New Gold Announces Third Quarter 2012 Results with New Afton
Contributing to Record Margins and Blackwater Achieving Key
Milestones
(All figures are in US dollars unless otherwise indicated)
VANCOUVER,
Nov. 1, 2012 /PRNewswire/ - New Gold
Inc. ("New Gold") (TSX and NYSE MKT:NGD) today announces results
for the third quarter of 2012, with gold production of 104,577
ounces at total cash costs(1) per ounce sold, net of
by-product sales, of $443 per ounce.
The company is pleased to report that the combination of its low
costs and the continued strength of the gold price resulted in New
Gold delivering shareholders a margin of over $1,100 per ounce for the first time in the
company's history.
Third Quarter 2012 Highlights
- New Afton successfully transitioned into production, achieving
full mill design throughput of 11,000 tonnes per day over one month
ahead of schedule
- Gold production increased by 16% to 104,577 ounces from 90,384
ounces in the same period of the prior year
- Total cash costs(1) per ounce sold, net of
by-product sales, of $443 per ounce
were $85 per ounce below the same
period of the prior year and well below industry average
- Adjusted net earnings of $43
million, or $0.09 per
share
- Cash generated from operations before working capital
changes(2) increased to $91
million from $80 million in
the same period of the prior year
- Completed Blackwater Preliminary Economic Assessment ("PEA")
with the following highlights:
-
- Start of production targeted for 2017
- Initial 15-year mine life with additional 1.4 years of
processing stockpiles at end of pit life
- Life-of-mine strip ratio of 2.36 to 1.00 of waste to
mineralized material
- First five years - average annual gold production of 569,000
ounces at total cash costs(1) per ounce sold, net of
by-product sales, of $467 per
ounce
- Spot Case (as at September
20th) - After-tax 5% NPV of $2.8 billion, IRR of 25.8% and payback of 2.7
years, at prices of $1,775 per ounce
gold, $34.50 per ounce silver and a
parity US$/CDN$ foreign exchange rate
During the quarter, earnings from mine
operations were $77 million, net
earnings were $18 million, or
$0.04 per share, and adjusted net
earnings were $43 million, or
$0.09 per share. Cash generated from
operations before working capital changes(2) increased
by 13% to $91 million. Beyond the
strong operating performance, the third quarter included three
significant milestones for the company's growth assets. New Afton
achieved commercial production, defined as 60% of the 11,000 tonne
per day design capacity, on July
31st, ahead of its August target. On September 20th, the company announced the results
of its PEA for the Blackwater Project, further establishing
Blackwater as the company's flagship asset. After its successful
production start, the New Afton mill achieved full design capacity
on September 21st, over one month
ahead of schedule, as an average of 11,000 tonnes per day were
processed in the preceding 30 day period. "Our company had another
strong quarter. To see our operations perform well, New Afton
successfully transition into production and Blackwater's expected
impact on our future growth is very gratifying and a testament to
our teams," stated Randall Oliphant,
Executive Chairman.
The PEA is preliminary in nature and includes
Inferred mineral resources that are considered too speculative
geologically to have the economic considerations applied to them
that would enable them to be categorized as mineral reserves, and
there is no certainty that the PEA based on these mineral resources
will be realized. Mineral resources that are not mineral reserves
do not have demonstrated economic viability.
"The third quarter saw us deliver on our key
objectives," added Mr. Oliphant. "The performance of our portfolio
of producing assets was, once again, solid. New Afton continuing
its successful start-up further establishes our company's near-term
production and cash flow growth potential. Finally, the completion
of the Blackwater PEA outlines just how impactful that great
project should be on the future our company."
Operations Overview
New Gold 2012 Third Quarter
Consolidated - Summary Operational Results |
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2012 |
2011 |
|
2012 |
2011 |
Gold Production (thousand ounces) |
|
|
|
|
|
|
Mesquite |
|
32.2 |
31.8 |
|
112.8 |
114.4 |
Cerro San Pedro |
|
34.5 |
34.3 |
|
105.4 |
109.6 |
Peak Mines |
|
23.9 |
24.4 |
|
66.7 |
62.5 |
New Afton |
|
14.0 |
- |
|
14.0 |
- |
Total Gold Production |
|
104.6 |
90.4 |
|
299.0 |
286.5 |
|
|
|
|
|
|
|
Total Gold Sales |
|
95.2 |
93.0 |
|
285.8 |
292.3 |
Average realized gold price ($ per
ounce) |
|
$1,560 |
$1,570 |
|
$1,540 |
$1,430 |
|
|
|
|
|
|
|
Silver Production (thousand ounces) |
|
|
|
|
|
|
Cerro San Pedro |
|
488.3 |
380.6 |
|
1,537.2 |
1,536.3 |
|
|
|
|
|
|
|
Total Silver Sales |
|
492.3 |
379.6 |
|
1,506.1 |
1,567.8 |
Average realized silver price
($ per ounce) |
|
$30.09 |
$37.71 |
|
$30.32 |
$36.25 |
|
|
|
|
|
|
|
Copper Production (million pounds) |
|
|
|
|
|
|
Peak Mines |
|
3.1 |
2.6 |
|
10.8 |
9.4 |
New Afton |
|
11.1 |
- |
|
11.1 |
- |
Total Copper Production |
|
14.2 |
2.6 |
|
21.9 |
9.4 |
|
|
|
|
|
|
|
Total Copper Sales |
|
9.2 |
4.9 |
|
15.9 |
12.4 |
Average realized copper price ($ per
pound) |
|
$3.69 |
$3.39 |
|
$3.60 |
$3.84 |
|
|
|
|
|
|
|
Total Cash
Costs(1) - net of by-product sales ($ per
ounce) |
|
|
|
|
|
Mesquite |
|
$722 |
$732 |
|
$664 |
$628 |
Cerro San Pedro |
|
$218 |
$193 |
|
$205 |
$73 |
Peak Mines |
|
$796 |
$715 |
|
$772 |
$580 |
New Afton |
|
($955) |
- |
|
($955) |
- |
Total Cash Costs(1)
- net of by-product sales |
|
$443 |
$528 |
|
$486 |
$409 |
|
|
|
|
|
|
|
Average realized margin ($ per ounce) |
|
$1,117 |
$1,042 |
|
$1,054 |
$1,021 |
Gold Production and Sales
Consolidated gold production during the third
quarter increased by 16% over the same period of the prior year.
