Exhibit
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1
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Business Acquisition Report
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NEW GOLD INC.
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||||
By:
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/s/ Lisa Damiani
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Date: October 7, 2013
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Lisa Damiani, Vice President, General Counsel, and Corporate Secretary
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ITEM 1
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IDENTITY OF COMPANY
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1.1
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Name and Address of Company
New Gold Inc.
Suite 1800 – 555 Burrard Street
Two Bentall Centre
Vancouver, BC V7X 1M9
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1.2
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Executive Officer
Hannes Portmann, Vice President, Corporate Development
Telephone: (416) 324-6000
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ITEM 2
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DETAILS OF ACQUISITION
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2.1
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Nature of Business Acquired
Summary
Pursuant to an offer dated June 18, 2013 (as extended by a notice of extension dated July 25, 2013, the “Offer”), New Gold Inc. (the “Company” or “New Gold”)) offered to acquire all of the outstanding common shares of Rainy River Resources Ltd. (“Rainy River”), including any common shares of Rainy River issued upon the exercise, exchange or conversion of any securities convertible into common shares of Rainy River (collectively, the “Common Shares”). On July 24, 2013, upon the initial expiry of the Offer, the Company took up approximately 89,200,000 Common Shares validly deposited under the Offer, and as of August 8, 2013, following the expiry of the extension of the Offer, the Company took up approximately an additional 11,700,000 Common Shares validly deposited under the Offer. As a result, the Company now owns approximately 100,900,000 Common Shares, representing approximately 97.5% of the outstanding Common Shares. The Company is in the process of acquiring all of the remaining Common Shares not acquired under the Offer pursuant to a compulsory acquisition under the Business Corporations Act (British Columbia) (the “Compulsory Acquisition”).
About Rainy River
Rainy River is a Canadian mineral exploration company engaged in the acquisition, exploration and development of mineral properties. Rainy River currently owns a 100% interest in the Rainy River Gold Project located in Northwestern Ontario, approximately 65 kilometres northwest of Fort Francis.
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2.2
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Date of Acquisition
July 24, 2013.
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2.3
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Consideration
Pursuant to the terms of the Offer, the Company acquired the Common Shares under the Offer for aggregate consideration consisting of 25,143,014 common shares of the Company and $192,596,199.62 in cash. The aggregate cash portion of the consideration for the Common Shares was funded from cash resources available to the Company.
Additional consideration will be issued in connection with the Compulsory Acquisition on the same terms as contained in the Offer.
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2.4
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Effect on Financial Position
The Company does not have any current plans for material changes in the Company’s or Rainy River’s business or affairs which may have a significant effect on the financial performance and financial position of the Company.
Following completion of the Compulsory Acquisition, the Company intends to delist the Common Shares from the Toronto Stock Exchange and cause Rainy River to cease to be a reporting issuer in all provinces in which it current reports, namely British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland.
The Company intends to advance its detailed review of the Rainy River project's feasibility study. It is anticipated that a project sequencing and related capital allocation decision relating to the Rainy River project and the Company’s Blackwater project would be made in the next 12 months.
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2.5
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Prior Valuations
Not Applicable.
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2.6
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Parties to Transaction
The Acquisition was not with an informed person, associate or affiliate of the Company.
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2.7
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Date of Report
October 7, 2013.
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ITEM 3
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FINANCIAL STATEMENTS
The following financial statements are incorporated by reference herein and are included as part of this Report:
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(i)
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the annual audited consolidated financial statements of Rainy River for the year ended December 31, 2012, which includes the annual audited consolidated financial statements of Rainy River for the year ended December 31, 2011; and
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(ii)
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the condensed interim consolidated financial statements of Rainy River for the three and six months ended June 30, 2013, which includes the comparable period in the 2012 financial year.
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The financial statements referred to in (i) and (ii) above are available on SEDAR at www.sedar.com.
