New Gold Announces 2008 Financial Results for its First Year as a Producer
(All figures are in US dollars unless otherwise stated)
VANCOUVER, March 17 /CNW/ - New Gold Inc. ("New Gold" or the "Company")
(TSX and NYSE Alternext US - NGD) today announced the financial and
operational results for the fourth quarter and year ended 2008(1), which
represents the Company's first year in production. In addition, New Gold
provided an update on the execution of its accretive growth strategy.
Highlights
- Gold production of 272,046 ounces in 2008(2)
- Total cash costs of $549 per ounce (net of by-product sales)(2) in 2008
- Adjusted net earnings(3) of $19.2 million or $0.13 per share
- Cash flow from operations of $66.1 million in 2008(4)
- Year end cash and equivalents of $185.6 million
- Completed business combination with Peak Gold Ltd. ("Peak Gold") and Metallica Resources Inc. ("Metallica") on June 30, 2008
- New Afton project construction schedule extended with start up expected in the second half of 2012
- Successful ramp-up of Cerro San Pedro in its first full year of operation
- Announced business combination with Western Goldfields Inc. on
- March 4th, 2009
"Despite the unprecedented economic challenges which unfolded in 2008,
New Gold made excellent progress on its strategic objectives while exceeding
production targets by 9%," said Robert Gallagher, President and Chief
Executive Officer. "New Gold made difficult decisions in a tough market
environment to ensure that the Company was in a stronger position to execute
our accretive growth strategy through operational excellence, continued
development of our New Afton project, and further consolidation of junior gold
producers. I'm thrilled about the next milestone in the exciting growth of
this Company; the recent announcement of the business combination with Western
Goldfields further delivers on our previously stated growth strategy."
Fourth Quarter and Annual Consolidated Financial Results(1)
Consolidated revenue for the fourth quarter of 2008 was $59.0 million for
a total of $218.1 million for the full year. Gold sales in the fourth quarter
were 78,194 ounces at a realized gold price of $792 per ounce and for the full
year totalled 237,589 ounces at a realized gold price of $863 per ounce, which
excludes production from Cerro San Pedro prior to the completion of the
business combination with Peak Gold and Metallica.
Reported net earnings for the fourth quarter were $41.1 million and the
reported net loss for the full year 2008 was $102.7 million. Reported earnings
for 2008 were increased by foreign exchange gains ($50.0 million net of tax)
and were decreased by the Amapari write down ($156.9 million net of tax) as
well as certain expenses related to the business combination with Peak Gold
and Metallica ($15.0 million, net of tax).
Cash flow from mining operations in 2008 was $20.3 million in the fourth
quarter and $45.8 million for the year. Cash flow from mining operations for
the full year including results from Cerro San Pedro for the period prior to
the close of the business combination with Peak Gold and Metallica was $66.1
million.
2008 Operational Review
Cerro San Pedro
Cerro San Pedro completed its first full year of production exceeding
expectations in operations, health and safety, environmental management
systems and practices. Cerro San Pedro achieved gold sales of 21,180 ounces at
a realized gold price of $799 per ounce sold in the fourth quarter and 85,362
ounces at a realized gold price of $872 per ounce for the full year. Total
cash cost, net of by-product sales was $522 per ounce for the fourth quarter
and $432 per ounce for the full year. The increased cost in the fourth quarter
is consistent with previous guidance as mining progressed through a lower
grade, higher strip ratio phase. Also contributing were higher consumable
costs, somewhat offset by depreciation of the Mexican Peso versus the US
dollar. The fourth quarter operating loss at Cerro San Pedro was $18.2 million
which includes an $18.0 million increase in operating expenses due to purchase
price allocation adjustments related to the revaluation of heap leach
inventory. For the full year earnings at Cerro San Pedro were $5.5 million(4).
Peak Mines
Peak Mines achieved gold sales of 28,815 ounces in the fourth quarter at
a realized gold price of $788 per ounce sold and 102,928 ounces at a realized
gold price of $877 per ounce for the full year. Record mill throughput of
768,727 tonnes in 2008 reflected New Gold's commitment to constant improvement
at its operations and demonstrates the high level of competency of the Peak
Mines' operating team. Total cash cost net of by-product sales was $624 per
ounce for the quarter and $477 per ounce for the full year. Higher cash cost
is solely due to decreasing copper price through the latter half of the year
with re-pricing of concentrate in process. Direct operating costs for 2008, in
Australian dollar terms were only 10% higher than those of 2007, with the cost
per tonne milled unchanged year on year. Earnings from Peak Mines were $2.5
million in the fourth quarter and $28.6 million for the full year 2008.
