The Ontario Teachers’ Pension Plan (OTPP) has invested millions of dollars into New Gold’s New Afton mine west of Kamloops.
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. The deal is expected to close by March 31.
Key positives of the transaction, the company announced Tuesday, 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.
“This transformational transaction provides us with upfront 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," New Gold president and chief executive officer Renaud Adams said in a release.
“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.”
According to the OTPP, the deal provides it “access to a free cash flow interest from a top quality asset in a stable and well-established mining area.”
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.