Shares in New Gold Inc. (TSE:NGD) shined on Wednesday after the gold miner penned a deal to sell its gold stream on the El Morro project to Goldcorp Inc. (NYSE:GG) for US$65mln in cash.
New Gold will use the cash to help fund its Rainy River project in Canada which is slated to start production this September.
The binding agreement also represents a decent return on investment for New Gold given that El Morro has had less than uS$7mln spent on its development.
Including the US$65mln generated by the sale of the stream, the company will have generated total proceeds of US$205mln from the project over the past seven years.
“Our interest in El Morro has generated significant value for our company over the last several years,” said New Gold President and chief executive Hannes Portman.
“The sale of the stream allows us to realize $65 million from an asset that is not a core part of our portfolio to support our key, near-term growth project at Rainy River.”
A definitive agreement still needs to be negotiated, but both parties expect the transaction to go through later this month.
Shares were up 5.4% to C$3.95 on Wednesday morning.