New Gold Reports Third Quarter Financial Results

Nov 5, 2020

TORONTO--(BUSINESS WIRE)-- November 5, 2020– New Gold Inc. (“New Gold” or the “Company”) (TSX and NYSE American: NGD) reports third quarter results for the Company as of September 30, 2020 and reaffirms its revised annual consolidated guidance, with all-in sustaining costs expected to be below guidance levels, primarily due to lower sustaining capital spend. On July 30, 2020, the Company issued revised guidance estimates for 2020 to incorporate the impact of COVID-19 and readers should refer to the Company's July 30, 2020 news release for further information. An earnings conference call and webcast will begin at 8:30 am Eastern Time today to discuss the third quarter financial results.

The Rainy River Mine delivered another strong quarter of operational and technical performance. During the quarter, mine operations ramped up towards the 2021 target capacity of approximately 150,000 tonnes per day and the mill delivered a record of 27,000 tonnes per day, reaching the maximum monthly average throughput allowable under the existing mill permit. With both the mine and mill operating at capacity and unit costs tracking towards 2021 planned levels, the Company’s efforts will now shift to focus on identifying additional opportunities to further optimize mine and mill productivities and unit cost performance.

New Afton operations continued to improve during the quarter and key B3/C-Zone projects were advanced. The focus will continue to prioritize B3/C-Zone development, thickened and amended tailings (TAT) construction, wick drain installation for the stabilization of the historic tailings facility and detailed design work related to C-Zone in-pit tailings deposition. In late October, Phase 1 of a strategic drilling program was launched to test the potential of the 12 kilometre Cherry Creek Trend, located within 3 kilometres of the New Afton mill, which could increase the resource inventory of the New Afton Mine and extend mine life.

Third Quarter and Recent Highlights

Total production for the third quarter was 115,536 gold equivalent (gold eq.) ounces (78,959 ounces of gold, 171,825 ounces of silver and 18.2 million pounds of copper). For the nine-month period, production was 317,050 gold eq. ounces (210,043 ounces of gold, 437,524 ounces of silver and 53.6 million pounds of copper).
Revenues for the quarter were $174 million and $444 million for the nine-month period.
Operating expense for the quarter was $778 per gold eq. ounce and $791 per gold eq. ounce for the nine-month period.
Total cash costs1,2 for the quarter were $822 per gold eq. ounce and $839 per gold eq. ounce for the nine-month period.
All-in sustaining costs (AISC)1,2 for the quarter were $1,313 per gold eq. ounce and $1,349 per gold eq. ounce for the nine-month period.
Net earnings from operations for the quarter was $16 million ($0.02 per share) and net loss from operations of $58 million ($0.09 per share) for the nine-month period.
Adjusted net earnings2 for the quarter was $12.4 million ($0.02 per share) and adjusted net loss of $8.7 million ($0.01 per share) for the nine-month period.
Cash generated from operations for the quarter was $92 million ($0.14 per share) and $196 million ($0.29 per share) for the nine-month period. Operating cash flow generated from operations for the quarter, before non-cash changes in working capital2, was $84 million ($0.12 per share) and was $184 million ($0.27 per share) for the nine-month period.
During the quarter, the Company completed the divestment of the Blackwater Project to Artemis Gold Inc. (“Artemis”) for total cash consideration of C$190 million. The initial cash payment of C$140 million was received during the quarter with the remaining C$50 million cash payment due on August 24, 2021. Under the terms of the agreement with Artemis, the Company retained an 8% gold stream and a 6% equity stake in Artemis. (Refer to the Company's June 9, 2020 and August 24, 2020 news releases for further information.)
During the quarter, the Company transferred approximately $90 million in letters of credit related to mine closure costs to surety bonds, increasing the funds available under the credit facility.
On October 9, 2020, the Company extended its secured credit facility with a syndicate of 8 top-tier financial institutions. The facility will now mature on October 9, 2023 and has a new maximum borrowing limit of $350 million. (Additional details provided below.)
At the end of the quarter, the Company had a cash position of $415 million and a strong liquidity position of approximately $720 million, based on the amended credit facility.
Mr. Eric Vinet has been promoted to Senior Vice President, Operations on October 19, 2020. Eric joined New Gold in January 2019 as Vice President, Technical Services and most recently was the Interim General Manager at the Rainy River Mine where he led the successful repositioning of the operation for profitability and free cash flow generation.

