(All dollar figures are in US dollars unless otherwise
indicated)
TORONTO, March 8, 2016 /PRNewswire/ - New Gold Inc.
("New Gold") (TSX:NGD) (NYSE MKT:NGD) today announces that the
company has entered into gold price option contracts covering
270,000 ounces of New Gold's remaining 2016 production. New Gold
purchased put options with a strike price of $1,200 per ounce covering 270,000 ounces of gold
and simultaneously sold call options with a strike price of
$1,400 per ounce covering an
equivalent 270,000 ounces. The contracts will cover 30,000 ounces
of gold per month for nine months beginning in April 2016. The net cost of entering into the
option contracts was $2 million. In
aggregate, the option contracts provide the company a guaranteed
floor price of $1,200 per ounce while
also providing exposure to further increases in the gold price up
to $1,400 per ounce. New Gold entered
into the contracts in order to further increase cash flow certainty
as the company invests in the continued construction of its
Rainy River project, which is
expected to begin production in mid-2017.
"We continue to have a positive view on the gold market. Given
the meaningful increase in the gold price, we are taking a prudent
step to establish a floor price for our revenues through the
balance of 2016 while maintaining significant exposure to higher
prices," stated Brian Penny,
Executive Vice President and Chief Financial Officer. "Our unique
decision to enter into the option contracts is solely a function of
2016 being our most significant year of investment at our
Rainy River project. We do not
have any plans to enter into any similar contracts beyond this
brief nine-month period."
New Gold's 2016 gold production guidance is 360,000 to 400,000
ounces at all-in sustaining costs(1) of $825 to $865 per ounce. Based on the mid-point of
New Gold's 2016 all-in sustaining costs(1) of
$845 per ounce, the gold option
contracts should enable the company to generate an all-in
sustaining cost margin(2) ranging from approximately
$355 per ounce on the low end to
$555 per ounce on the high end for
the 270,000 ounces covered by the contracts. The combination of the
company's expected low costs and increased gold price certainty
provides New Gold with further assurance of free cash flow from its
four operations for the balance of 2016. New Gold plans to fund the
remaining development capital expenditures at its Rainy River project from a combination of
current cash, a $75 million cash
receivable from Royal Gold related
to the previously announced Rainy
River streaming transaction and free cash flow. In addition,
the company has further financial flexibility through its revolving
credit facility. The company expects to spend a total of
approximately $500 million at
Rainy River in 2016 with the
balance of the development capital of approximately $90 million to be spent in the first half of
2017.
Overall, the Rainy River project enhances New Gold's growth
pipeline through its manageable capital costs, significant
production scale at below current industry average costs and
exciting longer term exploration potential in a great mining
jurisdiction. Rainy River is
expected to generate significant gold production growth for New
Gold at costs below the company's 2016 guidance for all-in
sustaining costs(1). 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
for the first nine years of its life at estimated all-in sustaining
costs(1) of approximately $670 per ounce. The company looks forward to
advancing the Rainy River project and providing further updates on
our progress.
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, all-in
sustaining costs and margin, as well as expected capital and other
expenditures; expected cash flows, funding plans and liquidity;
planned activities for 2016 and beyond at the Rainy River project;
the expected production, costs, economics and operating parameters
of the Rainy River project; targeting timing for development, first
production and other activities related to the Rainy River project;
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, or may in the future
operate, 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, Australian dollar, Mexican peso 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 First
Nations and other Aboriginal 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) in the
case of all-in sustaining cost outlook at the Rainy River Project,
the assumed exchange rate being C$1.25/US$; and (11) conditions to the payment of
the remaining $75 million from
Royal Gold being satisfied
mid-2016.
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, the United States, Australia and Mexico; 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 in Canada,
the United States, Australia and Mexico 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 in
which New Gold operates, including, but not limited to: in
Canada, obtaining the necessary
permits for the Rainy River project; and in Mexico, where Cerro
San Pedro has a history of ongoing legal challenges related
to our environmental authorization; 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 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
reclamation activities; uncertainties inherent to mining economic
studies including the feasibility study for Rainy River; 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 First Nations and other
Aboriginal 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.
TECHNICAL INFORMATION
The scientific and technical
information in this news release has been reviewed and approved by
Mark A. Petersen, Vice President,
Exploration of New Gold. Mr. Petersen is a SME Registered Member,
an AIPG Certified Professional Geologist and a "Qualified Person"
as defined under National Instrument 43-101.
For additional technical information on New Gold's material
properties, including a detailed breakdown of Mineral Reserves and
Mineral Resources by category, as well as key assumptions,
parameters and risks, refer to New Gold's Annual Information Form
for the year ended December 31,
2014.
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 below and
in the MD&A accompanying New Gold's financial statements filed
from time to time on www.sedar.com.
(2) ALL-IN SUSTAINING COST MARGIN
"All-in sustaining cost margin" per ounce is a non-GAAP financial
measure with no standard meaning under IFRS, which management uses
to evaluate the Company's aggregated and mine-by-mine approximate
contribution to cash flow after deducting sustaining capital
expenditures.
SOURCE New Gold Inc.