Amapari Mine
Amapari achieved gold sales of 28,199 ounces in the fourth quarter at a
realized gold price of $791 per ounce and 87,412 ounces at a realized gold
price of $859 per ounce for the year. Total cash cost for the quarter was $568
per ounce and for the full year was $748 per ounce. Earnings from Amapari were
$1.6 million in the fourth quarter and a loss of $177.1 million for the full
year 2008, net of the $156.9 million impairment charge (net of tax).
The full impact of the improved operating performance was realized in the
fourth quarter with record quarterly gold production. However, due to
depletion of ore suitable for treatment at the existing facilities, Amapari
was placed on temporary care and maintenance on January 2, 2009. New Gold is
evaluating a recently completed Preliminary Economic Assessment on the
economics of exploiting the underlying sulphide resources which would require
installation of a conventional crush/grind/carbon-in-leach mill. Considering
the large land package in a geologically interesting setting and the
occurrence of several interesting targets, the Company is also investigating
other strategic alternatives for the Amapari project.
Development Projects Update
New Afton
New Afton is an exciting project currently under construction in Western
Canada, a region known as an attractive destination for development. At
today's gold and copper prices, New Afton will be a significant cash flow
generator, expecting to more than double the current cash flow from our two
operating assets in 2013.
On November 12, 2008, the Company announced that due to New Gold's cash
position coupled with the funding requirements of the fast track construction
of the New Afton project and the uncertainty of today's capital markets, it
was extending the development schedule of the project. Under the revised
development plan, surface construction is being curtailed while the critical
path development of the underground workings will continue at a reduced rate.
Under the original fast track schedule, operations were to commence in late
2009 ramping up to achieve full production in the second quarter of 2011. With
the revised plan, surface construction would resume at the end of 2010 with
full production achieved in the second half of 2012. The delayed start up
provides additional time to arrange the required capital with initial
production more likely being achieved in robust metal markets.
The total project development spend excluding interest was $167.8 million
up to December 31, 2008 (at an average CDN:USD exchange rate of 0.95). Under
the revised development schedule the estimated remaining spend (excluding
interest) to bring the project into production is $60 million in 2009 and $340
million between 2010 and 2012 (at an average CDN:USD exchange rate of 0.88).
El Morro
The El Morro copper-gold project entered the permitting stage in November
2008, with delivery of the project's Environmental Impact Statement to the
Chilean Authorities. Permitting is expected to take from 12 to 18 months,
after which development activities could proceed. Total capital cost of the
project has been estimated at $2.5 billion. New Gold has an agreement with
Xstrata whereby Xstrata will finance 70 percent of New Gold's 30 percent share
of El Morro's project development costs. New Gold will repay the funds
advanced by Xstrata through 80 percent of its share of cash flow from the
project. With this funding agreement in place and the project entering the
permitting stage, New Gold is well positioned to participate in this world
class development project, in one of the most mining friendly jurisdictions.
Liquidity and Capital Review
At December 31, 2008, the Company's cash balance was $185.6 million. The
face value of the debt at December 31, 2008 was CDN$292 million, comprised of
CDN$237 million in Senior Secured Notes and CDN$55 million in Convertible
Debentures. On January 9, 2009, the Company reduced its debt position by
CDN$50 million, through the buy back of a portion of its Senior Secured Notes
for cash consideration of CDN$30 million. As a result of this transaction, New
Gold's total debt position was reduced to CDN$242 million.
The Company's capital expenditures for 2008, as per the consolidated
statement of cash flows, was $133.8 million, which includes $87.5 million for
New Afton (including interest), $29.4 million for Peak Mines, $7.1 million for
Amapari and $9.8 million for Cerro San Pedro and El Morro. Exploration expense
in 2008 was $8.5 million.
Corporate Outlook
New Gold is forecasting 2009 gold production of between 190,000 and
210,000 ounces at a cash cost of between $465 and $485 per ounce, net of
by-product sales. Capital expenditures for 2009 are expected to be $107.0
million, which includes $78.5 million for New Afton (including capitalized
interest), $24.5 million for Peak Mines and $2.8 million for Cerro San Pedro.
Exploration expense in 2009 is expected to be $6.2 million.
Assumptions used in the 2009 forecast for Peak Mines and Cerro San Pedro
include copper and silver prices of $2.00 per pound and $10.00 per ounce,
respectively, and Australian dollar and Mexican peso exchange rates of $0.70
and $12.00 to the U.S. dollar, respectively.
