Newmont Mining Corp., the world’s second-largest gold producer, says it may sell Franco-Nevada Corp. in an initial public offering as higher gold and oil prices boost the Canadian unit’s royalties.
Franco-Nevada holds stakes or royalty agreements in 290 projects, including Barrick Gold Corp.’s Goldstrike mine in Nevada and an Xstrata Plc property, the unit said Tuesday in a prospectus filed with Canadian regulators. Details of any share sale will be determined this year or in early 2008, Toronto-based Franco-Nevada said in a statement.
Newmont, which acquired Franco-Nevada in 2002, may seek to raise more than $1.03 billion from the sale, the Globe and Mail newspaper reported, citing analysts it didn’t identify. The new company would be led mostly by managers from Newmont’s former merchant-banking business, Franco-Nevada said.
“This possible public offering is one of several alternatives being considered,” Newmont said in a statement Tuesday.
Newmont said in July it wants to exit the merchant- banking business this year to focus on mining.
Gold and oil prices have surged in recent years as producers have struggled to find new resources to meet rising demand from China and India.
Speculation that the U.S. housing slump will prompt interest-rate cuts has fueled investor buying of gold to hedge against inflation and a weakening dollar.
Franco-Nevada made $48.6 million in dividends and royalties in the first half this year, up from $43.7 million a year earlier, according to the prospectus.
BMO Capital Markets and UBS Securities Canada were hired to arrange the possible sale, Franco-Nevada said.
Newmont rose 38 cents to $46.16 in New York Stock Exchange composite trading. The shares have risen 5.8 percent in the past year, valuing the company at $20.9 billion.
Barrick, based in Toronto, is the world’s biggest gold producer.
