* Deal has approval of New Gold and Richfield boards
* Richfield has agreed to break fee of C$18 million
* New Gold shares down 4.1 pct; Richfield shares surge
(Adds analyst comment, share price move, details on deal)
By Euan Rocha and Pav Jordan
TORONTO, April 4 New Gold Inc (NGD.TO) said on
Monday it struck a deal to acquire gold exploration company
Richfield Ventures RVC.V in a C$550 million ($567 million)
all-stock deal that lets it expand its asset base in Canada.
The deal gives New Gold, a mid-sized gold miner, control of
Richfield's flagship Blackwater project in British Columbia --
the acquisition will add about 3.8 million ounces of gold
resources to New Gold's portfolio.
Under the deal, which comes amid soaring gold prices and
bubbling gold sector M&A activity, Vancouver-based New Gold
will swap 0.9217 of a share for each Richfield share. The deal
values Richfield at C$10.38 a share, a 31 percent premium to
its April 1 closing price.
"The acquisition of the Blackwater project is an ideal fit
with our goal of continuing to enhance value in jurisdictions
where we already have a strong presence," New Gold's Executive
Chairman Randall Oliphant said in a statement.
Oliphant, the former president and chief executive of
Barrick Gold (ABX.TO)(ABX.N), said the Blackwater project would
significantly increase New Gold's production base at
competitive cash costs in the years ahead.
New Gold owns operating assets in the United States, Mexico
and Australia and is developing assets in Canada and Chile. The
acquisition comes weeks after Oliphant signaled the company was
on the lookout for advanced-stage exploration assets.
Fraser Mackenzie analyst Michael Starogiannis said in a
note to clients that he believes the bid full and fair.
"We believe that the limits of the (Blackwater) deposit
have been largely delineated by recent systematic drilling and
are therefore unlikely to grow significantly," he said.
Shares of New Gold were down 4.1 percent at C$10.80, while
those of Richfield were up 24.5 percent at C$9.88 on the TSX
The Blackwater project is a bulk-tonnage gold project in
central British Columbia and is about 450 kilometers (280
miles) north of New Gold's New Afton project, which is expected
to begin production in mid-2012.
New Gold, which expects to fund the development of
Blackwater from internal cash flow, said the timeline to
develop the project will allow it to transition its mine
building team from New Afton to Blackwater.
Richfield CEO Peter Bernier said the all-stock deal would
let Richfield's shareholders benefit from the advancement of
the project, and from New Gold's larger portfolio of assets.
Moreover, in a business where the pedigree of a company's
management team is almost as significant as the promise of its
resource, New Gold's board of directors reads like a veritable
who's who list of mining industry heavy weights.
Other board members besides Oliphant include Pierre
Lassonde, the former president of Newmont Mining (NEM.N) and
current chairman of Franco Nevada (FNV.TO); Ian Telfer, the
current chairman and former CEO of Goldcorp (G.TO); and Raymond
Threlkeld former CEO of Western Goldfields.
The boards of both companies support the deal and have set
an C$18 million break-up fee. Richfield directors and officers,
who control some 15.8 percent of its shares and options have
agreed to support the deal, which requires approval of holders
of two-thirds of Richfield shares.
New Gold's financial advisor is Canaccord Genuity and its
legal advisors are Cassels Brock & Blackwell LLP in Canada and
Shearman & Sterling LLP in the United States.
Richfield's financial advisor is National Bank Financial
Inc. and its legal advisor is McMillan LLP in Canada.
($1= $0.97 Canadian)
(Reporting by Euan Rocha and Pav Jordan; editing by Janet