Ontario Teachers’ Pension Plan is acquiring a 46 per cent cash flow stake in New Gold’s New Afton Mine in British Columbia.
In what’s being called a “strategic partnership,” the deal infuses the Toronto-based mining company with US$300 million in cash, giving them some wiggle room to pay down their debt and restructure the balance sheet as the company proceeds with developing the underground portion of the New Afton Mine, 10 kilometres west of Kamloops.
According to the agreement, after four years, Ontario Teachers’ has an option to enter into a 46 per cent joint venture (JV) in the mine.
During this period of exercising this option, New Gold holds an overriding buyback option to repurchase all of Ontario Teachers’ interest in New Afton.
The deal is expected to close on March 31.
The mining company retains full ownership of all its exploration claims around the New Afton Mine.
New Gold’s other main gold producer is its Rainy River open-pit and underground mine, northwest of Fort Frances in northwestern Ontario.
The company also has its Blackwater gold-silver mine under development in central B.C.
Ontario Teachers’ is Canada's largest single-profession pension plan with more than $190 billion in net assets, a fact not lost on New Gold president-CEO Renaud Adams.
“We are pleased to be partnering with Ontario Teachers’, one of the world’s preeminent and most well-respected investors, in this transformational transaction that provides us with up-front cash allowing us to restructure our balance sheet and lower our level of net indebtedness via a true shared risk and upside partnership focused on free cash flow,” he 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 per cent of New Afton.”
Dale Burgess, Ontario Teachers’ senior managing director of infrastructure and natural resources, is delighted to partner with New Gold on this “distinctive transaction.”
“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.”