Franco-Nevada
Encyclopedia
Franco-Nevada Corporation is a Canadian company that owns royalties
in gold mining
and other commodity and natural resource investments. It is traded on the Toronto Stock Exchange
and NYSE Arca stock exchange.
Franco-Nevada was founded in 1983 as a mineral exploration
company. It shifted its focus to gold royalties in 1985. Following several royalty acquisitions in the 1980s and 1990s, Franco-Nevada sold its only mining property to Normandy Mining
in exchange for a fifth of the company's shares. This made Franco-Nevada into a target for takeover by rival companies Newmont Mining Corporation and Anglo Gold.
In 2002, Newmont acquired 100% of Franco-Nevada. Newmont maintained Franco-Nevada as a royalty holding division, transferring numerous other royalties to it over the five year period following the acquisition, building its portfolio of royalties to include investments in almost 300 companies (two-thirds in base
s and precious metal
miners, and one-third in oil
and natural gas
). In 2007 Newmont spun off Franco-Nevada in an Initial Public Offering
.
and Pierre Lassonde made the decision to focus on investing in royalties. At the time, oil and gas royalty ownership—but not gold royalty ownership—was an established business strategy. In 1985 Franco-Nevada raised $930,000 to purchase gold royalties in a follow-on offering. The company made its first royalty investment in 1986, spending half the corporate treasury ($2 million) to acquire 4% of revenues from a mine in Nevada
owned by Western States Minerals. The mine had an annual production of 44000 ounces (1,247,379 g) of gold. Franco-Nevada assumed that known reserves would allow the royalty to pay for itself regardless of additional exploration results. By 2002 the property generated $23 million annually for Franco-Nevada.
In 1988 Franco-Nevada purchased a royalty on the Castle Mountain mine in California
. Despite the Castle Mountain mine being unsuccessful, losing money and eventually closing, Franco-Nevada collected triple its investment of $2.8 million.
Franco-Nevada further went on to purchase royalties in various other commodities, but continued its focus on gold.
on the Toronto Stock Exchange, raising CA$1.1 billion and diluting Newmont's ownership from 100% to about 7% [ref press release]. The IPO partially funded the US$1.3 billion acquisition of a large portfolio of royalties from Newmont. The listing was one of the largest in Canadian history, second only to the 2000 Sun Life
IPO, and the largest mining IPO in North American History.
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
in gold mining
Gold mining
Gold mining is the removal of gold from the ground. There are several techniques and processes by which gold may be extracted from the earth.-History:...
and other commodity and natural resource investments. It is traded on the Toronto Stock Exchange
Toronto Stock Exchange
Toronto Stock Exchange is the largest stock exchange in Canada, the third largest in North America and the seventh largest in the world by market capitalisation. Based in Canada's largest city, Toronto, it is owned by and operated as a subsidiary of the TMX Group for the trading of senior equities...
and NYSE Arca stock exchange.
Franco-Nevada was founded in 1983 as a mineral exploration
Mineral exploration
Mineral exploration is the process of finding ore to mine. Mineral exploration is a much more intensive, organized and professional form of mineral prospecting and, though it frequently uses the services of prospecting, the process of mineral exploration on the whole is much more involved.-Stages...
company. It shifted its focus to gold royalties in 1985. Following several royalty acquisitions in the 1980s and 1990s, Franco-Nevada sold its only mining property to Normandy Mining
Normandy Mining
Normandy Mining was an Australian mining company which predominantly mined gold. Normandy was, during much of the late 20th century, Australia's largest gold miner....
in exchange for a fifth of the company's shares. This made Franco-Nevada into a target for takeover by rival companies Newmont Mining Corporation and Anglo Gold.
In 2002, Newmont acquired 100% of Franco-Nevada. Newmont maintained Franco-Nevada as a royalty holding division, transferring numerous other royalties to it over the five year period following the acquisition, building its portfolio of royalties to include investments in almost 300 companies (two-thirds in base
Base metal
In chemistry, the term base metal is used informally to refer to a metal that oxidizes or corrodes relatively easily, and reacts variably with diluted hydrochloric acid to form hydrogen. Examples include iron, nickel, lead and zinc...
s and precious metal
Precious metal
A precious metal is a rare, naturally occurring metallic chemical element of high economic value.Chemically, the precious metals are less reactive than most elements, have high lustre, are softer or more ductile, and have higher melting points than other metals...
miners, and one-third in oil
Oil
An oil is any substance that is liquid at ambient temperatures and does not mix with water but may mix with other oils and organic solvents. This general definition includes vegetable oils, volatile essential oils, petrochemical oils, and synthetic oils....
and natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
). In 2007 Newmont spun off Franco-Nevada in an Initial Public Offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
.
Early history
Franco-Nevada initially began trading as a public gold exploration company in 1983 with no real success. In 1995 Franco-Nevada executives Seymour SchulichSeymour Schulich
Seymour Schulich, CM is a Canadian businessman and philanthropist. -Biography:Schulich graduated from McGill University with a B.Sc. in 1961 and an MBA in 1965. He earned a Chartered Financial Analyst designation through the University of Virginia in 1969.He is married to Tanna and they live in...
and Pierre Lassonde made the decision to focus on investing in royalties. At the time, oil and gas royalty ownership—but not gold royalty ownership—was an established business strategy. In 1985 Franco-Nevada raised $930,000 to purchase gold royalties in a follow-on offering. The company made its first royalty investment in 1986, spending half the corporate treasury ($2 million) to acquire 4% of revenues from a mine in Nevada
Nevada
Nevada is a state in the western, mountain west, and southwestern regions of the United States. With an area of and a population of about 2.7 million, it is the 7th-largest and 35th-most populous state. Over two-thirds of Nevada's people live in the Las Vegas metropolitan area, which contains its...
owned by Western States Minerals. The mine had an annual production of 44000 ounces (1,247,379 g) of gold. Franco-Nevada assumed that known reserves would allow the royalty to pay for itself regardless of additional exploration results. By 2002 the property generated $23 million annually for Franco-Nevada.
In 1988 Franco-Nevada purchased a royalty on the Castle Mountain mine in California
California
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
. Despite the Castle Mountain mine being unsuccessful, losing money and eventually closing, Franco-Nevada collected triple its investment of $2.8 million.
Franco-Nevada further went on to purchase royalties in various other commodities, but continued its focus on gold.
Newmont take over
In April 2001, Franco-Nevada sold the Nevada Midas mine, its only wholly owned mine, to Normandy Mining in exchange for 20% of the Normandy and a five-percent royalty on the mine. That September, Anglo Gold made a bid for Normandy at a valuation 60% greater than Franco-Nevada's acquisition cost. Seeing the potential to take advantage of Newmont's rivalry with Anglo, Schulich and Lassonde approached Newmont Mining Corporation to discuss purchasing Franco-Nevada and Normandy, striking a deal richer than Anglo's offer, and ultimately valuing Franco-Nevada shares at a 22% premium.Split from Newmont
In 2007 Franco-Nevada launched an initial public offeringInitial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
on the Toronto Stock Exchange, raising CA$1.1 billion and diluting Newmont's ownership from 100% to about 7% [ref press release]. The IPO partially funded the US$1.3 billion acquisition of a large portfolio of royalties from Newmont. The listing was one of the largest in Canadian history, second only to the 2000 Sun Life
Sun Life Financial
Sun Life Financial Inc. is an international financial services company known primarily as a life insurance company. Based in Toronto, Canada, Sun Life and its partners provide insurance, retirement and investment solutions for individuals and businesses around the world including Canada, the United...
IPO, and the largest mining IPO in North American History.