Royalty & Streaming Deal Flow Exceeds $13bn

Issue 105, November 2014

The royalty and streaming sector has pumped over $13bn into the mining industry since 2007, data compiled by Global Mining Observer shows.

The threshold was tripped in October by Franco-Nevada’s $648m gold streaming deal with Lundin Mining, funding its $1.8bn acquisition of the Candelaria copper mine in Chile. Franco has committed $4.7bn to royalty and streaming deals since its demerger from Newmont Mining in 2007, versus $4.8bn deployed by Silver Wheaton over the same period and $2.4bn committed by Denver-based Royal Gold.

Only around $700m was deployed by the sector in the years before 2007, highlighting its sudden and near-secular growth as a source of funding for the industry as a whole.

1 per cent

Royalty and streaming nonetheless remains a fringe source of mining finance, accounting for 1 per cent or less of all capital raised by the industry each year. Mining companies raised $272bn last year, according to accountancy Ernst & Young, down 20 per cent from a peak of $340bn in 2011. That compares to $2.75bn deployed by royalty and streaming companies last year and only around $1.2bn committed so far in 2014.

The drop largely reflects the absence of Silver Wheaton from the market, after a $2bn debt-funded deal binge last year, including a $1.9bn gold agreement with Brazilian group Vale, the sector’s largest transaction to date.

The company has “plenty of capacity on the equity side” for new deals, president Randy Smallwood says, having not issued shares since 2009. “The challenge is that there aren’t a lot of quality projects out there. That’s the biggest hurdle.”

Franco-Nevada has committed $930m to new deals this year, close to record levels for the company. “The best time to buy is when everyone is selling,” says chief executive David Harquail. “We see the current downturn as an opportunity and expect to do more.” The...

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