Franco-Nevada Corporation (FNV) Earnings Call Transcript & Summary

Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2021 Franco-Nevada Corporation Analyst Day Conference Call. [Operator Instructions] Mr. Paul Brink, President and CEO of Franco-Nevada, you may begin your conference.

Good morning. Welcome to the launch of our 2021 ESG Report and Asset Handbook. The session is planned to take 2 hours, and we'll break it in two halves. Some of our presentations contain forward-looking information, so please note our cautionary statement on Slide 2. We'll start the session with ESG, and then we'll talk about the Vale iron ore royalty debentures we've just acquired and the position in the Labrador Iron Ore Royalty fund we've accumulated. Sandip will provide highlights of our asset handbook and update our guidance to reflect the new addition. At that point, we'll open it up for 20 minutes of Q&A. The second half of the session will cover the asset handbook for our 2020 royalty ounces calculation first, followed by a review of certain assets. Our claim as the leading gold-focused royalty and stream company is that we have the largest and most diversified portfolio. The only downside of that is we have too many assets to cover in a single session. We'll cover our major assets and then selected assets where there are either recent developments or where we think the additional discussion will help with your modeling. We have a number of our team presenting and are proud to display the depths of the organization. We'll leave time for 15 minutes for questions at the end. [Operator Instructions] To set the stage for today, Slide 4 has a snapshot of our industry-leading track record. 2020 was no exception, and we're particularly proud of achieving $1 billion of revenue for the first time. Some of the key themes for today's session. You'll see growth of our long-life reserves and resources, sector-leading diversification in our portfolio, assets that are outperforming our acquisition assumptions and strong organic growth across the portfolio. We like to lead with our strengths, so we'll start with ESG. The principles behind ESG have long been a focus for Franco-Nevada. It's incorporated in our Board mandate and our executive compensation, and it extends throughout our organization. Lloyd Hong, our Chief Legal Officer, has a central role in our ESG effort. I'll hand it over to Lloyd.

Thanks, Paul, and good morning, everyone. It's my pleasure to be providing an overview of our commitment to ESG at Franco-Nevada. We've always said that Franco-Nevada is the gold investment that works. To us, that means that it works for all our stakeholders, including our shareholders, operating partners and communities. ESG is a big part of making sure we're living up to this goal. We've had a long-standing commitment to ESG and have been recognized by third parties with top rankings: by Sustainalytics, where we're ranked #1 out of 84 precious metals companies; MSCI with a AA rating; ISS ESG, where we're rated Prime; and report on business Board Games, where we're #2 among mining companies. We strive to continually improve and appreciate that our efforts are recognized. Our commitment to ESG starts at the highest level with our Board of Directors and as an ingrained part of the culture of our organization. We were the first royalty and streaming company to specifically include ESG and the mandates of our various Board committees. Our Audit and Risk Committee has specific responsibility for oversight of climate-related risk and other ESG risks. Our Compensation and Corporate Governance Committee became our Compensation and ESG Committee in 2020 and has specific responsibility for ESG matters, including the adoption of ESG initiatives, engaging with shareholders on ESG matters and setting ESG-related goals for compensation. This past year, the Compensation and ESG Committee implemented specific ESG goals for the executive compensation plan. And these are discussed in detail in our Management Information Circular, which is available online on our website. The Board recognizes the importance of ESG to the success of our business and to our shareholders, and are holding management accountable for ESG performance. I'm going to highlight some of our ESG commitments in the following slides, starting with diversity and inclusion and then moving on to responsible mining and energy extraction, community contributions and then climate and transparency. Let's start with diversity and inclusion on Slide 7. We're proud of our diversity in Franco-Nevada and recognize it is a key part of our success. We believe that it is important to achieve diversity at the highest levels and for diverse persons to also have opportunities to realize their full potential. Diverse persons have historically been underrepresented in the mining industry, and we are committed to making progress. At the Board level, we've made significant progress. Our first female Director, Dr. Catharine Farrow, joined our Board 6 years ago in 2015. Catharine brings years of technical experience and expertise to the review of new investments. In 2019, Jennifer Maki joined our Board, and we also adopted a formal goal of 30% women directors by 2022. Jennifer is the former CEO of Vale Canada and a recognized financial expert and is now the Chair of our Audit and Risk Committee. In 2020, Maureen Jensen joined our Board. Maureen is the former Chair and CEO of the Ontario Securities Commission and is a registered professional geoscientist. Her combination of regulatory and technical experience and expertise is a very unique and valuable skill set. Following our upcoming annual meeting, Catharine, Jennifer and Maureen will represent 30% to the Board, and we will have achieved our goal a year ahead of schedule. Franco-Nevada's diversity has grown over many years. At the executive level, both Sandip Rana, our Chief Financial Officer; and myself, are members of visible minorities. Sandip joined Franco-Nevada in 2010 and was also part of the old Franco-Nevada team. I joined Franco in 2012. We were very pleased to promote 2 team members, who are visible minorities, to VP positions at the end of 2020. Both joined Franco at more junior stages of their careers, and we're proud to see their professional development. Their promotions are a testament to their achievements and contributions to the company. We believe that what gets measured gets achieved, recognizing that we want to do more to progress diversity. Our Board adopted a new goal in 2021, which is in addition to our goal of 30% women directors. Going forward, we've adopted a goal of 40% representation of diverse persons at the Board and senior management level on an aggregated basis by 2025. We do not see these goals as the endpoint, but rather an ongoing commitment, which will continue to evolve. Outside of our company, we are committed to several diversity initiatives. This year, Paul signed on to the CEO pledge for the BlackNorth Initiative aimed at ending anti-black systemic racism. We have committed to a number of goals for this initiative, including student hiring goals and community contributions. We are also an influence level partner for the Prosperity Project, which is aimed at mitigating the impact of COVID-19 on Canadian women. Women have been disproportionately impacted by COVID-19 and we fully support the Prosperity Projects efforts to tackle this issue. We are also working with universities to provide a Franco-Nevada scholarship to help diverse persons access education to be able to enter the mining industry. We hope to have our first Franco-Nevada scholar in place for the start of the 2021 school year. I'd like to turn now to responsible mining and extraction on Slide 8. Our business model is focused on providing exposure to long-term resource optionality. This can only be achieved through responsible mining and energy extraction. We have strong alignment with operators on being committed to responsible mining and energy extraction and management of ESG risks. We have been able to partner with some of the best operators in the industry on world-class assets, and we commend all of our operators' efforts to implement best ESG and operating practices. Our greatest point of impact is our investment decision. Whenever we look at a new investment, we conduct comprehensive due diligence on all aspects of a project, including a focus on ESG. We continually refine our due diligence processes to ensure we review all materialist aspects of a project. This includes the operator's history, the history of the project, community relations, life-of-mine plan, climate risks, tailings management, water management and any other relevant factors. We engage external experts to help review and assess risks, and our Board is deeply involved in the review of new investments. We also work to negotiate contractual covenants and protections, including audit rights and tailings facilities review, where appropriate. All of this is focused on ensuring that a project has been and will continue to be responsibly operated. On a number of occasions, we have refrained from allocating capital where we've identified ESG issues. We are actively involved in industry leadership groups to more broadly promote responsible mining. We have a long-standing history with various industry organizations, including PDAC, the Canadian Institute of Mining and the World Gold Council. We've been particularly engaged with the World Gold Council. Pierre Lassonde, our Chair Emeritus; Randall Oliphant, one of our Board members; and David Harquall, our Chair, have all been past chairs of the World Gold Council. Under Pierre's chairmanship, the conflict-free gold standards were developed in 2012. Under David Harquall's leadership, the Responsible Gold Mining Principles or RGMPs were developed in 2019. The RGMPs are a significant achievement for the industry and represent a comprehensive framework, setting up clear expectations for consumers, investors and the downstream gold supply chain as to what constitutes responsible gold mining. For us, as a royalty and streaming company, this means that during negotiations of new investments, we will work to get gold miners to adopt the RGMPs. We also regularly monitor how gold mining companies are performing against the RGMPs. As an allocator of capital, we appreciate how we can help highlight the importance of ESG and are committed to doing so. We are also committed to voluntarily doing more under the RGMPs. We have engaged an independent third party to review and provide external assurance on our efforts to implement our commitment under the RGMPs. This is not required for royalty and streaming companies, but we believe it will provide further confidence to our stakeholders. Turning to Slide 9. We believe in giving back and being a positive force in our communities. We recognize that we are stewards of shareholders' capital, and it has long been a principle of Franco-Nevada that the best charitable contributions are made personally rather than using shareholder money. Seymour Schulich, at the original Franco; Pierre Lassonde; and David Harquall have been among Canada's most generous philanthropists. The current executive team is also active in the community, including major donors -- being major donors to the United Way. It is also important to make a positive impact in the communities with the projects over which we have royalties and streams are located. Some of our partnerships that I'd like to highlight include our partnership with the operator of Antamina in supporting Enseña Peru. Enseña Peru is a partner of Teach For All, an organization aimed at providing educational opportunities to children. We made a multiyear commitment to fund this program starting in 2018. In 2020, We partnered with Coeur to fund a water system upgrade project for the local communities around the Palmarejo project. Also in 2020, we partnered with Lundin Mining to provide financial support for Chilean health authorities to provide mental health supports for people in the Atacama region affected by COVID-19. We are actively engaging with operators to explore new projects and are now including commitments in our stream agreements for ESG initiatives. We are proud of the positive impact we've had and are excited to do more. I'd now like to turn to climate and transparency at Slide 10. Climate change is a major global challenge, and it requires timely, effective and practical action. As a first step in our efforts to address climate risk, we achieved carbon neutrality for 2020 through workplace initiatives to reduce our carbon footprint and by purchasing carbon offsets to account for emissions that we cannot eliminate. We appreciate that the impact of reducing our carbon footprint based on our small workforce and office environments is limited relative to the impact of our investment decisions. When allocating capital, we avoid investments where there is significant climate risk. We also consider an asset's climate footprint and the operator's commitment to reduce our client footprint. We believe that our precious metals, copper and nickel assets will play an important role in a lower carbon future and that natural gas also has an important role in the transition. Providing financing for the responsible development of these resources is core to our strategy and consistent with our climate change objectives. We believe our portfolio is resilient to climate risk. We have a diversified portfolio of assets with no material reliance on any single asset. No one operator or asset contributed more than 13% of our total 2020 revenues. This diversified portfolio mitigates the impact of any climate-related risks. We recognize the importance of disclosure to our stakeholders to understand our ESG efforts. Turning to the next slide. I'd like to highlight that our third Annual ESG Report is now available on our website. The ESG Report provides a detailed disclosure on all of our ESG efforts, including the matters I touched on today. We are committed to transparency and constant improvement, and we're pleased to include in the ESG report first-time disclosure, aligned with the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures, or TCFD, and the Sustainability Accounting Standards Board, or SASB framework. We've also included expanded emissions disclosure for the projects which -- or which we have royalties and streams and our first communication on progress under the UN Global Compact. Also available on our website is our 2021 Asset Handbook, containing comprehensive overview of our business and diversified portfolio, information on individual assets and consolidated reserves and resources. We'll cover off a number of the key highlights from our Asset Handbook during the balance of this Investor Day. I'd like to thank and recognize our team as it takes an enormous effort to put together the Asset Handbook and ESG Report, and they are great resources to help understand our business. I would highly recommend that everyone download their copy. And with that, I'd like to turn it over to our Senior Vice President of Business Development, Eaun Gray, who will talk about our iron ore investments.

