(All dollar figures are in US dollars unless otherwise
indicated)
TORONTO, Aug. 27, 2015 /CNW/ - New Gold Inc. ("New
Gold") (TSX:NGD) (NYSE MKT:NGD) today announces that the company
has entered into an agreement with Goldcorp Inc. ("Goldcorp") to
sell New Gold's 30% interest in the El Morro project to Goldcorp in
exchange for $90 million in cash, a
4% stream on gold production from the El Morro property and the
cancellation of New Gold's $93
million carried funding loan (the "Transaction"). The
Transaction provides New Gold with increased financial flexibility,
strengthens the balance sheet and enables the company to maintain
exposure to El Morro's significant 8.9 million ounce gold reserve
and ongoing exploration potential.
KEY TRANSACTION HIGHLIGHTS
$90 million cash consideration
- $90 million, less applicable
withholding taxes, to be paid at closing of the Transaction,
expected to be in the fourth quarter of 2015
4% stream on gold production from the El Morro property
- 4% stream on life-of-project gold production from the 417
square kilometre El Morro property
- El Morro's currently estimated gold mineral reserves – 599
million tonnes at an average gold grade of 0.46 grams per tonne,
totalling 8.9 million ounces
- Measured and Indicated mineral resources (exclusive of
reserves) – 92 million tonnes at an average gold grade of 0.41
grams per tonne, totalling 1.2 million ounces
- Inferred mineral resources (including open pit and underground
resources) – 678 million tonnes at an average gold grade of 0.30
grams per tonne, totalling 6.5 million ounces
- New Gold to pay fixed $400 per
ounce on the first 217,000 ounces of gold delivered as part of the
stream
$93 million carried funding loan
cancelled
- New Gold will no longer be obligated to repay the $93 million in debt that Goldcorp (and previous
joint venture partners) funded on the company's behalf
In conjunction with the Transaction, Goldcorp and Teck Resources
Limited ("Teck") today announced that they plan to combine their
respective El Morro and Relincho projects into a 50/50 joint
venture with the interim name of Project Corridor.
"This transaction makes strategic sense for all of the parties
involved," stated Randall Oliphant,
Executive Chairman of New Gold. "We believe Goldcorp and Teck have
developed a creative and thoughtful approach to bring their
projects together. It is logical for two large, well-capitalized,
proven operators to carry Project Corridor forward. At the same
time, New Gold has taken this opportunity to further enhance our
financial flexibility and strengthen our balance sheet while
retaining a meaningful, low-cost stream on El Morro's significant
gold reserves and ongoing potential."
"Goldcorp has been an excellent partner at El Morro over the
last five years and we look forward to Goldcorp and Teck
progressing Project Corridor for the benefit of all stakeholders,"
added Mr. Oliphant.
Additional Transaction Details
Based on the results of the Project Corridor Preliminary
Economic Assessment, when ore is sourced from El Morro, gold
production is expected to average over 400,000 ounces per year
which would enable New Gold to purchase over 16,000 ounces of gold
per year at $400 per ounce.
The cash purchase price for gold delivered under the stream is
fixed at $400 per ounce for the first
217,000 ounces of gold, where 217,000 ounces reflects 4% of El
Morro's currently estimated recoverable gold production.
Thereafter, the cash purchase price will be $400 per ounce plus an annual 1% inflation
adjustment.
Goldcorp and Teck are expecting to commence a Pre-Feasibility
Study in early 2016 which should be completed 12 to 18 months
thereafter.
El Morro has generated a significant return for the company
since it was originally brought into the portfolio by one of New
Gold's predecessor companies in 1996. Including the costs
associated with optioning into the property and subsequent
exploration expenditures, the company has spent less than
$7 million for its interest in El
Morro. In return for this investment, New Gold received a
$50 million payment from Goldcorp in
2010 when Goldcorp became the company's 70% joint venture partner,
as well as the cash proceeds related to today's Transaction.
Importantly, beyond these two cash payments, New Gold continues to
maintain meaningful exposure to the El Morro project through the 4%
gold stream. From an accounting perspective, the company expects to
realize a non-cash loss of approximately $100 million on the sale of its 30% interest in
El Morro, primarily related to the purchase accounting value
assigned to the project at the time of the New Gold's three-way
merger in 2008.
