EX-99.2 3 fnv-20200630ex992a73efe.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 5, 2020 and should be read in conjunction with Franco-Nevada’s unaudited condensed consolidated financial statements and related notes as at and for the three and six months ended June 30, 2020 and 2019. The unaudited condensed consolidated financial statements and this 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 condensed interim financial statements, including 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 unaudited consolidated financial statements for the three and six months ended June 30, 2020 and 2019 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 on Form 6-K 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 and Form 40-F, are available on SEDAR at www.sedar.com, and on EDGAR at www.sec.gov, respectively. 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, please see our website at www.franco-nevada.com.

Table of Contents

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3 | Overview
4 | Strategy
5 | Highlights
7 | Guidance
8 | Market overview
9 | Selected financial information
10 | Revenue by asset
11 | Review of quarterly financial performance
14 | Review of year-to-date financial performance
18 | Impairments of royalties, stream and working interests
19 | General and administrative expenses
20 | Other income and expenses
21 | Summary of quarterly information
21 | Balance sheet review
22 | Liquidity and capital resources
25 | Critical accounting estimates
26 | Outstanding share data
27 | Internal control over financial reporting and disclosure controls and procedures
27 | Non-IFRS financial measures
30 | Cautionary statement on forward-looking information

Abbreviations used in this report

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

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Abbreviated Definitions | ​ | ​ | ​ | ​ | ​ | ​
Periods under review | ​ | ​ | Interest types | ​ | Measurement
"H1/2019" | The six-month period ended June 30, 2020 | ​ | ​ | "NSR" | Net smelter return royalty | ​ | "GEO" | Gold equivalent ounces
"H1/2019" | The six-month period ended June 30, 2019 | ​ | ​ | "GR" | Gross royalty | ​ | "PGM" | Platinum group metals
"Q2/2020" | The three-month period ended June 30, 2020 | ​ | ​ | "ORR" | Overriding royalty | ​ | "oz" | Ounce
"Q1/2020" | The three-month period ended March 31, 2020 | ​ | ​ | "GORR" | Gross overriding royalty | ​ | "oz Au" | Ounce of gold
"Q4/2019" | The three-month period ended December 31, 2019 | ​ | ​ | "FH" | Freehold or lessor royalty | ​ | "oz Ag" | Ounce of silver
"Q3/2019" | The three-month period ended September 30, 2019 | ​ | ​ | "NPI" | Net profits interest | ​ | "oz Pt" | Ounce of platinum
"Q2/2019" | The three-month period ended June 30, 2019 | ​ | ​ | "NRI" | Net royalty interest | ​ | "oz Pd" | Ounce of palladium
​ | ​ | ​ | ​ | "WI" | Working interest | ​ | "LBMA" | London Bullion Market Association
Places and currencies | ​ | ​ | ​ | ​ | ​ | "bbl" | Barrel
"U.S." | United States | ​ | ​ | ​ | ​ | ​ | "boe" | Barrels of oil equivalent
"$" or "USD" | United States dollars | ​ | ​ | ​ | ​ | ​ | "WTI" | West Texas Intermediate
"C$" or "CAD" | Canadian dollars | ​ | ​ | ​ | ​ | ​ | "mcf" | Thousand cubic feet
"A$" or "AUD" | Australian dollars | ​ | ​ | ​ | ​ | ​ | ​ | ​
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2020 Second Quarter Management’s Discussion and Analysis | 2

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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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Overview

Franco-Nevada is the leading gold-focused royalty and streaming company with the largest and most diversified portfolio of royalties and streams by commodity, geography, revenue type and stage of project. The portfolio is actively managed to maintain a focus on precious metals (gold, silver and PGM) and a diversity of revenue sources with a target of not more than 20% of revenue from Energy (oil, gas and NGLs).

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Franco-Nevada Asset Count at August 5, 2020
​ |  | Mining |  | Energy | ​ |  | TOTAL
Producing | ​ | 53 | ​ | 56 | ​ | ​ | 109
Advanced | ​ | 38 | ​ | — | ​ | ​ | 38
Exploration | ​ | 206 | ​ | 23 | ​ | ​ | 229
TOTAL | ​ | 297 | ​ | 79 | ​ | ​ | 376

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 twelve years ago, Franco-Nevada has increased its dividend annually and its share price has outperformed the gold price and all relevant gold equity benchmarks.

Our aspiration is to make Franco-Nevada the “go to” gold stock for the generalist investor. We believe that our emphasis on minimizing risk, paying dividends and maintaining a strong balance sheet along with high governance standards is attractive to generalist investors. In a world confronted by political volatility and financial market instability, we believe making Franco-Nevada a lower risk gold investment that pays dividends and has leverage to gold is the right strategy.

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2020 Second Quarter Management’s Discussion and Analysis | 3

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Strategy

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 types of arrangements.

The Company does not operate mines, develop projects or conduct exploration. Franco-Nevada has a Free Cash Flow generating business with limited future capital commitments and management is focused on managing and growing its portfolio of royalties and streams. The advantages of this business model are:

| ● | Exposure to commodity price optionality;

| ● | A perpetual discovery option over large areas of geologically prospective lands;

| ● | No additional capital requirements 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

| ● | Management that focuses on forward looking growth opportunities rather than operational or development issues.

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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 assets. Financial results have also typically been supplemented by acquisitions of new 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 operated by maintaining a strong balance sheet so that it can make investments during commodity cycle downturns.

Franco-Nevada manages its portfolio to maintain a focus on precious metals (gold, silver and PGM) and a diversity of revenue sources with a target of not more than 20% of revenue from Energy (oil, gas and NGLs). In the short term, we may temporarily diverge from the long-term target based on opportunities available. In Q2/2020, 92.5% of revenue was earned from gold and gold equivalents and 7.5% from Energy assets.

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 the underlying asset. During H1/2020, production from some of our assets were impacted by temporary suspension of operations as a result of the COVID-19 pandemic. 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 operation. Profit-based royalties accounted for approximately 7.0% of total revenue in H1/2020.

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2020 Second Quarter Management’s Discussion and Analysis | 4

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Highlights

Financial Update – Q2/2020

| ● | 104,330 GEOs(1) sold in Q2/2020, a decrease of 3.2% from 107,774 GEOs sold in Q2/2019;

| ● | $195.4 million in revenue, an increase of 14.6% compared to $170.5 million in Q2/2019;

| ● | $27.0 million, or $259 per GEO sold, in Cash Costs(2) attributable to GEO production, compared to $25.6 million, or $238 per GEO sold, in Q2/2019;

| ● | $158.1 million, or $0.83 per share, of Adjusted EBITDA(2), an increase of 14.6% and 12.2%, respectively, compared to $137.9 million, or $0.74 per share, in Q2/2019;

| ● | 80.9% in Margin(2), compared to 80.9% in Q2/2019;

| ● | $94.4 million, or $0.50 per share, in net income, compared to $64.0 million, or $0.34 per share, in Q2/2019;

| ● | $91.8 million, or $0.48 per share in Adjusted Net Income(2), an increase of 43.4% and 41.2%, respectively, compared to $64.0 million, or $0.34 per share, in Q2/2019;

| ● | $150.2 million in net cash provided by operating activities, an increase of 21.3% compared to $119.1 million in Q2/2019;

| ● | $378.5 million in cash and cash equivalents at June 30, 2020 with no debt

| ● | $1.7 billion in available capital as at June 30, 2020.

Financial Update – H1/2020

| ● | 239,271 GEOs sold, an increase of 4.1% from 229,823 GEOs sold in H1/2019;

| ● | $435.9 million in revenue, an increase of 24.4% compared to $350.3 million in H1/2019;

| ● | $68.5 million, or $286 per GEO sold, in Cash Costs attributable to GEO production, compared to $56.6 million, or $246 per GEO sold, in H1/2019;

| ● | $350.8 million, or $1.85 per share, in Adjusted EBITDA, an increase of 25.8% and 24.2%, respectively, compared to $278.8 million, or $1.49 per share, in H1/2019;

| ● | 80.5% in Margin, compared to 79.6% in H1/2019;

| ● | $4.4 million, or $0.02 per share, in net loss, compared to $129.2 million net income, or $0.69 per share, in H1/2019;

| ● | $201.0 million, or $1.06 per share, in Adjusted Net Income, an increase of 55.6% and 53.6%, respectively, compared to $129.2 million, or $0.69 per share, in H1/2019;

| ● | $345.4 million in net cash provided by operating activities, an increase of 29.3% compared to $262.7 million in H1/2019.

Impact of the COVID-19 Pandemic

Franco-Nevada supports measures to address the COVID-19 pandemic. All of our employees are working remotely and there are no known cases in the Company. Our business development team has developed work-arounds for various due diligence processes.

The Company is closely monitoring the impact of the COVID-19 pandemic on its portfolio of assets. We remain in close contact with many of our operators who are facing increased challenges due to COVID-19. Further details are provided below in the “Significant Portfolio Updates” section of this MD&A.

In addition, a number of geopolitical and market factors impacting global energy markets (including those related to the COVID-19 pandemic) have contributed to extreme volatility and a significant decrease in the price of oil and gas. As a result of reduced production and capital spend by the operators of the Company’s Energy assets due to lower market expectations for oil and gas prices, the Company undertook a review of the carrying value of its Energy assets at the end of the first quarter this year and recorded after-tax impairments of $207.4 million ($271.7 million pre-tax) related to its interests in the SCOOP/STACK and Weyburn. Further details are provided in the “Impairment Charges” section of this MD&A.

Franco-Nevada is financially strong, debt-free, and well-positioned to make further investments to grow its diversified portfolio of assets. At June 30, 2020, the Company had working capital of $477.6 million, including cash and cash equivalents of $378.5 million, marketable securities of $137.3 million, and credit facilities of $1.1 billion.

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1 | GEOs include production from our Mining assets and do not include Energy 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 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 page 11 and 14 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, 2020 and 2019, respectively.

2 | Cash Costs, Adjusted 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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2020 Second Quarter Management’s Discussion and Analysis | 5

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Significant Portfolio Updates

Additional updates related to our portfolio of assets are available in our News Release issued on August 5, 2020, available on SEDAR at www.sedar.com, and EDGAR at www.sec.gov.

As a result of the COVID-19 pandemic, temporarily reduced or curtailed production was announced by the respective operators for the following Mining assets; however, several operations have been restarted recently:

| ● | Cobre Panama: On April 7, 2020, First Quantum Minerals Ltd. (“First Quantum”) announced that the Ministry of Health of the Republic of Panama (“MINSA”) ordered the temporary suspension of labour activities at the mine due to COVID-19. First Quantum placed the Cobre Panama operation on care and maintenance until MINSA was satisfied that the quarantine conditions were appropriate. On July 7, 2020, First Quantum announced that it had received notice from MINSA lifting the temporary suspension and is implementing a reopening plan. The operation is expected to ramp up to full production by mid-August, depending on successful implementation of the reopening plan.

| ● | Antamina: On April 13, 2020, Teck Resources Limited (“Teck”) announced that the operation was being temporarily suspended to support Peruvian COVID-19 response efforts and to facilitate a change in workforce. On May 27, 2020, Teck announced that Antamina had resumed operations with plans to start operating at 80% capacity with a gradual ramp up to full production expected in the third quarter of 2020.

| ● | Guadalupe-Palmarejo: On April 7, 2020, Coeur Mining, Inc. (“Coeur”) announced the temporary suspension of active mining and processing activities at its Palmarejo gold-silver complex in the State of Chihuahua, Mexico in accordance with a government-mandated decree in response to COVID-19. On May 13, 2020, Coeur announced that it had taken steps to restart active mining, processing and exploration activities at its Palmaejo gold-silver complex in accordance with updated guidance from the Federal government of Mexico.

| ● | Detour: On March 22, 2020, Kirkland Lake Gold Ltd. (“Kirkland Lake”) transitioned the Detour Lake mine to reduced operations effective March 23, 2020. Continuing activities at the mine included mill processing of reduced feed from the open pit and stockpiled ore, management of water levels during the spring run-off and environmental management activities. On May 6, 2020, Kirkland Lake announced that it had commenced a gradual recall of its workers at Detour Lake.

| ● | Other Mining Assets: Other assets with temporarily reduced operations or curtailed production include Golden Highway, Kirkland Lake (Macassa), Cerro Moro, Canadian Malartic, MWS, Musselwhite, Stillwater, Timmins West, and Island Gold. All have been subsequently authorized to resume operations except for Golden Highway which remains on temporary suspension while Kirkland Lake continues to assess options for the future of the assets. With the Golden Highway assets currently in temporary suspension, our total producing mining assets have reduced from 56 at the beginning of Q2/2020 to 53 at the end Q2/2020.

With respect to the Company’s Energy assets, several operators of the Company’s Energy assets announced in Q1/2020 significant reductions in planned capital expenditures and have curtailed production due to lower market expectations for oil and gas prices, including as a result of the COVID-19 pandemic. As a result, the Company recorded after-tax impairments of $207.4 million ($271.7 million pre-tax) rela ted to its interest in the SCOOP/STACK and Weyburn at March 31, 2020. Further details are provided in the “Impairment Charges” section of this MD&A. As of the date of this MD&A, oil and gas prices have partially rebounded from historic lows in April 2020.

