A day after announcing a share sale to finance purchasing precious-metals output from Glencore Plc, Franco-Nevada Corp. increased how big the financing by 45 per cent, citing “strong demand.”
The so-called “bought deal” will raise at least US$800 million through the sale of 16.7 million Franco-Nevada shares for US$47.85 each, the Toronto-based company said in a statement. On Wednesday it had expected to raise a minimum of 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 may be used to pay down the company’s credit facility, and for further investments, general corporate purposes and to fund its US$500 million acquisition of the precious-metals stream on output from Glencore’s Antapaccay mine in Peru. Completion of the offering is not conditional on successfully completing the streaming deal, it said.
Franco-Nevada Chief Executive Officer David Harquail said funding large streaming deals this way may be the coming trend.
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‘There’s a Window’
“We’ll discover towards the extent our shareholders support us by doing this kind of business,” he said late Wednesday inside a telephone interview from Toronto, when asked about the so-called bought deal, where underwriters purchase shares for a cheap price for resale.
“At this time, they’re available and there’s a window to complete these types of transactions,” Harquail said. “A lot of these companies need to recapitalize their balance sheets and we might help them with it. I just want to take advantage of the window while it exists.”
The bought deal is made with a syndicate of Canadian lenders led by Bank of Montreal, based on Thursday’s statement. The banks have an option to buy an additional 15 percent from the offering, which would bring total proceeds to US$920 million.
Companies such as Franco-Nevada have spoken openly about the fact that they are running out of cash to invest, because the interest among mining companies in selling streams on prime assets increases.
Debt Levels
Franco-Nevada has US$290 million in net debt, Harquail said in the Wednesday interview, in addition to a partly drawn US$- billion credit facility. “When we did another US$500 million deal essentially we’re using up our full facility.”
Pursuing bought deals would expand the company’s ability to keep investing, he said. “We never desire to use all of our bullets. So the extent to which our shareholders support us within this, there’s more opportunities for all of us.”
Franco-Nevada has done 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. It also helped Lundin Mining Corp. purchase Candelaria from Freeport-McMoRan Inc. in return for a silver and gold stream.
This newest deal with Glencore is comparable for the reason that it calls for a sizable developed mine.
“Glencore has committed to excess of US$1.5 billion to develop Antapaccay right into a low-cost operation with production that ranks amongst the top 20 copper mines globally,” the company said.
The Bank of Nova Scotia acted as financial adviser to Glencore.
Bloomberg News
