Revising Rainy River Outlook for 2021
TORONTO, Sept. 13, 2021 /CNW/ - New Gold Inc.
("New Gold" or the "Company") (TSX: NGD) and (NYSE
American: NGD) provides an update to its 2021 operational outlook
for the Rainy River Mine and the consolidated operational outlook.
All amounts are in U.S. dollars unless otherwise indicated.
In early August, the Company indicated that July production at
Rainy River was primarily from the
eastern area of the ODM zone ("East Lobe") and the realized gold
grade from this area was below the modeled gold grade in this
period. This trend continued in August. Over both July and August,
the modeled East Lobe high and medium grade ore negatively
reconciled to ounces mined, leading to a total of approximately
20,000 lower gold ounces produced during this period. The Company
has since followed up with additional reverse circulation drilling
and globally, all areas outside of the East Lobe, continues to
reconcile well where mining has occurred or is about to occur, and
are consistent with historical results. The East Lobe represents
approximately 35% of planned production for the remaining period of
September to December 2021. As a
result of the variance experienced in the East Lobe, Rainy River's gold equivalent1
production for 2021 is now expected to be between 240,000 and
255,000 ounces.
The Company continues reverse circulation drilling in the East
Lobe and the understanding of the mineralization is improving,
however, additional drilling is required to refine the block model
and improve its predictability. The Company is advancing an
underground optimization study for Rainy
River, with completion anticipated by year-end, and results
would be incorporated into the year-end Mineral Reserve and
Resource and life of mine update.
"While the reduction in our near-term guidance at
Rainy River is unfortunate, I
remain confident the mine has reached an inflection point, as
evidenced by the free cash flow generated in the second quarter and
the mine is on track to deliver an improved second half of the
year", stated Renaud Adams,
President & CEO. We continue to seek ways to further optimize
our costs and capital profiles, and with the underground growth
potential currently being evaluated, Rainy River is expected to be a meaningful
contributor of free cash flow in our portfolio going
forward."
As a result of the Rainy River revisions, consolidated gold
equivalent1 production for 2021 is now expected to be
between 405,000 and 450,000 ounces. Annual consolidated copper
production guidance remains unchanged at 56 to 66 million pounds.
New Gold expects its consolidated 2021 all-in sustaining costs to
be between $1,415 to $1,495 per gold eq. ounce2, and total
cash costs to be between $960 to
$1,030 per gold eq.
ounce2. New Afton guidance remains unchanged.
Rainy River
2021
Guidance
|
Revised
Guidance
|
Original
Guidance
|
Gold eq. production
(ounces)1
|
240,000 –
255,000
|
275,000 –
295,000
|
Gold production
(ounces)
|
235,000 -
250,000
|
270,000 –
290,000
|
Total cash costs, per
gold eq. ounce2
|
$925 -
$985
|
$715 -
$795
|
All-in sustaining
costs, per gold eq. ounce2
|
$1,365 -
$1,440
|
$1,125 -
$1,225
|
Sustaining capital
and sustaining leases ($M)2
|
$95 -
$125
|
$95 - $125
|
Growth capital*
($M)2
|
$15 -
$20
|
$10 - $15
|
Exploration
($M)
|
~$5
|
~$5
|
*$5 million increase
in Rainy River growth capital is due to accelerated development of
Intrepid zone.
|
Consolidated Guidance
2021
Guidance
|
Revised
Guidance
|
Original
Guidance
|
Gold eq. production
(ounces)1
|
405,000 –
450,000
|
440,000 –
490,000
|
Gold production
(ounces)
|
287,000 –
312,000
|
322,000 –
352,000
|
Copper production
(Mlbs)
|
56 –
66
|
56 - 66
|
Total cash costs, per
gold eq. ounce2
|
$960 -
$1,030
|
$810 -
$890
|
All-in sustaining
costs, per gold eq. ounce2
|
$1,415 -
$1,495
|
$1,230 -
$1,330
|
Sustaining capital
and sustaining leases ($M)2
|
$135 -
$185
|
$135 -
$185
|
Growth capital
($M)2
|
$95 -
$130
|
$90 - $125
|
Exploration
($M)
|
~$17
|
~$17
|
About New Gold Inc.