Thank you, Lloyd. I'm pleased to speak today about our recent acquisition of the Vale participating debentures. These provide an effective net sales royalty on all of Vale's core Northern System iron ore mines, and we estimate about 70% of the Southeastern System in Brazil. The debentures are open-ended, so are equivalent to life-of-mine royalties. I'll refer to them as a Vale royalty debentures or just the royalty. It is a rare event that these royalty debentures actually trade, and this offering by the government of Brazil is a unique opportunity for us to acquire meaningful exposure to some of the best iron ore mines globally. We've shown them in the global cost curve at the bottom of this first slide, which demonstrates the quality and size of these very long-life mines. The royalty was originally created as part of Vale's IPO way back in 1997 to provide resource upside for the holders, and we acquired our stake from the government of Brazil and the Brazilian Development Bank. On a 100% basis, the holders get 1.8% of net sales from the covered iron ore mines and 1.25% of net sales from the Sossego copper mine. A key feature of these royalties is the strong growth profile as the Northern System continues to ramp up and after a production threshold has reached the Southeastern System is expected to contribute to the royalty beginning in late 2024. We expect the iron ore production attributable to the royalty to increase by about 60% over current levels by 2026. The underlying assets are key to the global supply of high-grade and low impurity iron ore, which is increasingly important in an ESG-focused world. These high-grade products had a strong premium over the benchmark 62% iron product. Moving on to the next slide, 14, at highlighted map. This map shows the key operations covered by the Vale royalty debenture. The royalty is exposed to 2 of Vale's 3 main systems and represents approximately 80% of Vale's production. The overall land package of approximately 1.6 million hectares provides great upside. On Slide 15, we look at the Northern System in more detail. Vale's Northern System is one of the most profitable mining complexes globally and represents 98% of the current cash flows from the royalty. It also represents over 80% of our valuation. Royalty covers Serra Sul, also known as S11D; Serra Norte; and Serra Leste. And our interest equates to 0.264% royalty on the net sales of these assets. These operations are fully integrated from mine to port with excellent infrastructure positioning them as some of the lowest-cost iron ore mines globally. We see many years of upside here beyond just reserves from these lines. I think the high-grade product that they produce will be increasingly in demand, given the environmental benefits. The S11D operation is a good case in point. It's named after a single part of the deposit. The likely progression when S11D is depleted is from concession C to be and potentially even to A. These assets are really Vale's crown jewel, and Vale has plans to ramp up the Northern System production by a further 25% for the current capacity of 206 million tonnes per annum to 260 million tonnes per annum. Moving on to Slide 16, I'll talk to the Southeastern System. This is Vale's other fully integrated system and is largely focused on pellet feed and high-grade fines. These operations are well positioned given the rail infrastructure and premium product, which is key to arc furnaces and to blast furnaces seeking to lower emissions. We estimate the royalty to cover approximately 70% of the current Southeastern System production. These operations provide built-in growth for the royalty. The Southeastern System is not attributable until a threshold is met and we expect this during 2024. Once contributing, it's expected to increase attributable production by a further 35% compared to current levels. Moving on to Slide 17. Beyond the core iron ore systems, the royalty also covers the Sossego copper mine and some of the surrounding copper gold deposits. The land package offers great optionality beyond the core iron ore operations on other commodities. On the next slide, we provided a summary of some of the key numbers related to the iron ore assets. We expect that the mine lives of these operations will extend for decades beyond those based solely on reserves in the table, given the high-quality resources that are expected on the royalty ground. We've seen a number of analysts actually use a perpetuity model to value this. Even without credit for resources, the weighted average mine life is still 30 years. It's important to note that these operations provide high-quality products that we think will be in favor as emissions become more of a concern. We've included a chart illustrating the pricing for 65% Fe versus the benchmark as that is what these operations primarily produce. We see good potential for that margin to expand over time. Vale has also provided guidance for the ramp-up of their operations, which we summarized in this slide. We highlight that as the debentures are on the integrated systems, where a large amount of capital has been invested, we expect strong focus on them going forward. On Slide 19, we've shown a table summarizing the net sales calculation for the payments. The yield on the last royalty payment and our purchase price is just over 10%. And our guidance for the royalty contribution in 2021 were allowing for iron ore prices to soften through the year, which would imply closer to an 8% yield, while production attributable to the royalty is expected to increase 60% through 2026, consensus iron ore prices declined over that period. In that scenario, we'd be still receiving close to an 8% annual yield on a very long-dated investment. It's worth noting that the payments are semiannual with the first payment to Franco-Nevada due in September. This payment relates to the production for the first half of 2021, benefiting from the currently very strong iron ore price environment. Looking at the deductions, the payments are effectively based on the mine gate price for iron ore with small deductions for things like local sales taxes or insurance. We'd be happy to speak offline if anyone has specific questions on these calculations. Moving to Slide 20. We provided an overview of some of the ESG considerations. ESG was an important consideration in our investment decision, and we note some of the key observations here. Vale has made major progress since Brumadinho tailings failure. The corporate culture is clearly one now focused on ESG. They've greatly improved the risk profile of the remaining dams and continue to do so through rehabilitation and improved transparency. The recent settlement relating to Brumadinho also provides greater certainty on the financial implications. It's worth noting that the Northern System actually uses dry processing, and the Southeastern System mines do not use upstream construction for their current tailings impoundments. In fact, Vale is building tailings filtration plans at Itabira and Brucutu, the 2 most significant operations covered by the royalty in the Southeast as part of their focus on reducing wet tails. I'll now turn to Slide 21. This covers our accumulated interest in the Labrador Iron Ore Royalty Corporation. We acquired the shareholding over a period of years for a total cost of CAD 93 million. With dividends received to date, we've actually nearly achieved repayment. Investment function similar to a royalty given the flow-through of revenue from LIORC's 7% NSR interest, CAD 0.10 per tonne commission and 15.1% equity interest in IOC's Carol Lake mine operated by Rio Tinto. Labrador Iron Ore has a long track record of passing through its cash flows to shareholders. We see great long-term potential from the Carol Lake operations, which are again focused on high-grade products, including pellets. The operations are integrated from the Carol Lake mine to port and benefit from major infrastructure. In summary, IOC is a high-margin, long-life asset, and we expect this operation to contribute to our cash flows for decades to come. Moving to Slide 22. We've shown the historical dividend payments from Labrador Iron Ore. The company is generating an annualized cash yield of 27% based on our acquisition cost and the most recent dividend payment with a single asset mandate and very little G&A within Labrador Iron Ore. We see the shareholding as an effective royalty within our portfolio. The amounts received from Labrador Iron Ore are included in other mining in our reporting revenue. This revenue is included in our calculation of GEOs. Payments received from the Vale royalty debentures will be treated in the same fashion. To sum up, these 2 assets will provide revenues across many cycles and enhance our portfolio with long-life mines that benefit from huge invested capital and infrastructure. Asset diversification is particular strength of Franco-Nevada, and the 2 transactions adds both our asset and operator diversification. We like the outlook for iron ore. A low-carbon economy will be a steel-intensive one, electrical grids, renewables, mass transit, are all steel intensive, we believe there may be good upside to the current consensus outlook for iron ore. We're particular to these assets. We believe demand for premium products from both Vale and IOC will increase with environmental pressures. While they have some of the highest grade seaborne tonnes, which we prefer to reduce emissions from blast furnace production, and IOC is a leading North American DR pellet producer, which will be more important as a greater focus emerges on electric arc furnaces. With that, I'll now hand it over to Sandip Rana, our CFO, to discuss guidance. Thank you.

