Mr. Renaud Adams reports
NEW GOLD REPORTS SECOND QUARTER FINANCIAL RESULTS
New Gold Inc. has released its second quarter results for the company as of June 30, 2020, as well as its updated operational outlook for 2020.
All currency figure are in U.S. dollars.
During the quarter, the company has been able to execute on numerous key strategic opportunities, including the closing of the $300-million partnership with Ontario Teachers' Pension Plan, the divestment of the Blackwater project for $190-million (Canadian) cash and an 8-per-cent gold stream, and the restructuring of the company's balance sheet through the $400-million bond offering due 2027 that financed the redemption of the senior notes due 2022.
An earnings conference call and webcast will begin at 8:30 a.m. Eastern Time today to discuss the second quarter financial results (details provided at the end of this news release).
For detailed information, please refer to the company's second quarter management's discussion and analysis (MD&A) and financial statements that are available on the company's website and on SEDAR.
Second quarter and six-month highlights:
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The company is providing its updated operational outlook for 2020 that incorporates the impact of COVID-19. Annual guidance was withdrawn on April 15, 2020, while the company evaluated the impact on operations over the balance of the year.
- Total production for the second quarter was 98,079 gold equivalent ounces (64,294 ounces of gold, 134,282 ounces of silver and 16.9 million pounds of copper). For the six-month period, production was 201,514 gold equivalent ounces (131,084 ounces of gold, 265,699 ounces of silver and 35.4 million pounds of copper).
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Revenues for the quarter were $129-million and $271-million for the six-month period.
- Operating expense for the quarter was $726 per gold equivalent ounce and $799 per gold equivalent ounce for the six-month period.
- Total cash costs for the quarter were $773 per gold equivalent ounce and $849 per gold equivalent ounce for the six-month period.
- All-in sustaining costs (AISC) for the quarter were $1,283 per gold equivalent ounce and $1,370 per gold equivalent ounce for the six-month period.
- Net loss from operations for the quarter was $46-million (seven cents per share) and $74-million (11 cents per share) for the six-month period.
- Adjusted net loss for the quarter was $3.3-million (nil per share) and $21.1-million (three cents per share) for the six-month period.
- Cash generated from operations for the quarter was $53-million (eight cents per share) and $104-million (15 cents per share) for the six-month period. Operating cash flow generated from operations for the quarter before non-cash changes in working capital was $52-million (eight cents per share) and was $99-million (15 cents per share) for the six-month period.
- During the quarter, the company announced that it entered into a definitive agreement with Artemis Gold Inc. to divest its Blackwater project for $190-million (Canadian) in cash, an 8-per-cent gold stream and a $20-million (Canadian) equity stake in Artemis (refer to the company's June 9, 2020, news release for further information).
- During the quarter, the company completed a $400-million senior notes offering yielding 7.50 per cent due in 2027 that was used, along with cash on hand, to finance the full redemption of its outstanding 6.25 per cent senior notes due in 2022 completed on July 10, 2020 (refer to the company's June 24, 2020, and July 10, 2020, news releases for further information).
- The company's 2019 sustainability report, including the updated tailings fact sheet, is now available and can be accessed on-line.
"We are very pleased with our overall performance in this unprecedented quarter, a quarter that included enormous challenges presented by COVID-19. While we prioritized the safety of our employees and our key partners, we were able to report strong operational performance and complete two strategic transactions that restructured our balance sheet and improved our liquidity position," stated Renaud Adams, chief executive officer. "Over the balance of the year, our operations will return to pre-COVID levels and we will complete all non-recurring capital projects at Rainy River and advance the development of the C zone as we position the company for free cash flow generation beginning in 2021. New Gold's future will be supported by profitable operations [and] a stronger balance sheet, and, as our current hedges expire at year-end, we will be fully exposed to the strengthened gold price."
