New Gold produces 79,531 ounces gold in third quarter
2009-11-04 01:21 ET - News Release
Mr. Robert Gallagher reports
NEW GOLD ANNOUNCES A 16% INCREASE IN PRODUCTION, 17% DECREASE IN CASH COST IN THE THIRD QUARTER 2009 AND ENHANCED VALUE FOR ITS EL MORRO PROJECT
New Gold Inc. today released unaudited financial and operational results for the third quarter ended Sept. 30, 2009. Gold production was 79,531 ounces in comparison with 68,801 ounces in the same quarter in 2008. Earnings from mine operations increased by 67 per cent to $22.6-million from $13.5-million in the third quarter of 2008.
All figures are in United States dollars, unless otherwise stated.
Third quarter 2009 highlights:
- 16-per-cent increase in gold sales to 77,645 ounces from 67,156 ounces in the corresponding quarter in 2008;
- 17-per-cent decrease in total cash cost per ounce sold, net of byproduct sales, to $470 from $565 in the corresponding quarter of 2008;
- Cash and cash equivalents of $242.6-million at Sept. 30, 2009;
- Recent El Morro announcement increased the market value of the project.
"We are very pleased to report increased production and reduced cash cost in the third quarter, which demonstrates that we continue to deliver on our operational targets and we fully expect to continue on this trend going forward. The company has built tremendous momentum over the last six months and plans to continue to enhance value through assets such as El Morro and delivering on our growth strategy," said Robert Gallagher, president and chief executive officer.
Third quarter financial review
In the third quarter 2009, earnings from mine operations were $22.6-million in comparison with $13.5-million in the third quarter of 2008. Third quarter net earnings were $4.1-million, or one cent per basic share, in comparison with a net loss of $148.9-million, or 70 cents per basic share, in the same period in 2008. The third quarter 2009 increase in net earnings is primarily due to higher gold and silver production at Cerro San Pedro, initiation of production from the high-copper-grade Chesney orebody at Peak, the successful acquisition of the Mesquite mine which positively impacted earnings and a loss from discontinued operations of $166.9-million on the Amapari mine in the third quarter 2008.
Third quarter gold sales improved by 16 per cent to 77,645 ounces at an average realized gold price of $959 per ounce compared with 67,156 ounces at an average realized gold price of $870 per ounce in the corresponding quarter of 2008. The increase in gold sales in comparison with 2008 is mainly due to a significant increase in total tonnes of ore mined at Cerro San Pedro and from the successful acquisition of the Mesquite mine.
Total cash cost per gold ounce sold, net of byproduct sales, decreased by 17 per cent in the third quarter to $470 from $565 in the third quarter of 2008. This was primarily due to a significant increase in silver revenues at Cerro San Pedro, an increase in copper revenues at Peak Mines and a favourable Australian-dollar exchange rate versus the United States dollar.
Cash flow from operations in the third quarter 2009 was $6-million compared with cash flow used by operations of $5.4-million for the same period in 2008. The 2009 increase is mainly attributable to increased gold production, a 10-per-cent increase in average realized gold price per ounce sold of $959 in comparison with $870 in the third quarter 2008 and increased byproduct revenue. Consistent with New Gold's mine plans, cash flow from operations should continue to move higher in the fourth quarter of 2009 as production continues to increase.
Nine-month period
For the nine months ended Sept. 30, 2009, earnings from mine operations were $48.9-million in comparison with $36-million in the same period in 2008. For the year-to-date 2009 period, the net loss was $186.7-million, or 67 cents per basic share, compared with a net loss of $143.8-million, or $1.14 per basic share, in the same period in 2008.
For the nine months ended Sept. 30, 2009, gold sales were 185,932 ounces at an average realized gold price of $935 per ounce compared with 159,397 ounces at an average realized gold price of $915 per ounce in the corresponding period in 2008. The increase in gold sales in comparison with 2008 is mainly due to a 121-per-cent increase total tonnes of ore mined primarily from the acquisition of Mesquite and from ramping up Cerro San Pedro.
For the nine months ended Sept. 30, 2009, total cash cost per gold ounce sold, net of byproduct sales, decreased by 19 per cent to $460 from $568. The reduction in total cash cost compared with the same period in 2008, is mainly due to a significant increase in silver revenues at Cerro San Pedro and increased copper revenues at Peak Mines, which was partially offset by an unfavourable movement in the Australian-dollar exchange rate.
