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Franco-Nevada (NYSE:FNV)

Q3 2012 Earnings Call

November 07, 2012 10:00 am ET

Executives

Stefan Axell

Sandip Rana - Chief Financial Officer

H. Geoffrey Waterman - Chief Operating Officer

David Harquail - Chief Executive Officer, President and Non-Independent Director

Analysts

David Haughton - BMO Capital Markets Canada

Cosmos Chiu - CIBC World Markets Inc., Research Division

Greg Barnes - TD Securities Equity Research

Paolo Lostritto - National Bank Financial, Inc., Research Division

Brian MacArthur - UBS Investment Bank, Research Division

Operator

Good morning. My name is Steve, and I will be your conference operator today. At this time, I would like to welcome everyone to Franco-Nevada Third Quarter 2012 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Stefan Axell, Manager of Investor Relations. Please go ahead.

Stefan Axell

Thank you, Steve. Good morning, everyone. We are pleased that you have joined us today for the Franco-Nevada Q3 2012 financial results overview, as well as a discussion on the recent Weyburn net royalty interest acquisition. Accompanying our call today is a presentation which is available on our website at franco-nevada.com, where you will also find our full MD&A and financial results.

On the line, we have David Harquail, President and CEO; as well as Sandip Rana, our CFO, who will discuss our Q3 2012 results; and Geoff Waterman, our COO, who will discuss the Weyburn NRI transaction. In addition, we have most of our management team to answer any questions during the Q&A period.

Before we begin formal remarks regarding our Q3 results and our Weyburn transaction, we would like to remind participants that some of today's commentary may contain forward-looking information. In this respect, we refer you to our detailed cautionary note regarding forward-looking statements on Slide 2 of our presentation.

I will now turn the call over to Sandip Rana, our CFO, to discuss Q3 results.

Sandip Rana

Thank you, Stefan. Good morning, everyone. Thank you for taking the time to join us on our call to discuss the company's financial results for the 3 and 9 months ended September 30, 2012.

With respect to our financial results, as you all have seen from the press release issued yesterday after the market closed, the company had another solid quarter. Our overall royalty and stream operations continued to perform well. The company again surpassed the $100 million mark in revenue for the quarter.

Revenue was lower at $105.2 million for third quarter 2012 when compared to $113.3 million for third quarter 2011. But overall production or attributable gold ounces to Franco-Nevada from our royalty and stream properties was not significantly different from our expectations for the quarter and for the 9 months ended September 30, 2012. On a year-to-date basis, revenue was $312.9 million compared to $292.7 million a year ago, a 6.9% increase.

With respect to pricing, average commodity prices were generally lower in the quarter, with the average gold price being $1,655 per ounce compared to $1,700 per ounce in third quarter of 2011, a decrease of 2.6%. However, for the 9 months ended September 30, 2012, the average gold price was higher by 8% at $1,652 per ounce compared to $1,530 per ounce for the 9 months September 30, 2011. The decrease in average gold prices in the quarter, along with lower stream ounces delivered, led to a decrease in gold revenue in the quarter. Gold revenue of $79.9 million was lower by 8.2% for the quarter ended September 30, 2012, compared to prior year.

As mentioned, the company received less stream ounces, partly due to the absence of a minimum ounce requirement from Ezulwini, which is not in place in 2012. However, this lower stream revenue was partially offset by higher revenues from other properties, such as Timmins West, Subika and Edikan, all of which are acquisitions made by the company; as well as organic growth from our portfolio of assets such as the Musselwhite NPI, Hemlo NPI and Tasiast, as they all began generating revenue.

PGM revenues have decreased from $16.5 million in third quarter of 2011 to $15.8 million in third quarter of 2012. The decrease is due to lower average platinum and palladium prices. With respect to the pricing, platinum averaged $1,500 per ounce, down 15.3% from $1,771 per ounce in the third quarter of 2011; and palladium prices averaging $1,613 per ounce, down 18.7%.

From a production standpoint, the company did receive an increased number of ounces from our Sudbury operations. However, as we received gold equivalent ounces from our Sudbury asset, the lower PGM prices do have an impact on the number of gold ounces the company does receive.

For the 9 months ended September 30, 2012, total revenue was $312.9 million compared to $292.7 million a year ago, a 6.9% increase. The increase is due to a combination of the higher average gold prices for the 9 months, increased production from certain properties such as Gold Quarry, Bald Mountain and Golden Highway, as well as the organic growth mentioned with Musselwhite, Hemlo, as well as Duketon.