New Gold is a Canadian-focused intermediate mining Company with a
portfolio of two core producing assets in Canada, the Rainy River gold mine and the New
Afton copper-gold mine. The Company also holds an 8% gold stream on
the Artemis Gold Blackwater project located in Canada, a 6% equity stake in Artemis Gold
Inc., and other Canadian-focused investments. New Gold's vision is
to build a leading diversified intermediate gold company based in
Canada that is committed to
environment and social responsibility. For further information on
the Company, visit www.newgold.com.
Endnotes
1. Total gold eq. ounces include silver and
copper produced/sold converted to a gold eq. based on a ratio of
$1,800 per gold ounce, $25.00 per silver ounce and $3.50 per copper pound used for 2021 guidance
estimates. All copper is produced/sold by the New Afton Mine. Gold
equivalent ounces guidance includes approximately 585,000 to
600,000 ounces of silver at Rainy
River and approximately 250,000 to 270,000 ounces of silver
at New Afton.
2. "Total cash costs", "all-in sustaining
costs", "sustaining capital and sustaining leases", "growth
capital", "cash generated from operations", "free cash flow" and
"average realized gold/copper price per ounce/pound" are all
non-GAAP financial performance measures that are used in this press
release. These measures do not have any standardized meaning under
IFRS and therefore may not be comparable to similar measures
presented by other issuers. For more information about these
measures, why they are used by the Company, and a reconciliation to
the most directly comparable measure under IFRS, see the "Non-GAAP
Financial Performance Measures" section of this news release.
Non-GAAP Financial Performance Measures
Total Cash Costs per Gold eq. Ounce
"Total cash costs per gold equivalent ounce" is a non-GAAP
financial performance measure that is a common financial
performance measure in the gold mining industry but does not have
any standardized meaning under IFRS and therefore may not be
comparable to similar measures presented by other issuers. New Gold
reports total cash costs on a sales basis and not on a production
basis. The Company believes that, in addition to conventional
measures prepared in accordance with IFRS, this measure, along with
sales, is a key indicator of the Company's ability to generate
operating earnings and cash flow from its mining operations. This
measure allows investors to better evaluate corporate performance
and the Company's ability to generate liquidity through operating
cash flow to fund future capital exploration and working capital
needs.
This measure is intended to provide additional information only
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS. This
measure is not necessarily indicative of cash generated from
operations under IFRS or operating costs presented under IFRS.
Total cash cost figures are calculated in accordance with a
standard developed by The Gold Institute, a worldwide association
of suppliers of gold and gold products that ceased operations in
2002. Adoption of the standard is voluntary and the cost measures
presented may not be comparable to other similarly titled measures
of other companies. Total cash costs include mine site operating
costs such as mining, processing and administration costs,
royalties, production taxes, but are exclusive of amortization,
reclamation, capital and exploration costs. Total cash costs are
then divided by gold equivalent ounces sold to arrive at the total
cash costs per equivalent ounce sold.
In addition to gold the Company produces copper and silver. Gold
equivalent ounces of copper and silver produced or sold in a
quarter are computed using a consistent ratio of copper and silver
prices to the gold price and multiplying this ratio by the pounds
of copper and silver ounces produced or sold during that
quarter.
Notwithstanding the impact of copper and silver sales, as the
Company is focused on gold production, New Gold aims to assess the
economic results of its operations in relation to gold, which is
the primary driver of New Gold's business. New Gold believes this
metric is of interest to its investors, who invest in the Company
primarily as a gold mining business. To determine the relevant
costs associated with gold equivalent ounces, New Gold believes it
is appropriate to reflect all operating costs incurred in its
operations.
All-In Sustaining Costs per Gold eq. Ounce
"All-in sustaining costs per gold equivalent ounce" is a
non-GAAP financial performance measure that does not have any
standardized meaning under IFRS and therefore may not be comparable
to similar measures presented by other issuers. New Gold calculates
"all-in sustaining costs per gold equivalent ounce" based on
guidance announced by the World Gold Council ("WGC") in
September 2013. The WGC is a
non-profit association of the world's leading gold mining companies
established in 1987 to promote the use of gold to industry,
consumers and investors. The WGC is not a regulatory body and does
not have the authority to develop accounting standards or
disclosure requirements. The WGC has worked with its member
companies to develop a measure that expands on IFRS measures to
provide visibility into the economics of a gold mining company.
