Franco-Nevada to diversify after arranging gold loan

Through its wholly-owned U.S. subsidiary, Franco-Nevada has negotiated the 5-year gold loan with the Chase Manhattan Bank of Canada.

Under the terms of the loan, Franco-Nevada has sold forward 20,000 oz gold for April 1989 delivery at $418.75(US) per oz and plans to draw down approximately $10 million against the credit line in March 1989.

The amount of gold represented by the facility is about 6% of the net smelter royalty reserves at the company’s Goldstrike asset near Elko, Nev.

“This is the first time that anyone has been able to do this with a royalty company,” said Chairman Seymour Schulich.

Franco-Nevada has been able to negotiate the loan by virtue of its 4% royalty and 5% net profit interest in the Goldstrike mine where operator American Barrick Resources (TSE) is planning to accelerate production from 180,000 oz this year to 900,000 oz by 1992. Schulich said his company’s share of production from Goldstrike will add up to 106,000 oz over the next five years.

Proceeds of the gold loan will be used to explore a large copper deposit (37 million tons grading 4% copper) in the Northwest Territories. The deposit is held through Franco-Nevada’s 26 1/2% stake in Toronto-based Redstone Resources (TSE).

After increasing its cash position to $5.1 million on Dec 31 from $4.9 million at the same time last year, Franco-Nevada is preparing to pay its first year-end dividend by March 31.

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