Franco-Nevada Corp (FNV) 2011 Q4 法說會逐字稿

Good morning. My name is Melissa and I will be your conference operator today. At this time I would like to welcome everyone to the Franco-Nevada fourth-quarter financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

Thank you. Mr. Stefan Axell, Manager Investor Relations, you may begin your conference.

Thank you, Melissa. Good morning, everyone. We are pleased that you have joined us today for the Franco-Nevada 2011 financial results overview. Accompanying our call today is a presentation which is available on our website at Franco-Nevada.com where you'll also find our full MD&A and financial results. On the line we have David Harquail, President and CEO, and Sandip Rana, CFO, as well as most of our management team to answer any questions during the Q&A period. Before we begin formal remarks regarding our 2011 results, we like to remind participants that some of today's commentary may contain forward-looking information. In this respect, we refer you to detailed cautionary note regarding forward-looking statements on slide 2 of our presentation.

I will now turn the call over to David Harquail, President and CEO of Franco-Nevada.

Thank you, Stefan, and welcome. Given the fabulous weather we're having, I appreciate that so many investors and analysts are still taking the time to listen to this call. With me I have most of the management team for Franco-Nevada and I would like to express my appreciation. The folks in the room today, they have worked through the March break holidays to pull together our year-end reporting. And if there is one disadvantage of being a royalty Company is that, to make our documents complete, we have to wait for most of our operators to finish their year end disclosures. However, we believe this delay is worth it so that we are reporting on the same calendar and fiscal year as most of our operators.

We've already put out two press releases this month with updates on our transactions and I'm not going to repeat those details here. We are going to be happy to take any questions you have on those deals later. Instead, the focus of this call is our 2011 results. It is hard to believe that this is now our fourth complete fiscal year of financial results since our IPO. We are very proud of the growth in the numbers. But we are also very circumspect. We are reporting our first material impairment. I expect you will have questions on that.

Sandip Rana is our CFO and I would like him to walk you through our 2011 numbers and then take your questions. Sandip?

Thank you David. Good morning everyone. As you have seen from yesterday's earnings release, the Company reported a net loss of $105.4 million for the quarter ended December 31, 2011, a net loss of $6.8 million for the year ended December 31. The loss was a result of reporting an impairment charge on two of our mineral assets, as well as reporting an impairment charge on some of the Company's available for sale securities. The mineral asset impairments were triggered by decisions made by the operators of each of those assets. The recognition of these impairments should not cloud the fact that the Company did have a strong year financially when excluding these impairments. The momentum that was started in 2010 continued throughout 2011, and is visible when reviewing our revenue, adjusted EBITDA, and adjusted net income financial metrics. For the quarter and year ended December 31, 2011. Each has shown strong growth.

On slide 3, when one looks at these financial measures for each of the last four quarters and full-year 2011, the Company has had significant growth. Revenue, adjusted EBITDA, and adjusted net income have increased each quarter. The average gold price increased 28% for the full year from 2010 to 2011. However, the Company's revenue actually increased 81%, adjusted EBITDA 82%, and adjusted net income 161%. This is not only due to the commodity price increases we have seen over the year, but also due to the acquisitions completed and the organic growth experienced. In fact, when looking at Q4 2011 the average gold price actually decreased slightly compared to the previous quarter. Yet, all three metrics increased in fourth quarter. This was due to increased production on our royalty and stream lands, as well as new royalties starting to generate revenues such as the Musselwhite NPR.

If you refer to slide 4 in the presentation, the chart illustrates financial results on both an IFRS basis and non-IFRS measure basis. As mentioned, the Company did record a loss for the quarter of $105.4 million and loss for the year of $6.8 million compared to net income of $17.2 million in Q4 2010 and $62.7 million in full year 2010. The loss in 2011 is a result of the impairments being recorded on Podolsky and Ezulwini and some minor exploration properties totaling approximately $152 million. I will discuss the impairments shortly, but if we exclude these impairments, adjusted net income for the quarter was $40.8 million compared to $23.4 million in fourth quarter 2010, a 74% increase. For the year ended December 31, 2011, adjusted net income was $136 million compared to $52.1 million for the year ended December 31, 2010. Again, a significant increase. The boxes highlighted in yellow on the chart represent the record results achieved in the fourth quarter of 2011 and full-year 2011.