For the third quarter of 2012, net income was $52 million or $0.36 per share compared to $44.1 million or $0.35 per share in 2011. Although revenue was lower quarter-over-quarter, the company benefited from lower cost of sales, lower depletion and a recording of a mark-to-market adjustment upon capacity [ph], resulting in higher overall net income. For the 9 months ended September 30, 2012, net income was $135.7 million or $0.95 per share compared to $98.6 million or $0.80 per share in 2011, a 19% increase.

The company does use certain non-IFRS measures, which management believes provide a better measure of performance. For the 3 months ended September 30, 2012, adjusted EBITDA was $86.2 million or $0.59 per share compared to $92.3 million or $0.73 per share in the third quarter of 2011. The reduction in adjusted EBITDA is the result of the lower revenue realized in the quarter. On an adjusted net income basis, it was $45.3 million for the 3 months ended September 30, 2012, or $0.31 per share, compared to $39.80 million or $0.31 per share in the prior year.

As the company has 45 revenue-generating royalties and streams, the impacts of production fluctuations at royalty and stream properties are not as significant as they once were. The company is much more diversified.

Turning to Slide 5. We illustrate revenue by commodity growth on the portfolio. As can be seen from the chart, revenue in all categories, gold, PGM and other, had seen growth over the last 4 years, with gold revenue showing the largest overall increase.

In Q1 2009, gold revenue was approximately $20 million. For third quarter 2012, gold revenue was approximately $80 million, an increase of 300% during this period. When combining gold revenue with PGM revenue, precious metals revenue comprised 91% of total revenue for the third quarter of 2012, which is consistent with Q3 2011 and Q2 2012. As you can see on the chart, there are some fluctuations in results for certain quarters. But this is due to timing of when certain NPIs and minimums are recognized for accounting purposes.

Turning to Slide 6. You can see that the company has achieved annual revenue growth each year, with significant increases in 2010 and 2011. For the 9 months ended September 30, 2012, revenue has again shown growth, increasing by 6.9% compared to 9 months ended September 30, 2011.

One of the key advantages that we like to stress of our business model is scalability. Our costs have increased over the last few years, as you can see on Slide 7. The increase is due the addition of streams to our business, in particular, the Palmarejo, Sudbury Basin and MWS streams. In general, you have to pay the $400 per ounce for each ounce of gold delivered which, after a period of time, is adjusted for an inflation factor. This has led to the increase in cost of sales line item. However, the increase is far outweighed by the increase in revenue. And even more impressive is how corporate administration costs have remained fairly constant. Corporate administration costs continue to be less than 5% of revenue.

As you turn to Slide 8, the geographic revenue to profile continues to be lower risk, with 81% of revenue being from North America, with Canada being the largest contributor. The other portion has increased with the additions of MWS, Ezulwini and Edikan and the start of the Tasiast and Subika royalties as certain payout thresholds had been met. Also, please note that the diversification by asset is also expanding, with revenue being sourced for more and more properties, resulting in the company being less economically dependent on certain royalties that it once was. This will continue to grow as our advanced stage royalties begin to provide revenues. The company now benefits from 45 revenue-generating mineral assets.

Slide 9 provides a reconciliation of net income earned in Q3 2011 to net income generated in Q3 2012. The positives for the change include lower depletion due to the mix of assets generating revenue, the MWS and Ezulwini assets of higher book values and with the lower revenue generated, the result is lower depletion. There's lower costs of sales due to a reduction in the stream ounces delivered, in particular the minimum from Ezulwini, which is not in place this year; and other income adjustments, which includes the mark-to-market adjustment on warrants held as an investment. Offsetting these positives was the reduction in overall revenue discussed earlier and a onetime gain recognized in 2011 on the sale of investments. The end result is an increase in net income from $44.1 million in Q3 2011 to $52 million in Q3 2012 and an increase in adjusted net income from $39.8 million a year ago to $45.3 million this quarter.

And now, I will pass it over to Geoff Waterman, our Chief Operating Officer. Geoff manages our Oil & Gas division, and he will speak to the Weyburn acquisition we announced yesterday.

H. Geoffrey Waterman

Thank you, Sandip. Please turn to Slide 11. Yesterday, Franco-Nevada announced that it entered into a purchase and sale agreement to acquire an 11.7% net royalty interest in the Weyburn unit for CAD 400 million, with a closing date on or about November 30. For clarification, a net royalty interest is similar to a mineral net profit interests, as royalty payments are net of operating and capital costs.

