New Gold Inc. (TSXNGD) (NYSE American: NGD) is pleased to announce that it has entered into an agreement relating to its strategic partnership with Ontario Teachers’ Pension Plan at the New Afton Mine whereby New Gold will increase its effective free cash flow interest in New Afton to 80.1%.

On closing of the Transaction, Ontario Teachers’ free cash flow interest in New Afton will be reduced from 46.0% to 19.9% in exchange for an upfront cash payment of $255 million from New Gold. New Gold will fund the cash payment with cash on hand, borrowings from its existing revolving credit facility and net proceeds from a concurrent bought deal equity financing of common shares of New Gold for approximately $150 million.

Anticipated Benefits to New Gold Shareholders

• Increased free cash flow interest in an attractive copper/gold mine – With C-Zone on-track to achieve commercial production in the second half of 2024, New Afton is expected to enter a period of significant free cash flow growth driven by increasing production and improved costs.
• Accretive and disciplined transaction – Expected to deliver a meaningful increase in attributable life-of-mine cash flow while maintaining New Gold’s balance sheet strength and financial liquidity.
• Investment in an existing high-quality operation – Through many years of building and operating the New Afton mine, New Gold has developed extensive technical, operational, and social knowledge and expertise. The Transaction provides growth without requiring any increase in general and administrative expenses.
• Increased upside exposure – New Gold’s renewed focus on exploration activities provides the New Afton mine with the potential to add value by improving the production profile and extending mine life.

“This is an excellent transaction where we are able to increase our free cash flow exposure in a copper and gold asset which we already own and operate. This transaction is expected to allow us to grow accretively with no diligence risk and increase our free cash flow interest at New Afton,” stated Patrick Godin, President and CEO. “With key C-Zone milestones set for completion later this year, New Afton is on the verge of attractive production growth and cost improvement that we believe will lead to increased free cash flow generation. Our goal is not only to maximize this free cash flow generation at the mine, but to also maximize benefits for our shareholders.”

Bought Deal Equity Financing

New Gold has entered into an agreement with a syndicate of underwriters led by CIBC Capital Markets, pursuant to which the Underwriters have agreed to purchase, on a bought deal basis, 87,300,000 Common Shares at a price of $1.72 per Common Share, for aggregate gross proceeds of approximately $150 million.

The Company has granted the Underwriters an over-allotment option, exercisable in whole or in part at any time at the Offering Price up to 30 days after closing of the Offering, to purchase up to an additional 15% of the number of Common Shares issued pursuant to the Offering to cover over-allotments, if any.

The Company intends to use the net proceeds of the Offering to fund a portion of the cash payment to complete the Transaction.

Closing of the Offering is expected to occur on or about May 17, 2024, subject to customary closing conditions, including the receipt of all necessary approvals of the Toronto Stock Exchange and the NYSE American in accordance with their applicable listing requirements.

The Offering will be made in each of the provinces and territories of Canada, other than Quebec, by way of a prospectus supplement to the Company’s short form base shelf prospectus dated May 13, 2024. The Company has filed a registration statement on Form F-10 (including the Base Shelf Prospectus) and the Prospectus Supplement for the Offering with the U.S. Securities and Exchange Commission in accordance with the multi-jurisdictional disclosure system established between Canada and the United States. The Offering may also be made on a private placement basis in other international jurisdictions in reliance on applicable private placement exemptions. Before investing, prospective investors should read the Base Shelf Prospectus, the Prospectus Supplement, when available, the documents incorporated by reference therein, the Registration Statement containing such documents and other documents the Company has filed with Canadian securities regulators and the SEC for more complete information about the Company and the Offering.

When available, these documents may be accessed for free on the System for Electronic Document Analysis and Retrieval (“SEDAR+”) at www.sedarplus.ca and on the SEC’s Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”) at www.sec.gov. Alternatively, copies may be obtained from: CIBC Capital Markets, 161 Bay Street, 5th Floor, Toronto, ON M5J 2S8 or by telephone at 1-416-956-6378 or by email at mailbox.canadianprospectus@cibc.com, and in the United States from: CIBC Capital Markets, 161 Bay Street, 5th Floor, Toronto, ON M5J 2S8 or by telephone at 1-416-956-6378 or by email at mailbox.usprospectus@cibc.com.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any province, state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such province, state or jurisdiction.

Other terms of the Transaction

Closing of the Transaction is subject to customary conditions and is expected to close by the end of May, following completion of the Offering. The Transaction does not require shareholder approval.

At closing, the parties will enter into an amended free cash flow royalty agreement with an affiliate of Ontario Teachers’ to reflect the reduction in Ontario Teachers’ free cash flow interest to 19.9%. The amended agreement will, among other things, also remove the advisory committee, and reduce certain of Ontario Teachers’ governance rights with respect to the operating and capital expenditures of the New Afton mine and eliminate the option to convert the royalty into a partnership. New Gold will have a right of first refusal on a sale of the royalty by Ontario Teachers’. On a change of control of New Gold announced prior to December 31, 2030, that is subsequently completed, Ontario Teachers’ will have the right to sell the royalty to New Gold or its successor at fair market value, for cash or share consideration. In addition, following a change of control within 20 months following completion of the Transaction, Ontario Teachers’ would also receive a one-time cash payment of $20 million.

About New Gold

New Gold is a Canadian-focused intermediate mining company with a portfolio of two core producing assets in Canada, the Rainy River gold mine and the New Afton copper-gold mine. The Company also holds other Canadian-focused investments. New Gold’s vision is to build a leading diversified intermediate gold company based in Canada that is committed to the environment and social responsibility.