The increases in revenue, adjusted EBITDA, and adjusted net income are due to the following. Firstly commodity prices. Gold averaged $1686 per ounce in the fourth quarter of 2011 compared to $1367 per ounce in fourth-quarter 2010. For the for the full year, gold averaged $1569 per ounce compared to $1225 for the year ended December 31, 2010. This represents increases of 23% and 28% respectively. Secondly, acquisitions. The key catalyst in 2011 being the acquisition of Gold Wheaton. Revenue recognized by the Company on the Gold Wheaton streams was $32.7 million in fourth quarter 2011; split 79% gold and 21% PGMs. For the full-year, revenue from the Gold Wheaton streams generated $114.2 million.

Lastly, the Company has benefited from organic growth and increased production at our royalty and stream interests. For example, Palmarejo provided strong results as the stream generated in excess of $100 million in revenue for the full year. After deducting the $400 per ounce stream cost, the net was $76 million to Franco-Nevada. As mentioned, the Company recorded revenue on its 5% net profit interest from Musselwhite, $5.1 million in fourth quarter. Stillwater was a strong performer for Franco-Nevada last year. Benefiting from both higher production and higher commodity prices. In fact, Stillwater revenue increased 67% for the 12 months ended December 31, 2011. And in addition, Tasiast generated revenue for the first time in 2011, generating $2.8 million for the year.

Although the Gold Wheaton transaction added a lot of value in 2011, the Company would have still had strong growth in 2011 if we did exclude those assets. Revenue would have increased 31% in 2011 and adjusted EBITDA would have actually increased 32% for the full year ended December 31, 2011. Overall, the top five revenue producers of Palmarejo, the Sudbury Basin, MWS, Goldstrike, and Ezulwini generated $261 million in revenue for the full year, representing 64% of all revenue. From a cost perspective, cost of sales have seen a large increase from 2010, for both the three months and year ended December 31, 2011. With the addition of more stream assets, the Company now records the $400 per ounce purchase cost for stream ounces in this cost of sales. This is applicable to the five Gold Wheaton stream assets, as well as Palmarejo. In total, cost of sales increased 115% in 2011 due to these additional streams being added. Also included in cost of sales are proceed taxes for Nevada and Montana, as well as production taxes on oil and gas royalties, which all vary depending upon the revenue earned.

Slide 5 provides a summary of the impairments recognized for the year ended December 31, 2011. In March 2011 the Company closed its acquisition of Gold Wheaton Gold Corp. Under IFRS the transaction was accounted for as a business combination and $870 million was deferred by assessment determined for the five stream assets acquired at the time. As a result, no goodwill was recorded on the transaction. The fair values were determined based upon the reserves, resources, and mine plants in place at the time of acquisition. However, based upon announcements made by the operators in late 2011, the Company reported impairments on two of the mineral assets; Podolsky, $68.4 million, and Ezulwini, $84 million.

Under IFRS, when recognizing an impairment one has to determine if there's an indication of impairment prior to determining the value of any adjustment, basically a triggering event. With Podolsky, Quadra FNX, now KGHM, announced in November 2011 that they intended to cease mining operations at Podolsky by the end of 2012. Quadra FNX stated that it would continue to explore in the vicinity of Podolsky, and to evaluate methodologies for mining the [great gabro] resource. This shutdown of Podolsky was an indicator of impairment for the Company and, as a result, an impairment review was performed resulting in the impairment that was recorded. Quadra FNX will continue to evaluate the methodologies for recovering the [great gabro] resource, which Franco believes has significant potential and value.

With respect to the Ezulwini Mine, on December 19, 2011, First Uranium announced plans to restructure the Ezulwini operations, which included cessation of uranium production and a reduction of workforce by 50%. As well, First Uranium reported an impairment against Ezulwini in it's own financial results for the quarter ended December 31, 2011. After reviewing these facts, management made a decision that indicators of impairment also existed for Ezulwini. A fair value analysis was completed and accordingly an impairment of $84 million was reported.