Current IFRS measures used in the gold industry, such as operating
expenses, do not capture all of the expenditures incurred to
discover, develop and sustain gold production. New Gold believes
that "all-in sustaining costs per gold equivalent ounce" provides
further transparency into costs associated with producing gold and
will assist analysts, investors, and other stakeholders of the
Company in assessing its operating performance, its ability to
generate free cash flow from current operations and its overall
value. In addition, the Compensation Committee of the Board of
Directors uses "all-in sustaining costs", together with other
measures, in its Company scorecard to set incentive compensation
goals and assess performance.
"All-in sustaining costs per gold equivalent ounce" is intended
to provide additional information only and does not have any
standardized meaning under IFRS and may not be comparable to
similar measures presented by other mining companies. It should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. The measure is not
necessarily indicative of cash flow from operations under IFRS or
operating costs presented under IFRS.
New Gold defines "all-in sustaining costs per gold equivalent
ounce" as the sum of total cash costs, net capital expenditures
that are sustaining in nature, corporate general and administrative
costs, capitalized and expensed exploration that is sustaining in
nature, lease payments that are sustaining in nature, and
environmental reclamation costs, all divided by the total gold
equivalent ounces sold to arrive at a per ounce figure. The
definition of sustaining versus non-sustaining is similarly applied
to capitalized and expensed exploration costs and lease payments.
Exploration costs and lease payments to develop new operations or
that relate to major projects at existing operations where these
projects are expected to materially increase production are
classified as non-sustaining and are excluded. Gold equivalent
ounces of copper and silver produced or sold in a quarter are
computed using a consistent ratio of copper and silver prices to
the gold price and multiplying this ratio by the pounds of copper
and silver ounces produced or sold during that quarter.
Costs excluded from all-in sustaining costs are non-sustaining
capital expenditures, non-sustaining lease payments and exploration
costs, financing costs, tax expense, and transaction costs
associated with mergers, acquisitions and divestitures, and any
items that are deducted for the purposes of adjusted earnings.
Sustaining Capital and Sustaining Leases
"Sustaining capital" and "sustaining lease" are non-GAAP
financial performance measures that do not have any standardized
meaning under IFRS and therefore may not be comparable to similar
measures presented by other issuers. New Gold defines "sustaining
capital" as net capital expenditures that are intended to maintain
operation of its gold producing assets. Similarly, a "sustaining
lease" is a lease payment that is sustaining in nature. To
determine "sustaining capital" expenditures, New Gold uses cash
flow related to mining interests from its statement of cash flows
and deducts any expenditures that are capital expenditures to
develop new operations or capital expenditures related to major
projects at existing operations where these projects will
materially increase production. Management uses "sustaining
capital" and "sustaining lease", to understand the aggregate net
result of the drivers of all-in sustaining costs other than total
cash costs. These measures are intended to provide additional
information only and should not be considered in isolation or as
substitutes for measures of performance prepared in accordance with
IFRS.
Growth Capital
"Growth capital" is a non-GAAP financial performance measure
that does not have any standardized meaning under IFRS and
therefore may not be comparable to similar measures presented by
other issuers. New Gold considers non-sustaining capital costs to
be "growth capital", which are capital expenditures to develop new
operations or capital expenditures related to major projects at
existing operations where these projects will materially increase
production. To determine "growth capital" expenditures, New Gold
uses cash flow related to mining interests from its statement of
cash flows and deducts any expenditures that are capital
expenditures that are intended to maintain operation of its gold
producing assets. Management uses "growth capital" to understand
the cost to develop new operations or related to major projects at
existing operations where these projects will materially increase
production. This measure is intended to provide additional
information only and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
IFRS.
