(All dollar figures are in US dollars unless otherwise
indicated)
TORONTO, April 27, 2016 /CNW/ - New Gold Inc. ("New Gold")
(TSX:NGD) (NYSE MKT:NGD) today announces its 2016 first quarter
results and provides an update on the construction of the company's
Rainy River project.
2016 FIRST QUARTER HIGHLIGHTS
- Gold production of 90,811 ounces and copper production of 25.4
million pounds
- All-in sustaining costs(1) of $758 per ounce, including total cash
costs(2) of $354 per
ounce
- Cash generated from operations before changes in non-cash
operating working capital(3) of $62 million
- Cash generated from operations of $62
million
- Adjusted net loss(4) of $nil million, or $nil per
share
- Net earnings of $27 million, or
$0.05 per share
- Rainy River
construction 30% complete at March
31, 2016 with $82 million
in project capital expenditures during the quarter
- Construction currently 35% complete
- March 31, 2016 cash balance of
$298 million
"The year is off to a solid start," stated Randall Oliphant, Executive Chairman. "The
significant decrease in our all-in sustaining costs is particularly
rewarding as it enabled our company to generate a very robust
margin of $448 per ounce in the first
quarter."
"In addition, we entered into gold option contracts to increase
the certainty of our cash flows for the balance of 2016 as we
continue to focus on the development of our Rainy River project. We are well positioned
and look forward to an exciting year for our company," added Mr.
Oliphant.
2016 FIRST QUARTER OPERATIONAL RESULTS
New Gold's first quarter gold production of 90,811 ounces
remained in line with 2015 as slightly higher production from the
company's New Afton, Mesquite and Peak mines partially offset
planned lower production from Cerro San
Pedro. Quarterly copper production increased by 10% to 25.4
million pounds when compared to 2015 as a result of the continued
strong operating performance at New Afton stemming from the mine's
expanded grinding capacity. Silver production of 0.4 million ounces
remained consistent with 2015.
Consolidated first quarter all-in sustaining costs(1)
of $758 per ounce decreased by over
$270 per ounce relative to the first
quarter of 2015. The significant decrease in all-in sustaining
costs(1) relative to the prior-year quarter was
attributable to the combination of a $132 per ounce decrease in total cash
costs(2) to $354 per ounce
and a $124 per ounce, or $14 million, decrease in the company's
consolidated sustaining costs(1), which include New
Gold's cumulative sustaining capital, exploration, general and
administrative, and amortization of reclamation expenditures.
With the company's strong operational start to 2016, New Gold is
pleased to reiterate its guidance for full-year gold production of
360,000 to 400,000 ounces at all-in sustaining costs(1)
of $825 to $865 per ounce, including
total cash costs(2) of $435 to
$475 per ounce. Driven by expected increases in gold
production at Mesquite and the Peak Mines, consolidated quarterly
gold production should increase through the third quarter before
declining modestly in the fourth quarter.
NEW GOLD SUMMARY
OPERATIONAL RESULTS
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Three months ended
March 31
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2016
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2015
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GOLD PRODUCTION
(thousand ounces)
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New Afton
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25.1
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23.9
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Mesquite
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27.4
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25.7
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Peak Mines
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19.6
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19.4
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Cerro San
Pedro
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18.8
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26.0
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Total Gold
Production
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90.8
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95.0
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Total Gold Sales
(thousand ounces)
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86.0
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92.4
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Average Realized Gold
Price per ounce(5)
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$1,206
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$1,229
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COPPER PRODUCTION
(million pounds)
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New Afton
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22.4
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19.6
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Peak Mines
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3.0
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3.4
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Total Copper
Production
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25.4
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23.0
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Total Copper Sales
(million pounds)
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25.3
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22.1
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Average Realized
Copper Price per pound(5)
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$2.14
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$2.59
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SILVER PRODUCTION
(thousand ounces)
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New Afton
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68.6
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60.2
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Peak Mines
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28.8
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25.5
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Cerro San
Pedro
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272.9
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296.6
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Total Silver
Production
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370.3
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382.3
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Total Silver Sales
(thousand ounces)
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360.7
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332.7
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Average Realized
Silver Price per ounce(5)
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$14.72
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$16.65
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TOTAL CASH
COSTS(2) ($ per ounce)
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New Afton
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($641)
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($834)
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Mesquite
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626
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889
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Peak Mines
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780
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846
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Cerro San
Pedro
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934
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1,027
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Total Cash
Costs(2)
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$354
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$486
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All-IN SUSTAINING
COSTS(1) ($ per ounce)
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New Afton
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($268)
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($359)
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Mesquite
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1,101
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1,708
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Peak Mines
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1,024
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1,189
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Cerro San
Pedro
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952
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1,041
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All-in Sustaining
Costs(1)
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$758
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$1,014
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New Afton
Gold production at New Afton during the first quarter increased
by 5% to 25,068 ounces relative to the prior-year quarter. The
higher production was due to the combined benefit of a 14% increase
in mill throughput and a 2% increase in gold recovery to 82%, more
than offsetting a planned decrease in gold grade. As a result of
the successful completion of the mill expansion in mid-2015, New
Afton's average mill throughput during the first quarter was 15,250
tonnes per day.
