(All dollar figures are in US dollars unless otherwise
indicated)
TORONTO, July 20, 2015 /CNW/ - New Gold Inc. ("New
Gold") (TSX:NGD) (NYSE MKT:NGD) today announces that the company
has entered into a $175 million
streaming agreement with RGLD Gold AG, a wholly-owned subsidiary of
Royal Gold Inc. ("Royal Gold"). Under the terms of the agreement,
Royal Gold will provide New Gold
with a deposit of $175 million, to be
used for the ongoing development of the company's Rainy River project (the "Project"), in
exchange for a percentage of the future annual gold and silver
production from the Project.
TRANSACTION DETAILS
Upfront Deposit
- Royal Gold to provide New Gold
with a $175 million deposit for the
development of the company's Rainy
River project
- $100 million paid at signing with
the remaining $75 million to be paid
when 60% of the Project development capital has been spent;
expected by mid-2016
Gold and Silver Stream Percentage
- New Gold to deliver 6.50% of the Project's gold production up
to a total of 230,000 ounces of gold, and 3.25% of the Project's
gold production thereafter
- New Gold to deliver 60% of the Project's silver production up
to a total of 3.1 million ounces of silver, and 30% of the
Project's silver production thereafter
Ongoing Cash Purchase Price
- In addition to the upfront deposit, Royal Gold to pay 25% of the average spot gold
or silver price at the time each ounce of gold or silver is
delivered under the stream
"This transaction provides our company with an attractive cost
of capital. It further strengthens our financial position as
construction at Rainy River
continues," stated Randall Oliphant,
Executive Chairman of New Gold. "By partnering with Royal Gold we have been able to secure over 20%
of the remaining development capital for less than 6% of the
estimated future revenues. It increases Rainy River's rate of return to our equity
holders by approximately 3%. In addition, we have structured the
stream in a manner that maximizes our exposure to both the
continued exploration potential of the Rainy River district and
long-term gold and silver prices."
"We are delighted that Royal
Gold's enthusiasm for the project is entirely consistent
with ours and we look forward to completing the development of
Rainy River for the benefit of all
stakeholders," added Mr. Oliphant.
"The Rainy River project fits
well into our high-quality portfolio and met all our criteria for
new investments with nearly four million ounces of gold reserves,
continued exploration upside and projected cash costs below
$600 per ounce," stated Tony Jensen, President and Chief Executive
Officer of Royal Gold. "We are
particularly pleased to add another piece of business in
Canada and partner with New Gold -
a company that is well known for its development track record and
operational expertise."
Additional Stream Agreement Details
Under the terms of the agreement, Royal
Gold will provide New Gold with a deposit of $175 million in exchange for the delivery by New
Gold of a percentage of the future gold and silver production from
the Rainy River project. Royal Gold
has paid $100 million of the deposit
concurrent with entering into the transaction and the remaining
$75 million will be paid when 60% of
the estimated Project development capital has been spent and other
customary conditions precedent are met. Based on the currently
planned timing of development capital expenditures, it is estimated
that 60% of the Project development costs will have been spent by
mid-2016.
Upon the start of production at Rainy
River, New Gold will deliver 6.50% of the Project's monthly
gold production and 60% of the monthly silver production to
Royal Gold until a total of 230,000
ounces of gold and 3.1 million ounces of silver have been delivered
(the "Ounce Thresholds"). Once each of the Ounce Thresholds has
been satisfied, the stream percentage for that metal will decrease
by 50% such that New Gold will be required to deliver 3.25% of the
Project's gold production and 30% of the silver production. In
addition to the $175 million deposit,
Royal Gold will be required to pay
New Gold in cash 25% of the average spot gold price and silver
price at the time the stream ounces are delivered.
The gold and silver stream will cover future production from New
Gold's current Rainy River land
package, plus an additional two-kilometre area of interest, but
excluding any potential future mineralization discovered on New
Gold's Off Lake exploration claims located several kilometres to
the northeast of the Rainy River deposit.
