New Gold Announces a 30% Increase in Gold Sales and a 37% Reduction in Cash Cost with Cash Flow from Operations Increasing by $20 Million in the Second Quarter
(All figures are in US dollars unless otherwise stated)
As previously announced, during the quarter, the Company closed its merger with Western Goldfields Inc. (“Western Goldfields”) delivering on its strategy of value generating growth through continued merger and acquisition activity. The 2009 second quarter results presented below include one month of operations from Western Goldfields’ Mesquite mine.
Q2 2009 Highlights
- Operating cash flows of $16.5 million compared to cash flows used
from operations of $3.0 million in the corresponding quarter of 2008
- Adjusted net earnings(1) of $10.6 million, or $0.04 per share,
compared to adjusted net loss(1) of $4.7 million, or $0.05 per share,
in the corresponding quarter of 2008
- Gold production of 55,633 ounces representing a 32% increase over the
corresponding quarter in 2008
- Gold sales of 52,890 ounces at a total cash cost(2) per ounce sold,
net of by-product sales of $468 compared to 40,540 ounces at a total
cash cost(2) per ounce sold, net of by-product sales of $742, in the
corresponding quarter of 2008
- Cash and cash equivalents of $141.1 million at June 30, 2009
- Closed business combination with Western Goldfields Inc. on June 1st,
2009
“We are pleased to report a 30% increase in gold sales, a 37% decrease in cash cost and a
Second Quarter Financial Review
In the second quarter 2009, adjusted net earnings(1) were
Gold sales improved by 30% with 52,890 ounces at an average realized gold price of
- Additional gold and silver production from Cerro San Pedro which was
acquired on June 30, 2008;
- Increased copper sales volumes at Peak Mines in the second quarter of
2009 due to the transition into the Chesney ore body which contains
high copper grades, partially offset by lower copper prices;
- No high total cash cost(2) gold production from Amapari effective
March 31, 2009;
- Additional production from the Mesquite mine which was acquired
June 1 through the business combination with Western Goldfields; and
- Favourable Australian dollar exchange rate.
Cash flow from operations in the second quarter 2009 was
Operational Review
Mesquite
Gold sales at Mesquite for the period of ownership (subsequent to
For the period of ownership, total cash cost(2) per gold ounce sold was
- An increase in total tonnes moved of 13.9 million versus
12.5 million;
- Fewer ounces of gold and more waste than modelled in the Rainbow
Phase 3 layback;
- A one-time changeover from bias ply to radial tires for the entire
haulage fleet;
- Use of a mining contractor to catch up on waste stripping; and
- One time maintenance costs to correct component failures in the
haulage fleet.
The maintenance issues at Mesquite have now been resolved and the installation of radial tires on the trucks will result in reduced operating costs and higher production rates going forward. The use of a mining contractor allows for earlier production from Rainbow Phase 2, where the gold-bearing structure is more robust than Rainbow’s Phase 3.
Total cash cost(2) per gold ounce sold for the six months ended
For the period of ownership, loss from operations at Mesquite was
With significantly higher production expected in the second half of the year resulting in lower cash cost(2), we maintain our 2009 production guidance of 140,000 to 150,000 ounces, and anticipate slightly higher cash cost(2) per gold ounce sold in comparison to guidance of
Cerro San Pedro
Cerro San Pedro gold sales totaled 23,350 ounces at a realized gold price of
Total cash cost(2) per gold ounce sold, net of by-product sales, for the second quarter was
Second quarter earnings from operations at Cerro San Pedro were
As with Mesquite, the 2009 Cerro San Pedro mine plan projects increased gold production in the second half of 2009. Due to higher than planned silver production and prices, it is anticipated that cash cost(2) per gold ounce sold, net of by-product sales, will be lower than 2009 guidance of
Peak Mines
Peak Mines’ gold sales in the second quarter totaled 17,939 ounces at a realized gold price of
- Mining shifting to the Chesney ore body in the second quarter 2009,
which has higher copper grades;
- Lower than expected gold grade; and
- Sales were also negatively impacted due to a temporary delay from
heavier than normal rainfalls which held up concentrate drying
activities.
Total cash cost(2) per gold ounce sold, net of by-product sales, for the second quarter was
Earnings from operations at Peak Mines were
As with Mesquite and Cerro San Pedro, the 2009 mine plan for Peak Mines forecasts increased gold production in the second half of 2009 as the Perseverance Zone D ore body comes into production. With metal production at planned levels and copper prices remaining above our budgeted level, we are maintaining our production guidance of 90,000 to 100,000 ounces of gold and 13 million to 15 million pounds of copper while expecting to come in at the low end of our total cash cost(2) per gold ounce sold range of
New Afton Project Update
During the second quarter of 2009, the New Afton underground development crews advanced development by 424 metres in the second quarter compared to 195 metres during the first quarter of 2009. An innovative fibrecrete spraying technique was used to fully line one of the vent raises with shotcrete, which completed the support lining for all three ventilation boreholes excavated to date. Project spend during the second quarter at New Afton was
New Afton’s underground mining crews achieved breakthrough on
The development schedule for New Afton involves continuation of underground development through to 2012 and surface construction to resume at the end of 2010, with production commencing in the second half of 2012. The project will be an underground block cave mine, which will produce an annual estimated average of 85,000 ounces of gold and 75 million pounds of copper over a 12 year mine life.
