New Gold Inc. (NYSE: NGD, TSX: NGD) is buying Ontario-based Rainy River Resources Ltd. in a deal that values the company at C$310 million (about U.S. $300 million).
The buyer is offering 0.5 of its own shares per Rainy River share, or $3.83 in cash. The maximum number of shares that can be issued for the deal is 25.8 million, and the maximum cash consideration is C$198 million.
The deal gives New Gold Rainy River’s primary asset - a 4 million-ounce gold reserve in Ontario. New Gold, headquartered in Ontario, is a gold mining company that has four gold producing assets and two projects still in development.
Several deals in the metals and mining sector have cropped up recently among middle market players. They include Coeur d’Alene Mines Corp.’s (NYSE: CDE, TSX: CDM) purchase of Orko Silver Corp., Arian Silver Corp.’s (TSX: ACQ) decision to buy a silver processing plant in Mexico, and Hecla Mining Co. (NYSE: HL) plan to buy gold mining company Aurizon Mines Ltd. (TSX: ARZ, NYSE: AZK) for $775.2 million.
The transactions were announced in the midst of a sluggish M&A market. This is especially the case within the mining sector, due to sellers being unwilling to accept lower valuations and more complex deal negotiations taking place between buyers and targets, according to a report from financial services firm Ernst & Young. During 2012, 941 deals were completed in the mining space, 7 percent less than the number of closed transactions in 2011, while deal volume totaled $104 billion — a 36 percent decrease from the prior year.