"We are very pleased with our overall performance for the quarter and are tracking well to meet our revised consolidated annual guidance with AISC that are expected to be below guidance. We are very encouraged by the solid performance from the Rainy River Mine as the operation has continued to meet, or exceed, all key operational and cost targets and has substantially completed all deferred construction capital with the objective of returning to normalized sustaining capital levels. The Rainy River Mine is now repositioned to deliver strong production growth at lower costs and higher margins, which will drive a strong free cash flow stream over the life of the mine," stated Renaud Adams, CEO. "We are pleased with the improved performance at our New Afton Mine and currently all teams have been mobilized to advance all key projects, including B3/C-Zone development, thickened and amended tailings construction, stabilization of the historic tailings facility and detailed design work for the C-Zone tailings storage facility. Exploration drilling at the Cherry Creek target was recently launched with the overall objective of testing the potential for near mine resources that could extend the mine life of New Afton Mine and utilize existing infrastructure.”

Financial Highlights

Revenues for the quarter were $174 million, an increase compared to the prior-year quarter due to an increase in gold and copper prices which was partially offset by lower gold and copper sales volume. Revenues were $444 million for the nine-month period, a decrease compared to the prior-year quarter due to a decrease in gold and copper sales volume which was partially offset by an increase in gold prices.

Operating expenses for the quarter and nine-month period were lower than the prior-year period due to lower production.

Net earnings for the quarter was $16 million ($0.02 per share) and a net loss of $58 million ($0.09 per share) for the nine-month period, an increase in earnings from the prior-year quarter primarily due to higher revenue less cost of goods sold. Other gains and losses for the quarter and nine-month period includes a loss on sale of Blackwater of $30 million.

Adjusted net earnings for the quarter was $12.4 million ($0.02 per share) and adjusted net loss of $8.7 million ($0.01 per share) for the nine-month period, which is an increase in earnings over the prior-year periods, primarily due to higher revenue, lower operating expenses and lower depreciation and depletion.

Rainy River Highlights

The Rainy River Mine is expected to achieve the mid-range of the revised annual production guidance and operating expenses and cash costs are expected to be at, or potentially below the low end of revised annual guidance, primarily due to lower mining costs. AISC are expected to be below the revised annual guidance due to lower operating expenses and sustaining capital spend. Sustaining capital is tracking to achieve the lower end of the revised annual guidance estimates, primarily due to realized savings related to Tailings Management Area (TMA) construction as well as COVID-19 related delays.

