FRANCO-NEVADA MINING CORPORATION LIMITED ANNUAL INFORMATION FORM FOR THE FISCAL YEAR ENDED MARCH 31, 1998

Transcription

1 FRANCO-NEVADA MINING CORPORATION LIMITED ANNUAL INFORMATION FORM FOR THE FISCAL YEAR ENDED MARCH 31, 1998 August 18, 1998

2 TABLE OF CONTENTS Item Description Page Item 1. Incorporation... 1 Item 2. General Development of the Business... 1 Item 3. Narrative Description of the Business... 2 The Goldstrike Property... 2 Mine Development... 3 Ore Reserves... 4 Operations... 4 Financial Impact of Goldstrike Property on Franco-Nevada... 5 Midas Joint Venture... 5 Metal Royalties Division... 6 Oil and Gas Division... 7 Property Portfolio... 7 San Juan Basin Royalty Trust... 7 Other Resource Properties Interests... 8 Stillwater Mine, Nevada... 8 Dee Mine, Nevada... 8 Goldfields Project, Saskatchewan... 8 Hemlo Property, Ontario... 8 Holloway Project, Ontario... 9 Kirkland Lake, Ontario... 9 Pandora Platinum Royalty, South Africa... 9 Item 4. Selected Consolidated Financial Information Item 5. Management Discussion of Operating Results Item 6. Market for Securities Item 7. Directors and Officers Item 8. Additional Information... 12

3 1 Item 1. Incorporation Franco-Nevada Mining Corporation Limited was incorporated under the Canada Business Corporations Act by articles of incorporation dated October 5, The articles were amended on June 30, 1989 to create an unlimited number of preferred shares that may be issued in series. The articles were amended on July 11, 1996 and again on August 14, 1997 to subdivide the issued common shares on a two-for-one basis. In this annual information form ( AIF ) the term Corporation or Franco-Nevada means Franco-Nevada Mining Corporation Limited or, where appropriate, Franco-Nevada Mining Corporation Limited and its wholly owned subsidiaries. The Corporation s subsidiaries include Franco-Nevada Mining Corporation Inc., a Nevada company, Redstone Resources Inc., an Ontario company, Gold Marketing Corporation of America, Inc., a Barbados company and FN Capital Ltd., a Bermuda company. The registered and principal executive office of the Corporation is at Suite 1900, 20 Eglinton Avenue West, Toronto, Ontario, Canada M4R 1K8. All dollar amounts expressed in this AIF are Canadian dollars unless otherwise specified. Item 2. General Development of the Business The primary business of the Corporation is the acquisition of: (i) (ii) (iii) direct or indirect interests in mineral properties and, when appropriate, developing those properties to the account of the Corporation, royalty interests in producing gold mines and gold properties in the development or advanced exploration stage, and direct interests in mineral properties with a view to exploring and selling them to established mine operators and retaining royalty interests. Royalty interests are usually in the form of a net smelter return royalty ( NSR ) that provides for the payment either in cash or in-kind of a specified percentage of production, less costs associated with the product after it leaves the mine site. In some cases, Franco-Nevada acquires a net profit interest ( NPI ) pursuant to which Franco-Nevada is entitled to a specified percentage of the net profits, as defined in each case, from a particular mining operation. Franco-Nevada has a portfolio of NSRs and NPIs covering producing and non-producing mineral properties in the United States, Canada and South Africa. Franco-Nevada's principal royalty interest is a 4% NSR and a 5% NPI in the Post and Goldstrike Claims which cover a portion of the Goldstrike Property located in the Carlin Trend gold mining area of northern Nevada. The Goldstrike Property is owned and operated by a subsidiary of Barrick Gold Corporation ( Barrick ). During the quarter ended December 31, 1993, Barrick recovered its capital expenditures associated with the Post and Goldstrike Claims and, since that date, Franco-Nevada has received quarterly NPI payments. Franco-Nevada also has a 2% NSR on an additional 10 claims of the Goldstrike complex known as the Bazza and Bazza Strip Claims and an effective 5.7% NPI on 640 claims known as the SJ, SP and Bazza Strip Claims. Franco-Nevada's net smelter return royalties and net profits interests cover land containing all of the Betze-Post Mine reserves reported in Barrick's Annual Report for the year ended December 31, See The Goldstrike Property. Franco-Nevada owns a 50% interest in the Midas Joint Venture, which owns a 100% working interest in 25,820 acres of mineral lands in northern Nevada. See Midas Joint Venture.

