TSX-V-listed Artemis Gold has acquired the Blackwater project – one of Canada’s largest openpit gold deposits – from New Gold, sending the company’s stock up nearly 30%.

Blackwater, south-west of Prince George, British Columbia, has a federal decision statement and a provincial environmental assessment certificate, which are major milestones in de-risking the project to ultimate permitting and construction.

Artemis will acquire the project for C$190-million in cash, comprising C$140-million upon closing of the transaction and C$50-million payable 12 months later.

The transaction also comprises a gold stream on 8% of the gold produced from Blackwater, reducing to 4% of gold production once approximately 280 000 oz of gold have been delivered to New Gold. The stream is subject to a transfer price equal to 35% of the spot gold price.

In the event that agreed upon production targets at Blackwater are not achieved by the seventh, eight or ninth anniversary of closing of the transaction, New Gold will be entitled to receive additional cash payments of C$28-million on each of those dates.

NewGold will also acquire C$20-million in Artemis shares, subject to the company not acquiring more than 9.9% of Artemis’ issued and outstanding shares.

“The proposed acquisition of Blackwater is the first meaningful step in our strategy to develop a first tier gold deposit in one of the world’s premier low risk mining jurisdictions. As with our team’s previous success in developing the Moose River Consolidated mine in Nova Scotia for Atlantic Gold, our focus will be the methodical de-risking of the project development to enhance NPV [net present value], optimise IRR [internal rate of return] and minimise equity dilution to shareholders,” said Artemis chairperson and CEO Steven Dean.

A 2014 feasibility study, which was based on a gold price of $1 300/oz and a silver price of $22/oz, delivered a pretax NPV of $1.04-billion, an IRR of 11.3% and a payback period of 6.2 years.

The study estimates life-of-mine gold and silver production of seven-million ounces and 30-million ounces, respectively. In the first nine years, gold production will average at 485 000 oz/y at a total cash cost of $555/oz and an all-in sustaining cost of $685/oz.

The study is based on a conventional truck and shovel openpit mine with a 60 000 t/d whole ore leach processing plant.

Artemis will aim to reduce the initial capital expenditures (capex) by staging the mine throughput ramp-up, while remaining committed to the full-scale project. It is targeting lower initial startup capex with one to two subsequent expansion stages to the 20-million tonnes a year feasibility study case, estimated to be funded from future operating cashflows.

The company also said that, while it considered the 2014 feasibility study to be current, it planned to prepare an updated prefeasibility study based on its revised approach to developing the project over the next three months.

Meanwhile, New Gold CEO Renaud Adams stated that the transaction was another milestone for the company as it continued to reposition the business.

“With this transaction we have further strengthened our balance sheet with an upfront cash payment that is supported by our improved operational performance and our recently updated life-of-mine plans that are focused on profitability and free cash flow generation beginning in 2021,” stated Adams.

“We believe that surfacing value for Blackwater today, while retaining exposure to the project through a retained gold stream and an equity position in Artemis, allows the company to transition to the next phase of our growth plan as we continue to reposition the company for shareholder value creation.

“Artemis has clearly expressed its commitment to building and operating Blackwater that is supported by its management team’s strong track record in the industry. We are confident that they are the best positioned team to advance the project for the benefit of both Artemis and all New Gold stakeholders, including our host communities and partners,” he said.

Artemis Gold’s share price hit a 52-week high at C$2.46 a share on Tuesday. Its stock closed at C$2.34 a share – up 29.28% on the previous day – giving the company a market capitalisation of C$81.51-million.

New Gold's stock gained 9% to $1.32 apiece on the NYSE American and 10% to C$1.79 a share on the TSX.