(All dollar figures are in US dollars unless otherwise
indicated)
TORONTO, Sept. 7, 2016 /CNW/ - New Gold Inc. ("New
Gold") (TSX:NGD) (NYSE MKT:NGD) today provides an update on the
construction of the company's Rainy
River project, located in northwestern Ontario, which remains on schedule for its
targeted mid-2017 start-up. Once in production, Rainy River should generate significant gold
production growth for New Gold with expected average annual
production of 325,000 ounces at low all-in sustaining costs.
RAINY RIVER – PROJECT UPDATE
THROUGH THE END OF AUGUST
2016
- Overall construction progress over 45% complete
- Concrete placement over 85% complete
- Steelwork erection and cladding over 85% complete
- Powerline complete and main substation and switching station
over 70% complete and on schedule for connection to hydro grid in
the fourth quarter of 2016
- Installation of mechanical, piping, electrical and
instrumentation in processing facilities 15% complete
- Ball and SAG mill shells in place
- Pre-leach thickener complete and leach tanks over 80%
complete
- Construction of water management facility reinitiated after
receiving approval in mid-August
- Final tailings redesign has been submitted to the Ontario
Ministry of Natural Resources and Forestry ("MNRF") for review
- Consistent with emerging industry best practices, New Gold has
extended its tailings redesign across its full facility and
accelerated the purchase of $35
million of equipment into the construction phase, resulting
in a total estimated $105 million
increase in development capital costs, which includes $20 million of contingency
- 243 people currently on full-time operations team with over 70%
from local communities, including over 30% from Indigenous
communities
- Material moved for mine development on target
- No Lost Time Incidents since New Gold acquired the project in
2013
WATER AND TAILINGS MANAGEMENT FACILITIES
As previously disclosed, during the course of the construction
of the water management facility earlier in 2016, New Gold
identified areas underlying both the water and tailings management
facilities where the strength of the foundation is less than was
estimated for the original designs.
In mid-August, New Gold received approval from the MNRF to
recommence work on the water management facility and construction
is now underway. The company plans to complete the construction,
which includes flattening of slopes and the addition of rock toe
buttresses, by the end of October
2016. In July, New Gold received approval to begin pumping
water from the Pinewood River to the storage facility and the
company anticipates that as it progresses its construction, it
should be permitted to steadily increase the amount of water stored
in the facility.
In line with best practices in Canada, in the second half of 2015, the
company established an Independent Tailings Review Board ("ITRB"),
which is comprised of four independent engineers, to provide input
with respect to tailings management at New Gold's operations and
projects. After receiving additional feedback from the ITRB and
MNRF, New Gold recently submitted the final redesign of the Rainy
River tailings management facility for review by the MNRF.
The final redesign submitted is consistent with the approach
previously envisioned, including the use of flatter slopes and wick
drains. New Gold had previously estimated that approximately 30% of
the tailings structures would require redesign, however, after
completing its analysis, including input from the ITRB and
regulators, and consistent with emerging industry best practices,
the company has decided to extend the redesign across all of the
tailings facility.
At the same time, New Gold continues to work with Environment
and Climate Change Canada towards obtaining a Schedule 2 amendment,
required to deposit mine waste in certain creeks, which is targeted
to be received in mid-2017. However, in order to ensure that the
targeted mid-2017 project start-up is not dependent on this
amendment, New Gold's redesign of the tailings management facility
also incorporated a smaller starter dam within the broader
facility, which is an approach used at other Canadian mining
operations. Based on its location and scale, the starter dam would
provide capacity for approximately six months of mine waste and
does not require a Schedule 2 amendment.
CAPITAL COST UPDATE
As a result of the implementation of the tailings redesign
across the whole facility, the incorporation of the starter dam
into the overall design and other construction adjustments, New
Gold estimates that it will require eight million tonnes of
additional construction rock to complete these structures. This
represents approximately twice the amount of material previously
estimated for completion of the water and tailings management
facilities. To facilitate the movement of this additional material,
the company has decided to accelerate the purchase of eight haul
trucks, one shovel and two dozers into the construction phase.
