(All dollar figures are in US dollars unless otherwise
indicated)
TORONTO, Jan. 30, 2017 /CNW/ - New Gold Inc. ("New Gold")
(TSX:NGD) (NYSE MKT:NGD) today announces its 2016 fourth quarter
and full-year operating results, an update on its Rainy River project and 2017 guidance. The
preliminary figures provided for 2016 fourth quarter and full-year
production, sales, operating expense, total cash costs, all-in
sustaining costs and other financial information are approximate
and may differ slightly from the final results in the 2016 annual
audited consolidated financial statements and management's
discussion and analysis.
2016 HIGHLIGHTS
- Full-year gold production of 381,663 ounces achieved the
mid-point of the guidance range of 360,000 to 400,000 ounces
- Copper production of 102 million pounds exceeded the high end
of the guidance range of 81 to 93 million pounds by 10%
- 2016 operating expense of $640
per gold ounce and $1.14 per copper
pound
- 2016 delivered record low all-in sustaining costs(1)
of $692 per ounce, including total
cash costs(2) of $349 per
ounce
- All-in sustaining costs were well below the mid-2016 updated
guidance range of $750 to $790 per
ounce, which had been lowered by $75
per ounce relative to the original 2016 guidance
- Fourth quarter production of 95,883 ounces of gold and 26
million pounds of copper
- Fourth quarter operating expense of $780 per gold ounce and $1.58 per copper pound
- Fourth quarter all-in sustaining costs of $619 per ounce, including total cash costs of
$360 per ounce
- Year-end cash and cash equivalents of $186 million
2017 GUIDANCE
- Gold production to increase to 380,000 to 430,000 ounces,
benefitting from targeted first production at Rainy River in September
- Copper production to remain consistent at 100 to 110 million
pounds
- Operating expense of $630 to $670
per gold ounce and $1.25 to $1.45 per
copper pound
- All-in sustaining costs of $825 to
$865 per ounce, including total cash costs of $395 to $435 per ounce
- Rainy River targeted first
production in September, approximately three months later than
previous estimate
- Three-month delay due to slower than planned ramp-up of mining
rates impacting delivery of construction materials
- Commercial production expected November
1, 2017
- Rainy River estimated
remaining capital to achieve November commercial production of
$515 million, inclusive of
$40 million of contingency
BOARD AND MANAGEMENT CHANGES
- Randall Oliphant to step down as
Executive Chairman, continuing as a member of the Board
- Ian Pearce, a member of the
Board, to become non-executive Chair of the Board
- Hannes Portmann, currently
President, to become President and Chief Executive Officer
- Rainy River leadership team
further strengthened
"We are proud of our very strong 2016 operational results, and
despite challenges faced at Rainy
River in 2016, we are positioned to complete the
construction later this year," stated Randall Oliphant. "We have further strengthened
the Rainy River leadership team, and today we have announced a
change in leadership at the company."
Newly-appointed Chair of the Board Ian Pearce has over 25 years
of experience in the mining industry. Mr. Pearce was with
Fluor Inc. for ten years, in progressively more senior engineering
and project management roles, including managing numerous
significant development projects in the extractive sector. From
2003 to 2006, Mr. Pearce held executive roles at Falconbridge
Limited, including Chief Operating Officer, and he served as Chief
Executive Officer of Xstrata Nickel, a subsidiary of Xstrata plc,
from 2006 to 2013.
"As a significant New Gold shareholder, I couldn't be more
confident in the combination of Ian, with his mine operations and
project development experience, and Hannes, with his leadership,
energy and deep understanding of the value drivers of our
business," added Mr. Oliphant. "They have all of my support and I
look forward to continuing to serve as a Board member and working
with the entire New Gold team as we evaluate strategic
opportunities to fulfill our collective goal of creating long-term
shareholder value."
"I am delighted to be moving into the role of Chair and working
with Hannes and the team to deliver Rainy
River and continue to build a great intermediate gold mining
business," stated Ian Pearce. "On
behalf of our Board and entire company, I thank Randall for all he
has done in leading New Gold over the last eight years and look
forward to working with him as a fellow Board member."
"Randall has been a leader in the gold mining industry for many
years. As a founder of New Gold, I thank Randall for his dedication
and significant contributions to the company. I am pleased that he
will continue to participate as a Board member and share his
strategic advice with the next generation of leadership at the
company," stated Pierre Lassonde, a
former director and continuing large shareholder of New Gold.
PRELIMINARY 2016 CONSOLIDATED OPERATIONAL RESULTS
|
|
Three months ended
December 31
|
Year ended December
31
|
|
2016
|
2015
|
2016
|
2015
|
Operating
information
|
|
|
|
|
Gold
(ounces):
|
|
|
|
|
|
Produced
|
95,883
|
131,719
|
381,663
|
435,718
|
|
Sold
|
93,936
|
133,005
|
378,239
|
428,852
|
Copper (millions of
pounds):
|
|
|
|
|
|
Produced
|
25.6
|
28.8
|
102.3
|
99.9
|
|
Sold
|
24.6
|
25.5
|
99.2
|
92.9
|
Silver (millions of
ounces):
|
|
|
|
|
|
Produced
|
0.3
|
0.5
|
1.3
|
1.9
|
|
Sold
|
0.3
|
0.5
|
1.3
|
1.8
|
Revenue:
|
|
|
|
|
|
Gold
($/ounce)
|
1,176
|
1,067
|
1,219
|
1,120
|
|
Copper
($/pound)
|
2.22
|
1.96
|
2.03
|
2.21
|
|
Silver
($/ounce)
|
16.19
|
14.10
|
16.68
|
15.12
|
Average realized
price(3):
|
|
|
|
|
|
Gold
($/ounce)
|
1,211
|
1,094
|
1,255
|
1,149
|
|
Copper
($/pound)
|
2.45
|
2.16
|
2.23
|
2.42
|
|
Silver
($/ounce)
|
16.80
|
14.44
|
17.15
|
15.38
|
Operating
expense:
|
|
|
|
|
|
Gold
($/ounce)
|
780
|
614
|
640
|
647
|
|
Copper
($/pound)
|
1.58
|
1.21
|
1.14
|
1.36
|
|
Silver
($/ounce)
|
10.82
|
8.10
|
8.75
|
8.66
|
Total cash costs
($/ounce)(2)
|
360
|
389
|
349
|
443
|
All-in sustaining
costs ($/ounce)(1)
|
619
|
613
|
692
|
809
|
The company has included new revenue and cost disclosures,
namely, revenue and operating expense per ounce and per pound.