FINANCIAL HIGHLIGHTS
Q2 2020 Q2 2019 H1 2020 H1 2019
Revenue $128.5 $155.1 $270.8 $323.0
Net earnings (loss) per share (0.07) (0.06) (0.11) (0.08)
Adj. net earnings (loss) per share nil (0.01) (0.03) (0.02)
Operating cash flow per share 0.08 0.09 0.15 0.21
Adj. operating cash flow per share 0.08 0.10 0.15 0.23
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Revenues for the quarter were $129-million and $271-million for the six-month period, a decrease compared with the prior-year quarter due to a decrease in gold and copper sales volumes and a decrease in copper prices, partially offset by an increase in gold prices.
- Operating expenses for the quarter and six-month period were lower than the prior-year period due to lower production. Additionally, for the three months ended June 30, 2020, operating expenses were positively impacted by the receipt of the Canada Emergency Wage Subsidy.
- Net loss for the quarter was $46-million (seven cents per share) and $74-million (11 cents per share) for the six-month period, an increase in loss over the prior-year quarter primarily due to lower other gains and losses. Other gains and losses for the quarter and six-month period include a $38-million impairment loss on the reclassification of Blackwater as held for sale.
- Adjusted net loss for the quarter was $3.3-million (nil per share) and $21.1 million (three cents per share) for the six-month period, which is a decrease in loss over the prior-year quarter, primarily due to lower operating expenses and lower depreciation and depletion, partially offset by lower revenue.
2020 revised operational outlook
On April 15, 2020, the company, via news release, which is available at SEDAR, withdrew annual guidance until the impact of COVID-19 was better understood. The company's revised operational outlook for 2020 incorporates the lower than expected grades at New Afton over the balance of the year and the overall impact of COVID-19 at the company's operations as it continues to prioritize the safety of its employees and local and indigenous communities. Unit costs and capital are expected to remain near planned levels (refer to the company's Feb. 13, 2020, news release for original annual guidance information).
Following a two-week voluntary suspension at the Rainy River mine due to COVID-19, the mine resumed operations at reduced levels to allow the non-local work force to be safely reintroduced and is expected to achieve full capacity early in the third quarter. Development of the self-financed C zone has returned to planned levels and exploration programs will be launched at both operations as permits are received.
In 2020, the company reports production on a gold equivalent basis as well as on a per-metal basis. Cash costs
and AISC
will be reported on a per-gold-equivalent-ounce basis. Throughout the year the company will report gold equivalent ounces using a constant ratio of $1,500 per gold ounce, $17.75 per silver ounce and $2.85 per pound copper, and a foreign exchange rate of $1.35 (Canadian) to the U.S. dollar.
2020 REVISED GUIDANCE
2020 revised
Operational estimates Rainy River New Afton consolidated guidance
Gold produced (ounces) 222,000-232,000 62,000-72,000 284,000-304,000
Copper produced (mlb) 65-75 65-75
Gold equivalent produced (ounces) (1) 225,000-235,000 190,000-220,000 415,000-455,000
Operating expense per
gold equivalent ounce (1) (4) $920-$980 $630-$710 $780-$860
Cash costs per gold
equivalent ounce (1) (4) $920-$980 $740-$820 $830-$910
Corporate G&A per gold
equivalent ounce (1) $35-$45
Depreciation and
depletion per gold equivalent ounce (1) $540-$600 $240-$300 $400-$460
All-in sustaining costs
per gold equivalent ounce (1) (4) $1,610-$1,690 $1,080-$1,160 $1,410-$1,490
Capital investment and
exploration expense estimates
Sustaining capital and
sustaining leases ($M) (4) $145-$160 $62-$72 $207-$232
Growth capital ($M) (2) (4) $2-$5 $70-$85 $82-$102
Exploration ($M) (3) ~$2 $4-8 $7-12
(1) Gold equivalent ounces include approximately 285,000 to 305,000 ounces of
silver at Rainy River and approximately 295,000 to 315,000 ounces of silver
at New Afton.
(2) Consolidated growth capital includes about $10-million to $12-million for
Blackwater.
(3) Exploration expense includes about $1-million to $2-million of corporate
exploration.
(4) The revised operational outlook does not include any potential future
receivable under the Canadian Emergency Wage Subsidy, which has been
extended until December, 2020.
