TORONTO, ONTARIO (TSX: NGD)(AMEX: NGD) is pleased to provide the
2008 first quarter financial results and an update on its New Afton
Copper Gold Project (the "Project") situated 10 kilometres west of
Kamloops, British Columbia.
2008 First Quarter End Results
The Company incurred a loss of $9.2 million or $0.25 per share
in the first quarter as compared to a loss of $0.5 million or $0.02
per share in the first quarter of 2007. The increase in the loss is
primarily related to the expensing of $9.4 million related to
interest and accretion charges which do not qualify for
capitalization.
During the first quarter of 2008, the Company invested
approximately $20.1 million on its mineral properties as compared
to $5.9 million in the comparative quarter in 2007. During the
current quarter, expenditures on the New Afton project included
$18.0 million on underground development and infrastructure and
$1.3 million on surface exploration in and around the New Afton
project and $0.8 million on the Company's Ajax claims. In the
comparative quarter of 2007, the Company spent $3.7 million on
development activities, principally related to the construction of
a new pit road, $1.8 million on the feasibility study and $0.3
million on surface exploration programs in and around the current
resource.
In addition, during the first quarter of 2008, the Company spent
$11.0 million on property, plant and equipment in the first quarter
as compared to $1.3 million in the comparative quarter in 2007. The
significant increase relates to the acquisition of the initial mine
development fleet plus sundry capital assets required for the
development of the New Afton Mine. In 2007, the acquisitions
related to the acquisition of the underground equipment acquired
from the former underground mining contractor.
Cash Resources
As at March 31, 2008, the Company had cash and cash equivalents
totaling $158 million and negative working capital of $76.6 million
versus negative working capital of $29.6 million as at December 31,
2007. The primary reason for the negative working capital relates
to the continued accounting for the Notes as current debt pending
finalization of the permit waiver request and business combination
completion and categorizing the currently illiquid ABCP investments
as long-term assets. Once the Company meets or secures a waiver on
its permit test on the debt, the Company expects to return to a
positive working capital position. The increase in the negative
working capital has occurred primarily as a result of funding the
Project development which totaled $31.1 million in the quarter.
During the quarter it was determined that the previous approach
to exploration, which had been focused in and around the New Afton
resource both at surface and at depth, would be curtailed on the
basis that the mineralisation identified in this program would not
be mined in the first five years of the mine life. The Company will
now focus on a full evaluation of the previous drilling program
results and re-direct the future program to an evaluation of the
regional potential of the Company's mineral claim holdings
including a geophysical survey. As a result, the extent of drilling
expected in the near term will be significantly reduced.
Project Update
During the first quarter of 2008 the Company continued the
underground development of the Project. The underground development
is now proceeding on five development faces including commencement
of the surface portal which began in early 2008. The Company
completed 824 metres of underground development during the first
quarter of 2008 and is currently averaging 90 to 100 metres per
week.
Surface activities included the development of new surface roads
and preparation of the construction office site in advance of the
mill construction. This is planned to commence late in the third
quarter following site preparation and foundation completion for
the mill in the second quarter of 2008. The Company also
commissioned after the quarter end the pit de-watering system and
is now dewatering the New Afton pit into the previously mined
Pothook pit where water will be stored and later used when milling
commences.
The Company also continued its permitting processes for the
remaining permits. In April 2008 the remaining key permit
applications, focused on water use and tailings impoundment, were
submitted to the authorities.
The procurement procedures for the mill site continued with the
tendering of the mill structure, the vertimill and the floatation
cells. Detailed engineering attained the 30% level. In addition, as
previously reported, after a comprehensive review overseen by AMEC
Americas Limited 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 stated in the Feasibility Study. The primary
reasons for the increase are attributed to higher labour and
material costs.
The current schedule indicates that the mill will be completed
in the fourth quarter of 2009 with treatment of ore commencing
before the end of 2009. Mine production is planned to increase
throughout 2010 and attain an annualized production rate of 4
million tonnes per year in early 2011.
On March 24, 2008 the Company announced that it had signed a
Participation Agreement with the Kamloops Division of the Secwepemc
Nation, comprising the Kamloops Indian Band and the Skeetchestn
Indian Band.
Business Combination
The Company signed a letter agreement dated March 31, 2008 with
Metallica Resources Inc. ("Metallica") and Peak Gold Ltd. ("Peak")
to complete a business combination ("the Transaction") whereby New
Gold would be the surviving company. The Transaction is subject to
the completion of confirmatory due diligence, definitive
documentation, regulatory approvals and obtaining a minimum
two-thirds shareholder approval at special meetings of the
shareholders of each of Metallica and Peak and majority approval at
a general meeting of the shareholders of New Gold. Peak and
Metallica's obligations were conditional upon the Holders of the
Company's 10% Notes agreeing by extraordinary resolution to certain
amendments to the Note Indenture. As announced on May 8, 2008, the
necessary approval of the Noteholders has been obtained. On May 12,
2008 the Company, Peak and Metallica jointly announced that the
definitive agreement had been signed.
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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