(All dollar figures are in US dollars unless otherwise
indicated)
TORONTO, Oct. 4, 2016 /PRNewswire/ - New Gold Inc. ("New
Gold") (TSX:NGD) (NYSE MKT:NGD) today provides an update on the
company's Rainy River project,
located in northwestern Ontario,
where it is hosting an investor and analyst tour on October 5, 2016. A copy of the investor and
analyst tour presentation will be available tomorrow on the
company's website at www.newgold.com.
The company is also pleased to announce that New Gold has
further enhanced its financial flexibility by increasing the size
of the company's revolving credit facility by $100 million to $400
million and extending the increase in the facility's
associated Net Debt to EBITDA ("Leverage Ratio") covenant to the
end of 2017. Further, New Gold has entered into additional gold
price option contracts through mid-2017 to increase the cash flow
certainty from its four producing mines.
RAINY RIVER – PROJECT UPDATE
THROUGH THE END OF SEPTEMBER
2016
- Overall construction progress approximately 55% complete
- Concrete placement over 90% complete
- Steelwork erection and cladding over 95% complete
- Powerline complete and on schedule for connection to power grid
in November 2016
- Installation of mechanical, piping, electrical and
instrumentation in processing facilities approximately 25%
complete
- Construction of water management facility reinitiated in late
August with two of five dams now complete
- Final tailings redesign submitted to the Ontario Ministry of
Natural Resources and Forestry ("MNRF") in late August 2016 for approval
- Approximately 15 million tonnes of overburden and waste
stripping completed to date
- No Lost Time Incidents since New Gold acquired the project in
2013
FINANCIAL UPDATE
- Increased size of revolving credit facility by $100 million to $400 million
- $275 million available and
undrawn, with balance of $125 million
used to issue letters of credit for closure obligations at the
company's producing mines and development projects
- Combining the company's current cash balance of approximately
$150 million, the $75 million Royal
Gold stream receivable and the undrawn facility provides the
company with pro forma liquidity of approximately $500 million relative to the remaining
Rainy River development capital
spend of approximately $425 million
- In addition, with 2016 guidance for all-in sustaining
costs(1) of $750 to $790
per ounce, New Gold continues to generate significant free cash
flow from its operations
- Increased Leverage Ratio covenant from 3.5:1.0 to 4.0:1.0 for
the period from July 1, 2017 to
December 31, 2017
- At current commodity prices and foreign exchange rates, the
company expects its Leverage Ratio to remain below 3.5:1.0 through
the Rainy River start-up
- Entered into gold price option contracts covering 120,000
ounces of first half 2017 production providing a guaranteed floor
price of $1,300 per ounce while
providing continued exposure to increases in the gold price up to
$1,400 per ounce
RAINY RIVER CONSTRUCTION
UPDATE
Water and Tailings Management Facilities
After receiving approval from the MNRF in mid-August, New Gold
restarted work on the water management facility and construction
remains ongoing. As at the end of September, two of the five water
management dams were completed, with work on the remaining three
progressing well. The company plans to complete the construction,
which includes flattening of slopes and the addition of rock toe
buttresses, in November 2016. New
Gold plans to have approximately three million cubic metres of
water stored in the facility when the company initiates
commissioning of the mill in mid-2017.
After incorporating all of the results of the company's
supplemental geotechnical drilling program and receiving additional
input from New Gold's Independent Tailings Review Board ("ITRB")
and the MNRF, in late August, New Gold submitted the final redesign
of the Rainy River tailings management facility for approval by the
MNRF. The redesign included the use of flatter slopes across the
entire tailings facility as well as the incorporation of wick
drains in certain areas.
The company continues to work closely with Environment and
Climate Change Canada towards obtaining a Schedule 2 amendment,
required to deposit mine waste in creeks, which is targeted to be
received in mid-2017. However, New Gold's redesign of the tailings
management facility incorporated a starter dam within the broader
facility in order to ensure that the targeted mid-2017 project
start-up is not dependent on obtaining a Schedule 2 amendment from
the Federal government. 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. The
inclusion of a starter dam is an approach that has been used at
other Canadian mining operations.
