New Gold, Royal Gold deal boosts Rainy River mine development

Despite a significant drop in the price of gold, it's business as usual at New Gold's Rainy River project.

The company announced a $175 million agreement with Royal Gold of Colorado, which will be used for further development of its northwestern Ontario venture.

And while the price of gold dropped to historic lows this week ($1,103.50 on Tuesday), New Gold's vice president of corporate development said they are not worried about what they consider a short-term issue.

"When you have assets like Rainy River that have an initial mine life of 14 years — but lots of potential to extend well beyond that — what happens ... in the moment doesn't impact long-term potential for these assets," Hannes Portmann said.

He noted the development is on track to create close to 400 jobs and will be completed by 2017.

"What matters a lot more to us is the long-term prospectivity of gold prices."

Portmann said the company is paying attention to the influence China and India has on gold markets, as 50 per cent of the demand for the precious metal comes from "immensely growing populations with a propensity to own gold."

That, he said, is a more important factor "than exchange selling that was really the driver of what happened yesterday."

The deal with Royal Gold gives New Gold "a little more flexibility," Portmann said.