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, 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

 

New Gold executive chairman Randall Oliphant said: "This transaction provides our company with an attractive cost of capital. It further strengthens our financial position as construction at Rainy River continues.

"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. 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.