Process Facilities
As the steel erection and cladding of all of the process
facilities is now largely complete, the focus has shifted to
setting processing equipment as well as the installation of
mechanical, piping, electrical and instrumentation throughout the
process facility. The concrete foundations for the primary crusher
are complete and the installation of the crusher and ore conveyor
are both advancing well. The SAG and ball mill shells have been set
in place with completion of installation on schedule for later in
the fourth quarter of 2016. The pre-leach thickener tank is
complete and the leach tanks are approximately 85% complete and on
schedule for final completion later in October 2016. The installation of mechanical,
piping, electrical and instrumentation across the process
facilities was approximately 25% complete as at the end of
September 2016. The installation
should be completed by late April
2017. An additional development milestone is scheduled for
November 2016, as the site will tie
in to the Ontario power grid.
Mining – Overburden and Waste Stripping
New Gold's mining activities at Rainy
River continue to ramp up in line with expectations. Through
the end of September, the company had mined approximately 15
million tonnes of overburden and waste, simultaneously delivering
construction rock to other parts of the project and preparing the
open pit for the start of production. The Rainy River operating
team is currently mining at a rate of over 85,000 tonnes per day
with eight haul trucks and two shovels. Through the addition of
eight additional haul trucks and one shovel, as well as continued
productivity improvements, the daily mining rate is scheduled to
steadily increase to over 145,000 tonnes per day in early 2017. New
Gold is targeting the pre-stripping of 45 to 50 million tonnes of
overburden and waste by the start of production at Rainy River in mid-2017.
Capital Costs
The capital spending in September was $58
million resulting in total project development capital
spending through September 30, 2016
of approximately $620 million. Based
on a C$1.30/US$ exchange rate, the
remaining capital cost from October 1,
2016 through the targeted mid-2017 production start is
estimated to be $425 million,
including $50 million of
contingency.
RAINY RIVER OPERATIONAL
TARGETS
As Rainy River's development
remains on schedule, New Gold continues to target first production
from the mine in mid-2017. Once in full production, the 21,000
tonne per day combined open pit and underground operation is
scheduled to produce an average of 325,000 ounces of gold per year
over the first nine years of the mine's life.
Consistent with the company's continued focus on optimizing the
Rainy River mine plan and project economics, New Gold has decided
to defer the start of development of the Rainy River underground
mine by approximately one year to the second half of 2018. As the
initial underground development is estimated to cost approximately
$100 million over a two-year
development period, the deferral will better position Rainy River to generate robust free cash flow
once the mine begins production in mid-2017. Through the
optimization of Rainy River's open
pit and underground mine plans, the deferral of the underground
development is expected to have limited impact on the average
annual gold production in years three through eight of the mine
plan, when the underground mine is scheduled to reach its targeted
1,500 tonne per day capacity.
The combination of Rainy
River's location, average gold head grade of 1.5 grams per
tonne over the first nine years, secured low power rates and
predominantly Canadian dollar denominated operating costs is
expected to result in below industry average all-in sustaining
costs(1). New Gold has recently completed a thorough
review of its operating cost estimates at Rainy River and is targeting average total
cash costs(2) of $550 per
ounce and all-in sustaining costs(1) of $710 per ounce, over the first nine years of the
mine life. The company had previously estimated total cash
costs(2) of $570 per ounce
and all-in sustaining costs(1) of $670 per ounce over the same time period. The
current operating cost estimates are based on a C$1.30/US$ foreign exchange rate, a $0.75 per litre diesel price and a C$0.045/KwH power rate. The current spot price
for diesel is approximately 25% lower than the assumption used and
the current power rate would be approximately 50% lower.
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
continuing the advancement of the Rainy River project.
FINANCIAL UPDATE
New Gold's cash and cash equivalents as at September 30, 2016 were approximately
$150 million.
On October 3rd, the
company increased the size of its revolving credit facility by
$100 million to $400 million. As
$125 million of the facility has been
used to issue letters of credit for closure obligations at the
company's producing mines and development projects, $275 million now remains undrawn and available.