Corporate Developments

Acquisition of Alpala Royalty – Northern Ecuador

On May 11, 2020, the Company entered into an agreement with SolGold plc (“SolGold”) to acquire a 1% NSR with reference to all minerals produced from the Alpala copper-gold-silver project in northern Ecuador for $100.0 million. The Alpala project is owned by Exploraciones Novomining SA, which is held 85% by SolGold and 15% by Cornerstone Capital Resource Inc. SolGold has the option to increase the size of the transaction to $150 million for a 1.5% NSR until January 11, 2021 and also has the option to buy-back 50% of the royalty for a period of time. Franco-Nevada is entitled to receive certain minimum royalty payments from 2028 and also has the option to convert the NSR to a gold NSR for a period of time once Alpala is producing. The NSR will cover the 4,979 hectare Cascabel concession. Closing of the acquisition is subject to various conditions. In May 2020, the Company provided SolGold with a bridge loan of $15 million for a period of up to 8 months.

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Acquisition of U.S. Oil & Gas Royalty Rights with Continental Resources, Inc. – SCOOP and STACK, Oklahoma, U.S.A.

Franco-Nevada recorded contributions to the Royalty Acquisition Venture of $2.5 million and $19.3 million in Q2/2020 and H1/2020, respectively (Q2/2019 and H1/2019 - $35.1 million and $86.5 million, respectively). Of this, $0.5 million was funded after quarter-end. As at June 30, 2020, the total cumulative investment in the Royalty Acquisition Venture by the Company totalled $395.5 million and Franco-Nevada has remaining commitments of up to $124.5 million to be funded in future periods. In the first half of the year, in order to account for weakness in the commodity price environment, Franco-Nevada and Continental Resources, Inc. (“Continental”) collectively agreed to reduce their capital funding commitments to the Royalty Acquisition Venture by approximately half for the 2020 fiscal year. Since that time, the pace of acquisition has been slower than anticipated and capital contributions for 2020 are now expected to total approximately $30 million to $40 million, with $19.3 million expensed in the first half of 2020. The reduced funding level will target lower prices for acquiring acreage, which will allow the Royalty Acquisition Venture to bolster the land base and provide a stronger platform for a potential future rebound in commodity prices and a resumption of development activity by Continental.

Financing

Credit Facilities

As at June 30, 2020, the Company had no amounts outstanding against its $1.0 billion unsecured revolving term credit facility (the “Corporate Revolver”). However, the Company has posted security in the form of standby letters of credit in the amount of $17.0 million (C$23.1 million) in connection with the audit by the Canada Revenue Agency (“CRA”) of its 2013–2015 taxation years. The standby letters of credit reduce the available balance under the Corporate Revolver.

On March 10, 2020, Franco-Nevada (Barbados) Corporation amended its $100.0 million unsecured revolving credit facility (the “FNBC Revolver”) to extend the term by an additional year to March 20, 2021. The amendment also provided a reduction in the applicable margins and standby fees, which depend on the Company’s leverage ratio. As at June 30, 2020, the Company had no amounts outstanding against the FNBC Revolver.

On February 14, 2020, the Company made full repayment of the $80.0 million it had outstanding at December 31, 2019 under its non-revolving credit facility (the “Corporate Term Loan”). The Corporate Term Loan is a non-revolving facility, and is therefore no longer available to draw.

At-the-Market Equity Program

On May 11, 2020, the Company established an at-the-market equity program (the “ATM Program”) permitting the Company to issue up to an aggregate of $300 million worth of common shares from treasury at prevailing market prices to the public through the Toronto Stock Exchange, the New York Stock Exchange or any other marketplace on which the common shares are listed, quoted or otherwise trade. The Company’s previous at-the-market equity program established on July 19, 2019 that allowed the Company to issue up to $200 million worth of common shares was terminated on April 28, 2020.

In Q2/2020, the Company issued 474,900 common shares under the ATM Program at an average price per common share of $143.58. The gross proceeds from these issuances were $68.2 million, and the net proceeds were $66.8 million after deducting agent commission costs of $0.7 million and other share issuance costs of $0.7 million.

For H1/2020, the Company issued 909,900 common shares under the ATM Program as defined and the previous ATM program at an average price per common share of $125.54. The gross proceeds from these issuances were $114.2 million, and the net proceeds were $112.3 million after deducting agent commission costs of $1.1 million and other share issuance costs of $0.8 million.

Dividend Declaration

In Q2/2020, Franco-Nevada declared a quarterly dividend of $0.26 per share. The total dividend declared was $49.9 million, of which $39.8 million was paid in cash and $10.1 million was paid in common shares issued under the Company’s Dividend Reinvestment Plan (the “DRIP”). For H1/2020, dividends declared totaled $0.51 per share, or $97.0 million, of which $76.0 million was paid in cash and $21.0 million was paid in common shares under the DRIP.

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.

Franco-Nevada now expects attributable royalty and stream sales to total 475,000 to 505,000 GEOs from its mining assets and revenue of $60 to $75 million from its energy assets in 2020. For this updated guidance, silver, platinum and palladium metals have been converted to GEOs using assumed commodity prices of $1,800/oz Au, $20.00/oz Ag, $900/oz Pt and $2,200/oz Pd. The WTI oil price and Henry Hub natural gas price are assumed to average $40 per barrel and $2.00 per mcf, respectively. The 2020 guidance is based on public forecasts and other disclosures by the third-party owners and operators of our assets or our assessment thereof.

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2020 Second Quarter Management’s Discussion and Analysis | 7

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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 the level of interest rates, fiscal and monetary stimulus, 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 when converting non-gold 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 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.

Gold prices increased 30.6%, averaging $1,711/oz, compared to $1,310/oz in Q2/2019, reflecting improved sentiment toward gold as a safe haven in uncertain times. Gold prices ended Q2/2020 at $1,768/oz, approximately 9.9% higher than at the end of Q1/2020.

Silver prices averaged $16.38/oz in Q2/2020, an increase of 10.0% compared to $14.89/oz in Q2/2019. Platinum and palladium prices averaged $790/oz and $1,965/oz, respectively, in Q2/2020, compared to $842/oz and $1,388/oz, respectively, in Q2/2019, a decrease of 6.2% and an increase of 41.6%, respectively.

During the first half of the year, a number of geopolitical and market factors outside of the Company’s control (including those related to the COVID-19 pandemic) have contributed to volatility and a significant decrease in the price of oil and gas. WTI prices averaged $27.82/bbl in Q2/2020, a 53.4% decrease from Q2/2019, Edmonton Light prices averaged C$32.09/bbl in Q2/2020, down 55.7% compared to Q2/2019. Henry Hub natural gas prices averaged $1.76/mcf in Q2/2020 compared to $2.51/mcf in Q2/2019.

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Selected Financial Information

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​ | ​ | ​ | For the three months ended |  | ​ | For the six months ended | ​
(in millions, except Average Gold Price, GEOs sold, | ​ | ​ | June 30, | ​ | ​ | June 30, | ​
Margin, per ounce amounts and per share amounts) |  |  | 2020 |  | ​ | 2019 |  |  | 2020 |  |  | 2019 | ​
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Statistical Measures | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Average Gold Price | ​ | ​ | $ | 1,711 | ​ | ​ | $ | 1,310 | ​ | ​ | $ | 1,645 | ​ | ​ | $ | 1,307 | ​
GEOs sold(1) | ​ | ​ |  | 104,330 | ​ | ​ |  | 107,774 | ​ | ​ |  | 239,271 | ​ | ​ |  | 229,823 | ​
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Statement of Comprehensive Income (Loss) | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Revenue | ​ | ​ | $ | 195.4 | ​ | ​ | $ | 170.5 | ​ | ​ | $ | 435.9 | ​ | ​ | $ | 350.3 | ​
Depletion and depreciation | ​ | ​ |  | 52.3 | ​ | ​ |  | 58.9 | ​ | ​ |  | 116.7 | ​ | ​ |  | 119.8 | ​
Costs of sales | ​ | ​ |  | 28.0 | ​ | ​ |  | 27.4 | ​ | ​ |  | 71.6 | ​ | ​ |  | 59.8 | ​
Operating income (loss) | ​ | ​ |  | 105.8 | ​ | ​ |  | 79.0 | ​ | ​ |  | (37.6) | ​ | ​ |  | 159.0 | ​
Net income (loss) | ​ | ​ |  | 94.4 | ​ | ​ |  | 64.0 | ​ | ​ |  | (4.4) | ​ | ​ |  | 129.2 | ​
Basic earnings (loss) per share | ​ | ​ | $ | 0.50 | ​ | ​ | $ | 0.34 | ​ | ​ | $ | (0.02) | ​ | ​ | $ | 0.69 | ​
Diluted earnings (loss) per share | ​ | ​ | $ | 0.50 | ​ | ​ | $ | 0.34 | ​ | ​ | $ | (0.02) | ​ | ​ | $ | 0.69 | ​
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Dividends declared per share | ​ | ​ | $ | 0.26 | ​ | ​ | $ | 0.25 | ​ | ​ | $ | 0.51 | ​ | ​ | $ | 0.49 | ​
Dividends declared (including DRIP) | ​ | ​ | $ | 49.9 | ​ | ​ | $ | 47.4 | ​ | ​ | $ | 97.0 | ​ | ​ | $ | 92.3 | ​
Weighted average shares outstanding | ​ | ​ |  | 190.2 | ​ | ​ |  | 187.2 | ​ | ​ |  | 189.6 | ​ | ​ |  | 187.1 | ​
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Non-IFRS Measures | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash Costs(2) attributable to GEOs sold | ​ | ​ | $ | 27.0 | ​ | ​ | $ | 25.6 | ​ | ​ | $ | 68.5 | ​ | ​ | $ | 56.6 | ​
Cash Costs(2) per GEO sold | ​ | ​ | $ | 259 | ​ | ​ | $ | 238 | ​ | ​ | $ | 286 | ​ | ​ | $ | 246 | ​
Adjusted EBITDA(2) | ​ | ​ | $ | 158.1 | ​ | ​ | $ | 137.9 | ​ | ​ | $ | 350.8 | ​ | ​ | $ | 278.8 | ​
Adjusted EBITDA(2) per share | ​ | ​ | $ | 0.83 | ​ | ​ | $ | 0.74 | ​ | ​ | $ | 1.85 | ​ | ​ | $ | 1.49 | ​
Margin(2) | ​ | ​ |  | 80.9 | % | ​ |  | 80.9 | % | ​ |  | 80.5 | % | ​ |  | 79.6 | %
Adjusted Net Income(2) | ​ | ​ | $ | 91.8 | ​ | ​ | $ | 64.0 | ​ | ​ | $ | 201.0 | ​ | ​ | $ | 129.2 | ​
Adjusted Net Income(2) per share | ​ | ​ | $ | 0.48 | ​ | ​ | $ | 0.34 | ​ | ​ | $ | 1.06 | ​ | ​ | $ | 0.69 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Statement of Cash Flows | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net cash provided by operating activities | ​ | ​ | $ | 150.2 | ​ | ​ | $ | 119.1 | ​ | ​ | $ | 345.4 | ​ | ​ | $ | 262.7 | ​
Net cash used in investing activities | ​ | ​ | $ | (19.0) | ​ | ​ | $ | (33.5) | ​ | ​ | $ | (53.5) | ​ | ​ | $ | (89.8) | ​
Net cash provided by (used in) financing activities | ​ | ​ | $ | 34.8 | ​ | ​ | $ | 241.4 | ​ | ​ | $ | (42.7) | ​ | ​ | $ | 156.7 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​

​

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | As at | ​ | ​ | As at | ​
​ | ​ | ​ | June 30, | ​ | ​ | December 31, | ​
(expressed in millions) |  |  | 2020 |  |  | 2019 |
Statement of Financial Position | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | ​ | $ | 378.5 | ​ | ​ | $ | 132.1 | ​
Total assets | ​ | ​ |  | 5,182.2 | ​ | ​ |  | 5,280.6 | ​
Debt | ​ | ​ | ​ | — | ​ | ​ | ​ | 80.0 | ​
Deferred income tax liabilities | ​ | ​ | ​ | 69.4 | ​ | ​ | ​ | 82.4 | ​
Total shareholders’ equity | ​ | ​ | ​ | 5,070.4 | ​ | ​ | ​ | 5,062.2 | ​
Working capital(3) | ​ | ​ | ​ | 477.6 | ​ | ​ | ​ | 225.3 | ​

​

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 and 14 o f this MD&A for indicative prices which may be used in the calculations of GEOs for the three and six months ended June 30, 2020 and 2019, respectively.

2 | Cash costs, 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.

3 | The Company defines Working Capital as current assets less current lia bilities.