The increase was primarily driven by the successful start of
production at New Afton. Gold production at the company's other
three producing assets was consistent with the same period of the
prior year. The increase in gold sales was not as significant as
that of gold production as New Afton's pre-commercial production
during the month of July was offset against the project's capital
costs. In addition, a portion of New Afton's production remained in
inventory at the end of the quarter due to the timing of
concentrate sales.
The increase in gold production for the nine
months ended September 30, 2012 was
also primarily attributable to the production start at New Afton,
as an increase in production at the Peak Mines largely offset small
decreases at Mesquite and Cerro San Pedro. The difference in gold
sales during the nine months ended September
30, 2012 is due to a combination of the above noted New
Afton pre-commercial production not being reflected in sales as
well as timing of gold sales and related inventory movements at
Cerro San Pedro, Peak Mines and New Afton.
Silver Production and Sales
During the third quarter, silver production at
Cerro San Pedro increased by 28% when compared to the same period
of the prior year. This increase in production was attributable to
higher grade silver being placed on the leach pad in the second
quarter of 2012, the production benefit of which was primarily seen
in the third quarter due to timing of silver leach recoveries.
For the nine months ended September 30, 2012, silver production was
consistent with that of the prior year period as the impact of
fewer ore tonnes being placed on the leach pad was offset by the
mining of higher grade silver. The minor differences in silver
sales during both comparative periods are a result of timing of
silver sales and related inventory movements.
Copper Production and Sales
Consolidated copper production during the third
quarter increased significantly to 14 million pounds from three
million pounds in the same period of the prior year. The increase
was primarily driven by the successful start of production at New
Afton, though the Peak Mines also increased copper production by
20% during the quarter. The increased production at Peak was due to
a combination of increased ore tonnes milled, continued recovery
improvements and higher copper grades. Copper sales increased by
89% during the quarter. Copper sales were below production as New
Afton's pre-commercial production during the month of July was
offset against the project's capital costs rather than attributed
to sales. In addition, a portion of New Afton's production remained
in inventory at the end of the quarter due to the timing of
concentrate sales.
For the nine months ended September 30, 2012, copper production increased
by 133% when compared to the same period of the prior year, with
the increase attributable to the New Afton start-up and increases
in the Peak Mines' throughput, copper grades and recoveries. Copper
sales were up 28%, however, below copper production levels as noted
above.
Total Cash Costs(1) per Ounce Sold -
Net of By-Product Sales
Total cash costs(1) per ounce sold,
net of by-product sales, remained well below the industry average
during the third quarter of 2012 at $443 per ounce. The company was able to reduce
its total cash costs(1) by $85 per ounce when compared to the same period of
the prior year and $29 per ounce when
compared to the second quarter of 2012. The fourth quarter of 2012
should show further decreases in total cash costs(1) as
the company begins to realize the full benefit of New Afton's
production. For the nine months ended September 30, 2012, costs were higher than the
prior year period as increases in operating costs and lower silver
by-product revenues were only partially offset by higher copper
by-product revenues and favourable movements in foreign exchange
rates.
- Mesquite - Total cash costs(1) per ounce sold during
the quarter remained consistent when compared to the same period of
the prior year. For the nine months ended September 30, 2012, costs increased slightly as
the 2011 period benefitted from the mining of ore above reserve
grade due to mine sequencing.
- Cerro San Pedro - Total cash costs(1) per ounce
sold, net of by-product sales, remained among the lowest in the
industry, despite a slight increase over the same period of the
prior year. The lower realized silver price was offset by higher
silver sales volumes at Cerro San Pedro resulting in similar
by-product revenue. For the nine months ended September 30, 2012, the increase in costs when
compared to the record 2011 period is attributable to an
$11 million decrease in silver
by-product revenue primarily due to lower realized silver prices.
The lower silver by-product revenue accounts for approximately
$75 per ounce of the increase in
costs, with the balance of the difference due to mining of slightly
lower grade ore and general input cost increases.
- Peak Mines - Total cash costs(1) per ounce sold, net
of by-product sales, for the quarter increased when compared to the
same period of the prior year due to an $80 per ounce decrease in copper by-product
revenue. The decrease in copper sales volumes during the quarter,
due to a significant inventory reduction in 2011, was only
partially offset by the increased average realized copper price.
During 2012, copper production and sales have been broadly
consistent, while 2011 copper sales were higher due to sales of
Peak's concentrate inventory. Quarter-over-quarter increases in
operating costs were offset by the depreciation of the Australian
dollar. For the nine months ended September
30, 2012, the increase in costs when compared to 2011 is due
to a $175 per ounce decrease in
copper by-product revenue, due to lower copper sales volumes and
realized prices, as well as general operating cost pressures in
Australia. These increases were
only partially offset by the mining of higher grade ore and the
depreciation of the Australian dollar.
- New Afton - As New Afton achieved commercial production in
July 2012 and does not have a
comparable prior year period, New Gold provides an overview of the
New Afton start-up separately below.
