Newmont spinoff decision expected soon
ANDY HOFFMAN AND ANDREW WILLIS
November 16, 2007
Newmont Mining Corp. is expected to decide by next week whether to spin off Franco-Nevada Corp. as a reborn public company or sell its mining and energy royalty subsidiary to a consortium of buyers, who would split up the $1-billion portfolio.
Newmont's representatives are in talks with a group of potential buyers who, if successful in acquiring the portfolio, would separate the mining royalty holdings from those focused on oil and gas.
An outright sale of the royalties portfolio to two or more buyers would put a halt to plans for an initial public offering of a reborn Franco-Nevada. The IPO marketing campaign, which has been playing out for two weeks, could fetch more than $1-billion and rank as the largest share sale debut on the Toronto Stock Exchange this year.
Denver-based Newmont has dispatched competing teams of investment bankers to work separately on the two possible scenarios for the assets, which include royalties in mining projects such as the Stillwater platinum and palladium complex in Montana and Barrick Gold Corp.'s Goldstrike mine in Nevada. The oil and gas holdings include royalties in energy properties in Western Canada and the Canadian Arctic, and mineral rights to more than 100,000 acres of Canadian land.
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Potential buyers interested in the mining-focused assets include Denver-based mining royalty firms Royal Gold Inc. and International Royalty Corp. Sources identified Freehold Royalty Trust of Calgary as a potential suitor for the oil and gas holdings.
If the portfolio was divvied up between mining and energy, a private sale likely worth more than $1-billion in total could prove easier for the royalty firms to finance. Royal Gold has a market value of $861-million and International Royalty is valued at $338-million. Freehold's market capitalization is $744-million.
Newmont spokesman Omar Jabara said if Newmont's board chooses to sell the assets in a private sale, dividing the oil and mining holdings is a strong possibility. "Chances are pretty good that they will go separately," Mr. Jabara said in an interview.
Newmont is selling these assets as it focuses on gold mining. It is in the midst of a friendly $1.5-billion takeover of Miramar Mining Corp.
In order to be chosen by the Newmont board, private buyers would have to pay more for the portfolio than could be raised with the IPO. The private sale process is being led by investment bankers from Citigroup and J.P. Morgan Securities Canada. The IPO team includes bankers from BMO Nesbitt Burns Inc. and UBS Securities.
Premarketing efforts for the potential offering have generated strong interest, sources said, with investors looking for the steady stream of royalty payments as a fresh way to play the booming resource sector.
Industry veteran and former Newmont president Pierre Lassonde will become chairman of Franco-Nevada if the IPO goes ahead. David Harquail, who left Newmont this week and was also an executive at the original Franco-Nevada, will be CEO. One source close to Franco-Nevada said: "For any buyer, the risk in a takeover is that the management won't come with the assets."
Franco-Nevada Mining Corp. was sold to Newmont in 2002 as a part of a $4.2-billion (U.S.) three-way merger.
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