Robert Gallagher, President and Chief Executive Officer said "As we look
forward to 2009, we are committed to delivering on our operational targets. We
will continue to demonstrate prudent financial management and take the steps
necessary to maintain a strong financial position. We see sizable opportunity
for growth through the development of our New Afton project, and through
further consolidation of junior gold producers."
To view the 2008 financial statements and management discussion and
analysis please click here: http://files.newswire.ca/764/NewGoldMDAFIN.pdf.
Business Combination with Western Goldfields Inc.
On March 4, 2009, the Company announced a business combination with
Western Goldfields Inc. ("Western Goldfields"). Under the terms, New Gold will
acquire by way of a plan of arrangement all of the outstanding common shares
of Western Goldfields on the basis of one New Gold common share and CDN$0.0001
in cash for each common share of Western Goldfields (the "Transaction"). Upon
completion of the Transaction, existing New Gold and Western Goldfields
shareholders will own approximately 58% and 42% of the combined company,
respectively.
Based on the closing price of New Gold's common shares on the TSX of
CDN$2.30 on March 3, 2009, this offer represented a premium of 19.2% to the
closing price of Western Goldfields shares on the TSX on March 3, 2009 and
20.1% to the 20-day volume weighted average trading price of both companies'
shares on the TSX.
Highlights of the Transaction:
- Diversified gold production base from three gold mines in mining-friendly jurisdictions with forecasted gold production of approximately 335,000 ounces in 2009, expected to increase to over 400,000 ounces in 2012
- Strong cash flow to fully fund development at the New Afton copper-gold project in British Columbia
- Delivers on industry consolidation in a rising gold price environment
- Combines experienced management teams and boards of directorsEnhances market presence
- Increases mineable reserves to a total of 7.6 million gold ounces within a measured and indicated resource of 12.2 million gold ounces
The parties expect to complete and mail the joint information circular in
April 2009 and plan to hold the special meetings in May 2009. The Transaction
is expected to close at the end of May 2009.
Robert Gallagher, President and Chief Executive Officer said "We are
excited about the opportunity of building the leading intermediate gold
producer with the recent announcement of the business combination with Western
Goldfields. This is in line with our growth strategy and vision of becoming a
million ounce gold producer by 2012. This represents significant value for
both the New Gold and Western Goldfields shareholders with a greater leverage
to gold, immediate increase in production and operating cash flow,
strengthened financial position to contribute to the funding of our New Afton
development project, while remaining in mining-friendly jurisdictions."
(1) Due to the business combination between New Gold, Peak Gold and
Metallica which closed on June 30, 2008 the consolidated financial
statements of the company are presented on the basis that Peak Gold
is the acquirer for accounting purposes. Therefore consolidated
income and cash flow statements for January 1 through December 31,
2008 include results of Peak Gold for the period of January 1 to
December 31 and results of Metallica and New Gold assets from July 1
to December 31. The consolidated balance sheet at December 31, 2008
reflects the balances of the merged entity. For convenience, the
operating highlights, including total cash costs include full year
results from the operations of the three entities.
(2) Includes 12 months commercial operations for Peak Mines, Cerro San
Pedro and Amapari. Total production excluding Cerro San Pedro for
the first six months of 2008 was 237,589 ounces of gold and cash
cost per ounce of gold sold was $569.
(3) This data is furnished to provide additional information and is a
non-GAAP measure. It should not be considered in isolation as a
substitute for measures of performance prepared in accordance with
GAAP and is not necessarily indicative of net earnings presented
under GAAP.
(4) Includes 12 months commercial operations for Cerro San Pedro.
Conference Call-in Details
New Gold will hold a conference call on Tuesday, March 17, 2009 at 1:00
p.m. Eastern time to discuss these results. You may join the call by dialing
toll free 1-888-789-9572 or 1-416-695-7806 to access the call from outside
Canada or the U.S. Passcode 3281215. You can listen to a recorded playback of
the call after the event until April 14, 2009 by dialing 1-800-408-3053 or
1-416-695-5800 for calls outside Canada and the U.S. Passcode 3281215.