Revenue per ounce and per pound is net of treatment and refining
charges, whereas average realized price is before treatment and
refining charges are taken into account. Operating expense per
ounce and pound apportions the company's operating expense, as
shown on New Gold's consolidated income statement, to each metal on
a percentage of revenue basis.
The fourth quarter of 2016 delivered gold production of 95,883
ounces, resulting in full-year gold production of 381,663 ounces.
The combination of the Peak Mines' very strong year and solid
operating performances at New Afton and Cerro San Pedro enabled the
company to achieve the mid-point of its guidance range of 360,000
to 400,000 ounces. Full-year production was lower than 2015
primarily due to Cerro San Pedro's planned transition to residual
leaching in mid-2016.
New Gold's fourth quarter copper production of 26 million pounds
was consistent with the first three quarters of 2016 and slightly
below the prior-year quarter. Full-year copper production of 102
million pounds was in line with prior-year production and 10% above
the high end of the company's 2016 guidance range of 81 to 93
million pounds. Full-year silver production of 1.3 million ounces
was below the guidance range of 1.6 to 1.8 million ounces.
Operating expense per gold ounce during the fourth quarter
increased relative to the prior-year quarter primarily due to a
heap leach inventory write-down of $24
million at Cerro San Pedro. Operating expense per gold ounce
for the full year was in line with the prior year.
The company delivered fourth quarter all-in sustaining costs of
$619 per ounce, including total cash
costs of $360 per ounce, which was
the lowest cost quarter of the year and consistent with the
prior-year quarter. The company's strong fourth quarter performance
reduced New Gold's 2016 all-in sustaining costs to a record low
$692 per ounce, including total cash
costs of $349 per ounce. The
significant decrease in costs enabled New Gold to generate an
all-in sustaining cost margin of $563
per ounce, or 45%. The $117 per ounce
decrease in all-in sustaining costs relative to the prior year was
attributable to the combination of a $94 per ounce decrease in total cash costs,
primarily driven by significantly lower costs at the Peak Mines,
and a $27 million, or $23 per ounce, decrease in the company's
consolidated sustaining costs. Consolidated sustaining costs
include New Gold's consolidated sustaining capital, exploration,
general and administrative, and amortization of reclamation
expenditures.
As indicated in New Gold's 2016 second quarter results news
release, the company's original full-year guidance for consolidated
total cash costs and all-in sustaining costs was lowered by
$75 per ounce to $360 to $400 per ounce and $750 to $790 per ounce, respectively. The
company's full-year costs ultimately came in below the reduced cost
guidance. This was due to the positive impact of higher copper
production, lower sustaining costs and higher realized copper and
silver prices only being partially offset by the appreciation of
exchange rates relative to what was assumed when setting
guidance.
New Afton
|
|
|
|
Three months ended
December 31
|
Year ended December
31
|
|
2016
|
2015
|
2016
|
2015
|
Gold
(ounces):
|
|
|
|
|
|
Produced
|
23,879
|
30,231
|
98,098
|
105,487
|
|
Sold
|
24,171
|
28,473
|
96,851
|
99,458
|
Copper (millions of
pounds):
|
|
|
|
|
|
Produced
|
21.4
|
25.1
|
87.3
|
86.0
|
|
Sold
|
21.1
|
22.2
|
84.9
|
79.7
|
Operating
expenses:
|
|
|
|
|
|
Gold
($/ounce)
|
415
|
344
|
415
|
364
|
|
Copper
($/pound)
|
0.84
|
0.68
|
0.74
|
0.76
|
Total cash costs
($/ounce)
|
(720)
|
(614)
|
(634)
|
(724)
|
All-in sustaining
costs ($/ounce)
|
(253)
|
(340)
|
(218)
|
(242)
|
All-in sustaining
costs on a co-product basis:
|
|
|
|
|
|
Gold
($/ounce)
|
691
|
539
|
686
|
642
|
|
Copper
($/pound)
|
1.41
|
1.07
|
1.22
|
1.34
|
The decrease in gold production at New Afton relative to the
fourth quarter of 2015 was due to an expected decrease in gold
grade and gold recovery, partially offset by an increase in mill
throughput. New Afton's average mill throughput during the quarter
was over 17,000 tonnes per day. Copper production was also lower
than the prior-year quarter due to a decrease in copper grade and
recovery.
Fourth quarter operating expenses increased when compared to the
prior-year quarter due to higher costs associated with mining and
processing more ore tonnes. Quarterly total cash costs decreased by
$106 per ounce due to an increase in
by-product revenues relative to the prior-year quarter, which was
only partially offset by increased operating expenses. All-in
sustaining costs increased due to a $3
million, or $193 per ounce,
increase in sustaining costs, which was only partially offset by
the decrease in total cash costs.
