New Gold Inc. has announced that it has entered into a definitive agreement with Artemis Gold Inc. to divest its Blackwater Project, located in B.C.
Under the terms of the Agreement - which is still subject to closing conditions, including Artemis shareholder approval and required regulatory approvals - New Gold will receive the following:
- $190 million in cash, comprised of $140 million in cash upon closing of the deal and $50 million in cash payable twelve months later;
- A gold stream on eight per cent gold produced from Blackwater, reducing to four per cent of gold production once roughly 280,000 ounces of gold have been delivered to New Gold. The stream is subject to a transfer price equal to 35 per cent of the spot gold price;
- In the event that agreed upon production targets at Blackwater are not achieved by the seventh, eight, or ninth anniversary of closing, New Gold will be entitled to receive additional cash payments of $28 million on each of those dates; and
- $20 million in Artemis shares upon closing of the transaction, subject to New Gold not acquiring more than 9.9 per cent of Artemis’ issued and outstanding common shares, in which case the difference between $20 million and the value of the shares issued to New Gold shall be added to the second installment.
“This transaction marks another milestone for New Gold as we continue to reposition the Company and advance our vision of becoming a leading Canadian-focused, diversified intermediate gold producer. With this transaction we have further strengthened our balance sheet with an upfront cash payment that is supported by our improved operational performance and our recently updated life of mine plans that are focused on profitability and free cash flow generation beginning in 2021,” stated Renaud Adams, CEO. “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.”
If the transaction is approved, Artemis intends to fund the initial cash payment through a combination of cash on hand and an equity financing. Insiders of Artemis have agreed to provide a backstop commitment of up to $120 million. As such, the Transaction is not subject to a financing condition. The Transaction is expected to close in the third quarter of 2020.
Once divested of Blackwater, New Gold will hold two operating assets - the New Afton gold, silver and copper mine near Kamloops, B.C. and the Rainy River site. The company’s Cerro San Pedro site in Mexico is currently in reclamation.