VANCOUVER, BRITISH COLUMBIA
New Gold Inc. (the "Company" or "New Gold") (TSX: NGD)(AMEX:
NGD) is pleased to provide 2007 financial year end results and an
update on its New Afton Copper Gold Project situated 10 kilometres
west of Kamloops, British Columbia.
2007 Year End Results
The Company incurred a loss of $61.4 million or $2.00 per share
in 2007 compared with a loss of $3.5 million or $0.15 per share in
2006. The increased loss is primarily attributable to the $50.1
million impairment charge which the Company took in 2007 in respect
of its investments in non-bank sponsored Asset Backed Commercial
Paper ("ABCP"). In addition, the Company expensed $22.1 million
related to interest and accretion charges in respect of the debt
issuances which were completed in June and July 2007, which do not
qualify for capitalizing to the New Afton Copper Gold Project (the
"Project") costs. Partially offsetting these two items is an
increase in interest income of $3.8 million as well as the
recognition of a future tax recovery of $9.9 million in 2007
relating to available loss carry forward amounts and share and debt
issue costs.
In 2007, the Company expended $39.3 million, including
capitalized financing costs, on the Project and Ajax property as
compared to $20.2 million in 2006. In 2007, the Company's primary
expenditures were $25.7 million on the underground development
related to the expansion of the existing 2 kilometre decline and
commencement of new development faces, $5.0 million on interest
capitalized and paid in 2007, $3.0 million in payments to complete
the feasibility study on the Project, $4.5 million on surface
exploration in and around the New Afton deposit and $0.8 million on
exploration of the Company's Ajax property and optioned properties.
In 2006, the Company spent $6.3 million on the feasibility study on
the Project, $6.1 million on underground exploration, including
support services for the underground exploration, and $2.3 million
for tunneling costs (expended in 2005 but paid in 2006).
In addition, the Company spent $30.0 million on property, plant
and equipment in 2007 as compared to only $0.4 million in 2006. The
significant increase relates to the receipt of the initial portion
of the mine development fleet ($11.2 million) and installment
payments made on long lead mill equipment orders ($1.6 million).
Additionally, the Company completed the acquisition of the surface
rights for the Project in the fourth quarter of 2007 for
consideration of $16.3 million.
On June 28, 2007 and July 27, 2007, the Company completed an
offering (the "Offering") through a syndicate of underwriters,
pursuant to which the following securities were issued:
- 237,000 Series D units at a price of $1,000 per unit, each
unit consisting of a $1,000 principal amount unsecured note (the
"Note") and 100 share purchase warrants;
- 55,000 5% subordinated convertible debentures at a price of
$1,000 per debenture;
- 2,055,000 flow-through shares at $9.75 per share; and
- 10,700,000 shares at $7.50 per share.
The total Offering generated gross cash proceeds of $392.3
million (net proceeds $374.5 million).
Cash Resources
As at December 31, 2007, the Company had cash and cash
equivalents totalling $190.2 million and negative working capital
of $29.6 million. The negative working capital position is due to
the classification of the Company's Notes as a current liability,
because of a provision in the Note Indenture governing such Notes,
which requires the Company to obtain permits related to the Project
on or before June 27, 2008. The Mine Permit, which is the principal
approval required for the development of the mine, was received on
October 31, 2007. The additional material permits relate to the use
of water and waste management respecting effluent, sewage and air
emissions. The Company is in the process of applying for all of
these permits; however if the permits are not obtained by June 28,
2008 the Company may be obligated under the Note Indenture to offer
to redeem the Notes at par value ($237 million) from the holders.
The Company is presently reviewing alternatives, including seeking
an extension to the June 28, 2008 date. The negative working
capital position is also due to the classification of the Company's
investments in ABCP as non-current assets and will continue to be
classified as such until no sooner than the restructuring of the
ABCP is completed. The Company has $120 million of estimated
recoverable value ($170 million face value) in investments subject
to the ABCP restructuring in Canada.
The Company will be required to raise additional capital either
from the issuance of flow-through shares which qualify for the vast
majority of the underground development costs, additional debt,
although this market is currently limited due to the restrictive
credit markets world-wide, or equity financings. The timing and
amount of these will be impacted by the timing and ultimate
resolution of the Company's ABCP investments.