At the same time, New Afton's quarterly copper production
increased by 14% to 22.4 million pounds when compared to the first
quarter of 2015. The mine's copper production similarly benefitted
from the higher mill throughput and a 3% increase in copper
recovery to 85%. Copper grade remained in line with the prior-year
quarter.
The slight increase in New Afton's all-in sustaining
costs(1) to ($268) per
ounce was attributable to the impact of lower by-product revenues
only being partially offset by the combined benefit of the
depreciation of the Canadian dollar relative to the U.S. dollar and
a decrease in sustaining costs(1). New Afton's first
quarter total cash costs(2) of ($641) per ounce were impacted by a $2 million, or $281
per ounce, decrease in by-product revenues relative to the
prior-year quarter as the benefit of higher copper sales volumes
was more than offset by the decrease in the realized
price(5). As a result of the depreciation of the
Canadian dollar relative to the U.S. dollar, the mine's operating
costs, including mining, processing and general and administrative
costs, decreased to $16.92 per tonne
in the first quarter relative to $17.71 per tonne in the prior-year quarter. New
Afton's quarterly sustaining costs(1) decreased by
$2 million to $9 million when compared to the first quarter of
2015.
New Afton's first quarter co-product cash costs(2) of
$487 per ounce of gold and
$0.87 per pound of copper decreased
when compared to $494 per ounce and
$1.01 per pound in the prior-year
quarter as a result of the increase in gold and copper production
and the depreciation of the Canadian dollar. The mine's first
quarter co-product all-in sustaining costs(1) of
$631 per ounce of gold and
$1.12 per pound of copper were also
below the prior-year quarterly costs of $667 per ounce and $1.37 per pound as costs further benefitted from
the decrease in sustaining costs(1).
Subsequent to the end of the first quarter, New Afton was the
proud recipient of the 2015 John T. Ryan Safety Trophy in the Metal
Mine category for British Columbia
and the Yukon which is awarded to
the metal mine in the region with the lowest reportable injury
rate.
Mesquite
Mesquite had a solid start to the year with first quarter gold
production increasing by 7% to 27,371 ounces. The increase in
production relative to 2015 was primarily attributable to a 250%
increase in ore tonnes placed on the leach pad as the focus in the
first quarter of 2015 was on waste stripping. The significant
increase in ore tonnes mined and placed in the first quarter is
expected to benefit Mesquite's gold production in future
quarters.
Mesquite's first quarter all-in sustaining costs(1)
of $1,101 per ounce and total cash
costs(2) of $626 per ounce
were both significantly below the prior-year quarter. The mine's
total cash costs(2) benefitted from the combination of
higher gold production and lower diesel prices. Further, Mesquite's
quarterly sustaining costs(1) decreased by $11 million, or $344 per ounce, to $12
million, which contributed to the $607 per ounce total decrease in all-in
sustaining costs(1) relative to the prior-year quarter.
Sustaining costs(1) in the first quarter included
$6 million for capitalized waste
stripping and $2 million related to
the leach pad expansion, both of which were well below the costs
associated with these initiatives in the first quarter of 2015. The
leach pad expansion was approximately 80% complete at the end of
the first quarter and is on schedule to be fully completed in the
third quarter of 2016.
Subsequent to the end of the first quarter, Mesquite achieved an
important safety milestone, completing 500 days without a lost time
incident.
Peak Mines
First quarter gold production at the Peak Mines of 19,596 ounces
remained consistent with 2015 as a 5% increase in gold grade offset
a decrease in tonnes mined and processed.
Quarterly copper production of 3.0 million pounds also remained
in line with 2015 as the impact of the decrease in tonnes processed
and a slight decrease in copper grade was largely offset by a 2%
increase in copper recovery.
