Gold mine likely to see new owners

By Heather Latter
Fort Frances Times

Assuming the deal goes through, New Gold Inc.’s offer last week to acquire Rainy River Resources Ltd. is a move that will benefit the district.
“The offer gives us good exposure to New Gold’s cash reserves,” noted Raymond Threlkeld, president and CEO of Rainy River Resources Ltd., saying New Gold has about $678 million in reserves.
“For Rainy River shareholders, it’s a great opportunity because it is difficult to raise money to build mines these days and we have sufficient funds to build the mine,” said Robert Gallagher, president and CEO of New Gold Inc.
“This really ensures the Rainy River Gold Project is going to get built,” he added. “And I view that as a real positive step for the stakeholders in the area.
“I think that’s probably one of the most critical things is that we have employees there that will be employed; stakeholders in the area that will get jobs,” Threlkeld said.
“This will move the project forward at a pace in which we had originally envisioned.
“So I’m quite happy about it,” Threlkeld added. “I think it’s a win-win situation for everybody involved.”
Gallagher confirmed the intention of New Gold is to continue with the gold mine plans set forth by Rainy River Resources.
“Once we get full ownership, we can confirm it but the timeline now is to have the mine up and running in 2016,” he noted.
“I think particularly because of our company’s our strong balance sheet, our good financial position, it eliminates that risk of finance to get the project constructed,” he added.
New Gold is offering a 42 percent premium over market prices to acquire the junior mining company, which has an office located in Emo and is in the advanced stages of the Rainy River Gold Project north of Barwick.
It’s offer is $3.83 per share—paying up to $198 million in cash, with the remainder in stock on a prorated basis, to a maximum of about 25 million New Gold shares.
The offer values the share capital of Rainy River, net of its current cash balance, at roughly $310 million.
The board of directors of Rainy River Resources, upon the unanimous recommendation of its special committee, unanimously approved entering into the acquisition agreement and recommends that Rainy River shareholders tender their shares to the offer.
New Gold’s takeover bid circular and related documents, which will include full details of the offer, will be mailed out to shareholders next week, as well as Rainy River Resources’ recommendation to accept it.
Then there is a 35-day period for shareholders to tender their shares, so the companies are looking to complete the deal by mid-July.
New Gold will receive a $14-million termination fee if Rainy River Resources gets and accepts a superior offer.
“By doing this deal now, we have provided greater certainty to the development of the Rainy River Gold Project while providing our shareholders exposure to the upside in New Gold shares,” Threlkeld reiterated.
“We have a great project, with pre-production capital requirements of $700 million over the next couple of years,” he noted.
“While we have been diligently investigating various types of financing, we recognize that gold equity markets are challenging right now and we cannot predict the future.
“As a producer, New Gold has greater access to different financing options,” Threlkeld explained. “And, typically, producers such as New Gold benefit before developers from gold price increases.
“With this deal, Rainy River stakeholders, including our community and aboriginal partners, benefit from the increased certainty and New Gold share participation option,” he added.
Threlkeld, meanwhile, indicated business will continue as usual at its Emo office, as well as the work that’s ongoing at the exploration site.
“The Rainy River employees will get to stay on with New Gold, if they wish, as they need an operating team,” he noted, saying district residents won’t see too much change other than the new name.
“It will come under new management, but I think a lot of the same faces will be involved,” Threlkeld said, adding he will continue to be involved in the project.
The company will continue with the completion of the environmental assessment, looking to submit it by the beginning of the third quarter.
Threlkeld said they are hoping for a rapid turnaround and final approval of those in about a year.
The company also is continuing to develop the Intrepid Zone, hoping to add that into the feasibility study in the fourth quarter to show what its value will be.
“It’s quite compelling,” he enthused. “I think it’s going to be a very good addition.”
Both Threlkeld and Gallagher will be the district later this week to meet with stakeholders.
“We’re similar to Rainy River in we feel it’s very important to have an ongoing dialogue with the community and that the community understands what we’re doing,” stressed Gallagher, adding he hopes their experience and track record represents how they like to do business.
“We’re very much looking forward getting to know the people there,” he said.