Canadian gold miner New Gold acquires Rainy River for $310 mn
01 June 2013
New Gold Inc, an intermediate Canadian gold mining company yesterday agreed to buy gold-focused explorer and developer Rainy River Resources Ltd in a friendly cash-and-stock bid valued at approximately $310 million.
The deal will enable New Gold to add a large gold development project in northwestern Ontario to its asset portfolio.
Under the terms, New Gold will offer 0.5 a share of New Gold or $3.83 in cash for every share of Rainy River. The offer represents a 42-per cent premium over the closing price of Rainy River on the Toronto Stock Exchange (TSE) on 30 May, the last day of trading prior to announcement of the offer, the company said in a statement.
New Gold will issue a maximum of 25.8 million shares and the maximum cash consideration will be approximately $198 million. The total offer is valued at $310 million net of Rainy River's current cash balance.
Further to the news, shares in Rainy River shot up 35 per cent to $3.64 yesterday on TSE, while New Gold shares dropped 8 per cent to $7.05.
Price of the yellow metal has fallen significantly in recent months from its October high of $1791 an ounce to around $1388 yesterday, representing a 22-per cent drop which in turn has battered the stock prices of gold-focused exploration and mining companies.