Repositioned with Restructured Balance
Sheet
Provides Updated 2020 Annual Operational
Outlook
July 30, 2020 – New Gold Inc. (“New Gold” or the “Company”)
(TSX and NYSE American: NGD) reports second quarter results for
the Company as of June 30, 2020 as well as its updated operational
outlook for 2020.
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 C$190 million cash and an
8% gold stream and the restructuring of our balance sheet through
the $400 million bond offering due 2027 that funded the redemption
of the senior notes due 2022.
An earnings conference call and webcast will begin at 8:30 am
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 at
www.newgold.com and on SEDAR at www.sedar.com. The Company uses
certain non-GAAP financial performance measures throughout this
press release. Please refer to the “Non-GAAP Financial Performance
Measures” section of this press release and the MD&A. All
amounts are in U.S. dollars unless otherwise indicated).
Second Quarter and Six-Month Highlights
- 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withdrawn on April 15, 2020 while the Company evaluated the impact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 (gold eq.) 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 eq. ounces (131,084 ounces of
gold, 265,699 ounces of silver and 35.4 million pounds of
copper).
- Revenues for the quarter were $129 million and $271 million for
the six-month period.
- Operating expense for the quarter was $726 per gold eq. ounce
and $799 per gold eq. ounce for the six-month period.
- Total cash costs1,2 for the quarter were $773 per gold eq.
ounce and $849 per gold eq. ounce for the six-month period.
- All-in sustaining costs (AISC)1,2 for the quarter were $1,283
per gold eq. ounce and $1,370 per gold eq. ounce for the six-month
period.
- Net loss from operations for the quarter was $46 million ($0.07
per share) and $74 million ($0.11 per share) for the six-month
period.
- Adjusted net loss2 for the quarter was $3.3 million ($nil per
share) and $21.1 million ($0.03 per share) for the six-month
period.
- Cash generated from operations for the quarter was $53 million
($0.08 per share) and $104 million ($0.15 per share) for the
six-month period. Operating cash flow generated from operations for
the quarter, before non-cash changes in working capital2, was $52
million ($0.08 per share) and was $99 million ($0.15 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 C$190 million in cash, an 8% gold stream and
a C$20 million 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% due in 2027 that was used, along with
cash on hand, to fund the full redemption of its outstanding 6.25%
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 via the
following link: www.2019sustainabilityreport.newgold.com.
"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, CEO. “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, a stronger balance sheet, and
as our current hedges expire at year end, we will be fully exposed
to the strengthened gold price.”
1. "Total cash cost per gold equivalent ounce" and AISC per gold
equivalent ounce" are calculated gold equivalent ounces sold
2. See "Non-GAAP Measures" section of this press release.
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)1 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 flow1, per share
0.08
0.10
0.15
0.23
- Refer to the “Non-GAAP Performance Measures” section of this
press release.
- Revenues for the quarter were $129 million and $271 million for
the six-month period, a decrease compared to 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 ($0.07 per share) and
$74 million ($0.11 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 includes 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 ($0.03 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 www.sedar.com, withdrew annual guidance until the
impact of COVID-19 was better understood. Our 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 our operations as we continue to prioritize the safety
of our employees and local and Indigenous communities. Unit costs
and capital are expected to remain near planned levels. (refer to
the Company's February 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 workforce to be safely reintroduced and is
expected to achieve full capacity early in the third quarter.
Development of the self-funded 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
dollars to the US dollar.
Operational Estimates
Rainy River
New Afton
2020 Revised Consolidated
Guidance
Gold Produced (ounces)
222,000 - 232,000
62,000 - 72,000
284,000 - 304,000
Copper Produced (Mlbs)
65 - 75
65 - 75
Gold Eq. Produced (ounces)1
225,000 - 235,000
190,000 - 220,000
415,000 - 455,000
Operating expense per gold eq.
ounce1,4
$920 - $980
$630 - $710
$780 - $860
Cash Costs per gold eq. ounce1,4
$920 - $980
$740 - $820
$830 - $910
Corporate G&A per gold eq. ounce1
$35 - $45
Depreciation and depletion per gold eq.
ounce1
$540 - $600
$240 - $300
$400 - $460
All-in Sustaining Costs per gold eq.
ounce1,4
$1,610 - $1,690
$1,080 - $1,160
$1,410 - $1,490
Capital Investment & Exploration
Expense Estimates
Sustaining Capital & Sustaining Leases
($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
- Gold equivalent ounces includes 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.
- Consolidated growth capital includes ~$10-$12 million for
Blackwater.
- Exploration expense includes ~$1-$2 million of Corporate
Exploration.
