Franco-Nevada Corp boosts size of share sale by 45% following Glencore Plc deal

A day after announcing a share sale to fund purchasing precious-metals output from Glencore Plc, Franco-Nevada Corp. increased the size of the financing by 45 percent, citing “strong demand.”

The so-called “bought deal” will raise at least US$800 million with the sale of 16.7 million Franco-Nevada shares for US$47.85 each, the Toronto-based company said inside a statement. On Wednesday it had expected to raise at least US$550 million inside a bought deal. Franco-Nevada’s shares rose 2.3 per cent to US$51.51 at 12:10 p.m. in New York.

The company now says a few of the proceeds enables you to reduce the company’s credit facility, as well as for further investments, general corporate purposes and also to fund its US$500 million purchase of the precious-metals stream on output from Glencore’s Antapaccay mine in Peru. Completing the offering is not conditional on successfully completing the streaming deal, it said.

Franco-Nevada Ceo David Harquail said funding large streaming deals by doing this may be the wave of the future.

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‘There’s a Window’

“We’ll discover to the extent our shareholders support us in doing this kind of company,” he explained late Wednesday in a telephone interview from Toronto, when asked about the so-called bought deal, where underwriters purchase shares at a discount for resale.



“Right now, they’re available and there’s a window to complete these types of transactions,” Harquail said. “A lot of these companies have to recapitalize their balance sheets and we might help them with it. Among the finest to consider advantage of your window while it exists.”

The bought deal was made by a syndicate of Canadian lenders led by Bank of Montreal, according to Thursday’s statement. Banks come with an choice to buy one more 15 percent from the offering, which would bring total proceeds to US$920 million.

Companies for example Franco-Nevada have spoken openly concerning the fact that they are not having enough cash to invest, as the interest among mining companies in selling streams on prime assets increases.

Debt Levels

Franco-Nevada has US$290 million in net debt, Harquail said in the Wednesday interview, as well as a partly drawn US$- billion credit facility. “When we did another US$500 million deal essentially we’re depleting our full facility.”

Pursuing bought deals would expand the company’s ability to keep investing, he said. “We never desire to use all our bullets. Therefore the extent that our shareholders support us within this, there’s more opportunities for all of us.”

Franco-Nevada has been doing other large streaming deals since 2014. It bought a silver stream on Antamina from Teck Resources Ltd. in October that included an upfront payment of US$610 million. Additionally, it helped Lundin Mining Corp. purchase Candelaria from Freeport-McMoRan Inc. in exchange for a gold and silver stream. 

This newest cope with Glencore is comparable for the reason that it calls for a large developed mine.

“Glencore has invested in more than US$1.5 billion to develop Antapaccay into a low-cost operation with production that ranks amongst the top 20 copper mines globally,” the company said.

The Bank of Quebec acted as financial adviser to Glencore.

Bloomberg News