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2020 Second Quarter Management’s Discussion and Analysis | 9

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Revenue by Asset

Our portfolio is well-diversified with GEOs and revenue being earned from 56 Mining assets and 56 Energy 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, 2020 and 2019:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | For the three months ended | ​ | ​ | For the six months ended |
(expressed in millions) | ​ | ​ | ​ | ​ | June 30, | ​ | ​ | June 30, |
Property |  | Interest and % |  | ​ | 2020 |  | ​ | 2019 |  | ​ | 2020 |  | ​ | 2019 |
GOLD & GOLD EQUIVALENTS | ​ | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​
Latin America | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cobre Panama |  | Stream (indexed) Gold & Silver | ​ | ​ | $ | 17.6 | ​ | ​ | $ | — | ​ | ​ | $ | 57.9 | ​ | ​ | $ | — | ​
Candelaria |  | Stream 68% Gold & Silver | ​ | ​ | ​ | 26.6 | ​ | ​ | ​ | 21.0 | ​ | ​ | ​ | 45.9 | ​ | ​ | ​ | 47.4 | ​
Antapaccay |  | Stream (indexed) Gold & Silver | ​ | ​ | ​ | 11.6 | ​ | ​ | ​ | 18.6 | ​ | ​ | ​ | 36.1 | ​ | ​ | ​ | 42.0 | ​
Antamina |  | Stream 22.5% Silver | ​ | ​ |  | 13.2 | ​ | ​ |  | 10.8 | ​ | ​ |  | 25.8 | ​ | ​ |  | 23.1 | ​
Guadalupe-Palmarejo |  | Stream 50% Gold | ​ | ​ |  | 10.4 | ​ | ​ |  | 8.3 | ​ | ​ |  | 30.2 | ​ | ​ |  | 19.8 | ​
Other | ​ | ​ | ​ | ​ |  | 1.0 | ​ | ​ |  | 2.2 | ​ | ​ |  | 2.1 | ​ | ​ |  | 3.6 | ​
United States | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Goldstrike |  | NSR 2-4%, NPI 2.4-6% | ​ | ​ | $ | 5.2 | ​ | ​ | $ | 8.2 | ​ | ​ | $ | 9.7 | ​ | ​ | $ | 12.6 | ​
Stillwater |  | NSR 5% PGM | ​ | ​ |  | 13.2 | ​ | ​ |  | 8.5 | ​ | ​ |  | 22.8 | ​ | ​ |  | 17.7 | ​
Gold Quarry |  | NSR 7.29% | ​ | ​ |  | 5.5 | ​ | ​ |  | 2.7 | ​ | ​ |  | 9.3 | ​ | ​ |  | 5.8 | ​
Marigold |  | NSR 1.75-5%, GR 0.5-4% | ​ | ​ |  | 1.4 | ​ | ​ |  | 2.3 | ​ | ​ |  | 2.8 | ​ | ​ |  | 5.0 | ​
Bald Mountain |  | NSR/GR 0.875-5% | ​ | ​ |  | 2.9 | ​ | ​ |  | 1.3 | ​ | ​ |  | 5.5 | ​ | ​ |  | 3.5 | ​
South Arturo |  | GR 4-9% | ​ | ​ |  | 1.2 | ​ | ​ |  | — | ​ | ​ |  | 3.0 | ​ | ​ |  | 0.1 | ​
Other | ​ | ​ | ​ | ​ |  | 2.0 | ​ | ​ |  | 1.2 | ​ | ​ |  | 3.6 | ​ | ​ |  | 2.4 | ​
Canada | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Sudbury |  | Stream 50% PGM & Gold | ​ | ​ | $ | 9.5 | ​ | ​ | $ | 7.6 | ​ | ​ | $ | 24.1 | ​ | ​ | $ | 18.7 | ​
Detour Lake |  | NSR 2% | ​ | ​ |  | 4.7 | ​ | ​ |  | 3.9 | ​ | ​ |  | 9.3 | ​ | ​ |  | 8.0 | ​
Hemlo |  | NSR 3%, NPI 50% | ​ | ​ |  | 12.8 | ​ | ​ |  | 3.5 | ​ | ​ |  | 24.4 | ​ | ​ |  | 9.7 | ​
Golden Highway |  | NSR 2-10% | ​ | ​ |  | 0.3 | ​ | ​ |  | 0.9 | ​ | ​ |  | 3.0 | ​ | ​ |  | 3.0 | ​
Brucejack |  | NSR 1.2% | ​ | ​ | ​ | 1.9 | ​ | ​ | ​ | 1.2 | ​ | ​ | ​ | 3.3 | ​ | ​ | ​ | 2.4 | ​
Kirkland Lake |  | NSR 1.5-5.5%, NPI 20% | ​ | ​ |  | 1.2 | ​ | ​ |  | 1.1 | ​ | ​ |  | 2.7 | ​ | ​ |  | 2.4 | ​
Other | ​ | ​ | ​ | ​ |  | 4.0 | ​ | ​ |  | 5.7 | ​ | ​ |  | 7.2 | ​ | ​ |  | 7.7 | ​
Rest of World | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
MWS |  | Stream 25% | ​ | ​ | $ | 9.3 | ​ | ​ | $ | 9.3 | ​ | ​ | $ | 18.3 | ​ | ​ | $ | 16.2 | ​
Sabodala |  | Stream 6% | ​ | ​ |  | 5.9 | ​ | ​ |  | 7.3 | ​ | ​ |  | 10.6 | ​ | ​ |  | 14.7 | ​
Karma |  | Stream 4.875%, Fixed to 80,625 oz | ​ | ​ |  | 8.5 | ​ | ​ |  | 5.1 | ​ | ​ |  | 14.5 | ​ | ​ |  | 10.9 | ​
Tasiast |  | NSR 2% | ​ | ​ |  | 3.5 | ​ | ​ |  | 2.5 | ​ | ​ |  | 6.5 | ​ | ​ |  | 5.2 | ​
Subika |  | NSR 2% | ​ | ​ |  | 2.1 | ​ | ​ |  | 4.1 | ​ | ​ |  | 4.6 | ​ | ​ |  | 7.5 | ​
Duketon |  | NSR 2% | ​ | ​ |  | 1.7 | ​ | ​ |  | 1.5 | ​ | ​ |  | 4.2 | ​ | ​ |  | 3.9 | ​
Edikan |  | NSR 1.5% | ​ | ​ |  | 1.2 | ​ | ​ |  | 0.8 | ​ | ​ |  | 2.1 | ​ | ​ |  | 1.6 | ​
Other | ​ | ​ | ​ | ​ |  | 2.4 | ​ | ​ |  | 3.3 | ​ | ​ |  | 5.3 | ​ | ​ |  | 7.0 | ​
​ | ​ | ​ | ​ | ​ | $ | 180.8 | ​ | ​ | $ | 142.9 | ​ | ​ | $ | 394.8 | ​ | ​ | $ | 301.9 | ​
ENERGY | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
United States | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
SCOOP/STACK | ​ | Various Royalty Rates | ​ | ​ | $ | 4.8 | ​ | ​ | $ | 6.9 | ​ | ​ | $ | 13.4 | ​ | ​ | $ | 12.4 | ​
Permian Basin | ​ | Various Royalty Rates | ​ | ​ | ​ | 3.6 | ​ | ​ | ​ | 4.9 | ​ | ​ | ​ | 8.9 | ​ | ​ | ​ | 9.4 | ​
Marcellus | ​ | GORR 1% | ​ | ​ | ​ | 4.9 | ​ | ​ | ​ | — | ​ | ​ | ​ | 10.7 | ​ | ​ | ​ | — | ​
Canada | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Weyburn |  | NRI 11.71%, ORR 0.44%, WI 2.56% | ​ | ​ | $ | (0.6) | ​ | ​ | $ | 10.5 | ​ | ​ | $ | 3.6 | ​ | ​ | $ | 17.8 | ​
Orion | ​ | GORR 4% | ​ | ​ | ​ | 1.0 | ​ | ​ | ​ | 3.2 | ​ | ​ | ​ | 1.9 | ​ | ​ | ​ | 4.9 | ​
Other | ​ | ​ | ​ | ​ |  | 0.9 | ​ | ​ |  | 2.1 | ​ | ​ |  | 2.6 | ​ | ​ |  | 3.9 | ​
​ | ​ | ​ | ​ | ​ | $ | 14.6 | ​ | ​ | $ | 27.6 | ​ | ​ | $ | 41.1 | ​ | ​ | $ | 48.4 | ​
Revenue | ​ | ​ | ​ | ​ | $ | 195.4 | ​ | ​ | $ | 170.5 | ​ | ​ | $ | 435.9 | ​ | ​ | $ | 350.3 | ​

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2020 Second Quarter Management’s Discussion and Analysis | 10

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Review of Quarterly Financial Performance

The prices of precious metals, oil and gas and production from Mining and Energy 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 |  | ​ |  |  | Q2/2020 |  |  | Q1/2020 |  | Q2/2019 |  | (Q2/2020-Q1/2020) |  | (Q2/2020-Q2/2019)
Gold(1) |  | ($/oz) | ​ | ​ | $ | 1,711 | ​ | ​ | $ | 1,583 | ​ | $ | 1,310 | ​ | 8.1 | % | ​ | 30.6 | %
Silver(2) |  | ($/oz) | ​ | ​ |  | 16.38 | ​ | ​ |  | 16.90 | ​ |  | 14.89 | ​ | (3.1) | % | ​ | 10.0 | %
Platinum(3) |  | ($/oz) | ​ | ​ |  | 790 | ​ | ​ |  | 903 | ​ |  | 842 | ​ | (12.5) | % | ​ | (6.2) | %
Palladium(3) |  | ($/oz) | ​ | ​ |  | 1,965 | ​ | ​ |  | 2,284 | ​ |  | 1,388 | ​ | (14.0) | % | ​ | 41.6 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Edmonton Light |  | (C$/bbl) | ​ | ​ |  | 32.09 | ​ | ​ |  | 52.18 | ​ |  | 72.48 | ​ | (38.5) | % | ​ | (55.7) | %
West Texas Intermediate | ​ | ($/bbl) | ​ | ​ | ​ | 27.82 | ​ | ​ | ​ | 45.99 | ​ | ​ | 59.73 | ​ | (39.5) | % | ​ | (53.4) | %
Henry Hub | ​ | ($/mcf) | ​ | ​ | ​ | 1.76 | ​ | ​ | ​ | 1.87 | ​ | ​ | 2.51 | ​ | (5.9) | % | ​ | (29.9) | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
CAD/USD exchange rate(4) | ​ | ​ | ​ | ​ |  | 0.7219 | ​ | ​ |  | 0.7435 | ​ |  | 0.7476 | ​ | (2.9) | % | ​ | (3.4) | %

| 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 daily rates.

Revenue

Revenue and GEO sales by commodity, geographical location and type of interest for the three months ended June 30, 2020 and 2019 is as follows:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | Gold Equivalent Ounces(1) | ​ | ​ | Revenue (in millions) |
For the three months ended June 30, |  |  | 2020 |  |  | 2019 |  | Variance |  |  | 2020 |  |  | 2019 |  | Variance |
Commodity | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gold |  | ​ | 79,758 | ​ | ​ | 80,606 |  | (848) | ​ | ​ | $ | 136.6 | ​ | ​ | $ | 105.9 | ​ | $ | 30.7 | ​
Silver |  | ​ | 11,630 | ​ | ​ | 12,278 |  | (648) | ​ | ​ |  | 20.2 | ​ | ​ |  | 16.6 | ​ |  | 3.6 | ​
PGM |  | ​ | 11,367 | ​ | ​ | 10,540 |  | 827 | ​ | ​ |  | 21.4 | ​ | ​ |  | 14.7 | ​ |  | 6.7 | ​
Other Mining assets |  | ​ | 1,575 | ​ | ​ | 4,350 |  | (2,775) | ​ | ​ |  | 2.6 | ​ | ​ |  | 5.7 | ​ |  | (3.1) | ​
Mining | ​ | ​ | 104,330 | ​ | ​ | 107,774 | ​ | (3,444) | ​ | ​ | $ | 180.8 | ​ | ​ | $ | 142.9 | ​ | $ | 37.9 | ​
Energy | ​ | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ |  | 14.6 | ​ | ​ |  | 27.6 | ​ |  | (13.0 ) | ​
​ |  | ​ | 104,330 |  | ​ | 107,774 |  | (3,444) | ​ | ​ | $ | 195.4 | ​ | ​ | $ | 170.5 | ​ | $ | 24.9 | ​
Geography | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Latin America |  | ​ | 46,538 |  | ​ | 46,104 |  | 434 | ​ | ​ | $ | 80.4 | ​ | ​ | $ | 60.9 | ​ | $ | 19.5 | ​
United States |  | ​ | 18,509 |  | ​ | 18,642 |  | (133) | ​ | ​ | ​ | 44.7 | ​ | ​ | ​ | 36.0 | ​ | ​ | 8.7 | ​
Canada |  | ​ | 19,147 |  | ​ | 17,479 |  | 1,668 | ​ | ​ |  | 35.7 | ​ | ​ |  | 39.7 | ​ |  | (4.0) | ​
Rest of World |  | ​ | 20,136 |  | ​ | 25,549 |  | (5,413) | ​ | ​ |  | 34.6 | ​ | ​ |  | 33.9 | ​ |  | 0.7 | ​
​ |  | ​ | 104,330 |  | ​ | 107,774 |  | (3,444) | ​ | ​ | $ | 195.4 | ​ | ​ | $ | 170.5 | ​ | $ | 24.9 | ​
Type | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Revenue-based royalties |  | ​ | 29,138 |  | ​ | 30,471 |  | (1,333) | ​ | ​ | $ | 65.1 | ​ | ​ | $ | 56.4 | ​ | $ | 8.7 | ​
Streams |  | ​ | 64,141 |  | ​ | 65,742 |  | (1,601) | ​ | ​ |  | 112.6 | ​ | ​ |  | 88.1 | ​ |  | 24.5 | ​
Profit-based royalties |  | ​ | 9,467 |  | ​ | 7,885 |  | 1,582 | ​ | ​ |  | 14.1 | ​ | ​ |  | 17.3 | ​ |  | (3.2) | ​
Other |  | ​ | 1,584 |  | ​ | 3,676 |  | (2,092) | ​ | ​ |  | 3.6 | ​ | ​ |  | 8.7 | ​ |  | (5.1) | ​
​ |  | ​ | 104,330 |  | ​ | 107,774 |  | (3,444) | ​ | ​ | $ | 195.4 | ​ | ​ | $ | 170.5 | ​ | $ | 24.9 | ​

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

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Revenue for Q2/2020 was $195.4 million, up 14.6% from Q2/2019, and comprised $180.8 million from Mining assets and $14.6 million from Energy assets. Mining revenue in Q2/2020 increased 26.5% benefited from strong gold prices. Energy revenue in Q2/2020 decreased 47.1% compared to the same period in 2019, due to a decrease in commodity prices which negatively impacted all energy assets, most significantly the Weyburn NRI, offset partially by the addition of the Marcellus royalty.