Closing of the Transaction is conditional upon the closing of
the El Morro-Relincho joint venture between Goldcorp and Teck as
well as other customary conditions. The Transaction is expected to
close in the fourth quarter of 2015.
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 an interest in
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 are "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 the anticipated
benefits and effects of the Transaction, including the ability of
the parties to satisfy the conditions of and complete Transaction;
the ability of Teck and Goldcorp to satisfy the conditions of and
complete the El Morro-Relincho joint venture ("Project Corridor");
the estimation of mineral reserves and mineral resources and
metallurgical recoveries; the timing and amount of estimated future
production from the El Morro property; and the completion of a
pre-feasibility study for Project Corridor.
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. 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 assumptions regarding: (1) conditions
to closing of the Transaction being satisfied in a timely manner;
(2) conditions to closing of Project Corridor being satisfied in a
timely manner; (3) the future business strategies and the
environment in which Goldcorp and Teck will operate, including the
price of commodities and anticipated costs of developing Project
Corridor; (4) political and legal developments in Chile being consistent with the parties'
current expectations; (5) the accuracy of current mineral reserve
and resource estimates; (6) all required permits, licenses and
authorizations being obtained from the relevant governments and
other relevant stakeholders within the expected timelines; and (7)
the results of the conceptual design of Project Corridor 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: the Transaction not closing when planned; delay or
failure to receive regulatory approvals or the failure to satisfy
other closing conditions to the Transaction or Project Corridor;
future mineral prices; discrepancies between actual and estimated
production, mineral reserves and resources and metallurgical
recoveries; estimated mine life and sequencing of ore from the El
Morro property and the Relincho property; conclusions of economic
evaluations; litigation risks; mining operational and development
risks; general business, economic, competitive, political and
social uncertainties; currency exchange rate fluctuations; not
realizing the potential benefits of the Transaction or Project
Corridor; changes in parameters as plans continue to be refined; as
well as those risks identified in New Gold's filings with Canadian
securities regulators, which may be viewed at www.sedar.com.
Although New Gold has attempted to identify important factors
that could cause actual results to differ materially from those
contained in forward-looking statements and information, there may
be other factors that cause results not to be as anticipated,
estimated or intended.
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 whether as a result of new information,
events or otherwise, except in accordance with applicable
securities laws.
CAUTIONARY NOTE TO U.S. READERS CONCERNING ESTIMATES OF
MINERAL RESERVES AND MINERAL RESOURCES
Information concerning the properties and operations of New Gold
has been prepared in accordance with Canadian standards under
applicable Canadian securities laws, and may not be comparable to
similar information for United
States companies. The terms "Mineral Resource", "Measured
Mineral Resource", "Indicated Mineral Resource" and "Inferred
Mineral Resource" used in this news release are Canadian mining
terms as defined in the Canadian Institute of Mining, Metallurgy
and Petroleum ("CIM") Definition Standards for Mineral Resources
and Mineral Reserves adopted by CIM Council on May 10, 2014 and incorporated by reference in
National Instrument 43-101 ("NI 43-101"). While the terms
"Mineral Resource", "Measured Mineral Resource", "Indicated Mineral
Resource" and "Inferred Mineral Resource" are recognized and
required by Canadian securities regulations, they are not defined
terms under standards of the United States Securities and Exchange
Commission. As such, certain information contained in this
news release concerning descriptions of mineralization and mineral
resources under Canadian standards is not comparable to similar
information made public by United
States companies subject to the reporting and disclosure
requirements of the United States Securities and Exchange
Commission.
An "Inferred Mineral Resource" has a great amount of uncertainty
as to its existence and as to its economic and legal
feasibility. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of feasibility or
pre-feasibility studies. It cannot be assumed that all or any
part of an "Inferred Mineral Resource" will ever be upgraded to a
higher confidence category through additional exploration drilling
and technical evaluation. Readers are cautioned not to
assume that all or any part of an "Inferred Mineral Resource"
exists or is economically or legally mineable.
Under United States standards,
mineralization may not be classified as a "Reserve" unless the
determination has been made that the mineralization could be
economically and legally produced or extracted at the time the
reserve estimation is made. Readers are cautioned not to
assume that all or any part of the measured or indicated mineral
resources will ever be converted into mineral reserves. In
addition, the definitions of "Proven Mineral Reserves" and
"Probable Mineral Reserves" under CIM standards differ in certain
respects from the standards of the United States Securities and
Exchange Commission.