After providing shareholders with an average
realized margin of over $1,000 per
ounce in 2011 as well as in the first and second quarters of 2012,
New Gold is proud to have further increased its margin to over
$1,100 per ounce in the third quarter
for the first time in the company's history. Importantly, with the
continued strength of commodity prices and expected lower future
cash costs, New Gold anticipates further margin expansion in the
fourth quarter of 2012 and into 2013. New Gold remains well
positioned to achieve its production and cost guidance for the
year.
New Afton Start-Up
After starting production on June 28, 2012, New Afton successfully achieved
commercial production, ahead of schedule, on July 31st. Commercial production is
defined as 30 days of operation at an average of 60% of the 11,000
tonne per day design capacity, or 6,600 tonnes per day. New Afton
achieved an additional milestone on September 21st as the mill achieved a
30-day average at the design capacity of 11,000 tonnes per day. The
company has been pleased with the mill throughput as the New Afton
mill achieved full production over one month ahead of its November
target.
Grades in the first three months of production
at New Afton averaged 0.67 grams per tonne gold and 0.72% copper.
During the startup phase of the mill, the company processed ore
with gold grade consistent with reserve grade and copper grade
below reserve grade. The ore processed during the quarter was
sourced from a combination of the surface stockpile and
underground. With the mill achieving design capacity on
September 21st, the
company looks forward to moving into higher grade areas. Gold and
copper grades in the first half of October have averaged 0.79 grams
per tonne gold and 0.77% copper.
Recoveries in the first three months of
production have been in line with the company's forecasts averaging
76% for gold and 81% for copper. With the addition of a Knelson
concentrator and flash flotation units in September, recoveries
continue to increase. Gold and copper recoveries in the month of
September were 82 and 83%, respectively and have continued to
improve through October. New Gold continues to optimize the milling
circuit and anticipates life-of-mine recoveries at New Afton to be
in the 88 to 90% range, consistent with the project's latest
technical report.
New Afton's operating costs have met the
company's expectations during the start-up phase. Operating costs
during the quarter, including mining, processing and general and
administrative costs, have averaged approximately $20 per tonne. As the mill achieved full
throughput in late September and both grades and recoveries are
anticipated to increase, total cash costs(1) are
expected to decline in future periods. The co-product total cash
costs(1) during New Afton's first three months of
production were $729 per ounce gold
and $1.87 per pound copper.
New Afton's capital expenditures during the
third quarter totaled $82 million,
net of $8 million in pre-commercial
production sales. Of the $82 million,
$35 million was spent in advance of
New Afton reaching commercial production and $47 was post the July
31st commercial production announcement. New
Afton's total project development capital to achieve commercial
production was $793 million.
New Gold's exploration team commenced drilling
of the C-zone block of mineralization that lies below and to the
side of the New Afton reserve block at the beginning of the third
quarter. There are two drills actively exploring the zone in an
effort to add to the mine's base 12 year life. New Gold has
budgeted $5 million for this
exploration at New Afton in the second half of 2012.
"Our mines continued to perform well during the
quarter and I am proud of our operating team's desire to look for
ways to continually improve results," stated Robert Gallagher, President and Chief Executive
Officer. "As New Afton moved from development into production we
are able to successfully leverage the best practices used at our
other operations. Similarly, as Blackwater moves through the
development phase we can draw on the collective experience of
having successfully brought Cerro San Pedro, Mesquite and New Afton
into production over the last five years."
Consolidated Financial Results
Overview
New Gold 2012 Third Quarter
Consolidated - Summary Financial Results |
|
|
|
|
|
Three months ended |
|
Nine months ended |
Figures in US$ millions, except
per share amounts |
|
September 30, |
|
September 30, |
|
|
2012 |
2011 |
|
2012 |
2011 |
|
|
|
|
|
|
|
Revenue |
|
195.5 |
175.5 |
|
540.4 |
518.3 |
|
|
|
|
|
|
|
Earnings from Mine
Operations |
|
|
|
|
|
|
Mesquite |
|
12.7 |
13.7 |
|
58.3 |
57.7 |
Cerro San Pedro |
|
41.1 |
45.2 |
|
122.5 |
135.1 |
Peak Mines |
|
15.1 |
17.1 |
|
42.2 |
47.2 |
New Afton |
|
8.4 |
- |
|
8.4 |
- |
Earnings from Mine Operations |
|
77.3 |
76.0 |
|
231.4 |
240.0 |
|
|
|
|
|
|
|
Net Earnings |
|
17.8 |
40.7 |
|
75.1 |
144.0 |
Net Earnings per Share |
|
0.04 |
0.09 |
|
0.16 |
0.34 |
Adjusted Net Earnings(3) |
|
42.6 |
49.5 |
|
133.5 |
145.6 |
Adjusted Net Earnings per
Share(3) |
|
0.09 |
0.11 |
|
0.29 |
0.34 |
|
|
|
|
|
|
|
Cash Generated from
Operations before Working Capital(2) |
90.6 |
80.3 |
|
253.2 |
255.8 |
Pre-tax Cash Generated from Operations |
|
67.1 |
93.0 |
|
205.3 |
240.8 |
Net Cash Generated from Operations |
|
46.7 |
70.7 |
|
129.6 |
163.7 |
Revenue increased by 11% during the third quarter
through a combination of increased sales volumes of gold, silver
and copper as well as higher realized copper prices. These
increases were partially offset by lower realized gold and silver
prices. Earnings from mine operations remained consistent when
compared to the same period of the prior year primarily as a result
of a $14 million increase in
depreciation and depletion largely due to New Afton's commercial
production start.