Mining assets contributed 92.5% of the Company’s total revenue in Q2/2020, compared to 83.8% in Q2/2019. Geographically, the Company remains heavily invested in the Americas, representing 82.3% of revenue in Q2/2020, compared to 80.1% in Q2/2019.

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2020 Second Quarter Management’s Discussion and Analysis | 11

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GEO Sales

GEOs sold in Q2/2020 totaled 104,330 ounces, compared to 107,774 GEOs in Q2/2019.

The quarter-over-quarter decrease in GEOs sold was primarily due to the following assets:

| ● | Antapaccay – 6,702 GEOs sold in Q2/2020 compared to 14,228 GEOs in Q2/2019. While concentrate production at the mine was as expected in the LOM plan, concentrate shipment delays as a result of the COVID-19 pandemic impacted deliveries to Franco-Nevada.

| ● | Goldstrike – 3,138 GEOs sold in Q2/2020 compared to 6,396 GEOs in Q2/2019 as additional ounces were received in Q2/2019 in respect of a prior period adjustment.

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2020 Second Quarter Management’s Discussion and Analysis | 12

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| ● | Sabodala – 3,426 GEOs were sold from the Sabodala stream in Q2/2020 compared to 5,625 GEOs sold in Q2/2019, due to the fixed delivery requirements being fulfilled at the end of 2019.

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The above decreases were partly offset by the following assets:

| ● | Cobre Panama – Franco-Nevada sold 10,344 GEOs in Q2/2020, for which there were no comparatives in Q2/2019 as first deliveries were received in July 2019.

| ● | Hemlo – 7,699 GEOs were sold in Q2/2020, compared to 2,671 GEOs in Q2/2019 due to higher royalty payments from the NPI.

​

Energy Revenue

Energy assets earned revenue of $14.6 million (78% oil and 22% gas) for the quarter, a decrease of 47.1% compared to $27.6 million (90% oil and 10% gas) in Q2/2019. U.S. assets represented 91.1% of Franco-Nevada’s Energy revenue. The decrease in Energy revenue was primarily due to the following assets:

| ● | SCOOP/STACK – Royalties from the SCOOP/STACK contributed $4.8 million in Q2/2020 compared to $5.0 million in Q2/2019 due to lower realized commodity prices and lower volumes resulting from a reduction in drilling by operators on royalty lands.

| ● | Weyburn – Revenue from the Weyburn Unit during the quarter was negative, compared to $10.5 million in Q2/2019. Negative revenue in the quarter was due to accounting treatment for the NRI. While our ORR and WI royalties are accounted for on a gross basis, our NRI is recorded on net basis, after deduction of costs. The realized price from the NRI was C$22.13/boe compared to C$70.74/boe for Q2/2019.

​

The above decreases were partly offset by the following:

| ● | Marcellus – The royalty from the Marcellus, which was acquired in July 2019, contributed $4.9 million in Q2/2020.

Costs of Sales

​

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | For the three months ended June 30, |
(expressed in millions) |  |  | 2020 |  |  | 2019 |  | Variance |
Costs of stream sales | ​ | ​ | $ | 26.2 | ​ | ​ | $ | 25.0 | ​ | $ | 1.2 | ​
Mineral production taxes | ​ | ​ |  | 0.8 | ​ | ​ |  | 0.6 | ​ |  | 0.2 | ​
Mining costs of sales | ​ | ​ | $ | 27.0 | ​ | ​ | $ | 25.6 | ​ | $ | 1.4 | ​
Energy costs of sales | ​ | ​ |  | 1.0 | ​ | ​ |  | 1.8 | ​ |  | (0.8) | ​
​ | ​ | ​ | $ | 28.0 | ​ | ​ | $ | 27.4 | ​ | $ | 0.6 | ​

Costs of stream sales increased 4.8% from Q2/2019, reflecting an increase in costs of sales per ounce as a result of higher metal prices. Certain streams carry a cost per ounce which varies based on spot prices. The Company also received more ounces from the McCreedy West stream, which currently carries a higher cash payment per ounce relative to other streams.

Depletion and Depreciation

Depletion and depreciation expense totaled $52.3 million in Q2/2020, compared to $58.9 million in Q2/2019. The decrease was due to fewer GEOs sold in Q2/2020 compared to Q2/2019.

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2020 Second Quarter Management’s Discussion and Analysis | 13

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Income Taxes

Income tax expense was $11.5 million in Q2/2020 (Q2/2019 – $13.7 million), comprised of a current income tax expense of $10.1 million (Q2/2019 – $11.7 million) and a deferred income tax expense of $1.4 million (Q2/2019 – $2.0 million).

The Company is undergoing an audit by the CRA of its 2012-2015 taxation years. Refer to the “Liquidity and Capital Resources – Contingencies” section of this MD&A for further details.

Net Income

Net income for Q2/2020 was $94.4 million, or $0.50 per share, compared to $64.0 million, or $0.34 per share, for the same period in 2019. Adjusted Net Income, which adjusts for foreign exchange gains and losses and other income and expenses, among other items, was $91.8 million, or $0.48 per share, compared to $64.0 million, or $0.34 per share, earned in Q2/2019.

Review of Year-to-Date Financial Performance

The prices of precious metals, oil and gas and the actual production from Mining and Energy 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.

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Annual average prices and rates |  | ​ |  |  | H1/2020 |  |  | H1/2019 |  | Variance | ​
Gold(1) |  | ($/oz) | ​ | ​ | $ | 1,645 | ​ | ​ | $ | 1,307 |  | 25.9 | %
Silver(2) |  | ($/oz) | ​ | ​ |  | 16.65 | ​ | ​ |  | 15.23 |  | 9.3 | %
Platinum(3) |  | ($/oz) | ​ | ​ |  | 848 | ​ | ​ |  | 833 |  | 1.8 | %
Palladium(3) |  | ($/oz) | ​ | ​ |  | 2,128 | ​ | ​ |  | 1,435 |  | 48.3 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Edmonton Light |  | (C$/bbl) | ​ | ​ | ​ | 42.13 | ​ | ​ |  | 70.00 |  | (39.8) | %
West Texas Intermediate | ​ | ($/bbl) | ​ | ​ | ​ | 36.91 | ​ | ​ | ​ | 57.32 | ​ | (35.6) | %
Henry Hub | ​ | ($/mcf) | ​ | ​ | ​ | 1.81 | ​ | ​ | ​ | 2.69 | ​ | (32.7) | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
CAD/USD exchange rate(4) | ​ | ​ | ​ | ​ |  | 0.7326 | ​ | ​ |  | 0.7499 |  | (2.3) | %

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 rates.

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2020 Second Quarter Management’s Discussion and Analysis | 14

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Revenue

Revenue and GEO sales by commodity, geographical location and type of interest for the six months ended June 30, 2020 and 2019 is as follows:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | Gold Equivalent Ounces(1) | ​ | ​ | Revenue (in millions) |
For the six months ended June 30, |  |  | 2020 |  |  | 2019 |  | Variance |  |  | 2020 |  |  | 2019 |  | Variance |
Commodity | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gold |  | ​ | 185,509 |  | ​ | 168,184 |  | 17,325 | ​ | ​ | $ | 303.6 | ​ | ​ | $ | 219.9 | ​ | $ | 83.7 | ​
Silver |  | ​ | 25,512 |  | ​ | 27,576 |  | (2,064) | ​ | ​ |  | 42.3 | ​ | ​ |  | 36.6 | ​ |  | 5.7 | ​
PGM |  | ​ | 25,246 |  | ​ | 25,169 |  | 77 | ​ | ​ |  | 44.0 | ​ | ​ |  | 33.8 | ​ |  | 10.2 | ​
Other Mining assets |  | ​ | 3,004 | ​ | ​ | 8,894 |  | (5,890) | ​ | ​ |  | 4.9 | ​ | ​ |  | 11.6 | ​ |  | (6.7) | ​
Mining | ​ | ​ | 239,271 | ​ | ​ | 229,823 | ​ | 9,448 | ​ | ​ | $ | 394.8 | ​ | ​ | $ | 301.9 | ​ | $ | 92.9 | ​
Energy | ​ | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ |  | 41.1 | ​ | ​ |  | 48.4 | ​ |  | (7.3) | ​
​ |  | ​ | 239,271 |  | ​ | 229,823 |  | 9,448 | ​ | ​ | $ | 435.9 | ​ | ​ | $ | 350.3 | ​ | $ | 85.6 | ​
Geography | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Latin America |  | ​ | 120,632 |  | ​ | 103,650 |  | 16,982 | ​ | ​ | $ | 198.0 | ​ | ​ | $ | 135.9 | ​ | $ | 62.1 | ​
United States |  | ​ | 34,458 |  | ​ | 36,200 |  | (1,742) | ​ | ​ | ​ | 89.7 | ​ | ​ | ​ | 68.9 | ​ | ​ | 20.8 | ​
Canada |  | ​ | 44,114 |  | ​ | 39,060 |  | 5,054 | ​ | ​ |  | 82.1 | ​ | ​ |  | 78.5 | ​ |  | 3.6 | ​
Rest of World |  | ​ | 40,067 |  | ​ | 50,913 |  | (10,846) | ​ | ​ |  | 66.1 | ​ | ​ |  | 67.0 | ​ |  | (0.9) | ​
​ |  | ​ | 239,271 |  | ​ | 229,823 |  | 9,448 | ​ | ​ | $ | 435.9 | ​ | ​ | $ | 350.3 | ​ | $ | 85.6 | ​
Type | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Revenue-based royalties |  | ​ | 58,618 |  | ​ | 64,081 |  | (5,463) | ​ | ​ | $ | 133.5 | ​ | ​ | $ | 112.8 | ​ | $ | 20.7 | ​
Streams |  | ​ | 158,757 |  | ​ | 145,969 |  | 12,788 | ​ | ​ |  | 263.4 | ​ | ​ |  | 192.8 | ​ |  | 70.6 | ​
Profit-based royalties |  | ​ | 18,738 |  | ​ | 11,808 |  | 6,930 | ​ | ​ |  | 30.3 | ​ | ​ |  | 26.9 | ​ |  | 3.4 | ​
Other |  | ​ | 3,158 |  | ​ | 7,965 |  | (4,807) | ​ | ​ |  | 8.7 | ​ | ​ |  | 17.8 | ​ |  | (9.1) | ​
​ |  | ​ | 239,271 |  | ​ | 229,823 |  | 9,448 | ​ | ​ | $ | 435.9 | ​ | ​ | $ | 350.3 | ​ | $ | 85.6 | ​

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 above for indicative prices which may be used in the calculations of GEOs.

Revenue in H1/2020 was $435.9 million, up 24.4% from H1/2019 due primarily to an increase in GEOs sold of 4.1% and higher metal prices.

Mining revenue comprised 90.6% of total revenue in H1/2020, compared to 86.2% in H1/2019. We continue to earn the majority of our revenue from the Americas, at 84.8% in H1/2020 compared to 80.9% in H1/2019.

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2020 Second Quarter Management’s Discussion and Analysis | 15

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GEO Sales

GEOs sold in H1/2020 totaled 239,271 ounces, compared to 229,823 GEOs in H1/2019.

The year-over-year increase in GEOs sold was primarily due to the following assets:

| ● | Cobre Panama – Franco-Nevada sold 35,651 GEOs in H1/2020, for which there were no comparatives in H1/2019 as first deliveries were received in July 2019.

| ● | Hemlo – 15,382 GEOs were sold in H1/2020 compared to 7,684 GEOs in H1/2019 due to higher royalty payments from the NPI.

| ● | Guadalupe-Palmarejo – 18,678 GEOs were sold in H1/2020 compared to 14,992 GEOs in H1/2019 due to higher grade.

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The above increases were partly offset by the following assets:

| ● | Antapaccay – 22,174 GEOs were sold in H1/2020 compared to 32,144 GEOs in H1/2019 due to lower head grades as expected based on the life of mine plan and concentrate shipment delays due to the COVID-19 pandemic.

| ● | Candelaria – 27,493 GEOs were sold in H1/2020 compared to 36,773 GEOs in H1/2019 as mill throughput and gold feed grade were lower than those in H1/2019, in part due to COVID-19 pandemic.

| ● | Goldstrike – 5,957 GEOs sold in H1/2020 compared to 9,773 GEOs in H1/2019. Additional ounces were received in Q2/2019 in respect of a prior period adjustment.

| ● | Sabodala – 6,458 GEOs sold in H1/2020 compared to 11,250 GEOs in H1/2019 due to the fixed delivery requirements being fulfilled at the end of 2019.

Energy Revenue

The Company’s Energy assets contributed revenue of $41.1 million in H1/2020 (78% oil and 22% gas), a decrease of 15.1% compared to $48.4 million in H1/2019 (91% oil and 9% gas). The Company’s U.S. Energy assets contributed 80.3% of the Company’s Energy revenue. The year-over-year decrease in Energy revenue was primarily due to the following assets:

| ● | Weyburn – Revenue from the Weyburn Unit in H1/2020 was $3.6 million compared to $17.8 million in H1/2019 due to lower realized prices as well as increased operating and capital expenditures. The actual realized price from the Weyburn NRI was C$34.22/boe in H1/2020 compared to C$66.62/boe in H1/2019.