Thanks, Eaun. Good morning, everyone. Before I speak to the company's revised 2021 guidance and 2025 outlook, I would like to touch on the Asset Handbook, which Paul mentioned earlier. Referring to Slide 24, the handbook is a key document for anyone who wants to understand our business. It provides an overview of many aspects of Franco-Nevada, including performance over the last 14-plus years, how the portfolio has grown and become more diverse over this period as well as the increase in reserves and resources on our royalty and stream interest. It illustrates how the share price has outperformed our peers and the gold price delivering a 19% CAGR to shareholders since IPO and how our revenue has grown to over $1 billion for the first time in 2020. The Asset Handbook provides a summary of where the company is today with the largest portfolio of 401 assets and the most diversified within our industry, whether it is by commodity, by asset, geography or by operator. One key component of our business is our long-life reserves and resources. The handbook highlights an impressive 10% increase in reserves and resources on our royalty and streaming assets for 2020. The Vale royalty is not reflected in the 2021 Asset Handbook, but will only serve to increase our asset diversity and our long life reserves and resources. We recommend that you visit our website and download a copy of the asset handbook. Turning to our guidance, I would like to make it clear that the guidance we do provide is based on GEOs sold and not GEOs produced as is the case for some of our peers. It represents the gold and gold equivalent ounces that Franco-Nevada earns from its royalties and streams after recoveries, refining deductions and payabilities. We feel it's a more accurate measure to forecast revenue and EBITDA than production GEOs. As you know, the company recorded approximately 522,000 GEOs sold for 2020, which was an increase over 2019. For 2021, we have guided to a further increase in GEOs sold with a range of 555,000 to 585,000. The key drivers of this growth are highlighted on Slide 25 with the largest driver of this increase being the ramp-up of Cobre Panama as it reaches a production level of 85 million tonnes per year. With the addition of the Vale royalty, we now expect an additional 25,000 to 35,000 GEOs to be recognized in 2021. This represents a full year of royalty payments from the debentures based on current iron ore prices. As a result, we are increasing the range for GEOs sold for 2021 to 580,000 to 615,000, which is a significant increase over 2020 actuals. The Vale royalty transaction further diversifies the company's asset geographic and operator profile. In fact, Cobre Panama is expected to be the only asset that generates more than 10% of our revenue in 2021. And even then, it will still be less than 20% of total revenue at current commodity prices. For accounting purposes, the Vale royalty debenture will be recorded as a royalty interest as the structure is effectively a royalty. The asset will be depleted similar to how other royalties and streams are depleted. From a tax perspective, the royalty debentures are held in Canada and the royalty payments will be taxed in Canada. Similar to other foreign royalties held, Franco-Nevada will be able to record tax depletion against this income. As we look forward to 2025, the company already had built-in growth, with expected GEOs sold to be between 600,000 to 630,000 for the year. The key drivers of that growth are again highlighted on the left-hand side of Slide 26. With the addition of the Vale royalty debentures, we are increasing the outlook for 2025 to a range of 630,000 to 660,000 GEOs sold. You'll notice our expected GEO contribution from the debentures is a similar amount in 2021 and 2025. Although we do anticipate an increase in production on the royalty lands by 2025, the GEOs sold associated with the Vale royalty payments have been converted using consensus iron ore prices for 2025, which are lower than current prices. Also, please note that for the 2021 guidance and 2025 outlook, the Labrador Iron Ore royalty GEOs are already included in the guidance. Dividends are accrued each quarter and reflected in revenue. Prior to the Vale acquisition, Franco-Nevada already had built-in growth over the next 5 years. With the addition of the Vale royalties, Slide 27 highlights the scale of that growth. For 2021 and 2025, when including forecasted energy revenue, the projected overall growth in revenue for the company over 2020 is expected to be over 15% in 2021 and 25% for 2025. With the low and fixed cost nature of our business model, this increase will filter down and be reflected in growing EBITDA and earnings. The Vale royalty debenture acquisition adds greater diversity to Franco-Nevada's commodity mix. Although through 2025, we still expect precious metals to make up at least 80% of revenues. One of the core principles of the Franco-Nevada Board and management is to have a progressive and sustainable dividend. As you can see on Slide 28, Franco-Nevada has paid an increasing amount of dividends each year since IPO despite the volatility in the gold price. With the long-life profile of the Vale iron ore assets, combined with the long life and steady cash flow expected from our core assets, we are confident we can continue to raise our dividend for years to come. For 2021, the company has increased the dividend by 15% to $0.30 per share per quarter, which will be reflected in the Q2 2021 dividend payment. After funding of the Vale acquisition, the company has approximately $1.2 billion in available capital to continue to add to the portfolio. The transaction was funded with a combination of cash on hand and a small drawdown of our $1 billion credit facility. I would like to point out that the company remains in a net cash position even after funding this acquisition. With that, we will now have a Q&A session before we move into a discussion on specific assets. Operator, please go ahead with any questions.

[Operator Instructions] First question comes from Cosmos Chiu at CIBC.

Maybe my first question is on the Vale debenture, royalty debenture acquisition. I'm not sure how much you can share with us here. But I'm just wondering what some motivation of the Brazilian Development Bank and the government of Brazil and divesting their investment in these royalty debentures? And did they retain anything? And also, there -- was there like a formal process that was being run to divest about 14% of these debentures?

Cosmos, thanks for the question. I'm going to hand that to Eaun.

Cosmos, yes, so this is part of the broader privatization of investments that is going on in Brazil of government holdings. BNDES recently sold their shareholding in Vale as well. It was a formal process. We have been tracking these royalty debentures for years now. But the process we've run top left by Bradesco. The total amount monetized was around $2 billion. So we took part in the process as an anchor order, along with, I think, 1 or 2 other parties. And in terms of motivation, I think it's just to be able to read, mobilize the capital elsewhere in Brazil.

Great. Maybe a question on the accounting side now. I think Sandip kind of touched on it in terms of taxes, this structure through Canada. But I just -- I'm hoping for a bit more guidance here in terms of -- I believe the corporate tax rate here is about 26-ish-percent, but there's accelerated depreciation, I believe you can take. So I'm just trying to figure out, what we should be modeling for, say, cash taxes? What depreciation rate should we expect on the upfront investment? Any further guidance would be appreciated, Sandip.

Sure, Cosmos. So on the accounting side, it's typical you deplete on reserves or tax. We do have withholding tax out of our -- out of -- sorry, Brazil at 15%, we'll get a credit for that in Canada and pay tax in Canada. On the tax depletion, it's 10% and it can be up to 30%, depending upon how much revenue it generates. So at a minimum, the drawdown on the investment will be 10% per year.

We're not getting any additional questions from the operator now. So Lloyd, why don't we take any questions that you're getting on the -- that have been entered through the webex space here.

Sure. We've got three questions here, Paul. So the first one is from James DiCenzo at iA Private Wealth. And his question is, "Congratulations on the great news this morning, ladies and gentlemen. On that note, does FNV still have future plans to continue to concentrate on gold and base metals and then considering splitting off the energy assets into a new separately trading royalty, especially with the company's new ESG focus?"

Well, thank you for that question. In terms of the strategy of the company, nothing has changed in doing this. Our strategy is always focused on gold and precious metals. But we do say to shareholders give us some adequate -- it is a cyclical market. There are times when it's too expensive to add gold assets or that there's just not a lot of capital being spent in the sector. So in terms of commodity diversification, we think there are times where we can continue to expose our shareholders to great resource optionality in other commodities. I think these Vale bonds are a case in point. We're not particularly tied to a single commodity there. It really is driven by ore bodies. If we can explore ourselves to great ore bodies, that's the number one objective. Happy to do that in energy, happy to do that in the base metals and here in the box. In terms of our ESG focus, the way we think about it is all of these commodities are going to be used for many decades, and many of them will play an important role in the transition to a lower carbon economy. The way we look at it is we want to be financing the better assets, the better operators in terms of ESG performance and also in terms of their climate footprint.

Okay. Thanks, Paul. The next question [indiscernible]. And his question is, "What is FNV's asset life based on reserves only?"

The -- we can get into that in a second. I think you're going to see, as Phil runs through it, that we're approaching 20 years in terms of reserve life, much longer than that in terms of resources. Then I got to leave the specifics to Phil. He's going to give you some detailed numbers on our most recent calculation. I think everyone will be particularly impressed by, one, the long reserve life; and two, the good growth we've had in reserves this year.

Our next question comes from Jackie Przybylowski at BMO. Can you please explain the difference between a royalty debenture and a normal royalty?

I'm going to hand that one over to Eaun.

Thanks, Jackie. Yes, the Vale royalty debenture is a contract directly with Vale S.A., the TopCo. A typical royalty in North America is an interest land. So this is more contractually based than a direct interest in the land. Thank you.

Okay. Our next question is for Sandip from Greg Barnes, TD Securities. Question is, "Revenue guidance for 2021 is based on a full year payments from Vale and will FNV receive -- but FNV will only receive the first payment in September."

