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Franco-Nevada Agrees To Acquire Weyburn Net Royalty Interest For C$400 Million

TORONTO, Nov. 6, 2012 /PRNewswire/ - Franco-Nevada Corporation (TSX: FNV, NYSE: FNV) ("Franco-Nevada") today announced that it has entered into a purchase and sale agreement with Penn West Petroleum Ltd. and Penn West Petroleum (collectively "Penn West") to acquire an approximate 11.7% net royalty interest ("NRI") in the Weyburn Oil Unit (the "Unit") for C$400 million in cash, prior to normal closing adjustments.

The Unit is a conventional unitized oil field encompassing approximately 53,360 acres located in southeast Saskatchewan. The Unit has been in production for approximately 50 years with production to date of approximately 460 million barrels ("MMbbl") out of an initial oil in place estimate of 1.4 billion barrels. Current production levels are approximately 26,000 barrels of oil per day of medium grade slightly sour crude. The reserve life index based on proven plus probable reserves is more than 20 years.  Significant opportunity remains within the Unit for further increases in oil recovery through enhanced oil recovery technology. The Unit is operated by Cenovus Energy Inc.

The NRI is paid net of operating and capital costs similar to a mineral net profits interest royalty. This adds to Franco-Nevada's existing interests in the Weyburn Unit which include both a 0.44% overriding royalty and a 2.26% working interest. The NRI adds approximately 24 MMbbl (20.4 MMbbl net after crown royalties) to Franco-Nevada's proven plus probable oil equivalent reserves, based on an independent engineering report effective as of December 31, 2011.  Based on the purchase price the cost of the acquired proven plus probable reserves is C$16.53 per barrel.

Closing is expected to occur on or about November 30, 2012 and will be funded through Franco-Nevada's existing working capital. Once closed, this acquisition is expected to be immediately accretive to Franco-Nevada's revenue, cash flow and earnings.  It furthers the diversification of Franco-Nevada's royalty and stream portfolio with the addition of a known and proven cash-flowing asset in a safe jurisdiction. After this acquisition, Franco-Nevada expects that at least 80% of its future revenues will continue to be earned from precious metals assets.  On this transaction, Scotia Waterous acted as an advisor on behalf of Franco-Nevada and CIBC World Markets acted as an advisor on behalf of Penn West.

Conference call details

Management of Franco-Nevada will host a conference call, in conjunction with the third quarter 2012 conference call, on November 7, 2012 at 10:00 a.m. Eastern Time to review this transaction.  Analysts and interested investors are invited to participate as follows;

  • Conference Call: Local: 647-427-7450; Toll-Free: 1-888-231-8191; Title: Franco-Nevada Corporation Third Quarter 2012 Financial Results .
  • Conference Call Replay: A recording will be available until November 14, 2012 at the following numbers: Local: 416-849-0833; Toll-Free: 1-855-859-2056; Pass code: 58833221.
  • Webcast: A live audio webcast will be accessible at www.franco-nevada.com under upcoming events.
  • Slides: A presentation to accompany the conference call will be available on the Company's website prior to the call.

Corporate Summary

Franco- Nevada is a gold royalty and stream company.  The Company has a diversified portfolio of cash-flow producing assets and interests in some of the largest new gold development and exploration projects in the world.  Its business model benefits from rising commodity prices and new discoveries while limiting exposure to operating and capital cost inflation.  Franco-Nevada has substantial cash with no debt and is generating cash flow from its portfolio that is being used to expand its portfolio and pay monthly dividends.  Franco-Nevada's common shares trade under the symbol FNV on both the Toronto and New York stock exchanges.

ADVISORY REGARDING OIL AND GAS RESERVES

Reserves are the estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, from a given date forward, based on: analysis of drilling, geological, geophysical and engineering data, the use of established technology, and specified economic conditions, which are generally accepted as being reasonable.  Proven reserves are those reserves which can be estimated with a high degree of certainty to be recoverable.  It is likely that the actual remaining quantities recovered will exceed the estimated proven reserves.  Probable reserves are those additional reserves that are less certain to be recovered than proven reserves.  It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proven plus probable reserves.  Franco-Nevada retains Independent Qualified Reserves Evaluators (IQREs) to conduct a full evaluation of the company's reserves.

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