The five stream assets acquired as part of the Gold Wheaton transaction did generate $114.2 million in revenue and $86.7 million in adjusted EBITDA for the Company in 2011 for only 9.5 months of ownership. For 2012, the Company does forecast higher revenues for both the Sudbury Basin and MWS. In addition, the Company does hold a number of available for sale investments which have been trading at below cost of acquisition for a prolonged period of time. Based upon our internal accounting policies, the difference between fair market value and cost at December 31, 2011 was recorded as an impairment in the statement of income. This impairment was $17.5 million.

Moving to slide 6, you can see from the revenue by commodity slide the Company's overall revenue has steadily increased over the last number of years. In Q4 2011 the Company again surpassed the $100 million mark in revenue with precious metals revenue continuing to increase. In fourth quarter 2011, in excess of 90% of revenue was from precious metals. But more so, the gold component of revenue has increased significantly during this timeframe. Gold revenue was up 53% over Q4 2010 and comprises 80% of total revenue for Q4 2011.

Slide 7 again illustrates the steady increase in overall revenue, and in particular gold and PGM revenue for the Company over the last three years. Revenue itself has increased from approximately $40 million in Q4 2008 to approximately $120 million this quarter. This is a 200% increase. For Q4 of 2011, the importance of PGMs to our portfolio is again more evident as 12% of revenue for the quarter was attributable to PGMs. As you can see, revenue has increased 58% in Q4 2011 compared to Q4 2010. The percentage is actually higher if Q4 2010 was adjusted for the Gold Quarry minimum top up that was recorded. In 2011, the Gold Quarry minimum was recorded each quarter.

The Company always stresses the scalability of our business model. That continues to be the case for Franco-Nevada. As you can see from slide 9, sorry, slide 8 illustrates the increase in Franco-Nevada's gold revenue over the last three years compared to the increase in the price of gold over the same period. As we all know, gold has performed very well over the last three years. However, Franco-Nevada's gold revenue has increased at a faster rate.

For the 12 month period ended December 31, 2011, the increase is due to the following. Firstly, the increase in the price of gold is a key contributor. For fourth-quarter 2011, the average gold price was $1686 per ounce. Secondly, the Company acquired 12 royalties or streams in 2011, of which some were significant revenue generators and others will be future revenue generators. And lastly is organic growth, whether that be increased production or additional exploration done on our existing producing royalties. Or our development royalty pipeline, seeing royalties and streams move into the production stage. In 2011, the growth in the quarter, 15% was associated to the gold price increase, 27% to organic leverage and 58% to new acquisitions.

The Company always stresses the scalability of our business. As you can see from slide 9, revenue and adjusted EBITDA continued to move in an upward trend over the last couple of years, while the Company has maintained a fairly constant cost structure. Administrative costs have remained fairly constant and we have been able to add growth without significantly increasing our cost structure. G&A was slightly higher in fourth quarter 2011 compared to prior-year and earlier quarters due to costs incurred related to corporate tax planning, being listed on two exchanges, and filing of the Company's shelf perspectives. However total G&A as a percentage of revenue was 5.8% for fourth quarter of 2011 compared to 7.3% in fourth quarter 2010.

If you refer to slide 10, you will recall that the Company provided revenue guidance in March 2011 of $325 million to $350 million. This guidance was updated in August 2011 to $375 million to $400 million. As you know, actual revenue came in at approximately $410 million. The higher revenue amount was a combination of higher commodity prices and better performance at our royalty and stream interests.

Turning to slide 11, the geographic profile continues to be lower risk with 79% of revenue being from North America which is fairly evenly split amongst the United States, Canada, and Mexico. The South African portion has increased in 2011 due to the addition of Mine Waste Solutions and Ezulwini, and the start of the Tasiast royalty. Also, please note that the diversification by asset is also expanding with revenue being sourced from more and more properties, resulting in the Company being less economically dependent on certain royalties as it once was. This will continue to grow as our advanced stage royalties begin to provide revenue. The Company now benefits from 43 revenue-generating mineral assets.

