New Gold surged after forming an unusual partnership with Ontario Teachers’ Pension Plan that gives the miner $300-million in exchange for selling a portion of the free cash flow from its flagship operation.
Miners often sell rights to future production called streams, as well as royalties, to help finance development of big projects.
But in the agreement announced Tuesday with the Canadian pension fund, New Gold will sell a 46% free cash flow interest from its New Afton mine over four years. After the term ends, Teachers’ has the option to convert it into a 46% joint venture interest in the British Columbia mine, while New gold retains an “overriding” right to buy back the stake under certain conditions.