Rainy River outlook:
-
Production estimates for the year have been lowered, primarily related to the impact of COVID-19 in the first half of the year, resulting in lower tonnes and slightly lower grades milled for the full year.
-
Cash costs and operating expense per gold equivalent ounce for the year have been slightly increased primarily due to lower sales.
- Total capital for the year has increased by less than $10-million due to a portion of the tailings management area construction that was originally scheduled for completion in 2021, now planned for completion in 2020.
New Afton outlook:
-
Gold and copper production estimates for year have been lowered, primarily due to lower-than-planned gold and copper grades.
- Cash costs and operating expense per gold equivalent ounce for the year are expected to increase, primarily due to lower sales.
- Total capital estimates remain consistent with original estimates, and it is expected that planned capital projects will be completed in the second half of the year.
OPERATIONAL HIGHLIGHTS
Q2 2020 Q2 2019 H1 2020 H1 2019 2020 updated guidance
Gold equivalent
production (ounces) (1) 98,079 132,556 201,514 255,820 415,000-455,000
Gold production (ounces) 64,294 85,216 131,084 164,614 284,000-304,000
Copper production (mlb) 16.9 21.6 35.4 41.1 65-75
Average realized gold
price per ounce 1,516 1,304 1,485 1,302 -
Average realized copper
price per pound 2.51 2.74 2.54 2.77 -
Operating expense per
gold equivalent ounce 726 684 799 664 $780-$860
Total cash costs per gold
equivalent ounce 773 740 849 717 $830-$910
Depreciation and depletion
per gold equivalent ounce 445 432 478 445 $400-$460
AISC per gold equivalent
ounce 1,283 1,087 1,370 1,085 $1,410-$1,490
Sustaining capital and
sustaining leases ($M) 41.1 36.9 90.2 81.6 $207-$232
Growth capital ($M) 11.4 6.6 30.4 14.4 $85-$103
(1) Total gold equivalent ounces include silver and copper produced (excluding production
from the Cerro San Pedro mine) converted to a gold equivalent based on a ratio of
$1,500 per gold ounce, $17.75 per silver ounce and $2.85 per copper pound. Throughout
the year the company will report gold equivalent ounces using a constant ratio of those
prices. All copper is produced by the New Afton mine.
RAINY RIVER HIGHLIGHTS
Rainy River mine Q2 2020 Q2 2019 H1 2020 H1 2019 2020 revised guidance
Gold equivalent
production (ounces) (1) 49,633 66,765 100,739 129,043 225,000-235,000
Gold equivalent sold (ounces) 47,873 68,812 101,411 140,295 -
Gold production (ounces) 48,800 66,013 99,181 127,570 222,000-232,000
Gold sold (ounces) 47,064 68,042 99,846 138,737 -
Average realized
gold price per ounce 1,514 1,301 1,483 1,298 -
Operating expense per
gold equivalent ounce 890 906 980 853 $920-$980
Total cash costs per
gold equivalent ounce 890 907 980 853 $920-$980
Depreciation and depletion
per gold equivalent ounce 646 297 654 300 $540-$600
AISC per gold equivalent ounce 1,567 1,314 1,666 1,322 $1,610-$1,690
Sustaining capital and
sustaining leases ($M) 30.9 27.0 66.6 63.6 $145-$160
Growth capital ($M) 0.1 2.8 0.2 6.6 $2-$5
(1) Gold equivalent ounces for Rainy River in Q2 2020 include 70,394 ounces of silver
converted to a gold equivalent based on a ratio of $1,500 per gold ounce and $17.75
per silver ounce.