Following the approval by Health Canada, three rapid testing devices were procured to test for the COVID-19 virus as we continue to prioritize the safety and well-being of our employees and our local and Indigenous communities. Daily testing increased during the quarter to further enhance screening protocols, which have been instrumental in keeping the operation COVID-19 free.
For the third quarter, gold eq. production was 64,221 ounces (63,004 ounces of gold and 102,814 ounces of silver) and 164,960 gold eq. ounces (162,185 ounces of gold and 234,472 ounces of silver) for the nine-month period. For the three and nine-month production decreased when compared to the prior-year period primarily due to planned lower grades.
During the quarter, the open pit mine continued to ramp-up towards our 2021 target capacity of 150,000 tonnes per day. Mine productivity increased by 15% over the prior quarter, averaging 145,701 tonnes per day, achieving 97% of the 2021 productivity target. Approximately 3.4 million ore tonnes and 10.0 million waste tonnes (including 4.3 million capitalized waste tonnes) were mined from the open pit at an average strip ratio of 2.99:1. Capitalized waste increased in the third quarter as waste mining efforts focused on Phase 3 stripping.
During the quarter, the mill achieved a record of 26,998 tonnes per day, reaching the maximum average allowable under the existing mill permit. The mill continued to process ore directly supplied by the open pit combined with ore from the medium grade stockpile and processed an average grade of 0.88 grams per tonne at a gold recovery of 89%. Low grade ore continues to be stockpiled for future processing as part of the underground mine plan. Now that the mill has reached its maximum capacity, efforts will focus on additional optimization opportunities to increase recovery and unit cost performance. Mill availability for the quarter averaged 90%, in-line with plan.
Operating expense and total cash costs were $833 per gold eq. ounce for the quarter, including the Canada Emergency Wage Subsidy, which positively impacted operating expense in the quarter. For the nine-month period, operating expense and total cash costs per gold eq. ounce were $924, an increase over the prior-year period due to lower production and sales as a result of planned lower grade ore mined and processed.
Depreciation and depletion was $602 per gold eq. ounce for the quarter and $634 per gold eq. ounce for the nine-month period. Depreciation and depletion decreased from the prior-year period primarily due to decreased reserves and shorter mine life when compared to prior-year.
Sustaining capital and sustaining lease payments for the quarter were $37.4 million and $103.9 million for the nine-month period, including $10.8 million and $23.3 million of capitalized mining costs, respectively. Substantially all key capital projects were completed during the quarter, including the Stage 2 tailings dam raise, wick drain installation for stabilization of the east waste dump, commissioning of the maintenance and warehouse facilities as well as the water treatment train following the commissioning of the Biochemical Reactor (BCR2) that allows clean water effluent discharge. As previously disclosed, a small portion of the TMA construction as well as potentially other smaller projects that were originally scheduled for completion in 2021 are now planned for completion in 2020, thereby potentially reducing planned capital requirements for 2021.
AISC were $1,469 per gold eq. ounce for the quarter and $1,592 per gold eq. ounce for the nine-month period. For the quarter AISC decreased from the prior-year period, due to the decrease in sustaining capital spend and lower operating costs. For the nine-month period, AISC increased over the prior-year period due to lower gold eq. ounces sold.
In late August, development of the decline towards the Intrepid underground zone resumed with approximately 170 metres of the planned 550 metres completed to date. The objective of the 2021 program will be focused on refinement of the long-hole mining methodology as the operation prepares for the expected start of mining in 2022.
In the latter part of the quarter, drilling permits were received, and an exploration drilling program will be launched during the fourth quarter that will initially focus on the northeast trend area, located approximately 18 kilometers northeast of the Rainy River Mine. The 8,000 metre drilling campaign has been designed in two phases and will test previously identified high priority targets.

New Afton Highlights

The New Afton Mine is expected to achieve the mid-range of the revised annual production guidance as well as the operating expense and cash costs guidance. AISC are expected to be at, or below the low end of the revised annual guidance, primarily due to lower sustaining capital spend. Sustaining and growth capital are also expected to be at, or below, the low end of the revised annual guidance estimates, primarily due to B3 development efforts being shifted in the third quarter to focus on the east cave recovery areas, as well as COVID-19 delays primarily related to construction of the thickener.

