New Gold Announces Revised New Afton Development Schedule and Third Quarter Results
(All figures are in US dollars unless otherwise stated)
VANCOUVER, Nov. 12 /CNW/ - New Gold Inc. ("New Gold") (TSX and AMEX -
NGD) today announced the financial and operational results for the quarter
ending September 30, 2008 and the revised New Afton project development
schedule.
Q3 2008 Highlights
- Gold sales increased by 7% to 67,156 ounces over the prior quarter
- Total cash cost reduced by 8% to $566 per ounce (net of by-product
credits) over the prior quarter
- Adjusted net earnings (1) of $8.0 million or $0.04 per share, before
write down of the Company's investment in Amapari. Net loss was
$148.9 million including the $156.9 million Amapari impairment
- Foreign exchange gains of $15.5 million
- Cash and cash equivalents of $251.1 million
- Decision to slow development of the New Afton Project
Revised New Afton Development Schedule
Due to the volatility and uncertainty of today's capital markets and New
Gold's current cash position coupled with the funding requirements for the
fast track construction of the New Afton project, New Gold has made the
decision to slow development of the project.
Under the revised development plan, surface construction will be shut
down in an orderly fashion over the coming weeks while development of the
underground workings will continue at a reduced rate to gain access to the
bottom of the ore body. The revised schedule projects a cash requirement of
approximately $83.0 million in 2009, as compared to the previous fast track
schedule which had a cash requirement of $320.0 million for the coming year.
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 anticipated full production in the second half of 2012.
"I am most conscious of the impacts that the decision to slow the
development of the New Afton project will have on our shareholders, employees
and the communities adjacent to the project," said Robert Gallagher, President
and Chief Executive Officer. "In the current atmosphere of uncertain financial
markets, coupled with the severe cost pressures in the construction industry,
this is the right action to take to ensure completion of the project in the
shortest time frame while maximizing value to our stakeholders. We have
identified potential cost reductions in the revised development plan. At
today's commodity prices, New Afton will be a strong cash producer. New Gold
is making progress in putting in place the required funding that would enable
us to complete development of the project."
Amapari Write Down
New Gold has reviewed the carrying value of its investment in Amapari and
has concluded that there has been an impairment. The evaluation of results
from the 2007/2008 drill program has not added significant amounts of oxides
that would be economical to process in the existing heap leach circuit.
Remaining heap leachable material will be exhausted in the fourth quarter of
2009. Production beyond 2009 is subject to ongoing studies on the feasibility
of mining and processing the sulphide resources underlying and surrounding the
oxide pits. As a result of the limited mine life for the oxides and unproven
economic viability of the identified sulphide resources, management has
written down its investment in Amapari by $156.9 million, net of tax
recoveries, to a value of $10.6 million.
Third Quarter Financial Review
Consolidated revenue for the third quarter 2008 was $63.4 million with a
realized gold price of $870 per ounce. Gold sales in the third quarter were
67,156 ounces, consistent with previous guidance. Cash cost was $566 per
ounce, net of by-product sales for the third quarter, which is above forecast
due to higher operating costs at Amapari, lower copper concentrate sales at
Peak Mines and the impact of falling copper price on copper revenues not yet
received.
Consolidated net earnings for the third quarter 2008, before the
impairment charge, were $8.0 million, which includes a $15.5 million gain on
foreign exchange. Foreign exchange gains arise mainly from Canadian dollar
denominated monetary items and the revaluation of foreign future income tax
liabilities.
Third Quarter Operational Review
Cerro San Pedro
Cerro San Pedro achieved good results in the third quarter with gold
sales of 26,070 ounces. The increase in production over the second quarter was
due to a higher recovery as leach pads approach equilibrium. Total cash cost,
net of by-product sales for the third quarter, was $369 per ounce and for the
nine month period ending September 30, 2008 was $403 per ounce. Cash cost was
lower in the third quarter mainly because of the increase in the volume of
gold sold, offset by the reduction in the selling price of silver, higher
strip ratio and increased consumable costs. Operating cash flow from the mine
for the third quarter was $7.0 million. Consistent with previous guidance,
gold and silver production during the fourth quarter will be lower than
previous quarters as planned mining progresses through a lower grade, higher
strip ratio phase.