Liquidity and Capital Resources
New Gold held cash and cash equivalents of
- $25.1 million spent on the senior secured notes buy back on
January 9, 2009;
- $20.7 million (not including restricted cash) acquired through the
business combination with Western Goldfields on June 1, 2009;
- $39.2 million in spending at New Afton for the six month period
ending June 30, 2009, which includes capitalized interest; and
- $24.3 million generated in operating cash flow for the six month
period ending June 30, 2009.
The Company’s overall debt position is
Capital expenditures for the remaining six months of 2009 are expected to total approximately
Second Quarter Results Overview
Second quarter and year to date results for 2009 and full year 2008 actuals presented in the table below are for the period of ownership for the Mesquite and Cerro San Pedro mines, following the business combinations with Western Goldfields on
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2009 FY 2008 FY
Q2 2009 YTD 2009 Guidance Actuals
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Gold Production oz
Mesquite 9,041 9,041 80k-90k -
Cerro San Pedro 24,210 44,793 90k-100k 45,618
Peak Mines 22,382 43,011 90k-100k 100,493
Amapari - 13,726 10k 86,992
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Total Gold Production oz 55,633 110,571 270k-300k 233,103
Copper m lbs (Peak) 4.27 8.08 13-15 8.25
Silver oz (Cerro San Pedro) 414,038 841,477 1.1-1.3m 572,575
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Gold sales oz 52,890 108,287 - 237,590
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Total cash cost/oz(2) $468 $491 $470-$490 $569
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2009 Forecast Update
For the combined Company, previously announced 2009 guidance for gold production of 330,000 to 360,000 ounces at a total cash cost(2) per gold ounce sold, net of by-product sales, of
Please click the following link to view the second quarter Financial
Statements:
http://files.newswire.ca/764/NewGold_Financials_Q2.pdf
Please click the following link to download the second quarter
Management's Discussion and Analysis:
http://files.newswire.ca/764/NewGold_MDA_Q209.pdf
Conference Call-in Details
New Gold will hold a conference call to discuss these results at
About New Gold
New Gold is an intermediate gold mining company, headquartered in
Supplemental Information
Reconciliation of Adjusted Net Earnings to GAAP Net Earnings – Management of New Gold uses the non-GAAP financial measure adjusted net earnings to evaluate the Company’s operating performance, and for planning and forecasting future business operations. The Company believes the use of adjusted net earning allows investors and analysts to compare the results of the continuing operation of the Company and its direct and indirect subsidiaries relating to the production and sale of minerals to similar operating results of other mining companies, by excluding exceptional or unusual items, income or loss from discontinued operations and the permanent impairment of assets, including marketable securities and goodwill. Management’s determination of the components of adjusted net earnings are evaluated periodically and based, in part, on a review of non-GAAP financial measures used by mining industry analysts. Adjusted net earnings is not, and should not be used, as an alternative to GAAP net earnings as reflected in the consolidated financial statements of the Company. Adjusted net earnings is not a measure of financial performance under GAAP and this measure should not be considered in isolation or as a substitute to performance measures calculated in accordance with GAAP. The table below sets forth a reconciliation of adjusted net earnings to GAAP net earnings, which is the most directly comparable GAAP financial measure.
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Description ($ million) Q2 2009 YTD 2009 Q2 2008 YTD 2008
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Net Earnings (loss) per
Financial Statements (202.8) (190.8) (4.8) 5.0
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Adjusted for the following
items:
Impairment charge (Western
Goldfields) 189.6
Foreign exchange loss 31.1 33.1 0.1 1.2
Gain on redemption of
long-term debt - (14.2) -
Realized and unrealized gain
on gold and fuel contracts (9.0) (9.0) -
Realized and unrealized gains
on investments (9.7) (9.7) -
Business combination expenses 5.9 6.6 -
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Adjusted net earnings (loss) 5.0 5.6 4.7 6.2
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Tax effect on adjustments (30%) 5.6 2.0 0 0.4
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Adjusted net earnings (loss) 10.6 7.6 4.7 6.6
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Shares basic 258 235 213 73
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Shares- basic per share 0.04 (0.03) (0.05) 0.09
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(1) ADJUSTED NET EARNINGS/ADJUSTED NET LOSS
See reconciliation from adjusted net earnings to GAAP net earnings on
page 6 under the Supplemental section of this release.
(2) 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-GAAP measure. Total cash
cost presented do not have a standardized meaning under GAAP. 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.
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’s anticipated synergies from the business combination with Western Goldfields Inc. may not be realized; there may be difficulties in integrating the operations and personnel of New Gold; significant capital requirements; fluctuations in the international currency markets and in the rates of exchange of the currencies of
SOURCE New Gold Inc.