For the nine months ended Sept. 30, 2009, cash flow from operations increased by $18.9-million to $24.6-million from $5.7-million in the same period in 2008. The increase in cash flow from operations is mainly attributable to increased gold production and increased byproduct revenues.
Operational review
Mesquite
Gold sales at Mesquite for the third quarter totalled 27,594 ounces, compared with the quarterly record gold sales of 47,535 ounces in the corresponding quarter of 2008. For the nine months ended Sept. 30, 2009, gold sales were 87,647 ounces compared with 80,255 ounces sold in the same period in 2008, which includes the first five months of production in 2009 and the full period in 2008 prior to New Gold ownership. As the strip ratio has decreased during this period in comparison with 2008, Mesquite has been able to increase the tonnes processed by three million to 8.7 million tonnes, which will continue to positively impact production going forward.
Total cash cost per gold ounce sold in the third quarter of 2009 was $662 compared with $390 in the third quarter of 2008. Total cash cost per gold ounce sold for the nine months ended Sept. 30, 2009, was $624 compared with $503 in the same period last year. The total cash cost increase during this period is mainly attributable to lower production and the following temporary items: use of a mining contractor to catch up on waste stripping, fewer ounces of gold and more waste than modelled in the Rainbow 3 pit, increased cost associated with abnormal equipment maintenance and a one-time changeover from bias ply to radial tires for the entire haulage fleet. Additionally, Mesquite has increased cyanide and lime consumption to achieve optimum recovery. As outlined in the mine plan, production at Mesquite began ramping up in the month of September and is expected to continue on this trend in the fourth quarter, providing the highest production levels for the year.
Cerro San Pedro
Cerro San Pedro gold sales totalled 27,193 ounces for the third quarter compared with 26,070 ounces in the same quarter in 2008. For the nine months ended Sept. 30, 2009, gold sales were 68,857 ounces compared with 64,182 ounces sold in the same period in 2008, which includes the first six months of production in 2008 prior to New Gold ownership. The increase in gold sales during the quarter was due to higher tonnes placed on the pad and increased recovery rate, partially offset by lower feed grade. Silver sales for the third quarter increased significantly to 382,278 ounces compared with 305,430 ounces sold in the third quarter of 2008. For the nine months ended Sept. 30, 2009, silver sales were 1.2 million ounces compared with 800,000 ounces sold in 2008, which includes the first six months of production in 2008 prior to New Gold ownership. The increase in silver production in the quarter is attributed to higher silver grades mined and the benefits of secondary leaching which commenced during the first half of 2009.
Total cash cost per gold ounce sold, net of byproduct sales for the third quarter, was $416 compared with $367 in the third quarter of 2008. Total cash cost per gold ounce sold, net of byproduct sales, for the nine months ended Sept. 30, 2009, was $394 compared with $370 in the same period last year. The increase in cash cost is due to significantly higher tonnes moved and slightly higher consumable costs, which were partly offset by the depreciation in the Mexican peso versus the United States dollar and higher silver revenues.
Peak Mines
Peak Mines' gold sales in the third quarter totalled 22,858 ounces compared with 24,425 ounces in the same quarter of 2008. For the nine months ended Sept. 30, 2009, gold sales totalled 61,653 ounces compared with 74,114 ounces sold in the same period of 2008. Copper sales increased by 119 per cent during the third quarter 2009 to 3.8 million pounds from 1.7 million pounds in the same period in 2008. Gold sales were lower and copper sales higher in the third quarter 2009 in comparison with the same quarter in the prior year due to mining shifting to zones of higher copper grades and lower gold content, which was partially offset by higher gold recoveries. The mill feed was 8 per cent lower and 42 per cent higher in gold and copper grade, respectively.
Total cash cost per gold ounce sold, net of byproduct sales, for the third quarter was $302, compared with $560 in the same period of 2008. Total cash cost per gold ounce sold, net of byproduct sales, for the nine months ended Sept. 30, 2009, was $332 compared with $426 in the same period last year. The decrease in cash cost is primarily due to higher copper revenues from increased copper sales, which was partly offset by an increase in the Australian-dollar exchange rate versus the United States dollar.
