El Morro options for New Gold :)Posted: October 13, 2009, 11:00 AM by Peter Koven
Financial Post
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Analysts say that New Gold Inc. may sell its 30% stake in the El Morro copper-gold project, or swap it for something else, after Barrick Gold Corp. announced on Monday that it is buying in.
Barrick struck a deal to buy Xstrata PLC's 70% stake in Chile-based El Morro for US$465-million. New Gold has a right of first refusal to buy that interest itself and take over 100% of the project. But Wellington West Capital Markets analyst Steve Parsons thinks it will look to divest instead.
"We believe New Gold is unlikely to exercise the right of first refusal and will likely look to monetize the 30% stake, either through a cash transaction, or more likely through an asset swap whereby New Gold would exchange their interest in the project for one of Barrick's non-core gold mines," he wrote in a note to clients.
Andrew Kaip of BMO Capital Markets agreed that New Gold may look to divest its way out of El Morro. But on the other hand, he pointed out that Barrick provides New Gold with a "committed, gold focused partner" to develop the project, which is a good thing.
Both analysts were pleasantly surprised at the high price Barrick paid for its 70% stake. Based on that transaction, they noted that the implied value of New Gold's stake is about US$200-million, which was way above their past calculations. Mr. Parsons increased his
target price on New Gold by 19% to
$5.00a share to reflect a higher valuation for El Morro.
Peter Koven
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from:
https://network.nationalpost.com/np/blogs/tradingdesk/archive/2009/10/13/el-morro-options-for-new-gold.aspx