Vancouver — New Gold (NGD-T, NGD-X) has closed a $375.3-million financing, leaving the company with some $400 million in the bank to fund mine development at its New Afton copper-gold project in south-central B.C.
New Gold issued and sold a total of 55,000 debentures for $55 million, 220,000 units for $220 million, and 10.7 million shares as well as 2 million flow-through shares for a total of $100.3 million.
Flow-through shares were sold at $9.75 apiece and shares at $7.50 each. The debentures have a 7-year term, 5% coupon, and are convertible into common shares at $9.35 per share. The units each consist of an unsecured series D note with a $1,000 face value, a 10% coupon, and a 10-year term, as well as 100 common share purchase warrants, each exercisable for one common share for 10 years at $15 per share.
New Gold can now move ahead with development at its 100%-owned New Afton project, just west of Kamloops. The deposit is a deep, high-grade copper-gold porphyry with a probable ore reserve estimate of 44.4 million tonnes grading 0.98% copper, 0.72 gram gold, and 2.27 grams silver per tonne.
The financing is a major step forward for New Gold, but investors were not overly excited about the news. New Gold’s share price climbed just a penny, to $6.71, still in the slump it has fallen into over the past eight months. In November, the company posted a closing high of $10.00.
New Gold needed to raise funds to finance the US$268 million in capital costs necessary to bring New Afton into production, plus the US$137 million required in expansion capital and US$78 million in sustaining costs.
New Afton sits on the site of the old open-pit Afton mine, which produced roughly 500 million lbs. copper, 500,000 oz. gold, and 3 million oz. silver between 1978 and 1987. Through its predecessor company DRC Resources, New Gold staked the mineral rights in 1999, and by 2003, had outlined a large copper-gold orebody. A 2004 scoping study indicated the project had potential as an underground mine, so in 2005, the company completed more than 2 km of tunnelling to provide access for infill drilling and geotechnical analysis.
A feasibility study, released in April, confirmed that the project is economically and technically feasible as an underground block-cave mine, accessed via a ramp from surface. Initial construction is expected to take two years, meaning the project could see commercial production by mid-2009. The mine life is currently projected at 12 years.
Upon startup, the mine is expected to produce 1.6 million tonnes of ore per year for two years. After the ramp-up period, ore production is set to increase to 4 million tonnes annually, making it one of Canada’s largest underground metals mines.
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