Slide12 provides a reconciliation of net income earned in 2010 to the net loss generated in 2011. The positives for the year are obviously the substantial increase in revenue which was largely attributable to the performance of Palmarejo and new royalty generating revenue and the Gold Wheaton transaction, as well as some foreign exchange losses reversing in 2011. Offsetting this large revenue increase is the impairment adjustment which was mentioned earlier related to Podolsky and Ezulwini. Increased cost of sales which is mainly a result of reporting of $400 per gold equivalent ounce purchase price for the stream ounces. And increased depletion due to higher overall revenue and the addition of the Gold Wheaton assets.

On slide 13, you can see that the Company continues to have the resources to complete additional transactions. In fourth quarter, the Company completed an equity offering raising $370 million after transaction costs which is added to our cash resources. As a result, at December 31 2011, available capital was $895 million, not including the credit facility of $175 million. In first-quarter 2012 the Company has already expanded in excess of $100 million on transactions, and just last week the March 2012 warrants expired resulting in an additional $175 million in cash funds being added to cash resources. The $960 million in current available capital does not include the operating cash flow generated in the first few months of 2012.

Referring to slide 14, we provide a summary of our revenue outlook for 2012. The Company will benefit from a full year of revenue recognition for the Sudbury Basin and Mine Waste Solution assets. For 2011 the Company only recorded financial results from March 14 onward. Our revenue guidance is based upon higher commodity prices of $1700 gold per ounce, $1700 platinum per ounce and $750 palladium per ounce, as well as $95 oil. We should continue to benefit from smaller asset start-ups, or full year benefits from assets such as Garden Well, Edikan, Hemlo, and Tasiast. In 2011, Goldstrike was affected by a waste stripping exercise resulting in a lower NPI. We expect this not to be the case in 2012.

On the downside, we are forecasting lower production at Palmarejo based upon operator production guidance. Also we will not have a minimum ounce requirement in place at Ezulwini, which was the case in 2011. Overall the Company expects 2012 revenue to be between $430 million to $460 million, based upon the inception prices mentioned and continuing steady-state operations. Please note that this does not include any potential acquisitions we may do using our available capital. With respect to stream ounces the Company expects to receive approximately 110,000 to 130,000 gold equivalent ounces. We look forward to a strong 2012. Please note that the appendices to the presentation do include reconciliations of all the non-IFRS measures referenced for three months and year-end December 2011 and December 2010.

Now I will pass it back to Stefan, thank you.

Thank you Sandip. With that, we have most of the executive and management team of Franco-Nevada available here and are happy to take any questions you may have.

(Operator Instructions)

We will pause for a moment to compile the roster. David Haughton, BMO Capital Markets.

Yes, good morning and thank you for the update. David, would you be able to please explain the new deal that you've got with AngloGold and Gold One with regard to the South African assets?

David I appreciate that but I am going to let my South African here explain. Paul Brink. He is the one behind that.

Morning Paul.

Morning David. David, the agreement as you would have seen there is for AngloGold to acquire the Mine Waste asset for Gold One, to acquire the [unsold asset] from First Uranium. Overall, we see that as a very positive transaction for the streams that in both cases would have stronger operators and more better capitalized operators to run both of the assets. So we were very pleased to see that transaction announced. And very hopeful that it will be concluded as the Company is expecting in the second quarter of this year.

On Mine Waste, the AngloGold has a number of dumps of its own, which are in the same area as the Mine Waste dumps. So their plan is they will process both their dumps plus the Mine Waste dumps. The AngloGold dumps are on average higher grade than the Mine Waste dumps. They will process the two at the same time.

Our agreement with them is we would still receive 25% of all the production that comes out of that facility. But we would, that stream would stop once we've received a total of 312,500 ounces. We see that as a very positive transaction. There is the prospect that we would receive our payments slightly sooner than we would have under the First Uranium operation.

On the Ezulwini Mine, the Gold One is looking to acquire the asset there. Gold One operates the East modern mine in South Africa. It's currently the lowest or one of the lowest cost operations in South Africa. They also recently acquired land uranium, which has the Cooke operations which are immediately to the north of Ezulwini. Ezulwini at one stage used to be part of the Cooke operations. It's only a kilometer or so from the most southerly of the Cooke shots. There are operating synergies between the two operations, and in particular, one of them is the probability that Gold One would process some of the uranium bearing ores because they are mining the same reef horizons as Ezulwini is, that they would be able to process those uranium ores through the uranium plant at Ezulwini.

