Gold is poured at Agnico-Eagle's Meadowbank Mine.CHRIS WATTIE/Reuters
Franco-Nevada Corp.'s $500-million (U.S.) share offering is struggling to sell, according to sources familiar with the process, and the weak demand has created uncertainty.
At first, the share offering seemed like a sign of hope for the mining sector. Although the volume of industry financings has been ticking higher, progress has been slow, so the large deal made it look like confidence was coming back in a big way. Now that the sale is struggling, there is less reason to be as optimistic about the industry's outlook.
Franco-Nevada's shares have been on a tear in 2014, soaring 41 per cent. To capitalize on the surge, the revenue streaming company, which specializes in gold royalty streams, launched a new share offering on Wednesday afternoon. The deal was priced at a 1.8 per cent discount to yesterday's closing price, but by late Thursday the shares were trading 5.2 per cent below this value.
For this reason, it is more expensive for investors to buy new shares from the deal's underwriters than it is for them to buy Franco-Nevada shares in the market.
Whispers of a Franco-Nevada financing had been circulating around Bay Street for a few weeks, according to an investment banker, and a number of dealers have been bidding for the business, which created a competitive process.
Franco-Nevada could not be reached for comment. Regardless of what happens, the company will receive the full $500-million because the bought deal structure dictates that the underwriters assume liability for selling the shares.
Tim Kiladze