Designated News Release
(in U.S. dollars unless otherwise noted)
TORONTO, Dec. 2, 2019 /PRNewswire/ - As previously
disclosed, the Canada Revenue Agency ("CRA") is conducting an audit
of Franco-Nevada Corporation's 2012-2015 taxation years and the
Company received a reassessment for its 2013 taxation year as
described below. Franco-Nevada has now received a proposal
letter from the CRA for the 2014 and 2015 taxation years.
Franco-Nevada is providing this update given shareholder interest
in this matter.
Mexico 2013
Reassessment
In December 2018, Franco-Nevada
was reassessed in relation to royalty income earned by its Mexican
subsidiary during 2013 as though a majority of such income was
subject to tax in Canada. The amount of the reassessment was
approximately $8 million of Canadian
tax plus applicable interest and penalties but before any relief
under the Canada-Mexico tax treaty. Franco-Nevada's
Mexican subsidiary has paid approximately $12 million in Mexican taxes on income earned in
Mexico in 2013.
Franco-Nevada has filed a formal notice of objection in connection
with the 2013 reassessment and, if necessary, will seek relief
under the Canada-Mexico tax treaty.
Mexico 2014 and 2015
Proposal Letter
The CRA is now proposing to tax a majority of the royalty income
earned by Franco-Nevada's Mexican subsidiary during the 2014 and
2015 taxation years as though such income is subject to tax in
Canada. If the CRA is successful, Franco-Nevada's preliminary
estimate is that it would be subject to Canadian tax of
approximately $11 million for these
years plus applicable interest and penalties but before any relief
under the Canada-Mexico tax treaty. During the 2014 and
2015 taxation years, Franco-Nevada's Mexican subsidiary paid
approximately $18 million in Mexican
taxes on income earned in Mexico. Franco-Nevada will object
to any subsequent reassessment as it did with the 2013
reassessment. If the CRA were to audit and reassess
Franco-Nevada in relation to its Mexican subsidiary for the years
2016 through 2018 on the same basis, Franco-Nevada's preliminary
estimate is that it would be subject to additional Canadian tax for
these years of approximately $3.5
million plus applicable interest and penalties but before
any relief under the Canada-Mexico
tax treaty. During the years 2016 through 2018,
Franco-Nevada's Mexican subsidiary paid approximately $3.8 million in Mexican taxes on income earned in
Mexico. Franco-Nevada intends to vigorously defend its
position and, if necessary, seek relief under the Canada-Mexico
tax treaty.
Barbados 2014 and 2015
Proposal Letter
The CRA is proposing to tax a majority of the stream income
earned by Franco-Nevada's Barbadian subsidiary during the 2014 and
2015 taxation years as though such income is subject to tax in
Canada. If the CRA is successful, Franco-Nevada's preliminary
estimate is that it would be subject to Canadian tax of
approximately $5 million for these
years plus applicable interest and penalties. Franco-Nevada
will object to any subsequent reassessment. If the CRA were
to audit and reassess Franco-Nevada in relation to its Barbadian
subsidiary for the years 2016 through 2018 on the same basis,
Franco-Nevada's preliminary estimate is that it would be subject to
additional Canadian tax for these years of approximately
$48 million plus applicable interest
and penalties. Franco-Nevada intends to vigorously defend its
position.
The CRA audit is ongoing and there can be no assurance that the
CRA will not further challenge the manner in which the Company or
any of its subsidiaries has filed their tax returns and reported
its income and the Company may be subject to greater exposure than
anticipated. The Company does not believe that the CRA
reassessments and proposed reassessments are supported by Canadian
tax law and jurisprudence. Management believes that the
Company and its subsidiaries have filed their tax returns and paid
all applicable taxes in compliance with Canadian, Mexican and
Barbadian tax laws.
Corporate Summary
Franco-Nevada Corporation is the leading gold-focused royalty
and stream company with the largest and most diversified portfolio
of cash-flow producing assets. Its business model provides
investors with gold price and exploration optionality while
limiting exposure to many of the risks of operating
companies. Franco-Nevada has a strong balance sheet and uses
its free cash flow to expand its portfolio and pay dividends.
It trades under the symbol FNV on both the Toronto and New
York stock exchanges. Franco-Nevada is the gold investment that works.
Forward Looking Statements
This press release contains "forward looking information" and
"forward looking statements" within the meaning of applicable
Canadian securities laws and the United States Private Securities
Litigation Reform Act of 1995, respectively, which may include, but
are not limited to, statements with respect to future events or
future performance, management's expectations regarding
Franco-Nevada's growth, results of operations, estimated future
revenues, carrying value of assets, future dividends and
requirements for additional capital, mineral reserve and mineral
resource estimates, production estimates, production costs and
revenue, future demand for and prices of commodities, expected
mining sequences, business prospects and opportunities, audits
being conducted by the CRA, the expected exposure for current and
future assessments and available remedies, the remedies relating to
and consequences of the ruling of the Supreme Court of Panama in relation to the Cobre Panama
project, the aggregate value of Common Shares which may be issued
pursuant to the ATM Program, the Corporation's expected use of the
net proceeds of the ATM Program, and expected succession planning.