All-in sustaining costs(1) at the Peak Mines
decreased by $165 per ounce to
$1,024 per ounce relative to the
prior-year quarter. The decrease in all-in sustaining
costs(1) was a result of a $66 per ounce decrease in total cash
costs(2) to $780 per ounce
coupled with a $3 million, or
$99 per ounce, decrease in sustaining
costs(1). The decrease in total cash costs(2)
was primarily attributable to the 9% depreciation of the Australian
dollar relative to the U.S. dollar. By-product revenues remained
consistent with the prior-year quarter as an increase in copper
sales volumes offset the decrease in the realized
price(5).
Cerro San Pedro
Cerro San Pedro's quarterly gold
production decreased to 18,776 ounces as planned. As the mine is in
its final months of active mining, the ore tonnes mined and placed
on the leach pad decreased by 47% relative to the prior-year
quarter while gold grade and recovery remained consistent.
At the same time, Cerro San
Pedro's first quarter silver production remained consistent
with 2015 at 0.3 million ounces.
Cerro San Pedro's first quarter
all-in sustaining costs(1) of $952 per ounce decreased by $89 per ounce relative to the prior-year quarter,
driven by a $93 per ounce decrease in
total cash costs(2) to $934 per ounce. The decrease in total cash
costs(2) was driven by a 38% decrease in operating costs
primarily related to a 53% decrease in total tonnes mined relative
to the first quarter of 2015. Consistent with the prior-year
quarter, Cerro San Pedro's quarterly
sustaining costs(1) were well below $1 million, or $18
per ounce.
"Our four operations are performing well and we continue to
evaluate and pursue opportunities to further enhance their
performance and increase cash flow," stated David Schummer, Executive Vice President and
Chief Operating Officer.
FINANCIAL RESULTS
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Three months ended
March 31
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(in millions of
U.S. dollars, except per share amounts)
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2016
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2015
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Revenues
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$154.5
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$168.9
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Operating
margin(6)
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72.6
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69.3
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Adjusted net
(loss)(4)
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nil
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(4.9)
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Adjusted net (loss)
per share(4)
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nil
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(0.01)
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Net
earnings/(loss)
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26.8
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(43.8)
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Net earnings/(loss)
per share
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0.05
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(0.09)
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Cash generated from
operations before changes in non-cash
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operating working
capital(3)
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62.1
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67.4
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Cash generated from
operations
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61.5
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69.8
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First quarter revenues of $155
million decreased by $14
million, or 9%, relative to 2015 due to lower realized metal
prices(5). When compared to the prior-year quarter, the
increase in copper sales volumes of 3.2 million pounds offset the
revenue impact of the decrease in gold sales of 6,367 ounces.
Relative to the first quarter of 2015, the average realized
price(5) decreased by $23
per ounce of gold, or 2%, $0.45 per
pound of copper, or 17%, and $1.93
per ounce of silver, or 12%.
Despite lower metal prices, New Gold's first quarter operating
margin(6) increased by $4
million, or 5%, relative to 2015 as the $18 million decrease in the company's quarterly
operating expenses more than offset the lower revenues. The
decrease in operating expenses was attributable to the combined
benefit of the depreciation of the Canadian and Australian dollars
relative to the U.S. dollar as well as the company's ongoing cash
flow optimization initiatives.
New Gold had an adjusted net loss(4) of $nil million,
or $nil per share, in the first quarter of 2016 relative to an
adjusted net loss(4) of $5
million, or $0.01 per share,
in the prior-year quarter. The $5
million change relative to the first quarter of 2015 was
primarily attributable to the increase in operating
margin(6) noted above as a $6
million decrease in finance costs was offset by a
$3 million increase in depreciation
and depletion expense and higher exploration and business
development expenses. The decrease in finance costs was driven by a
greater portion of the company's interest expense being capitalized
against Rainy River.
The company reported net earnings of $27
million, or $0.05 per share,
in the first quarter relative to a net loss of $44 million, or $0.09 per share, in the first quarter of 2015.
The significant change in net earnings was primarily due to
non-cash foreign exchange movements where the first quarter
included a $34 million pre-tax
foreign exchange gain while the prior-year quarter included a
$36 million pre-tax foreign exchange
loss.
New Gold's first quarter cash generated from operations before
changes in non-cash operating working capital(3) was
$62 million. As the decrease in
operating expenses more than offset the impact of lower realized
commodity prices(5), the $5
million decrease in cash generated from operations before
changes in non-cash operating working capital(3)
relative to the first quarter of 2015 was primarily a result of the
prior-year quarter benefitting from net tax refunds of $7 million while the first quarter of 2016 was
cash tax neutral. The company's cash generated from operations in
the first quarter was also $62
million as changes in non-cash operating working capital
were negligible during the quarter.