EL MORRO MINERAL RESERVES AND RESOURCES (ON A 100%
BASIS)
EL MORRO MINERAL
RESERVES AND RESOURCES SUMMARY TABLE AS AT DECEMBER 31, 2014 (100%
basis)
|
|
|
Metal
grade
|
Contained
metal
|
|
Tonnes
000s
|
Gold
g/t
|
Silver
g/t
|
Copper
%
|
Gold
Koz
|
Silver
Koz
|
Copper
Mlbs
|
|
|
|
|
|
|
|
|
MINERAL
RESERVES
|
|
|
Proven
|
321,814
|
0.56
|
-
|
0.55
|
5,820
|
-
|
3,877
|
Probable
|
277,240
|
0.35
|
-
|
0.43
|
3,097
|
-
|
2,627
|
Total El Morro
P&P
|
599,054
|
0.46
|
-
|
0.49
|
8,917
|
-
|
6,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEASURED AND
INDICATED MINERAL RESOURCE
|
|
|
Measured
|
19,790
|
0.53
|
-
|
0.51
|
340
|
-
|
223
|
Indicated
|
72,563
|
0.38
|
-
|
0.39
|
883
|
-
|
630
|
Total El Morro
M&I
|
92,353
|
0.41
|
-
|
0.42
|
1,220
|
-
|
853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INFERRED
RESOURCE
|
|
|
El Morro - Open
Pit
|
564,217
|
0.16
|
-
|
0.26
|
2,903
|
-
|
3,233
|
El Morro -
Underground
|
113,840
|
0.97
|
-
|
0.78
|
3,550
|
-
|
1,957
|
NOTES TO MINERAL RESERVE AND RESOURCE ESTIMATES
- New Gold's mineral reserves have been estimated in accordance
with the Canadian Institute of Mining, Metallurgy and Petroleum
("CIM") Definition Standards for Mineral Resources and Mineral
Reserves adopted by CIM Council on May 10,
2014 and incorporated by reference in National Instrument
43-101 ("NI 43-101").
- For year-end 2014 mineral reserves for the El Morro property
have been estimated based on the following metal prices and lower
cut-off criteria:
Mineral
Property
|
Gold
($/oz)
|
Silver
($/oz)
|
Copper
($/lb)
|
Lower
Cut-off
|
El Morro
|
$1,300
|
-
|
$3.00
|
0.20% CuEq
|
|
|
|
|
|
- New Gold reports its Measured and Indicated mineral resources
exclusive of mineral reserves. Measured and Indicated mineral
resources do not have demonstrated economic viability. Inferred
mineral resources have a greater amount of uncertainty as to their
existence, economic and legal feasibility, do not have demonstrated
economic viability, and are likewise exclusive of mineral
reserves.
- For year-end 2014 mineral resources for the El Morro property
have been estimated based on the following metal prices and lower
cut-off criteria:
Mineral
Property
|
Gold
($/oz)
|
Silver
($/oz)
|
Copper
($/lb)
|
Lower
Cut-off
|
El Morro
|
$1,500
|
-
|
$3.50
|
0.20% CuEq
|
|
|
|
|
|
- Mineral resources are classified as Measured, Indicated and
Inferred resources and are reported based on technical and economic
parameters consistent with the methods most suitable for their
potential commercial exploitation. Where different mining and/or
processing methods might be applied to different portions of a
mineral resource, the designators 'open pit' and 'underground' have
been applied to indicate envisioned mining method. Mineral reserves
and mineral resources may be materially affected by environmental,
permitting, legal, title, taxation, sociopolitical, marketing and
other risks and relevant issues. Additional details regarding
mineral reserve and mineral resource estimation, classification,
reporting parameters, key assumptions and associated risks for the
El Morro property are provided in the NI 43-101 Technical Report
for the El Morro Project, Region III, Chile, dated March 26,
2012 which is available under New Gold's profile at
www.sedar.com.
- The preparation of the mineral reserve and mineral resource
estimates for the El Morro property has been done by Qualified
Persons as defined under NI 43-101, under the oversight and review
of Mr. Mark A. Petersen, a Qualified
Person under NI 43-101.
SOURCE New Gold Inc.