Greg, yes, so the way it's going to work is for our Q2 results, for the end of June, we will be recording 6 months' worth of revenue for the dividends. So we will make an estimate from January 1 to June 30, because we won't be entitled to the dividends for that period. That payment will be received in September, depending on what that payment is, we'll do a true-up at that time. And then at the end of the year in December, again, we'll make an estimate for the revenue accrual for the next dividend that gets paid in March. So we will be recognizing revenue for 12 months of the year.

Okay. And our last question comes from Josh Wolfson at RBC. Where it's -- can we clarify the last comment? Was the $2 billion Bradesco-led divestiture solely related to these royalties? Or were there other transactions included in that figure?

Go ahead, Eaun.

Yes. That just relates to these securities. The other transactions were separate and they've been executed by BNDES prior.

Thanks, Eaun. We do have one last -- another question that just came in from Brian MacArthur at Raymond James. It's, "Can you elaborate on the Vale debenture security and where the royalty ranks?"

Go ahead, Eaun.

The Vale royalty debentures are unsecured, but they are an obligation of Vale S.A., which is a very strong credit [ firm ].

And there are no further questions, Paul.

So why don't we see if -- at the outset there, we lost the operator. Operator, do you have any further questions?

Yes. The next question on the phone is from Tanya Jakusconek at Scotiabank.

Paul, just wanted to ask you, on my estimates, we're getting just under 20% from non-precious metals. So I'm just wanting to talk to you more about strategically. Do you feel that you would need to do a precious metal transaction before you could further increase your interest in non-precious metals?

Tanya, it is our focus now. I think this has been a tremendous opportunity to acquire an interest in these assets, but it does mean the focus is on precious metals going forward. The fantastic thing is we've had a bit of a pullback in the gold price. I think it's going to give us a great window to add some precious metal assets.

And Paul, are you still seeing the precious metals transaction in terms of funding for projects as we chatted about on the Q4 call?

That's right, Tanya. It's -- see a number of players now who are looking to put new mines in the production. And I think that, in particular, is where we can be helpful. We're looking to not be of all the capital on those mines, but I think in providing part of that capital and in particular, our endorsement to some of those projects, I think, can be very meaningful.

Okay. And I think we had also talked on the Q4 call that these sorts of transaction would be anywhere from a couple hundred million dollars up to $500 million. Is that still a fair statement?

Yes. I think that's a very fair range.

Okay. And then just lastly, just one question on the Vale transaction, looks like it's like $55 million per annum revenue contribution. And it says that majority of that is from the Northern System, I think it was like 98% in the second half of 2020. As we look at 2021, is it still a very significant contribution from this? Like would we be up in that range?

Go ahead, Eaun.

It should be. It really depends on iron ore price. You're going to see increased focus on the Northern System, I would expect. The Northern System produces these very high-grade iron ore tonnes, which are very important to reduce emissions. So depending on what iron ore price you assume, you could expect something similar. There are a number of growth projects scheduled in the Northern System. Serra Sul S11 continues to ramp up. They've approved their Serra Sul 120 Project. So you're going to see really good tailwinds in terms of production there, I would expect.

Okay. And just to confirm that 80% of your value for this transaction was [ accounted ] to the Northern System when you looked at it? I just wanted to confirm.

Yes. A little more actually, but yes, approximately.

The next question on the line is from Tyler Langton at JPMorgan.

I think, Eaun, just had a question for you. I think for the Southeastern System, you mentioned, and I'm just looking at Slide 18, that it was subject to a threshold. Could you just kind of walk us through, I guess, the -- for your royalty, how to think about sort of you want the tonnes and sort of the associated revenues with that threshold?

Yes. So Vale actually puts out a semiannual report. And in the original filing debentures back in 1997, they said a threshold, I believe it's 1.7 billion tonnes of cumulative production before the payments would start on the Southeast. And in Vale's last semiannual report, they said they expect that to be met in 2024.

Okay. So you -- so I think you said your royalty kind of covers roughly 70%. So that would just be on the -- whatever tonne is, so long that cumulative amount is reached, you kind of earn that 70% sort of on that production?

That's right. Yes. We've shown the 100% numbers here for the Southeastern System, which Vale puts out publicly. And our estimate is that over the kind of medium term here, it will be about 70% that's covered on the ground.

There are no further questions on the line.

Well, thank you, operator. We'll now move into the second half of the session here. And we're going to start with Phil Wilson, our VP Technical. Phil is going to cover our mineral reserves and royalty ounces. Go ahead, Phil.

Good morning, everybody. Thank you, Paul. In the next few slides, we're going to look at the underlying reserves and resources on properties in our portfolio that Franco is attributable share of those reserves and resources. So if you could turn to Slide #32. The chart on this slide shows the change in the underlying gold equivalent ounces in reserves and exclusive M&I resources in our portfolio since IPO in 2007. As well as a significant growth as reflected in the chart, the same assets have produced over 50 million GEOs since acquisition. Now we want to emphasize that the chart shows 100% of the operators' disclosed reserves and resources, and it's not Franco's attributable share. But we showed this chart because it's easily verifiable. News is almost exclusively public data. It involves the fewest assumptions, estimates and adjustments and it still gives us a very good indication of growth in the underlying portfolio. The disadvantage being that it doesn't tell you what Franco's attributable share is, and we'll address that later. If you could turn now to Slide #33. The waterfall chart here shows the growth in reserve GEOs by region. Geographically, Canada has shown the biggest increase with Detour and Dublin Gulch being particularly notable, followed by Latin America, where Cobre Panama, Candelaria and Salares Norte have made significant contributions. It's worth noting that approximately 40% of this growth has come from the original IPO assets and 60% has come from acquisitions. If you turn now to Slide #34, moving to the concept of royalty ounces. We introduced royalty ounces a few years ago to overcome the limitations of a simple ounce count and also to provide a better representation of value for a royalty or streaming company. To estimate royalty ounces, we basically normalized the value of an NPI or stream to that of a gold NSR ounce. This requires making certain adjustments to the simple ounce count, such as we estimate the percentage of land covered by our agreement. In many instances, our royalty doesn't cover all of the property, for example, Nevada Gold Mines. Streams and NPIs are generally less valuable per ounce and in NSR. So we adjust for the relative economics of a stream, NPI or the commodity. And finally, whilst our agreements may cover all of a property, it could be with a party that is not the sole owner of the property. So we need to adjust for this an example being Antamina and Teck. The result in royalty ounces reflect our best estimate of GEOs we can expect to receive over time. If you turn to Slide #35, the concluding slide. I wanted to conclude by showing the growth in royalty ounces over the last decade. We estimate there's been a threefold increase in royalty ounces from reserves and a further 2.5x increase in royalty ounces from M&I, and that's after mine production. As of the end of 2020, by our estimation, we can expect to receive approximately 11 million royalty ounces based on reserves and a further 5 million royalty ounces based on the M&I resources. An alternative way to look at this, and this isn't perfect, but it is directional, is if you were to take the midpoint of our original 2021 guidance, which is 570,000 GEOs, it would take approximately 19 years to deplete the 2P royalty ounces and a further 28 years -- or a total of 28 years to deplete the 2P and the M&I royalty ounces. So it's been a great growth story since IPO, and we're looking forward to continuing this growth. With that, I'll hand over to John Blanchette, President of Franco-Nevada Barbados to talk about our Barbados assets.

