Wheaton buys New Gold stream for US$300 million

New Gold Inc. (NGD-TSX, NYSE American) said it has struck a deal to sell the existing gold stream held on the Blackwater Project in British Columbia to Wheaton Precious Metals Corp. (WPM-TSX, WPM-NYSE) for US$300 million.

The deal was announced after the close of trading on December 13, 2021, when New Gold shares closed at $1.83 and trade in a 52-week range of $3.05 and $1.29.

The Blackwater Gold project is a planned open pit gold and silver mine located in central B.C. approximately 160 kilometres southwest of Prince George and 446 kilometres northeast of Vancouver. It is accessible by a major highway and access/service roads.

The aim is to build the Blackwater project into a new 250,000 ounce per year gold operation, growing to an average of 381,000 ounces.

Artemis bought the Blackwater Project from New Gold Inc. (NGD-TSX, NYSE American) in August, 2020.

The agreement with New Gold involved an initial payment of $140 million, 7.4 million common shares at $2.70 per share, and $50 million cash payment on the first anniversary of the closing of the deal. In connection with the deal, New Gold pledged to acquire 8.0% of the refined gold production. However, once 279,908 ounces has been delivered, the gold stream will be reduced to 4.0%.

Under the original deal, New Gold consented to make payments for the purchased gold equal to 35% of the U.S. dollar value of the quoted gold price two days before delivery. In the event that commercial production at Blackwater is not achieved by the seventh, eight, and nineth anniversary of closing, New Gold was entitled to receive additional cash payments of $28 million on each of those dates.

Under its agreement with Wheaton, New Gold will receive US$300 million in cash upon closing.

The gold stream entitles Wheaton to 8% of the gold produced from Blackwater, reducing to 4% once approximately 280,000 ounces has been delivered to Wheaton. Gold delivered under the stream is subject to an ongoing cash price equal to 35% of the spot gold price, payable to Artemis.

“This transaction highlights another milestone for New Gold as we continue to surface value from the divestment of the Blackwater Project. The cash payment will provide additional liquidity and financial capacity to New Gold as we continue to execute our strategy,” said New Gold President and CEO Renaud Adams.

New Gold has agreed to waive its right of first refusal with respect to Wheaton’s offer on November 15, 2021 to purchase a silver stream from Artemis, which has waived its right of first refusal to acquire the gold stream, which was available to Artemis under the terms of the gold stream agreement.

The transaction is expected to close by the end of 2021.

New Gold is a Canada-focused intermediate gold mining company. It’s two core producing assets are the Rainy River mine and the New Afton copper-gold mine, which is located in British Columbia.