FINANCIAL UPDATE
New Gold's cash and cash equivalents at March 31, 2016 were $298
million. The company also has a $300
million revolving credit facility, of which $122 million has been used as at March 31, 2016 to issue letters of credit, with
the balance remaining undrawn. In addition, as part of the
company's July 2015 streaming
transaction with RGLD Gold AG, a wholly-owned subsidiary of Royal
Gold Inc. ("Royal Gold"), the remaining $75
million of the stream deposit is to be paid to New Gold when
60% of the estimated Rainy River
project development capital has been spent, which is expected to be
in mid-2016, and other customary conditions precedent have been
met.
During the first quarter, New Gold announced that it had entered
into gold price option contracts. 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 the nine-month period
from April through December 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 for 270,000 ounces of the
company's remaining 2016 gold production. New Gold entered into the
contracts to increase cash flow certainty as the company invests in
the continued construction of its Rainy
River project.
At March 31, 2016, the face value
of the company's long-term debt was $800
million (book value – $788
million). The components of the debt include: $300 million of 7.00% face value senior unsecured
notes due in April 2020 and
$500 million of 6.25% face value
senior unsecured notes due in November
2022. The company currently has approximately 510 million
shares outstanding.
"We took two proactive steps to further solidify our financial
flexibility in the first quarter," stated Brian Penny, Executive Vice President and Chief
Financial Officer. "In February, we amended our revolving credit
facility to increase the maximum leverage ratio for the four
quarter-end measurement periods beginning September 30, 2016 and in March, we entered into
the gold option contracts. The combined financial impact of these
two initiatives together with our current cash balance and the
stream receivable from Royal Gold
leaves us well positioned to finance the construction of
Rainy River."
PROJECTS UPDATE
RAINY RIVER
Development activity at New Gold's Rainy River project, located in northwestern
Ontario, continued to advance
during the first quarter. The focus of the 2016 development
activities is on the construction of the processing facilities and
supporting infrastructure as well as the initial stripping of the
open pit. Key construction activities include: installation of
mechanical, piping, electrical and instrumentation, completion of
the power line, completion of the water management ponds, and
commencement of construction of the tailings dam.
RAINY RIVER – 2016 FIRST
QUARTER PROJECT UPDATES
- Overall construction progress is currently 35%
complete
- Plant site earthworks over 90% complete
- Concrete placement over 50% complete
- Grinding building fully enclosed with steel erection in
progress on process building
- Installation of mechanical, piping, electrical and
instrumentation in grinding building began in April
- Power line construction is 85% complete
- Construction of water and tailings management facilities
impacted by ground conditions
- Assembly of initial mine fleet complete
- Material moved for mine development on target
- No Lost Time Incidents since New Gold acquired the project in
2013
The construction of the process facilities and the
pre-production mining activities are both advancing well. The
grinding building is fully enclosed and the team is positioned to
commence installation of the mechanical, piping, electrical and
instrumentation equipment, with the first mill shell scheduled to
be installed later in the second quarter. Construction of the
process building is also progressing with the final structural
steel truss ready to be installed. In the first quarter, the mine
operations team moved approximately 2.4 million tonnes of waste and
overburden at costs 9% below budget. The team continues to increase
the mining rate with a project-to-date record set in April of
approximately 65,000 tonnes moved in one day.
During the course of the construction of the water management
facility, New Gold identified discrete areas where the strength of
the foundation is less than was estimated for the original designs.
Based on the analysis completed to date, which includes the results
of additional geotechnical drilling, the company's remediation plan
is expected to include the addition of rock toe buttresses at the
base of the water management berms where required. New Gold further
extended its supplemental geotechnical drilling with a focus on the
foundations of the tailings management facility. Based on the
results received to date, one section of the starter dam, which
represents approximately 30% of the initial structure, is expected
to be redesigned to incorporate flatter slope angles and wick
drains. The planned improvements to the design of the water and
tailings management facilities require amendments to existing
permits. The company expects to apply for the amendment for the
water management facility in early May and the amendment for the
tailings management facility early in the third quarter,
and continue construction on the facilities immediately after
receiving the respective approvals.