So we see Gold One as better capitalized, able to spend the capital on Ezulwini. Hopefully achieve some of the production growth that First Uranium had been trying to achieve, but they've also got the additional benefit of those operating synergies. Net-net, we think it's a very positive transaction.

When would you expect those deals to close?

Q2, so around mid-summer we're expecting closing.

Okay, so as far as the changes go, is the MSW that we will see some slightly higher production but it's now got a sunset of a finite number of ounces coming up?

Yes, it was, because it's tailings, it always was a finite number of ounces, because it was previously restricted just to those certain dumps. Now, because you're dealing with a far bigger resource stake, we have to transfer that cap from being a cap just what was in a set amount of dumps to a per ounce cap.

All right. Given the difficult market conditions that we have seen now, especially if you're a smaller Company wanting to raise money, have you seen over the last month or so, any changes to the deal patent? Have you had more inquiries in bound?

Overall we see a very strong pipeline, David. We see a number of opportunities that are both royalty and stream opportunities that we are working on right now. I would say the change really started in the fourth quarter last year when you started to see valuations come down on the equity side. And ever since then, we have had a number of inquiries and a very strong interest.

All right. And I guess the other thing that you would consider would be changes to your dividend yield. I presume that's going to be left up to the Board. Does it feature, David, in our Board discussions?

Yes it does. And I think what we would like to do is save the good news to give directly to our shareholders at our annual meeting. I expect that will be a discussion in time for our annual meeting on May 8.

Thanks David and Paul.

Thank you.

Greg Barnes, TD Securities.

Thank you operator. David, you've got $1 billion in available liquidity now. I know you've talked about changing or adjusting the revenue stream mix going forward. Are you looking at non-gold, non precious metal, royalty revenue streams, as well?

Greg, thank you very much. I think you can see from the transactions since December we have already started. Paul and his team acquired the Lumina package of royalties in December for $66 million and they are primarily copper projects in Latin America, very long term, but we think that is something we're going to be talking a lot more about five years from now. Relincho, we are very pleased. Teck is going to a full visibility on that next year. And so we think that's now on the pipeline to be developed.

And we are very, very pleased with what Lumina Copper is doing at Taca Taca in Argentina. It looks like that is going to be a 1 billion-ton plus ore body developing very rapidly. So we are excited about it. And then we just featured in our press release a couple of weeks ago that we have bought, added to our own gas assets, and I would like actually Geoff Waterman who manages our oil and gas sites just to speak briefly on what we are doing on the oil and gas side.

Greg, yes, we added to our existing positing in the Weyburn Unit. It was an opportunity to get in there with one of the other joint venture partners, putting their interest up for sale and we are looking at other opportunities within the oil and gas space.

Greg, we have the luxury now. We are up to 92% precious metals in our revenue mix as of the latest quarter. And we believe as long as we stay well north of the 80% level, that we can have a fairly balanced portfolio and still be precious metals focused. What I like is we have the flexibility now to do deals in almost any commodity. And that's really opened up our investment universe so it's a wonderful sweet spot to be in.

But north of 80% is what you see as the lower limit on gold.

Because we're looking at what are the other major gold companies and what their revenue mixes are, so as long as we don't get a lower percentage of precious metals compared to the big cap gold companies, we should be comfortable.

Great. Okay. Good, thank you.

Thanks Greg.

Anita Soni, Credit Suisse.

Good morning Dave and Sandip. My question is with respect to the impairment charges at Ezulwini. What is the book value now of Ezulwini?

Book value is approximately $80 million.

Now, the decision to focus more on uranium I guess, does that mean that there will be no gold stream or is that just, is it more of an accounting decision that you guys have to take?

We took an accounting, there still will be a gold stream. We still anticipate having revenue each year from Ezulwini.

Okay,

Anita, really what it reflects is First Uranium's decision that they would cut their workforce there.

Okay.

They have been mining two horizons, the Upper Elsberg, which is the gold rich, higher grade and then the lower grade gold, but also with a uranium byproduct in the Middle Elsberg horizon.

Okay.

