TORONTO (miningweeky.com) – Precious metals royalty and streaming firm Royal Gold has agreed to provide Canadian miner New Gold with $175-million in financing to be used for the ongoing development of the company's Rainy River project, in Ontario, in exchange for a percentage of the future yearly gold and silver output from the mine.
Royal Gold would provide New Gold with $100-million at signing of the deal and the remaining $75-million when 60% of the development capital had been spent at the project, which management expects to occur by mid-2016.
New Gold would deliver 6.5% of gold output, up to 230 000 oz, and 3.25% of gold produced after that threshold was reached, as well as 60% of silver output up to 3.1-million ounces, with 30% of silver produced to be delivered to Royal Gold after that threshold.
Royal Gold would pay 25% of the spot price at the time of delivery.
New Gold had last year acquired Rainy River Resources for C$310-million.
The advanced-stage Rainy River project would process ore at a rate of 21 000 t/d from a combination of openpit, underground and stockpiled ore. A January 2014 feasibility study expected the project to produce about 325 000 oz/y of gold, at all-in sustaining costs of $736/oz over the first nine years, starting in 2017.
The initial capital outlay was estimated at $885-million and sustaining capital at $348-million, or $102/oz, for capital of $1.23-billion.
New Gold planned to process higher-grade ounces in the project's early years, while stockpiling lower grades for processing towards the end of the mine life.
Markets in Toronto fell on Monday as tumbling gold miners, hurt by a slump in bullion prices to five-year lows, led the retreat. Spot gold prices retreated 3.11% on Monday to below the psychologically important $1 100/oz mark at $1 096/oz.
In pace with the gold industry, New Gold's stock shed 13% on Monday to close at C$2.81 apiece.