2016 full-year gold production decreased by 7% relative to the
prior year as a planned increase in mill throughput was offset by
an expected decrease in gold grade. Gold recovery remained in line
with the prior year, despite the lower gold grade and increased
throughput, as a result of the company's successful completion of
the mill expansion project in mid-2015. New Afton's full-year gold
production achieved the high end of its guidance range of 90,000 to
100,000 ounces.
2016 full-year copper production was consistent with the prior
year. Similar to gold production, the higher mill throughput offset
a slight decrease in copper grade, while copper recovery remained
consistent with 2015. New Afton's full-year copper production
exceeded the high end of its guidance range of 75 to 85 million
pounds.
Operating expenses increased in 2016 due to higher costs
associated with mining and processing additional ore tonnes. Total
cash costs increased by $90 per ounce
due to a $3 million, or $30 per ounce, decrease in by-product revenues
resulting from lower copper prices, coupled with increased
operating expenses. All-in sustaining costs remained in line with
the prior year as the increase in total cash costs was largely
offset by an $8 million, or
$66 per ounce, decrease in sustaining
costs.
New Afton's 2016 full-year costs were approximately $330 per ounce below the guidance ranges of
($335) to ($295) per ounce for total
cash costs and $95 to $135 per ounce
for all-in sustaining costs. The $330
per ounce decrease in costs relative to guidance was due to the
combined benefit of copper production being above the high end of
the guidance range and the realized copper price being above the
guidance assumption, which was only partially offset by the
appreciation of the Canadian dollar relative to the assumption used
when setting guidance.
New Afton's 2016 co-product cash costs of $526 per gold ounce and $0.94 per copper pound met the guidance ranges of
$505 to $545 per gold ounce and
$0.90 to $1.05 per copper pound.
Co-product all-in sustaining costs also achieved their guidance
ranges of $660 to $700 per gold ounce
and $1.20 to $1.35 per copper
pound.
Mesquite
|
|
|
|
Three months ended
December 31
|
Year ended December
31
|
|
2016
|
2015
|
2016
|
2015
|
Gold
(ounces):
|
|
|
|
|
|
Produced
|
39,353
|
43,389
|
111,123
|
134,868
|
|
Sold
|
38,366
|
44,474
|
113,843
|
133,712
|
Operating
expenses:
|
|
|
|
|
|
Gold
($/ounce)
|
660
|
621
|
628
|
734
|
Total cash costs
($/ounce)
|
670
|
631
|
638
|
743
|
All-in sustaining
costs ($/ounce)
|
771
|
869
|
979
|
1,156
|
As expected, Mesquite's fourth quarter was the mine's strongest
quarter of the year. Fourth quarter production benefitted from
higher tonnes placed on the leach pad, which was offset by lower
grade material being mined relative to the prior-year quarter.
Fourth quarter operating expenses were in line with the
prior-year quarter. Operating expense per ounce and total cash
costs increased relative to the prior-year quarter due to lower
gold sales volumes. Fourth quarter all-in sustaining costs
decreased due to a $7 million, or
$137 per ounce, decrease in
sustaining costs, which was only partially offset by the slight
increase in total cash costs.
Despite Mesquite's strong fourth quarter, 2016 production
decreased by 18% relative to the prior year primarily due to the
lower recoveries associated with the transition material that was
mined in 2016. Consistent with the company's previously disclosed
expectations, Mesquite's full-year production came in below the low
end of its 2016 guidance range of 130,000 to 140,000 ounces.
2016 full-year operating expenses and total cash costs decreased
due to lower diesel prices, the company's business improvement
initiatives and a higher portion of mining costs being capitalized
to leach pad inventory. All-in sustaining costs decreased relative
to 2015 due to a $16 million, or
$72 per ounce, decrease in sustaining
costs, resulting from lower capitalized stripping and the decrease
in total cash costs.
Mesquite's 2016 total cash costs were slightly above the
guidance range of $590 to $630 per
ounce due to lower gold sales volumes. 2016 all-in sustaining costs
were below the guidance range of $1,015 to
$1,055 per ounce, resulting from lower capitalized
stripping.
Peak Mines
|
|
|
|
Three months ended
December 31
|
Year ended December
31
|
|
2016
|
2015
|
2016
|
2015
|
Gold
(ounces):
|
|
|
|
|
|
Produced
|
18,587
|
34,798
|
107,449
|
89,852
|
|
Sold
|
18,049
|
34,690
|
103,396
|
89,265
|
Copper (millions of
pounds):
|
|
|
|
|
|
Produced
|
4.2
|
3.7
|
15.0
|
14.0
|
|
Sold
|
3.5
|
3.3
|
14.3
|
13.2
|
Operating
expenses:
|
|
|
|
|
|
Gold
($/ounce)
|
815
|
591
|
695
|
830
|
|
Copper
($/pound)
|
1.62
|
1.14
|
1.20
|
1.77
|
Total cash costs
($/ounce)
|
662
|
552
|
590
|
791
|
All-in sustaining
costs ($/ounce)
|
742
|
706
|
736
|
1,071
|
Fourth quarter production decreased relative to the prior-year
quarter, which benefitted from the mining and processing of
significantly higher gold grade material. Quarterly copper
production increased by 13% when compared to the fourth quarter of
2015 due to higher copper grade.
Fourth quarter operating expenses were in line with the
prior-year quarter. Operating expense per ounce and total cash
costs increased compared to the prior-year quarter primarily due to
lower gold sales volumes. All-in sustaining costs increased during
the quarter as the increase in total cash costs was only partially
offset by a $4 million, or
$64 per ounce, decrease in sustaining
costs.
