delaware Basin U.S. Oil & Gas royalties has been accounted for as an asset acquisition.

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