Cautionary Note Regarding Forward-Looking Statements
Certain information contained in this news release, including
any information relating to New Gold's future financial or
operating performance are "forward-looking". All statements in this
news release, other than statements of historical fact, which
address events, results, outcomes or developments that New Gold
expects to occur are "forward-looking statements". Forward-looking
statements are statements that are not historical facts and are
generally, but not always, identified by the use of forward-looking
terminology such as "plans", "expects", "is expected", "budget",
"scheduled", "targeted", "estimates", "forecasts", "intends",
"anticipates", "projects", "potential", "believes" or variations of
such words and phrases or statements that certain actions, events
or results "may", "could", "would", "should", "might" or "will be
taken", "occur" or "be achieved" or the negative connotation of
such terms. Forward-looking statements in this news release
include, among others, statements with respect to: the continued
reverse circulation drilling in the East Lobe and the potential
improvement in model predictability; planned production in the East
Lobe for the remaining period of September to December, 2021; the
Company's expectations regarding gold equivalent production for
2021 at Rainy River and on a
consolidated basis; the anticipated percentage of ounces resulting
from the East Lobe in 2022 and 2023; the completion of a
underground optimization study for Rainy
River and the timing thereof as well as; the Company's plan
to incorporate the results into the year-end Mineral Reserve and
Resource and life of mine update; the Company's expectations
regarding higher grades in the near and medium term and an improved
second half of the year at Rainy
River; the anticipated free cash flow to be contributed to
the Company's portfolio from Rainy
River; and the Company's expectations regarding consolidated
2021 all-in sustaining costs and total cash costs.
All forward-looking statements in this news release are based on
the opinions and estimates of management that, while considered
reasonable as at the date of this press release in light of
management's experience and perception of current conditions and
expected developments, are inherently subject to important risk
factors and uncertainties, many of which are beyond New Gold's
ability to control or predict. Certain material assumptions
regarding such forward-looking statements are discussed in this
news release, New Gold's latest annual management's discussion and
analysis ("MD&A"), its most recent annual information form and
technical reports on the Rainy River Mine and New Afton Mine filed
on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. In addition
to, and subject to, such assumptions discussed in more detail
elsewhere, the forward-looking statements in this news release are
also subject to the following assumptions: (1) there being no
significant disruptions affecting New Gold's operations other than
as set out herein; (2) political and legal developments in
jurisdictions where New Gold operates, or may in the future
operate, being consistent with New Gold's current expectations; (3)
the accuracy of New Gold's current mineral reserve and mineral
resource estimates and the grade of gold, silver and copper
expected to be mined; (4) the exchange rate between the Canadian
dollar and U.S. dollar, and to a lesser extent, the Mexican Peso,
being approximately consistent with current levels; (5) prices for
diesel, natural gas, fuel oil, electricity and other key supplies
being approximately consistent with current levels; (6) equipment,
labour and materials costs increasing on a basis consistent with
New Gold's current expectations; (7) arrangements with First
Nations and other Aboriginal groups in respect of the New Afton
Mine and Rainy River Mine being consistent with New Gold's current
expectations; (8) all required permits, licenses and authorizations
being obtained from the relevant governments and other relevant
stakeholders within the expected timelines; (9) there being no
significant disruptions to the Company's workforce at either the
Rainy River or New Afton Mine due to cases of COVID-19 or any
required self-isolation requirements (due, among other things, to
cross-border travel to the United
States or any other country); (10) the responses of the
relevant governments to the COVID-19 outbreak being sufficient to
contain the impact of the COVID-19 outbreak; (11) there being no
material disruption to the Company's supply chains and workforce
that would interfere with the Company's anticipated course of
action at the Rainy River Mine and the systematic ramp-up of
operations; and (12) the long-term economic effects of the COVID-19
outbreak not having a material adverse impact on the Company's
operations or liquidity position.
