Innovative ways to finance your business Monday, June 6, 2016

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Speakers Robert Mason Partner Toronto T:+1 416.216.2967 robert.mason@nortonrosefulbright.com Robert Mason represents issuers and investors on alternative finance arrangements and is a leading lawyer in the area of streaming and royalty transactions.

Michael Wahl Associate Toronto +1 416.216.2999 michael.wahl@nortonrosefulbright.com Michael Wahl practises corporate and commercial law, focusing on general corporate and commercial law matters, including raising capital, structuring investments, corporate reorganizations, private mergers and acquisitions, and project finance.

David Nowak Managing Partner, Brookfield Asset Management Email: david.nowak@brookfield.com Phone: 416-359-8634 Mr. David Nowak serves as the Managing Partner at Brookfield Asset Management Inc. and Brookfield Asset Management Inc., Private Equity. Mr. Nowak has responsibility for transaction origination and execution for Brookfield Asset Management's private equity group.

Agenda 1. Streaming Transactions – Recent NRF Deals 2. Streaming Transactions – Key Terms 3. Streaming Transactions – Key Negotiation Points 4. Private Equity in Streaming 5. Key Trends in Streaming

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Streaming Transactions

Streaming Transactions – Recent NRF Deals

• Banro Corporation closed a US$67.5 million gold stream on its Twangiza Mine in February 2016 – RFWB was the purchaser

• Banro Corporation announced a US$50 million gold stream on its Namoya Mine in February 2015 - Gramercy was the purchaser

• Stornoway Diamond Corporation closed a C$275 million diamond

streaming transaction in July 2014 – Orion Co-Investments and the Caisse de dépôt et placement du Québec

acquired a 20% streaming interest in the Renard Diamond Project – Example of a successful mixed financing transaction – C$944 million raised

from a combination of stream, equity and debt.

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Streaming Transactions – Key Terms Price • Typical Pricing (plus inflation adjustment)

– Current pricing is typically a significant discount to spot price but is sometimes a fixed price (eg. US$150/ounce of gold)

Percentage of Production • The stream is usually for a % of a project’s life of mine production

rather than for a fixed number of ounces

Completion tests • Failure to satisfy completion tests may result in refunding of a

portion of the upfront deposit and/or right of the purchaser to terminate the agreement

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Streaming Transactions – Key Negotiation Points Security • Purchaser often takes debt-like security • Security may lighten once the upfront payment is paid back • Inter-creditor agreements are usually essential to streaming

negotiations Termination • In the event of a default by the seller, the stream purchaser may

have the right to terminate the stream agreement • What payments to the purchaser are due on termination?

– The uncredited amount of the upfront payment plus interest – NPV of the stream

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Private Equity in Streaming

• PE has become a significant participant in streaming deals • PE has become a more critical player in stream financing since

2012 –Many mining projects have begun to look more attractive to PE as the

result of falling share prices and valuations –Non-producing mining companies often have fewer alternatives but to

accept PE’s terms

• One notable side-effect of the increased interest by PE in streaming is that mining companies with world-class mines have negotiated improved streaming and royalty terms due to the competition on the buy side.

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Key Trends in Streaming

• Buy-Back Rights • Loosening of Security • Insolvency and Streaming

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Crowdfunding

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Source: CVCA

Crowdfunding Limits

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Investor: • Non-accredited investors

(Ontario): (i) $10,000 per year and (ii) $2,500 per investment;

• Accredited investors (Ontario): (i) $50,000 per year and (ii) 25,000 per investment;

• Permitted clients (Ontario): no investment limits

Issuer:

• Maximum of $1.5 million per 12-month period

Crowdfunding Cost Implications

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Transaction Costs

Ongoing Corporate

Governance Costs

Continuous Disclosure and Financial Costs

Crowdfunding Growth in North America

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Source: Canadian Media Fund

Brookfield Asset Management Inc. A Global Alternative Asset Management Company Focused on Private Equity, Property, Renewable Energy and Infrastructure

Brookfield Private Equity and Finance

June 2016

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5.7x 6.3x

5.4x 4.1x

4.9x 5.4x 5.3x 5.6x 5.9x 5.9x 5.8x

2.9x

3.5x 4.1x

3.8x

3.7x 3.7x 3.5x 3.2x

3.8x 4.2x 5.3x

8.6x

9.8x 9.5x

7.9x

8.5x 9.1x 8.9x 8.8x

9.7x 10.1x

11.2x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Q1 '16

Debt Equity

Transaction Multiples and Leverage

LBO purchase price multiples are at historic highs

LBO Purchase Price Multiples

Source: S&P LCD

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0%

1%

2%

3%

4%

5%

6%

Apr-06 Apr-08 Apr-10 Apr-12 Apr-14 Apr-16

Effective Fed Funds Rate

Borrowing Costs

Leverage has been inexpensive over a prolonged period of time

Effective Fed Funds Rate U.S. Corporate High Yield Spread

Source: Federal Reserve Bank of St. Louis, Barclays

0%

5%

10%

15%

20%

25%

Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16

U.S. Corporate HY Spread

19 Cyclical: Credit Markets in Context

Historic period in new-issue credit markets is coming to an end with 2018-2022 maturity wall creating significant opportunity

$126 $151 $100 $47 $95 $68 $152 $158 $106 $149 $148 $53 $181 $302 $246 $368 $399 $356 $293

$9 $28 $57 $60 $44 $34 $58

$90 $154 $187 $325 $388

$72 $38

$155 $229

$301

$670

$467 $326

$31

$0

$200

$400

$600

$800

$1,000

$1,200

High-Yield Volume Institutional Loan Volume

($ in billions)

(1) J.P. Morgan.