Rainy River mine FY 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020
Tonnes mined per day (ore and waste) 108,392 111,679 114,544 111,078 136,124 127,684 126,512
Ore tonnes mined per day 33,687 15,739 21,368 18,220 19,485 26,012 23,101
Operating waste tonnes per day 47,128 62,955 82,488 75,206 74,020 75,596 72,575
Capitalized waste tonnes per day 25,576 32,986 10,688 17,652 42,619 26,077 30,836
Total waste tonnes per day 74,705 95,941 93,176 92,858 116,639 101,673 103,411
Strip ratio (waste:ore) 2.22 6.10 4.36 5.10 5.99 3.91 4.48
Tonnes milled per calendar day 17,934 19,725 21,117 24,500 22,521 18,441 23,880
Gold grade milled (g/t) 1.25 1.19 1.15 1.14 0.85 1.03 0.78
Gold recovery (%) 86 90 93 91 91 90 89
Mill availability (%) 77 89 88 88 89 91 90
Gold production (oz) 227,284 61,557 66,013 75,080 51,122 50,381 48,800
Gold equivalent production (1) (oz) 230,349 62,278 66,765 76,092 51,915 51,106 49,633
(1) Gold equivalent ounces for Rainy River in Q2 2020 include 70,394 ounces of silver
converted to a gold equivalent based on a ratio of $1,500 per gold ounce and $17.75
per silver ounce.
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The Rainy River mine resumed operations on April 3, after a temporary two-week shutdown that allowed the work force to complete a 14-day period of self-isolation following travel outside of Canada related to COVID-19. Following the recent approval by Health Canada, three rapid testing devices were procured and have been received on site. Currently, a period of training and calibrating is under way prior to being rolled out for permanent use. These devices will initially test for the virus and provide results within three hours of testing, adding another level of protection against the transmission of COVID-19 as the company continues to prioritize the safety and well-being of its employees and its local and indigenous communities.
- Early in the second quarter, the mine utilized its local work force and gradually began to safely reintroduce a portion of the non-local work force to advance the ramp-up of operations. During the quarter, the open pit averaged 126,512 tonnes per day. Mining productivity increased during the quarter from approximately 100,000 tonnes per day in early April to approximately 140,000 tonnes per day in June, achieving presuspension productivity levels. Most of the non-local work force has now been reintegrated and it is expected that the mine will complete the ramp-up to full capacity early in the third quarter.
- For the second quarter, gold equivalent production was 49,633 ounces (48,800 ounces of gold and 70,394 ounces of silver), which was lower than plan. Production was impacted by reduced mine productivity as described above, resulting in the processing of a higher-than-planned proportion of the medium-grade ore from stockpile and pit rehandling. The averaged grade processed for the quarter was 0.78 gram per tonne at gold recovery of 89 per cent. For the six-month period, production was 100,739 gold equivalent ounces (99,181 ounces of gold and 131,659 ounces of silver).
- Operating expenses and total cash costs were $890 per gold equivalent ounce for the quarter, which is a decrease from the prior-year quarter, primarily due to an increase in capital waste tonnes mined, improved operational performance as well as the receipt of the Canada Emergency Wage Subsidy, which positively impacted operating expenses in the quarter. For the six-month period, operating expense per gold equivalent ounce was $980, an increase over the prior-year period due to lower production and sales as a result of planned lower-grade ore mined and processed.
- Depreciation and depletion were $646 per gold equivalent ounce for the quarter and $654 per gold equivalent ounce for the six-month period, an increase from the prior-year period primarily due to decreased reserves and shorter mine life when compared with the prior year.
- Sustaining capital and sustaining lease payments for the quarter were $30.9-million and $66.6-million for the six-month period including $5.9-million and $12.5-million of capitalized mining costs, respectively. During the quarter, key capital projects were advanced including a planned tailings dam raise, wick drain installation for stabilization of the east waste dump, final stage construction of the maintenance and warehouse facilities, as well as the commissioning of a biochemical reactor (BCR2) to allow clean water discharge. It is expected that all key construction projects will be substantially completed by the end of the third quarter with all planned capital projects expected to be completed by year-end. A small portion of the tailings management area (TMA) construction that was originally scheduled for completion in 2021 is now planned for completion in 2020, thereby reducing planned capital requirements for 2021.
- AISC was $1,567 per gold equivalent ounce for the quarter, which is an increase from the prior-year quarter, due to the increase in sustaining capital spend and lower gold equivalent ounces sold in the quarter. For the six-month period, AISC was $1,666 per gold equivalent ounce, an increase over the prior-year period due to higher sustaining capital spend and lower gold equivalent ounces sold in the period.
