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Franco-Nevada To Acquire Precious-Metals Stream From Glencore For $500 Million

(Kitco News) - Franco-Nevada To Acquire Precious-Metals Stream From Glencore For $500 Million

A Franco-Nevada Corp. (TSX, NYSE: FNV) subsidiary has agreed to acquire a precious-metals stream for production from Glencore Plc’s Antapaccay copper mine, located in southern Peru, for $500 million.
Franco Nevada has also arranged in $550 million in financing to fund the deal, the company announced late Wednesday.

Franco-Nevada said the company is expecting 60,000 to 70,000 gold-equivalent ounces from the stream in 2016. Full-year stream contributions to Franco-Nevada are expected to average 70,000 to 80,000 gold-equivalent ounces over the next five years, the company added. Glencore's current mine plan, based on the mineral reserves, projects production to 2030.

"Following our recent Antamina and Candelaria investments, this is yet another step in strengthening and diversifying Franco-Nevada's portfolio with some of the best mining projects in the world,” said David Harquail, president and chief executive officer of Franco-Nevada. “This investment is expected to be immediately accretive and provide our shareholders with gold price optionality over multiple cycles and potential further exploration and expansion upside."

Glencore will use the proceeds from the agreement as part of its debt-reduction plan, according to news reports.

Shares of Franco Nevada Corp.

The streaming agreement is expected to close yet this month. Franco Nevada will also initially pay an ongoing price of 20% of the spot price of gold and silver until 750,000 ounces of refined gold and 12.8 million ounces of silver have been delivered. Then, the ongoing price will increase to 30% of the spot price of gold and silver.

Franco Nevada reported that the Antapaccay open-pit mine has been expanding throughput rates and production since late 2012. Glencore has invested more than $1.5 billion to develop Antapaccay into a low-cost operation with production that ranks amongst the top 20 copper mines globally.

To fund the stream with Glencore, Franco Nevada reported that it entered into an agreement with underwriters that will purchase 11.5 million shares of Franco Nevada at $47.85 per share for gross proceeds of $550 million. The banks include BMO Capital Markets, CIBC Capital Markets, RBC Capital Markets and Scotiabank.
“The company plans to use the net proceeds of the offering for the funding of Franco-Nevada's acquisition of a precious metals stream (for) production from Glencore Plc's Antapaccay mine…, and the balance will be added to the working capital of the company and used for further investments and other general corporate purposes,” Franco Nevada said.

By Allen Sykora of Kitco News;



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