New Afton project update
The development schedule for New Afton remains on budget and on schedule to commence production in the second half of 2012. During the third quarter of 2009, underground development crews advanced development by 453 metres compared with 424 metres during the second quarter of 2009. An underground development milestone was achieved in the third quarter with the breakthrough of the conveyor decline which creates a secondary access to the mine and facilitates improved equipment access.
Project spend during the third quarter at New Afton was $12.2-million (including $6-million of capitalized interest), which mainly comprise underground development. For the nine months ended Sept. 30, 2009, the project spend was $51.4-million (including $15.8-million of capitalized interest). The New Afton development cost is expected to be financed internally from existing financial resources and operating cash flow.
Third quarter results overview
Third quarter and year-to-date results for 2009 and 2008 presented in the attached table are for the period of ownership for the Mesquite and Cerro San Pedro mines, following the business combinations with Western Goldfields on June 1, 2009, and Metallica Resources Inc. and Peak Gold Ltd. on June 30, 2008, respectively.
THIRD QUARTER RESULTS OVERVIEW For the three months For the year ended Sept. 30, ended Sept. 30, 2009 2008 2009 2008 Production Mesquite gold (ounces) 29,012 - 38,053 - Cerro San Pedro Gold (ounces) 24,928 24,387 69,721 24,387 Silver (ounces) 342,633 282,055 1,184,110 282,055 ------- ------- --------- ------- Peak Mines Gold (ounces) 25,591 26,662 68,601 72,875 Copper (million pounds) 3.6 2.4 11.7 5.8 ------- ------- --------- ------- Amapari gold (ounces) - 17,752 13,726 56,891 ======= ======= ========= ======= Total production Gold (ounces) 79,531 68,801 190,101 154,153 Copper (million pounds) 3.6 2.4 11.7 5.8 ------- ------- --------- ------- Silver ounces 342,633 282,055 1,184,110 282,055 ======= ======= ========= ======= Gold sales ounces 77,645 67,156 185,932 159,397 ------- ------- --------- ------- Total cash cost/ounces $470 $565 $460 $568
Two thousand nine forecast update
New Gold's previously announced 2009 gold production guidance of 270,000 to 300,000 ounces and total cash cost of $470 to $490 per ounce of gold sold, net of byproduct sales, remains unchanged.
Value enhancement
New Gold is working on enhancing value of key assets in its portfolio beyond the levels currently ascribed by the broader market. These assets include: the El Morro project with the recent announcement made by Barrick Gold Corp., the Amapari project, where New Gold completed a scoping study last April and several parties have shown interest in purchasing the asset, and the asset-backed notes, where the company may have the opportunity to sell the notes for additional cash if required, given that their trading value has been steadily increasing, in line with the broader credit market, over the last year.
El Morro is a copper-gold project in Chile. New Gold has a 30-per-cent interest with project operator, Xstrata Copper Chile SA, which owns the remaining 70 per cent. On Oct. 12, 2009, Barrick announced in Stockwatch that it has entered into an agreement with Xstrata to acquire its 70-per-cent interest in the El Morro project for $465-million in cash. New Gold has the right of first refusal to purchase Xstrata's 70-per-cent interest. The company is currently reviewing alternatives to maximize the value of its 30-per-cent stake, which would include but are not limited to the following options:
- Exchange New Gold's stake for a gold-producing asset;
- Participate in the development of the asset with an experienced, gold-focused partner;
- Monetize New Gold's stake.
New Gold's share of the El Morro project represents annual estimated average production of 95,000 ounces of gold and 100 million pounds of copper over a 15-year mine life.
Robert Gallagher, president and chief executive officer, said: "As we look forward to the fourth quarter, we reiterate our guidance and remain focused on continued improvements at the Mesquite operation as we ramp up production. We will continue to work towards unlocking value from assets such as El Morro, Amapari and the asset-backed notes which will further strengthen our financial position and contribute towards achieving our future production growth targets."
Conference call-in details
New Gold will hold a conference call and webcast on Wednesday, Nov. 4, at 10 a.m. ET, to discuss the 2009 third quarter results. Anyone may join the call by dialling toll-free 1-888-789-9572 or 1-416-695-7806 to access the call from outside Canada or the United States -- pass code 4424442. Investors can listen to a recorded playback of the call after the event until Dec. 17, 2009, by dialling 1-800-408-3053 or 1-416-695-5800 for calls outside Canada and the U.S. pass code 8373702.
A live and archived webcast will also be available at the company website.
We seek Safe Harbor.
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