So, they have announced a mine plan where they will just focus on the Upper Elsberg. It is the majority of the M&I, but it's a smaller portion of the ore body and they will also be at a lower mining rate. We still get 7% of everything they produce.

What do you anticipate would be the ounces that you would get then on that 7% per year?

The company hasn't put out guidance yet for the asset. Because they are still working on putting together their mine plan, but I expect that there will be some better clarity here fairly shortly from the company.

Great. Thank you very much.

(Operator Instructions)

John Tumazos, John Tumazos Independent Network.

I want to compliment you on promptly taking the write-down within a year of the purchase of Gold Wheaton. It's good to be aggressive and ahead of the curve. Do you think that in the future, your criteria will be different? That you might use higher discount rates due to specific risks. Or avoid purchasing anything that's a stock price. You know how sometimes stock markets get ahead of themselves.

John, it's a good question. And we have had that discussion at the Board level, as well. It's easier to do an asset deal in that you can put a lot of bells and whistles in a asset deal transaction. For instance, some of our deals we've actually been able to say, our money doesn't go in until certain permits are in places, or that there has to be sort of minimum production payments regardless of how the mine performs, or we target specific risks.

When you do an M&A, it's kind of all or nothing. You have got to buy a package deal, the price is kind of set by the marketplace, and then when you have the decision, okay, most gold deals are done at a bit of a premium to NEV, do you put that premium as a goodwill component? Or do you try to put it as a multiple on the asset, realizing that if any trigger happens in the future, you are a bit vulnerable because you then have to do under IFRS the discounted NEV evaluation on the asset.

I think what's happened here is that we just had some triggers, I think everyone is more comfortable saying given that First Uranium -- the operators, both of First Uranium and Quadra FNX have taken impairments, it wouldn't be seemly for us not to take an impairment, as well. But do we believe that the ounces will never be recovered from these particular properties? No, we just think it's going to be a longer timeframe.

But in terms of doing the best representation of what we have in the assets and what's being represented by the operators right now, this is the right thing to do. So, we've had a long history of never doing a material impairment and regretted it very much. We could've made the arguments that ultimately the gold is going to be produced and the precious metals produced, we wouldn't need an impairment.

But we thought there's no use arguing this. People realize there's issues with these assets, let's take it on board and get it behind us. Are we going to look at deals differently in the future? I think we will look at all our deals hard, but sometimes we need to take advantage of the opportunities when they're there. I would still do the Gold Wheaton deal today because I still think we're going to have a great long-term assets there and regardless of the impairment, it's still been an accretive deal for this Company long-term.

David, there are other markets where the players in the markets are more conservative than in gold. For example, in silver, many people expect long-term prices that are below the spot, often more than 50% below the spot. One consensus of London analysts for copper for next year was 279. And if I hadn't been in it, it would've been 260. Do you think that maybe the gold people like gold a lot and you can do deals at cheaper multiples or discounts in NPV and other things, and maybe the 80% or 90% gold mix is constraining you too much? You should go into other areas.

You know what -- I hear your point, but I think again we have to look at our shareholder base. We have a lot of people that specifically want to have a precious metals exposure versus a fully diversified Company. And we know that for certain because we started out this Company back in late 2007 and we were less than 50% precious metals. And as we got more precious metals the valuation of our Company was re-rated.

So, we're very conscious about the shareholder base that we have already. In terms of the respective valuations. I think we've got a lot of room to play with right now. Given our market capitalization we can do north of $500 million in other commodity deals right now without impacting on our valuation -- I think our overall metrics from a street perspective.

I don't feel constrained yet in terms of the transactions we are looking at right now in the non precious metals phase. And I still don't feel constrained to do bigger deals because we're really running a portfolio, and to the extent that we ended up doing a lot more than $500 million in the future, then we would look at selling maybe some of our shorter duration oil and gas assets and creating, actually, a better mix of assets than we have within our non precious metals portfolio.

And ultimately, if we did something super large, there's always the flexibility of putting in another vehicle. So we've got, in my mind, no constraints, in terms of what the opportunities are out there. It's just that there's a lot more precious metal deals. There's a lot more smaller operations, a lot more development. So we have a lot of room to play with there.

