New Gold’s New Afton mine west of Kamloops, B.C., in 2021. The operation is one of two to be acquire by U.S. gold miner Coeur Mining in a deal with New Gold.Dennis Owen/The Globe and Mail
Coeur Mining Inc. CDE-N shares took a dive after the silver and gold producer announced its $9.5-billion acquisition of New Gold Inc. NGD-T, a takeover that, if approved, will see one of Canada’s leading intermediate gold producers fall into American hands.
The deal follows Anglo American Plc’s NGLOY offer to buy Canada’s Teck Resources Ltd. TECK-B-T in September, marking another instance in which a respected Canadian miner is selling itself rather than bulking up by being the acquirer.
Chicago-based Coeur hopes to buy New Gold in an all-stock deal worth roughly $12 a New Gold share, amounting to a 16-per-cent premium to New Gold’s market price before the deal was announced. Coeur shareholders will own 62 per cent of the combined company, while New Gold shareholders will own 38 per cent.
Toronto-based New Gold owns two gold projects – the New Afton mine near Kamloops, which also produces copper, and the Rainy River mine in Northern Ontario – and until recently the company struggled to attract investor interest. In September, 2022, New Gold’s shares traded for 82 cents apiece, but its stock took off as the price of gold more than doubled and investors grew impressed by New Gold’s operating results.
U.S. gold miner Coeur Mining to buy New Gold, its two Canadian operations in deal worth $7-billion
Before the proposed takeover, New Gold traded at roughly 1.3 times its net asset value, while its peers traded at an average of 0.75 times their net asset values, according to RBC Dominion Securities.
Coeur, which has five mines across Mexico and the United States, has also seen its shares jump over the last three years, but its stock price really took off in August and September as silver prices unexpectedly soared. The company’s share price had already started to correct over the past month amid talks of a silver bubble, and Coeur’s shares dropped another 11.8 per cent Monday after the company announced the New Gold deal.
Because the takeover is an all-share transaction, Coeur’s falling share price wiped out the premium offered to New Gold shareholders, and New Gold’s stock closed 1 per cent lower on the Toronto Stock Exchange on Monday.
The two miners are marketing their combination as a way of bulking up to earn more respect from a wider range of investors. “This is less about synergies and really more about what these two companies together represent,” Coeur chief executive Mitchell Krebs said on a conference call, adding that the bigger business will offer scale and quality given its North American footprint.
In other words, by adding New Gold’s highly profitable Canadian assets, Coeur will become a lower-risk investment. Over the first three quarters of 2025, New Gold made US$194-million.
As for New Gold, current chief executive officer Patrick Godin – who will join Coeur’s board of directors – described the takeover as the company’s “next best step.” Coeur is a North American miner, which he described as better than selling to a producer in a higher-risk jurisdiction, such as Africa, and investors will now be able to diversify their risk over seven assets instead of two.
Plus, he added, no mine will be more than 25 per cent of the combined company’s net asset value, making it a balanced revenue mix.
After the takeover, 72 per cent of Coeur’s revenue will come from gold production, 20 per cent from silver and the rest from copper. Half of the company’s revenue will come from Canada, about one-third from the United States, and 18 per cent from Mexico.
Because New Gold’s New Afton mine in British Columbia also produces copper, management was asked on the conference call if they expect any pushback from the Canadian government, considering copper is a critical mineral. (Teck Resources also produces copper in B.C.)
Mr. Krebs, Coeur’s CEO, said there have not been any preliminary conversations with the Canadian government, but said the company is committed to spend on exploration to extend the lives of the New Gold’s mines, and Coeur will also apply to be listed on the Toronto Stock Exchange.
Given the revenue mix, he added, copper isn’t a driver of this deal. “We see this mostly through a precious metals lens,” he said.