We like the Weyburn unit. Franco acquired its initial interest in the Weyburn unit in 1995. A 1.15% working interest was added earlier this year, and this net royalty will add to Franco's 2.26% working interest and 0.44% overriding royalty interest. The Weyburn unit is located 129 kilometers southeast of Regina, Saskatchewan and encompasses approximately 53,000 acres. The unit was formed in 1963 and is the third largest conventional oil pool in the Western Canadian sedimentary basin.

The Weyburn unit is operated by a proven and experienced operator, Cenovus Energy. The current production is 26,000 barrels per day. And as noted in Cenovus' 2011 AIF, investment in undeveloped reserves is projected to continue for well over 40 years.

Please turn to Slide 12. As previously stated, we like the Weyburn unit. This net royalty increases Franco's interest in one of the largest conventional oil pools in Canada and will provide immediate cash flow from a proven operation. Historically, the margins on the net royalty have ranged between 40% and 50%. This net royalty will add approximately 1,400 net margin barrels per day to Franco's current 2,100 barrels of oil equivalent production per day. Net margin barrels are the barrels equivalent to the net royalty received after all operating and capital cost deductions based on the price received per Weyburn unit production. The Weyburn unit produces medium sour crude between 28- and 32-degree API with approximately 2% sulfur.

We expect that this will approximately double revenues from the oil and gas portfolio and have an even larger impact in the oil and gas portfolio's EBITDA, as revenues from this royalty are equivalent to EBITDA. This net royalty will add significantly to the proven and probable oil and gas reserves and extend the reserve life from 12 to 18 years. The cost of these additional reserves is CAD 16.53 per barrel.

Going forward, Franco expects Weyburn unit production to increase annually, peaking in 2020 at around 30,000 barrels per day. Under the current Enhanced Oil Recovery program, the Weyburn unit is expected to be in production until 2050. However, there is opportunity for increasing recoveries beyond that expected from the current Enhanced Oil Recovery program. An expansion of this oil recovery program, would shift peak oil production out beyond 2020. And production from the Weyburn unit would continue past 2050. The Weyburn unit is a world-class asset with long life reserves, and Franco believes that the addition of this net royalty interest will be the right balance to Franco's portfolio.

I'd now like to turn the call over to David Harquail. David?

David Harquail

Thank you, Geoff. Just for some historical perspective, Geoff Waterman was with us in the original Franco-Nevada back in '95 when we bought our first interest in Weyburn. He has been ably managing our oil and gas interests ever since and is now our Chief Operating Officer.

We have a lot of continuity with the Weyburn assets, and that's why I'm so confident in this investment. Our Oil & Gas division is probably one of the least appreciated strengths of Franco-Nevada. Some analysts on Franco had been applying low multiples on our oil and gas assets, typical of traditional oil and gas working interests that deplete very quickly. However, royalties on unitized, long-duration assets, which Geoff has just described, are worth substantially more. Oil and Gas has been a very good business for Franco-Nevada, and we're delighted to have this opportunity to add to one of our favorite assets. We will highlight the strengths of our Oil & Gas division in our next Investors Day.

Now that we've effectively doubled our Oil & Gas division, and assuming we do nothing else, we expect our precious metals revenues for the near term be closer to 80% of overall revenues. That assumes current commodity prices. As our Detour, Subika and ultimately, Cobre Panama, and gold revenues begin generating, we expect to see growth in the precious metals percentage of overall revenues.

We are looking at further acquisitions, and our focus is now back towards new precious metal opportunities. On Slide 14, there's an update of our available capital for more acquisitions. We still have over $1 billion in available capital. We have what we need. You can also see that we have not levered our balance sheet and have substantial additional credit capacity. We believe Franco-Nevada can be regarded as an investment-grade credit.

Finally, we are just approaching the fifth anniversary of the IPO of the current Franco-Nevada. In those 5 years, we've announced 5 dividend -- successive dividend increases and have almost quadrupled the value of the share price. I regularly get challenged that a 1.3% yield is too low. We like to remind investors about that capital appreciation and the value of their shares, which has impacted the yield. We also like to point out to anyone who bought us at the IPO is now getting close to a 5% yield on their cost base. This is very good for gold investments. We're very happy that many of those IPO investors are still with us and are profiting with us.