- During the quarter, approximately 2.1 million ore tonnes and 9.4 million waste tonnes (including 2.8 million capitalized waste tonnes) were mined from the open pit at an average strip ratio of 4.48:1.
- Since the April 3 restart, the mill has ramped up to full capacity, achieving an average run rate of approximately 24,700 tonnes per day, including downtime during the quarter, primarily to complete a liner change as well as other maintenance related to the SAG (semi-autogenous grinding) mill. Mill availability for the quarter averaged 90 per cent, in line with plan.
NEW AFTON HIGHLIGHTS
New Afton mine Q2 2020 Q2 2019 H1 2020 H1 2019 2020 revised guidance
Gold equivalent
production (ounces) (1) 48,446 65,791 100,775 126,777 190,000-220,000
Gold equivalent sold (ounces) 43,517 55,717 93,915 118,933 -
Gold production (ounces) 15,494 19,203 31,903 37,044 62,000-72,000
Gold sold (ounces) 13,789 16,142 29,780 34,759 -
Copper production (mlb) 16.9 21.6 35.4 41.1 65-75
Copper sold (mlb) 15.3 18.3 33.0 38.6 -
Average realized gold
price per ounce 1,520 1,314 1,490 1,321 -
Average realized copper
price per pound 2.51 2.74 2.54 2.77 -
Operating expense per
gold equivalent ounce 545 409 604 441 $630-$710
Total cash costs per
gold equivalent ounce 644 534 707 557 $740-$820
Depreciation and depletion
per gold equivalent ounce 217 596 280 614 $240-$300
AISC per gold equivalent ounce 881 711 962 712 $1,080-$1,160
Sustaining capital and
sustaining leases ($M) 10.0 9.7 23.4 17.7 $62-$72
Growth capital ($M) 10.4 2.8 21.2 5.4 $70-$85
(1) Gold equivalent ounces for New Afton in Q2 2020 include 16.9 pounds of copper and
63,889 ounces of silver converted to a gold equivalent based on a ratio of $1,500
per gold ounce, $2.85 per copper pound and $17.75 per silver ounce.
New Afton mine FY 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020
Tonnes mined per day (ore and waste) 16,156 15,824 16,357 15,773 14,539 16,727 15,358
Tonnes milled per calendar day 14,668 14,759 14,992 15,572 15,861 15,377 14,240
Gold grade milled (g/t) 0.53 0.50 0.53 0.43 0.42 0.45 0.46
Gold recovery (%) 85 83 83 80 79 81 81
Gold production (oz) 77,329 17,841 19,203 16,007 15,734 16,409 15,494
Copper grade milled (%) 0.87 0.80 0.86 0.76 0.70 0.73 0.72
Copper recovery (%) 83 83 83 84 81 82 83
Copper production (mlb) 85.1 19.5 21.6 20.1 18.3 18.5 16.9
Mill availability (%) 98 98 97 96 98 98 92
Gold equivalent production (1) (oz) 279,755 60,986 65,791 52,807 49,507 52,329 48,446
(1) Gold equivalent ounces for New Afton in Q2 2020 include 16.9 million pounds of copper
and 63,889 ounces of silver converted to a gold equivalent based on a ratio of $1,500
per gold ounce, $2.85 per copper pound and $17.75 per silver ounce.
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The New Afton mine reached a significant safety milestone, achieving three million person-hours lost-time injury-free.
-
The mine produced 48,446 gold equivalent ounces for the quarter (15,494 ounces of gold and 16.9 million pounds of copper), below plan primarily due to lower copper and gold grades. During the quarter, scheduled mine and mill shutdowns were completed for maintenance, including the replacement of two kilometres of underground conveyor belts and replacement of SAG mill liners, with the original completion date extended due to COVID-19 safety protocols. There are no further planned major shutdowns expected over the balance of the year.