Yes, there are some really big base metal and commodity deals, but they tend to be very granular in terms of there's not as many of those projects out there. They're a lot slower to get developed and permitted and progress. We'd love to have them but what I expect is we're going to be doing a mixture, the odd granular bigger deal in the non precious metals space, and continuing just the constant accumulation of both smaller and larger gold assets, which is what we've been doing for the last couple of years.

I don't see a constraint. And the nice thing too is the valuations are really getting in line. When we're doing most of these pricing discussions on gold assets, we are using price consensus pricing index, and we're talking to the other parties. And so they are already discounting the future for gold prices by quite a bit, unlike I think, you don't have the same discounts in other commodities.

When you look at it and if you actually valued all these commodities using the same forward curves that the market has, we're almost at parity in terms of the respective valuations for doing deals in different commodities. So, I don't see a huge arbitrage in terms of deal making.

Okay.

JP Barlow, Industrial Online Securities.

Yes, good morning. Could you please explain to me why you take the impairment through the income statement?

Why you take the impairment through the income statement?

Yes.

It's accelerated depletion basically. It's a charge against the Company. It's a write-down of the asset. Where would you expect it to be taken?

I'm asking you because I don't know the answer. I appreciate your answer.

It's a cost of doing our operations. Just like any other cost such as depletion, G&A, the charge flows through the income statement.

Okay, thank you.

(Operator Instructions)

David Haughton, BMO Capital Markets.

Yes, thank you David. Just coming back on one of the points that you had made when discussing it with Greg. When looking at the contribution from the Weyburn, should we just have a look at the revenue that you got this year and effectively double it, all things being equal, as far as the contribution of the additional working interest?

David, Geoff Waterman here. No, because the Weyburn revenue that you see is a combination of a working interest and our royalty position.

Right.

Okay. It's not quite a double.

All right.

80%, 85%.

80%, 85%, just trying to get a sense as to the impact of it potentially going to your revenue stream going forward.

Right.

Thanks, Geoff.

John Dickerson, Private Investor.

Thank you. John Dickerson, investor. Question on the Seiko deal that you signed a couple years ago. I believe in May there has to be a decision made on that. Can you update me on what is going on there?

John, it is Paul Brink. I will answer that. The Company has reformatted the mine plant at Prosperity, the property is now called New Prosperity. And the main feature of the new mine plant is that they would maintain Fish Lake. And so the waste drop from the pit would be transported to the far side of the lake. And so a new plan has been submitted on that basis. That plan has been accepted by the federal permitting regulators so a timeline has been set. They will get a decision on that new plan around November of this year.

Your deal that you formatted change in respect to the $400 gold over a period of 22% of the ore body.

John, you were cutting in and out there. I'm presuming your question is will the existing transaction remain in place.

Correct.

We do have the option of keeping that transaction in place. My expectation is that on a positive permitting decision, that we would work with the company and that you would see a substantially similar transaction on a go forward basis.

Thank you very much. You guys do a great job.

Thank you.

There no further questions at this time. I will turn the call back over for any closing remarks.

Thank you Melissa. On our website today you will find our full 2011 financials and MD&A. In a few days we will be posting our annual report, as well as our expanded annual information form. We appreciate that Franco-Nevada is difficult to analyze given our large number of assets. Not counting our oil and gas and exploration assets, we are now up to 43 producing mineral assets and another 25 advanced mineral assets.

You will see that in our higher level disclosure, we are beginning to talk about our gold assets in terms of regions such as US, Canada, Australia, and International. We're going to be providing you with breakouts of our adjusted EBITDA by revenue category such as commodity, region, and type of assets. We believe that this will help you have a better comparison of the relative contributions between our royalty, net profit, net profit interests, stream assets, as each one has different economics.

On May 8 in conjunction with our Q1 release, Franco-Nevada will be hosting an analyst and investor day. On that day we will be providing you with an asset handbook which will provide even more detail including assets not covered in our AIF. In this book for the first time we will be presenting some perspectives as the best way to interpret what the respective mineral reserves and mineral resources are at our different assets.

Please mark May 8 in your calendars and you can participate in person or by teleconference at the TSX Broadcasting Center. Thank you very much for your continued interest in Franco-Nevada.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.