US Bond and Leveraged Loan Maturity Profile(1)

US Annual Leveraged Finance New-Issuance(1)

2012 – 2015 Volume: $3.2 trillion

2018 – 2022 Volume: $1.6 trillion

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Credit markets have grown dramatically post-financial crisis and are now dependent upon liquid holders and structured products

2015 US High Yield Ownership(1)

(1) J.P. Morgan. Other includes CBOs. (2) S&P Capital IQ. Annual Primary Institutional market.

Cyclical: Credit Market Ownership

2015 US Leveraged Loans Primary Issuance (Ex-Banks)(2)

US High Yield and Leveraged Loan Outstanding(1)

($in billions)

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Recently constrained liquidity for alternative sources of funding for credit markets will create specialty lending opportunities for alternative credit sources throughout 2016 and beyond

(1) BDC AUM is from Wells Fargo. Price to NAV is based on Cliffwater’s NAV index and price return index . (2) J.P. Morgan. (3) S&P Capital IQ LCD.

BD

C A

UM

(1)

Leve

rage

d Lo

an M

utua

l Fu

nd F

low

s(2)

CLO Issuance and Outlook

• Weaker demand for mezzanine and equity tranches

• Concerns over more loans being downgraded to CCC

• Rising interest rates causing decreased cash flows to equity holders

• Challenges from risk retention

CLO Market Participants Expect a Smaller New-Issue Calendar Throughout 2016(3)

Secular: Trends for Alternative Credit Sources

22 Credit Market Yields

US high yield and leveraged loan markets have recently repriced risk creating a bifurcated market with many companies unable to access traditional financing sources

US High Yield(1) US Leveraged Loan(1)

BB-CCC Spreads(1)

5%7%9%

11%13%15%17%19%21%

Yield to worst

20-year average =9.49% 20-year median=9.02%

Nov-00 14.80%

Oct-90 19.12%

Dec-08 20.92%

20-May-15 6.46%

(1) J.P. Morgan.

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Alternative sources of capital that drove significant 2010-2015 credit cycle are now compromised

Secular: Credit Markets are Constrained

CLOs

BDCs

High Yield Mutual Funds

Banks • Basel III and Fed regulations – increased capital and structural requirements • Leveraged lending is heavily scrutinized and limited by regulators • Avoid publicity and underwriting risk

• Risk retention regulations: CLO managers must hold 5% of entire structure starting in 4Q16 • Severely reduced CLO issuance and number of viable managers

• Capital is limited by access to public equity markets • Write-downs and questionable business practices have damaged industry’s reputation • Shareholder activism is disrupting traditional lending activities and forcing industry changes

• Retail equity product – highly sensitive to market swings and sentiment • Not a consistent, discerning or reliable market • Price volatility leads to more price volatility – selling follows selling

Constrained

2010 - 2015

• Banks • BDCs

• CLOs • HY Mutual Funds

2016 - Present

Opportunity for Brookfield

24 Illustrative Corporate Credit Spectrum

Syndication First Lien Bank

Debt Traditional

Private Credit High Yield

Bonds Mezzanine

Loans Distressed

Debt

Loan to Value (“LTV”) 20%-50% 30%-75% 50%-75% 60%-80% 80%-100%

Security Senior Secured Secured Typically

Unsecured Unsecured Varies

Return Target 5%-7% 6%-11% 7%-9% 9%-13% 20%+

Covenants None/Limited Limited Incurrence Only Limited Limited

Low LTV High LTV

25 Cyclical: Credit Markets in Context

High Yield Funds Report Third Inflow in the Last Twelve Months(1)

Increase in Distressed Trading Levels(1)

An increase in distressed trading levels and investor losses resulted in increased outflows from the high yield market and retail investors

$9 $7

$5 $2

-$3

$2 $6 $4

$4

-$1 -$4

-$1

$2

-$2

$1 $0

-$3

-$14

$5

-$4

$4 $4

$1

-$1 $0

$3 $1 $0

$3

-$1

-$11

-$5 -$7

$4 $2

-$10

$4

$8

-$3 $0

$0

-$8

-$2 -$5

-$3

$9

-$4

-$12

-$4

$5 $5

-$15

-$10

-$5

$0

$5

$10

$15

Monthly High Yield Fund Flows ($ in billions)

(1) J.P. Morgan. Distressed Trading Level data through February 2016.

Contact

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Robert Mason Partner T:+1 416.216.2967 robert.mason@nortonrosefulbright.com

Michael Wahl Associate 1 416.216.2999 michael.wahl@nortonrosefulbright.com

If you have any questions regarding today’s presentation or would like to discuss any of the topics that have been presented, please feel free to stay behind or leave your business card behind and we will be sure to follow-up with you. Thank you.

Resource material

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