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Canada’s New Gold Inc said on Tuesday it has agreed to sell a 46 per cent free cash flow interest in its New Afton mine to Ontario Teachers’ Pension Plan for an upfront cash infusion of $300 million, which the gold miner will use to cut debt.

The deal will also give one of Canada’s biggest pension funds an option to convert the interest into a 46 per cent joint venture in four years.

The Toronto-based miner’s long-term debt stood at $714.5 million for the year ended Dec. 31.

If the pension fund does not exercise the joint venture option, its free cash flow interest in the British Columbia-based mine will drop to 42.5 per cent.

The deal is subject to approval under New Gold’s credit facility and is expected to close on or about March 31.

Scotiabank was the financial adviser to New Gold, while Cassels Brock & Blackwell LLP and Lawson Lundell LLP were the legal counsels. BMO Capital Markets was the financial adviser to Ontario Teachers’, while Stikeman Elliott LLP was the legal counsel.

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