In 2016, Peak Mines had a strong year both operationally and
financially. Full-year gold production was 20% higher than 2015 and
the mine's 2016 guidance range of 80,000 to 90,000 ounces. The
increase in production relative to 2015 was due to higher gold
grade and increased productivity realized through business
improvement initiatives which led to higher throughput. Peak Mines'
2016 copper production was also above the prior year and almost
double the mine's 2016 guidance range of 6 to 8 million pounds due
to the combined benefit of higher throughput, copper grade and
recovery.
Full-year operating expenses decreased due to lower total tonnes
mined as 2015 included higher than normal waste mining stemming
from the seismic challenges encountered at depth. Total cash costs
decreased relative to 2015 due to the lower operating expenses and
higher gold sales volumes. All-in sustaining costs decreased
substantially due to the combined benefit of lower total cash
costs, coupled with a $10 million, or
$134 per ounce, decrease in
sustaining costs.
Peak Mines' 2016 costs were well below the guidance ranges of
$800 to $840 per ounce for total cash
costs and $1,020 to $1,060 per ounce
for all-in sustaining costs. Full-year costs were lower due to the
mine's strong operating performance, as well as the realized copper
price being above the guidance assumption, the benefits of which
were only partially offset by the appreciation of the Australian
dollar relative to the assumption used when setting guidance.
Cerro San Pedro
|
|
|
|
Three months ended
December 31
|
Year ended December
31
|
|
2016
|
2015
|
2016
|
2015
|
Gold
(ounces):
|
|
|
|
|
|
Produced
|
14,064
|
23,302
|
64,993
|
105,512
|
|
Sold
|
13,351
|
25,368
|
64,149
|
106,417
|
Silver (millions of
ounces):
|
|
|
|
|
|
Produced
|
0.2
|
0.4
|
0.9
|
1.5
|
|
Sold
|
0.2
|
0.4
|
0.9
|
1.5
|
Operating
expense:
|
|
|
|
|
|
Gold
($/ounce)
|
2,585
|
1,283
|
1,311
|
991
|
|
Silver
($/pound)
|
35.87
|
17.03
|
17.68
|
13.38
|
Total cash costs
($/ounce)
|
1,014
|
868
|
933
|
865
|
All-in sustaining
costs ($/ounce)
|
1,045
|
883
|
959
|
879
|
As previously announced, Cerro San Pedro finished active mining
late in the second quarter of 2016 and has now transitioned into
residual leaching. As a result, and consistent with expectations,
the mine's fourth quarter gold and silver production decreased
compared to the prior year.
Fourth quarter operating expenses decreased when compared to the
prior-year quarter as the mine transitioned into residual leaching.
However, operating expense per gold and silver ounce increased
significantly as a $24 million heap
leach inventory write-down was included when calculating the
operating expense per ounce. The inventory write-down increased the
quarterly operating expense by $1,528
per gold ounce and $21.20 per silver
ounce. Total cash costs increased due to lower gold sales volumes
and lower by-product revenues. All-in sustaining costs were higher
during the quarter primarily due to the increase in total cash
costs.
2016 full-year gold production achieved the mid-point of the
guidance range of 60,000 to 70,000 ounces while silver production
was below the guidance range of 1.3 to 1.5 million ounces.
2016 full-year operating expenses decreased as Cerro San Pedro
mined and processed less ore. Similar to the fourth quarter,
operating expense per gold and silver ounce increased as a result
of the fourth quarter heap leach inventory write-down. Consistent
with the fourth quarter, total cash costs and all-in sustaining
costs increased due to lower gold sales volumes and lower
by-product revenues.
Cerro San Pedro's 2016 costs were above their respective
guidance ranges of $755 to $795 per
ounce for total cash costs and $765 to
$805 per ounce for all-in sustaining costs primarily due to
lower by-product revenues.
PROJECTS UPDATE
RAINY
RIVER
Development activities at New Gold's Rainy River project, located in northwestern
Ontario, continue to advance and
the project is scheduled to transition from construction to
operation in the third quarter of 2017.
RAINY RIVER – KEY
HIGHLIGHTS
- First production scheduled for September
2017
- Commercial production (60% of 21,000 tonne per day design
capacity) targeted for November 1,
2017
- Estimated 2017 development capital through November commercial
production of $515 million, inclusive
of $40 million of contingency
- Approximately 24 million tonnes of overburden and waste
stripping completed to date
- Mining rate in January 2017
averaged approximately 100,000 tonnes per day
- Installation of mechanical, piping, electrical and
instrumentation in processing facilities currently over 60%
complete
- Staged commissioning of processing facilities scheduled to
commence with primary crusher in March
2017
- Dry and wet commissioning of full process facility scheduled
for August 2017
- 2017 gold production guidance – 50,000 to 60,000 ounces,
including pre-commercial production of approximately 15,000
ounces
- 2017 cost guidance – operating expense of $905 to $945 per gold ounce and all-in sustaining
costs of $1,200 to $1,240 per
ounce
Personnel Changes
As a result of the development challenges encountered at
Rainy River last year, the company
has made several personnel changes to further strengthen the team
as the project advances through the final stages of development and
transitions into operation later this year.
In addition to Ray Threlkeld's
active involvement in the project as Interim Chief Operating
Officer, New Gold has moved Greg
Bowkett, who was previously the General Manager at the Peak
Mines, into the General Manager role at Rainy River. Mr. Bowkett has been with New
Gold since 2012. Under his leadership, the Peak Mines delivered
progressively stronger operating results, culminating in 2016 when
the mine had its best operating year in over ten years. Also, New
Gold has engaged Pierre Légaré as the Project Director for the
balance of construction at Rainy
River. Mr. Légaré has over 30 years of experience in project
development, including over 20 years in increasingly senior roles
at SNC-Lavalin Inc., culminating in his role as Vice President,
Projects, Mining and Metallurgy from 2011 to 2013. Since 2013, he
has continued to provide project management services to mining and
other large scale construction projects through his consulting
company. Peter Marshall, Vice
President of Projects for New Gold, will be leaving his position at
the end of February, though he will remain with New Gold as a
consultant on a part-time basis through a transition period. New
Gold expects to permanently fill Mr. Marshall's role in the coming
months.