The above decrease was partly offset by the following:

| ● | Marcellus – The royalty from the Marcellus, which was acquired in July 2019, contributed $10.7 million in H1/2020.

| ● | SCOOP/STACK – Royalties from the SCOOP/STACK generated $13.4 million in revenue in H1/2020 compared to $12.4 million in H1/2019 due to additional contribution from the Royalty Acquisition Venture with Continental.

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2020 Second Quarter Management’s Discussion and Analysis | 16

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Costs of Sales

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | For the six months ended June 30, |
(expressed in millions) |  |  | 2020 |  |  | 2019 |  | Variance |
Costs of stream sales | ​ | ​ | $ | 67.0 | ​ | ​ | $ | 55.4 | ​ | $ | 11.6 | ​
Mineral production taxes | ​ | ​ |  | 1.5 | ​ | ​ |  | 1.2 | ​ |  | 0.3 | ​
Mining costs of sales | ​ | ​ | $ | 68.5 | ​ | ​ | $ | 56.6 | ​ | $ | 11.9 | ​
Energy costs of sales | ​ | ​ |  | 3.1 | ​ | ​ |  | 3.2 | ​ |  | (0.1) | ​
​ | ​ | ​ | $ | 71.6 | ​ | ​ | $ | 59.8 | ​ | $ | 11.8 | ​

Costs of stream ounces in H1/2020 increased 20.9% relative to H1/2019, reflecting an increase in stream GEOs sold of 4.1% in H1/2020 as well as higher gold prices. The Company also received more ounces from the McCreedy West stream, which currently carries a higher cash payment per ounce relative to other streams.

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2020 Second Quarter Management’s Discussion and Analysis | 17

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Depletion and Depreciation

Depletion and depreciation expense totaled $116.7 million in H1/2020, compared to $119.8 million in H1/2019. While GEOs sold increased year-over-year, depletion expense decreased as the incremental GEOs were earned from assets carrying lower depletion rates. Depletion on a per ounce basis also decreased for certain of the Company’s assets where reserves increased year-over-year.

Impairment Charges

During Q1/2020, the Company recorded pre-tax impairments of $271.7 million, or $207.4 million after-tax, related to its interests in the SCOOP/STACK and Weyburn. Refer to the Impairments of Royalties, Stream and Working Interests section of this MD&A for details.

Income Taxes

Income tax recovery in H1/2020 totaled $33.4 million (H1/2019 –$26.7 million income tax expense), comprised of a current income tax expense of $24.5 million (H1/2019 –$21.4 million) and a deferred income tax recovery of $57.9 million (H1/2019 – $5.3 million deferred income tax expense). The deferred income tax recovery in H1/2020 was mostly related to the impairment charges recorded in the first quarter of 2020.

The Company is undergoing an audit by the CRA of its 2012-2015 taxation years. Refer to the “Liquidity and Capital Resources – Contingencies” section of this MD&A for further details.

Net Loss (Income)

Net loss in H1/2020 was $4.4 million, or $0.02 per share, compared to net income of $129.2 million, or $0.69 per share, for the same period in 2019. The decrease in net income reflects the impairment charges recorded in the first quarter of 2020. Adjusted Net Income was $201.0 million, or $1.06 per share, compared to $129.2 million, or $0.69 per share, earned in H1/2019.

Impairments of Royalties, Stream and Working Interests

Royalties, stream and working interests are reviewed for impairment if there is an indication that the carrying amount may not be recoverable. As a result of reduced production and capital spend by the operators of the Company’s Energy assets due to lower market expectations for oil and gas prices, the Company noted the presence of impairment indicators at March 31, 2020 and carried out an asset impairment analysis of its Energy assets. The Company recorded impairment charges for Q1/2020 with respect to the following CGUs:

SCOOP/STACK

The Company’s interest in the SCOOP/STACK comprises acquisitions of royalty rights through the Royalty Acquisition Venture, a jointly-owned entity with Continental, as well as two packages of royalty rights acquired in December 2016 for a price of $100.0 million, and in November 2017 for $27.6 million.

Weyburn

The Company holds a 11.71% NRI, a 0.44% ORR and a 2.56% WI in the Weyburn Unit, which is located 129km southeast of Regina, Saskatchewan. The 11.71% NRI was acquired on November 13, 2012.

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2020 Second Quarter Management’s Discussion and Analysis | 18

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The following table summarizes the impairment losses recorded in Q1/2020 and estimated recoverable amount by CGU:

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​ | ​ | ​ | ​ | Impairment | ​ | ​ | ​ | Recoverable | ​
(expressed in millions) |  |  | ​ | Amount | ​ | ​ | ​ | Amount |
Royalty, stream and working interests, net | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
SCOOP/STACK | ​ | ​ | $ | 207.2 | ​ | ​ | $ | 309.2 | ​
Weyburn | ​ | ​ | ​ | 60.5 | ​ | ​ | ​ | 162.8 | ​
Other assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Oil well equipment | ​ | ​ | $ | 4.0 | ​ | ​ | $ | 4.7 | ​
​ | ​ | ​ | $ | 271.7 | ​ | ​ | $ | 476.7 | ​

Key assumptions and sensitivity analysis

Key assumptions and estimates used in determining the recoverable amounts of the Company’s Energy assets are related to oil prices and discount rates. The future cash flows expected from each CGU were derived from a model developed by management using cash-flows prepared by an independent reserve engineer or a third-party advisor, and expected performance based on publicly-released technical information to predict future performance. For the SCOOP/STACK CGUs, the Company’s management made assumptions of future drilling activity to reflect the reduced capital spending by operators in the current environment.

The Company’s management made assumptions of future WTI prices to estimate future revenues, based on long-term consensus price estimates obtained from a sample of independent reserve evaluators. For the Weyburn CGU, the differential to Edmonton Light prices assumption was $8.55/barrel, and the U.S. dollar to Canadian dollar foreign exchange rate assumption was $0.72. Forecasted WTI prices as at March 31, 2020 used to determine future cash flows were as follows:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Average | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Annual | ​
​ |  | Remainder of |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | Increase |
​ |  | 2020 |  | 2021 |  | 2022 |  | 2023 |  | 2024 |  | Thereafter |
WTI oil price (US$/barrel) | ​ | $ | 30.00 | ​ | $ | 41.18 | ​ | $ | 49.88 | ​ | $ | 55.87 | ​ | $ | 57.98 | ​ | 2 | % | ​

The future cash-flows were discounted using an after-tax discount rate which reflects specific market risk factors associated with individual characteristics of the CGU. For the SCOOP/STACK CGUs, the discount rate ranged between 5% for proved producing reserves to 12% for undeveloped contingent resources. For the Weyburn CGU, the discount rate assumed was 9.5%.

A sensitivity analysis showing the impact of a change, in isolation, in the WTI oil price and discount rate assumptions is shown below:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | Increase (Decrease) to Impairment Charges
​ | ​ | 1% Increase | ​ | 1% Decrease | ​ | 10% Decrease | ​ | 10% Increase |
​ | ​ | in the | ​ | in the | ​ | in WTI Oil | ​ | in WTI Oil |
​ | ​ | Discount Rate | ​ | Discount Rate | ​ | Price | ​ | Price |
SCOOP/STACK | ​ | $ | 34.1 | ​ | $ | (39.9) | ​ | $ | 37.8 | ​ | $ | (37.3) | ​
Weyburn, including oil well equipment | ​ |  | 16.9 | ​ | ​ | (19.1) | ​ | ​ | 39.8 | ​ | ​ | (39.0) | ​
​ | ​ | $ | 51.0 | ​ | $ | (59.0) | ​ | $ | 77.6 | ​ | $ | (76.3) | ​

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In the second quarter 2020, oil and gas prices rebounded from April 2020. There remains a level of uncertainty surrounding oil and gas prices, and the Company determined that this did not warrant a reversal in the previously recorded impairments.

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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, |  | ​ | For the six months ended June 30, |
(expressed in millions) |  |  | 2020 |  |  | 2019 |  | Variance |  |  | 2020 |  |  | 2019 |  | Variance |
Salaries and benefits | ​ | ​ | $ | 2.0 | ​ | ​ | $ | 1.5 | ​ | $ | 0.5 | ​ | ​ | $ | 4.5 | ​ | ​ | $ | 3.4 | ​ | $ | 1.1 | ​
Professional fees | ​ | ​ |  | 0.8 | ​ | ​ |  | 0.9 | ​ |  | (0.1) | ​ | ​ |  | 1.4 | ​ | ​ |  | 1.4 | ​ |  | — | ​
Office costs | ​ | ​ |  | 0.1 | ​ | ​ |  | 0.1 | ​ |  | — | ​ | ​ |  | 0.2 | ​ | ​ |  | 0.2 | ​ |  | — | ​
Board of Directors' costs | ​ | ​ |  | 5.7 | ​ | ​ |  | 1.3 | ​ |  | 4.4 | ​ | ​ |  | 5.8 | ​ | ​ |  | 2.1 | ​ |  | 3.7 | ​
Share-based compensation | ​ | ​ |  | 1.3 | ​ | ​ |  | 1.2 | ​ |  | 0.1 | ​ | ​ |  | 2.5 | ​ | ​ |  | 2.6 | ​ |  | (0.1) | ​
Other | ​ | ​ |  | 1.8 | ​ | ​ |  | 0.6 | ​ |  | 1.2 | ​ | ​ |  | 3.5 | ​ | ​ |  | 2.8 | ​ |  | 0.7 | ​
​ | ​ | ​ | $ | 11.7 | ​ | ​ | $ | 5.6 | ​ | $ | 6.1 | ​ | ​ | $ | 17.9 | ​ | ​ | $ | 12.5 | ​ | $ | 5.4 | ​

General and administrative expenses represented 6.0% of revenue for Q2/2020 (Q2/2019 –3.3%) and 4.1% of revenue in H1/2020 (H1/2019 – 3.6%). General and administrative expenses, which include business development costs, vary depending upon the level of business development related activity and the timing of completing transactions.

Salaries and benefits increased relative to Q2/2019 and H1/2019 due to a higher headcount, and the timing of payment of certain bonuses. Board of Directors’ fees increased relative to Q2/2019 and H1/2019 due primarily to the mark-to-market of the value of the deferred share units (“DSUs”) previously granted to the directors of the Company. The Company also changed its procedures to issue the annual grants to the directors of the Company during the second quarter rather than issuing them on a quarterly basis, resulting in an increase of Board of Director costs in Q2/2020 relative to Q2/2019.

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2020 Second Quarter Management’s Discussion and Analysis | 19

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Other Income and Expenses

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, |  | ​ | For the six months ended June 30, |
(expressed in millions) |  |  | 2020 |  |  | 2019 |  | Variance |  |  | 2020 |  |  | 2019 |  | Variance |
Foreign exchange loss | ​ | ​ | $ | (0.2) | ​ | ​ | $ | (0.1) | ​ | $ | (0.1) | ​ | ​ | $ | (0.4) | ​ | ​ | $ | (0.1) | ​ | $ | (0.3) | ​
Other income | ​ | ​ |  | 0.1 | ​ | ​ |  | 0.1 | ​ |  | — | ​ | ​ | ​ | 0.2 | ​ | ​ | ​ | 0.1 | ​ | ​ | 0.1 | ​
​ | ​ | ​ | $ | (0.1) | ​ | ​ | $ | — | ​ | $ | (0.1) | ​ | ​ | $ | (0.2) | ​ | ​ | $ | — | ​ | $ | (0.2) | ​

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, | ​ | ​ | For the six months ended June 30, |
(expressed in millions) |  |  | 2020 |  |  | 2019 |  | Variance |  |  | 2020 |  |  | 2019 |  | Variance |
Finance income |  | ​ | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest | ​ | ​ | $ | 1.0 | ​ | ​ | $ | 1.2 | ​ | $ | (0.2) | ​ | ​ | $ | 1.9 | ​ | ​ | $ | 1.9 | ​ | $ | — | ​
​ | ​ | ​ | $ | 1.0 | ​ | ​ | $ | 1.2 | ​ | $ | (0.2) | ​ | ​ | $ | 1.9 | ​ | ​ | $ | 1.9 | ​ | $ | — | ​
Finance expenses |  | ​ | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest | ​ | ​ | $ | — | ​ | ​ | $ | 1.7 | ​ | $ | (1.7) | ​ | ​ | $ | 0.3 | ​ | ​ | $ | 3.6 | ​ | $ | (3.3) | ​
Standby charges | ​ | ​ | ​ | 0.5 | ​ | ​ | ​ | 0.6 | ​ | ​ | (0.1) | ​ | ​ | ​ | 1.0 | ​ | ​ | ​ | 0.9 | ​ | ​ | 0.1 | ​
Amortization of debt issue costs | ​ | ​ |  | 0.3 | ​ | ​ |  | 0.2 | ​ | ​ | 0.1 | ​ | ​ |  | 0.5 | ​ | ​ |  | 0.4 | ​ |  | 0.1 | ​
Accretion of lease liabilities | ​ | ​ |  | — | ​ | ​ |  | — | ​ |  | — | ​ | ​ |  | 0.1 | ​ | ​ |  | 0.1 | ​ |  | — | ​
​ | ​ | ​ | $ | 0.8 | ​ | ​ | $ | 2.5 | ​ | $ | (1.7) | ​ | ​ | $ | 1.9 | ​ | ​ | $ | 5.0 | ​ | $ | (3.1) | ​

Finance income is earned on our cash and cash equivalents. Finance income also includes interest income in the amount of $0.6 million accrued on the Noront loan during Q2/2020 (Q2/2019 – $0.6 million), and $1.2 million in H1/2020 (H1/2019 - $1.1 million). Finance expenses consist of interest expense incurred on our Corporate Revolver and Corporate Term Loan. The Company also incurs standby charges, which represent the costs of maintaining our credit facilities based on the undrawn amounts, and recognizes the amortization of costs incurred with respect to the initial set-up or subsequent amendments of our credit facilities. Finance expenses also includes the accretion expense on lease liabilities, as required under IFRS 16 Leases, effective January 1, 2019.