4 2 During March 1998 the Corporation entered into an agreement to acquire a 5% NSR covering a portion of the Stillwater platinum and palladium mine. The mine is located in Montana USA and is operated by Stillwater Mining Company. See The Stillwater mine. Franco-Nevada owns 4.1% of Falconbridge Dominicana, C. por A. that owns the Falcondo Mine, a fully integrated nickel mine located in the Dominican Republic. During 1997 the Falcondo Mine produced 71.7 million pounds of nickel in ferronickel. See Metal Royalties Division. The Corporation has a royalty portfolio covering oil and gas properties in Saskatchewan, Alberta, Manitoba and the Arctic, and holds a 4.3% interest in the San Juan Basin Royalty Trust, a New York Stock Exchange listed entity. The Corporation also has various interests in resource properties located in Nevada, Ontario, Saskatchewan and South Africa. See Oil and Gas Division and Other Resource Property Interests. To management's knowledge, Franco-Nevada and Euro-Nevada Mining Corporation Limited ( Euro- Nevada ) are two of only five public companies in North America actively pursuing NSRs and NPIs in mineral properties. The two companies have four executive officers and three directors in common who collectively own approximately 12% of the issued common shares of Franco-Nevada and 10% of the issued common shares of Euro-Nevada. In addition, the two companies occupy the same executive and field offices in the United States and share overhead expenses. However, the acquisition targets of the two companies differ. Franco-Nevada's acquisition targets generally include precious metals, base metals, and oil and natural gas royalties in Canada and the United States. Euro-Nevada generally pursues gold royalties in the United States, Latin America and the Pacific Rim. As both companies have significant interests in the United States, they have agreed to equally share material future gold acquisitions in the United States. In addition, if either company decides that an acquisition is too great a commitment of its resources to a single royalty, it will offer an equal share of the royalty to the other. No such opportunities currently exist. The Corporation shares with Euro-Nevada 29 full-time employees in the United States and 11 full-time employees at their mutual principal executive office. The Corporation also has four full-time employees in its Oil & Gas Division and two employees dedicated to its Canadian exploration programmes. Item 3. Narrative Description of the Business The Goldstrike Property Franco-Nevada's principal royalty interest is a NSR (the Goldstrike Royalty ) and a NPI (the Goldstrike NPI ) in the Post and Goldstrike Claims which cover a total of 44 claims (865 acres) comprising a portion of the Goldstrike Property. The Goldstrike Royalty entitles Franco-Nevada to 4% of the gross production from the Post and Goldstrike Claims. Franco-Nevada pays approximately $2 per ounce of gold for smelting and shipping. Based upon the December 31, 1997 reserve estimates of Barrick, the Post and Goldstrike Claims contain 32% of the proven and probable mineable ounces of gold at the Betze-Post Mine. See Ore Reserves. Franco-Nevada receives its share of gold production whenever Barrick receives a settlement from the refinery. Currently, these settlements occur once or twice a week. Gold Marketing Corporation of America, Inc. sells Franco-Nevada's gold bullion in foreign markets. The Goldstrike NPI entitles Franco-Nevada to 5% of the revenue from the production and sale of gold extracted from the Post and Goldstrike Claims, less the costs associated with mining and treating of the ore. Franco-Nevada received its first quarterly Goldstrike NPI payment during the quarter ended