As construction of the processing facilities and other
components of the project remains ongoing and on schedule, and
based on the expected adjustments to the permitting and
construction schedule for the water and tailings management
facilities, the company continues to target first production at
Rainy River in mid-2017. New Gold
estimates the additional costs associated with the improvements to
the facilities to total approximately $35
million, with the balance of the project costs remaining
consistent with the $877 million
estimate outlined at New Gold's February
2016 Investor Day.
Project capital expenditures at Rainy
River during the first quarter totalled $82 million, bringing the total project
development capital spending through March
31, 2016 to $394 million. As
the company plans to spend approximately $500 million on the development of Rainy River in 2016, spending in the remaining
three quarters of the year is expected to be higher than in the
first quarter.
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,
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
advancing the Rainy River project and providing further updates on
its development.
BLACKWATER
The company's Blackwater project, located in south-central
British Columbia, is expected to
produce an average of 485,000 ounces of gold per year at below
industry average costs. The current focus at Blackwater is
attaining the approval of the Environmental Assessment ("EA"). The
coordinated Federal and Provincial EA technical review is in
progress. Technical review comments have now been received from the
Federal government, Provincial agencies and the company's
Indigenous partners, and New Gold is in the process of responding
to the review comments. At the same time, during the first quarter,
New Gold responded to comments received as part of the public
comment period, which was initiated in January 2016. The company continues to anticipate
approval of the Blackwater EA by early 2017.
Capital expenditures at Blackwater during the first quarter were
$2 million.
In the current commodity price environment, New Gold plans to
sequence the development of its projects with the near-term focus
being on the advancement of the lower capital cost Rainy River project. Thereafter, the timing of
Blackwater's development will be driven by prevailing market
conditions.
EL MORRO – 4% GOLD STREAM
As part of New Gold's 2015 sale of its 30% interest in the El
Morro property to Goldcorp Inc. ("Goldcorp"), the company retained
a 4% stream on future gold production from El Morro. As at the end
of 2015, 4% of the El Morro mineral reserves represented 357,000
ounces of gold. For a detailed breakdown of mineral reserves by
category, as well as key assumptions, parameters and risks, refer
to New Gold's Annual Information Form for the year ended
December 31, 2015 filed on
www.sedar.com.
The El Morro property forms part of Goldcorp and Teck Resources
Limited's Project Corridor in Chile ("Corridor"). The current focus at
Corridor is the completion of various trade-off studies which is
expected to be followed by the commencement of a pre-feasibility
study as well as Environmental Impact Assessment baseline
studies.
EXPLORATION UPDATE
New Gold's exploration efforts during the first quarter were
centered on New Afton and the Peak Mines. At New Afton, the primary
objective of the company's 2016 program is to test the potential to
extend the C-zone mineralization laterally to the west, and the
first phase of this drilling is nearing completion. At the Peak
Mines, New Gold is drill testing multiple targets. Drilling
campaigns directed at the Chronos and Anjea zones, which were
discovered in 2015, are focused on resource delineation. At the
same time, the company is completing reconnaissance drill testing
of earlier stage targets along the nine-kilometre Peak Mines
corridor. New Gold expects to provide a more detailed update on its
exploration initiatives, including drill results, in mid-2016.
New Gold's first quarter exploration expenditures totalled
$4 million, of which $3 million was included in the company's
consolidated all-in sustaining costs(1) with the balance
associated with the New Afton C-zone growth project.
WEBCAST AND CONFERENCE CALL
A webcast and conference call to discuss these results will be
held on Thursday, April 28, 2016
beginning at 9:00 a.m. Eastern time.
Participants may participate via webcast by registering on our
website at www.newgold.com. You may also listen to the conference
call by calling toll free 1-888-231-8191, or 1-647-427-7450 outside
of the U.S. and Canada. A recorded
playback of the conference call will be available until
May 28, 2016 by calling toll free
1-855-859-2056, or 1-416-849-0833 outside of the U.S. and
Canada, passcode 76409286. An
archived webcast will also be available until July 28, 2016 at www.newgold.com.
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, total cash costs and all-in sustaining costs, and the
factors contributing to those expected results, as well as expected
capital and other expenditures; planned activities for 2016 and
beyond at the Company's projects, as well as planned exploration
activities and expenses; the expected production, costs, economics
and operating parameters of the Rainy River project; targeting
timing for development and other activities related to the Rainy
River project; expected sequencing for the Blackwater 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
and Blackwater projects 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 outlooks 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, New Afton C-zone and Blackwater
projects; 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 exploration or reclamation
activities; uncertainties inherent to mining economic studies
including the feasibility studies for the Rainy River, New Afton
C-zone and Blackwater projects; the uncertainty with respect to
prevailing market conditions necessary for a positive development
decision at Blackwater; 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,
including those associated with the environmental assessment
process for Blackwater. 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, 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, 2015
filed on www.sedar.com.