Net earnings in the third quarter of 2012 were
$18 million, or $0.04 per share. Net earnings were negatively
impacted by a $9 million non-cash tax
expense related to an increase in the Chilean prescribed tax rate
from 17 to 20%, as well as a $9
million non-cash loss related to the mark-to-market of the
conversion option of the company's convertible debentures. Adjusted
net earnings were $43 million, or
$0.09 per share. Net earnings have
been adjusted and tax effected for the group of costs in "Other
gains (losses)" on the condensed consolidated income statement as
well as the increase in income tax expense related to the change in
the Chilean tax rate. See notes at the end of the news release for
a reconciliation of adjusted net earnings(3).
Cash generated from operations before working
capital(2) increased by 13% during the third quarter
driven by a combination of higher gold sales and lower costs.
Pre-tax cash generated from operations in the third quarter was
$67 million, which included a
$24 million working capital use of
cash. $15 million was related to a
New Afton concentrate sale receivable where funds were not
collected prior to the quarter end. The $15
million payment was received in early October. Pre-tax cash
generated from operations in the prior year period benefitted from
$13 million in positive working
capital, primarily related to significant inventory sales at the
Peak Mines during the third quarter of 2011. In total, the relative
working capital movements resulted in a $36
million difference when comparing pre-tax cash generated
from operations in the third quarters of 2012 and 2011. Net cash
generated from operations during the third quarter was $47 million and was similarly impacted by the
$15 million in New Afton
receivables.
For the nine months ended September 30, 2012, revenue increased by 4%,
while earnings from mine operations were down slightly when
compared to the same period of the prior year as operating costs
and depreciation increased by 6% and 32%, respectively. The
increase in depreciation is primarily attributable to the start of
commercial production at New Afton.
Net earnings in the first nine months of 2012
were $75 million, or $0.16 per share. Adjusted net earnings were
$134 million, or $0.29 per share.
Cash generated from operations before working
capital(2) in the first nine months of 2012 was
consistent with that of the same period of the prior year. Pre-tax
cash generated from operations and net cash generated from
operations were $205 million and
$130 million, respectively. Both
pre-tax and net cash generated from operations were negatively
impacted by a $48 million working
capital use of cash.
Balance Sheet
As at September 30,
2012, the key components of New Gold's consolidated
statements of financial position included:
- Cash and cash equivalents of $148
million
- Consolidated debt of $398
million, including:
-
- 7% senior notes of $292 million
due in 2020
- 5% convertible debenture of $49
million (face value of C$55
million) due in 2014 with a conversion price of C$9.35
- El Morro funding loans of $56
million
- Basic shares outstanding - 463 million
As a result of the company's strong share price
performance, on October
11th, the company announced the early redemption
of its outstanding 5% subordinated convertible debentures due
June 28, 2014. The redemption of any
outstanding debentures will take place on November 20, 2012 and will eliminate the
company's requirement to repay C$55
million with cash in mid-2014, as well as the interest
payments that would have been incurred in the period between
redemption and June 28, 2014.
Development Update
Blackwater PEA Outlines Project with Over
500,000 Ounces of Production Annually at Below Average Costs
On September
20th, the company released the PEA for the
Blackwater Project, further demonstrating the significant impact
the project should have on the company's gold production and cash
flow growth. Over the initial 15 years of its mine life, Blackwater
is estimated to produce an annual average of 507,000 ounces of gold
and 2,039,000 ounces of silver at total cash costs(1)
per ounce sold, net of by-product sales, of $536 per ounce. At assumed gold and silver prices
of $1,275 and $22.50 per ounce and a 0.94 US$/CDN$ foreign exchange rate, the project
is expected to yield a base case after-tax, 5% net present value
("NPV") of $1.1 billion and an
after-tax internal rate of return ("IRR") of 14.0%. At commodity
prices of $1,775 per ounce gold and
$34.50 per ounce silver on
September 20, 2012, the day of the
PEA announcement, and a parity exchange rate, the after-tax, 5% NPV
and IRR move to $2.8 billion and
25.8%, respectively. All NPV calculations are calculated to the
beginning of the construction period in 2015.
The PEA is preliminary in nature and includes
Inferred mineral resources that are considered too speculative
geologically to have the economic considerations applied to them
that would enable them to be categorized as mineral reserves, and
there is no certainty that the PEA based on these mineral resources
will be realized. Mineral resources that are not mineral reserves
do not have demonstrated economic viability.
The PEA resource is based on drill results up to
mid-May 2012. Since then, New Gold's
exploration program has continued apace and the company looks
forward to incorporating these additional results in the project's
Feasibility Study scheduled for completion in 2013. Beyond the
primary Blackwater deposit that forms the basis of the PEA, the
company's total land package is now over 1,000 square kilometres.
New Gold looks forward to continuing its exploration efforts within
and around the Capoose gold-silver deposit, located approximately
25 kilometres from Blackwater, as well as the multiple exploration
targets that have been identified through New Gold's 2012
property-wide reconnaissance program. The company has now completed
its infill drilling program at Blackwater and plans to focus its
attention on the recently identified northwest silver zone. At
Capoose, results from this year's drilling are starting to be
received with assays highlighting mineralization both within and
outside of the boundaries of the previously identified Capoose
mineral resource. Beyond Blackwater and Capoose, New Gold continues
to evaluate four new targets on its broader land package that were
identified through its regional reconnaissance program. During the
third quarter, the company drilled 352 holes totaling 81,250 metres
at Blackwater and an additional 22 holes totaling 10,984 metres at
Capoose. For the nine months ended September
30, 2012, the company has completed 723 holes totaling
215,459 metres.