In addition, statements (including data in tables) relating to
reserves and resources and gold equivalent ounces ("GEOs") are
forward looking statements, as they involve implied assessment,
based on certain estimates and assumptions, and no assurance can be
given that the estimates and assumptions are accurate and that such
reserves and resources and GEOs will be realized. Such forward
looking statements reflect management's current beliefs and are
based on information currently available to management. Often, but
not always, forward looking statements can be identified by the use
of words such as "plans", "expects", "is expected", "budgets",
"scheduled", "estimates", "forecasts", "predicts", "projects",
"intends", "targets", "aims", "anticipates" or "believes" or
variations (including negative variations) of such words and
phrases or may be identified by statements to the effect that
certain actions "may", "could", "should", "would", "might" or
"will" be taken, occur or be achieved. Forward looking statements
involve known and unknown risks, uncertainties and other factors,
which may cause the actual results, performance or achievements of
Franco-Nevada to be materially different from any future results,
performance or achievements expressed or implied by the forward
looking statements. A number of factors could cause actual events
or results to differ materially from any forward looking statement,
including, without limitation: fluctuations in the prices of the
primary commodities that drive royalty and stream revenue (gold,
platinum group metals, copper, nickel, uranium, silver, iron-ore
and oil and gas); fluctuations in the value of the Canadian and
Australian dollar, Mexican peso, and any other currency in which
revenue is generated, relative to the U.S. dollar; changes in
national and local government legislation, including permitting and
licensing regimes and taxation policies and the enforcement
thereof; regulatory, political or economic developments in any of
the countries where properties in which Franco-Nevada holds a
royalty, stream or other interest are located or through which they
are held; risks related to the operators of the properties in which
Franco-Nevada holds a royalty, stream or other interest, including
changes in the ownership and control of such operators; influence
of macroeconomic developments; business opportunities that become
available to, or are pursued by Franco-Nevada; reduced access to
debt and equity capital; litigation; title, permit or license
disputes related to interests on any of the properties in which
Franco-Nevada holds a royalty, stream or other interest; whether or
not the Corporation is determined to have "passive foreign
investment company" ("PFIC") status as defined in Section 1297 of
the United States Internal Revenue Code of 1986, as amended;
potential changes in Canadian tax treatment of offshore streams;
excessive cost escalation as well as development, permitting,
infrastructure, operating or technical difficulties on any of the
properties in which Franco-Nevada holds a royalty, stream or other
interest; access to sufficient pipeline capacity; actual mineral
content may differ from the reserves and resources contained in
technical reports; rate and timing of production differences from
resource estimates, other technical reports and mine plans; risks
and hazards associated with the business of development and mining
on any of the properties in which Franco-Nevada holds a royalty,
stream or other interest, including, but not limited to unusual or
unexpected geological and metallurgical conditions, slope failures
or cave-ins, flooding and other natural disasters, terrorism, civil
unrest or an outbreak of contagious diseases; and the integration
of acquired assets. The forward looking statements contained in
this press release are based upon assumptions management believes
to be reasonable, including, without limitation: the ongoing
operation of the properties in which Franco-Nevada holds a royalty,
stream or other interest by the owners or operators of such
properties in a manner consistent with past practice; the accuracy
of public statements and disclosures made by the owners or
operators of such underlying properties; no material adverse change
in the market price of the commodities that underlie the asset
portfolio; the Corporation's ongoing income and assets relating to
determination of its PFIC status; no material changes to existing
tax treatment; no adverse development in respect of any significant
property in which Franco-Nevada holds a royalty, stream or other
interest; the accuracy of publicly disclosed expectations for the
development of underlying properties that are not yet in
production; integration of acquired assets; the expected
application of tax laws and regulations by taxation authorities;
the expected assessment and outcome of any audit by any taxation
authority; and the absence of any other factors that could cause
actions, events or results to differ from those anticipated,
estimated or intended. However, there can be no assurance that
forward looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Investors are cautioned that
forward looking statements are not guarantees of future
performance. In addition, there can be no assurance as to the
outcome of the ongoing audit by the CRA or the Corporation's
exposure as a result thereof. Franco-Nevada cannot assure
investors that actual results will be consistent with these forward
looking statements and investors should not place undue reliance on
forward looking statements due to the inherent uncertainty therein.
For additional information with respect to risks, uncertainties and
assumptions, please refer to the "Risk Factors" section of
Franco-Nevada's most recent Annual Information Form filed with the
Canadian securities regulatory authorities on www.sedar.com and
Franco-Nevada's most recent Annual Report filed on Form 40-F filed
with the SEC on www.sec.gov. The forward looking statements herein
are made as of the date of this press release only and
Franco-Nevada does not assume any obligation to update or revise
them to reflect new information, estimates or opinions, future
events or results or otherwise, except as required by applicable
law.
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SOURCE Franco-Nevada Corporation