The following financial statements are attached as Schedule “A” to this Report and included as part of this Report:
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(i)
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pro forma financial statement of financial position of the Company as at June 30, 2013, that gives effect to the Acquisition as if the Acquisition had taken place as of June 30, 2013;
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(ii)
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pro forma income statement of the Company for the year ended December 31, 2012, that gives effect to the Acquisition as if the Acquisition had taken place on January 1, 2012;
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(iii)
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pro forma income statement of the Company for the period ended June 30, 2013, that gives effect to the Acquisition as if the Acquisition had taken place on January 1, 2012; and
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(iv)
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pro forma earnings per share based on the pro forma financial statements referred to in (ii) and (iii) above.
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New Gold
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Rainy River
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Pro forma
adjustments
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Notes
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Pro forma
consolidated
$
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||||||
Assets
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||||||||||
Current assets
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||||||||||
Cash and cash equivalents
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562.5
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76.5
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(186.9)
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a)
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452.1
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|||||
Trade and other receivables
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10.6
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0.5
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-
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11.1
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||||||
Inventories
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185.0
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-
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-
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185.0
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||||||
Current income tax receivables
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12.8
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-
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-
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12.8
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||||||
Prepaid expenses and other
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6.9
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0.1
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-
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7.0
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||||||
Total current assets
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777.8
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77.1
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(186.9)
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668.0
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||||||
Investments
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0.6
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0.1
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0.7
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|||||||
Non-current inventories
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33.3
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-
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33.3
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|||||||
Mining interests
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3,202.8
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54.1
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269.0
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b)
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3,525.9
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|||||
Deferred income tax asset
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189.7
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-
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-
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189.7
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||||||
Other assets
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3.2
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-
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-
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3.2
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||||||
Goodwill
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-
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-
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29.9
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b)
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29.9
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|||||
Total assets
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4,207.4
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131.3
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112.0
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4,450.7
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||||||
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The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
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New Gold
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Rainy River
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Pro forma
adjustments
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Notes
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Pro forma
consolidated
$
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||||||
Liabilities
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||||||||||
Current liabilities
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||||||||||
Trade and other payables
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88.4
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6.7
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14.0
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a), e)
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109.2
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|||||
Total current liabilities
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88.4
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6.7
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14.0
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109.2
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Reclamation and closure cost obligations
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59.8
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-
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-
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59.8
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||||||
Provisions
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10.9
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-
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-
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10.9
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||||||
Non-current non-hedged derivative liabilities
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34.2
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-
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-
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34.2
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||||||
Long-term debt
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855.5
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-
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-
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855.5
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||||||
Deferred tax liabilities
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354.0
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-
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29.9
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b)
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383.9
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|||||
Deferred benefit
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46.3
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-
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-
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46.3
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||||||
Other liabilities
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0.6
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0.1
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-
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0.7
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||||||
Total liabilities
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1,449.7
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6.8
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43.9
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1,500.5
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||||||
Shareholders’ Equity
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||||||||||
Common shares
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2,625.3
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310.8
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(126.9)
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c)
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2,809.2
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|||||
Contributed surplus
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86.9
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30.0
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(30.0)
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c)
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86.9
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|||||
Other reserves
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(29.2)
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-
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-
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(29.2)
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||||||
Retained earnings/(deficit)
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74.7
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(216.3)
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216.3
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c)
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74.7
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|||||
Total equity
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2,757.7
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124.5
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59.4
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2,941.6
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Non-controlling interest
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-
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-
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8.7