Blackwater PEA Highlights
- Conventional truck and shovel open pit mine with 60,000 tonne
per day ("tpd") whole ore leach process plant
- Start of production targeted for 2017
- Initial 15-year mine life with additional 1.4 years of
processing stockpiles at end of pit life
- Life-of-mine strip ratio of 2.36 to 1.00 of waste to
mineralized material
- Life-of-mine gold and silver recoveries of 87% and 53%,
respectively
- Life-of-mine gold and silver production, inclusive of
stockpiles, of 6.2 and 18.6 million ounces from the Indicated
category and 1.8 and 13.5 million ounces from the Inferred
category, respectively
- Development capital costs of $1.8
billion inclusive of 24%, or $346
million, contingency
- Higher grade initial five years resulting in accelerated
payback of capital costs
-
- First five years - average annual gold production of 569,000
ounces at total cash costs(1) per ounce sold, net of
by-product sales, of $467 per
ounce
- Base Case - After-tax 5% NPV of $1.1
billion, IRR of 14.0% and payback of 4.8 years, at
$1,275 per ounce gold, $22.50 per ounce silver and a 0.94 US$/CDN$ foreign exchange rate
- Spot Case (as at September
20th) - After-tax 5% NPV of $2.8 billion, IRR of 25.8% and payback of 2.7
years, at prices of $1,775 per ounce
gold, $34.50 per ounce silver and a
parity US$/CDN$ foreign exchange rate
Total capital spending at Blackwater, including
exploration and infrastructure-related expenditures, in the third
quarter of 2012 was $36 million. The
total capital spending for the nine months ended September 30, 2012 was $93
million.
The Project Description for Blackwater has been
successfully submitted. As a result, Blackwater has now commenced
the federal and provincial environmental assessment process. The
company looks forward to advancing its permitting efforts through
the remainder of 2012 and into 2013.
Focus Remains on Working with Stakeholders after
Temporary Suspension of Environmental Permit at El Morro
El Morro is an advanced stage, world-class
copper/gold project in northern Chile. Two principal zones of gold-copper
mineralization have been identified to date - the El Morro and La
Fortuna zones - and several additional targets have been identified
as part of a regional exploration program. Future exploration
efforts will also test the potential bulk-mineable gold and copper
production below the bottom of the current La Fortuna open pit.
Based on the most recent Feasibility Study, completed in late 2011,
once in production, New Gold's 30% share of annual production is
expected to be over 90,000 ounces of gold and 85 million pounds of
copper over an initial 17-year mine life. Life-of-mine cash costs
are expected to be approximately ($700) per ounce of gold on a by-product basis
and approximately $550 per ounce of
gold and $1.45 per pound of copper on
a co-product basis. Metal price assumptions used to calculate the
average life-of-mine El Morro cash costs are $1,200 per ounce of gold and $2.75 per pound of copper.
Under the terms of New Gold's agreement with
Goldcorp Inc. ("Goldcorp"), Goldcorp is responsible for funding New
Gold's 30% share of capital costs. The carried funding will accrue
interest at a fixed rate of 4.58%. New Gold will repay its share of
capital plus accumulated interest out of 80% of its share of the
project's cash flow with New Gold retaining 20% of its share of
cash flow from the time production commences.
Activity at site during the third quarter was
limited due to the previously announced temporary suspension of the
project's environmental permit, pending the resolution by the
Chilean Environmental Permitting Authority (the "Servicio de
Evaluación Ambiental" or "SEA") of certain deficiencies in
consultation asserted by a group of indigenous people whose claims
were supported by the Chilean court. In June
2012, SEA initiated the administrative process to address
the deficiencies identified by the Chilean court. During the period
of temporary suspension, Goldcorp's focus is on obtaining the
project permits and optimizing project economics including sourcing
of a long-term power supply.
Outlook for 2012
New Gold is pleased to reiterate its guidance
for 2012. The company continues to forecast gold production of
405,000 to 445,000 ounces at a total cash costs(1) per
ounce sold, net of by-product sales, of $410
to $430 per ounce. As outlined in the company's February 2012 guidance news release, gold
production was expected to increase, coupled with a decrease in
cash costs, in the second half of the year as New Afton started
production. As anticipated, the third quarter delivered increased
production at lower costs when compared to both of the first two
quarters of 2012. Importantly, as New Afton has now reached design
throughput and should begin to benefit from improved grades and
recoveries, this trend of increasing production and declining costs
should continue in the fourth quarter. New Gold is proud of its
performance through three quarters of 2012 and looks forward to a
strong finish to the year.
New Gold 2012 Production and Cost
Guidance |
|
|
|
|
|
|
|
Gold |
|
Silver |
|
Copper |
|
|
|
(000
Ounces) |
|
(000
Ounces) |
|
(Million
pounds) |
|
Total Cash
Cost(1) |
|
|
|
|
|
|
|
|
Mesquite |
140-150 |
|
-- |
|
-- |
|
$710-$730 |
|
|
|
|
|
|
|
|
Cerro San Pedro |
140-150 |
|
1,900-2,100 |
|
-- |
|
$250-$270 |
|
|
|
|
|
|
|
|
Peak Mines |
90-100 |
|
-- |
|
12-14 |
|
$640-$660 |
|
|
|
|
|
|
|
|
New Afton |
35-45 |
|
-- |
|
30-35 |
|
($1,200)-($1,300) |
|
|
|
|
|
|
|
|
New Gold Total |
405-445 |
|
1,900-2,100 |
|
42-49 |
|
$410-$430
|
Note: New Afton production range includes gold and copper
produced between mill start-up and achievement of |
commercial production. The revenue from this
pre-commercial production will be offset against capital costs.