Thank you, Phil, and good morning, everyone. Today, I will cover select streaming assets, including Cobre Panama, Candelaria, Antapaccay, Guadalupe and Condestable, which combined represent approximately 43% of Franco-Nevada's total revenue in 2020. Moving to Slide 37, our largest single investment to date is a precious metal stream on First Quantum's Cobre Panama mine, where we invested approximately $1.36 billion. Following the close of our second tranche in 2018, the precious mile stream covers 100% of the ownership of the Cobre Panama operations, with gold and silver deliveries initially indexed copper and concentrate shift to align our interest with First Quantum's. Ramp-up is progressing well with a throughput of 85 million tonnes per annum targeted for this year. In January, a throughput of [ 6.8 million tonnes ] was achieved, which is just shy of this level. As an update on Law 9, there is no time line yet for resolution, but we understand the discussions are ongoing and have been productive. Turning to Slide 38. The chart on the right illustrates First Quantum's guidance for Cobre Panama over the next 3 years and the attributable GEOs to Franco-Nevada. First Quantum's guidance for Cobre Panama is 300,000 to 330,000 tonnes of copper in 2021, growing to 330,000 to 360,000 tonnes of copper by 2023. Importantly, the proposed expansion is on track to achieve target throughput of 100 million tonnes per annum during 2023. Our guidance for 2021 is 105,000 to 125,000 GEOs, up from 76,000 GEOs received in 2020. Growth is expected in the near term to reflect the ramp-up profile. Overall, we see great potential at Cobre Panama and commend the efforts by First Quantum to safely continue its ramp-up plans during the pandemic and expect Cobre Panama to be a significant contributor to our business over its 35-plus year mine life. Turning to Slide 39. Candelaria is one of our largest revenue generators, representing approximately 10% of 2020 revenues and has outperformed our original expectations. Exploration success has extended the mine life from 2028 at the time of the acquisition to 2040 today. Specifically, the underground reserves have grown more than tenfold from 12 million tonnes to 160 million tonnes over the same period. In addition, the recently discovered La Española open pit is targeted for production in 2024, demonstrating continued strong exploration potential on the broader land package. Although not all of La Española deposit is on our royalty ground, it is covered under our area of interest, and we have the option to buy into any production over the [indiscernible] ground. Turning to Slide 40. The chart on the right illustrates lending guidance for Candelaria over the next 3 years and then triple GEOs to Franco-Nevada. Lundin's Candelaria gold guidance on a 100% basis is 95,000 to 100,000 ounces in 2021 and 2022, nearly a 30% increase over 2020 levels. Gold production is set to further increase in 2023 to 110,000 to 115,000 ounces and is expected to average nearly 100,000 ounces a year over the next 10 years. Franco-Nevada's 2021 guidance for Candelaria is 65,000 to 75,000 GEOs in 2021, up from just under 60,000 GEOs in 2022 -- I'm sorry, in 2020, which was impacted any year by labor issues, which have now been resolved. Turning to Slide 41. Glencore's Antapaccay mine is also one of our largest revenue generators, representing approximately 12% of Franco-Nevada's total revenue in 2020. The stream covers 100% of the entire 997 square kilometer concessions, which offers a number of large-scale regional targets. For example, one such example is the Coroccohuayco deposit, which was previously planned as an open-pit and underground operation to be mined in tandem with Antapaccay, but is now being rescoped as a large open-pit only mine, sequenced later in the mine plan. We think this will provide exposure to additional gold and silver production than originally contemplated. At Antapaccay, gold and silver deliveries are initially referenced to copper in concentrate. Our guidance for 2021 is 55,000 to 65,000 GEOs. This is slightly lower than 2020 due to a planned lower grades this year as scheduled in the life-of-mine plan. Turning to Slide 42. Our gold stream on Coeur's underground silver/gold Guadalupe-Palmarejo operation has proven to be one of our best return on investments. In 2014, we worked with Coeur to enter into a new 50% gold stream to support the continued growth. And this improved mine economics helped extend the mine life and entire Palmarejo operation. Although the original stream was on the full property, Guadalupe was lower grade than Palmarejo, so we reduced the stream burden and provided capital to help advance Guadalupe's development. This is a great example of value generated by working with a partner to rightsize the stream. Coeur has identified a number of large-scale regional targets on their extensive land package, of which the stream area covers 1,200 square kilometers. Infill drilling has also recently extended mine life, and we expect exploration success to continue with up to 10 rigs expected on site over the course of this year. Coeur's 2021 guidance for Palmarejo is 100,000 to 110,000 ounce of gold, which is similar to 2020 production levels. Coeur purchased the Palmarejo ground to the east of our coverage area after our deal and it is not covered by our stream. We do not provide specific guidance for Guadalupe but estimate that over 80% of the existing mineral reserves and resources are covered by the stream agreement. For reference, we received almost 45,000 ounces of gold from Guadalupe in 2020. Turning to Slide 43. As disclosed in our Q4 conference call, we were excited to announce a new $165 million gold and silver stream over the Condestable mine in Peru, which is owned by Southern Peaks Mining. The transaction was effective January 1 and we received our first quarterly delivery on March 15. The deliveries are fixed for the first 5 years, providing approximately 13,000 GEOs annually. We like this feature as it provides certainty in the medium term, while variable deliveries give us exposure to the geological upside and resource expansions that we expect to see at this deposit. The delivery switch is 63% of gold and silver production after year 5, which we expect to last for roughly another 5 years before stepping down to 25% gold and silver production for the life of mine. Condestable has a very long history, and we believe the potential for near mine and depth extensions of the ore bodies is excellent, and we see good potential for output growth at mine life extensions. The mine is currently in the process of expanding throughput this year to 8,400 tonnes per day and is advanced in studies to potentially move to 10,000 tonnes per day. While the mine is privately owned and does not provide publicly reported reserves -- our public reported reserves, our team is confident that current resource supports a 15-year plus mine life plan, and we have provided a life-of-mine forecast for your reference on the slide. Turning to Slide 44. We have shown a cross-section of deposit that makes that makes up Condestable. The stream applies to all of Condestable, Raul and Vinchos. The key takeaway here is the potential to add for both at depth and [ along strike ]. We see good drill indicated upside confirming the large size of the system. This makes us believe that assets will be a contributor across multiple [ sites ]. It is also worth highlighting that our technical team sees great parallels between this deposit geology and the underground at Candelaria where the resources have grown almost tenfold with focused exploration since Lundin acquired the mine. As Lloyd mentioned earlier, similarly to what we have been doing with our -- with some of our other operators, as part of this deal, we will be partnering with Southern Peaks on community development initiatives around the mine. We're excited to help make a positive impact alongside our investments. Thank you. And with that, I'll hand it over to David Milstead, Manager of Asset Management.

Thank you, John. Good morning, everyone. Today, I will be discussing our Antamina stream, our Detour Lake NSR and our Hemlo NPI and NSR. These assets do a very good job of showcasing the diversity of our operating portfolio. With the Antamina stream being held in Canada, we have included it with our Canadian assets for today's presentation. Turning to Slide 46, Antamina has been a stable cornerstone investment for Franco-Nevada since late 2015. It, along with Cobre Panama, are likely to be our 2 longest life streams. In operations since 2001, Antamina is one of the highest-grade major base metal mines globally as well as one of the lowest cost. The 382 million tonnes of reserves at Antamina are constrained only by the currently permitted tailings storage capacity. Engineering studies for additional tailing storage options and alternative mine plans are being evaluated, which could result in significant mine life extensions. Additional resources over and above the reserves at Antamina are 590 million tonnes. It is worth noting that historically, a high level of Antamina's inferred resource has converted to M&I and ultimately into reserves. Beyond the known resource, Antamina hosts potential for additional open pit and underground targets on stream ground. Turning to Slide 47. Antamina has outperformed our acquisition expectations. This is in part because of conservative silver modeling at a local level, which has, from time to time, led to better-than-anticipated grades and higher-than-expected recoveries. The chart on the right highlights historical stream contributions and our 2021 guidance of between 3.0 million and 3.3 million ounces of silver. Worth noting is the guidance provided at time of acquisition of 2.8 million to 3.2 million ounces of silver per year. Antamina is one of the richest ore bodies in our portfolio, with tremendous potential for future exploration and expansion upside. Now turning to Detour Lake. Exploration success and new growth plans at Detour had one of the biggest growth impacts in our portfolio in 2020. The first stage of this growth was outlined with the release of Kirkland Lake Gold's updated 2021 life-of-mine plan in March of this year. Franco-Nevada's NSR covers 140 square kilometers, including the main Detour pit and its extensions along the Sunday Lake Deformation Zone. The schematic below highlights the main pit, the Saddle Zone, the West Pit and the North Pit. The Saddle Zone, bridging the Main and West pits is currently being drilled with encouraging results, which could lead to the combination of these pits. Turning to Slide 49. Kirkland Lake's acquisition of Detour Gold Corp in early 2020 has brought a renewed focus to exploration in both near mine and regionally. A 250,000-meter drill program is in progress, and it is planned that the results of this drilling will be incorporated into a new mine plan to be issued in 2022. The chart on the right highlights the growth outlook for Detour. The new life-of-mine plan outlines a 22-year mine life, expanding the previous 650,000 ounce average annual production to approximately 800,000 ounces per year in 2025 and 900,000 ounces per year by 2032. One of the main objectives of this new drilling program is to minimize the production drop-off post-2025, while achieving 900,000 ounces per year earlier in the mine life. Detour, along with Goldstrike and Tasiast is one of Franco-Nevada's 3 home runs. At current gold prices, royalty ounces at Detour attributable to Franco-Nevada are worth over $0.5 billion. Turning to Slide 50. At Hemlo, Franco-Nevada holds a 50% NPI and a 3% NSR on the Western down-dip extension of the Williams underground line, principally known as the lower C zone. Hemlo is an exit [indiscernible] of a profit-based royalty, providing leverage to gold prices, and this has been particularly beneficial to Franco-Nevada in 2020. Coupled with the NPI, the 3% NSR provides high margins and downside protection to changes in gold prices. Referring to the schematic below, Franco-Nevada's NPI and NSR covers the inter-Lake claims, the portion of the lower C zone illustrated directly below the chevron. Capital is largely sunk in the near term on NPI ground. Turning to Slide 51. The chart on the right highlights the historical GEOs sold and 2021 guidance for our Hemlo royalties. Franco-Nevada expects royalties from Hemlo to range from between 20,000 and 30,000 GEOs in 2021, down from a record of 40,155 GEOs in 2020. It is worth reminding everyone that our GEO guidance for the NPI is based on profit payments divided by the gold price and not directly from production coming from royalty ground. Based on current reserves and development, production on royalty ground is expected to gradually reduce through 2028, and this is reflected in our guidance. There is, however, good likelihood of production being sustained beyond this point through either resource conversion or exploration success. Barrick is actively exploring Hemlo and is targeting the 2 most prospective areas: the upper C zone, which is not on our royalty ground; and the depth extensions at the lower C zone, which are on our royalty ground. NPI royalty payments are notoriously hard to predict, although in a strong gold price environment, they can provide exciting upside to our portfolio. As a reminder, we have NPI interest at Goldstrike, Musselwhite, Macassa and Pandora. And with that said, I will now hand it over to Jeff Jenkins, our Director of Finance for Franco-Nevada USA. Jeff?