Based on prevailing spot prices of gold, copper and silver and the
prevailing exchange rate for the Canadian dollar to the U.S.
dollar, New Gold believes that the company is well positioned to
complete the construction of Rainy
River within the Leverage Ratio covenants in the current
revolving credit facility. However, in order to provide the company
with additional financial flexibility after the planned mid-2017
start-up of Rainy River, in
conjunction with the recent increase in the size of the facility,
New Gold amended the revolving credit facility to increase the
maximum Leverage Ratio to 4.0 to 1.0 from July 1, 2017 to December
31, 2017, where the Leverage Ratio in this period was
previously 3.5 to 1.0. There were no other material changes made to
the terms of the revolving credit facility.
In addition to New Gold's current cash and the amount available
under the credit facility, the remaining $75
million of the stream deposit is scheduled to 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. The Leverage Ratio contained in the
company's agreement with Royal Gold
has also been adjusted to match the revised Leverage Ratio noted
above.
Combining the current cash balance, the undrawn facility and the
stream receivable provides the company with pro forma liquidity of
approximately $500 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. Looking ahead to the first half of 2017, New
Gold has extended its use of gold price option contracts to
increase its cash flow certainty over the remaining Rainy River development period. The company
has entered into gold price option contracts covering 120,000
ounces of New Gold's first half 2017 production. New Gold purchased
put options with a strike price of $1,300 per ounce covering 120,000 ounces of gold
and simultaneously sold call options with a strike price of
$1,400 per ounce covering an
equivalent 120,000 ounces. In aggregate, the option contracts
provide the company a guaranteed floor price of $1,300 per ounce while also providing exposure to
further increases in the gold price up to $1,400 per ounce. The contracts will cover 20,000
ounces of gold per month for six months beginning in January 2017. The net cost of entering into the
option contracts was less than $1
million.
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; planned design for the Rainy River project;
construction activities at the Rainy River project and their
expected progress and timelines, including the timing for, and
duration of, underground development and its impact; expected
capital costs and contingency amounts; planned preparations for
operations, including the mining rate, removal of overburden and
waste and storage of water prior to commissioning; the expected
production, costs, economics, grade and other operating parameters
of the Rainy River project; the capacity of the starter dam;
targeted timing for permits; targeted timing for commissioning,
start-up and production; statements with respect to the company's
future compliance with its leverage ratio covenants; statements
regarding future free cash flow; 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, namely when 60% of the estimated
Rainy River project development
capital has been spent and other customary conditions, 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.
(2) TOTAL CASH COSTS
"Total cash costs" per ounce is a non-GAAP financial measure which
is 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. New Gold
reports total cash costs on a sales basis. The company believes
that certain investors use this information to evaluate the
company's performance and ability to generate liquidity through
operating cash flow to fund future capital expenditures and working
capital needs. This measure, along with sales, is considered
to be a key indicator of the company's ability to generate
operating earnings and cash flow from its mining operations. Total
cash costs include mine site operating costs such as mining,
processing and administration costs, royalties, production taxes,
and realized gains and losses on fuel contracts, but are exclusive
of amortization, reclamation, capital and exploration costs and net
of by-product sales. Total cash costs are then divided by ounces of
gold sold to arrive at a per ounce figure. Co-product cash costs
remove the impact of other metal sales that are produced as a
by-product of gold production and apportion the cash costs to each
metal produced on a percentage of revenue basis, and subsequently
divides the amount by the total ounces of gold or silver or pounds
of copper sold, as the case may be, to arrive at per ounce or per
pound figures. Unless otherwise indicated, all total cash cost
information in this news release is net of by-product sales. This
data is furnished to provide additional information and is a
non-GAAP financial measure. Total cash costs and co-product cash
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 GAAP. Further details
regarding historical total cash 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. The scientific
and technical information relating to the expected operations at
Rainy River has been reviewed and
approved by Grant Goddard, General
Manager, Rainy River, and employee
of New Gold. The scientific and technical information relating to
mineral resources and exploration 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. Goddard is a licensed
Professional Engineer with Professional Engineers of Ontario. Mr. Petersen is a SME Registered
Member, AIPG Certified Professional Geologist. Mr. Marshall, Mr.
Goddard and Mr. Petersen are "Qualified Persons" for the purposes
of NI 43-101.
SOURCE New Gold Inc.