Canadian gold mining company New Gold has signed an agreement with Ontario Teachers’ Pension Plan to acquire the remaining 19.9% free cash flow interest in the New Afton copper-gold mine in British Columbia, Canada, for a $300m (C$425.51m) cash payment in return.
The payment will be financed through available cash, borrowings from an existing credit facility and a gold prepayment financing arrangement.
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Approximately $100m of the cash payment will be funded through gold prepayment financing.
Under this arrangement, New Gold will deliver a predetermined number of gold ounces over a 12-month term, which represents around 8% of the company’s projected consolidated gold production for that period.
This transaction will result in New Gold fully consolidating its free cash flow interest in the mine to 100%.
Global investor Ontario Teachers’ formed a strategic partnership with New Gold in 2020, acquiring a 46% free cash flow interest in the New Afton mine for $300m upfront.
In 2024, this interest was reduced to 19.9% following a $255m cash payment from New Gold.
Additional terms of the transaction include the termination of all existing agreements related to Ontario Teachers’ interest in New Afton, such as the right to a $20m cash payment on a change of control of New Gold before 31 January 2026.
The transaction’s closing, expected at the beginning of May, is subject to customary conditions and does not require shareholder approval.
New Gold anticipates increased upside potential from ongoing exploration activities at the New Afton mine, including a $17m investment in 2025 focused on the K-Zone.
New Gold president and CEO Patrick Godin said: “This is an excellent transaction allowing New Gold to fully consolidate the free cash flow exposure to one of Canada’s highest quality gold/copper assets, which we already own and operate. This transaction allows us to grow in an exceptional location with no diligence or integration risk, and with no equity dilution to our shareholders.
“With the C-Zone ramp up progressing well, New Afton is on the verge of exceptional production growth and cost improvement that should lead to increased free cash flow generation. Our goal is to maximise this free cash flow generation at the mine, while continuing our exploration programme to extend mine life and create further value for our shareholders and stakeholders. We would also like to thank Ontario Teachers’ for their support and partnership over the last five years.”
In August 2022, Foran Mining entered into a preliminary agreement for a C$200m investment from the Ontario Teachers’ Pension Plan Board in the McIlvenna Bay project in eastern Saskatchewan, Canada.