Previously, the majority of this equipment was scheduled to be
purchased during the first year of mine operations with the balance
a few years into the mine life. In addition, New Gold intends to
purchase one excavator, one dozer and a small maintenance fleet,
which were not previously scheduled to be purchased in Rainy River's development or operating
period.
The accelerated purchase of the haul trucks, shovel and dozers
brings forward approximately $35
million of capital expenditures that were otherwise due to
be incurred early in Rainy River's
operating period. Positively, the cost of this equipment is
expected to be $10 million, or 22%,
below what the company had included in its estimated life-of-mine
costs. This $10 million savings
covers the cost of the smaller incremental equipment requirements
noted above. The flattening of the slopes across all of the water
and tailings management facilities, including material requirements
and operating costs, is estimated to result in an incremental
$35 million of development costs,
while the addition of the starter dam within the broader tailings
management facility is estimated to cost $15
million. These items, coupled with an estimated $10 million increase in costs associated with
completion of the process facilities, results in a total increase
in capital costs during the development period of $105 million, which includes $20 million of contingency. Early in the
operating period, the impact of this increase in development costs
should be partially offset by a net $30
million reduction in costs that were previously scheduled to
be incurred once production commenced at Rainy River.
The total project development capital spending through
August 31, 2016 was approximately
$565 million. Based on an assumed
C$1.30/US$ exchange rate on capital
expenditures going forward, the remaining capital cost from
September 1, 2016 through the
targeted mid-2017 production start is estimated to be $480 million, including $50 million of contingency.
FINANCIAL UPDATE
New Gold's cash and cash equivalents as at August 31, 2016 were approximately $145 million. The company also has a $300 million revolving credit facility, of which
$125 million has been used to issue
letters of credit, with the $175
million balance remaining undrawn. Though New Gold does not
currently anticipate requiring it, the company's revolving credit
facility also provides New Gold with the option to draw an
additional $50 million above and
beyond the base $300 million, subject
to lender participation. In addition, the remaining $75 million of the stream deposit will be
received from RGLD Gold AG, a wholly-owned subsidiary of Royal Gold
Inc., when 60% of the estimated Rainy
River project development capital has been spent and other
customary conditions have been satisfied, which is expected to be
in the fourth quarter of 2016. Combining these three sources of
funding provides the company with pro forma liquidity of
approximately $400 million. At the
same time, with 2016 guidance for all-in sustaining
costs(1) of $750 to $790
per ounce, New Gold's four operations continue to generate robust
margins and cash flow.
Overall, the Rainy River project enhances New Gold's growth
pipeline through its significant production scale at below current
industry average costs and exciting longer-term exploration
potential in a great mining jurisdiction. Relative to the company's
consolidated 2016 gold production guidance of 360,000 to 400,000
ounces, Rainy River alone is
expected to produce an average of 325,000 ounces of gold annually,
which will more than offset the decrease in production and cash
flow arising from the transition of Cerro
San Pedro to residual leaching. The company looks forward to
advancing the Rainy River project and providing further updates on
its development.
ABOUT NEW GOLD INC.
New Gold is an intermediate gold mining company. The company has
a portfolio of four producing assets and two significant
development projects. The New Afton Mine in Canada, the Mesquite Mine in the United States, the Peak Mines in
Australia and the Cerro San Pedro
Mine in Mexico, provide the
company with its current production base. In addition, New Gold
owns 100% of the Rainy River and Blackwater projects, both in
Canada, as well as a 4% gold
stream on the El Morro project located in Chile. New Gold's objective is to be the
leading intermediate gold producer, focused on the environment and
social responsibility. For further information on the company,
please visit www.newgold.com.