Mining and Construction
The team completed a thorough review of the project's mining and
construction plans in January and expects to have all construction
activities required for start-up completed in September. The
targeted September completion is approximately three months behind
the company's original target. The delay is primarily a result of
the impact of the slower than planned ramp-up of the mining rate
which has extended the time required for construction materials, in
the form of waste rock and clay, to be delivered from the mine to
the construction team. Approximately 24 million tonnes of
overburden and waste have been mined from the open pit through late
January, and the mining rate has increased to an average of
approximately 100,000 tonnes per day. The September start-up is
based on an expectation that the mining rate will continue to
increase to an average of approximately 120,000 tonnes per day over
the next seven months, which includes both planned productivity
gains and the impact of changing weather conditions through the
spring. New Gold will supplement its own fleet with contractors who
will mine discrete areas where mining can be performed more
efficiently using smaller equipment.
Processing Facilities
All of the key structural components of the process facilities
have been completed and the setting of mechanical equipment and
installation of piping, electrical and instrumentation services is
well advanced. New Gold plans to complete the testing of the
various components of the process facility using a staged approach,
after which the company will complete dry and wet commissioning of
the full process circuit.
The primary crusher and conveyor system are 80% complete and
commissioning of the crusher is scheduled to commence in March of
2017. Thereafter, the commissioning of the ball and SAG mills
should start during the second quarter. Finally, the refining
portion of the circuit should be completed and ready to begin
commissioning early in the third quarter. Dry and wet commissioning
of the full process circuit is scheduled to take place in August,
which should leave approximately one month before targeted first
production for any required adjustments to the circuit.
Based on the mine plan, the company will begin to stockpile a
small amount of low grade ore in the first half of 2017, which will
be used during the commissioning of the mill. At the time of the
targeted September mill start-up, New Gold expects to have
approximately 0.5 million tonnes of ore stockpiled, which is
equivalent to approximately 20 days of mill feed at the design
capacity of 21,000 tonnes per day.
Permitting
After receiving approval to commence construction of the
redesigned tailings management facility from the Ontario Ministry
of Natural Resources and Forestry ("MNRF") in mid-November 2016, the company has remained in
regular communication with the MNRF as it relates to their review
of other operational permits and permit amendments appropriate for
the project's current stage of activity.
The company also continues to work closely with Environment and
Climate Change Canada towards obtaining an amendment to Schedule 2
of the Metal Mining Effluent Regulations, required to close two
small creeks and deposit tailings, which is targeted to be received
in the third quarter of 2017. However, as previously disclosed, New
Gold's redesign of the tailings management facility incorporated a
starter tailings cell within the broader facility that does not
require a Schedule 2 amendment from the Federal government. The
inclusion of a starter cell is an approach that has been used at
other Canadian mining operations. Based on its location and scale,
the starter cell would provide capacity for approximately six
months of tailings. Once the Schedule 2 amendment is received, New
Gold would need approximately three months, in good construction
weather, to complete construction of the tailings dam. In the event
the Schedule 2 amendment is not received on a sufficiently timely
basis to allow for the completion of the construction of the
broader tailings facility before the starter cell is full, the
company would have to consider other alternatives, which may
include a slowdown or temporary suspension of operations.
2017 Production and Cost Guidance
Based on the company's targeted September production start, New
Gold expects total 2017 production at Rainy River to be 50,000 to 60,000 ounces.
Approximately 15,000 ounces are planned for the pre-commercial
production period with revenue for this production being credited
against the development capital estimate.
Over Rainy River's targeted two
months of commercial production in 2017, the operating expense is
expected to be $905 to $945 per gold
ounce with all-in sustaining costs expected to be $1,200 to $1,240 per ounce. Both the operating
expense and all-in sustaining costs are well above the levels
targeted once Rainy River reaches
full capacity. The 2017 costs are negatively impacted by lower gold
sales resulting from the combination of throughput being lower than
design during commissioning and ramp-up and planned lower grade to
be processed during the commissioning phase. In addition, there is
approximately $12 million, or
$305 per ounce, of sustaining costs
budgeted during the commercial production period.
Capital Expenditures
Project spending at Rainy River
during the fourth quarter totalled $146
million, bringing 2016 full-year capital spending at the
project to $465 million. The total
Rainy River project development
capital spending through the end of 2016 was $777 million.
Based on a C$1.30/US$ exchange
rate, the remaining capital cost from the beginning of 2017 to the
targeted November commercial production is estimated to be
approximately $515 million, inclusive
of $40 million of contingency.
Consistent with the project's historical month-end accounts payable
balances, it is expected that approximately $50 to $75 million of the $515 million will be payable after commercial
production is achieved.
The estimated 2017 capital cost through commercial production,
including contingency, is approximately $195
million higher than New Gold's previous estimate. The key
driver of this increase is the slower than planned ramp-up in
mining rates, resulting in a three-month delay in commercial
production relative to the company's original target. As a
result of the delay, approximately $40
million of mining and site general and administrative costs
that would have previously been scheduled to be incurred during the
operating period, are now shifted into the capital period. Further,
as New Gold has opened up the pit, the company has identified
specific areas where there are layers of peat and basal till that
can be more efficiently mined using smaller equipment. As such, and
in order to help support the targeted increase in mining
productivity going forward, the company plans to hire contractors
to complete this work as well as the mining of a small outcrop to
source additional construction rock at a total incremental cost of
approximately $40 million. The
temporary construction camp will also be required for an additional
three months at a total cost of approximately $5 million. The balance of the increase in
capital expenditures is attributable to additional earthworks and
incremental costs associated with the completion of the processing
facilities. The incremental cost for earthworks is approximately
$35 million and includes additional
construction costs required for final completion of the water
management pond, the tailings starter cell and the mine rock pond
as well as incremental costs associated with pit dewatering. The
estimated cost to complete and commission the process facilities
has increased by $35 million,
primarily as a result of the extended schedule. In addition, the
company has included $40 million of
contingency for the balance of the Rainy River development.
