Oliphant’s New Gold strikes $310-million deal for Rainy River Resources

TORONTO – New Gold Inc. (TSX:NGD) is offering a 42 per cent premium over market prices to acquire Rainy River Resources Ltd. (TSX:RR), a junior mining company with an advanced gold project in Ontario.

The offer values Rainy River at about $310 million, net of its cash balance. According to recent filings, Rainy River had about $100 million of cash at the end of March.

New Gold is offering $3.83 per share. New Gold would pay up to $198 million in cash with the remainder in stock on a prorated basis, to a maximum of about 25 million New Gold shares.

Rainy River shares closed Thursday at $2.70 on the Toronto Stock Exchange while New Gold’s closed at $7.66. Like most gold companies, their shares have declined since last year with the falling price for bullion.

New Gold’s executive chairman Randall Oliphant, a former CEO of Barrick Gold Corp., said Friday that the deal comes at a good price and opportune time.

“We have followed Rainy River for some time and see this as an opportune time to add this great asset to our portfolio,” Oliphant said.

“We view the combination of Rainy River’s ideal location, sizeable reserve, robust production potential and experienced team as presenting a truly compelling opportunity.”

Rainy River’s board is supporting the deal and its directors as well as the management team have agreed to tender their shares to New Gold.

“This is a great outcome for Rainy River shareholders,” stated Dale Peniuk, chair of the special committee that recommended the deal to Rainy River’s board.

“To be able to realize a meaningful premium, while gaining the ability to combine with a well-established mine builder in New Gold, is a win-win scenario for our shareholders.”

New Gold will receive a $14-million termination fee if Rainy River receives and accepts a superior offer.