For the third quarter, the mine produced 51,315 gold eq. ounces (15,955 ounces of gold, and 18.2 million pounds of copper) and 152,090 gold eq. ounces (47,858 ounces of gold, and 53.6 million pounds of copper) for the nine-month period. For the three- and nine-month production decreased when compared to the prior-year period primarily due to planned lower grades.
The underground mine averaged 17,249 tonnes per day for the quarter, above original planned levels.
During the quarter, the mill averaged 15,483 tonnes per day, in-line with plan. The mill processed an average gold and copper grade of 0.44 grams per tonne gold and 0.71% copper, respectively, with gold and copper recoveries of 80% and 82%, respectively. Mill availability for the quarter averaged 98%, in-line with plan.
Operating expense per gold eq. ounce were $708 for the quarter and $640 per gold eq. ounce for the nine-month period. Operating expense per gold eq. ounce has increased as compared to the prior-year period due to lower gold and copper production and sales as a result of lower grades.
Total cash costs were $807 per gold eq. ounce for the quarter and $742 per gold eq. ounce for the nine-month period. Total cash costs per gold eq. ounce have increased as compared to the prior-year period, driven by lower equivalent sales in the quarter.
Depreciation and depletion was $255 per gold eq. ounce for the quarter and $272 for the nine-month period. Depreciation and depletion decreased from the prior-year periods as a result of the inclusion of C-zone reserves in its depletion base and a longer mine life.
Sustaining capital and sustaining lease payments for the quarter were $8.7 million and for the nine-month period were $32.0 million, primarily related to B3 mine development and advancement of the planned tailings dam raise. As a result of the delays in B3 development, there is a deferral of up to $10 million of sustaining capital to 2021. Currently, efforts are refocused on accelerating B3 development with the objective of returning to target levels in the near term and production from the B3 Zone remains on schedule for the second half of 2021.
AISC were $988 per gold eq. ounce for the quarter and $971 per gold eq. ounce for the nine-month period. AISC increased compared to prior-year periods due to lower gold eq. ounces sold as a result of lower gold and copper production in the quarter.
Growth capital was $16.1 million for the quarter and $37.2 million for the nine-month period. Growth capital in the quarter was primarily related to C-Zone development and detailed engineering, earthworks, associated with concrete, lime system and starting steel erection of the TAT project. Short term delays in thickener construction have been experienced by the manufacturer due to COVID-19 and as a result, up to $20 million of growth capital will be deferred to 2021. The thickener is expected to be delivered in Q1 2021 and the overall TAT project remains on schedule. In the fourth quarter, key capital projects will focus on C-Zone development, TAT construction, wick drain installation for the stabilization of the historic tailings facility and detailed design work related to C-Zone in-pit tailings deposition.
During the quarter, total development towards the B3 and C-Zone advanced by approximately 1,150 metres, achieving 92% of planned levels year to date as B3 development efforts were shifted to focus on the east cave recovery areas. Currently, C-Zone development is at target levels while B3 development will be accelerated in the fourth quarter and the overall B3/C-Zone execution remains on schedule.
As previously disclosed, the mill continues to process lower copper and gold grades than originally planned. Both the 2020 and 2021 mine plans incorporate multiple sources of mined ore, including extraction from the east and west caves and rehabilitation and pillar recoveries of medium-high grade. During the quarter, a new access point into the east cave recovery zone was completed supporting an initial average extraction rate of 1,400 tonnes per day, including a peak of 2,000 tonnes per day, with an ultimate target extraction rate of 4,000 tonnes per day.
During the quarter, a key portion of the water permit was received and the Phase 1 permit for the Thickened and Amended Tailings was received in late October. B3 permitting remains on schedule and submission of the C-Zone permit is expected during the fourth quarter.
Approval for Phase 1 of the Cherry Creek Trend drilling program was recently received, and drilling was launched in late October. The program will focus on drilling high priority targets defined by coincidental geochemical and geophysical anomalies. The objective of the 10,000 metre Phase 1 drilling campaign is to evaluate both near surface epithermal gold and underlying copper-gold system potential within the approximately 12 kilometre trend of the prospective structural corridor located approximately 3 kilometres west of the New Afton mill.

Credit Facility Highlights

On October 9, 2020, the Company entered into an amended and restated credit agreement with a syndicate of financial institutions, including The Bank of Nova Scotia, Royal Bank of Canada, Canadian Imperial Bank of Commerce, The Toronto Dominion Bank, Bank of America N.A., Bank of Montreal, JP Morgan Chase Bank N.A., and National Bank of Canada. The amended and restated credit agreement extends the maturity date for the facility from August 14, 2021 to October 9, 2023 and modifies the maximum borrowing limit to $350 million from $400 million. All material financial covenants remain the same.

Third Quarter 2020 Conference Call and Webcast

The Company will host an earnings call and webcast on Thursday, November 5, 2020 at 08:30 AM Eastern Time to discuss the financial results. Details are provided below:

Participants may listen to the webcast by registering on our website at www.newgold.com or via the following link https://onlinexperiences.com/Launch/QReg/ShowUUID=669A87CE-F2EB-4685-A672-8B43399BEAFE

Participants may also listen to the conference call by calling toll free 1-833-350-1329, or 1-236-389-2426 outside of the U.S. and Canada.
A recorded playback of the conference call will be available until by calling toll free 1-800-585-8367, or 1-416-621-4642 outside of the U.S. and Canada, passcode 7759268. An archived webcast will also be available until December 5, 2020 at www.newgold.com.

About New Gold Inc.

New Gold is a Canadian-focused intermediate gold mining company with a portfolio of two core producing assets in Canada, the Rainy River and New Afton Mines. The Company also holds an 8% gold stream on the Artemis Gold Blackwater project located in British Columbia and a 6% equity stake in Artemis. The Company also operates the Cerro San Pedro Mine in Mexico (in reclamation). 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.

Source: https://www.newgold.com/2020/Q3-2020-Results-Webcast-Presentation/default.aspx

Please login or register to join our webinar.

New Gold Reports Third Quarter Financial Results