New Gold to take Richfield in all-share deal worth $550 million

Vancouver – Richfield Ventures (RVC-V) has capped an impressive rise by being snapped up by New Gold (NGD-T, NGD-X) in an all-share deal that values the junior at $550 million.

New Gold is offering 0.9217 of a New Gold share for each Richfield share, which works out to the equivalent of $10.38 per Richfield share and represents a 31% premium to its April 1 closing price and a 46% premium based on each company’s 20-day volume weighted average price. The actual transaction value is estimated at $513 million.

For New Gold, the deal has it gaining Richfield’s promising but still early stage Blackwater gold property in central British Columbia. Richfield only announced an initial resource in early March, establishing 53.5 million indicated tonnes grading 1.06 grams gold per tonne for 1.8 million oz. gold, plus 75.5 million inferred tonnes at 0.96 gram gold for a further 2.3 million oz. A first scoping study was expected out later this year.

New Gold also noted that it is securing Blackwater for minimal dilution. The deal will see about 49 million NewGold shares issued with Richfield shareholders making up 10.4% of combined company.

While the takeover comes at a fairly early stage for Blackwater, a number of companies had actually entered into confidentiality agreements last summer to look into the possibility of buying the company. New Gold executive chairman Randall Oliphant said in a conference call that the company had been in negotiations and due diligence for 10 months before the deal went through.

For Richfield, the New Gold offer apparently turned out to be the best one.

“I think New Gold’s offer is by far the most compelling and clearly advanced,” said Bernier on the same call, “which is why we locked up with the New Gold offer.”

For Bernier, the deal marks a major success for his first foray as head of a public mining company, having started Richfield in 2007 and optioned into the Blackwater project in 2009. Oliphant noted on the call that Bernier “founded the company by mortgaging his home, and today has delivered a half billion dollars of value to his shareholders.”

New Gold can now bring Blackwater to the next stage faster with the help of much deeper pockets, though company executives said production was likely five or six years away.

Plus, with operations in the United States, Mexico and Australia and development projects in Chile and B.C., Blackwater is not first in line for New Gold.

“We didn’t need to do this Richfield deal,” said Oliphant. “We were only going to do something if we found it to be compelling because…we’re pleased with where New Gold was.”

But with plans to put its New Afton gold-silver-copper mine near Kamloops, B.C., into production in 2012, the company sees a smooth transition for its team to another development project nearby. Plus, by continuing with development work in B.C., the company estimates it can defer roughly $150 million in taxes by three more years.

The transaction has the full support of both boards, with Richfield directors and officers holding 15.8% of outstanding shares. The deal has a $18 million break fee and New Gold has the right to match higher offers.

“We expect to be adding another great gold project in a great province for mining,” said Oliphant.

Richfield’s share price was up $1.99 or 25% on the day to $9.92 on 5.9 million shares traded. The company has climbed from around a dollar last July, while it was only 2009 that Richfield was rolling back its shares 5 for 1 and optioning into the Blackwater project.

New Gold’s share price was down 43¢ or 3.8% to $10.83 on 4.3 million shares traded. On March 31 the company hit a 52-week trading high of $11.59, having climbed from under $5 last July.