Last night in the U.S., watching the Obama win, they were chanting, "4 more years." Here at Franco, I will have our management team chant, "5 more years." And we're just delighted that's been a -- it's a great ride, and we expect more to come.

So with that, all of the management team that's here, we would be very happy to take any of your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of David Haughton from BMO.

David Haughton - BMO Capital Markets Canada

With the Weyburn acquisition, my understanding is that although it closes at the end of November, it -- the royalty is effective from the 1st of October. Is that correct? So you get the full benefit in this quarter?

David Harquail

Yes. That's correct, David.

David Haughton - BMO Capital Markets Canada

And previously, you had a revenue guidance of $430 million to $460 million. Are you prepared to give us a guide now that Weyburn is in the mix?

Sandip Rana

David, Sandip here. We still anticipate that overall 2012 revenue will be at the low end of its previously provided guidance range, which is the $430 million to $460 million.

David Haughton - BMO Capital Markets Canada

Okay. Even with the contribution of Weyburn.

Sandip Rana

Yes.

David Haughton - BMO Capital Markets Canada

Okie dokie. And I heard your conversation about the firepower and where you're positioning. But do you see that there's scope for more non-gold acquisitions? And if more oil and gas opportunities came your way, how would you feel about that?

David Harquail

David, it's -- we've always guided the Street that we see ourselves primarily as a gold-focused royalty and stream company. We feel that if we went below 80%, cause concern to a good part of our investor base. So we're not completely ruling out other deals. But we would have to demonstrate to the marketplace that we can quickly get above 80%. So right now, our focus is on other investment deals. I'd rather -- precious metal deals. My preference is to build up our percentages like we did before. And then when we -- as we get overweighted the precious metals, then be more opportunistic on the oil and gas deals. But if we see another non-precious deal that looks really good, I'll just have to have Paul Brink work doubly hard to get that precious metals revenues up as well.

David Haughton - BMO Capital Markets Canada

Paul -- I'm sure that Paul would love to do that hard work.

David Harquail

He's working hard. Unfortunately, he's not here with us today, but I can get to speak to it. But I think the best thing for us right now is to do another precious metals deal. That would give us more capacity on the non-precious.

David Haughton - BMO Capital Markets Canada

And that also speaks to one another point. I know that you've got a diversified portfolio, some 45 or so, producing mineral assets. But Palmarejo still represents, at this stage, 20% of your revenue mix. Do you feel comfortable or uncomfortable with such a large exposure to a single asset?

Sandip Rana

Well, obviously, we do try to diversify and add additional assets. With Palmarejo, we are fortunate that we have this annual minimum in place at a minimum of 50,000 ounces per year, which should go on for another 4 years. So as our other properties, the Detour and the Cobre Panama, has come onstream, the percentage will decrease for Palmarejo.

David Harquail

And David, the other thing to remember too is on a stream, they tend to be -- we report them on a gross basis. So on EBITDA basis, the proportion of our EBITDA from Palmarejo is smaller. We do have to pay that $400 an ounce.

Operator

[Operator Instructions] And your next question comes from the line of Cosmos Chiu with CIBC.

Cosmos Chiu - CIBC World Markets Inc., Research Division

Got a few questions here. Maybe the first question is for Geoff. Can you walk me through, I guess, at Weyburn? It's got to be a medium-grade, slightly sour oil. I think in the past, it's always been -- the price realized will be at a discount to WTI. Is that still holding true? And how should we look at it?

H. Geoffrey Waterman

Yes, Cosmo. There is a quality differential because of the grade of the oil and the sulfur content. Our benchmark is actually the Edmonton Light posting because the fact that it's Canadian oilfield. And it's currently running -- our average this year is about $8 a barrel. And if you look historically, WTI and the Edmonton Light posting, when you factor in foreign exchange, pretty well equal. Earlier this year, we had a differential between the Edmonton Light and WTI. But currently, Edmonton Light is -- let's see, it's about $4 above WTI.

Cosmos Chiu - CIBC World Markets Inc., Research Division

Okay. And Geoff, the $8 per barrel, that's a discount.

H. Geoffrey Waterman

Yes. That the quality differentials because of the lower grade of the oil and the sulfur content.

David Harquail

And that reflects like the past 5 years' average.

Cosmos Chiu - CIBC World Markets Inc., Research Division

And then just want to confirm, Weyburn is pretty much 100% oil, right?

H. Geoffrey Waterman

It is 100% oil.