Forward-looking statements are necessarily based on estimates
and assumptions that are inherently subject to known and unknown
risks, uncertainties and other factors that may cause actual
results, level of activity, performance or achievements to be
materially different from those expressed or implied by such
forward-looking statements. Such factors include, without
limitation: significant capital requirements and the availability
and management of capital resources; additional funding
requirements; price volatility in the spot and forward markets for
metals and other commodities; fluctuations in the international
currency markets and in the rates of exchange of the currencies of
Canada, the United States and, to a lesser extent,
Mexico; volatility in the market
price of the Company's securities; hedging and investment related
risks; dependence on the Rainy River Mine and New Afton Mine;
discrepancies between actual and estimated production, between
actual and estimated mineral reserves and mineral resources and
between actual and estimated metallurgical recoveries; risks
related to early production at the Rainy River Mine, including
failure of equipment, machinery, the process circuit or other
processes to perform as designed or intended; risks related to
construction, including changing costs and timelines; adequate
infrastructure; fluctuation in treatment and refining charges;
changes in national and local government legislation in
Canada, the United States and, to a lesser extent,
Mexico or any other country in
which New Gold currently or may in the future carry on business;
global economic and financial conditions; risks relating to New
Gold's debt and liquidity; the adequacy of internal and disclosure
controls; taxation; impairment; conflicts of interest; risks
relating to climate change; controls, regulations and political or
economic developments in the countries in which New Gold does or
may carry on business; the speculative nature of mineral
exploration and development, including the risks of obtaining and
maintaining the validity and enforceability of the necessary
licenses and permits and complying with the permitting requirements
of each jurisdiction in which New Gold operates; the lack of
certainty with respect to foreign legal systems, which may not be
immune from the influence of political pressure, corruption or
other factors that are inconsistent with the rule of law; the
uncertainties inherent to current and future legal challenges New
Gold is or may become a party to; risks relating to proposed
acquisitions and the integration thereof; information systems
security threats; diminishing quantities or grades of mineral
reserves and mineral resources; competition; loss of, or inability
to attract, key employees; rising costs of labour, supplies, fuel
and equipment; actual results of current exploration or reclamation
activities; uncertainties inherent to mining economic studies;
changes in project parameters as plans continue to be refined;
accidents; labour disputes; defective title to mineral claims or
property or contests over claims to mineral properties; unexpected
delays and costs inherent to consulting and accommodating rights of
Indigenous groups; risks, uncertainties and unanticipated delays
associated with obtaining and maintaining necessary licenses,
permits and authorizations and complying with permitting
requirements; disruptions to the Company's workforce at either the
Rainy River Mine or the New Afton Mine, or both, due to cases of
COVID-19 or any required self-isolation (due to cross-border
travel, exposure to a case of COVID-19 or otherwise); the responses
of the relevant governments to the COVID-19 outbreak not being
sufficient to contain the impact of the COVID-19 outbreak;
disruptions to the Company's supply chain and workforce due to the
COVID-19 outbreak; an economic recession or downturn as a result of
the COVID-19 outbreak that materially adversely affects the
Company's operations or liquidity position; there being further
shutdowns at the Rainy River or New Afton Mines; the Company not
being able to complete its construction projects at the Rainy River
Mine or the New Afton Mines on the anticipated timeline or at all;
and the Company not being able to complete the exploration drilling
program to be launched at the Rainy River Mine and Cherry Creek on the anticipated timeline or at
all. In addition, there are risks and hazards associated with the
business of mineral exploration, development and mining, including
environmental events and hazards, industrial accidents, unusual or
unexpected formations, pressures, cave-ins, flooding and gold
bullion losses (and the risk of inadequate insurance or inability
to obtain insurance to cover these risks) as well as "Risk Factors"
included in New Gold's most recent annual information form,
MD&A and other disclosure documents filed on and available on
SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Forward looking
statements are not guarantees of future performance, and actual
results and future events could materially differ from those
anticipated in such statements. All forward-looking statements
contained in this news release are qualified by these cautionary
statements. New Gold expressly disclaims any intention or
obligation to update or revise any forward-looking statements
whether as a result of new information, events or otherwise, except
in accordance with applicable securities laws.
Technical Information
The scientific and technical information contained in this news
release has been reviewed and approved by Eric Vinet, Senior Vice President, Operations of
New Gold. Mr. Vinet is a Professional Engineer and member of
the Ordre des ingénieurs du Québec. He is a "Qualified Person" for
the purposes of National Instrument 43-101 – Standards of
Disclosure for Mineral Projects.
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SOURCE New Gold Inc.