Though the Rainy River construction has presented challenges,
New Gold continues to look forward to the expected growth in the
company's production and cash flow once Rainy River transitions into operation later
this year. Rainy River has
multiple important asset qualities including its great
jurisdiction, significant annual production potential, long
estimated reserve life and continued exploration potential.
"With a new leadership team on site at Rainy River and a comprehensive review of the
project's remaining construction schedule and commissioning plan
completed, we are committed to delivering on our updated plan at
Rainy River," stated Hannes Portmann, President and Chief Executive
Officer.
FINANCIAL UPDATE
New Gold's 2016 year-end cash and cash equivalents were
$186 million. During the fourth
quarter, the company received the remaining $75 million of the stream deposit from RGLD Gold
AG, a wholly-owned subsidiary of Royal Gold Inc. ("Royal Gold") and
drew $100 million from its
$400 million revolving credit
facility. At December 31, 2016, an
additional $122 million of the
facility was used to issue letters of credit for closure
obligations at the company's producing mines and development
projects, leaving $178 million
remaining undrawn.
In 2016, New Gold entered into gold price option contracts
covering 120,000 ounces of its first half 2017 production, with put
options at a strike price of $1,300
per ounce and call options at a strike price of $1,400 per ounce. The company has also fixed the
price for 31.7 million pounds of the company's first half 2017
copper production at $2.52 per pound.
These two initiatives increase the company's cash flow certainty
during a portion of the remaining Rainy
River development period. In total, the company has
$364 million of available liquidity
(cash plus undrawn credit facility) plus its expected free cash
flow generation from its operating mines in 2017.
New Gold's most significant capital expenditures for 2017 will
be at the Rainy River project. The $195 million increase in capital costs will
negatively impact the company's liquidity. Based on prevailing spot
prices of gold and copper (taking into account the gold price
option contracts and fixed price copper contracts referred to
above) and exchange rates as of the date of this news release,
management believes that New Gold has approximately a $100 million shortfall in the liquidity and
capital resources required to pay for the company's normal
operating requirements and complete the construction of
Rainy River and bring it to
commercial production on the current schedule. Depending on
market conditions, New Gold intends to implement one or more
financing alternatives, which could include the sale of non-core
assets, such as the stream on El Morro, the sale of a stream on
production from the company's operations or projects, subordinated
debt or equity financing or other similar measures, to address the
shortfall and provide additional working capital and financial
flexibility.
At the end of 2016, the face value of the company's long-term
debt was $900 million (book value –
$890 million). The components of the
long-term debt include: $300 million
of 7.00% face value senior unsecured notes due in April of 2020,
$500 million of 6.25% face value
senior unsecured notes due in November of 2022 and $100 million drawn from the revolving credit
facility. The company currently has approximately 514 million
shares outstanding.
Preliminary unaudited cash generated from operations was
approximately $280 million for the
year ended December 31, 2016, and
approximately $50 million for the
three months ended December 31, 2016.
Preliminary unaudited cash generated from operations before changes
in non-cash working capital was approximately $300 million for the year ended December 31, 2016, and approximately $70 million for the three months ended
December 31, 2016. The working
capital difference was primarily due to an outstanding concentrate
receivable of approximately $20
million that was collected in January
2017.
In 2014, New Gold exchanged its 30% holding of the Rio Figueroa
property in Chile to Antofagasta
PLC for a 3% net smelter royalty (NSR). At December 31, 2016, the company recorded an
impairment charge of $6 million on
the Rio Figueroa 3% NSR asset.
2017 GUIDANCE
Going forward, New Gold's asset by asset cost guidance will
include operating expense per gold ounce, operating expense per
copper pound and all-in sustaining costs. Operating expense per
ounce and pound apportions the company's operating expense, as
shown on New Gold's consolidated income statement, to each metal on
a percentage of revenue basis. New Gold will continue to provide
total cash cost guidance on a consolidated basis, but not at the
asset level.
|
|
|
|
|
|
|
Gold
Production
|
Copper
Production
|
Operating
Expense
|
Operating
Expense
|
All-in Sustaining
Costs
|
|
(thousand
ounces)
|
(million
pounds)
|
($ per gold
ounce)
|
($ per copper
pound)
|
($ per gold
ounce)
|
|
|
|
|
|
|
Rainy
River(1)
|
50 - 60
|
--
|
$905 -
$945
|
--
|
$1,200 -
$1,240
|
New Afton
|
70 - 80
|
85 - 95
|
$405 -
$445
|
$0.80 -
$1.00
|
($280) -
($240)
|
Mesquite
|
140 - 150
|
--
|
$675 -
$715
|
--
|
$805 -
$845
|
Peak Mines
|
85 -
95
|
~15
|
$780 -
$820
|
$1.55 -
$1.75
|
$1,060 -
$1,100
|
Cerro San
Pedro
|
35 -
45
|
--
|
$1,080 -
$1,120
|
--
|
$1,090 -
$1,130
|
New Gold
Consolidated
|
380 -
430
|
100 -
110
|
$630 -
$670
|
$1.25 -
$1.45
|
$825 -
$865
|
Note: Estimated
consolidated silver production in 2017 approximately 1.1 million
ounces.
|
(1) Rainy River gold
production guidance includes pre-commercial production of
approximately 15,000 ounces. Rainy River operating
expense
|
per gold ounce and
all-in sustaining costs calculated based on commercial production
ounces.
|
CONSOLIDATED PRODUCTION AND COSTS
New Gold's 2017 consolidated gold production is expected to
increase relative to the prior year due to the planned September
start-up of Rainy River.
