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July 22, 2015

Royal Gold signs $175m deal with New Gold for Canada’s Rainy River project

RGLD Gold has signed a $175m agreement with New Gold to acquire a percentage of the gold and silver production from the Rainy River project in Canada.

RGLD Gold has signed a $175m agreement with New Gold to acquire a percentage of the gold and silver production from the Rainy River project in Canada.

Located 65km north-west of Fort Frances in western Ontario, the Rainy River project is scheduled to produce an average of 325,000oz of gold a year over its first nine years of production.

The combined open-pit underground operation has a capacity to produce 21,000t per day.

RGLD has received permits to begin major earthworks at the operation.

"The Rainy River Project fits well into our portfolio and met all our criteria for new investments with nearly four million ounces of gold reserves."

As of mid-2015, detailed engineering is 95% complete and the company spent 14% of the total development capital estimate of $877m.

Royal Gold president and chief executive officer Tony Jensen said: "The Rainy River Project fits well into our high-quality portfolio and met all our criteria for new investments with nearly four million ounces of gold reserves, continued exploration upside and projected cash costs below $600 per ounce.

"We are particularly pleased to add another piece of business in Canada and partner with New Gold, a company that is well-known for its development track record and operational expertise."

As part of the deal, Royal Gold will pay $100m to New Gold at closing and $75m once capital spending on the project is 60% complete.

New Gold will deliver 6.5% of the gold produced at Rainy River to Royal Gold until 230,000oz have been delivered, and later on deliver 3.25%.

Under the purchase and sale agreement, New Gold will deliver gold and silver to Royal Gold on a monthly basis, which in turn plans to sell the gold within a few weeks of receiving each delivery.

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