TORONTO - New Gold (NYSE:NGD) Inc. (TSX and NYSE American: NGD) has announced an agreement to increase its free cash flow interest in the New Afton Mine to 80.1%, up from its current interest. This change comes as a result of a transaction with Ontario Teachers' Pension Plan, which will see its interest decrease from 46.0% to 19.9%. New Gold will make an upfront cash payment of $255 million to Ontario Teachers', funded through cash on hand, borrowings, and a concurrent bought deal equity financing of approximately $150 million.
The transaction is aimed at enhancing the value for New Gold shareholders by increasing the company's share in the expected free cash flow growth from the mine, particularly with the C-Zone expected to commence commercial production in the latter half of 2024. The anticipated increase in production and improved costs at New Afton are projected to drive significant free cash flow growth.
The company's President and CEO, Patrick Godin, expressed confidence in the strategic partnership, emphasizing the transaction's alignment with the company's growth strategy and the potential to add value through increased exposure to the copper and gold asset.
In conjunction with the transaction, New Gold has also entered into an underwriting agreement for a bought deal equity financing of 87,300,000 common shares at a price of $1.72 per share, aiming to raise gross proceeds of about $150 million. An over-allotment option is also in place for the underwriters to purchase up to an additional 15% of the common shares within 30 days of the offering's close to cover any over-allotments.
The closing of the offering is anticipated on or about May 17, 2024, subject to standard closing conditions and necessary approvals from the Toronto Stock Exchange and the NYSE American. The net proceeds from the offering are intended to fund a portion of the cash payment for the transaction with Ontario Teachers'.
The transaction does not require shareholder approval and is expected to close by the end of May, following the completion of the offering. Upon closing, an amended free cash flow royalty agreement will be entered into with an affiliate of Ontario Teachers', reflecting the new interest levels and modifying certain governance rights.
This news is based on a press release statement from New Gold Inc. and does not constitute an offer to sell or a solicitation of an offer to buy any securities.
InvestingPro Insights
As New Gold Inc. (NGD) prepares for an increase in production and a strategic shift in ownership interest, investors are closely watching the company's financial health and market performance. Recent data from InvestingPro provides a snapshot of New Gold's current financial position and market trends:
- The company's Price to Book (P/B) ratio stands at 1.75, indicating a moderate valuation of the company's net assets.
- With a strong Revenue Growth of 23.08% over the last twelve months as of Q1 2024, New Gold is showing signs of robust top-line expansion.
- The stock has experienced a significant 3 Month Price Total Return of 62.5%, reflecting positive investor sentiment and market momentum.
Among the valuable InvestingPro Tips, two particularly stand out for New Gold at this juncture:
- Analysts predict the company will be profitable this year, which could be a key driver for future growth as the New Afton Mine's C-Zone commences production.
- The stock's strong return over the last three months suggests that investor confidence in New Gold's strategic decisions and growth potential is on the rise.
For investors seeking a deeper dive into New Gold's financials and market performance, additional InvestingPro Tips are available. There are 11 more tips listed in InvestingPro for NGD, which could provide further insights into investment decisions. Interested readers can explore these tips and more at: https://www.investing.com/pro/NGD.
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With the transaction set to enhance shareholder value and the company's strategic positioning, these InvestingPro insights offer a valuable perspective on New Gold's current state and potential future performance.
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