New Gold has signed a binding letter agreement with Goldcorp to sell its gold stream on the El Morro project in Chile for a cash consideration of $65m.
With this sale, New Gold procures additional liquidity would help the company advance the Rainy River project, scheduled to start production in September.
New Gold president and chief executive officer Hannes Portmann said: “Our interest in El Morro has generated significant value for our company over the last several years.
“The sale of the stream allows us to realise $65m from an asset that is not a core part of our portfolio to support our key, near-term growth project at Rainy River.”
The total expenditure on El Morro by New Gold and its predecessor companies since the asset was first acquired has been less than $7m.
New Gold claimed that the company has generated total proceeds of nearly $205m from this El Morro property in the last seven years through a series of transactions, including this latest $65m payment.
Expected to get closed this month, the transaction is subject to customary closing conditions including the negotiation of a definitive agreement.
Both companies have obtained all internal approvals for this deal.
An intermediate gold mining company, New Gold owns a portfolio of four producing assets with two significant development projects.
The portfolio includes the New Afton Mine in Canada, the Mesquite Mine in the US, Peak Mines in Australia, and Cerro San Pedro Mine in Mexico.
Furthermore, it owns 100% interest in the Rainy River and Blackwater projects in Canada.