New
Gold Provides Update on El Morro Project
VANCOUVER, Jan. 9, 2012 /CNW/ - New
Gold Inc. ("New Gold") (TSX:NGD)(NYSE
AMEX:NGD) today provides an update on the El Morro Project where the
company is a 30 percent partner, with Goldcorp
Inc. ("Goldcorp"), the project developer and operator, holding
the remaining 70 percent. El Morro is an advanced stage, world-class
copper/gold project in northern Chile,
one of the most attractive mining jurisdictions in the world.
New Gold has been informed
that Goldcorp's Board of Directors has officially approved the
decision to commence with construction of the El Morro Project, with
the start of construction targeted for the end of the Chilean winter season in September
2012. In total, the development of El Morro is expected to take five
years at a capital cost of $3.9 billion (100% basis). Under the
terms of New Gold's agreement
with Goldcorp, Goldcorp
is responsible for funding New Gold's
30% share of capital costs, or approximately $1.2 billion. The
carried funding will accrue interest at a fixed rate
of 4.58%. New Gold will repay
its share of capital plus accumulated interest out of 80% of its 30% share of
the project's cash flow with New Gold
retaining 20% of its 30% share of cash flow from the time production commences.
"Our 30 percent interest in El Morro positions us very well as we have
a meaningful share of this great project, with a proven mine developer and
operator as a partner and a favourable financing arrangement that carries us
through production," stated Randall Oliphant, Executive
Chairman.
Initial production from the mine is expected in 2017 with full production
anticipated in 2018. Development activities during 2012 will focus on access
road construction, engineering, equipment procurement and exploration. Drilling
will be a combination of additional condemnation drilling for infrastructure
locations and exploration drilling to test potential extensions of the La
Fortuna deposit. La Fortuna, which hosts the current mineral resource, is one
of the two principal zones of gold-copper mineralization that have been
identified to date. The El Morro zone and several additional targets have also
been identified which could become the focus of future exploration efforts.
Current open pit proven and probable mineral reserves on a 100% basis total 537
million tonnes at 0.52% copper and 0.49 grams per tonne gold. New
Gold's 30% share of the reserves includes 1.8 billion pounds copper and
2.5 million ounces gold.
New Gold has recently
received the data and analysis supporting Goldcorp's update of the
project's 2008 feasibility study and has engaged Roscoe Postle Associates
Inc. to complete a detailed review of the results on New
Gold's behalf. The results of Goldcorp's updated study
indicate that New Gold's 30
percent share of annual production is expected to be over 90,000 ounces of gold
and 85 million pounds of copper over an initial 17-year mine life. Life-of-mine
cash costs are expected to be approximately ($700) per ounce of
gold on a by-product basis and approximately $550 per ounce of
gold and $1.45 per pound of copper on a co-product basis. Metals
price assumptions used to calculate the average life-of-mine El Morro cash
costs are $1,200 per ounce of gold and $2.75 per
pound of copper.
The El Morro Project currently contemplates the mining and
milling of sulphide copper and gold ore from the La Fortuna mineral deposit through
a 90,000 tonne-per-day concentrator. The plant design includes: a crushing
plant, semi-autogenous grinding (SAG) circuit, rougher flotation and regrind
circuit, and cleaner and scavenger flotation banks. Additional project-related
infrastructure includes: a desalination plant, power plant and concentrate
filtration plant. The construction of a new access route from the project to
the Pan American highway is also contemplated with the route serving as the
concentrate and water pipeline route, and the preferred location for the
project power line. Water supply is planned to be sourced from a
reverse-osmosis desalination plant that will produce 740 litres per second of
agricultural-quality water, which will be conveyed to site along a 193 kilometre-long water pipeline. Concentrate will be
transferred via pipeline to a concentrate filter plant at the port site for
overseas shipment.
About New Gold Inc.
New Gold is an intermediate
gold mining company. The company has a portfolio of three producing assets and three
significant development projects. The Mesquite Mine in the
United States, the Cerro San Pedro Mine in Mexico
and Peak Gold Mines in Australia
are expected to produce between 380,000 and 400,000 ounces of gold in 2011. The
fully-funded New Afton project in Canada
is scheduled to add further growth in 2012. In addition, New
Gold owns 30% of the world-class El Morro project located in Chile
and, in June 2011, New
Gold acquired the exciting Blackwater project in Canada.
For further information on the company, please visit www.newgold.com.
Cautionary Note Regarding Forward-Looking Statements
Certain information contained in this news release, including any
information relating to New Gold's
future financial or operating performance may be deemed "forward
looking". All statements in this news 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 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. Forward-looking statements are
necessarily based on estimates and assumptions (including that the business of
recent transactions will be integrated successfully in the New
Gold organization) 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; fluctuations in the
international currency markets and in the rates of exchange of the currencies
of Canada, the
United States, Australia,
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, 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 and maintaining
the validity and enforceability of the necessary licenses and permits and
complying with the permitting requirements of each jurisdiction that New
Gold operates, including, but not limited to, Mexico,
where New Gold is involved with
ongoing challenges relating to its environmental impact statement for the Cerro
San Pedro Mine; the lack of certainty with respect to the Mexican
and other 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
the company is or may become a party to, including the third party claim
related to the El Morro transaction with respect to New
Gold's exercise of its right of first refusal on the El Morro copper-gold
project in Chile
and its partnership with Goldcorp Inc., which transaction and third
party claim were announced by New Gold
in January 2010; 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 "Risk Factors" included in New
Gold's disclosure documents filed on and available at www.sedar.com. Forward-looking statements are
not guarantees of future performance, and actual results and future events
could materially differ from those anticipated in such statements. All of the
forward-looking statements contained in this news release are qualified by
these cautionary statements. New Gold
expressly disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, events or
otherwise, except in accordance with applicable securities laws.
Technical Information
The El Morro Project reserves and resources were prepared by Ms. Maryse
Belanger, P. Geo and Ms. Sophie Bergeron, Ing. both of Goldcorp, each a "Qualified Person"
under NI 43-101.
The scientific and technical information in this news release has been
reviewed by Mark Petersen, a Qualified Person under National
Instrument 43-101 and employee of New
Gold.
(1) TOTAL CASH COST
"Total cash cost" per ounce 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 widely accepted as the 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-IFRS measure. Total cash cost presented do not have a standardized meaning prescribed by IFRS and may not be
comparable to similar measures presented by other mining companies. It should
not be considered in isolation as a substitute for measures of performance
prepared in accordance with IFRS and is not necessarily indicative of operating
costs presented under IFRS.