(All figures are in US dollars unless otherwise indicated)
June 27, 2012
/PRNewswire/ - New Gold Inc. ("New Gold") (TSX and NYSE MKT:NGD) today announces that the Ontario Superior Court of Justice (the "Court") has rendered its decision regarding the ownership interests in the El Morro project in
. The Court's decision confirms that New Gold and Goldcorp Inc. ("Goldcorp") will continue as partners in the El Morro project. The Court dismissed
Corporation's ("Barrick") attempt to claim it should have been New Gold's partner. Based on the decision, the El Morro transaction between New Gold and Goldcorp, which closed on
February 16, 2010
, will stand. New Gold holds a fully carried 30 percent interest in the El Morro project and Goldcorp, the project developer and operator, holds the remaining 70 percent.
The Court's decision relates to the Statement of Claim (the "Claim") that was originally filed in
by Barrick against the company and Goldcorp as well as affiliated subsidiaries, and which was subsequently amended to include Xstrata Plc ("Xstrata") and affiliated subsidiaries as defendants. Barrick made the Claim after New Gold exercised its right of first refusal to acquire its previous partner, Xstrata's 70 percent interest in the project, where the right of first refusal was triggered when Barrick made an offer to purchase Xstrata's share of the El Morro project. After exercising its right of first refusal, in early 2010, New Gold completed a transaction that resulted in Goldcorp becoming its 70 percent partner in the El Morro project. The Court has dismissed Barrick's claim.
"We are pleased that the Court's decision affirms our position that we validly exercised our right of first refusal," stated
, Executive Chairman. "El Morro's significant gold and copper mineral resources, continued exploration potential and strategic location make it one of the best undeveloped projects in our industry. As it was our company that originally discovered El Morro, we believe we are in a great position with a significant, fully funded interest in this world class project."
Certain of the key terms under the El Morro shareholders agreement include:
- Goldcorp carries New Gold's full 30 percent share of the project's capital costs. The development capital costs, on a 100 percent basis, were most recently estimated at the end of 2011 at $3.9 billion.
- After the start of production, New Gold retains 20 percent of its 30 percent of cash flow with the remaining 80 percent going towards the carried funding and accumulated interest
- The interest rate on the carried funding has been fixed at 4.58%
- Goldcorp is obligated to pay New Gold a penalty payment of $1.5 million per month should Goldcorp not start construction within 60 days of the receipt of requisite permits and approvals
Once in production, New Gold's 30 percent share of annual production is expected to be over 90,000 ounces of gold and 85 million pounds of copper over an initial 17-year mine life. Life-of-mine cash cost is expected to be approximately
per ounce of gold on a by-product basis and approximately
per ounce of gold and
per pound of copper on a co-product basis. Metals price assumptions used to calculate the average life-of-mine El Morro cash cost are
per ounce of gold and
per pound of copper.
In a separate matter, in late April, the company announced that the Chilean Supreme Court had temporarily suspended the approval of the environmental permit for the El Morro project which had originally been granted in March of 2011. The temporary suspension was based on the Chilean court's belief that the Chilean Environmental Permitting Authority (the "Servicio de Evaluación Ambiental" or "SEA") had not sufficiently consulted an indigenous group in the area of the El Morro project. Since the Chilean court's decision, SEA and Goldcorp, the project developer and operator, have worked collaboratively to pursue the renewal of the permit in a manner that best addresses the interests of all stakeholders. SEA plans to engage stakeholders in an additional round of consultation, similar to those that took place in advance of the granting of the environmental permit.