5 3 December 31, NPI receipts fell from $31.0 million during fiscal 1997 to $24.7 million for fiscal Franco-Nevada has a 2% NSR (the Bazza Royalty ) on 10 claims known as the Bazza and Bazza Strip Claims that also comprise a portion of the Betze Post mine. Based upon the December 31, 1997 reserve estimates of Barrick, the Bazza and Bazza Strip Claims contain 16% of the proven and probable mineable ounces of gold at the Betze-Post Mine. See Ore Reserves. Franco-Nevada has a 6% NPI on 640 acres known as the SJ and SP Claims. Based upon the December 31, 1997 reserve estimates of Barrick, the SJ and SP Claims are estimated to contain 51% of the proven and probable mineable ounces of gold at the Betze-Post Mine. In addition, Franco-Nevada has a 2.4% NPI in the Bazza Strip Claims. The 6% and 2.4% NPIs are contained in the same agreement. As a result, the combined NPIs are known as the 6% NPI and the claims covered by the agreement are referred to as the 6% NPI Claims. The 6% NPI has an effective rate of 5.7%. The 6% NPI entitles Franco-Nevada to the applicable percentage of the proceeds from the sale of gold from the 6% NPI claims less all operating costs relating to the 6% NPI Claims. The 6% NPI becomes payable at such time as Barrick has recovered out of net profit its capital expenditures associated with the 6% NPI Claims. To date, the Corporation has not received any payment from Barrick in respect of the 6% NPI. See Ore Reserves. Mine Development In January 1989, Barrick began developing the Betze-Post deposit. At that time, the mine was forecast to produce 10.4 million ounces of gold. The following excerpt from Barrick's 1997 Annual Report updates the project to December 31, As Barrick reports in US currency, the dollar amounts are in US currency. Barrick discusses the Meikle mine that is located adjacent to the Betze-Post mine. Franco does not own any royalty or other interests in the Meikle mine. In 1997, Betze-Post once again replaced reserves, for a year-end total of 24.1 million ounces, the largest single gold deposit in the Americas. The production target for Betze-Post in 1998 is 1.5 million ounces of gold, with costs of $180 per ounce. In 1997, Betze-Post mined 159 million tons of material and produced 1.6 million ounces of gold at $171 per ounce. The movement in the southeast pit wall, experienced earlier in the year, has abated. This part of the pit, which is jointly held between Barrick and Newmont Gold Company, has been redesigned to incorporate all of the movement area in the southeast wall. All of the Barrick ounces originally included in the mine plan will be recovered. In 1998, the majority of the 150 million tons to be mined will come from the west side of the open pit (Sixth West Layback) and from the southeast quadrant of the pit (Second Southeast Layback). Under the 1992 Betze-Post Joint Operating Agreement, Barrick, as the operator, mines contiguous deposits owned by Newmont. Newmont process all its own ore. Betze-Post and Meikle are both managed to optimize their contributions to the Property as a whole. Ore from both mines is processed in the 17,500-tons-per-day autoclaving and carbon-in-leach processing facility. As part of this strategy, some Betze-Post ore is currently being displaced by higher-grade Meikle ore. The Betze-Post material is being stockpiled for processing at a later date.

6 4 Ore Reserves The Betze-Post mine's proven and probable ore reserves have been prepared by Barrick's personnel and audited by Pincock, Allen & Holt Inc., a division of Hart Crowser, Inc., an independent international mineral consulting firm. Reserves as at December 31, 1997, based upon US $350 per ounce of gold, total 132,825,000 tons grading ounces of gold per ton. In addition, Barrick disclosed additional mineralized material totalling 45,608,000 tons at a grade of ounces of gold per ton. Based upon the foregoing reserves for the Betze-Post Mine, the portion of the reserves attributable to ownership by Franco-Nevada is as follows: Grade - ounces per ton Contained ounces Tons Goldstrike Royalty 1,808, ,320 Goldstrike NPI 2,260, ,150 Bazza Royalty 284, ,127 6% NPI 4,239, ,255 Operations The following table is an excerpt from Barrick s 1997 Annual Report and summarizes operations at the Betze-Post Mine for the two years ended December 31, 1997: Tons of ore milled 5,487,100 6,038,300 Average grade (ounces per ton) Recovery rate (%) Ounces of gold produced from: -Mill ore 1,593,300 1,909,000 -Leach ore 12,500 26,000 Total ounces produced 1,605,800 1,935,000 Cash operating cost per ounce US $171 US $162 The following table sets forth Franco-Nevada s NSR receipts in respect of the Goldstrike Royalty and the Bazza Royalty (in ounces of gold) for the fiscal years ended March 31: Goldstrike Royalty 61,078 68,434 Bazza Royalty Total 61,497 69,015 Percentage of Betze-Post production total from land covered by Goldstrike Royalty and Bazza Royalty 99.2% 99.0% During fiscal 1998 a total of 1,526,956 ounces of production were subject to the Goldstrike NPI, down from 1,710,853 ounces in fiscal 1997.