Rainy River Project Update
Development activity at New Gold's Rainy River project, located in northwestern
Ontario, has continued to advance
on schedule, with first production remaining on target for
mid-2017. Over its first nine years of full production, the 21,000
tonne per day, combined open pit-underground operation is expected
to produce an average of 325,000 ounces of gold per year at well
below industry average costs.
RAINY RIVER – SECOND QUARTER
2015 PROJECT UPDATES
- Permits to enable commencement of major earthworks construction
received in May
- Detailed engineering – on schedule and approximately 95%
complete
- Construction-related activities progressing on schedule
- Temporary accommodation facility – 80% complete
- First major earthworks for the process plant site commenced in
May; scheduled for completion in the fourth quarter of 2015
- Delivery of initial truck fleet and shovels scheduled for the
third quarter of 2015
- Delivery of mills scheduled for the fourth quarter of 2015
- Five prospective areas within five-kilometre radius of mine
development area identified for future drill testing
Capital expenditures at Rainy
River during the second quarter totalled $32 million, bringing the project development
capital spending through June 30,
2015 to $119 million. Through
mid-2015, New Gold has spent 14% of the total development capital
estimate of $877 million.
New Gold Financial Flexibility
The completion of the stream transaction will provide New Gold
with a further $175 million of
financial flexibility which supplements the liquidity already
available to the company from its current cash balance, future free
cash flow generation from its four operations and New Gold's
revolving credit facility.
New Gold's June 30, 2015 cash
balance of $327 million together with
Royal Gold's full $175 million deposit and the amount available for
drawdown under New Gold's revolving credit facility provide the
company with approximately $738
million of liquidity relative to Rainy River's remaining project development
capital of approximately $760
million. The amount of free cash flow generated by New
Gold's four operations over the coming two years will determine the
amount, if any, that is required to be drawn on the company's
revolving credit facility to complete the development of
Rainy River. In 2014, New Gold's
net cash generated from operations less sustaining capital
expenditures was $143 million.
The company looks forward to advancing the Rainy River project
and providing further updates on its development through the
remainder of 2015 and beyond.
New Gold will discuss the transaction as part of the company's
second quarter earnings call scheduled for 9:00 a.m. Eastern time on Wednesday, July 29, 2015.
CONFERENCE CALL DETAILS
New Gold plans to release its second quarter 2015 financial
results after market close on Tuesday, July
28, 2015. A webcast and conference call to discuss these
results and the streaming transaction will be held on Wednesday, July 29, 2015 at 9:00 a.m. Eastern time. Participants may listen
to the webcast by registering on our website at www.newgold.com.
You may also listen to the conference call by calling toll free
1-888-231-8191, or 1-647-427-7450 outside of the U.S. and
Canada. A recorded playback of the
conference call will be available until August 31, 2015 by calling toll free
1-855-859-2056, or 1-416-849-0833 outside of the U.S. and
Canada, passcode 76281198. An
archived webcast will also be available until October 28, 2015 at www.newgold.com.
ABOUT NEW GOLD INC.
New Gold is an intermediate gold mining company. The company has
a portfolio of four producing assets and three significant
development projects. The New Afton Mine in Canada, the Mesquite Mine in the United States, the Peak Mines in
Australia and the Cerro San Pedro
Mine in Mexico, provide the
company with its current production base. In addition, New Gold
owns 100% of the Rainy River and Blackwater projects, both in
Canada, as well as 30% of the El
Morro project located in Chile.
New Gold's objective is to be the leading intermediate gold
producer, focused on the environment and social responsibility. For
further information on the company, please visit
www.newgold.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information contained in this news release, including
any information relating to New Gold's future financial or
operating performance, is "forward looking". All statements in this
news release, other than statements of historical fact, which
address events, results, outcomes or developments that New Gold
expects to occur are "forward-looking statements". Forward-looking
statements are statements that are not historical facts and are
generally, but not always, identified by the use of forward-looking
terminology such as "plans", "expects", "is expected", "budget",
"scheduled", "targeted", "estimates", "forecasts", "intends",
"anticipates", "projects", "potential", "believes" or variations of
such words and phrases or statements that certain actions, events
or results "may", "could", "would", "should", "might" or "will be
taken", "occur" or "be achieved" or the negative connotation of
such terms. Forward-looking statements in this news release
include, among others, statements with respect to: payment of the
remaining $75 million from
Royal Gold and the timing of such
payment, expected production, costs and operating parameters of the
Rainy River project; expected timing for production from
Rainy River and the expected
development cost; sources of future liquidity to fund the
construction of Rainy River; and
expected timing of activities and deliveries at Rainy River.
