Equinox Gold Acquiring Mesquite Mine From New Gold
(Kitco News) - Equinox Gold Corp. (TSXV: EQX) has entered into an agreement to acquire the Mesquite Gold Mine in California from New Gold Inc. (TSX, NYSE American: NGD) for $158 million, the companies reported.
Equinox said the acquisition immediately establishes the developing company as a gold producer and accelerates growth. New Gold said the deal allows it to focus on core assets and “crystallize” future cash flow.
Mesquite is on track to achieve New Gold’s production guidance of 140,000 to 150,000 ounces of gold in 2018 and has produced an average 135,000 ounces annually over the previous 10 years, Equinox said. Mesquite is an open-pit, run-of-mine heap leach gold mine in Imperial County with a long history of operations, producing more than 4 million ounces of gold since it opened in 1985.
Equinox said the acquisition is expected to close in the fourth quarter and does not require shareholder approval. The purchase will be funded through a combination of debt and equities, with the company announcing a private placement for gross proceeds of $75 million.
Equinox said this production will be bolstered in the not-too-distant future by production from the company’s 136,000-ounce-per-year construction-stage Aurizona Gold Mine in Brazil and its development-stage Castle Mountain Gold Mine in California.
“The Mesquite Gold Mine will bring immediate production and cash flow to Equinox Gold from a well-established operation in an attractive mining jurisdiction,” said Christian Milau, chief executive officer of Equinox Gold. “Mesquite is the perfect fit for our portfolio of gold assets at this stage of growth and advances our strategy of becoming a major gold producer over the next few years.”
As of the end of 2017, the Mesquite gold deposit was estimated at 1.13 million ounces of proven and probable reserves, plus 1.18 million ounces of measured and indicated resources. This represents increases of 25% and 40%, respectively, from Equinox Gold’s current reserve and resource base, the company said.
The transaction “allows New Gold to immediately crystallize several years’ worth of future free-cash flow as part of our strategy to prudently manage our balance sheet, providing the company with the
financial flexibility to focus on our core assets,” said Renaud Adams, president and chief executive officer of New Gold.