The Prospector News

New Gold Agrees to Acquire Rainy River Resources Growing Gold Reserves by Over 40 Percent per Share

You have opened a direct link to the current edition PDF

Open PDF Close

Share this news article

New Gold Agrees to Acquire Rainy River Resources Growing Gold Reserves by Over 40 Percent per Share






New Gold Inc. (TSX and NYSE MKT:NGD) and Rainy River Resources Ltd. (TSX: RR) today jointly announce that they have entered into a definitive acquisition agreement, whereby New Gold will offer to acquire all of the outstanding common shares of Rainy River through a friendly take-over bid. Under the terms of the Agreement, New Gold will offer, at the election of each holder of Rainy River common shares, 0.5 of a common share of New Gold or $3.83 in cash, in each case subject to pro ration. The Offer represents a premium of 42% over the closing price of the Rainy River shares on the Toronto Stock Exchange on May 30, 2013, the last day of trading prior to announcement of the Offer, and a 67% premium to Rainy River’s 20-day volume weighted average trading price. The maximum number of New Gold shares to be issued will be approximately 25.8 million and the maximum cash consideration will be approximately $198 million. The Offer values the fully-diluted in-the-money share capital of Rainy River, net of Rainy River’s current cash balance, at approximately $310 million.



Transaction Highlights – New Gold


  • Accretive on all key per share metrics – gold reserves, net asset value, future production and cash flow
  • Adds 4.0 million ounce gold reserve in Ontario, further growing New Gold’s Canadian presence
    • Asset located in great mining jurisdiction, near infrastructure
  • Enhances pipeline by adding asset with annual average production potential of over 225,000 ounces over the life of the mine, at below industry average total cash costs(1)
  • Modest transaction size with minimal equity dilution to New Gold shareholders
  • Further strengthens New Gold technical development team, who have a track record of delivering on projects



“The acquisition of Rainy River is consistent with our strategy of identifying opportunities to create shareholder value,” stated Randall Oliphant, New Gold Executive Chairman. “We have followed Rainy River for some time and see this as an opportune time to add this great asset to our portfolio. We view the combination of Rainy River’s ideal location, sizeable reserve, robust production potential and experienced team as presenting a truly compelling opportunity.”



Transaction Highlights – Rainy River


  • Significant and immediate premium of 42% to current share price and 67% to 20-day volume weighted average share price
  • Flexibility to elect form of consideration in either cash or highly liquid New Gold shares
  • Opportunity to gain exposure to New Gold’s current operating cash flow and attractive growth portfolio
  • Access to New Gold’s strong balance sheet and current and future operating cash flow to develop the Rainy River project
  • Ability to partner with New Gold’s experienced management and operating teams



“This is a great outcome for Rainy River shareholders,” stated Dale Peniuk, Chair of the Special Committee of the Board of Directors of Rainy River. “To be able to realize a meaningful premium, while gaining the ability to combine with a well-established mine builder in New Gold, is a win-win scenario for our shareholders. New Gold’s offer is a testament to both the quality of the Rainy River management team and their efforts to advance the Rainy River project to this point.”



Rainy River Gold Project



The Rainy River Gold project is an advanced-stage gold project situated in the Richardson Township, approximately sixty-five kilometres northwest of Fort Frances in Northwestern Ontario. The property has excellent infrastructure, with year-round road access and powerlines in close proximity, as well as a railway located 21 kilometres to the south of the property. The Fort Frances area has a population of approximately 10,000 people from which a workforce could be sourced for future development.



On April 10, 2013, Rainy River announced the results of a Feasibility Study for the project, with 4.0 million ounces in Proven and Probable gold reserves and 6.2 million ounces in Measured and Indicated gold resources, inclusive of reserves. The Feasibility Study contemplates a 21,000 tonne per day processing rate from a combination of open pit, underground and stockpiled ore. The project has the potential to produce over 225,000 ounces of gold annually, at below industry average cash costs(1), for an initial mine life of 16 years. The Feasibility Study also highlights the potential to process higher grade ounces in the project’s early years, while stockpiling lower grades for processing towards the end of the mine life. This should help drive higher production and lower costs at the beginning of the mine life, enhancing both cash flow and the overall economics of the project.


Rainy River Mineral Resource Estimate


Metal grade

Contained metal



(grams per tonne)

(grams per tonne)















Total Reserves


















Total Measured & Indicated














Additional Details of Offer



The Board of Directors of Rainy River, upon the unanimous recommendation of its Special Committee, after consultation with its financial and legal advisors, has unanimously approved entering into the Agreement and recommends that Rainy River shareholders tender their shares to the Offer. BMO Capital Markets, the financial advisor to Rainy River, has provided a verbal opinion to the effect that, as of the date of such opinion and subject to the assumptions, limitations, and qualifications stated in such opinion, the consideration proposed to be paid to the holders of Rainy River common shares pursuant to the Offer is fair from a financial point of view to such holders. CIBC World Markets has provided a separate verbal opinion solely to Rainy River’s Special Committee to the effect that, as of the date of such opinion and subject to the assumptions, limitations, and qualifications stated in such opinion, the consideration proposed to be paid to the holders of Rainy River common shares pursuant to the Offer is fair from a financial point of view to such holders.