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: guidance for
production and all-in sustaining costs ("AISC"); planned design for
the tailings management area; planned rock requirements, equipment
purchases and other development activities at the Rainy River
project; expected capital costs and contingency amounts; the
expected production, costs, economics and operating parameters of
the Rainy River project; the capacity of the starter dam; targeted
timing for permits and for development and other activities related
to the Rainy River project including start-up; and statements with
respect to the payment of the remaining $75
million from Royal Gold.
All forward-looking statements in this news release are based on
the opinions and estimates of management as of the date such
statements are made and are 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 annual and quarterly management's discussion and analysis
("MD&A"), its Annual Information Form and its Technical Reports
filed at www.sedar.com. 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; (2) political and legal developments in
jurisdictions where New Gold operates being consistent with New
Gold's current expectations; (3) the accuracy of New Gold's current
mineral reserve and mineral resource estimates; (4) the exchange
rate between the Canadian dollar and U.S. dollar 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 Indigenous
groups in respect of the Rainy River project 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) the
results of the feasibility study for the Rainy River project being
realized; (10) conditions to the payment of the remaining
$75 million from Royal Gold being satisfied later in 2016; and
(11) with respect to guidance for 2016 AISC, refer to "2016
Guidance" in New Gold's news release dated February 17, 2016 for the key assumptions.
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 and the United States; discrepancies between
actual and estimated production, between actual and estimated
mineral reserves and mineral resources and between actual and
estimated metallurgical recoveries; changes in national and local
government legislation; taxation; 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, including, but not limited to: in Canada, obtaining the necessary permits for
the Rainy River project; the uncertainties inherent to current and
future legal challenges New Gold is or may become a party to;
diminishing quantities or grades of reserves and resources;
competition; loss of key employees; rising costs of labour,
supplies, fuel and equipment; actual results of current exploration
or reclamation activities; uncertainties inherent to mining
economic studies including the feasibility study for the Rainy
River project; 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. 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 disclosure documents
filed on and available at www.sedar.com. 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 of the 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.
NON-GAAP MEASURES
(1) ALL-IN SUSTAINING COSTS
"All-in sustaining costs" per ounce is a non-GAAP financial
measure. Consistent with guidance announced in 2013 by the World
Gold Council, an association of various gold mining companies from
around the world of which New Gold is a member, New Gold defines
"all-in sustaining costs" per ounce as the sum of total cash costs,
capital expenditures that are sustaining in nature, corporate
general and administrative costs, capitalized and expensed
exploration that is sustaining in nature and environmental
reclamation costs, all divided by the ounces of gold sold to arrive
at a per ounce figure. New Gold believes this non-GAAP financial
measure provides further transparency into costs associated with
producing gold and assists analysts, investors and other
stakeholders of the company in assessing the company's operating
performance, its ability to generate free cash flow from current
operations and its overall value. This data is furnished to provide
additional information and is a non-GAAP financial measure. All-in
sustaining costs presented do not have a 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 and is not necessarily indicative of cash flow from
operations under IFRS or operating costs presented under IFRS.
Further details regarding historical all-in sustaining costs and a
reconciliation to the nearest IFRS measures are provided in the
MD&A accompanying New Gold's financial statements filed from
time to time on www.sedar.com.
TECHNICAL INFORMATION
The scientific and technical information relating to the
construction of New Gold's Rainy River Project contained herein has
been reviewed and approved by Peter
Marshall, Vice President, Project Development of New
Gold. Any other scientific and technical information
contained herein has been reviewed and approved by Mark A. Petersen, Vice President, Exploration of
New Gold. Mr. Marshall is a Professional Engineer and a member of
the Association of Professional Engineers and Geoscientists of
British Columbia. Mr. Petersen is
a SME Registered Member, AIPG Certified Professional Geologist.
Both Mr. Marshall and Mr. Petersen are "Qualified Persons" for the
purposes of NI 43-101.
SOURCE New Gold Inc.