NON-GAAP MEASURES
(1) ALL-IN SUSTAINING COSTS AND 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.
"Sustaining costs" is a non-GAAP financial measure. New Gold
defines sustaining costs as the difference between all-in
sustaining costs and total cash costs, being the sum of 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.
Management uses sustaining costs to understand the aggregate net
result of the drivers of all-in sustaining costs other than total
cash costs. The line items between cash costs and all in
sustaining costs in the tables below break down the components of
sustaining costs. Sustaining costs is intended to provide
additional information only and does not have any 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.
(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 below and in the MD&A
accompanying New Gold's financial statements filed from time to
time on www.sedar.com.
TOTAL CASH COSTS
AND ALL-IN SUSTAINING COSTS RECONCILIATION
|
|
|
|
|
|
|
Three months ended
March 31
|
(in millions of
U.S. dollars, unless otherwise noted)
|
2016
|
2015
|
|
|
|
Operating expenses
from continuing operations
|
$81.9
|
$99.6
|
Treatment and
refining charges on concentrate sales
|
8.6
|
7.4
|
Adjustments
|
(0.8)
|
0.7
|
Total cash costs
before by-product revenue
|
89.7
|
107.7
|
By-product copper and
silver sales
|
(59.4)
|
(62.8)
|
Total cash costs net
of by-product revenue
|
30.3
|
44.9
|
Gold ounces
sold
|
86,031
|
92,398
|
Total cash costs per
gold ounce sold ($/ounce)
|
$354
|
$486
|
Total cash costs per
gold ounce sold on a co-product basis ($/ounce)
|
$641
|
$729
|
Total cash costs net
of by-product revenue
|
30.3
|
44.9
|
Sustaining capital
expenditure
|
22.4
|
39.2
|
Sustaining
exploration - expensed & capitalized
|
2.2
|
0.6
|
Corporate G&A
including share-based compensation
|
8.7
|
8.0
|
Reclamation
expenses
|
1.3
|
1.0
|
Total all-in
sustaining costs
|
64.9
|
93.7
|
All-in sustaining
costs per gold ounce sold ($/ounce)
|
$758
|
$1,014
|
All-in sustaining
costs per gold ounce sold on a co-product basis
($/ounce)
|
$898
|
$1,069
|
(3) CASH GENERATED FROM OPERATIONS BEFORE CHANGES IN WORKING
CAPITAL
"Cash generated from operations before changes in working capital"
is a non-GAAP financial measures with no standard meaning under
IFRS, which exclude changes in non-cash operating working capital.
Management uses this measure to evaluate the Company's ability to
generate cash from its operations before temporary working capital
changes.
CASH GENERATED
FROM OPERATIONS BEFORE CHANGES IN WORKING CAPITAL
RECONCILIATION
|
|
|
|
|
Three months ended
March 31
|
(in millions of
U.S. dollars)
|
2016
|
2015
|
|
|
|
Cash generated from
operations
|
$61.5
|
$69.8
|
|
Add back (deduct):
Change in non-cash operating working capital
|
0.6
|
(2.4)
|
Cash generated from
operations before changes in non-cash working capital
|
62.1
|
67.4
|
(4) ADJUSTED NET (LOSS)/EARNINGS
"Adjusted net (loss)/earnings" and "adjusted net (loss)/earnings
per share" are non-GAAP financial measures. Net (loss)/earnings
have been adjusted and tax affected for the group of costs in
"Other gains and losses" on the condensed consolidated income
statement. The adjusted entries are also impacted for tax to the
extent that the underlying entries are impacted for tax in the
unadjusted net (loss)/earnings from continuing operations. The
company uses this measure for its own internal purposes.
Management's internal budgets and forecasts and public guidance do
not reflect fair value changes on senior notes and non-hedged
derivatives, foreign currency translation and fair value through
profit or loss and financial asset gains/losses.
Consequently, the presentation of adjusted net earnings and
adjusted net earnings per share enables investors and analysts to
better understand the underlying operating performance of our core
mining business through the eyes of management. Management
periodically evaluates the components of adjusted net earnings and
adjusted net earnings per share based on an internal assessment of
performance measures that are useful for evaluating the operating
performance of our business and a review of the non-GAAP measures
used by mining industry analysts and other mining companies.