7 5 Financial Impact of Goldstrike Property on Franco-Nevada Barrick's mining sequence from various claim groups, the operating results, and capital costs of the Goldstrike Property directly impact Franco-Nevada s revenue receipts. The Goldstrike Royalty is based upon gross production from the Post and Goldstrike claims, reduced only by the ancillary costs of smelter charges and transportation of about US$2.00 per ounce. The determinants of the revenue received in respect of the Goldstrike Royalty are the number of ounces of gold produced, Franco-Nevada s selling price of the gold and the cost of shipping and smelting. The Goldstrike NPI became payable only upon Payout. Payout was achieved in October 1993, the point that Barrick recovered all capital costs associated with exploration and development of the claims covered by the Goldstrike NPI out of net profit. Prior to Payout, the Goldstrike NPI defined net profit as the entire proceeds, including hedge gains and losses, received by Barrick from the gold produced from the Post and Goldstrike Claims less expenses attributable to the production. Since Payout, net profit has been, and will continue to be, calculated using the average spot price of gold. The 6% NPI defines net profit as gold sales revenue from the 6% NPI claims less all reasonable expenditures relating to the 6% NPI Claims. The 6% NPI is payable at such time as Barrick has recovered out of net profit its capital expenditures associated with the 6% NPI Claims. The 6% NPI has not yet reached payout nor does Franco-Nevada expect the 6% NPI to reach payout during fiscal Midas Joint Venture Over the past year, Franco-Nevada, in a 50/50 joint venture ( Midas Joint Venture ) with Euro-Nevada, has been developing its Midas project in the Carlin Trend of northern Nevada. On January 22, 1997, the Boards of Directors of Franco-Nevada and Euro-Nevada approved the development of the Rex-Grande deposit, at a cost of US $84 million. The deposit is now known as the Ken Snyder Mine. The proven and probable reserves of the Ken Snyder Mine are estimated to be 2,170,000 tons grading 1.04 ounces of gold and ounces of silver per ton for a total of 2.75 million ounces gold equivalent (at a cut-off of 0.25 ounces of gold per ton). This is a 58% increase over year-end 1996 reserves, which stood at 1.74 million ounces gold equivalent. The Ken Snyder Mine resources, including the above reserves, also increased substantially over year-end 1996 estimates to 4.0 million ounces of gold and 45.7 million ounces of silver for a total of 4.9 million ounces gold equivalent. The Ken Snyder Mine's reserves extend along 5,800 feet of a fault zone that can be traced for over 20,000 feet. The ore body demonstrates continuity and remains open along strike to the north, south, and at depth. It occupies approximately 60 acres of the 25,820 acres of land controlled by the Midas Joint Venture. The initial development plan of the Ken Snyder Mine envisions a 500-ton per day plant (175,000 tons per year). The design includes crushing, grinding, gravity concentration, staged leaching, thickening, zinc precipitation and smelting. The design is for production of 250,000 ounces of gold equivalent per year. Recovery rates are forecast to be 97% for gold and 95% for silver. Kilborn Engineering on May 29, 1997 completed a final feasibility study that estimated capital costs of US $84 million and cash operating costs of US $78 per ounce gold equivalent. Following the January 1997 decision to proceed with the Ken Snyder Mine, development has moved rapidly. During 1997, the Midas Joint Venture development expenditures totalled US$22.4 million, excluding exploration. All access roads and power lines were completed. The fire control system, fresh water and mine de-watering systems were installed. The mill site was excavated in preparation for the 1998 construction program. Engineering was complete and all major equipment was ordered.