Thank you, David. I would also like to thank our operators, their dedicated employees for the work that they do. This morning, I'd like to highlight our royalties at Stillwater, the Carlin Complex and Subika. Turning to Slide 53. Located in Montana, Stillwater is the only U.S. PGM producer. Franco holds a 5% royalty on 90% of the reserves and resources at Stillwater. Stillwater has 3 operating areas: Stillwater, East Boulder and Blitz. The Stillwater mine has been in operation since 1986 and East Boulder since 2002. Located on Franco's royalty, the Blitz project began production in 2017 and will achieve full production in 2024. Stillwater's current reserves support a 30-year mine life. Franco is expecting to see meaningful increase in PGM production from Stillwater, with production forecasted between 660,000 to 680,000 ounces in 2021. Turning to Slide 54, this slide showed Stillwater's large land package. Franco's royalty covers 68% -- 68 square kilometers. Slide 55. Stillwater is forecasting year-over-year production increases during the next 5 years. When Blitz reaches full production in 2024, the Stillwater complex is targeted to produce 850,000 PGM ounces. Turning to Slide 56. In 2019, Barrick and Newmont combined their significant assets in Nevada to create the Nevada Gold Mines joint venture. As part of this combination, the Carlin Complex was born. Franco has royalties on 3 of the key mines within the Carlin Complex: Goldstrike, Gold Quarry and South Arturo. One of the most famous royalties in Franco's portfolio is Goldstrike. Franco has both an NSR and an NPI royalty on the majority of the Goldstrike operation. The mine currently has 4 million ounces in stockpile that is ready to be processed. Few mines can boast life-of-mine reserves of that magnitude. The processing power within the Carlin Complex adds additional flexibility to process these stockpiles. In 2020, Goldstrike saw growth in the reserves and resources. This growth was mainly on Franco's royalty ground. Production at Goldstrike will be at steady state for years to come, with Franco receiving similar royalty payments as it has over the past few years. Turning to Slide 57. South Arturo is a joint venture between Nevada Gold Mines and i-80 located close to the Goldstrike mine. Franco's royalty on South Arturo is a sliding scale between 4% and 9%, depending on the value of the ore. Franco's royalty rate is currently at 6%. Mining at South Arturo is focused on the El Nino deposit, which is known for its very high grades. Plans for an expansion of the mine include Phase 1 and Phase 3 of the open pits and heap leach. Franco is anticipating 3,000 GEOs from South Arturo in 2021. Looking at Gold Quarry, Gold Quarry's royalty is a 7.25% NSR based on production with an annual minimum royalty obligation. The royalty is tied to the reserves and stockpiles attributed to the Gold Quarry royalty property. Franco has been paid for all-known reserves on the royalty property at Gold Quarry. For 2021, Franco is expecting royalty to generate 5,500 GEOs. Going forward, the royalty will be closer to 1,350 GEOs. Gold Quarry has potential for reserve growth. And if this growth is realized, Franco's royalty payment will be adjusted accordingly. Turning to Subika on Slide 56. Franco's Subika royalty is located on Newmont's Ahafo property located in Ghana. Franco holds a 2% royalty that covers approximately 68% of the reported reserves. Newmont operates 4 open pits and 1 underground mine at the Ahafo mine. The largest of those open pits is Subika. And in 2018, Newmont began production at the Subika underground. Looking at Slide 59. Newmont is forecasting a continued increase in production at Ahafo. In 2019, Ahafo mill expansion was completed. This expansion increased the processing capability by 3.5 million tonnes per year by adding a crusher, a SAG mill and leach tanks. Production has seen increases over the past 5 years except for a decline in 2020 due to COVID and some operating-related issues. For 2021, Ahafo is forecasting production of 515,000 ounces. Now I'll turn it over to Matt Begeman, Director of Business Development, who will be speaking about Franco's near-term growth opportunities.

Thank you, Jeff. As mentioned, I will discuss some of our near-term growth projects within our royalty portfolio with production expected over the next several years. Starting first with Salares Norte, where we have 2 separate 2% NSR royalties covering the full resource in surrounding areas. The project is being developed by Gold Fields and is located in the Atacama region of Chile at an elevation of 4,200 to 4,900 meters above sea level. The project has advanced relatively quickly from the initial discovery in 2011 to a large high-grade reserve of 3.5 million ounces of gold at an average grade of 5 grams per tonne. The project will be a conventional open pit operation with processing from a 2 million tonne per annum plant. Gold Fields has the relevant environmental approvals, including water rights and will utilize dry-stack tailings to minimize water requirements. Gold Fields has commenced construction for the fully financed project. The mining contractor was mobilized in October 2020 and first production is expected in Q1 2023. Once in production, the project is expected to produce 450,000 ounces of gold equivalent per year in its first 7 years and to average 355,000 ounces of gold equivalent over the 11.5 year mine life. We like the upside potential of the project quite a bit, as the royalty covers the strike extension of the current resource provides further exposure to near mine exploration potential on the 18 square kilometer land package. Turning to Hardrock, where Franco-Nevada holds a 3% NSR on the project located in Ontario, which was recently acquired by Equinox Gold, who now holds 60% and Orion Mine Finance, who owned the remaining 40% ownership interest. The open pit development project includes a large reserve endowment of more than 5 million ounces of gold. The project is fully permitted for construction, having received federal and provincial approvals in 2018 and 2019, respectively, as well as securing agreements with the First Nation stakeholders. As such, we expect Hardrock to be one of the next Canadian gold projects to receive a positive construction decision. An updated feasibility study was released in December 2020, which outlined a 14-year mine life averaging 350,000 ounces of gold per year from an open pit operation with a 9.9 million tonne per annum processing plant. There is also good potential for additional upside from an existing underground resource, looking at adjacent the open pit that is not included in the current feasibility study mine plan, among other targets on the royalty grounds. Staying in Canada, at Valentine Lake, Franco-Nevada hold a 2% NSR on the entire 240 square kilometer land position owned by Marathon Gold. The project is located in Central Newfoundland and is expected to be a conventional open pit operation initially with a 2.5 million tonne per annum plant before expansion. Marathon is advancing the project with a feasibility study completed in March of this year. While the company continues to have success with exploration-expanding resources, the feasibility study contemplates a mine life of 13 years at an average of 173,000 ounces of gold in the first 10 years, followed by a period of lower production from stockpiles. Marathon submitted their EIS application last September and expects the review to take approximately 12 months to conclude. Following permitting, Marathon expects construction could begin as soon as 2022, with first gold in the second half of 2023. We remain excited about the prospectivity of the royalty area, and Marathon remains focused on continued exploration with an ongoing $10 million exploration program this year. Of particular note, we expect a maiden resource to be published on the Berry Zone in the near term and see further potential for continued discoveries on trend along the more than 10 kilometers strike length between the Leprechaun and Victory deposits. Turning to the United States. Franco-Nevada holds at 1.7% NSR on Perpetua Resources, formerly Midas Gold, Stibnite gold project in Idaho. Stibnite is one of the largest feasibility stage gold projects in the U.S. outside of a senior producer. Stibnite Gold is a relatively high-grade open pit project and would be the sole producer of the strategic metal antimony within the United States. The feasibility study was announced in December 2020, projecting a 15-year mine life with 466,000 ounces of gold produced per year in the first 4 years and with the life-of-mine average of 300,000 ounces of gold per year. The major federal permitting process is well advanced with a draft EIS released in August 2020 and a final EIS expected as early as Q2 2021, with a record decision expected to follow thereafter. Once permitting is in place, construction could then begin as early as 2022, the several year construction period. In addition to producing a strategic metal, the operation will also reclaim historic mining operations and restore fish passages, improving the local environment. The Nez Perce Tribe had previously started legal action around remediation of the existing site, although recently, the 2 parties agreed to a 3-month stay to pursue a dispute resolution process. Beyond the reserve, we see good potential for further exploration success on the property as time progresses, with several high-priority targets identified on the royalty area. And with that, I will now turn it over to Chris Bell, Vice President of Geology, to discuss our longer-term growth projects.

