Canadian mining company New Gold has signed an agreement with the Ontario Teachers’ Pension Plan (Ontario Teachers’) to increase its interest in the New Afton mine to 80.1%.
In addition, New Gold has agreed to sell its 87,300,000 common Shares to a syndicate of underwriters led by CIBC Capital Markets, at $1.72 per share, for a total of $150m.
The offering is expected to be closed by 17 May 2024, subject to customary closing conditions, including the receipt of all necessary approvals by the Toronto Stock Exchange and the NYSE.
The company intends to use the $150m bought deal equity financing to partly fund the transaction, along with cash on hand, and borrowings from its existing revolving credit facility.
Upon closing, Ontario Teachers’ interest in New Afton will be reduced from 46.0% to 19.9% in exchange for an upfront cash payment of $255m from New Gold.
New Gold president and CEO Patrick Godin said: “This is an excellent transaction where we increase our free cash flow exposure in a copper and gold asset which we already own and operate.
“This transaction is expected to allow us to grow accretively with no diligence risk and increase our free cash flow interest at New Afton.
“With key C-Zone milestones set for completion later this year, New Afton is on the verge of attractive production growth and cost improvement that we believe will lead to increased free cash flow generation.
“Our goal is not only to maximize this free cash flow generation at the mine, but to also maximize benefits for our shareholders.”
New Afton mine’s C-Zone is expected to enter commercial production in the second half of this year, with significant free cash flow growth driven by increasing production and improved costs.
With New Gold increasing its stake, New Afton would enter a period of significant growth driven by increasing production and improved costs.
The transaction is expected to deliver a meaningful increase in attributable life-of-mine cash flow while maintaining New Gold’s balance sheet strength and financial liquidity.
New Gold said that the transaction provides growth without needing any additional general and administrative expenses.
Furthermore, its focus on exploration activities will improve the production profile and extend the mine-life of the New Afton mine, said the Canadian mining company.