New |
Afton gold and copper sales from the point of
commercial production forward are expected to be 20,000 to
30,000 |
ounces and 20 to 25 million pounds,
respectively. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions used in the 2012 guidance include gold, silver and
copper prices of $1,600 per ounce,
$30.00 per ounce and $3.50 per pound, respectively, and Canadian
dollar, Australian dollar and Mexican peso exchange rates of
$1.00, $1.00 and 13.00 to the U.S. dollar, respectively.
The diesel price assumed for 2012 is $3.30 per gallon.
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. New Gold's New Afton project met
its targeted June 2012 production
start and began commercial production ahead of schedule in
July 2012. Together with the Mesquite
Mine in the United States, the
Cerro San Pedro Mine in Mexico and
Peak Gold Mines in Australia, the
company is forecasting between 405,000 and 445,000 ounces of gold
production in 2012. In addition, New Gold owns 30% of the
world-class El Morro project located in Chile and 100% of the exciting Blackwater
project in Canada. 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 may be deemed "forward looking".
All statements in this news release, other than statements of
historical fact, that address events 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", "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. All such
forward-looking statements 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.
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; fluctuations in the international currency
markets and in the rates of exchange of the currencies of
Canada, the United States, Australia, Mexico and Chile; price volatility in the spot and
forward markets for commodities; impact of any hedging activities,
including margin limits and margin calls; discrepancies between
actual and estimated production, between actual and estimated
reserves and resources and between actual and estimated
metallurgical recoveries; changes in international, national and
local government legislation in Canada, the United
States, Australia,
Mexico and Chile or any other country in which New Gold
currently or may in the future carry on business; 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 that New Gold
operates, including, but not limited to obtaining the necessary
permits for the Blackwater project, in Mexico where the Cerro San Pedro mine has a
history of ongoing legal challenges related to our EIS and
Chile where the courts have
temporarily suspended the approval of the environmental permit for
the El Morro project; the lack of certainty with respect to foreign
legal systems, which may not be immune from the influence of
political pressure, corruption or other factors that are
inconsistent with the rule of law; the uncertainties inherent to
current and future legal challenges the company is or may become a
party to,; diminishing quantities or grades of reserves;
competition; loss of key employees; additional funding
requirements; actual results of current exploration or reclamation
activities; 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.
In addition, there are risks and hazards associated with the
business of mineral exploration, development and mining, including
environmental 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.
Cautionary Note to U.S. Readers Concerning
Estimates of Measured, Indicated and Inferred Mineral
Resources
Information concerning the properties and
operations discussed in this news release has been prepared in
accordance with Canadian standards under applicable Canadian
securities laws, and may not be comparable to similar information
for United States companies. The
terms "Mineral Resource", "Measured Mineral Resource", "Indicated
Mineral Resource" and "Inferred Mineral Resource" used in this news
release are Canadian mining terms as defined in accordance with NI
43-101 under guidelines set out in the Canadian Institute of
Mining, Metallurgy and Petroleum ("CIM") Standards on Mineral
Resources and Mineral Reserves adopted by the CIM Council on
December 11, 2005. While the terms
"Mineral Resource", "Measured Mineral Resource", "Indicated Mineral
Resource" and "Inferred Mineral Resource" are recognized and
required by Canadian regulations, they are not defined terms under
standards of the United States Securities and Exchange Commission.
Under United States standards,
mineralization may not be classified as a "reserve" unless the
determination has been made that the mineralization could be
economically and legally produced or extracted at the time the
reserve calculation is made. As such, certain information contained
in this news release concerning descriptions of mineralization and
resources under Canadian standards is not comparable to similar
information made public by United
States companies subject to the reporting and disclosure
requirements of the United States Securities and Exchange
Commission. An "Inferred Mineral Resource" has a great amount of
uncertainty as to its existence and as to its economic and legal
feasibility. It cannot be assumed that all or any part of an
"Inferred Mineral Resource" will ever be upgraded to a higher
category. Under Canadian rules, estimates of Inferred Mineral
Resources may not form the basis of feasibility or other economic
studies. Readers are cautioned not to assume that all or any part
of Measured or Indicated Resources will ever be converted into
Mineral Reserves. Readers are also cautioned not to assume that all
or any part of an "Inferred Mineral Resource" exists, or is
economically or legally mineable. In addition, the definitions of
"Proven Mineral Reserves" and "Probable Mineral Reserves" under CIM
standards differ in certain respects from the standards of the
United States Securities and Exchange Commission.
TECHNICAL INFORMATION
The scientific and technical information in this
news release has been reviewed by Mark
Petersen, a Qualified Person under National Instrument
43-101 and an employee of New Gold.
(1) TOTAL CASH COSTS
"Total cash costs" per ounce figures are
calculated in accordance with a standard developed by The Gold
Institute, which was a worldwide association of suppliers of gold
and gold products and included leading North American gold
producers. The Gold Institute ceased operations in 2002, but the
standard is widely accepted as the standard of reporting cash cost
of production in North America.
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. Total cash costs includes mine site operating costs such as
mining, processing, administration, royalties and production taxes,
but is exclusive of amortization, reclamation, capital and
exploration costs. Total cash costs are reduced by any by-product
revenue and are then divided by ounces sold to arrive at the total
by-product cash costs of sales. The measure, along with sales, is
considered to be a key indicator of a company's ability to generate
operating earnings and cash flow from its mining operations. This
data is furnished to provide additional information and is a
non-IFRS measure. Total cash costs presented does not have a
standardized meaning prescribed by IFRS and may not be comparable
to similar measures presented by other mining companies. It should
not be considered in isolation as a substitute for measures of
performance prepared in accordance with IFRS and is not necessarily
indicative of operating costs presented under IFRS. A
reconciliation will be provided in the MD&A accompanying the
quarterly financial statements.