Cosmos Chiu - CIBC World Markets Inc., Research Division

Okay. And what's that tax treatment behind from Franco's perspective on its acquisition? Is that one of those structures where taxes will be lower in the first few years until your $400 million acquisition cost has been recovered?

Sandip Rana

No. So the taxes it's considered cost fees. So we'll get a 10% declining balance tax deduction each year. So we could -- we will be taking a deduction in 2012 a 10% of the acquisition price.

Cosmos Chiu - CIBC World Markets Inc., Research Division

Okay. So it's a 10% kind of straight-line depreciation.

Sandip Rana

Declining balance.

Cosmos Chiu - CIBC World Markets Inc., Research Division

Okay. And then maybe moving on to the quarter here. The Subika number that we saw in the Q3, is that for the full quarter sort of? Or is it -- when did they kind of come in terms of -- at the royalty?

H. Geoffrey Waterman

It came in partway through the quarter, but we actually haven't gotten all the full detail on it yet. So that's something we'll be able to guide better on. But we just don't know how much of the quarter it represented. We only have a royalty on part of the Ahafo property of Newmont. So we'll chase up those details. We only got that sort of late in the quarter.

Cosmos Chiu - CIBC World Markets Inc., Research Division

Okay. And then, David, I don't know if you can comment on the South African situation here. I know both MWS and Ezulwini have been impacted. My understanding is that maybe the labor situation in MWS is a little bit better on a relative basis. I don't know if that's true. And in terms of Ezulwini, the 30-day shutdown, was that in Q3? Or is that going to go into Q4? And I guess, overall, we know there will be impact in Q4. But to the best of your knowledge, is it -- how much longer could it be impacting your royalty?

H. Geoffrey Waterman

The more significant one is Mine Waste. And we were talking to them just a couple weeks ago, and they already had 2 of the 3 lines back up. So I haven't had a confirmation on the third line, but we knew it was back to at least 2/3. They haven't yet gone any of the higher-grade dumps on the Anglo side, which is where our royalty now applies to as well. So we're still mining from the lower-grade First Uranium dump. So actually, we're actually quite optimistic on that asset. It seems to be in strong hands with Anglo. There's still some upside to perform. And we're not too worried to extent that it was impacted temporarily with the labor interruptions. Ezulwini is a different story. They're taking a longer-term shutdown. I think Gold One management team is having a hard look at that operation, combined with the labor issues. I think part of the negotiating position is they're taking an additional 30-day hiatus, which will impact mostly in our fourth quarter. And I think there's a reasonable chance they might extend it longer because there is this ongoing negotiation. Gold One has had a especially problematic challenge, not so much at their Cooke operations but at another operation in South Africa. And so I think they're trying to send the right messages to the overall labor union. Nice aspect about this one is that we have a very long-term tenure on this property. We feel very secure about it. We're not as concerned about the near term, but it could have an impact in our fourth quarter numbers. But it's not a big number for us at this stage. Last year, we had the benefit of a minimum guarantee royalty. We always knew they were never going to be close to the minimum this year. We've always budgeted a much smaller number. It's a bit disappointing, but it's not that material an asset for us right now.

Operator

Your next question comes from the line of Greg Barnes of TD Securities.

Greg Barnes - TD Securities Equity Research

Geoff, to make this simple, do we just take the net margin barrels of 1,400 per day, I guess, it is, multiply that by oil price minus the discount?

H. Geoffrey Waterman

Yes.

Greg Barnes - TD Securities Equity Research

That would give us the revenue net to Franco.

H. Geoffrey Waterman

Correct, before tax.

David Harquail

So Greg, in a way, we're trying to do with oil and gas what we've done with our royalty asset where we talked about royalty equivalent units. And so we're going to keep expanding that because we actually want to get out of the commodity forecasting business, which -- because we're, I think, one of the few companies that guides on revenues. And we want to start guiding on barrels or royalty equivalent units of ounces, so that we can be or maybe even more accurate in terms of the guidance to provide the Street.

Greg Barnes - TD Securities Equity Research

Okay. Just one sort of a question. You have some warrants coming due next year, I believe. It should bulk up the balance sheet cash wise, too.

Sandip Rana

Yes. So they're due, I believe, June of next year. And yes, tag price is just over $64 a share.

Greg Barnes - TD Securities Equity Research

Canadian.

Sandip Rana

Canadian, yes.

Greg Barnes - TD Securities Equity Research

And how many?

Sandip Rana

$4.5 million roughly.