New Gold is an intermediate gold mining company with operating assets in
Mexico, and Australia and development projects in Canada and Chile. For
further information on New Gold, please visit our website at www.newgold.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information contained in this press release, including any
information relating to New Gold's future financial or operating performance,
may be deemed "forward looking". All statements in this press release, other
than statements of historical fact, that address events 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 words "expects", "does not expect", "plans",
"anticipates", "does not anticipate", "believes", "intends", "estimates",
"projects", "potential", "scheduled", "forecast", "budget" and similar
expressions, or that events or conditions "will", "would", "may", "could",
"should" or "might" occur. All such forward looking statements are subject to
important risk factors and uncertainties, many of which are beyond New Gold's
ability to control or predict. 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 New Gold's
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: New Gold and Western
Goldfields will be able to satisfy the conditions in the Business Combination
Agreement, that the required approvals (shareholder, third party regulatory
and governmental) will be obtained and all other conditions will be satisfied
or waived; the results of the preliminary economic assessment assessing the
viability of a new process facility at Amapari; New Gold's operations are
subject to significant capital requirements; fluctuations in the international
currency markets and in the rates of exchange of the currencies of Canada, the
United States, Australia, Brazil, Mexico and Chile; price volatility in the
spot and forward markets for commodities; impact of any hedging activities,
including margin limits and margin calls; discrepancies between actual and
estimated production, between actual and estimated reserves and resources and
between actual and estimated metallurgical recoveries; changes in national and
local government legislation in Canada, the United States, Australia, Brazil,
Mexico and Chile 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 necessary licenses and permits; diminishing
quantities or grades of reserves; competition; loss of key employees;
additional funding requirements; actual results of current exploration or
reclamation activities; 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. In addition, there are
risks and hazards associated with the business of mineral exploration,
development and mining, including environmental 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 "Risks and Uncertainties" included
in New Gold's MD&A filed on November 12, 2008, 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 press 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.
CAUTIONARY NOTE TO U.S. READERS CONCERNING ESTIMATES OF MEASURED, INDICATED AND INFERRED RESOURCES
Information concerning the properties and operations of New Gold has been
prepared in accordance with Canadian standards under applicable Canadian
securities laws, and may not be comparable to similar information for United
States companies. The terms "Mineral Resource", "Measured Mineral Resource",
"Indicated Mineral Resource" and "Inferred Mineral Resource" used in this
press release are Canadian mining terms as defined in accordance with NI
43-101 under guidelines set out in the Canadian Institute of Mining,
Metallurgy and Petroleum ("CIM") Standards on Mineral Resources and Mineral
Reserves adopted by the CIM Council on December 11, 2005. While the terms
"Mineral Resource", "Measured Mineral Resource", "Indicated Mineral Resource"
and "Inferred Mineral Resource" are recognized and required by Canadian
regulations, they are not defined terms under standards of the United States
Securities and Exchange Commission. Under United States standards,
mineralization may not be classified as a "reserve" unless the determination
has been made that the mineralization could be economically and legally
produced or extracted at the time the reserve calculation is made. As such,
certain information contained in this press release concerning descriptions of
mineralization and resources under Canadian standards is not comparable to
similar information made public by United States companies subject to the
reporting and disclosure requirements of the United States Securities and
Exchange Commission. An "Inferred Mineral Resource" has a great amount of
uncertainty as to its existence and as to its 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. Readers are cautioned not to assume that all or any part of
Measured or Indicated 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. In addition,
the definitions of "Proven Mineral Reserves" and "Probable Mineral Reserves"
under CIM standards differ in certain respects from the standards of the
United States Securities and Exchange Commission.
(1) CASH COST
"Total cash cost" figures are calculated in accordance with a standard
developed by The Gold Institute, which was a worldwide association of
suppliers of gold and gold products and included leading North American gold
producers. The Gold Institute ceased operations in 2002, but the standard is
the accepted standard of reporting cash cost of production in North America.
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 cost on a sales basis. Total cash cost includes mine site
operating costs such as mining, processing, administration, royalties and
production taxes, but is exclusive of amortization, reclamation, capital and
exploration costs. Total cash cost is reduced by any by-product revenue and is
then divided by ounces sold to arrive at the total by-product cash cost of
sales. The measure, along with sales, is considered to be a key indicator of a
company's ability to generate operating earnings and cash flow from its mining
operations. This data is furnished to provide additional information and is a
non-GAAP measure. It should not be considered in isolation as a substitute for
measures of performance prepared in accordance with GAAP and is not
necessarily indicative of operating costs presented under GAAP. The
calculation of "Cash Cost" is consistent with Western Goldfields' prior
disclosures of "Cost of Sales"; Western Goldfields does not have by-product
credits.
For further information:
M�lanie Hennessey, Vice President Investor Relations, New Gold Inc.,
Direct: (604) 639-0022
Toll-free: (888) 315-9715
Email: info@newgold.com
Website: www.newgold.com
or
Vanguard Shareholder Solutions
Tel: (604) 608-0824
Toll Free: (866) 398-1088
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