Project Update
Construction started in 2007 with underground mine development
which is the critical path component of the Project. Cementation
Canada Inc. ("Cementation"), which was engaged as the Company's
underground contractor in late 2006, has completed the expansion of
the existing 2 kilometre exploration decline suitable for the
larger development equipment. It is now proceeding on progressing
three underground faces plus the surface portal from which mining
commenced in January 2008. In support of the mining activities
there are presently 3 mining crews working 7 days a week, 20 hours
a day. The Cementation crew totals 71 contractors and their efforts
are being supported by 4 mining jumbos, 6 haulage trucks, 4 rock
bolters, 7 mining scoops and a fleet of equipment to deliver and
apply shotcrete.
The Company has ordered the long lead mill components and
ordered and received the initial mine development fleet. Additional
major components for the surface facilities that have been awarded
since December 31, 2007 include the electrical transformers, power
line upgrading and the mill building and site office
facilities.
At the end of February 2008, the mine site employee and
contractor levels totaled 146. The development crews will increase
from three to 6 crews once the underground development reaches the
bottom of the ore body and the ore access development commences in
the second half of 2008.
The Company has retained AMEC Americas Ltd. ("AMEC") as its EPCM
Contractor and Ledcor Projects Inc ("Ledcor") is being engaged to
construct the surface facilities including the plant and tailings
facilities. Ledcor is scheduled to commence excavation of the
surface facilities in April of 2008 and building erection is
planned to commence in September/October of 2008.
Project Cost Update
Costs of building mining projects world-wide have been
increasing as a result of higher labour and material costs. As a
result of a comprehensive review overseen by AMEC and including
input from Cementation, Ledcor and AMC Consultants (Pty) Ltd., the
Company's mining consultant, the construction costs for the Project
are now projected to total $592 million (which includes a
contingency of $48.6 million), 19.6% over the projected costs
contained in the Feasibility Study and are as follows:
-----------------------------------------------------
Major Area ($M) % of Total Costs
-----------------------------------------------------
Mining $197.5 33
-----------------------------------------------------
Site Development $16.3 3
-----------------------------------------------------
Process $90.5 15
-----------------------------------------------------
Utilities $12.5 2
-----------------------------------------------------
Ancillary Buildings $12.3 2
-----------------------------------------------------
Water/Waste Management $14.4 2
-----------------------------------------------------
Total Direct Costs $343.5 58
-----------------------------------------------------
EP Cost $22.1 4
-----------------------------------------------------
Construction Management $12.3 2
-----------------------------------------------------
Construction Indirects $77.1 13
-----------------------------------------------------
Other Indirect costs $11.3 2
-----------------------------------------------------
Total Indirect Costs $122.8 21
-----------------------------------------------------
Owner's costs $74.0 12
-----------------------------------------------------
Contingency $48.6 8
-----------------------------------------------------
Capitalized Operating Costs $3.3 1
-----------------------------------------------------
Total Other Costs $125.9 21
-----------------------------------------------------
Total Costs $592.2 100
-----------------------------------------------------
These capital costs will see the mine reach the 4 million tonne
per year throughput rate and a portion of these costs can be funded
by operations during the initial 1.6 million tonne per year ramp up
period. The Company is presently completing its review of the
financial and operational consequences of reducing the ramp up
period of less than 12 months from the presently disclosed 27
months and any corresponding effect on funding requirements. The
Project cost increase is primarily related to labour cost increases
which are now based on actual contractor labour rates for the
surface and underground contractors, particularly in the
underground development area plus escalation on material costs. The
Project scope has not been amended from that contained in the
Feasibility Study.
To December 31, 2007, the Company has expended approximately $39
million of the Project capital costs.
Participation Agreement with First Nations
As announced on March 24, 2008, the Company has entered into a
Participation Agreement with the Kamloops Division of the Secwepemc
Nation, comprising the Kamloops Indian Band and the Skeetchestn
Indian Band. The purpose of the Participation Agreement is to
establish a co-operative and mutually beneficial relationship
between the First Nations and the Company with respect to the
Project and provide a long-term framework for communication,
collaboration and cooperation. The Agreement will provide the
Kamloops Division with economic opportunities and social and
financial benefits, including employment, education, training and
business opportunities. The Agreement secures the consent of the
Kamloops Division to the Project and its support through all
project phases.