Operator

Your next question comes from the line of Paolo Lostritto from National Bank Financial.

Paolo Lostritto - National Bank Financial, Inc., Research Division

In the past, we've used the decline rate on the Weyburn oilfield of about 5%. Now that this represents a larger portion of your revenue, I just wanted to get kind of what your thinking is on the decline rate from that field.

H. Geoffrey Waterman

So going forward, as we look at our production forecast for the unit, we see it increasing due to the implementation of the balance of the current EOR program, Enhance Oil Recovery program. And as I said in my presentation, we're expecting production to increase through 2020 to approximately 30,000 barrels a day for the unit. And thereafter, without any further Enhanced Oil Recovery program in place, we would see declines running at 3% to 5%.

Operator

Your next question comes from the line of Brian MacArthur from UBS.

Brian MacArthur - UBS Investment Bank, Research Division

I just want to go back a little bit to what Greg was asking. You have the price. You have a discount. And obviously we have operating costs and royalties, whatever, we have to take off. But then, given this increasing production, does the capital change over time as well? Or can we assume that sort of linear historically? I'm just trying to figure out whether that's going to have a negative impact on the downside.

H. Geoffrey Waterman

With respect to capital, I guess you could equate it to as our production is increasing, that's due to the capital that's being deployed on the balance of the Enhanced Oil Recovery program. So you could go on and say, that's a model that are linearly. And then once that recovery program -- once the capital has been fully deployed there, we'd see a significant drop-off in the capital to be expended on the project. Of course, if we -- if the unit goes in to a second phase EOR program, then we'll see additional capital going towards that.

David Harquail

So Brian, the easy way I look it as a layman is that it's actually been a pretty steady capital contribution all the way through. Each time they decide to do another program, they just sort of tag it on to the expiry of that first capital program. So right now, we have a capital program that takes us for the expansion to 2020. But actually, these start decreasing spending in the next few years. So we could see a substantial -- to decide, for instance, not to do another capital program, we'd actually see a substantial step-up on the cash flow from those assets. So it's an upside to us. Except, we would like to have this a long-term asset. So we wouldn't mind them actually reinvesting the cash flow. But we don't expect it to be any -- substantially any higher than what we're experiencing right now. We believe we're at peak capital expenditures on this project at this stage.

Brian MacArthur - UBS Investment Bank, Research Division

[indiscernible] So just to get it clear, all that I’d worried a bit is just an, let's say, an event you don't want to happen, have the oil price drop to 60 or 50. Your margins are compressed. But they probably wouldn't reinvest as fast, so you don't get caught on that sort of equation.

David Harquail

And that's exactly what's happened on this one. They never really had a cash call to the working interest partners on this. Because what they do is they do manage their capital programs. When times are tougher, they just slow down on the capital capacity [ph].

H. Geoffrey Waterman

You're right. As I stated in my presentation, I've been involved with this since 1995 for this unit. Our initial interest was a 1.1% working interest. And in 17 years, given the ups and downs in oil prices, it's never been cash flow negative.

Brian MacArthur - UBS Investment Bank, Research Division

Great. And maybe just -- you made another interesting comment. I thought -- we talked about forecasting revenues in oil, keeping over 1% of revenue. And obviously, that whole revenue percentage is a little bit in how we account all the time between streams. Or in this case, the revenue is coming in out of EBITDA level as I understand it, not a 100% level. If you look at this asset, maybe you can't comment on this, what sort of percentage increase in, say, a long-term NAV basis, would this have been relative to where we were before? Because it looks pretty attractive even on a long-term basis, so the relative percentage might even go up if you see what I'm saying.

David Harquail

Brian, you're spot on. This is very accretive for us. We can buy oil and gas assets at much higher accretion numbers than we can, precious metal assets. So if you look at it from day 1, absolutely. It's just we don't have the same expiration optionality as we do with our gold assets, and we probably think gold prices maybe -- have even more potential longer term than oil prices. But NAV accretion, what is the percentage of our overall NAV? We've definitely even higher stepped up a proportion of oil and gas NAV with this transaction. We think we've gotten it at a terrific price. We think good things come to people when they're able to write checks.

Operator

I'm showing there are no further questions at this time. I'll turn it back to Mr. Axell.

Stefan Axell

Thank you, Steve. I want to remind investors that our full year 2012 results are expected to be released on March 19, 2013, with a conference call scheduled for the following morning. Thank you for joining us today and your continued interest in Franco-Nevada.

Operator

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

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