Rainy River’s Board of Directors and management team have entered into lock-up agreements with New Gold agreeing to tender their shares, including shares issuable on the exercise of stock options, and support the transaction.



The Agreement between New Gold and Rainy River provides for, among other things, a non-solicitation covenant on the part of Rainy River subject to customary “fiduciary out” provisions, a right in favour of New Gold to match any superior proposal and a payment to New Gold of a termination fee of approximately $14 million in certain circumstances, including if Rainy River accepts a superior proposal.



The Offer is expected to commence during the week of June 10, 2013 upon the mailing of New Gold’s takeover bid circular and related documents, which will include full details of the Offer. Rainy River’s directors’ circular, which will set out the unanimous recommendation of the board of Rainy River that shareholders accept the Offer, will also be mailed. The Offer will be open for acceptance for a period of not less than 35 days from the date of mailing of the takeover bid circular and will be conditional upon, among other things, there being deposited under the Offer, and not withdrawn at the expiry time, shares representing not less than 66 2/3% of the Rainy River shares on a fully diluted basis. In addition, the Offer will be subject to certain customary conditions, including receipt of relevant regulatory approvals and the absence of a material adverse change with respect to Rainy River.



New Gold’s financial advisor is RBC Capital Markets and its legal advisors are Cassels Brock & Blackwell LLP in Canada and Paul, Weiss, Rifkind, Wharton & Garrison LLP in the United States. Rainy River’s financial advisor is BMO Capital Markets and its legal advisors are Bull, Housser & Tupper LLP and Davies Ward Phillips & Vineberg LLP. CIBC World Markets provided a fairness opinion to Rainy River’s Special Committee.



About New Gold Inc.



New Gold is an intermediate gold mining company. The company has a portfolio of four producing assets and two significant development projects. The combination of the New Afton Mine in Canada, the Cerro San Pedro Mine in Mexico, the Mesquite Mine in the United States and the Peak Mines in Australia positions New Gold as one of the lowest cost producers in the industry. In 2013, the company is forecasting between 440,000 and 480,000 ounces of gold production. In addition to its four operating mines, New Gold owns 100% of the exciting Blackwater project in Canada and 30% of the world-class El Morro project located in Chile. For further information on the company, please visit



About Rainy River Resources Ltd.



Rainy River is a Canadian precious metals exploration company whose key asset is the Rainy River Gold Project, a large gold system centred in Richardson Township (part of Chapple Township). As at March 31, 2013, the Company had approximately $90 million in cash and cash equivalents, and it remains well funded for its ongoing activities, including: 1) commencement of basic and detailed engineering work and ongoing permitting and environmental assessment work; 2) continuing to grow the existing resource through exploration; and 3) conducting a condemnation program in areas identified for potential mine facilities. The project is very well located in northwestern Ontario. It is accessed by a network of roads and is close to hydro-electric infrastructure. The Rainy River district has a skilled labour force and is one of the lowest-cost areas for mineral exploration and development in Canada. Ontario has low political risk and, according to the annual Fraser Institute global survey of the mining industry, has consistently ranked as one of the top jurisdictions embracing mineral development.








Posted May 31, 2013

Share this news article


RNC Minerals Closes Oversubscribed $18.5 Million Bought Deal Financing

RNC Minerals (TSX: RNX) is pleased to announce that it has closed... READ MORE

September 20, 2019

Moneta Announces Closing of Strategic Investment by Eric Sprott

Moneta Porcupine Mines Inc. (TSX:ME) (OTC:MPUCF) (XETRA:MOP) is p... READ MORE

September 20, 2019

Golden Tag Resources Closes $1.5 Million Financing Including Strategic Investment by Eric Sprott

Golden Tag Resources Ltd. (TSX-V: GOG) is pleased to announ... READ MORE

September 20, 2019

Osisko Increases Credit Facility to $400 Million

Osisko Gold Royalties Ltd (TSX:OR) (NYSE:OR) is pleased to ... READ MORE

September 20, 2019

Unigold Announces Closing of Private Placement of 32,350,000 Units for Gross Proceeds of Approximately $3 Million

Unigold Inc. (TSX-V: UGD) is pleased to announce that it has clos... READ MORE

September 19, 2019

Copyright 2019 The Prospector News - Site design by Spyderbaby Productions