Thanks, Matt. 2020 was a great year for exploration success across our expanding portfolio. Today, I'll present 3 of Franco-Nevada's exciting long-term options, starting with Alpala. Turning to Slide 66. Franco-Nevada hold a 1% NSR on the Cascabel claim, which covers the Alpala copper/gold/porphyry deposit located in Northern Ecuador. The license map in the center shows the large footprint of mineralization and surrounding exploration targets in gray. The Cascabel license has excellent upside and so the actively drill testing at Tandayama America, with very encouraging initial results. Alpala benefits from strong shareholders with extensive mine building experience in BHP and block caving experience in Newcrest. Alpala has a large high-grade core, containing 3.8 million tonnes of copper and 12.3 million ounces of gold, which we'll now review in the north-south cross section on Slide 67. On this section, you can see where SolGold are targeting a block cave mining operation on the high-grade core of the deposit and also assessing potential for an open pit mine on the outcropping mineralization in the upper zone. SolGold's revised mine plan is focused on an initial small-scale block cave that would introduce an upper extraction level to access early high-grade ore without sterilizing any of the resource. A smaller tonnage, higher-grade feed was accounted for in how we structured our royalty agreement. Alpala contains 22 million ounces of gold and counting, with an absolutely spectacular drill intersections. It is without doubt, a world-class asset, and we're exciting to see it progress through PFS in Q4 and into production. Now we should focus to Canada with Fenelon on Slide 68. Franco-Nevada acquired a 1% NSR on Wallbridge Mining's rapidly extending -- expanding Fenelon Gold project in Western Quebec in 2020. The upper map shows the location of Fenelon, a commerce to the east of the Detour Lake gold mine. You'll know both that Detour and Fenelon that mineralization sits adjacent to the Sunday Lake Deformation Zone. And like Detour, prior to mining, Fenelon has high-grade shoots in the Tabasco, Cayenne and Gabbro zones adjacent to low-grade, near-surface open pit mineralization in Area 51. Now on Slide 69, we'll zoom in on the Northwestern in Tabasco zone. This Northeast facing inclines long section contains screaming high-grade intersections, including 48 meters at 22 grams that form a West plunging ore shoot. The high-grade core of this ore shoot extends 600 meters down plunge and is open at depth. Wallbridge are progressing through an aggressive infill and step-out drill program this year, with a maiden mineral resource estimate expected in Q3. The Detour trend is a proven mineral province and our royalty centers right on Fenelon, giving us lots of room to grow with Wallbridge Mining's exploration success. Turning to Slide 70. We'll now shift focus to the Golden Triangle in British Columbia, where Franco-Nevada own a 1% NSR on Skeena Resources Eskay Creek VMS deposit. Skeena recently published their updated mineral resource estimate for Eskay Creek of 5.3 million ounces of gold equivalent from in-pit mineralization. Eskay Creek was historically one of the highest grade gold producers in North America, with production up until 2008, averaging 45 grams per tonne and over 2 kilos per tonne of silver. Eskay Creek is amongst the highest grade open pit resources in the world and with Skeena's partnership with [ premium line ] Tahltan Nation, we're really looking forward to seeing the feasibility study in Q1 next year and the asset go through permitting and into construction. In wrapping up, Alpala, Fenelon and Eskay Creek are just 3 assets from Franco's portfolio of long-term options that are excited to see grow and develop. And now I'll hand over to the Senior Vice President, Jason O'Connell, heading up Franco-Nevada's Energy Group.

Thank you, Chris, and hello, everyone. Beginning on Slide 72, we have a diversified portfolio of energy assets that generated $92 million in revenue in 2020, 9% of our corporate total. Investing in energy has allowed us to grow revenues and resource optionality during times when acquisitions are less attractive or not available in precious metals. The criteria that we look for in our energy investments are in essence the same as mining: secure title where we often own a permanent interest in the land; long-life assets, which provide cash flow for many decades and exposure through multiple commodity price cycles; low risk through diversification of operators and basins; and little exposure to capital and operating costs. Lastly, we have upside exposure through multiple reservoirs at depth and through advances in drilling and extraction technologies. Turning to Slide 73. The chart on this slide shows the contribution of energy to our revenues over time and the assets that have been added. There are a couple of items worth noting. At our IPO in 2007, we had a portfolio of assets focused solely in Western Canada that we have since grown and expanded as we have invested in the growth of the U.S. shale plays. Additionally, the last 2 transactions that we completed were in gas basins, anticipating a shift in the capital flows in the energy space with the ongoing global energy transition. On Slide 74, the slide expands a bit on the previous slide. The investments that we have made in the last several years have changed the complexion of our portfolio. This slide compares our Q4 2020 revenue, with the same period 5 years earlier and highlights that our portfolio has an increased exposure to the United States. At gas, now represents a much larger portion of our commodity mix at about 35%, with another 10% coming from natural gas liquids. And whereas the portfolio was historically concentrated in Weyburn, the asset base has become much more diverse across many different basins. Turning to Slide 75. The top chart shows how the volumes for our portfolio have grown rapidly over the last several years. The chart on the bottom shows our energy revenues. In particular, you could see the lower revenues in 2020 due to the impact that COVID-19 had on energy prices. Energy prices have recovered much of background to date in 2021 and a stimulus-driven recovery bodes well for our outlook. I'll switch gears now on Slide 76. And to speak about several of our key assets, beginning with Weyburn. Weyburn has been a cornerstone asset for the energy portfolio since our initial investments in the 1990s and is the largest of our Canadian assets. We have working interest overriding royalties and the NRI, which together make Franco-Nevada the largest economic interest holder in the asset outside of the operator Whitecap. The asset itself is a conventional oilfield located in Southeast Saskatchewan with a long and established production history. It has a very long reserve life in excess of 20 years, which is supported by a very low decline rate of only 2% annually. That decline rate is offset when the operator spends capital in drilling new wells, and we expect a stable level of production for at least the next 5 years. One of the compelling features of Weyburn is that it is one of the world's largest carbon capture and sequestration projects, where carbon dioxide is captured from a coal-fired power plant in Saskatchewan, and an industrial facility in North Dakota and pipe to Weyburn and injected into the reservoir to help recover oil. Since injection began in the year 2000, approximately 31 million tonnes of CO2 has been stored underground on a 100% basis, which equates to about 6 million cars being taken off the road. As you can see from the table on the right of the slide, the revenue was less than half of typical levels this year with low oil prices, primarily because of the NRI, which is a profit interest that we account for on a net basis and which generates leverage to oil prices. Turning to Slide 77. Our assets in the Permian Basin consists of mineral title, which is spread across the Midland Basin and Delaware Basin, which together comprise the Permian. The royalties in the Permian as well as our other U.S. assets are impacted by the level of drilling activity being undertaken by operators on our lands. As you're likely aware, when commodity prices crashed in the spring of 2020, operators dramatically reduced their drilling activity. Despite a downturn, the Permian has remained one of the more active basins in the U.S. owing to strong underlying economics for the operators. In 2020, with the reduced drilling rate, 359 wells were drilled on our royalty lands. The land base has up to 13,000 future potential drilling locations across multiple formations. So at the current rate, that implies 30-plus years of drilling activity, followed by long tail as the wells decline. We expect the drilling rates will improve along with commodity prices in the next few years, accelerating the development of cash flows from these assets. Turning to Slide 78. We have made multiple investments in the SCOOP/STACK play in Oklahoma over the last several years. We acquired 2 portfolios of land for $128 million that performed very well early on, but the basin saw a pullback in drilling activity in 2019, which was exacerbated with the commodity price crash in early 2020. Wells drilled on our royalty lands were reduced from 148 in 2019 down to 12 wells in 2020, leaving a lot of room for increased contribution when drilling activity levels improve. Our largest investment in the SCOOP/STACK is with Continental Resources, where we have a joint acquisition venture to acquire royalties under Continental's operated position. The benefit in partnering with an operator is that they provide geologic and land knowledge, and most importantly, they provide a drill schedule, which allows for the venture to target acreage that will be developed in the near term. The venture consists of a $520 million capital commitment, of which $114 million is outstanding, and of that amount, approximately half is expected to be funded in 2021. Distributions from the venture are shared 50-50 between ourselves and Continental. However, we have volume protections included in the structure, which could increase our share of distributions up to 75% in the coming years if certain targets are not met. Turning to Slide 79. In 2019, we completed a $300 million investment in the Marcellus Shale in Appalachia, which is one of the largest natural gas plays in North America. The investment was structured as a 1% overriding royalty, covering substantially all of Range Resources' operated position. The investment increased our exposure to gas a well-established asset with strong cash flow from its existing production base. In addition, the acreage position is large and allows for a very long life. In 2020, Range drilled 57 wells on royalty lands and the company touts up to 3,300 potential well locations, which implies around 50 years of future potential drilling activity. Range has guided that production volumes in 2021 and 2022 are expected to be similar to those in 2020. However, there is potential for volume growth under a more constructive gas price environment. Slide 80 focuses on our most recent investment, which was the acquisition of a package of royalty rights in the Texas portion of the Haynesville gas play for $135 million, which we closed at the end of last year. The assets further increased our gas weighting in our portfolio and provide strong existing cash flow. Effective date for the investment was October 1, and we accrued $4.2 million of revenue in Q4 of last year. We expect revenues will be sustained at similar levels for 2021. In terms of longevity, we forecast approximately 700 future potential drilling locations on our lands. And at last year's rate of 60 wells per year, that would imply about 12 years of drilling, again, followed by a long period where the wells decline. Slide 81 shows the 2021 energy guidance that we provided at year-end. Assuming oil prices at $55 a barrel WTI and gas prices of $2.50 per Mcf Henry Hub, we expect revenues of between $115 million and $135 million this year. That represents an increase over last year due to the full year contribution from the Haynesville asset as well as stronger prices. At the bottom of the slide, we've also provided a table showing sensitivities to commodity price changes. The portfolio has leverage to prices both in terms of financial leverage in Canada, primarily through the Weyburn NRI as well as volume leverage associated with drilling activity levels for our U.S. assets. The sensitivity shown here only relate to the expected impact of price changes in 2021 and don't reflect any change to our base case estimates of drilling activities. As you can see, of both oil and gas, prices increased by 10%, total revenues increased by about 13%. Turning to Slide 82. Longer term, we expect energy revenue to grow to a range of $150 million to $170 million at the same forecast commodity prices. The outlook assumes increased volumes from the SCOOP/STACK as our full commitment to Continental is deployed. And importantly, we're also assuming that drilling activity in the U.S. continues to rebound. You can see from the chart that rig counts dropped precipitously at the outset of the COVID-19 pandemic and have since started to rebound. Our assumption is that within 5 years, activity levels rebound to approximately 70% to 80% of their 2019 levels for our oil basins and to 100% of 2019 levels for our gas basins. With indications of a rapid recovery in energy demand in the U.S., we are optimistic that drilling rates will continue to improve. That's all for energy. So with that, I'll hand it over to Paul to wrap up.