- 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 eq. 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 eq. 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 eq. 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 (Mlbs)
16.9
21.6
35.4
41.1
65 - 75
Average realized gold price, per
ounce2
1,516
1,304
1,485
1,302
-
Average realized copper price, per
pound2
2.51
2.74
2.54
2.77
-
Operating expense, per gold eq. ounce
726
684
799
664
$780 - $860
Total cash costs, per gold eq. ounce2
773
740
849
717
$830 - $910
Depreciation and depletion per gold eq.
ounce
445
432
478
445
$400 - $460
AISC, per gold eq. ounce2
1,283
1,087
1,370
1,085
$1,410 - $1,490
Sustaining capital and sustaining leases
($M)2
41.1
36.9
90.2
81.6
$207 - $232
Growth capital ($M)2
11.4
6.6
30.4
14.4
$85 - $103
- 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.
- Refer to the “Non-GAAP Financial Performance Measures" section
of this press release.
Rainy River Highlights
Rainy River Mine
Q2 2020
Q2 2019
H1 2020
H1 2019
2020 Revised Guidance
Gold eq. production (ounces)1
49,633
66,765
100,739
129,043
225,000 - 235,000
Gold eq. 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 eq. ounce
890
906
980
853
$920 - $980
Total cash costs, per gold eq. ounce
890
907
980
853
$920 - $980
Depreciation and depletion per gold eq.
ounce
646
297
654
300
$540 - $600
AISC, per gold eq. ounce
1,567
1,314
1,666
1,322
$1,610 - $1,690
Sustaining capital and sustaining leases
($M)2
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 includes 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.
2. Refer to the “Non-GAAP Financial
Performance Measures" section of this press release.
Rainy River Mine
FY 2018
Q1 19
Q2 19
Q3 19
Q4 19
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 eq. production1 (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 includes 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.
- The Rainy River mine resumed operations on April 3, after a
temporary two-week shutdown that allowed the workforce 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 underway 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 we continue to prioritize
the safety and well-being of our employees and our local and
Indigenous communities.
- Early in the second quarter, the mine utilized its local
workforce and gradually began to safely reintroduce a portion of
the non-local workforce 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 pre-suspension productivity
levels. Most of the non-local workforce 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 eq. 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 grams per tonne at gold recovery of 89%. For the
six-month period, production was 100,739 gold eq. ounces (99,181
ounces of gold and 131,659 ounces of silver).
- Operating expenses and total cash costs were $890 per gold eq.
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 eq. 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 was $646 per gold eq. ounce for the
quarter, and $654 per gold eq. ounce for the six-month period, an
increase from the prior-year period primarily due to decreased
reserves and shorter mine life when compared to 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 bio-chemical 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 were $1,567 per gold eq. ounce for the quarter, which is
an increase from the prior-year quarter, due to the increase in
sustaining capital spend and lower gold eq. ounces sold in the
quarter. For the six-month period, AISC were $1,666 per gold eq.
ounce, an increase over the prior year period due to higher
sustaining capital spend and lower gold eq. 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 mill. Mill availability for the quarter averaged 90%, in line
with plan.
New Afton Highlights
New Afton Mine
Q2 2020
Q2 2019
H1 2020
H1 2019
2020 Revised Guidance
Gold eq. production (ounces) 1
48,446
65,791
100,775
126,777
190,000 - 220,000
Gold eq. 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 (Mlbs)
16.9
21.6
35.4
41.1
65 - 75
Copper sold (Mlbs)
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 eq. ounce
545
409
604
441
$630 - $710
Total cash costs, per gold eq. ounce
644
534
707
557
$740 - $820
Depreciation and depletion per gold eq.
ounce
217
596
280
614
$240 - $300
AISC, per gold eq. ounce
881
711
962
712
$1,080 - $1,160
Sustaining capital and sustaining leases
($M)2
10.0
9.7
23.4
17.7
$62 - $72
Growth capital ($M)
10.4
2.8
21.2
5.4
$70 - $85
- Gold equivalent ounces for New Afton in Q2 2020 includes 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.
- Refer to the “Non-GAAP Financial Performance Measures" section
of this press release.
New Afton Mine
FY 2018
Q1 19
Q2 19
Q3 19
Q4 19
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 (Mlbs)
85.1
19.5
21.6
20.1
18.3
18.5
16.9
Mill availability (%)
98
98
97
96
98
98
92
Gold eq. production1 (oz)
279,755
60,986
65,791
52,807
49,507
52,329
48,446
- Gold equivalent ounces for New Afton in Q2 2020 includes 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.
