New Gold is set to receive a gold stream on 8% of the production, which will then be reduced to 4% once it collects 280,000 ounces of the mineral from the deposit in British Columbia, Canada
Wood Mackenzie's Julian Kettle said the energy transition "starts and ends with metals" ($15m) (Credit: Flickr/benketaro)
New Gold has agreed to sell its Blackwater project to Artemis Gold for $190m Canadian dollars ($142m) in cash.
The Toronto-headquartered miner is set to receive a gold stream on 8% of the production, which will then be reduced to 4% once it collects 280,000 ounces of the mineral from the deposit in British Columbia, Canada.
As part of the deal to sell its C$1.8bn ($1.34bn) project, New Gold will also purchase 9.9% of Vancouver-based Artemis’ common shares for C$20m ($15m).
New Gold’s CEO Renaud Adams said “We believe that surfacing value for Blackwater today, while retaining exposure to the project through a retained gold stream and an equity position in Artemis, allows the company to transition to the next phase of our growth plan as we continue to reposition the company for shareholder value creation.
“Artemis has clearly expressed its commitment to building and operating Blackwater that is supported by its management team’s strong track record in the industry.
“We are confident that they are the best positioned team to advance the project for the benefit of both Artemis and all New Gold stakeholders, including our host communities and partners.”
What is the Blackwater project?
The proposed Blackwater project is based about 160km from the city of Prince George, British Columbia.
Exploration of the site first started in 1973, before Richfield Ventures acquired the rights in 2009 – and then New Gold purchased Richfield in June 2011 to gain full ownership of the project.
It holds 8.2 million ounces of gold in proven and probable mineral reserve, and 60.8 million ounces of silver. In the measured and indicated category, Blackwater holds 1.4 million ounces of gold and 8.7 million ounces of silver in reserve.
The site is regarded as one of the largest open-pit gold deposits in the country and will create 1,500 construction and 495 operations jobs.
According to the 2014 feasibility study, it will produce 485,000 ounces of gold a year across its initial nine years of operation and is expected to produce about seven million ounces of gold and 30 million ounces of silver throughout its anticipated 17-year mine life.
The Canadian Environmental Assessment Agency granted the project approval in April 2019, but it still requires additional permits and authorisations from both the provincial and federal governments before proceeding to the construction and operations phase.
What does the deal means for Artemis?
In a statement announcing the deal, Artemis said it will be targeting improved economics and financeability against the 2014 feasibility study.
“While the company considers the 2014 feasibility study to be current, it plans to prepare an updated pre-feasibility study based on our revised approach to developing the project over the next three months and will file the technical report within 180 days of this announcement of mineral resources and mineral reserves,” it added.
The miner said it “respects the rights and interests of Indigenous groups who may be impacted by the project” and intends to “fully honour New Gold’s existing agreements, including the participation agreement with the Lhoosk’uz Dené Nation and the Ulkatcho First Nation”.
Artemis’ chairman and CEO Steven Dean believes the proposed acquisition of Blackwater is the “first meaningful step” in its strategy to develop a “first-tier gold deposit in one of the world’s premier low-risk mining jurisdictions”.
“As with our team’s previous success in developing the Moose River Consolidated Mine in Nova Scotia for Atlantic Gold, our focus will be the methodical de-risking of the project development to enhance the net present value (NPV), optimise the internal rate of return (IRR) and minimise equity dilution to shareholders,” he added.
“Furthermore, the additional attribute of having an environmental assessment approval in hand significantly curtails the timeline to construction and ultimate production. This value cannot be underestimated in today’s world.
“We look forward to completing the acquisition in due course, working with the various key stakeholders to continue to advance Blackwater through the development stage and into operation.”