Thanks, Jason. I'll finish with a brief summary and comments on our outlook. We received top ESG rankings in 2020, and I believe we're well placed to maintain our ESG leadership. For 2021, we've set new targets committed to enhance transparency and disclosure and expanded our programs. Please all download and read our Asset Handbook. I'm sure it'll impress you on the diversity of our portfolio, the outperformance of our core investments and the growth in our long-life reserves and resources. I hope the teams conveyed our excitement around the organic growth in the portfolio through mine expansions, new mines and ongoing exploration. We're delighted with the addition of the Vale royalty debentures. Both the Vale and the Labrador Iron Ore investments add to the base of low-risk long-life cash flow that we get from Cobre, Candelaria, Antamina and Antapaccay. The combination of that long-dated foundation with the resource optionality of our golden energy royalties, I think, is very attractive. In 2020, we achieved $1 billion in revenue for the first time. With the growth in the portfolio and the Vale addition, we're fast approaching our next growth milestone, which is $1 billion per year in EBITDA. Our updated 5-year outlook is for 25% growth in the business. We believe the best is still to come. We have no net debt and $1.2 billion in available capital. Our acquisition focus is now squarely on adding new purchase metal assets. We have a good pipeline of opportunities. And I think the recent pullback in gold prices is a great opportunity for us to finance the construction of new mines. Operator, we'd love to take any questions.

[Operator Instructions] At this time, it appears we have no questions on the phone.

Lloyd, do you have any coming through the way back?

Yes. We have a few here, Paul. So the first one is from Bobby Eubank at Chevy Chase Trust. And Bobby's question is, "Are there any new COVID-related production concerns in South America?"

Bobby, fortunately, since the restrictions that we had that were through the mid of last year, we haven't had any mines that have had to close down. There are a lot of cases in South America at the moment. In particular, when we hear there's a concentration of cases at Antamina. But our understanding at this stage is that all the operations are able to continue at full production.

Okay. Our next question comes from Lyman Delano at Beck, Mack and Oliver. "Do you believe Bitcoin has been a factor in the recent weakness in gold price? Do you believe Bitcoin is gold 2.0?"

It's an interesting question. And there's no doubt in terms of the themes between -- behind gold and Bitcoin as a hedge against fiat currency, there is some overlap. But I don't think there's a big overlap in the investor basis. When you look at gold, the investors in gold are looking to protect capital and in particular, they're looking for a hedge against the market. When you look at the performance of gold, it is very much counter to the market. On the other hand, when you look at Bitcoin, the actual performance is very much leveraged to the market. So Bitcoin has, over the last number of years, obviously, appreciated substantially. But I think you've got very different investors, more conservative investors looking to hedge against the market in gold, speculative investors looking to get a leverage to the market in Bitcoin.

Our next question comes from Puneet Singh at iA Capital Markets. "In the precious metal space, we expect you along with a couple of your larger competitors to be making bids for the deals of size available in the royalty sector. On the energy side, is it more competitive with additional private equity players also trying to do royalty acquisitions now? How has the competition increased or decreased over time?"

Jason, I'll hand that to you.

Thanks for the question. In the energy space, there are -- or there remain, I guess, a lot of opportunities, both in oil and in gas. The challenge has been the volatility in prices has made it difficult for buyers and sellers to actually transact. I think in terms of private equity money, There is still private equity money in the space that's interested in acquiring royalties although they pulled back a little bit here. Again, they're trying to assess what the new normal here is in terms of drilling activity levels and what valuations look like going forward. So there are opportunities. It's just a question of getting the valuation right. And I think at that point, we'll start to see more transactions being executed.

Thanks, Jason. Our next question comes from [ Jamie Holman ]. "Have you found that your exposure to unconventional oil and gas has negatively affected your ESG rating?"

[ Jamie ], I would say no, overall. And we're very cognizant, obviously, of the impacts of climate change and the different products that we invest in. But I will reiterate what I said before is we are -- we're very conscious when we do our due diligence. And looking at who are the operators, what are the assets. We are trying to invest in what are the better performers and think through our allocation of capital that we can ensure that the players are producing from assets that have a lower carbon footprint than others. And I think that's well appreciated by our investors.

Our next question comes from Ingrid Rico at Stifel GMP. "On Antapaccay, number one, is there any mine sequencing of note that could see production from the mine lower over the next 5-year period? And number two, the comment that Coroccohuayco rescoped as an open pit with potential to extend mine life. Could you remind the original development plan? And is Coroccohuayco included in Antapaccay reserves?"

I'll hand that over to John Blanchette.

Thanks, Paul. In terms of mine sequencing, over the next 5 years, yes, the mine is obviously going lower. And specifically, in terms of Coroccohuayco, it was originally designed as an open pit/underground operation. It was supposed to be mined in conjunction with Antapaccay earlier in the mine plan. It's currently now going to be mined potentially at the end. They are rescoping it, so they're going to come out with new technical data on that front. We see it as, obviously, it's going to be a larger potential operation now that's going to be open pit only and potential for additional silver and gold deliveries to Franco-Nevada in that case. So if you included Antapaccay with -- sorry, and last point, in the answer to the last comment, I believe because it's gotten rescoped, it is now going to be out of the reserve itself. But they're probably once they have additional detail on how the open pit's going to phase out, it will come back into the reserves.

Thanks, John. Our next question comes from an individual, hasn't provided their name, but who made at [ swa.ca ]. "Understanding your focus is now back on precious metals, have you considered looking into potash?"

As I commented earlier on, the -- we're broadly in our strategy to all commodities. It really is driven by good deposits. Just like with these iron ore investments, we do have potash deposits that have got tremendously long reserves. If there was a great deposit in a good jurisdiction that came along, we would certainly consider that. But back to our immediate focus and our immediate pipeline, it is very much focused on gold opportunities.

Okay. Our next question is from Mike Jalonen. "Antamina has a 20-plus year mine life based on current M&I resources. How will FNV share of annual solar production trend over that period? Or maybe over 5 to 10 years?"

David, would you like to take that?

Sure, Paul. Thank you very much. Over the next 5 to 10 years, we see the silver production at Antamina being quite steady and falling within our 2.8 million to 3.2 million ounce per annum target. We see that over the long term, beyond the 5 years, and it continues to be steady as well.

Thanks, David. Our next question comes from Matthew Murphy at Barclays. "How do you feel about the progress of your 223 gold and equivalent to exploration assets? Are projects advancing as you might have hoped, given current metal prices? Is activity accelerating?"

Very much so. The higher gold prices that we've seen in recent years as so often is the case, it means we've got greater cash flow available to the operators. They look to expand mines. You see mines that have been waiting in the development pipeline now moving forward. You've seen decision last year on Castle Mountain, we expect that Salares Norte has been built, expect the next decision here will be in Hardrock again, another great example of parties wanting to, in this case, Equinox and Orion take ownership of that asset to move to production. So mines have been accelerated and then increased exploration activity across the portfolio, both the operators, Detour is a good case in point as we chatted about, but also throughout the exploration portfolio. I wish we had more time. We're only able to cover a couple of the assets, but we've got a long list of assets that had exciting exploration results through last year, and I'm sure that will translate very well into reserve and resource additions in the years to come.

Okay. Our next question comes from [ Peter Iverson ]. And his question is he's just wondering about whether we still have the Drake gas field assets in the Eastern Arctic.

We do still have those assets. The likelihood of their development is anytime soon is particularly low, but continue to hold those.

Okay. A follow-up question from Mike Jalonen. "One -- can one envision Alpala entering commercial production?"

Eaun, why don't you take that?

Thanks, Paul. You've probably seen that recently, SolGold has delayed its PFS. The plan at the moment is really to focus on a migrate core of the deposit, which has significant benefits in terms of development and also the ability to access it via shaft, because the development period is quite long given the decline that they were previously envisaging. I think at the moment, they have previously been talking about 2025, I believe, is kind of the soonest date. We're going to have to, I think, with the delay in the PFS, I think that it's after that. Worth noting, however, we have minimum payments beginning in 2028. The project isn't under construction and financed. Thank you.

Thanks, Eaun. This looks to be our last question here, Paul. It's a follow-up from Bobby Eubank at Chevy Chase Trust. Saying, okay, off the wall here, but would you consider forestry assets?

Bobby, to date, we have -- we've always looked at our skill sets, which is very good geologists, very good mining engineers. And so our best capabilities are evaluating resources in the ground and the potential for those to expand. But I know where you're coming through on forestry assets. We've, from time-to-time, looked at them just from the perspective of extremely long-dated assets, very steady cash flows. So maybe one day, if we don't have good resources to invest in, it would be a direction to go in.

Okay. There are no further questions at all. So I'll close it out here. So everyone, I'd just like to remind you that we have our annual meeting on May 5. It will be held virtually, and log-in details can be found on our website. We invite anyone who's interested to attend. We'll also be releasing our Q1 results after market close on May 5, and we'll be holding our results conference call the following morning. Thank you, everyone, for attending our Virtual Analyst Day and for your interest and support.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.