Consolidated gold production from New Afton, Mesquite and the Peak
Mines should remain in line with 2016 production levels, however,
production at Cerro San Pedro is scheduled to decrease as the mine
enters its first full year of residual leaching. Copper production
is expected to increase slightly at New Afton due to higher copper
grades, while copper production from the Peak Mines is expected to
be in line with 2016. Consolidated silver production is scheduled
to remain in line with the prior year at approximately 1.1 million
ounces.
Consistent with previous years, New Gold's 2017 full-year gold
production is not scheduled to be evenly distributed across the
four quarters. Consolidated gold production is expected to build
steadily throughout the year with the fourth quarter benefitting
from the start-up of Rainy
River.
New Gold's by-product pricing assumptions for 2017 of
$2.50 per copper pound and
$16.00 per silver ounce are both
approximately 5% below current spot prices. The 2017 assumptions
for the Canadian dollar, Australian dollar and Mexican peso
exchange rates of $1.30, $1.35 and $20.00 to
the U.S. dollar, are in line with spot exchange rates.
The company's 2017 operating expense will increase due to the
advancement of Rainy River into
production, however, operating expense per gold ounce and operating
expense per copper pound should both remain in line with 2016.
Consolidated total cash costs for the year are expected to
increase by approximately $65 per
ounce to $395 to $435 per ounce as a
result of higher gross operating costs attributable to the start-up
of Rainy River, partially offset
by higher by-product revenues. New Gold's 2017 all-in sustaining
costs are expected to increase by approximately $150 per ounce when compared to the $692 per ounce delivered in 2016. 2017 sustaining
costs, including sustaining capital, exploration, general and
administrative and amortization or reclamation expenditures, are
expected to increase by approximately $35
million relative to the prior year with the increase in
sustaining capital expenditures from the start-up of Rainy River, and increased underground
development costs at New Afton and Peak Mines, partially offset by
lower capital expenditures at Mesquite.
New Gold 2017 All-In Sustaining Costs Key
Sensitivities
Sensitivities to silver price and the Mexican peso are not shown
as the sensitivities are limited.
|
|
|
|
Category
|
Copper
Price
|
CDN/USD
|
AUD/USD
|
Base
Assumption
|
$2.50
|
$1.30
|
$1.35
|
Sensitivity
|
+/-$0.25
|
+/-$0.05
|
+/-$0.05
|
COST PER OUNCE
IMPACT
|
|
|
|
Rainy
River
|
--
|
+/-$45
|
--
|
New Afton
|
+/-$185
|
+/-$80
|
--
|
Mesquite
|
--
|
--
|
--
|
Peak Mines
|
+/-$40
|
--
|
+/-$50
|
New Gold
Total
|
+/-$45
|
+/-$20
|
+/-$10
|
New Afton
|
|
|
|
2016
Actuals
|
2017
Guidance
|
Gold
(ounces)
|
98,098
|
70,000 -
80,000
|
Copper (millions of
pounds)
|
87.3
|
85 - 95
|
Operating
expenses:
|
|
|
|
Gold
($/ounce)
|
415
|
405 - 445
|
|
Copper
($/pound)
|
0.74
|
0.80 -
1.00
|
All-in sustaining
costs ($/ounce)
|
(218)
|
(280) -
(240)
|
Capital expenditures
(sustaining capital) ($mm)
|
38
|
55
|
Capital expenditures
(growth capital) ($mm)
|
3
|
5
|
Gold production at New Afton should decrease relative to 2016
due to an expected decrease in gold grade and recovery. The mine is
expected to operate at similar throughput levels to 2016. Copper
production should remain in line with 2016.
New Afton's 2017 operating expenses should remain in line with
2016, while all-in sustaining costs are targeted to remain among
the lowest in the industry. The decrease in all-in sustaining costs
is due to an increase in by-product revenues of approximately
$35 million, or $460 per ounce, resulting from the 2017 copper
price assumption being higher than the 2016 realized price. This is
partially offset by an increase in sustaining costs of
approximately $17 million, or
$225 per ounce, mainly attributable
to increased mine development of the B3 zone.
Mesquite
|
|
|
|
2016
Actuals
|
2017
Guidance
|
Gold
(ounces)
|
111,123
|
140,000 -
150,000
|
Operating
expenses:
|
|
|
|
Gold
($/ounce)
|
628
|
675 - 715
|
All-in sustaining
costs ($/ounce)
|
979
|
805 - 845
|
Capital expenditures
(sustaining capital) ($mm)
|
36
|
20
|
As planned, production at Mesquite is expected to increase
relative to 2016 with gold grade increasing towards reserve grade
and recoveries improving as mining has moved away from the
transition zones encountered in 2016.
2017 operating expenses are expected to increase relative to
2016 due to the combination of higher tonnes processed and no waste
stripping being capitalized. Mesquite's 2017 all-in sustaining
costs are targeted to decrease due to a planned $16 million, or $110 per ounce, decrease in sustaining costs
related to lower waste stripping being capitalized as well as
higher gold sales volumes.
