New Gold rejigs mine plans, stock down

Rainy River project, Ontario. Image by New Gold

With the release of optimized mine plans for both Rainy River in Ontario and New Afton mine in British Columbia, New Gold (NYSE: NGD) is focusing on cash flow generation. The company also provided full-year financial results and issued guidance for 2020; operating results from 2019 were pre-released in January.

This year, New Gold expects to produce a total of 465,000 oz. to 515,000 gold-equivalent oz. at all-in sustaining costs of $1,260 to $1,340 per oz.; in line with last year’s performance.

At Rainy River, with a reserve reduction of 1.6 million oz., New Gold developed a mine plan to maximize returns with a shorter resulting mine life. The updated plan features average gold production of 289,000 oz. annually at AISCs of $967 per oz. with a resulting net present value estimate, at a 5% discount rate, of $421 million.

The new plan involves a smaller open pit shell and an underground component starting up in 2022.

At New Afton, New Gold has focused on a self-funding development of the C-zone which will see lower production between 2021 and 2024

“Over the past number of months we have evaluated numerous scenarios for the Rainy River mine and are pleased to release an updated life of mine plan that delivers a solid open pit and underground mine plan that positions the operation for profitability and free cash flow generation beginning in Q4 2020 that continues over the balance of the mine life,” Renaud Adams, the company’s CEO, said in a release.

Last year, Rainy River produced 257,051 oz. at AISCs of $1,630 per oz. This year, the mine is expected to produce 240,000 oz. to 260,000 oz. at AISCs of $1,470 to $1,550 per oz.

At New Afton, New Gold has focused on a self-funding development of the C-zone which will see lower production between 2021 and 2024 with the C-zone starting up in 2024 and extending mine life to 2030. The mine is now expected to generate an average of 260,200 oz. of gold-equivalent a year at AISCs of $681 per oz. The associated net present value has been estimated at $735 million, also at a 5% discount rate.

“We have also released an integrated mine plan that optimizes the self-funded development of New Afton’s B3 and C-zone that could deliver significant free cash flow of more than $1 billion over the life of the mine,” Adams added.

This year, New Afton is expected to contribute 220,000 oz. to 250,000 gold-equivalent oz. at AISCs of $940 to $1,020 per oz.

At market close Thursday, New Gold’s stock was down over 10%. The day’s trades were over 12 million, 10 times the daily average. The company has a $509 million market capitalization.

(A version of this article first appeared in the Canadian Mining Journal)

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