All forward-looking statements in this news release are based on
the opinions and estimates of management as of the date such
statements are made and are subject to important risk factors and
uncertainties, many of which are beyond New Gold's ability to
control or predict. Certain material assumptions regarding such
forward-looking statements are discussed in this news release, New
Gold's annual and quarterly management's discussion and analysis
("MD&A"), its Annual Information Form and its Technical Reports
filed at www.sedar.com. In addition to, and subject to, such
assumptions discussed in more detail elsewhere, the forward-looking
statements in this news release are also subject to the following
assumptions: (1) there being no significant disruptions affecting
New Gold's operations and development activities; (2) political and
legal developments in jurisdictions where New Gold operates, or may
in the future operate, being consistent with New Gold's current
expectations; (3) the accuracy of New Gold's current mineral
reserve and resource estimates; (4) the exchange rate between the
Canadian dollar and U.S. dollar being approximately consistent with
current levels; (5) prices for diesel, natural gas, fuel oil,
electricity and other key supplies being approximately consistent
with current levels; (6) equipment, labour and materials costs
increasing on a basis consistent with New Gold's current
expectations; (7) arrangements with First Nations and other
Aboriginal groups in respect of Rainy
River being consistent with New Gold's current expectations;
(8) all required permits, licenses and authorizations being
obtained from the relevant governments and other relevant
stakeholders within the expected timelines; and (9) the results of
the feasibility study for the Rainy River projects being
realized.
Forward-looking statements are necessarily based on estimates
and assumptions that are inherently subject to known and unknown
risks, uncertainties and other factors that may cause actual
results, level of activity, performance or achievements to be
materially different from those expressed or implied by such
forward-looking statements. Such factors include, without
limitation: significant capital requirements and the availability
and management of capital resources; additional funding
requirements; price volatility in the spot and forward markets for
metals and other commodities; fluctuations in the international
currency markets and in the rate of exchange between the Canadian
and U.S. dollar; discrepancies between actual and estimated
production, between actual and estimated reserves and resources and
between actual and estimated metallurgical recoveries; changes in
national and local government legislation in Canada; taxation; the speculative nature of
mineral exploration and development, including the risks of
obtaining and maintaining the validity and enforceability of the
necessary licenses and permits and complying with the permitting
requirements of each jurisdiction in which New Gold operates; the
uncertainties inherent to current and future legal challenges New
Gold is or may become a party to; loss of key employees; rising
costs of labour, supplies, fuel and equipment; actual results of
current exploration; uncertainties inherent to mining economic
studies including the feasibility study for Rainy River; changes in project parameters as
plans continue to be refined; accidents; labour disputes; defective
title to mineral claims or property or contests over claims to
mineral properties; unexpected delays and costs inherent to
consulting and accommodating rights of First Nations and other
Aboriginal groups; uncertainties with respect to obtaining all
necessary surface and other land use rights or tenure for
Rainy River; and risks,
uncertainties and unanticipated delays associated with obtaining
and maintaining necessary licenses, permits and authorizations and
complying with permitting requirements. In addition, there are
risks and hazards associated with the business of mineral
exploration, development and mining, including environmental events
and hazards, industrial accidents, unusual or unexpected
formations, pressures, cave-ins, flooding and gold bullion losses
(and the risk of inadequate insurance or inability to obtain
insurance to cover these risks) as well as "Risk Factors" included
in New Gold's Annual Information Form and Management's Discussion
and Analysis for the year ended December 31,
2014 filed on and available at www.sedar.com.
Forward-looking statements are not guarantees of future
performance, and actual results and future events could materially
differ from those anticipated in such statements. All of the
forward-looking statements contained in this news release are
qualified by these cautionary statements. New Gold expressly
disclaims any intention or obligation to update or revise any
forward-looking statements.
SOURCE New Gold Inc.