Amapari Mine
Amapari had gold sales of 16,661 ounces in the third quarter at a
realized gold price of $853 per ounce and cash cost of $882 per ounce
resulting in negative cash flow from operations of $5.1 million. The full
impact of the recently improved operating performance on production and cash
cost is expected to be realized in the fourth quarter due to delayed
recoveries associated with heap leaching. Recoverable ounces placed on the
leach pads increased 44 percent from 16,400 in the second quarter to 23,600 in
the third quarter. Higher mobile equipment availabilities resulted in more
tonnes moved and higher grade ore deliveries, while better plant availability
increased tonnes placed. Work to improve recovery is showing positive results
with completed piles averaging 75 percent in the quarter compared to historic
results in the low 60 percent range.
Peak Mines
Peak Mines gold sales in the third quarter totaled 24,425 ounces at a
realized gold price of $878 per ounce sold. Gold production returned to
planned levels with improvement in ore grade as mining focused on primary
stopes. Record mill throughput of 196,633 tonnes reflects consistent
underground production and high mill availability. Total cash cost for the
quarter was $560 per ounce, net of by-product sales. The higher than forecast
cash cost is primarily a result of a negative adjustment of approximately $155
per ounce to copper concentrate accounts receivable, due to decreased copper
prices. Operating cash flow from the Peak Mines in the third quarter was $5.0
million which was adversely impacted by the delay in receipt of copper
concentrate sales.
El Morro
New Gold has a 30 percent interest in the El Morro project with joint
venture partner and operator Xstrata plc ("Xstrata"). El Morro is a 450
million tonne copper-gold deposit located in north-central Chile. New Gold's
share of the project's reserves is 2 million ounces of gold and 1.7 billion
pounds of copper.(2) Development of the El Morro project is expected to
progress to the permitting stage with delivery of the project's Environmental
Impact Statement to the Chilean Authorities in the coming weeks. 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,
at New Gold's election, 70 percent of New Gold's 30 percent share of El
Morro's project development costs. New Gold is pleased to see the project
progressing towards the permitting stage and views El Morro as an important
part of its growth pipeline.
Corporate Outlook
"The third quarter saw improvements in operating performance at Amapari
and Peak Mines and we expect to see the full effect of those improvements in
the fourth quarter results. At Cerro San Pedro gold production has ramped up
continuously to record levels in the third quarter. Consistent with previous
guidance, production will be lower in the fourth quarter due to planned mining
of lower grade ore. Consolidated total cash cost, net of by-product sales,
will be adversely impacted with the recent decrease in copper and silver
prices. As a result, New Gold expects to exceed its cash cost guidance for the
full year but leaves its anticipated gold production of 250,000 ounces for the
year unchanged" said Robert Gallagher, President and Chief Executive Officer.
"In the current uncertain and volatile financial atmosphere, New Gold has
made the decision to slow development at the New Afton project to maintain its
solid financial position. At the end of the current quarter New Gold has cash
and cash equivalents of $251.1 million. New Afton is an important part of New
Gold's internal growth strategy and management is making progress in putting
in place the required funding that would enable us to resume full development
of the project."
(1) 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.
(2) Proven and probable reserves 450,234,000 tonnes; gold grade 0.46 gpt
and copper 0.58%; the qualified persons (as defined under NI 43-101)
for the mineral reserve estimates are Barton G. Stone, P.G., and
Richard J. Lambert, P.E., Pincock, Allen & Holt. See El Morro
Feasibility Technical Report, May 9, 2008.
Please click http://files.newswire.ca/764/New_Gold_Q3_Financial.pdf to
view the financial statements
Please click http://files.newswire.ca/764/New_Gold_Q3_MDA.pdf to download
the third quarter report
Conference Call-in Details
New Gold will hold a conference call on Thursday, November 13, 2008 at
10:00 a.m. Pacific 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. You can listen to a recorded playback of the call
after the event until December 11, 2008 by dialing 1-800-408-3053 or
1-416-695-5800 for calls outside Canada and the U.S. Passcode 3273675.
New Gold is an intermediate gold mining company with three operating
assets in Mexico, Brazil and Australia and two development projects in each of
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 as 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: anticipated synergies
from the business combination may not be realized, there may be difficulties
in integrating the operations and personnel of New Gold, Peak Gold Ltd. and
Metallica Resources Inc. New Gold is subject to significant capital
requirements associated with its expanded operations and portfolio of
development projects since completion of the business combination;
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
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 August
14, 2008 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.
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. The
Company 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 then divided by ounces sold
to arrive at the total 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.
For further information: M�lanie Hennessey, Vice President, Investor
Relations, New Gold Inc., Direct: (604) 639-0022, Toll-free: +1 (888)
315-9715, Email: info@newgold.com, Website: www.newgold.com
.
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