Peak Mines
|
|
|
|
2016
Actuals
|
2017
Guidance
|
Gold
(ounces)
|
107,449
|
85,000 -
95,000
|
Copper (millions of
pounds)
|
15.0
|
~15.0
|
Operating
expenses:
|
|
|
|
Gold
($/ounce)
|
695
|
780 - 820
|
|
Copper
($/pound)
|
1.20
|
1.55 -
1.75
|
All-in sustaining
costs ($/ounce)
|
736
|
1,060 -
1,100
|
Capital expenditures
(sustaining capital) ($mm)
|
11
|
30
|
Capital expenditures
(growth capital) ($mm)
|
--
|
10
|
Gold production at the Peak Mines should decrease and remain
closer to historical levels due to lower throughput and gold
grades. Copper production is expected to remain in line with
2016.
2017 operating expenses are expected to increase as a result of
higher tonnes mined. All-in sustaining costs are targeted to
increase relative to 2016 due to higher sustaining costs, related
to increased underground development, and lower gold sales volumes,
partially offset by higher by-product revenues resulting from the
2017 copper price assumption being higher than the 2016 realized
price. Approximately $10 million in
growth capital has been budgeted for underground infrastructure
related to the future development of Great Cobar.
Cerro San Pedro
|
|
|
|
2016
Actuals
|
2017
Guidance
|
Gold
(ounces)
|
64,993
|
35,000 -
45,000
|
Operating
expenses:
|
|
|
|
Gold
($/ounce)
|
1,311
|
1,080 -
1,120
|
All-in sustaining
costs ($/ounce)
|
959
|
1,090 -
1,130
|
Capital expenditures
(sustaining capital) ($mm)
|
1
|
1
|
As Cerro San Pedro enters its first full year of residual
leaching in 2017, gold and silver production is expected to decline
and all-in sustaining costs are expected to increase as a result of
the lower gold sales volumes.
Blackwater
Blackwater's 2017 non-sustaining capital expenditures are
expected to be approximately $10
million related to the continued advancement of the
Environmental Assessment process.
WEBCAST AND CONFERENCE CALL
A webcast and conference call to discuss these results will be
held on Monday, January 30, 2017
beginning at 9:00 a.m. Eastern time.
Participants may join the 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
February 28, 2017 by calling toll
free 1-855-859-2056, or 1-416-849-0833 outside of the U.S. and
Canada, passcode 60560458. An
archived webcast will also be available until April 30, 2017 at www.newgold.com.
UPCOMING EVENTS
New Gold plans to release its year-end 2016 financial results
after market close on Wednesday, February
15, 2017. A webcast and conference call to discuss these
results will be held on Thursday, February
16, 2017 at 10:00 a.m. Eastern
time. Participants may listen to the 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 March 15,
2017 by calling toll free 1-855-859-2056, or 1-416-849-0833
outside of the U.S. and Canada,
passcode 62154111. An archived webcast will also be available until
May 15, 2017 at www.newgold.com.
New Gold plans to host its Annual Investor Day in May at which
point the company will provide an update on first quarter results
as well as the continuing progress at Rainy River.
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 (which transitioned
to residual leaching in 2016), 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
the statements made under "2017 Guidance" and "Project Update Rainy
River-2017 Production and Cost Guidance", as well as other
statements elsewhere in this news release, including, among others,
statements with respect to: guidance for production, operating
expense, 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 development activities for
2017 at the Rainy River project, including the completion and
commissioning of the processing facilities; planned preparations
for operations at the Rainy River project, including the mining
rate, removal of overburden and waste, and storage of water, and
stock piling of ore prior to first production ; the expected
production, costs, economics, grade and other operating parameters
of the Rainy River project; the capacity of the starter dam; the
expected production, costs, economics and operating parameters of
the Rainy River project; the capacity of the starter dam; targeted
timing for permits, including the amendment to Schedule 2 of the
Metal Mining Effluent Regulations; targeted timing for
commissioning, start-up, production and commercial production; and
targeting timing for development and other activities related to
the Rainy River project.
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, including the
amendment to Schedule 2 of the Metal Mining Effluent Regulations,
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; and
(10) in the case of production, cost and expenditure outlooks at
the operating mines and the Rainy River project for 2017, commodity
prices and exchange rates being consistent with those estimated for
the purposes for 2017.
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; fluctuation in treatment and refining
charges; 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 mineral reserves and mineral resources;
competition; inherent uncertainties with cost estimates and
estimated schedule for the construction and commencement of
production at Rainy River as
contemplated; 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 project; 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 Indigenous 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
amendment to Schedule 2 of the Metal Mining Effluent Regulations
for the Rainy River Project. 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 risks associated
with the start of production of a mine, such as Rainy River, (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 contained herein has
been reviewed and approved by Mark A.
Petersen, Vice President, Exploration of New Gold, except
for the scientific and technical information regarding capital
costs at Rainy River set out under
the heading "Projects Update - Rainy
River - Capital Expenditures", which has been reviewed and
approved by Arshya Qureshi,
Co-Founder and Project Manager at LQ Consulting and
Management Inc. Mr. Qureshi is a Professional Engineer registered
with Professional Engineers of Ontario. Mr. Petersen is a SME Registered
Member, AIPG Certified Professional Geologist. Mr. Petersen and Mr.
Qureshi are "Qualified Persons" for the purposes of NI 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
"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 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 net 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 in the MD&A accompanying New
Gold's financial statements filed from time to time on
www.sedar.com.
(3) 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 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.
Further details regarding average realized price and a
reconciliation to the nearest IFRS measure is provided in the
MD&A accompanying New Gold's financial statements filed from
time to time on www.sedar.com.
(4) 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, excludes 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. Further details regarding cash generated from operations
before changes in working capital and a reconciliation to the
nearest IFRS measure is provided in the MD&A accompanying New
Gold's financial statements filed from time to time on
www.sedar.com.
SOURCE New Gold Inc.