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f)
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8.7
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|||||
Total liabilities and equity
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4,207.4
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131.3
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112.0
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4,450.7
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||||||
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New Gold
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Rainy River
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Pro forma
adjustments
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Notes
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Pro forma
consolidated
$
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||||||
Revenue
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385.3
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-
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-
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385.3
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||||||
Operating expenses
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211.7
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-
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-
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211.7
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||||||
Depreciation and depletion
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82.0
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-
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-
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82.0
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||||||
Earnings from mine operations
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91.6
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-
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-
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91.6
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||||||
Corporate administration
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14.6
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5.0
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-
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19.6
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||||||
Share-based compensation
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4.3
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1.0
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(1.0)
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g)
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4.3
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|||||
Exploration and business development
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15.9
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15.7
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(15.7)
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d)
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15.9
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|||||
Income from operations
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56.8
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(21.7)
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16.7
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42.0
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||||||
Finance income
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0.6
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0.7
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-
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1.3
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||||||
Finance costs
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(22.9)
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-
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-
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(22.9)
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||||||
Other gains/(losses)
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33.2
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(0.1)
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-
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33.1
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||||||
Earnings before taxes
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67.7
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(21.1)
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16.7
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63.3
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||||||
Income tax expense
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(16.4)
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-
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-
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(16.4)
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||||||
Net earnings/(loss)
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51.3
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(21.1)
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16.7
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46.9
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||||||
Non-controlling interest
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0.5
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(0.4)
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f)
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0.1
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||||||
Net earnings/(loss) attributable to New Gold shareholders
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(20.6)
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16.3
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47.0
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|||||||
Earnings per share
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||||||||||
Basic
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0.11
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0.09
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||||||||
Diluted
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0.11
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0.09
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||||||||
Weighted average number of shares outstanding (in millions)
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||||||||||
Basic
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476.6
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501.7
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||||||||
Diluted
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480.1
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505.2
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||||||||
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
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|
New Gold
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Rainy River
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Pro forma
adjustments
|
Notes
|
Pro forma
consolidated
$
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||||||
Revenue
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791.3
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-
|
-
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791.3
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||||||
Operating expenses
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344.3
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-
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-
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344.3
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||||||
Depreciation and depletion
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116.4
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-
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-
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116.4
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||||||
Earnings from mine operations
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330.6
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-
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-
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330.6
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||||||
Corporate administration
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25.2
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7.5
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-
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32.7
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||||||
Share-based compensation
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10.9
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4.1
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(3.8)
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d)
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11.2
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|||||
Exploration and business development
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20.6
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55.0
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(50.7)
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d)
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24.9
|
|||||
Income from operations
|
273.9
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(66.6)
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(54.5)
|
261.8
|
||||||
Finance income
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1.4
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1.2
|
-
|
2.6
|
||||||
Finance costs
|
(16.4)
|
-
|
-
|
(16.4)
|
||||||
Other gains/(losses)
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19.9
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(0.6)
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-
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g)
|
-
|
|||||
Transaction costs
|
-
|
-
|
(8.8)
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(8.8)
|
||||||
Earnings before taxes
|
278.8
|
(66.0)
|
45.7
|
258.5
|
||||||
Income tax expense
|
(79.8)
|
-
|
-
|
(79.8)
|
||||||
Net earnings/(loss)
|
199.0
|
(66.0)
|
45.7
|
178.7
|
||||||
Non-controlling interest
|
1.7
|
(1.1)
|
f)
|
0.6
|
||||||
Net earnings/(loss) attributable to New Gold shareholders
|
(64.3)
|
44.6
|
179.3
|
|||||||
Earnings per share
|
||||||||||
Basic
|
0.43
|
0.36
|
||||||||
Diluted
|
0.42
|
0.36
|
||||||||
Weighted average number of shares outstanding (in millions)
|
||||||||||
Basic
|
463.4
|
488.5
|
||||||||
Diluted
|
468.4
|
493.5
|
||||||||
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
|
|
1
|
Basis of presentation
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a)
|
An unaudited pro forma consolidated statement of financial position giving effect to the transaction described in note 3, as if the transaction occurred on June 30, 2013 combining:
|
|
·
|
the unaudited consolidated statement of financial position of the Company as at June 30, 2013; and
|
|
·
|
the unaudited consolidated balance sheet of Rainy River as at June 30, 2013.
|
|
b)
|
An unaudited pro forma consolidated statement of income/(loss) for the year ended December 31, 2012, which assumes the transaction occurred as of January 1, 2012, combining:
|
|
·
|
the audited consolidated statement of income of the Company for the year ended December 31, 2012; and
|
|
·
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the audited consolidated statement of loss of Rainy River for the year ended December 31, 2012.
