New Gold goes all-in at Blackwater

Vancouver – New Gold (NGD-T, NGD-N) has put pen to paper with two B.C.-focused junior gold explorers holding land near the company’s most recent acquisition, the Blackwater gold-silver project, located 150 km southwest of Prince George.

It has agreed to acquire Randy Turner’s Silver Quest Resources (SQI-V) for approximately $131 million in shares and Michael England’s Geo Minerals (GM-V) for roughly $17 million in cash. 

Silver Quest holds a 25% interest in the Davidson property, which forms the northern half of the Blackwater project, as well as 100% of the 41,000-hectare Capoose gold-silver-zinc property, located 25 km west of Blackwater.

The main prize for New Gold is consolidating ownership of the Blackwater project by gaining the 560,000 indicated gold oz. and 210,000 inferred gold oz. attributable to Silver Quest at Davidson, bringing the total resource at Blackwater under the company’s control to 5.35 million oz. gold indicated and 1.17 million oz. gold inferred. The ounces are contained in 165 million indicated tonnes grading 1.01 grams gold per tonne and 5.1 grams silver per tonne, as well as 38.7 million inferred tonnes grading 0.94 gram gold and 4.8 grams silver, all at a cut-off grade of 0.4 gram gold per tonne.

Capoose also provides a potential satellite deposit and comes stocked with indicated resources totaling 836,000 gold-equivalent oz. contained in 31.2 million tonnes grading 0.83 gram gold-equivalent and inferred resources totaling 947,000 gold-equivalent oz. contained in 37.2 million tonnes averaging 0.79 gram gold-equivalent.

In all, New Gold will control more than 8.3 million oz. gold-equivalent in the area across all resource categories after the acquisitions.

Turner, Silver Quest’s president and CEO and the holder of 1.94 million of its shares, has pledged his support for the all-share offer. It values Silver Quest at approximately $1.32 a share and allows for the creation of a spinoff company, McIntyre Minerals, which will continue to explore Silver Quest’s many Yukon gold projects as well as its 3Ts gold project about 20 km southeast of Capoose. McIntyre will also hold onto Silver Quest’s substantial treasury, and should launch with roughly $15 million in the till. A geologist and long-time diamond enthusiast, Turner is best known in the industry for having sold Winspear Diamonds and its Snap Lake diamond project in the Northwest Territories to De Beers for $305 million in 2000. De Beers officially opened the $1.1-billion underground mine in July 2008.

As for Geo Minerals, New Gold has agreed to pay 16c a share for the 1,470-hectare West Blackwater properties, located immediately northwest of the Blackwater project. Geo Minerals shareholders will also receive one common share of a new company for every 15 shares currently held, and New Gold will complete a $250,000 private placement in it for a 9.9% shareholding.

New Gold acquired the Blackwater project in June 2011 through a friendly $550-million all-share takeover of Richfield Ventures at $10.38 per share. Since then, the company has increased the project’s resources by 50% and is well on track to increase them further, with the deposit remaining open in all directions and at depth. It plans to complete up to 50,000 metres of drilling at Blackwater in the second half of 2011 using up to 10 drill rigs.

The project also fits in well with New Gold’s corporate strategy for British Columbia, as the company plans to transfer over a significant portion of its mine-building team once they are done with construction of the New Afton copper-gold-silver project near Kamloops. The underground mine is expected to begin production in the second half of 2012 and produce an average of 75 million lbs. copper, 85,000 oz. gold and 214,000 oz. silver per year.

Shares of New Gold retreated 57c to $11.23 on news of the double takeover on Oct. 17. The company has a 52-week share price range of $6.65-$14.12.

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