Franco-Nevada Sees Mine Deals Affected by Canada Tax Move – by Danielle Bochove (Bloomberg News – July 8, 2015)

Franco-Nevada Corp., a Canadian company that invests in mining, said a government review of how a competitor will be taxed on foreign earnings could in future lower the profitability of some financing projects.

“It just changes the level of where these deals would get bid,” Franco-Nevada Chief Executive Officer David Harquail said Wednesday in a telephone interview.

He was referring to so-called streaming arrangements in which companies such as Franco-Nevada help fund a mining company in exchange for a percentage of future revenue from the operation in the form of discounted metals.

Streaming company Silver Wheaton Corp. said Tuesday the Canada Revenue Agency wants to reassess as much as C$715 million ($562 million) in earnings from its foreign subsidiaries. This could result in more than $200 million in back taxes and penalties for the years 2005-2010, Andrew Kaip, a Toronto-based analyst at Bank of Montreal, said in a note Tuesday.

Harquail said he believes Silver Wheaton will have to factor the tax risk into future streaming bids.

“I think that’s the way we’ll be bidding them as well,” he said.

Silver Wheaton said it saw different consequences as a result of the CRA letter.

“Our approach going forward is, we know this is going to be there but we’re not going to have to start factoring it,” Randy Smallwood said Wednesday by phone. “Tax does not decide if we win or lose.

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