New Gold Completes Purchase of El Morro

New Gold Completes Purchase of El Morro

Thursday, April 22, 2010

The El Morro project lies in the centre of a huge legal dispute, but New Gold Inc. went ahead and bought it anyway.

Yesterday, the Vancouverbased miner said it closed a transaction to buy 70% of El Morro, a copper-gold deposit in Chile, from Xstrata PLC for US$463-million. It then transferred that stake to Goldcorp Inc., which plans to team up with New Gold to develop the project.

New Gold and Xstrata went ahead and closed the transaction despite a lawsuit from Barrick Gold Corp., which claims it is the rightful owner of the 70% stake in El Morro and has no plans to give up the fight for it.

Barrick struck a deal to buy the stake from Xstrata last fall, but New Gold took it away by exercising its right of first refusal to purchase the interest. However, Barrick claims that New Gold violated Chilean law by immediately transferring it over to Goldcorp.

In its statement of claim, Barrick said it was seeking an injunction preventing New Gold and Goldcorp from buying the Xstrata interest. However, Xstrata still decided to go ahead and sell it, even with the lawsuit hanging over the transaction.

Randall Oliphant, executive chairman of New Gold, said he is confident that Barrick’s suit will be dismissed. “Our view has been absolutely consistent, that we have a right of first refusal and we’re going to work towards completing our transaction,” he said.

As part of the deal with Goldcorp, New Gold received US$50-million in cash, and Goldcorp agreed to pay for all of the development costs at El Morro.

New Gold Completes Purchase of El Morro Reviewed by NajlA On Thursday, April 22, 2010, at 8:57 PM Rating: 5
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