Royal Gold To Sell Shs To Fund $295M Teck Buy

Royal Gold Inc. will offer 6.5 million shares to help fund its $295 million acquisition of Teck Cominco Ltd.'s Andacollo mine, announced Monday, April 6.
HSBC Securities (USA) Inc. is the global coordinator and acting as joint bookrunner with Goldman, Sachs & Co. and Scotia Capital (USA) Inc. Bank of America Merrill Lynch and NBF Securities (USA) Corp. are acting as co-managers.
The Vancouver, British Columbia, mining company sold a 90% royalty interest in the Andacollo mine in Chile as part of an ongoing strategic review. BMO Capital Markets Corp. advised Teck Cominco on the deal.
Royal Gold will pay $100 million in cash and 4.45 million common shares to Teck, which has been considering asset sales since Nov. 12. It loaded up on debt for its last major acquisition, a $13 billion-plus takeover of Fording Canadian Coal Trust.
The Andacollo mine is 217 miles north of Santiago, Chile's capital, and has been in production since 1996.
Teck spokeswoman Sarah Goodman said the deal is part of a threefold strategy for the company, which is trying to ramp up its cash flow to pay down debt.
"We're doing this through efforts to reduce costs and through assets sales. Obviously, this announcement is a step in that direction," she said.
Teck is trying to reduce and refinance its $5.35 billion bridge loan due in October through the Fording deal. A $4 billion senior term loan facility also helped finance the takeover, and Teck has to begin paying that this month.
Along with selling an interest in one of its gold mines, Teck continues to look at putting assets on the block, according to Goodman.
"We also want to strengthen our asset base," she said, explaining that Teck wants to develop its other holdings. The company has assets throughout Canada, the U.S. and Peru, as well as Chile. "This transaction freed up some money to do that," Goodman added.
"This transaction is a unique opportunity and has all the characteristics we look for in an acquisition," said Royal Gold president and CEO Tony Jensen in a statement.
The deal should close in the second quarter. Teck Cominco in February agreed to sell its 50% stake in the Hemlo gold operations of northwest Ontario to Toronto joint venture partner Barrick Gold Corp. for $65 million. It has been selling off interests to strategic partners since last fall.
Royal Gold officials did not return calls seeking comment.
Teck Cominco is a minerals company. It produces copper, coal, zinc and gold. It has a market capitalization of $3.33 billion.
Royal Gold is a precious-metals royalties company. It has a market capitalization of $1.37 billion.