8 6 By the end of calendar 1997, the main decline was advanced 3,200 feet and 2,358 feet of development had been completed. Ore is exposed on the 5,600 and 5,500 levels of development spiral No. 1. The mine is in predevelopment and an additional 1,900 feet of decline and 10,400 feet of development work will be completed by the end of September Mill construction started in February As of July 1998, both the mine development and mill construction are on budget and on schedule. It is anticipated that surface construction will be complete and the crushing and milling circuit will accept ore by the end of November. The underground development program is ahead of schedule and underground mineralization encountered to date compares favourably with the project s reserve model. All of the environmental approvals and permits required for building and operating the mine have been granted. In view of the progress, full commercial production is expected during the first quarter of calendar All aspects of the mine and mill are being built with the ability to accommodate an expansion, should adequate reserves be proven. With minor modifications, the mill should be able to handle 700 tons of ore per day. The mill has also been designed to accommodate an expansion to over 1,000 tons per day at a capital cost of less than US$10 million. On July 31, 1998, the Midas Joint Venture announced that they had selected Dynatec Mining Corporation ( Dynatec ) as the operator of the Ken Snyder mine and mill facilities. Dynatec is currently the underground contractor in charge of the development and as such has a thorough understanding of the ore body. Dynatec will provide the underground equipment, and the personnel to operate both the surface and underground facilities. The contract is the first of its type. It calls for the contractor to be paid in part by a fixed price per ounce of gold produced and in part by a 5% Net Profit Interest. Metal Royalties Division The division's largest asset is a 4.1% equity interest in Falconbridge Dominicana, C. Por A. ( Dominicana ) which owns the Falcondo Mine. The Falcondo Mine is a fully integrated nickel smelter and mine located in the Dominican Republic. Dominicana reported in its December 31, 1997 Annual Report that production totalled 71.7 million pounds (1996: 67.0 million pounds) of ferronickel. At December 31, 1997, ore reserves were 67.8 million tons grading 1.56% nickel. The following table summarizes the results for the past two years ended December 31 (table in thousands): Total Franco-Nevada s 4.1% Pre-tax earnings $82,664 $94,714 $3,389 $3,883 Earnings after tax 41,344 47,220 1,695 1,936 Dividends 29,072 57,271 1,192 2,348 Working capital 122, ,382 5,029 4,649 Shareholders equity $190,958 $170,866 $7,829 $7,005 The Corporation holds an effective 0.6% NSR over the Robinson copper project located near Ely, Nevada. The mine began production in the first quarter of Broken Hill Proprietary Company Limited ( BHP ) operates the mine. According to BHP's Annual Report for the year ended May 31, 1997, the proven and probable reserves at Robinson were estimated to be 249 million tons grading 0.550% copper and.007 ounces of gold per ton. The Corporation has a royalty interest covering the Midwest uranium deposit, a non-producing property located in northern Saskatchewan. The royalty is approximately 2% of the value of the product sold. The

