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New Gold releases new life-of-mine plans, posts 4Q adjusted loss

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(Kitco News) - New Gold Inc. (TSX, NYSE American: NGD) released updated life-of-mine plans for Rainy River and New Afton Thursday, as well as reporting a fourth-quarter adjusted loss that came in around expectations.

The life-of-mine plans call for cumulative free cash-flow generation that could exceed $1 billion at both Rainy River and New Afton.

New Gold listed an adjusted net loss for the fourth quarter of $28 million, or four cents per share, compared to a one-cent-per-share profit in the year-ago period. Company officials said the decline was due to planned lower grade ore mined and processed. The four-cents-per-share loss was in line with consensus estimates, Credit Suisse and BMO Capital Markets reported.

Net earnings for the October-December quarter was $0.3 million, or zero cents per share, an improvement over a loss of $1.28 per share in the prior-year quarter, when there was a Rainy River impairment charge.

Fourth-quarter revenues were $139.2 million, a decrease from $157.4 million a year ago due to less gold-equivalent ounces sold and lower copper prices, partially offset by an increase in average realized price of gold, New Gold said.

Total production (excluding the Cerro San Pedro Mine) was 101,423 gold-equivalent ounces, consisting of 66,856 ounces of gold, 140,475 ounces of silver and 18.3 million pounds of copper, New gold said. All-in sustaining costs were $1,862 per gold-equivalent ounce.

Full-year 2019 production was 486,141 gold-equivalent ounces, including 322,557 ounces of gold, 596,452 ounces of silver and 79.4 million pounds of copper. This enabled the company to achieve its annual guidance of 465,000 to 520,000 gold-equivalent ounces. Full-year AISC were $1,310 per gold-equivalent ounce, which was below guidance of $1,330 to $1,340.

New Gold said it expects 2020 production to be in line with the prior year. Consolidated guidance is 465,000 to 515,000 gold-equivalent ounces, including 313,000 to 343,000 ounces of gold. AISC per gold-equivalent ounce were projected at $1,260 to $1,340. BMO described guidance as slightly below its expectations, as mining from the Rainy River underground operation is now expected to start in 2022.

Over the past year, New Gold undertook a mine optimization study for Rainy River that included a review of alternative open pit and underground mining scenarios, with the goal of improving the return of investment and creating a life-of-mine plan that results in optimal profitability at a mineral reserve gold price of $1,275 per ounce. The company also undertook an integrated New Afton B3 and C-zone optimization life-of-mine study that was focused on “derisking” execution of the C-zone project, primarily targeting mine plan optimization and subsidence control, confirming capital requirements, finalization of the tailings disposal plan, dewatering and stabilization of the historic tailings area, and advancing permitting efforts while maintaining a self-funded approach.

A National Instrument 43-101 technical report will be filed for each mine within 45 days.

“Over the past number of months, we have evaluated numerous scenarios for the Rainy River Mine and are pleased to release an updated life-of-mine plan that delivers a solid open pit and underground mine plan that positions the operation for profitability and free cash flow generation beginning in Q4 2020 that continues over the balance of the mine life,” said Renaud Adams, chief executive officer.

“We have also released an integrated mine plan that optimizes the self-funded development of New Afton’s B3 and C-Zone that could deliver significant free cash flow of more than $1 billion over the life of mine.”

The Rainy River life-of-mine plan projects total gold-equivalent production of 2.4 million ounces over roughly eight years at AISC of $967 an ounce. The company said it raised the cutoff grade to a range of 0.46 to 0.49 grams per metric ton from 0.3 g/t previously.

For the life-of-mine period, the operation is expected to generate free cash flow (including capital leases, closure costs and gold stream payments) of approximately $550 million at a gold price assumption of $1,300 per gold ounce, or more than $1 billion at a spot gold price assumption of $1,550 per gold ounce.

Highlights of the New Afton life-of-mine plan include gold production of 917,800 ounces and copper output of 745.7 million pounds. Lower output is expected from 2021 to 2024, until the C-zone begins production.

Over the life of mine, New Gold said, the operation is expected to generate free cash flow (including capital leases) of more than $1 billion, at metal prices of $1,300 per gold ounce and $3 per copper pound, and spot gold and copper prices of $1,550 per gold ounce and $2.75 per copper pound.

“At first glance, the company is in a better position to execute on the revised life-of-mine plans given the decreased capital requirements,” BMO said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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