- Operating expense per gold equivalent ounce were $545 for the quarter and $604 per gold equivalent ounce for the six-month period. Operating expense per gold equivalent ounce has increased as compared with the prior-year period due to lower gold and copper production and sales as a result of lower grades, partially offset by the receipt of the Canada Emergency Wage Subsidy.
Total cash costs were $644 per gold equivalent ounce for the quarter and $707 per gold equivalent ounce for the six-month period.
- Total cash costs per gold equivalent ounce have increased as compared with the prior-year period, driven by lower equivalent sales in the quarter.
- Depreciation and depletion were $217 per gold equivalent ounce for the quarter and $280 for the six-month period, which is a decrease from the prior-year periods as a result of the inclusion of C zone reserves in its depletion base and a longer mine life.
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Sustaining capital and sustaining lease payments for the quarter were $10.0-million and for the six-month period were $23.4-million, primarily related to B3 mine development and advancement of the planned tailings dam raise.
-
AISC was $881 per gold equivalent ounce for the quarter and $962 per gold equivalent ounce for the six-month period, which is an increase compared with prior-year periods primarily driven by lower gold equivalent ounces sold as a result of lower gold and copper production in the quarter.
- Growth capital was $10.4-million for the quarter and $21.2-million for the six-month period. Growth capital in the quarter is primarily related to C zone development and detailed engineering, earthworks, associated with concrete, lime system and starting steel erection of the thickened and amended tailings (TAT) project.
- During the quarter, total development toward the B3 and C zone advanced by approximately 1,253 metres, achieving 95 per cent of planned levels year to date.
- The underground mine averaged 15,358 tonnes per day for the quarter; the lower production was primarily due to a planned maintenance shutdown.
- The mill averaged 14,240 tonnes per day for the quarter, including the maintenance shutdowns as described above, at an average gold and copper grade of 0.46 gram per tonne gold and 0.72 per cent copper, respectively, with gold and copper recoveries of 81 per cent and 83 per cent, respectively, in line with plan.
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During the quarter, the mill continued to process lower-than-planned copper and gold grades as the mine continued to experience lower grades mined during the quarter. The 2020 and 2021 mine plans incorporate multiple sources of mined ore, including depletion of the east and west caves and rehabilitation and pillar recoveries of medium-high grade zones. In the first and second quarters of 2020, higher-than-expected dilution was experienced in portions of the east and west caves. Additionally, the rehabilitation and pillar recovery productivities were lower than planned contributing to the lower grades mined in the first half of the year. Management continues to work on optimization scenarios, but based on current information, lower grades are expected to continue over the balance of the year and potentially into 2021 as the company completes mining in these areas. It is not expected that the lower grades currently being experienced in the east and west cave zones will be encountered in the SLC, B3 and C zones. Ore extraction from the B3 cave is expected to begin in second half of 2021.
- Exploration activities in the quarter included underground delineation drilling on the East extension zone and refinement of exploration targets for the planned drilling campaign within the Cherry Creek trend area.
Second quarter 2020 conference call and webcast
The company will host an earnings call and webcast on Thursday, July 30, 2020, at 8:30 a.m. Eastern Time to discuss the financial results. Details are provided below:
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Participants may listen to the webcast by registering on the company's website.
- Participants may also listen to the conference call by calling toll-free 1-833-502-0493 or 1-778-560-2562 outside of the U.S. and Canada.
- A recorded playback of the conference call will be available until by calling toll-free 1-800-585-8367 or 1-416-621-4642 outside of the U.S. and Canada, pass code 3546224. An archived webcast will also be available until Aug. 30, 2020.
About New Gold Inc.
New Gold is a Canada-focused intermediate gold mining company with a portfolio of two core producing assets in Canada, the Rainy River and New Afton mines as well as the 100-per-cent-owned Blackwater development project. The company announced on June 9, 2020, that it entered into a definitive agreement with Artemis Gold Inc. to divest its Blackwater project for $190-million (Canadian) in cash, an 8-per-cent gold stream and a $20-million (Canadian) equity stake in Artemis. The company also operates the Cerro San Pedro mine in Mexico (in reclamation).
We seek Safe Harbor.
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