(2) CASH GENERATED FROM OPERATIONS BEFORE
WORKING CAPITAL
Cash generated from operations before working
capital is a non-IFRS performance measure which the company
believes provides additional information about the company's
ability to generate cash flows from its mining operations.
(3) RECONCILIATION OF ADJUSTED NET EARNINGS
New Gold 2012 Third Quarter
Consolidated - Adjusted Net Earnings Reconciliation |
|
|
Three months
ended |
|
Nine months
ended |
Figures in US$
millions, except per share amounts |
|
September 30, |
|
September 30, |
|
|
2012 |
2011 |
|
2012 |
2011 |
|
|
|
|
|
|
|
Net earnings |
|
17.8 |
40.7 |
|
75.1 |
144.0 |
Net earnings per share |
|
0.04 |
0.09 |
|
0.16 |
0.34 |
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on Redemption of Senior
Secured Notes |
|
- |
- |
|
31.8 |
- |
|
Gain on FVTPL financial
assets |
|
- |
- |
|
- |
(1.3) |
|
Ineffectiveness on hedging instruments |
|
(0.6) |
0.5 |
|
1.6 |
4.2 |
|
Fair value change of non-hedged
derivatives |
|
11.6 |
24.9 |
|
9.1 |
18.4 |
|
(Gain) Loss on foreign exchange |
|
3.7 |
(18.0) |
|
4.7 |
(20.0) |
|
Other |
|
0.9 |
0.3 |
|
2.5 |
2.3 |
|
Tax impact of adjustments |
|
9.2 |
1.1 |
|
8.7 |
(2.0) |
|
|
24.8 |
8.8 |
|
58.4 |
1.6 |
|
|
|
|
|
|
|
Adjusted net earnings |
|
42.6 |
49.5 |
|
133.5 |
145.6 |
Adjusted net
earnings per share |
|
0.09 |
0.11 |
|
0.29 |
0.34 |
CONDENSED CONSOLIDATED INCOME
STATEMENTS |
|
|
|
|
THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2012 |
|
|
|
|
(unaudited) |
|
|
|
|
|
Three months ended |
Nine months ended |
|
$ |
$ |
$ |
$ |
(In millions of U.S. dollars, except
per share amounts) |
2012 |
2011 |
2012 |
2011 |
|
|
|
|
|
|
|
|
|
|
Revenues |
195.5 |
175.5 |
540.4 |
518.3 |
Operating expenses |
88.8 |
83.6 |
239.1 |
225.2 |
Depreciation and depletion |
29.4 |
15.9 |
69.9 |
53.1 |
Earnings from mine operations |
77.3 |
76.0 |
231.4 |
240.0 |
|
|
|
|
|
Corporate administration |
3.2 |
6.2 |
16.2 |
17.4 |
Share-based payment expenses |
3.3 |
3.6 |
8.6 |
9.0 |
Exploration and business
development |
4.7 |
1.4 |
12.0 |
7.7 |
Income from operations |
66.1 |
64.8 |
194.6 |
205.9 |
|
|
|
|
|
|
Finance income |
0.2 |
1.0 |
1.0 |
2.9 |
|
Finance costs |
(2.3) |
(1.3) |
(4.9) |
(4.0) |
|
Other (losses) and gains |
(15.6) |
(7.6) |
(49.7) |
(3.6) |
|
|
|
|
|
Earnings before taxes |
48.4 |
56.9 |
141.0 |
201.2 |
Income tax expense |
(30.6) |
(16.2) |
(65.9) |
(57.2) |
|
|
|
|
|
Net earnings |
17.8 |
40.7 |
75.1 |
144.0 |
|
|
|
|
|
Earnings per share |
|
|
|
|
|
Basic |
0.04 |
0.09 |
0.16 |
0.34 |
|
Diluted |
0.03 |
0.09 |
0.16 |
0.33 |
|
|
|
|
|
Weighted average number of shares
outstanding (in millions) |
|
|
|
|
|
Basic |
462.2 |
450.1 |
461.8 |
422.1 |
|
Diluted |
468.8 |
456.5 |
473.6 |
433.8 |
CONDENSED CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION |
(unaudited) |
|
|
|
|
|
|
|
|
|
$ |
$ |
|
|
|
|
As at |
As at |
|
|
|
|
September 30 |
December 31 |
(In millions of U.S. dollars) |
|
|
|
2012 |
2011 |
|
|
|
|
|
|
Assets |
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
147.6 |
309.4 |
|
Trade and other receivables |
|
|
|
67.6 |
37.6 |
|
Inventories |
|
|
|
158.0 |
106.5 |
|
Prepaid expenses and other |
|
|
|
5.3 |
7.9 |
Total current assets |
|
|
|
378.5 |
461.4 |
|
|
|
|
|
|
Investments |
|
|
|
1.0 |
1.8 |
Non-current inventories |
|
|
|
28.0 |
20.3 |
Mining interests |
|
|
|
3,053.4 |
2,695.3 |
Deferred tax assets |
|
|
|
15.8 |
8.9 |
Non-current non-hedged derivative
asset |
|
|
|
- |
18.8 |
Reclamation deposits and other |
|
|
|
4.6 |
14.9 |
Total assets |
|
|
|
3,481.3 |
3,221.4 |
|
|
|
|
|
|
Liabilities and equity |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
|
|
|
122.4 |
100.4 |
|
Current tax liabilities |
|
|
|
10.5 |
20.5 |
|
Current derivative liabilities |
|
|
|
62.6 |
49.2 |
|
Current non-hedged derivative liabilities |
|
|
|
47.7 |
53.3 |
Total current liabilities |
|
|
|
243.2 |
223.4 |
|
|
|
|
|
|
Reclamation and closure cost
obligations |
|
|
|
53.3 |
50.7 |