9 7 royalty agreement stipulates that Franco-Nevada is entitled to advance minimum royalties prior to production. During fiscal 1998, the Corporation received advance minimum royalties of $896,992. The advance minimum royalties escalate by 6% each year. The Midwest deposit is owned 19.5% by Denison Mines Limited ( Denison ). According to Denison's Annual Information Form for the year ended December 31, 1997, proven mineable reserves are 400,800 tons grading 4.5% uranium oxide, or about 36 million pounds of uranium oxide. Property Portfolio Oil and Gas Division The Corporation has a portfolio of oil and gas royalties on properties located in Saskatchewan, Alberta, Manitoba and the Canadian Arctic. The royalty rates on the properties vary from 1.5% to 15% and average approximately 6.0%. Although Franco-Nevada specializes in royalties, many sellers will bundle royalties and working interests together. As a result, Franco-Nevada sometimes acquires working interests with royalties. The most significant working interest acquired in this fashion is the Royce well that is 100% owned by Franco-Nevada. The Corporation is drilling a 9,000 foot horizontal well to a depth of 6,700 feet. The well is budgeted to cost $1.4 million and the objective is to test three zones for both oil and gas. The Royce property showed promise three years ago when it was connected to market. Since connection, the property has shown virtually no drop in pressure, leading the Corporation to further explore the area. The following table sets forth certain financial and other information concerning the Corporation's oil and gas royalty portfolio as at, and for the years ended March 31: Financial Aggregate acquisition cost $45,108,000 $39,441,000 Accumulated Depletion 6,366,000 4,559,000 Net Book Value $38,742,000 $34,882,000 Revenue $13,430,000 $16,146,000 After tax cash flow 9,344,000 10,404,000 After tax earnings $4,617,000 $6,046,000 Other Acres of royalty land 1,900,000 1,900,000 Average royalty 6.0% 6.0% Number of wells 3,537 3,405 Reserves (equivalent barrels) Proven and probable 11,300,000 10,500,000 Shut-in gas Alberta 800, ,000 Total conventional reserves 12,100,000 11,300,000 Shut-in gas Arctic 114,000,000 60,000,000 Total reserves 126,100,000 71,300,000 San Juan Basin Royalty Trust Franco-Nevada owns 2 million units or 4.3% of the issued and outstanding units of San Juan Basin Royalty Trust ( San Juan ). The cost of the investment totals $23.4 million and it has a net book value of $17.6 million. The Corporation is depleting its investment in San Juan using the units-of-production

10 8 method. San Juan is listed on the New York Stock Exchange and its major asset is a 75% net overriding royalty on 151,900 acres of land in the San Juan Basin of New Mexico. Burlington Resources Inc. is the operator of San Juan s properties. There are three gas zones ranging in depth from 1,500 to 8,000 feet underlying the properties and 3,038 producing gas wells. As reported in San Juan s Annual Report for the year ended December 31, 1997, the proven reserves on its royalty lands were 559,000 barrels of oil and 203,339,000 mcf of natural gas. Stillwater Mine, Nevada Other Resource Properties Interests During March 1998 the Corporation entered into an agreement with an independent third party to purchase a 5% NSR covering a portion of the Stillwater Mine. The transaction was consummated during April 1998 at a cost of US $36 million. The royalty covers 816 of 995 claims and 82% of the 21.6 million ounces of proven and probable platinum and palladium reserves. During calendar 1997 the mine produced 84,700 ounces of platinum (1996: 59,000) and 271,000 ounces of palladium (1996:196,000). The royalty covered 54% of 1997 s production and 57% of 1996 production. Stillwater has recently completed a US $70 million expansion project that is expected to double production to approximately 500,000 ounces of platinum and palladium in Dee Mine, Nevada Franco-Nevada owns a NSR on the Dee Mine and the surrounding 5,000 acres situated along the Carlin Trend in northern Nevada. The royalty rate varies from 2% to 4.5% depending upon the value of the ore per ton and whether or not the ore is oxidized. Rayrock Yellowknife Resources Inc. ( Rayrock ) is the owner and operator of the Dee Mine. Production in 1997 totalled 39,439 ounces of gold versus 45,000 ounces in Dee has reserves of 55,551 ounces of gold, sufficient for a year and a half of operations. Franco-Nevada's primary reason for acquiring a royalty on the Dee Mine was its location in the Carlin Trend area of Nevada near the Goldstrike property operated by Barrick. Rayrock has reached an agreement with Barrick whereby Barrick will spend up to US $5 million to explore for deeper mineralization. Barrick must spend a minimum of US $2 million and will earn a 60% interest. Goldfields Project, Saskatchewan Franco-Nevada has a 2% NSR on the Goldfields Project located in northern Saskatchewan and consisting of two gold deposits, one a former producing mine known as Box and the other known as Athona. The operator is Greater Lenora Resources Corporation ( Greater Lenora ). The royalties cover the two gold deposits plus any gold reserves developed by Greater Lenora in the surrounding 250,000-acre area of mutual interest. Franco-Nevada has a 90-day option to acquire a further 1% NSR for $1.5 million. The 90-day term of the option begins upon Franco-Nevada receiving a feasibility study that meets banklending requirements. According to Greater Lenora's Annual Report for the year ended December 31, 1997 it has completed a draft pre-easibility study indicating a mineable diluted reserve of 16,700,000 tons grading oz. gold per ton containing 943,500 ounces Gold (Box Pit 792,500 ozs, Athona Pit 151,000). Hemlo Property, Ontario Franco-Nevada owns a 100% working interest in 620 acres adjacent to the Williams Mine located in the Hemlo gold mining area of northwestern Ontario. The Williams Mine produced 402,000 ounces of gold during 1997 versus 411,000 in Previous surface drilling on Franco-Nevada s property yielded an