- The New Afton Mine reached a significant safety milestone,
achieving 3 million person-hours lost-time injury-free.
- The mine produced 48,446 gold eq. 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 2 kilometers 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 eq. ounce were $545 for the quarter,
and $604 per gold eq. ounce for the six-month period. Operating
expense per gold eq. ounce has increased as compared to 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 eq. ounce for the quarter
and $707 per gold eq. ounce for the six-month period. Total cash
costs per gold eq. ounce have increased as compared to the prior
year period, driven by lower equivalent sales in the quarter.
- Depreciation and depletion was $217 per gold eq. 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.
- 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 were $881 per gold eq. ounce for the quarter and $962 per
gold eq. ounce for the six-month period, which is an increase
compared to prior year periods primarily driven by lower gold eq.
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 towards the B3 and C-zone
advanced by approximately 1,253 metres, achieving 95% 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 grams per tonne gold and
0.72% copper, respectively, with gold and copper recoveries of 81%
and 83%, respectively, in-line with plan.
- 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 we complete 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 08:30 AM Eastern Time to discuss the financial
results. Details are provided below:
- Participants may listen to the webcast by registering on our
website at www.newgold.com or via the following link
https://onlinexperiences.com/Launch/QReg/ShowUUID=760E8780-16EE-4E71-A923-6C796959BE5A
- 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, passcode 3546224. An archived
webcast will also be available until August 30, 2020 at
www.newgold.com.
About New Gold Inc.
New Gold is a Canadian-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% 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 C$190 million in cash, an 8% gold
stream and a C$20 million equity stake in Artemis. The Company also
operates the Cerro San Pedro Mine in Mexico (in reclamation). New
Gold’s vision is to build a leading diversified intermediate gold
company based in Canada that is committed to environment and social
responsibility. For further information on the Company, 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: the Company’s ability to complete the
divestiture of the Blackwater Project to Artemis Gold Inc. on the
terms described herein or at all; operations returning to pre-COVID
levels; the Company completing all non-recurring capital projects
at Rainy River, which will position the Company for free cash flow
generation beginning in 2021; New Gold’s exposure to the
strengthened gold price; the roll out of rapid COVID-19 testing
devices at the Rainy River Mine; the Company’s anticipated course
of action at the Rainy River mine and the re-integration of the
local workforce; the Company’s expectations with respect to the key
construction projects, including the TMA, at the Rainy River Mine;
there being no major planned shutdowns at the New Afton Mine for
the remainder of the year; the Company’s expectations with respect
to the copper and gold grades being processed through the mill at
the New Afton Mine; the Company’s expectations with respect to the
grades encountered in the SLC, B3 and C-zones; Ore extraction from
the B3 cave beginning in second half of 2021; the Company’s ability
to reduce the risk of the spread of COVID-19; and statements under
the heading “2020 Revised Operational Outlook”.
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 latest annual management’s discussion and analysis
(“MD&A”), its most recent annual information form and technical
reports on the Rainy River Mine and New Afton Mine filed at
www.sedar.com and on EDGAR at www.sec.gov. 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 other than
as set out herein; (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 and U.S. dollar, and to a lesser extent, the Mexican Peso,
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 New Afton
Mine, Rainy River Mine and Blackwater project being consistent with
New Gold’s current expectations, particularly in the context of the
outbreak of COVID-19; (8) all required permits, licenses and
authorizations being obtained from the relevant governments and
other relevant stakeholders within the expected timelines and the
absence of material negative comments during the applicable
regulatory processes; (9) there being no cases of COVID-19 in the
Company’s workforce at either the Rainy River or New Afton Mine and
the assumption that no additional members of the workforce are
expected to be required to self-isolate due to cross-border travel
to the United States or any other country; (10) the responses of
the relevant governments to the COVID-19 outbreak being sufficient
to contain the impact of the COVID-19 outbreak; (11) there being no
material disruption to the Company’s supply chains and workforce
that would interfere with the Company’s anticipated course of
action at the Rainy River Mine, including the reintegration of the
local workforce, the roll out of rapid COVID-19 testing devices and
the completion of key construction projects, including the TMA, on
the timing described herein or at all; (12) the long-term economic
effects of the COVID-19 outbreak not having a material adverse
impact on the Company’s operations or liquidity position; and (13)
the Company being able to complete the divestiture of the
Blackwater Project to Artemis Gold Inc. on the terms described
herein.