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2020 Second Quarter Management’s Discussion and Analysis | 20

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Summary of Quarterly Information

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

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in millions, except Average Gold Price, Margin, |  | Q2 |  |  | Q1 |  |  | Q4 |  |  | ​ | Q3 |  |  | ​ | Q2 |  |  | ​ | Q1 | ​ |  |  | Q4 | ​ |  |  | Q3 | ​
GEOs, per GEO amounts and per share amounts) | ​ | 2020 | ​ | ​ | 2020 | ​ | ​ | 2019 | ​ | ​ | ​ | 2019 | ​ | ​ | ​ | 2019 | ​ | ​ | ​ | 2019 | ​ | ​ | ​ | 2018 | ​ | ​ | ​ | 2018 | ​
Revenue | ​ | $ | 195.4 | ​ | ​ | $ | 240.5 | ​ | ​ | $ | 258.1 | ​ | ​ | $ | 235.7 | ​ | ​ | $ | 170.5 | ​ | ​ | $ | 179.8 | ​ | ​ | $ | 148.2 | ​ | ​ | $ | 170.6 | ​
Costs and expenses(2) | ​ |  | 89.6 | ​ | ​ |  | 383.9 | ​ | ​ |  | 129.1 | ​ | ​ |  | 113.5 | ​ | ​ |  | 91.5 | ​ | ​ |  | 99.8 | ​ | ​ |  | 167.5 | ​ | ​ |  | 104.8 | ​
Operating (loss) income | ​ |  | 105.8 | ​ | ​ |  | (143.4) | ​ | ​ |  | 129.0 | ​ | ​ |  | 122.2 | ​ | ​ |  | 79.0 | ​ | ​ |  | 80.0 | ​ | ​ |  | (19.3) | ​ | ​ |  | 65.8 | ​
Other (expenses) income | ​ |  | 0.1 | ​ | ​ |  | (0.3) | ​ | ​ |  | 1.5 | ​ | ​ |  | (2.7) | ​ | ​ |  | (1.3) | ​ | ​ |  | (1.8) | ​ | ​ |  | (0.3) | ​ | ​ |  | 0.1 | ​
Income tax expense (recovery) | ​ |  | 11.5 | ​ | ​ |  | (44.9) | ​ | ​ |  | 17.2 | ​ | ​ |  | 17.9 | ​ | ​ |  | 13.7 | ​ | ​ |  | 13.0 | ​ | ​ |  | 11.7 | ​ | ​ |  | 13.8 | ​
Net income (loss) | ​ |  | 94.4 | ​ | ​ |  | (98.8) | ​ | ​ |  | 113.3 | ​ | ​ |  | 101.6 | ​ | ​ |  | 64.0 | ​ | ​ |  | 65.2 | ​ | ​ |  | (31.3) | ​ | ​ |  | 52.1 | ​
Basic earnings (loss) per share | ​ | $ | 0.50 | ​ | ​ | $ | (0.52) | ​ | ​ | $ | 0.60 | ​ | ​ | $ | 0.54 | ​ | ​ | $ | 0.34 | ​ | ​ | $ | 0.35 | ​ | ​ | $ | (0.17) | ​ | ​ | $ | 0.28 | ​
Diluted earnings (loss) per share | ​ | $ | 0.50 | ​ | ​ | $ | (0.52) | ​ | ​ | $ | 0.60 | ​ | ​ | $ | 0.54 | ​ | ​ | $ | 0.34 | ​ | ​ | $ | 0.35 | ​ | ​ | $ | (0.17) | ​ | ​ | $ | 0.28 | ​
Net cash provided by operating activities | ​ | $ | 150.2 | ​ | ​ | $ | 195.2 | ​ | ​ | $ | 184.6 | ​ | ​ | $ | 170.4 | ​ | ​ | $ | 119.1 | ​ | ​ | $ | 143.6 | ​ | ​ | $ | 97.8 | ​ | ​ | $ | 128.2 | ​
Net cash used in investing activities | ​ | ​ | (19.0) | ​ | ​ | ​ | (34.5) | ​ | ​ | ​ | (1.8) | ​ | ​ | ​ | (344.5) | ​ | ​ | ​ | (33.5) | ​ | ​ | ​ | (56.3) | ​ | ​ | ​ | (285.3) | ​ | ​ | ​ | (89.4) | ​
Net cash provided by (used in) financing activities | ​ | ​ | 34.8 | ​ | ​ | ​ | (77.5) | ​ | ​ | ​ | (142.6) | ​ | ​ | ​ | (133.9) | ​ | ​ | ​ | 241.4 | ​ | ​ | ​ | (84.7) | ​ | ​ | ​ | 182.5 | ​ | ​ | ​ | (33.8) | ​
Average Gold Price(3) | ​ | $ | 1,711 | ​ | ​ | $ | 1,583 | ​ | ​ | $ | 1,480 | ​ | ​ | $ | 1,474 | ​ | ​ | $ | 1,310 | ​ | ​ | $ | 1,304 | ​ | ​ | $ | 1,228 | ​ | ​ | $ | 1,213 | ​
GEOs sold(4) | ​ |  | 104,330 | ​ | ​ |  | 134,941 | ​ | ​ |  | 153,396 | ​ | ​ |  | 133,219 | ​ | ​ |  | 107,774 | ​ | ​ |  | 122,049 | ​ | ​ |  | 104,877 | ​ | ​ |  | 120,021 | ​
Cash Costs(5) attributable to GEOs sold | ​ | $ | 27.0 | ​ | ​ | $ | 41.5 | ​ | ​ | $ | 44.1 | ​ | ​ | $ | 36.8 | ​ | ​ | $ | 25.6 | ​ | ​ | $ | 31.0 | ​ | ​ | $ | 21.5 | ​ | ​ | $ | 29.9 | ​
Cash Costs(5) per GEO sold | ​ | $ | 259 | ​ | ​ | $ | 308 | ​ | ​ | $ | 287 | ​ | ​ | $ | 276 | ​ | ​ | $ | 238 | ​ | ​ | $ | 254 | ​ | ​ | $ | 208 | ​ | ​ | $ | 254 | ​
Adjusted EBITDA(5) | ​ | $ | 158.1 | ​ | ​ | $ | 192.7 | ​ | ​ | $ | 201.7 | ​ | ​ | $ | 192.9 | ​ | ​ | $ | 137.9 | ​ | ​ | $ | 140.9 | ​ | ​ | $ | 118.7 | ​ | ​ | $ | 134.7 | ​
Adjusted EBITDA(5) per share | ​ | $ | 0.83 | ​ | ​ | $ | 1.02 | ​ | ​ | $ | 1.07 | ​ | ​ | $ | 1.03 | ​ | ​ | $ | 0.74 | ​ | ​ | $ | 0.75 | ​ | ​ | $ | 0.64 | ​ | ​ | $ | 0.72 | ​
Margin(5) | ​ |  | 80.9 | % | ​ |  | 80.1 | % | ​ |  | 78.1 | % | ​ |  | 81.8 | % | ​ |  | 80.9 | % | ​ |  | 78.4 | % | ​ |  | 80.1 | % | ​ |  | 79.0 | %
Adjusted Net Income(5) | ​ | $ | 91.8 | ​ | ​ | $ | 109.2 | ​ | ​ | $ | 110.8 | ​ | ​ | $ | 101.6 | ​ | ​ | $ | 64.0 | ​ | ​ | $ | 65.2 | ​ | ​ | $ | 44.7 | ​ | ​ | $ | 54.6 | ​
Adjusted Net Income(5) per share | ​ | $ | 0.48 | ​ | ​ | $ | 0.58 | ​ | ​ | $ | 0.59 | ​ | ​ | $ | 0.54 | ​ | ​ | $ | 0.34 | ​ | ​ | $ | 0.35 | ​ | ​ | $ | 0.24 | ​ | ​ | $ | 0.29 | ​

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

2 | Includes impairment charges on royalty, stream and working interests of $271.7 million and $76.0 million recorded in Q1/2020 and Q4/2018, respectively.

3 | Based on LBMA Gold Price PM Fix.

4 | GEOs include production from our Mining assets and do not include Energy 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 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 page 11 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, 2020 and 2019, respectively.

5 | Cash Costs, 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.

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Balance Sheet Review

Summary Balance Sheet and Key Financial Metrics

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | At June 30, | ​ | ​ | At December 31,
(expressed in millions, except debt to equity ratio) |  | 2020 |  | 2019 |
Cash and cash equivalents | ​ | $ | 378.5 | ​ | $ | 132.1 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current assets | ​ |  | 515.7 | ​ |  | 278.7 | ​
Non-current assets | ​ |  | 4,666.5 | ​ |  | 5,001.9 | ​
Total assets | ​ | $ | 5,182.2 | ​ | $ | 5,280.6 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current liabilities | ​ |  | 38.1 | ​ |  | 53.4 | ​
Non-current liabilities | ​ |  | 73.7 | ​ |  | 165.0 | ​
Total liabilities | ​ | $ | 111.8 | ​ | $ | 218.4 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total shareholders’ equity | ​ | $ | 5,070.4 | ​ | $ | 5,062.2 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Debt | ​ | $ | — | ​ | $ | 80.0 | ​
Total common shares outstanding | ​ |  | 190.6 | ​ |  | 189.4 | ​
Key Financial Metrics | ​ | ​ | ​ | ​ | ​ | ​ | ​
Working Capital | ​ | $ | 477.6 | ​ | $ | 225.3 | ​
Debt to equity | ​ |  | — | ​ |  | 0.02:1 | ​

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2020 Second Quarter Management’s Discussion and Analysis | 21

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Assets

Total assets were $5,182.2 million at June 30, 2020 compared to $5,280.6 million at December 31, 2019. Our asset base is primarily comprised of non-current assets such as our royalty, stream and working interests, equity investments and loan receivable, while our current assets primarily comprise cash and cash equivalents, and accounts receivable. The decrease in non-current assets reflects a decrease in the carrying amount of the Company’s royalty, stream and working interests as a result of impairment charges recognized in Q1/2020 and depletion and depreciation expense, as well as a decrease in the fair value of equity investments. These decreases were partly offset by the acquisitions of the Island Gold royalty interest and investments in the Royalty Acquisition Venture with Continental.

Liabilities

Total liabilities as at June 30, 2020 primarily comprise $35.3 million of accounts payable and accrued liabilities and $69.4 million deferred income tax liabilities. The decrease in non-current liabilities reflects the repayment of $80.0 million of debt the Company had outstanding at December 31, 2019, which was repaid during Q1/2020.

Shareholders’ Equity

Shareholders’ equity increased by $8.2 million as at June 30, 2020 compared to December 31, 2019, reflecting a net loss of $4.4 million and net proceeds of $112.3 million from issuances under the ATM Program and the previous at-the-market equity program, after agent commission costs of $1.1 million and other share issuance costs $0.8 million. Declared dividends reduced shareholders’ equity by $97.0 million, but were partly settled through the issuance of $21.0 million in common shares pursuant to the DRIP. Shareholders’ equity also includes a gain on the fair value of investments of $1.7 million, and a loss of $34.2 million in currency translation adjustment in H1/2020.

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Liquidity and Capital Resources

Cash flow for the three and six months ended June 30, 2020 and 2019 was as follows:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the three months ended | ​ | ​ | For the six months ended |
​ | ​ | June 30, | ​ | ​ | June 30, | ​
(expressed in millions) |  | 2020 |  | ​ | 2019 |  |  | 2020 |  |  | 2019 |
Net cash provided by operating activities | ​ | $ | 150.2 | ​ | ​ | $ | 119.1 | ​ | ​ | $ | 345.4 | ​ | ​ | $ | 262.7 | ​
Net cash used in investing activities | ​ |  | (19.0) | ​ | ​ |  | (33.5) | ​ | ​ |  | (53.5) | ​ | ​ |  | (89.8) | ​
Net cash provided by (used in) financing activities | ​ |  | 34.8 | ​ | ​ |  | 241.4 | ​ | ​ |  | (42.7) | ​ | ​ |  | 156.7 | ​
Effect of exchange rate changes on cash and cash equivalents | ​ | ​ | 2.7 | ​ | ​ | ​ | (0.7) | ​ | ​ | ​ | (2.8) | ​ | ​ | ​ | (0.4) | ​
Net change in cash and cash equivalents | ​ | $ | 168.7 | ​ | ​ | $ | 326.3 | ​ | ​ | $ | 246.4 | ​ | ​ | $ | 329.2 | ​

Operating Cash Flow

Net cash provided by operating activities was $150.2 million in Q2/2020 (Q2/2019 - $119.1 million) and $345.4 million in H1/2020 (H1/2019 - $262.7 million), respectively. Operating cash flow increased due to higher revenue primarily as a result of higher commodity prices compared to the corresponding 2019 period. Also reflected in operating cash flow are proceeds from the sale of gold bullion the Company receives as settlement for certain of its royalties.