Adjusted net (loss)/earnings and adjusted net (loss)/earnings per
share are intended to provide additional information only and do
not have any standardized meaning under IFRS and may not be
comparable to similar measures presented by other companies. They
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS. The
measures are not necessarily indicative of operating profit or cash
flows from operations as determined under IFRS.
ADJUSTED NET
EARNINGS RECONCILIATION
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31
|
(in millions of
U.S. dollars, except per share amounts)
|
|
|
2016
|
2015
|
|
|
|
|
|
Net earnings (loss)
before taxes
|
|
|
$21.1
|
($37.0)
|
|
Other (gains)
losses
|
|
|
(21.6)
|
31.4
|
|
Inventory
write-down
|
|
|
0.7
|
--
|
Adjusted net earnings
(loss) before tax
|
|
|
0.2
|
(5.6)
|
|
Income tax recovery
(expense)
|
|
|
5.7
|
(6.8)
|
|
Income tax
adjustments
|
|
|
(6.2)
|
7.5
|
Adjusted income tax
expense
|
|
|
(0.5)
|
0.7
|
Adjusted net earnings
(loss)
|
|
|
nil
|
(4.9)
|
Adjusted earnings
(loss) per share (basic)
|
|
|
nil
|
(0.01)
|
Adjusted effective
tax rate
|
|
|
250%
|
13%
|
(5) AVERAGE REALIZED PRICE
"Average realized price per ounce or pound sold" is a non-GAAP
financial measure with no standard meaning under IFRS. Management
uses this measure to better understand the price realized in each
reporting period for gold, silver, and copper sales. Average
realized price includes realized gains and losses from gold hedge
settlements up until May 15, 2013 but
excludes from revenues unrealized gains and losses on non-hedged
derivative contracts and the revenue reduction related to the
non-cash accounting charge as the loss incurred on the monetization
of the company's legacy hedge position is realized into income over
the original term of the hedge contract. Average realized price is
intended to provide additional information only and does not have
any standardized definition under IFRS; it should not be considered
in isolation or as a substitute for measures of performance
prepared in accordance with IFRS. Other companies may calculate
this measure differently and this measure is unlikely to be
comparable to similar measures presented by other companies.
(6) OPERATING MARGIN
"Operating margin" 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 contribution to net earnings before
non-cash depreciation and depletion charges.
OPERATING MARGIN
RECONCILIATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31
|
(in millions of
U.S. dollars)
|
|
|
|
|
|
2016
|
2015
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
$154.5
|
$168.9
|
Less: Operating
expenses
|
|
|
|
|
|
(81.9)
|
(99.6)
|
Operating
margin
|
|
|
|
|
|
72.6
|
69.3
|
CONDENSED
CONSOLIDATED INCOME STATEMENTS (unaudited)
|
|
|
|
|
|
|
Three months ended
March
|
(in millions of
U.S. dollars, except per share amounts)
|
|
2016
|
2015
|
Revenues
|
|
154.5
|
168.9
|
Operating
expenses
|
|
81.9
|
99.6
|
Depreciation and
depletion
|
|
57.6
|
55.1
|
Earnings from mine
operations
|
|
15.0
|
14.2
|
|
|
|
|
Corporate
administration
|
|
5.7
|
6.0
|
Share-based payment
expenses
|
|
3.0
|
2.1
|
Exploration and
business development
|
|
2.5
|
1.1
|
(Loss) earning from
operations
|
|
3.8
|
5.0
|
|
|
|
|
Finance
income
|
|
0.3
|
0.2
|
Finance
costs
|
|
(4.6)
|
(10.8)
|
Other
(losses)
|
|
21.6
|
(31.4)
|
|
|
|
|
Earnings (loss)
before taxes
|
|
21.1
|
(37.0)
|
Income tax recovery
(expense)
|
|
5.7
|
(6.8)
|
Net earnings
(loss)
|
|
26.8
|
(43.8)
|
|
|
|
|