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 and, to a lesser extent, Mexico;
discrepancies between actual and estimated production, between
actual and estimated mineral reserves and mineral resources and
between actual and estimated metallurgical recoveries; risks
related to early production at the Rainy River Mine, including
failure of equipment, machinery, the process circuit or other
processes to perform as designed or intended; fluctuation in
treatment and refining charges; changes in national and local
government legislation in Canada, the United States and, to a
lesser extent, 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, 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; 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; 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; there being cases of COVID-19 in the
Company’s workforce at either the Rainy River or New Afton Mine, or
both; the Company’s workforce at either the Rainy River Mine or the
New Afton Mine, or both, being required to self-isolate due to
cross-border travel to the United States or any other country; the
responses of the relevant governments to the COVID-19 outbreak not
being sufficient to contain the impact of the COVID-19 outbreak;
disruptions to the Company’s supply chain and workforce due to the
COVID-19 outbreak; an economic recession or downturn as a result of
the COVID-19 outbreak that materially adversely affects the
Company’s operations or liquidity position; the Company’s not being
ability to complete the divestiture of the Blackwater Project to
Artemis Gold Inc. on the terms described herein or at all; the
Company experiencing a material delay in completing all
non-recurring capital projects at Rainy River; a delay in ore
extraction from the B3 cave beginning in second half of 2021;
difficulties in the reintegration of the local workforce at the
Rainy River Mine due to various factors. 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 Annual Information Form, MD&A and other
disclosure documents filed on and available at www.sedar.com and on
EDGAR at www.sec.gov. 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 Eric Vinet, Vice President, Technical
Services of New Gold. Mr. Vinet is a Professional Engineer and
member of the Ordre des ingénieurs du Québec. He is a "Qualified
Person" for the purposes of National Instrument 43-101 – Standards
of Disclosure for Mineral Projects (“NI 43-101”).
Cautionary Note to U.S. Readers Concerning Estimates of
Mineral Reserves and Mineral Resources
This news release was prepared in accordance with Canadian
standards for reporting of mineral resource estimates, which differ
in some respects from United States standards. In particular, and
without limiting the generality of the foregoing, the terms
“inferred mineral resources,” “indicated mineral resources,”
“measured mineral resources” and “mineral resources” used or
referenced in this news release are Canadian mineral disclosure
terms as defined in accordance with NI 43-101 under the guidelines
set out in the 2014 Canadian Institute of Mining, Metallurgy and
Petroleum Standards for Mineral Resources and Mineral Reserves,
Definitions and Guidelines, May 2014 (the “CIM Standards”). Until
recently, the CIM Standards differed significantly from standards
in the United States. The U.S. Securities and Exchange Commission
(the “SEC”) has adopted amendments to its disclosure rules to
modernize the mineral property disclosure requirements for issuers
whose securities are registered with the SEC under the U.S.
Securities Exchange Act of 1934, as amended (the “Exchange Act”).
These amendments became effective February 25, 2019 (the “SEC
Modernization Rules”) with compliance required for the first fiscal
year beginning on or after January 1, 2021. The SEC Modernization
Rules replace the historical property disclosure requirements for
mining registrants that were included in SEC Industry Guide 7,
which will be rescinded from and after the required compliance date
of the SEC Modernization Rules. As a result of the adoption of the
SEC Modernization Rules, the SEC now recognizes estimates of
“measured mineral resources”, “indicated mineral resources” and
“inferred mineral resources”. In addition, the SEC has amended its
definitions of “proven mineral reserves” and “probable mineral
reserves” to be “substantially similar” to the corresponding
definitions under the CIM Standards, as required under NI 43-101.
Accordingly, during this period leading up to the compliance date
of the SEC Modernization Rules, information regarding mineral
resources or mineral reserves contained or referenced in this news
release may not be comparable to similar information made public by
United States companies. Readers are cautioned that “inferred
mineral resources” have a great amount of uncertainty as to their
existence, and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of an
inferred mineral resource will ever be upgraded to a higher
category. Under Canadian rules, estimates of inferred mineral
resources may not form the basis of feasibility or other economic
studies, except in limited circumstances. The term “resource” does
not equate to the term “reserves”. Readers should not to assume
that all or any part of measured or indicated mineral resources
will ever be converted into mineral reserves. Readers are also
cautioned not to assume that all or any part of an inferred mineral
resource exists, or is economically or legally mineable.
Non-GAAP Financial Performance Measures
All-in sustaining costs (AISC) per gold eq. ounce, total cash
costs per gold ounce and per gold eq. ounce, sustaining capital,
sustaining lease and growth capital, Adjusted net earnings/(loss),
operating cash flows generated from operations, before changes in
non-cash operating working capital and average realized price and
are non-GAAP financial measures that 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. The Company believes that these measures,
together with measures determined in accordance with IFRS, provide
investors with an improved ability to evaluate the underlying
performance of the Company. In addition, certain non-GAAP measures
are utilized, along with other measures, in the Company scorecard
to set incentive compensation goals and assess performance of its
executives.