Investing Activities

Net cash used in investing activities was $19.0 million in Q2/2020 (Q2/2019 - $33.5 million), consisted mostly of the issuance of a $15.0 million loan to SolGold. For the six months ended June 30, 2020, net cash used in investing activities of $53.5 million (H1/2019 – $89.8 million) included the acquisition of the Island Gold royalty for a gross purchase price of $13.4 million (C$19.0 million), the funding of Franco-Nevada’s share in the Royalty Acquisition Venture with Continental of $24.4 million and issuance of a $15.0 million loan to SolGold.

Comparatively, investing activities in the prior year periods included primarily of funding of Franco-Nevada’s share in the Royalty Acquisition Venture with Continental, the acquisition of the Salares Norte and Valentine Lake royalties.

Financing Activities

Net cash provided by financing activities of $34.8 million in Q2/2020 (Q2/2019 - $241.4 million net cash used) included net proceeds from the ATM Program of $66.8 million, partially offset by dividend paid in cash of $39.8 million. For the H1/2020, net cash used in financing activities of $42.7 million (H1/2019 - $156.7 million) included $80.0 million repayment of amounts borrowed against the Corporate Term Loan and dividends paid in cash of $76.0 million, partially offset by net proceeds of $110.3 million from the ATM Program and the previous at-the-market equity program.

Comparatively, financing activities in the three and six months ended June 30, 2019 included the drawdown of $275.0 million to fund the acquisition of the Marcellus royalty interest, repayment of the balance outstanding under the Corporate Revolver and payment of cash dividends.

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2020 Second Quarter Management’s Discussion and Analysis | 22

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Capital Resources

Our cash and cash equivalents totaled $378.5 million as at June 30, 2020 (December 31, 2019 – $132.1 million). In addition, we held investments and loan receivables of $194.9 million as at June 30, 2020 (December 31, 2019 – $183.2 million), of which $137.3 million was held in publicly-traded equity instruments (December 31, 2019 – $141.7 million).

As at August 5, 2020, the Company also has a total of approximately $1.1 billion available under its two revolving credit facilities.

The Corporate Revolver is a $1.0 billion unsecured, revolving credit facility with a five-year term maturing March 22, 2024. Advances under the Corporate Revolver bear interest depending upon the currency of the advance and the Company’s leverage ratio. Funds are generally drawn using LIBOR 30-day rates plus 100 basis points. As at June 30, 2020, the Company has two standby letters of credit in the amount of $17.0 million (C$23.1 million) against the Corporate Revolver in relation to the audit by the CRA of its 2013–2015 taxation years, as referenced in the “Contingencies” section of this MD&A. The standby letters of credit reduce the available balance under the Corporate Revolver.

The FNBC Revolver is a $0.1 billion unsecured, revolving credit facility. As at June 30, 2020, the available balance under the FNBC Revolver was $0.1 billion. The FNBC Revolver was amended on March 10, 2020 to extend the term by an additional year, such that the maturity date is currently March 20, 2021. Under the amendment, funds are generally drawn using LIBOR 30-day rates plus 125 basis points.

The Company also had a Corporate Term Loan, which was a $160.0 million unsecured, non-revolving credit facility. On February 14, 2020, funds borrowed under the Corporate Term Loan were repaid in full. The Corporate Term Loan is a non-revolving facility, and is therefore no longer available to draw.

Management’s objectives when managing capital are to:

| (a) | when capital is not being used for long-term investments, ensure its preservation and availability 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, 2020, 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 within 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 general and administrative expenses and depletion of Mining and Energy interests incurred in our Canadian and Australian entities due to their respective functional currencies. During Q2/2020, the Canadian dollar traded in a range of $0.7034 to $0.7472, closing the quarter at $0.7338, and the Australian dollar traded between $0.6002 and $0.6993, closing the quarter at $0.6878.

Our near-term cash requirements include funding of our commitments towards the Royalty Acquisition Venture with Continental, the acquisition of Alpala Royalty, corporate administration costs, certain costs of operations, payment of dividends and income taxes directly related to the recognition of royalty, stream and working interest revenues. As a royalty and stream company, there are limited requirements for capital expenditures other than for the acquisition of additional royalties or streams and capital commitments for our working interests. Such 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, available credit facilities and future cash flows will be sufficient to cover the costs of our commitments, operating and administrative expenses, 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 | ​

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2020 Second Quarter Management’s Discussion and Analysis | 23

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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 until 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 until 29,731,000 ounces of silver delivered. Thereafter, 62.1% of the silver in concentrate.

13 | After 1,341,000 ounces of gold delivered, purchase price is the greater of 50% of spot and $418.27 per ounce. As the mill throughput for 30 consecutive days commensurate with annual capacity of 58 million tonnes per annum was not reached by January 1, 2019, Franco-Nevada will receive a 5% annual rate of return until such mill throughput was achieved, through a reduction of the applicable fixed gold price of $100 per ounce or a delivery of additional ounces for no consideration.

14 | 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 until 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 until 7,432,750 ounces of silver delivered. Thereafter 15.53% of the silver in concentrate.

17 | After 604,000 ounces of gold delivered, purchase price is 50% of the spot price of gold. As the mill throughput for 30 consecutive days commensurate with annual capacity of 58 million tonnes per annum was not reached by January 1, 2019, Franco-Nevada will receive a 5% annual rate of return until such mill throughput was achieved, through a reduction of the applicable fixed gold price of $100 per ounce or a delivery of additional ounces for no consideration.

18 | After 9,618,000 ounces of silver delivered, 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. Payment is based on gold equivalent ounces. For McCreedy West, the fixed price per gold equivalent ounce was increased to $800 per ounce (with no annual inflationary adjustment), effective July 1, 2018 until December 31, 2021.

Acquisition of Royalty Rights with Continental Resources, Inc.

As described in the Corporate Developments section above, the Company has a strategic relationship with a subsidiary of Continental to jointly acquire royalty rights in the SCOOP and STACK plays of Oklahoma. As at June 30, 2020, Franco-Nevada has remaining commitments of up to $124.5 million to be funded in future periods. In the first half of the year, Franco-Nevada and Continental have collectively agreed to reduce their capital funding commitments to the Royalty Acquisition Venture for 2020 to approximately total $30 million to $40 million, with $19.3 million expensed in the first half of 2020.

Contingencies

Canada Revenue Agency Audit

The CRA is conducting an audit of Franco-Nevada’s 2012-2015 taxation years.

| a) | Canadian Domestic Tax Matters (2014-2015):

In October 2019, certain wholly-owned Canadian subsidiaries of the Company received Notices of Reassessment for the 2014 and 2015 taxation years (the “Domestic Reassessments”) in which the CRA is seeking to increase income by adjusting the timing of the deduction of the upfront payments which were made in connection with precious metal stream agreements. The CRA’s position is that the upfront payment should be deducted for income tax purposes in a similar manner to how such upfront payment is expensed for financial statement purposes. Consequently, the CRA’s position results in a slower deduction of the upfront payment and an acceleration of the payment of Canadian taxes. This results in the Company being subject to an incremental payment of Federal and provincial income taxes for these years of $1.0 million (C$1.4 million) plus interest and applicable penalties (after applying available non-capital losses and other deductions). The Company has filed formal Notices of Objection with the CRA against the Domestic Reassessments.

If the CRA were to audit and reassess the particular Canadian subsidiaries of the Company for taxation years 2016 through 2019 on the same basis, the Company estimates that it would be subject to an incremental payment of Canadian tax for these years of approximately $23.1 million (C$31.4 million) plus interest and applicable penalties (after applying available non-capital losses and other deductions).

| b) | Mexico (2013-2015):

In December 2018, the Company received a Notice of Reassessment from the CRA for the 2013 taxation year (the “2013 Reassessment”) in relation to its Mexican subsidiary. The reassessment was made on the basis of the transfer pricing provisions in the Income Tax Act (Canada) (the “Act”) and asserts that a majority of the income earned by the Mexican subsidiary should have been included in the income of the Company and subject to tax in Canada. The 2013 Reassessment

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2020 Second Quarter Management’s Discussion and Analysis | 24

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results in additional Federal and provincial income taxes of $8.0 million (C$10.8 million) plus interest and applicable penalties but before any relief under the Canada-Mexico tax treaty.

In December 2019, the Company received Notices of Reassessment for the 2014 and 2015 taxation years (the “2014 and 2015 Reassessments”, and collectively with the Domestic Reassessments and the 2013 Reassessment, the “Reassessments”) on the same basis as the 2013 Reassessment, resulting in additional Federal and provincial income taxes of $10.3 million (C$14.1 million) plus interest and applicable penalties but before any relief under the Canada-Mexico tax treaty. The Company has filed formal Notices of Objection with the CRA against the 2013 Reassessment and the 2014 and 2015 Reassessments and has posted security in the form of a standby letter of credit for 50% of the reassessed amounts of tax, interest and penalties. Further, the Company has commenced an appeal in the Tax Court of Canada with respect to the 2013 Reassessment and the 2014 and 2015 Reassessments.

For taxation years 2013 through 2015, the Company’s Mexican subsidiary paid a total of $30.3 million (419.4 million Pesos) in cash taxes, at a 30% tax rate, to the Mexican tax authorities on income earned in Mexico. If required, the Company intends to seek relief from double taxation under the Canada-Mexico tax treaty.

If the CRA were to audit and reassess the Company for taxation years 2016 through 2019 on the same basis, the Company estimates that it would be subject to additional Canadian tax for these years of approximately $3.4 million (C$4.6 million) plus interest and applicable penalties but before any relief under the Canada-Mexico tax treaty. During the years 2016 through 2019, the Company’s Mexican subsidiary paid $3.8 million (71.0 million Pesos) in cash taxes, at a 30% tax rate, to the Mexican tax authorities on income earned in Mexico.

| c) | Barbados (2014-2015):

The 2014 and 2015 Reassessments also reassess the Company in relation to its Barbadian subsidiary. The reassessments were made on the basis of the transfer pricing provisions in the Act and assert that a majority of the income relating to certain precious metal streams earned by the Barbadian subsidiary should have been included in the income of the Company and subject to tax in Canada, resulting in additional Federal and provincial income taxes of $4.8 million (C$6.5 million) plus interest and applicable penalties. The Company has filed formal Notices of Objection with the CRA against the 2014 and 2015 Reassessments and has posted security in the form of a standby letter of credit for 50% of the reassessed amounts of tax, interest and penalties. Further, the Company has commenced an appeal in the Tax Court of Canada with respect to the 2014 and 2015 Reassessments.

If the CRA were to audit and reassess the Company for taxation years 2016 through 2019 on the same basis, the Company estimates that it would be subject to additional Canadian tax for these years of approximately $76.3 million (C$104.0 million), plus interest and applicable penalties.

| d) | Barbados (2012-2013):

In July 2020, the Company received a letter from the CRA (the “Proposal Letter”) proposing to reassess the 2012 and 2013 taxation years in relation to its Barbadian subsidiary. The Proposal Letter asserts that a majority of the income relating to precious metal streams earned by the Barbadian subsidiary, in those years, should have been included in the income of its Canadian parent company and subject to tax in Canada as Foreign Accrual Property Income (“FAPI”). The Company does not agree with the Proposal Letter and has responded to the CRA requesting that the proposed reassessments not be issued. If the CRA issues the reassessments proposed and is successful, the Company’s preliminary estimate is that it would be subject to additional Federal and provincial income taxes of $7.0 million plus interest and applicable penalties before applying available non-capital losses and other deductions. The Proposal Letter notes that CRA’s position may not extend beyond the 2013 taxation year.

Management believes that the Company and its subsidiaries have filed their tax returns and paid all applicable taxes in compliance with Canadian and applicable foreign tax laws and, as a result, no amounts have been recorded in the financial statements of the Company for the Reassessments, or for any potential tax liability that may arise in respect of these matters. The Company does not believe that the Reassessments are supported by Canadian tax law and jurisprudence and intends to vigorously defend its tax filing positions.

The CRA audit is ongoing and there can be no assurance that the CRA will not further challenge the manner in which the Company or any of its subsidiaries has filed its income tax returns and reported its income. In the event that the CRA successfully challenges the manner in which the Company or a subsidiary 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 the Company.

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.

The areas of judgment and estimation are consistent with those reported in the annual consolidated financial statements for the year ended December 31, 2019 and include measurement uncertainty in assessments of impairment of royalty, stream and working interests which are impacted by the following developments during the first half of 2020:

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2020 Second Quarter Management’s Discussion and Analysis | 25

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| a) | Impact of the COVID-19 Pandemic

The COVID-19 (coronavirus) global health pandemic is significantly impacting the global economy and commodity and financial markets. The full extent and impact of the COVID-19 pandemic is unknown and to date has included extreme volatility in financial markets, a slowdown in economic activity, extreme volatility in commodity prices (including gold, silver, palladium and oil and gas) and has raised the prospect of an extended global recession. As well, as efforts are undertaken to slow the spread of the COVID-19 pandemic, the operation and development of mining projects have been impacted. During H1/2020, a number of mining projects, including certain of those in respect of which Franco-Nevada has assets, were suspended globally for precautionary purposes or as governments have declared a state of emergency, but many operations have restarted since then. If the operation or development of one or more of the properties in which Franco-Nevada holds a royalty, stream or other interest and from which it receives or expects to receive significant revenue becomes or remains suspended for an extended period of time, it may have a material adverse impact on Franco-Nevada’s profitability, results of operations, financial condition and the trading price of Franco-Nevada’s securities. The broader impact of the COVID-19 pandemic on investors, businesses, the global economy or financial and commodity markets may also have a material adverse impact on Franco-Nevada’s profitability, results of operations, financial condition and the trading price of Franco-Nevada’s securities.

b)Impact of Recent Global and Market Developments on Oil and Gas Prices

In addition, a number of geopolitical and market factors impacting global energy markets (including those related to the COVID-19 pandemic) have contributed to extreme volatility and a significant decrease in the price of oil and gas (WTI, WCS and NYMEX). Excess supply relative to current demand and a lack of available storage have also created significant downward pressure on global energy markets, with oil prices and futures contracts reaching historic lows. Prices have since partially rebounded. If these conditions continue for a prolonged period, the oil and gas operations in which Franco-Nevada holds oil and gas royalties and working interests are expected to be materially adversely affected, including potentially requiring temporary or permanent suspension or reductions in production. The lower oil and gas prices (WTI, WCS and NYMEX) may adversely impact potential future development as well as operators’ cashflow, ability to access additional capital and financial condition. The continuation of low oil and gas prices (WTI, WCS and NYMEX) for a prolonged period may have a material adverse impact on Franco-Nevada’s profitability, results of operations, financial condition and the trading price of Franco-Nevada’s securities.