Finalization of Arrangements with Abacus Mining &
Exploration Corp
As announced on March 25, 2008, the arrangements with Abacus
Mining & Exploration Corp. ("Abacus") and with Teck Cominco
Ltd. ("Teck"), which were first reported on in the October 30, 2007
release, have been finalized. The agreement between Abacus, Teck
and the Company is intended to ensure that New Gold and Abacus are
able to freely develop their assets in the area of the New Afton
Project. This agreement will ensure that Abacus maintains the
rights of access previously granted to it by Teck and provides
Abacus with shared use of New Gold's water pipeline in the event
that it develops a new milling operation. New Gold will be provided
access from the Trans-Canada Highway to its New Afton operations
over a small portion of the land which Abacus is purchasing from
Teck around the old Afton mill building.
The agreement between Abacus and the Company is intended to
ensure that any economic mineralization within and surrounding the
past producing Ajax pits, is explored, delineated and developed in
the most effective manner. As a result the agreement is intended to
grant Abacus an option to explore for, and potentially develop,
mineralization in the area surrounding Abacus' Ajax Mineral Claims,
which overly the past-producing Ajax pits. Under this agreement
Abacus must spend $2.5 million over 2 years over a portion of New
Gold's mineral claims surrounding the Ajax pits, and complete a
preliminary economic study within 6 months following the 2 year
period. If economic mineralization is established, it will be
developed as a joint venture between the two companies. In the
event of an open pit operation the interests will be 60:40 in
favour of Abacus who will be the operator. In the event of an
underground operation the interests will be 60:40 in favour of New
Gold who will be the operator.
Move to Kamloops
With the financial, personnel, administration and Project
functions all having been moved to Kamloops, we have decided to
close our Vancouver office effective March 31, 2008. All enquiries
regarding investor and shareholder matters should now be directed
to our Toronto office.
Certain of the statements made and information contained herein
is "forward- looking information" within the meaning of the
Securities Act (Ontario) and the Securities Act (Alberta) or
"forward-looking statements" within the meaning of Section 21E of
the Securities Exchange Act of 1934 of the United States.
Forward-looking statements are subject to a variety of risks and
uncertainties which could cause actual events or results to differ
from those reflected in the forward-looking statements, including,
without limitation, risks and uncertainties relating to the
interpretation of drill results and the estimation of mineral
resources and reserves, the geology, grade and continuity of
mineral deposits, the possibility that future exploration,
development or mining results will not be consistent with the
Company's expectations, metal recoveries, accidents, equipment
breakdowns, title matters and surface access, labour disputes or
other unanticipated difficulties with or interruptions in
production, the potential for delays in exploration or development
activities or the completion of feasibility studies, the inherent
uncertainty of production and cost estimates and the potential for
unexpected costs and expenses, commodity price fluctuations,
currency fluctuations, failure to obtain adequate financing on a
timely basis and other risks and uncertainties, including those
described under Risk Factors in the Company's Annual Information
Form and in each management discussion and analysis.
Forward-looking information is in addition based on various
assumptions including, without limitation, the expectations and
beliefs of management, the assumed long term price of copper and
gold, that the feasibility study will confirm that a technically
viable and economic operation exists, that the Company will receive
required permits and access to surface rights, that the Company can
access financing, appropriate equipment and sufficient labour and
that the political environment within British Columbia and Canada
will continue to support the development of environmentally safe
mining projects so that the Company will be able to commence the
development of the New Afton project within the timetable to be
established by the feasibility study. Should one or more of these
risks and uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those described in forward-looking statements. Accordingly,
readers are advised not to place undue reliance on forward-looking
statements.
Cautionary note to U.S. investors concerning estimates of
Measured and Indicated Resources, and the use the terms "measured"
and "indicated resources." We advise U.S. investors that, while
those terms are recognized and required by Canadian regulations,
the U.S. Securities and Exchange Commission does not recognize
them. U.S. investors are cautioned not to assume that any part or
all of mineral deposits in these categories will ever be converted
into reserves.
WARNING: The Company relies upon litigation protection for
"forward-looking" statements.
Contacts: New Gold Inc. Mr Cliff Davis President and Chief
Executive Officer (416) 977-1067 or Toll Free: 1-877-977-1067 New
Gold Inc. Ms. Laura Sandilands Manager of Investor Relations (416)
977-1067 or Toll Free: 1-877-977-1067
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