New Gold Inc. has closed the previously announced partnership with the Ontario Teachers’ Pension Plan (OTTP) at the New Afton mine west of Kamloops for upfront cash of $300 million.
New Gold now has approximately $590 million in total available liquidity, including approximately $390 million in cash and cash equivalents.
The agreement has the OTPP acquiring a 46 per cent free cash flow interest in the mine for $300 million upfront, with the company retaining 100 per cent ownership of the copper and gold mine for a four-year term.
After that four-year term, the OTPP has an option to either maintain its cash flow interest at a reduced 42.5 per cent or convert it to a 46 per cent partnership interest, with New Gold retaining a controlling 54 per cent stake.
New Gold will retain a buyback option to potentially re-acquire 100 per cent of New Afton in the future.
Key positives of the transaction is that it will give New Gold increased financial flexibility and reduce its net debt. It also enables the company to retain control of the mine during development of C-Zone operations, which is expected to increase the lifetime of the mine.
New Gold has two mines in Canada — New Afton and Rainy River in Ontario — and operates the Cerro San Pedro Mine in Mexico.
As of 2019, the Ontario Teachers’ Pension Plan had assets exceeding $200 billion in value and boasts a diverse group of holdings, including airports in Europe, the Cadillac-Fairview real-estate company, Toronto’s Eaton Centre and Toronto-Dominion Centre and international power and water utilities.