As a result of reduced production and capital spend by the operators of the Company’s Energy assets due to lower market expectations for oil and gas prices, the Company recorded impairments of $271.7 million at March 31, 2020 related to its interests in the SCOOP/STACK and Weyburn, as detailed in the “Impairment Charges” section of this MD&A.

There is heightened potential for further impairments or reversal of these and possibly other impairments over the remainder of 2020. In the current environment, assumptions about future commodity prices, interest rates and levels of supply and demand of commodities are subject to greater variability than normal, which could significantly affect the valuation of the Company’s financial and non-financial assets.

New and Amended Standards Adopted by the Company

The following standard was effective and implemented for the annual period as of January 1, 2020.

Amendments to IFRS 3 Business Combinations

In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations (“IFRS 3”). The amendments are intended to assist entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition. The amendments clarify the minimum requirements for a business, remove the assessment of whether market participants are capable of replacing any missing elements, add guidance to help entities assess whether an acquired process is substantive, narrow the definitions of a business and of outputs, and introduce an optional fair value concentration test. While it is generally expected that the application of the amendments will result in more acquisitions being accounted for as asset acquisitions, the Company will evaluate the impact of the amendments based on the nature and terms of acquisitions the Company may complete in future.

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 most recent Annual Information Form, 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 5, 2020, the number of common shares outstanding or issuable pursuant to other outstanding securities is as follows:

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Common Shares |  | Number |
Outstanding |  | 190,588,491 | ​
Issuable upon exercise of Franco-Nevada options(1) |  | 710,946 | ​
Issuable upon vesting of Franco-Nevada RSUs |  | 107,971 | ​
Diluted common shares |  | 191,407,408 | ​

| 1 | There were 710,946 stock options under our share compensation plan outstanding to directors, officers, employees and others with exercise prices ranging from C$33.12 to C$129.32 per share.

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2020 Second Quarter Management’s Discussion and Analysis | 26

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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, 2020, 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.

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Non-IFRS Financial Measures

Cash Costs attributable to GEOs sold and Cash Costs per GEO

Cash Costs attributable to GEOs sold and Cash Costs per GEO sold are non-IFRS financial measures. Cash Costs are calculated by starting with total costs of sales and removing depletion and depreciation, costs not attributable to GEOs sold such as our Energy operating costs, and other non-cash costs of sales such as costs related to our prepaid gold purchase agreement. Cash Costs per GEO sold are calculated by dividing Cash Costs by the number of GEOs sold in the period, excluding prepaid GEOs.

Management uses Cash Costs and Cash Costs per GEO sold to evaluate the Company’s ability to generate positive cash flow from its mining royalty, stream and working interests. Management and certain investors also use this information to evaluate the Company’s performance relative to peers in the mining industry who present this measure on a similar basis. Cash Costs and Cash Costs per GEO 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.

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Reconciliation of Cash Costs and Cash Costs per GEO sold:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the three months ended | ​ | For the six months ended | ​
​ | ​ | June 30, | ​ | ​ | June 30, | ​
(expressed in millions, except per GEO amounts) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Total costs of sales | ​ | $ | 80.3 | ​ | ​ | $ | 86.3 | ​ | ​ | $ | 188.3 | ​ | ​ | $ | 179.6 | ​
Depletion and depreciation | ​ | ​ | (52.3) | ​ | ​ | ​ | (58.9) | ​ | ​ | ​ | (116.7) | ​ | ​ | ​ | (119.8) | ​
Energy operating costs | ​ |  | (1.0) | ​ | ​ |  | (1.8) | ​ | ​ |  | (3.1) | ​ | ​ |  | (3.2) | ​
Cash Costs attributable to GEOs sold | ​ | $ | 27.0 | ​ | ​ | $ | 25.6 | ​ | ​ | $ | 68.5 | ​ | ​ | $ | 56.6 | ​
GEOs, excluding prepaid ounces | ​ |  | 104,330 | ​ | ​ |  | 107,774 | ​ | ​ |  | 239,271 | ​ | ​ |  | 229,823 | ​
Cash Costs per GEO sold | ​ | $ | 259 | ​ | ​ | $ | 238 | ​ | ​ | $ | 286 | ​ | ​ | $ | 246 | ​

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2020 Second Quarter Management’s Discussion and Analysis | 27

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Adjusted EBITDA and Adjusted EBITDA per share

Adjusted 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 EPS, 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) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net Income (loss) | ​ | $ | 94.4 | ​ | ​ | $ | 64.0 | ​ | ​ | $ | (4.4) | ​ | ​ | $ | 129.2 | ​
Income tax expense (recovery) | ​ |  | 11.5 | ​ | ​ | ​ | 13.7 | ​ | ​ | ​ | (33.4) | ​ | ​ | ​ | 26.7 | ​
Finance expenses | ​ |  | 0.8 | ​ | ​ | ​ | 2.5 | ​ | ​ | ​ | 1.9 | ​ | ​ | ​ | 5.0 | ​
Finance income | ​ |  | (1.0) | ​ | ​ | ​ | (1.2) | ​ | ​ | ​ | (1.9) | ​ | ​ | ​ | (1.9) | ​
Depletion and depreciation | ​ |  | 52.3 | ​ | ​ | ​ | 58.9 | ​ | ​ | ​ | 116.7 | ​ | ​ | ​ | 119.8 | ​
Impairment of royalty, stream and working interests | ​ |  | — | ​ | ​ | ​ | — | ​ | ​ | ​ | 271.7 | ​ | ​ | ​ | — | ​
Foreign exchange (gains)/losses and other (income)/expenses | ​ |  | 0.1 | ​ | ​ | ​ | — | ​ | ​ | ​ | 0.2 | ​ | ​ | ​ | — | ​
Adjusted EBITDA | ​ | $ | 158.1 | ​ | ​ | $ | 137.9 | ​ | ​ | $ | 350.8 | ​ | ​ | $ | 278.8 | ​
Basic weighted average shares outstanding | ​ |  | 190.2 | ​ | ​ |  | 187.2 | ​ | ​ |  | 189.6 | ​ | ​ |  | 187.1 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic earnings (loss) per share | ​ | $ | 0.50 | ​ | ​ | $ | 0.34 | ​ | ​ | $ | (0.02) | ​ | ​ | $ | 0.69 | ​
Income tax expense (recovery) | ​ |  | 0.06 | ​ | ​ | ​ | 0.07 | ​ | ​ | ​ | (0.18) | ​ | ​ | ​ | 0.14 | ​
Finance expenses | ​ |  | — | ​ | ​ | ​ | 0.02 | ​ | ​ | ​ | 0.01 | ​ | ​ | ​ | 0.03 | ​
Finance income | ​ |  | (0.01) | ​ | ​ | ​ | — | ​ | ​ | ​ | (0.01) | ​ | ​ | ​ | (0.01) | ​
Depletion and depreciation | ​ |  | 0.28 | ​ | ​ | ​ | 0.31 | ​ | ​ | ​ | 0.62 | ​ | ​ | ​ | 0.64 | ​
Impairment of royalty, stream and working interests | ​ |  | — | ​ | ​ | ​ | — | ​ | ​ | ​ | 1.43 | ​ | ​ | ​ | — | ​
Adjusted EBITDA per share | ​ | $ | 0.83 | ​ | ​ | $ | 0.74 | ​ | ​ | $ | 1.85 | ​ | ​ | $ | 1.49 | ​

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.

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) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net Income (loss) | ​ | $ | 94.4 | ​ | ​ | $ | 64.0 | ​ | ​ | $ | (4.4) | ​ | ​ | $ | 129.2 | ​

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2020 Second Quarter Management’s Discussion and Analysis | 28

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Income tax expense (recovery) | ​ |  | 11.5 | ​ | ​ |  | 13.7 | ​ | ​ |  | (33.4) | ​ | ​ | ​ | 26.7 | ​
Finance expenses | ​ |  | 0.8 | ​ | ​ |  | 2.5 | ​ | ​ |  | 1.9 | ​ | ​ | ​ | 5.0 | ​
Finance income | ​ |  | (1.0) | ​ | ​ |  | (1.2) | ​ | ​ |  | (1.9) | ​ | ​ | ​ | (1.9) | ​
Depletion and depreciation | ​ |  | 52.3 | ​ | ​ |  | 58.9 | ​ | ​ |  | 116.7 | ​ | ​ | ​ | 119.8 | ​
Impairment of royalty, stream and working interests | ​ |  | — | ​ | ​ |  | — | ​ | ​ |  | 271.7 | ​ | ​ | ​ | — | ​
Foreign exchange (gains)/losses and other (income)/expenses | ​ |  | 0.1 | ​ | ​ |  | — | ​ | ​ |  | 0.2 | ​ | ​ | ​ | — | ​
Adjusted EBITDA | ​ | $ | 158.1 | ​ | ​ | $ | 137.9 | ​ | ​ | $ | 350.8 | ​ | ​ | $ | 278.8 | ​
Revenue | ​ |  | 195.4 | ​ | ​ |  | 170.5 | ​ | ​ |  | 435.9 | ​ | ​ |  | 350.3 | ​
Margin | ​ |  | 80.9 | % | ​ |  | 80.9 | % | ​ |  | 80.5 | % | ​ |  | 79.6 | %

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 EPS, 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) |  | 2020 |  | ​ | 2019 |  |  | 2020 |  | ​ | 2019 |
Net Income (loss) | ​ | $ | 94.4 | ​ | ​ | $ | 64.0 | ​ | ​ | $ | (4.4) | ​ | ​ | $ | 129.2 | ​
Impairment of royalty, stream and working interests | ​ |  | — | ​ | ​ |  | — | ​ | ​ |  | 271.7 | ​ | ​ |  | — | ​
Foreign exchange (gains)/losses and other (income)/expenses | ​ |  | 0.1 | ​ | ​ |  | — | ​ | ​ |  | 0.2 | ​ | ​ |  | — | ​
Tax effect of adjustments | ​ | ​ | (2.7) | ​ | ​ | ​ | — | ​ | ​ | ​ | (66.5) | ​ | ​ | ​ | — | ​
Adjusted Net Income | ​ | $ | 91.8 | ​ | ​ | $ | 64.0 | ​ | ​ | $ | 201.0 | ​ | ​ | $ | 129.2 | ​
Basic weighted average shares outstanding | ​ |  | 190.2 | ​ | ​ |  | 187.2 | ​ | ​ |  | 189.6 | ​ | ​ |  | 187.1 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic earnings (loss) per share | ​ | $ | 0.50 | ​ | ​ | $ | 0.34 | ​ | ​ | $ | (0.02) | ​ | ​ | $ | 0.69 | ​
Impairment of royalty, stream and working interests | ​ | ​ | — | ​ | ​ | ​ | — | ​ | ​ | ​ | 1.43 | ​ | ​ | ​ | — | ​
Foreign exchange (gains)/losses and other (income)/expenses | ​ |  | — | ​ | ​ |  | — | ​ | ​ |  | — | ​ | ​ |  | — | ​
Tax effect of adjustments | ​ | ​ | (0.02) | ​ | ​ | ​ | — | ​ | ​ | ​ | (0.35) | ​ | ​ | ​ | — | ​
Adjusted Net Income per share | ​ | $ | 0.48 | ​ | ​ | $ | 0.34 | ​ | ​ | $ | 1.06 | ​ | ​ | $ | 0.69 | ​

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2020 Second Quarter Management’s Discussion and Analysis | 29

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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, audits being conducted by the CRA, the expected exposure for current and future assessments and available remedies, the remedies relating to and consequences of the ruling of the Supreme Court of Panama in relation to the Cobre Panama project, the aggregate value of Common Shares which may be issued pursuant to the ATM program, and the Company’s expected use of the net proceeds of the ATM program, if any, and the acquisition of the SolGold royalty interest. 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 statement, including, without limitation: the price at which Common Shares are sold in the ATM program and the aggregate net proceeds received by the Company as a result of the ATM program; 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 Energy); fluctuations in the value of the Canadian and Australian dollar, 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; access to sufficient pipeline capacity; 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; the impact of the COVID-19 (coronavirus) pandemic; 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; risks related to the completion of the acquisition of the SolGold royalty interest; 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; 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. In addition, there can be no assurance as to the outcome of the ongoing audit by the CRA or the Company’s exposure as a result thereof. 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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2020 Second Quarter Management’s Discussion and Analysis | 30

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