New Gold Targeting Mid-2017 Production Start at Rainy River
Detailed engineering for Rainy River was on schedule and 95% complete, and the temporary accommodation facility was 80% complete. First major earthworks for the processing plant site began in May and are scheduled for completion in the fourth quarter of 2015. Deliveries of the initial truck fleet and shovels are scheduled for the third quarter of 2015, and delivery of mills is scheduled for the fourth quarter.
Five prospective areas within a 5-km radius of the mine development area have been identified for future drill testing.
Capital expenditures at Rainy River during the second quarter totaled $32 million, bringing the project development capital spending through June 30 to $119 million. Total capital to develop the project is estimated at $877 million.
New Gold has entered into a $175 million streaming agreement with Royal Gold that will provide funds for project development in exchange for a percentage of future gold and silver production from the project. Royal Gold paid $100 million toward the streaming agreement concurrent with entering into the transaction. The remaining $75 million will be paid when 60% of the estimated project development capital has been spent and other customary conditions precedent have been met. Based on the currently planned timing of development capital expenditures, New Gold estimates that 60% of the project development costs will have been spent by mid-2016.
Under the streaming agreement, upon the start of production at Rainy River, New Gold will deliver 6.5% of the projectís monthly gold production and 60% of its monthly silver production to Royal Gold until a total of 230,000 oz of gold and 3.1 million oz of silver have been delivered. Once these thresholds have been satisfied, the stream percentages will be reduced to 3.25% for gold and 30% for silver. In addition to its initial $175 million payment, Royal Gold will pay New Gold 25% of the average spot prices for gold and silver at the time the stream ounces are delivered.