Glencore to sell gold and silver to Franco-Nevada in $500 million deal

Mining and commodities giant Glencore (LON:GLEN) has inked a $500 million deal to deliver gold and silver to Canada’s Franco-Nevada (TSX, NYSE:FNV), as part of the the Swiss company’s ongoing efforts to rebuild its troubled balance sheet.

Toronto-based Franco-Nevada has committed to acquire a precious metal stream from Glencore’s Antapaccay mine in southern Peru, which has been expanding production since late 2012. The company said Wednesday the so-called “bought deal” will raise at least $800 million through the sale of 16.7 million Franco-Nevada shares for $47.85 each.

Franco-Nevada increased the size of the financing by 45% on Wednesday, citing “strong demand.”

The company had said Tuesday it had arranged a $550 million to fund the deal, but increased the size of the financing by 45% on Wednesday, citing “strong demand.”

The miner said some of the proceeds may be used to pay down its credit facility, as well as for further investments and for general corporate purposes.

Franco-Nevada will make payments of 20% of the gold and silver delivered from the mine, increasing them to 30% once Glencore delivers 750,000 ounces of gold and 12.8 million ounces of silver.

The contract follows a similar streaming agreement with Silver Wheaton (TSX, NYSE:SLW) in November to deliver silver from its Antamina mine in Peru in exchange for $900 million.

Streaming firms typically provide a chunk of cash upfront to mining companies to secure a “stream” of precious metals down the road. Streaming deals have become increasingly popular of late, as miners have had great difficulty raising cash on stock and bond markets.