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New Gold gets first ratings, launches new issue

New Gold Inc. , one of Canada's growing gold producers, has taken a big step forward toward establishing itself as a reputable choice for investors.

Despite its $4.5-billion market capitalization, before Tuesday, the company lacked a debt rating from one of the big agencies, such as Standard & Poors or Moody's. That's now changed, and with the new ratings came a new $300-million debt issue.

On Tuesday, the company launched the issue of senior notes, and both Moody's and S&P were asked to weigh in. Moody's offered a B2 rating, and S&P offered a BB- rating. Proceeds from the new offering, scheduled to mature in 2020, will be used to redeem the company's existing 10 per cent senior secured notes that come due in 2017.

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New Gold also has $55-million in convertible debentures outstanding. These pay a 5 per cent coupon and mature in 2014.

About a year ago, New Gold bought Richfield Ventures Corp. in a $513-million friendly deal, adding Richfield's Blackwater mine to its roster of projects. However, adding that project didn't help much with the debt rating -- at least in Moody's eyes -- because Blackwater isn't scheduled to start producing until 2017.

Moody's noted that New Gold currently depends on three operating mines, plus the prospect of its New Afton mine coming on stream within the next year. "The ratings reflect the risk that operational difficulty at any one of these mines could have a significant impact on the company's financial position," Moody's said.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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