11 9 inferred resource that Watts, Griffis and McOuat Limited, consulting geologists and engineers, estimates to be 9.5 million tons grading ounces of gold per ton. Franco-Nevada believes that its Hemlo property contains the down-dip western extension of the Hemlo ore body. After gaining access to the Williams underground workings, Franco-Nevada undertook an exploration programme in fiscal The programme s objective was to upgrade confidence in the previously established resource estimate. The programme cost $2.6 million and comprised a 2,000-foot exploration drift and a 21-hole, 33,000-foot drilling program. Based upon the results of the initial program, an incremental 1,300 feet of drifting and 20 drill holes have been approved for fiscal The budget for the incremental programme is $2.2 million. Holloway Project, Ontario Franco-Nevada and its equal joint venture partner, Greater Lenora Resources Corporation ( Greater Lenora ) are exploring a 6,200 acre land package near Barrick's Holt McDermott mine. The property is located 26 miles northeast of Kirkland Lake. During fiscal 1998 line cutting and geophysics were completed and an 18,000-foot drilling program is underway to test the same Ghostmount horizon that hosts the south and vertical zones of the Holt McDermott mine. Initial drilling indicates that the mineralized system continues onto the joint venture property. In addition, Franco-Nevada has a 2% NSR over 3,000 acres comprising a portion of the property that contains the Holt McDermott mine. Barrick has an exploration programme, including drilling, underway on these royalty lands. Kirkland Lake, Ontario Franco-Nevada and Queenston Mining Inc. have formed an equal joint venture that has a 100% working interest in 25,000 acres in the Kirkland Lake gold mining area of Ontario. The joint venture covers over 22 miles of strike length along the Larder Lake Break from west of Kirkland Lake eastward toward Larder Lake. The joint venture began exploring in August 1996 and to date has drilled 42 holes for approximately 100,000 feet of exploratory drilling. The current resource of 1.44 million ounces of gold is uneconomic at current gold prices. The focus of this year's exploration has shifted from delineation of additional low-grade resources to targeting high-grade deposits similar to the nearby Kerr mine. Franco- Nevada s share of the 1998 budget is $1.5 million. Pandora Platinum Royalty, South Africa Franco-Nevada has a 5% net profits interest in 17,193 acres known as the Pandora property. Anglo American Platinum Corporation operates the property. Pandora is an undeveloped platinum property in the Western Bushveld of South Africa, the area that produces approximately three-quarters of the world's annual platinum output. Watts, Griffis and McOuat Limited, consulting geologists and engineers, estimate reserves and resources to be 27.2 million ounces of platinum group metals.

