Shares of trading and mining company Glencore continue to fall. A look at the conditions under which the company is no longer able to service its debt or continue restructuring, with David Wang, Analyst, Morningstar.
Franco-Nevada Corp raised $550-million (U.S.) and struck a deal to buy precious metal from one of Glencore PLC's mines, the Canadian company's second big acquisition in less than a year.
Franco-Nevada, which buys streams of future precious metal production from miners, will use $500-million of the proceeds to pay for production from Glencore's Antapaccay mine in Peru.
The company raised the $550-million by selling 11.5 million shares at $47.85 in a bought deal to a group of banks led by Bank of Montreal. The share offering is priced at a 5-per-cent discount to the company's closing stock price on Wednesday.
The Antapaccay announcement comes about six months after Franco-Nevada paid $610-million for future silver production from another Peruvian mine called Antamina, which is jointly owned by a group of miners including Glencore.
The rout in metal prices has forced indebted miners such as Glencore to sell assets, giving Franco-Nevada and other financiers an abundance of buying opportunities. Over the past year, Franco-Nevada and its rivals have all gobbled up streams from distressed mining companies.
With gold prices up more than 10 per cent to about $1,200 an ounce on the year, precious metal companies are starting to tap public markets for funds.
Osisko Gold Royalties Ltd. raised $150-million (Canadian) in a bought deal earlier this week.
In a bought deal, underwriters buy the shares and resell them to investors, giving the issuer the funds immediately. Osisko's shares are trading below the offering price.
Franco-Nevada expects the Glencore transaction to close later this month.
Rachelle Younglai