Located in British Columbia, the New Afton gold mine has been producing since 2012
New Gold has agreed to sell a 46% free cash flow interest in the New Afton mine in Canada to Ontario Teachers’ Pension Plan (OTPP) for $300m.
New Afton is a gold producing mine, which is owned 100% by the Canadian mining company. Located in British Columbia, the New Afton gold mine has been producing since 2012.
As per the terms of the deal, Ontario Teachers’ has an option to convert the free cash flow interest into a 46% joint venture (JV) interest in four years. There is also an option to have the interest continue as a free cash flow interest, but at a lowered rate of 42.5%.
Ontario Teachers’ infrastructure and natural resources senior managing director Dale Burgess said: “We gain access to a free cash flow interest from a top quality asset in a stable and well-established mining area, with the ability to convert to a JV interest in four years.
“Ontario Teachers’ Natural Resources group has a global mandate to pursue investments that provide attractive returns and inflation protection through exposure to a basket of key commodities.”
New Gold said that the proceeds from the deal will be used for improving its financial flexibility and to cut down its total debt.
The mining company will have an overriding buyback option to re-purchase and scrap the interim interest during the joint venture interest option exercise period, and also a right of first offer for the duration of the agreements.
New Gold to retain 100% operating control over New Afton mine
The Canadian miner will retain complete operating control over the New Afton mine during development of the C-Zone. According to the company, the C-Zone is a continuation of the copper-gold deposit at the mine that extends along strike and under the currently mined B-zone block.
New Gold said that it will retain 100% ownership of the exploration claims located outside of the New Afton mining permit area. The miner has given an option to Ontario Teachers’ to acquire its proportionate share of the claims following the conversion of its free cash flow interest into the joint venture interest.
New Gold president and CEO Renaud Adams said: “This transaction provides New Gold with an attractive cost of capital, further strengthens our financial position, allows us to benefit from the full exploration potential elsewhere on the New Afton land package and provides the opportunity to re-acquire 100% of New Afton.
“Ontario Teachers’ is known to conduct in-depth due diligence and partner with high quality management teams that share its values of integrity and operational excellence. We look forward to our partnership with Ontario Teachers’ as we continue our mission to turn New Gold into Canada’s leading intermediate diversified gold producer.”