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|
c)
|
An unaudited pro forma consolidated statement of income/(loss) for the six months ended June 30, 2013, which assumes the transaction occurred as of January 1, 2012, combining:
|
|
·
|
the unaudited consolidated statement of income of the Company for the six months ended June 30, 2013; and
|
|
·
|
the unaudited consolidated statement of loss of Rainy River for the six months ended June 30, 2013.
|
·
|
June 30, 2013 balance sheet at the exchange rate of $0.9508;
|
|
· | December 31, 2012 income statement at the average rate for the year of $1.0006; and | |
· | June 30, 2013 income statement at the average rate for the period of $0.9842. |
2
|
Summary of significant accounting policies
|
3
|
The transaction
|
$
|
||||
Total cash consideration
|
186.9
|
|||
Total equity consideration
|
183.9
|
|||
Total consideration paid
|
370.8
|
|||
$
|
||||
Net assets acquired and liabilities assumed
|
||||
Net assets per June 30, 2013
|
||||
Cash and cash equivalents
|
76.5
|
|||
Receivables
|
0.5
|
|||
Prepaid expenses
|
0.1
|
|||
Investments
|
0.1
|
|||
Liabilities
|
(6.8)
|
|||
Additional liabilities at acquisition
|
(14.0)
|
|||
Mineral properties, plant and equipment
|
323.1
|
|||
Deferred income tax liability
|
(29.9)
|
|||
Total net assets acquired
|
349.6
|
|||
Non-controlling interest
|
(8.7)
|
|||
Goodwill
|
29.9
|
|||
4
|
Pro forma assumptions and adjustments
|
a)
|
An adjustment to recognize the cash paid to Rainy River shareholders as part of the purchase consideration.
|
b)
|
An adjustment to reflect the fair value of assets acquired and excess of the preliminary purchase price over the estimated fair value of the net assets acquired from Rainy River, as a result of the transaction described in note 3, representing goodwill.
|
c)
|
An adjustment to eliminate Rainy River’s historical equity accounts and an adjustment of $183.9 million to reflect the issuance of 22,310,594 and 2,832,420 common shares of New Gold (for the first and second take ups under the bid on July 24 and August 8, 2013, respectively) in exchange for an 86.2% and 11.3% stake in the common shares of Rainy River. The closing price of New Gold shares on July 24, 2013 was $7.35 and on August 8, 2013 was $6.95.
|
d)
|
An adjustment to reflect the impact of the accounting policy change on Exploration and Evaluation costs and associated share-based payment costs of Rainy River previously expensed.
|
e)
|
An adjustment to reflect sundry accruals.
|
f)
|
An adjustment to reflect the 2.5% of Rainy River shares not acquired as of the date of filing.
|
g)
|
An adjustment to reflect the transaction costs related to the transaction.
|
5
|
Pro forma share capital
|
June 30, 2013
|
December 31, 2012
|
|||||||
Number of
shares
|
$
|
Number of
shares
|
$
|
|||||
(in thousands)
|
(in thousands)
|
|||||||
New Gold’s common shares outstanding
|
477,102
|
2,625.3
|
463,400
|
2,618.4
|
||||
New Gold’s common shares issued under the proposed transaction (note 3)
|
25,143
|
183.9
|
25,143
|
183.9
|
||||
Pro forma share capital
|
502,245
|
2,809.2
|
488,543
|
2,802.3
|
||||
6
|
Pro forma earnings per share
|
June 30,
2013
|
December 31,
2012
|
|||
(in millions)
|
(in millions)
|
|||
Actual weighted average number of New Gold shares outstanding
|
476.6
|
463.4
|
||
Assumed number of New Gold shares issued to Rainy River shareholders (note 4)
|
25.1
|
25.1
|
||
Pro forma weighted average number of New Gold shares outstanding (basic)
|
501.7
|
488.5
|
||
Pro forma net income
|
$
|
47.0
|
$
|
179.3
|
Pro forma earnings per share - basic
|
$
|
0.09
|
$
|
0.36
|
Pro forma weighted average number of New Gold shares outstanding
|
501.7
|
488.5
|
||
Actual New Gold dilutive shares
|
3.5
|
5.0
|
||
Pro forma weighted average number of New Gold shares outstanding (diluted)
|
505.2
|
493.5
|
||
Pro forma net income
|
$
|
47.0
|
$
|
179.3
|
Pro forma earnings per share (diluted)
|
$
|
0.09
|
$
|
0.36
|