12 10 Item 4. Selected Consolidated Financial Information A. Last five completed fiscal years Thousands of dollars, except per share amounts Total revenue $84,938 $99,536 $80,859 $77,244 $48,483 Earnings before tax 75,835 90,071 75,252 73,072 45,705 -per share Earnings 52,746 61,010 52,808 50,238 31,893 -per share per share (fully diluted) Long-term debt Nil Nil Nil Nil Nil Dividends per share B. Last eight quarters ended March 31, 1998 Thousands of dollars, except per share amounts Fiscal year ended March 31, 1998 Fiscal year ended March 31, /31/98 12/31/97 9/30/97 6/30/97 3/31/97 12/31/96 9/30/96 6/30/96 Total revenue $21,261 $19,349 $22,155 $22,173 $20,601 $28,426 $22,938 $27,571 Earnings before tax 19,380 16,935 19,753 19,767 18,018 26,173 20,592 25,288 -per share Earnings 14,862 11,343 13,646 12,895 12,055 17,394 14,084 17,477 -per share per share (fully diluted) C. Dividend Policy The Corporation's dividend policy is reviewed annually by the Board of Directors. Item 5. Management Discussion of Operating Results Management s discussion and analysis of financial condition and results of operations for Franco- Nevada s last two fiscal years, which is included in the Corporation s 1998 Annual Report, is incorporated herein by reference. Item 6. Market for Securities The only issued shares of the Corporation are common shares ( Common Shares ). The Common Shares are listed and posted for trading on The Toronto Stock Exchange. The Corporation has million warrants outstanding. Each warrant entitles the holder to purchase four Common Shares for a total price of $ The warrants expire on September 15, 1998 but will be extended for an additional five years in the event the Common Shares do not trade at an average price

13 11 exceeding $50.00 per share for the 20 days prior to September 15, The warrants are quoted on the CDN inter-dealer network. Item 7. Directors and Officers The following are the names and municipalities of residence of the directors and senior officers of Franco-Nevada, their positions held with the Corporation and their principal occupations. Name and municipality of residence Seymour Schulich (1) Willowdale, Ontario Pierre Lassonde Toronto, Ontario M. Craig Haase Reno, Nevada H. Willis Higgs Auburn, California Robert W. Luba (1) Toronto, Ontario Austin C. Beutel (1) Toronto, Ontario C. Thomas Ogryzlo Vancouver, British Columbia Ron Binns Toronto, Ontario Sharon E. Dowdall Toronto, Ontario Position held with the Corporation Chairman of the Board, Chief Executive Officer and Director President, Chief Operating Officer and Director Executive Vice-President, General Counsel and Director Director Director Director Director Chief Financial Officer and Vice- President, Finance Secretary Principal occupation Chairman and Chief Executive Officer of the Corporation and Chairman of Euro-Nevada President and Chief Operating Officer of the Corporation and President and Chief Executive Officer of Euro-Nevada Executive Vice-President and General Counsel of the Corporation and Euro-Nevada Private mining consultant President, Luba Financial Inc. (merchant banking) Corporate Director President and Chief Executive Officer of Triton Mining Corporation Chief Financial Officer and Vice- President, Finance of the Corporation and Euro-Nevada Partner, Smith Lyons (law firm) (1) Member of the Audit Committee. The Corporation does not have an executive committee. Each of foregoing individuals has held the occupation set forth opposite his or her name during the past five years except for: Robert W. Luba who, prior to January 1994, was President and Chief Executive Officer of Royal Bank Investment Management Inc. (investment management); Austin C. Beutel who,

14 12 prior to June 1994, was Chairman, Beutel, Goodman & Company Ltd; and C. Thomas Ogryzlo who, prior to August 1997, was President, Kilborn SNC Lavalin Inc. Directors are elected at each annual meeting of shareholders and serve until the next annual meeting or until their successors are elected or appointed. The directors of the Corporation as a group beneficially own directly or indirectly 12% of the total number of Common Shares outstanding. Item 8. Additional Information The Corporation will provide one copy of the following to any person, upon written request to the Secretary of the Corporation: (i) (ii) (iii) this AIF, together with any document incorporated by reference in this AIF, the comparative financial statements of the Corporation for its most recently completed fiscal year together with the accompanying report of the auditor and any interim financial statements of the Corporation subsequent to the financial statements for its most recently completed fiscal year, and the information circular of the Corporation in respect of its most recent annual meeting of shareholders that involved the election of directors. Additional information including directors' and officers' remuneration, principal holders of the Corporation's Common Shares and options to purchase Common Shares is contained in the Corporation's information circular for its most recent annual meeting of shareholders. Additional financial information is provided in the Corporation's comparative financial statements for its most recently completed financial year.