All-In Sustaining Costs per Gold eq. Ounce
"All-in sustaining costs per gold eq. 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 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, lease payments that are sustaining in nature,
and environmental reclamation costs, all divided by the ounces of
gold eq. sold to arrive at a per ounce figure.
In addition to gold the Company produces copper and silver. Gold
eq. ounces of copper and silver produced or sold in a quarter are
computed by calculating the ratio of the average spot market copper
and silver prices to the average spot market gold price in a
quarter and multiplying this ratio by the pounds of copper and
silver ounces produced or sold during that quarter. Gold eq. ounces
produced or sold in a period longer than one quarter are calculated
by adding the number of gold eq. ounces in each quarter of that
period. In 2020 the Company will report gold eq. ounces using a
consistent ratio. Notwithstanding the impact of copper and silver
sales, as a Company focused on gold production, New Gold aims to
assess the economic results of its operations in relation to gold,
which is the primary driver of New Gold’s business.
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.
Sustaining Capital and Sustaining Lease
"Sustaining capital" is a non-GAAP financial measure as well as
“sustaining lease”. New Gold defines sustaining capital as net
capital expenditures that are intended to maintain operation of its
gold producing assets. A sustaining lease is similarly a capital
lease payment that is sustaining in nature. To determine sustaining
capital expenditures, New Gold uses cash flow related to mining
interests from its statement of cash flows and deducts any
expenditures that are non-sustaining or growth capital. Management
uses sustaining capital and other sustaining costs, to understand
the aggregate net result of the drivers of all-in sustaining costs
other than total cash costs. Sustaining capital and sustaining
lease are intended to provide additional information only, 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.
Growth Capital
"Growth capital" is a non-GAAP financial measure. New Gold terms
non-sustaining capital costs to be “growth capital”, which are
capital expenditures to develop new operations or capital
expenditures related to major projects at existing operations where
these projects will materially increase production. To determine
growth capital expenditures, New Gold uses cash flow related to
mining interests from its statement of cash flows and deducts any
expenditures that are sustaining capital. Growth capital is
intended to provide additional information only, 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.
Total Cash Costs
"Total cash costs per ounce” and total cash costs per gold eq.
ounce are non-GAAP financial measures which are 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, but are
exclusive of amortization, reclamation, capital and exploration
costs. Total cash costs per gold ounce are net of by-product sales
and are divided by gold ounces sold to arrive at a per ounce
figure. Total cash costs per gold eq. ounce are divided by gold eq.
ounces sold to arrive at a per ounce figure. Unless otherwise
indicated, all total cash cost information in this news release is
on a gold eq. ounce basis. Gold eq. ounces of copper and silver
produced in a quarter are computed by calculating the ratio of the
average spot market copper and silver prices to the average spot
market gold price in a quarter and multiplying this ratio by the
pounds of copper and silver ounces produced during that quarter.
Gold eq. ounces produced in a period longer than one quarter are
calculated by adding the number of gold eq. ounces in each quarter
of that period. In 2020 the Company will report gold eq. ounces
using a consistent ratio. This data is furnished to provide
additional information and is a non-GAAP financial measure. Total
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.
Adjusted Net Earnings/(Loss)
"Adjusted net earnings/(loss)" and "adjusted net earnings/(loss)
per share" are non-GAAP financial measures. Net earnings/(loss)
have been adjusted and tax affected for the group of costs in
"Other gains and losses" on the condensed consolidated income
statement and other nonrecurring items. The adjusted entries are
also impacted for tax to the extent that the underlying entries are
impacted for tax in the unadjusted net earnings/(loss) 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 items which are included in other
gains and 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.
Operating Cash Flows Generated from Operations, before Changes
in Non-Cash Operating Working Capital
“Operating cash flows generated from operations, before changes
in non-cash operating working capital” is a non-GAAP financial
measure with no standard meaning under IFRS, which 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.
Operating cash flows generated from operations, before non-cash
changes in working capital is intended to provide additional
information only and does not have any standardized meaning 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.
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.
For additional information with respect to the non-GAAP measures
used by the Company, including reconciliation to the nearest IFRS
measures, refer to the detailed non-GAAP performance measure
disclosure in the Management’s Discussion and Analysis for the
three months ended June 30, 2020 filed at www.sedar.com and on
EDGAR at www.sec.gov.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005272/en/
Anne Day Vice President, Investor Relations Direct: +1
(416) 324-6003 Email: anne.day@newgold.com
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