Earnings (loss) per
share
|
|
|
|
Basic
|
|
0.05
|
(0.09)
|
Diluted
|
|
0.05
|
(0.09)
|
|
|
|
|
Weighted average
number of shares outstanding (in millions)
|
|
|
|
Basic
|
|
509.6
|
508.6
|
Diluted
|
|
510.7
|
508.6
|
CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
As at March
31
|
|
As at December
31
|
(in millions of
U.S. dollars)
|
|
|
|
2016
|
|
2015
|
ASSETS
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
298.3
|
|
335.5
|
Trade and other
receivables
|
|
|
|
99.0
|
|
109.0
|
Inventories
|
|
|
|
160.1
|
|
145.9
|
Current income tax
receivable
|
|
|
|
16.0
|
|
19.2
|
Prepaid expenses and
other
|
|
|
|
9.5
|
|
5.0
|
Total current
assets
|
|
|
|
582.9
|
|
614.6
|
|
|
|
|
|
|
|
Non-current
inventories
|
|
|
|
114.4
|
|
115.4
|
Mining
interests
|
|
|
|
2,868.2
|
|
2,803.2
|
Deferred tax
assets
|
|
|
|
166.9
|
|
138.9
|
Other
|
|
|
|
3.2
|
|
3.4
|
Total
assets
|
|
|
|
3,735.6
|
|
3,675.5
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Trade and other
payables
|
|
|
|
155.9
|
|
141.1
|
Current income tax
payable
|
|
|
|
3.3
|
|
6.2
|
Total current
liabilities
|
|
|
|
159.2
|
|
147.3
|
|
|
|
|
|
|
|
Reclamation and
closure cost obligations
|
|
|
|
71.4
|
|
67.5
|
Provisions
|
|
|
|
11.4
|
|
9.2
|
Gold Stream
Obligation
|
|
|
|
169.5
|
|
147.6
|
Derivative
liabilities
|
|
|
|
2.4
|
|
2.1
|
Long-term
debt
|
|
|
|
788.0
|
|
787.6
|
Deferred tax
liabilities
|
|
|
|
400.0
|
|
414.4
|
Other
|
|
|
|
0.2
|
|
0.2
|
Total
liabilities
|
|
|
|
1,602.1
|
|
1,575.9
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Common
shares
|
|
|
|
2,842.9
|
|
2,841.0
|
Contributed
surplus
|
|
|
|
103.4
|
|
102.3
|
Other
reserves
|
|
|
|
6.7
|
|
2.6
|
Deficit
|
|
|
|
(819.5)
|
|
(846.3)
|
Total
equity
|
|
|
|
2,133.5
|
|
2,099.6
|
Total liabilities
and equity
|
|
|
|
3,735.6
|
|
3,675.5
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)
|
|
|
|
|
|
Three months ended
March
|
(in millions of
U.S. dollars)
|
2016
|
2015
|
OPERATING
ACTIVITIES
|
|
|
Net loss
|
26.8
|
(43.8)
|
Adjustments
for:
|
|
|
Foreign exchange
(gains) losses
|
(33.9)
|
36.0
|
Reclamation and
closure costs paid
|
(0.9)
|
(0.1)
|
Depreciation and
depletion
|
57.7
|
55.1
|
Other non-cash
adjustments
|
(1.2)
|
(4.6)
|
Income tax (recovery)
expense
|
(5.7)
|
6.8
|
Finance
income
|
(0.3)
|
(0.2)
|
Finance
costs
|
4.6
|
10.8
|
Unrealized
(gain)/loss on gold stream liability
|
15.1
|
-
|
|
62.2
|
60.0
|
Change in non-cash
operating working capital
|
(0.6)
|
2.4
|
Income taxes refunded
(paid)
|
(0.1)
|
7.4
|
Cash generated from
operations
|
61.5
|
69.8
|
INVESTING
ACTIVITIES
|
|
|
Mining
interests
|
(107.4)
|
(69.2)
|
Government grant
received
|
-
|
0.2
|
Proceeds from the
sale of assets
|
0.5
|
0.2
|
Gold
price contract investment costs
|
(2.1)
|
-
|
Interest
received
|
0.3
|
-
|
Cash used in
investing activities
|
(108.7)
|
(68.8)
|
|
|
|
FINANCING
ACTIVITY
|
|
|
Proceeds received
from exercise of options
|
0.8
|
0.1
|
Financing initiation
costs
|
(0.3)
|
-
|
Interest
paid
|
(0.8)
|
-
|
Cash generated from
financing activities
|
(0.3)
|
0.1
|
EFFECT OF EXCHANGE
RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
10.3
|
(5.8)
|
|
|
|
Change in cash and
cash equivalents
|
(37.2)
|
(4.7)
|
Cash and cash
equivalents, beginning of period
|
335.5
|
370.5
|
Cash and cash
equivalents, end of period
|
298.3
|
365.8
|
|
|
|
Cash and cash
equivalents are comprised of:
|
|
|
Cash
|
214.4
|
247.4
|
Short-term money
market instruments
|
83.9
|
118.4
|
|
298.3
|
365.8
|
SOURCE New Gold Inc.