- All dollar figures are in US dollars unless otherwise indicated)
TORONTO, Aug. 27, 2015 /CNW/ - New Gold Inc. ("New Gold") (TSX:NGD) (NYSE MKT:NGD) today announces that the company has entered into an agreement with Goldcorp Inc. ("Goldcorp") to sell New Gold's 30% interest in the El Morro project to Goldcorp in exchange for $90 million in cash, a 4% stream on gold production from the El Morro property and the cancellation of New Gold's $93 million carried funding loan (the "Transaction"). The Transaction provides New Gold with increased financial flexibility, strengthens the balance sheet and enables the company to maintain exposure to El Morro's significant 8.9 million ounce gold reserve and ongoing exploration potential.

KEY TRANSACTION HIGHLIGHTS

$90 million cash consideration

$90 million, less applicable withholding taxes, to be paid at closing of the Transaction, expected to be in the fourth quarter of 2015
4% stream on gold production from the El Morro property

4% stream on life-of-project gold production from the 417 square kilometre El Morro property
El Morro's currently estimated gold mineral reserves – 599 million tonnes at an average gold grade of 0.46 grams per tonne, totalling 8.9 million ounces
Measured and Indicated mineral resources (exclusive of reserves) – 92 million tonnes at an average gold grade of 0.41 grams per tonne, totalling 1.2 million ounces
Inferred mineral resources (including open pit and underground resources) – 678 million tonnes at an average gold grade of 0.30 grams per tonne, totalling 6.5 million ounces
New Gold to pay fixed $400 per ounce on the first 217,000 ounces of gold delivered as part of the stream
$93 million carried funding loan cancelled

New Gold will no longer be obligated to repay the $93 million in debt that Goldcorp (and previous joint venture partners) funded on the company's behalf


In conjunction with the Transaction, Goldcorp and Teck Resources Limited ("Teck") today announced that they plan to combine their respective El Morro and Relincho projects into a 50/50 joint venture with the interim name of Project Corridor.

"This transaction makes strategic sense for all of the parties involved," stated Randall Oliphant, Executive Chairman of New Gold. "We believe Goldcorp and Teck have developed a creative and thoughtful approach to bring their projects together. It is logical for two large, well-capitalized, proven operators to carry Project Corridor forward. At the same time, New Gold has taken this opportunity to further enhance our financial flexibility and strengthen our balance sheet while retaining a meaningful, low-cost stream on El Morro's significant gold reserves and ongoing potential."

"Goldcorp has been an excellent partner at El Morro over the last five years and we look forward to Goldcorp and Teck progressing Project Corridor for the benefit of all stakeholders," added Mr. Oliphant.

Additional Transaction Details

Based on the results of the Project Corridor Preliminary Economic Assessment, when ore is sourced from El Morro, gold production is expected to average over 400,000 ounces per year which would enable New Gold to purchase over 16,000 ounces of gold per year at $400 per ounce.

The cash purchase price for gold delivered under the stream is fixed at $400 per ounce for the first 217,000 ounces of gold, where 217,000 ounces reflects 4% of El Morro's currently estimated recoverable gold production. Thereafter, the cash purchase price will be $400 per ounce plus an annual 1% inflation adjustment.

Goldcorp and Teck are expecting to commence a Pre-Feasibility Study in early 2016 which should be completed 12 to 18 months thereafter.

El Morro has generated a significant return for the company since it was originally brought into the portfolio by one of New Gold's predecessor companies in 1996. Including the costs associated with optioning into the property and subsequent exploration expenditures, the company has spent less than $7 million for its interest in El Morro. In return for this investment, New Gold received a $50 million payment from Goldcorp in 2010 when Goldcorp became the company's 70% joint venture partner, as well as the cash proceeds related to today's Transaction. Importantly, beyond these two cash payments, New Gold continues to maintain meaningful exposure to the El Morro project through the 4% gold stream. From an accounting perspective, the company expects to realize a non-cash loss of approximately $100 million on the sale of its 30% interest in El Morro, primarily related to the purchase accounting value assigned to the project at the time of the New Gold's three-way merger in 2008.

Closing of the Transaction is conditional upon the closing of the El Morro-Relincho joint venture between Goldcorp and Teck as well as other customary conditions. The Transaction is expected to close in the fourth quarter of 2015.

ABOUT NEW GOLD INC.

New Gold is an intermediate gold mining company. The company has a portfolio of four producing assets and three significant development projects. The New Afton Mine in Canada, the Mesquite Mine in the United States, the Peak Mines in Australia and the Cerro San Pedro Mine in Mexico, provide the company with its current production base. In addition, New Gold owns 100% of the Rainy River and Blackwater projects, both in Canada, as well as an interest in the El Morro project located in Chile. New Gold's objective is to be the leading intermediate gold producer, focused on the environment and social responsibility. For further information on the company, please visit www.newgold.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information contained in this news release, including any information relating to New Gold's future financial or operating performance are "forward looking". All statements in this news release, other than statements of historical fact, which address events, results, outcomes or developments that New Gold expects to occur are "forward-looking statements". Forward-looking statements are statements that are not h... etc etc.

- See more at: http://www.newgold.com/investors/NewGoldNews/PressReleaseDetail/2015/New-Gold-Announces-Sale-of-El-Morro-Interest-for-90-Million-Cash-and-a-4-Gold-Stream/default.aspx#sthash.fGGhMnmi.dpuf

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