Provisions |
|
|
|
12.8 |
12.6 |
Non-current derivative
liabilities |
|
|
|
74.8 |
92.4 |
Non-current non-hedged derivative
liabilities |
|
|
|
131.2 |
114.3 |
Long-term debt |
|
|
|
397.5 |
251.7 |
Deferred tax liabilities |
|
|
|
130.0 |
146.9 |
Deferred benefit |
|
|
|
46.3 |
46.3 |
Other |
|
|
|
0.6 |
0.7 |
Total liabilities |
|
|
|
1,089.7 |
939.0 |
|
|
|
|
|
|
Equity |
|
|
|
|
|
Common shares |
|
|
|
2,474.9 |
2,464.0 |
Contributed surplus |
|
|
|
83.8 |
80.4 |
Other reserves |
|
|
|
(66.6) |
(86.4) |
Deficit |
|
|
|
(100.5) |
(175.6) |
Total equity |
|
|
|
2,391.6 |
2,282.4 |
Total liabilities and equity |
|
|
|
3,481.3 |
3,221.4 |
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS |
|
|
|
THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2012 |
|
|
|
|
(unaudited) |
|
|
|
|
|
Three months ended |
Nine months ended |
|
$ |
$ |
$ |
$ |
(In millions of U.S. dollars) |
2012 |
2011 |
2012 |
2011 |
|
|
|
|
|
Operating activities |
|
|
|
|
|
Net earnings |
17.8 |
40.7 |
75.1 |
144.0 |
|
Adjustments for: |
|
|
|
|
|
|
Realized gains on gold contracts |
(2.5) |
(2.3) |
(7.3) |
(6.5) |
|
|
Realized and unrealized foreign exchange losses
(gains) |
3.7 |
(18.0) |
4.7 |
(20.0) |
|
|
Realized and unrealized gains on investments |
- |
- |
- |
(1.3) |
|
|
Realized and unrealized losses on non-hedged
derivatives |
11.6 |
24.9 |
9.1 |
18.4 |
|
|
Unrealized non-hedged derivative gains on
concentrate contracts |
(1.0) |
- |
(1.0) |
- |
|
|
Reclamation and closure costs paid |
(3.4) |
- |
(7.9) |
- |
|
|
Loss on redemption of senior secured notes |
- |
- |
31.8 |
- |
|
|
Loss on disposal of assets |
0.7 |
0.4 |
1.3 |
0.6 |
|
|
Depreciation and depletion |
29.4 |
15.8 |
69.5 |
52.6 |
|
|
Equity-settled share-based payment expense |
2.2 |
1.8 |
6.5 |
5.5 |
|
|
Unrealized (gain) loss on cash flow hedging
items |
(0.6) |
0.5 |
1.6 |
4.2 |
|
|
Income tax expense |
30.6 |
16.2 |
65.9 |
57.2 |
|
|
Finance income |
(0.2) |
(1.0) |
(1.0) |
(2.9) |
|
|
Finance costs |
2.3 |
1.3 |
4.9 |
4.0 |
|
90.6 |
80.3 |
253.2 |
255.8 |
|
Change in non-cash operating working
capital |
(23.5) |
12.7 |
(47.9) |
(15.0) |
Cash generated from operations |
67.1 |
93.0 |
205.3 |
240.8 |
|
Income taxes paid |
(20.4) |
(22.3) |
(75.7) |
(77.1) |
Net cash generated from
operations |
46.7 |
70.7 |
129.6 |
163.7 |
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
Mining interests |
(142.6) |
(112.0) |
(398.0) |
(255.1) |
|
|
Proceeds received from sale of pre-commercial
production inventory |
7.6 |
- |
7.6 |
- |
|
|
Purchase of additional Blackwater mining
claims |
- |
- |
(6.0) |
- |
|
|
Receipt of reclamation deposits |
- |
- |
8.9 |
8.1 |
|
|
Cash acquired in asset acquisition, net
transaction costs |
- |
- |
- |
18.6 |
|
|
Proceeds from sale of investments |
- |
- |
- |
8.9 |
|
|
Interest received |
0.2 |
1.0 |
0.8 |
2.5 |
|
|
Proceeds from disposal of assets |
- |
0.3 |
- |
0.5 |
Cash used in investing activities |
(134.8) |
(110.7) |
(386.7) |
(216.5) |
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Issuance of common shares on exercise of options
and warrants |
2.9 |
2.5 |
7.7 |
15.1 |
|
|
Redemption of senior secured notes |
- |
- |
(197.6) |
- |
|
|
Proceeds from issuance of senior notes |
- |
- |
300.0 |
- |
|
|
Financing initiation costs |
- |
- |
(8.0) |
- |
|
|
Interest paid |
- |
- |
(7.6) |
(11.4) |
Cash generated by financing
activities |
2.9 |
2.5 |
94.5 |
3.7 |
|
|
|
|
|
Effect of exchange rate changes on
cash and cash equivalents |
2.4 |
(19.7) |
0.8 |
(8.5) |
|
|
|
|
|
Decrease in cash and cash
equivalents |
(82.8) |
(57.2) |
(161.8) |
(57.6) |
Cash and cash equivalents, beginning
of period |
230.4 |
490.4 |
309.4 |
490.8 |
Cash and cash equivalents, end of
period |
147.6 |
433.2 |
147.6 |
433.2 |
|
|
|
|
|
Cash and cash equivalents are
comprised of: |
|
|
|
|
|
Cash |
48.2 |
267.5 |
48.2 |
267.5 |
|
Short-term money market
instruments |
99.4 |
165.7 |
99.4 |
165.7 |
|
147.6 |
433.2 |
147.6 |
433.2 |
SOURCE New Gold Inc.