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New Gold gets a good neighbour

awillis@globeandmail.com

Barrick Gold's latest South American acquisition is expected to boost the fortunes of mid-tier mining play New Gold Inc.

Barrick spent $465-million (U.S.) yesterday to buy a 70 per cent stake in the El Morro property in Chile from Xstrata. The site is close to existing Barrick gold and copper mines, so the buyer should be able to achieve substantial cost savings on a project with a $1.4-billion budget. Debt-heavy Xstrata can pay down loans and focus its portfolio.

The other 30 per cent of El Morro is owned by Canadian intermediate mining company New Gold, which had the right of first refusal on the Xstrata stake. From New Gold's point of view, Barrick's arrival is a positive development.

First off, the implied value of New Gold's stake is $199-million. That's well north of where analysts such as BMO Nesbitt Burns' Andrew Kaip valued the interest: He pegged the El Morro holding at just $103-million prior to yesterday's deal.

Looking ahead, Mr. Kaip said New Gold has a number of attractive options. "Barrick's interest would provide New Gold with a committed, gold-focused partner for future El Morro development," the analyst said. "Alternatively, BMO Research expects New Gold to consider divesting of El Morro either for cash or through an asset swap for one of Barrick's non-core mining operations."

New Gold is backed by a number of the top players in gold mining, with a board that includes semi-retired but still extremely active directors Pierre Lassonde of Franco-Nevada fame, Goldcorp's Ian Telfer and former Barrick CEO Randall Oliphant. The firm's strategy is to grow by acquisition.

Other supposedly retired executive types were also involved in the deal game yesterday: Former Peters & Co. chairman Rob Peters is a long-time backer and director at junior Breaker Energy, and it was sold for $310-million to NAL Oil and Gas Trust.

BMO Nesbitt Burns was NAL's adviser on this deal. Across the table, FirstEnergy Capital worked with Breaker, and advised its board. National Bank Financial and GMP Securities chipped in as "strategic advisers" to Breaker.

VC funds find a target

Two of Canada's leading venture capital funds put their capital to work recently by investing $10-million in Fresco Microchip, a sign of life in a sector that's seen financing activity hit two-decade lows.

Celtic House Venture Partners and Ventures West combined to make an investment in Toronto-based Fresco, which makes components for the boxes that connect TVs, cable, PVRs and DVD players. To date, Fresco has raised $40-million in venture capital. Brian Antonen, a partner of Celtic House, said in a news release: "Fresco's success confirms our long-term investment strategy of building a cluster of world-leading companies focused on consumer video." This transaction, while small, comes at a time when venture capital funding is in a severe slump.

Financing activity in venture capital hit a 14-year low in the second quarter of 2009, the most recent period measured by Canada's Venture Capital & Private Equity Association. The CVCA found there was $179-million invested nationwide in that three-month period, down 42 per cent from the same period in 2008.

"The data conclusively demonstrate that there is a venture capital crisis in Canada," Gregory Smith, president of the CVCA, said in a news release that came with these industry data. "We have a structural problem and this means Canada's ability to drive innovation will weaken and we will see the overall economy suffer."

Celtic House is a $315-million fund manager, co-founded by Terry Matthews, although the Newbridge and Mitel co-founder is no longer involved day to day. Ventures West has a 40-year track record, and has raised more than $700-million that's been invested in 200-plus companies.

Invesco gets global boost

Mutual fund manager Invesco Trimark added to its global equity team last week by snagging a pair of portfolio managers from Burgundy Asset Management.

The Toronto-based fund company named Michael Hatcher and Jeff Feng as vice-presidents on its global equities team. Invesco Trimark manages $29-billion for clients. This move was first reported on the Bill's Buzz blog run by executive search firm Vlaad and Co.

Scotia rainmaker to retire

One of the Street's finest citizens is calling it a career, as Scotia Capital vice-chairman Bob Williams told colleagues recently that he plans to retire at the end of the month.

Mr. Williams spent the bulk of his career running the equity capital markets group at the investment dealer arm of Bank of Nova Scotia. This is the group that helps shape financings by linking the investment bankers with the institutional and retail brokerage teams. He started at predecessor firm McLeod Young Weir in 1967, moved into equity capital markets in the 1980s, became department head in 1997 and then took the rainmaking vice-chairman role in 2007.

In a note to colleagues, Scotia Capital's Lawrence Lewis said: "During his time with our firm, Bob has been instrumental in some of Scotia Capital's most notable transactions, earning a reputation for his creativity, strong relationships, structuring knowledge, pricing expertise and market sense."

Within Scotia, Mr. Williams was known as an early champion of income trusts, for his work in structured products, and for his close ties to Western Canada's energy firms and utilities. In retirement, Mr. Williams plans to keep a hand in the financial community as a director on boards.

See Andrew Willis's Streetwise Blog at ReportonBusiness.com

© 2007 The Globe and Mail. All rights reserved.

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