Q3 2019 Earnings Call
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I'd now like that and the conference over to your Speaker today and day, Vice President Investor Relations. Please go ahead mr.
Thank you operator, and good morning, everyone. Repreve. We appreciate you joining us today for new golds third quarter earnings conference call them Webcasts.
On the line today, we have Renaud Adams, President and CEO rupture say CFO and Luckily Deload Bureau, other members of the management team have also joined US will be available during the Q1 day period at the end of the coal.
She should you wish to follow along with a webcast. Please sign in from a website at new gold dotcom.
For the team begins a presentation that we'd like to direct your attention to our cautionary language related to forward looking statements found in the presentation.
Today's commentary includes forward looking statements relating to new gold in this respect we refer you to are detailed cautionary note regarding forward looking statements in the presentation.
You are cautioned that actual results and future events could differ materially from those expressed or implied in forward looking statements.
Slide two provides additional information and should be reviewed the also refer you to the section entitled risk factors and new latest Mdna another filings available on SEDAR, which set out certain material factors that could cause actual results to differ.
Please note that all amounts are presented in U.S. dollars unless otherwise indicated.
In addition at the conclusion of the presentation. There were a number then no to provide important information.
You'd in conjunction with the material presented.
Now I'll turn the call over there were no Adam.
Thank you I'm in thank you everyone for joining us today.
We're very pleased to report a fourth consecutive quarter for improving operational and cost performance from both faster as we continue to it depends on our short term operational plan and realization that company for a long term success.
Hi life for the quarter includes improvement in our performers performance is underpinned the completion of a strategic equity financing, which allowed us to reduce our long term adapt position by 100 million. The rainy River mine achieved a significant milestone delivering the first full quarter.
Mailing rate above the 24000 tonnes per day.
Also one following that definitely payment of 100 Meldium the company have maintained available liquidity.
421 million, including 135 million in cash cash equivalent.
We have we have maintained that we'll continue to maintain a diligent approach on managing our capital of execution with the objective to complete substantially all remaining construction project at rainy.
Order to reposition the asset for efficient and profitable mining as we also continue to advance the development of the C zone at new Afton.
On the mid long term, though we continue to advance our updated life of mine plans for a rainy river in new Afton Ritter, which are now expected to be released at the latest at the mid first quarter 2020.
Also we have advance on our global of exploration plan in order to position strategic drilling as more and therefore, our main focus in 2020.
Well now [noise] now pass the call it over to Rob So fearful for review or part third quarter financial result.
Thanks, Robin and good morning, with details are consistent with our early October production press release Slide five provides our operating highlights also a day to discuss today is on a continuing ops basis.
During Q3, the company produced 129000 gold equivalent ounces. The amount consisted of 20.1 million pounds of copper approximately 75000 gold ounces from rainy River and 16000 gold ounces from new Afton, giving us a total of approximately 91000 gold ounces.
The higher gold production was compared to the prior year quarter is primarily due to higher productivity at rainy River operating expense per equivalent ounce was 15% higher than the prior year quarter due to an increase in operating waste tons mined during Q3 at rainy River all in sustaining costs at rainy River and new asking for the quarter.
Well were 15 93 per equivalent ounce and $869 <unk> dollars per equivalent ounce, respectively amounts are higher than in prior quarter due to sustain higher sustaining capital spend.
Solidly at all in sustaining cost for the quarter were 1300 $18 per equivalent ounce, 20% higher than the prior year quarter.
Due to hires a sustaining capital spend and the increased the opex per ounce.
Turning to our financial results on slide six.
Third quarter revenue from continuing operations was $168 million driven by sales of approximately 86000 gold ounces at an average realized price of 13 83 per ounce and sales of 20.6 million pounds of copper at $2. A 62 cents per pound Q3 revenue was 14%.
Other than the prior quarter due to production increases related to the ramp up of rainy River and higher realized gold prices, partially offset by lower copper sales.
Operating cash flow before working capital adjustments was 67.4 million or 11 cents per share for the quarter lower than the prior prior prior year quarter, primarily due to higher strip at rainy during Q3 19. The company recorded a net loss from continuing operations of 24.7 million or four cents per share during <unk>.
Through three compared to a loss of zero cents per share in Q3 18 after adjusting for certain charges. The net loss was 10.3 million or two cents per share in Q3 compared to a loss of one cents per share in the third quarter of 18.
Our Q3 adjusted earnings includes adjustments related to other gains and losses that include unrealized loss, our gold price option contracts and our stream mark to market RMD and I has additional details on the non-GAAP measures that are discussed.
Turning to slide seven on our Capex.
This slide provides a breakdown of our Q3 19 capex, our total sustaining capital leases for the quarter was 56.3 million and spend was primarily related to tailings work and towards the purchase of the rainy River cap facility.
Growth capital was focused on project development at New Afton.
Slide eight as rental mentioned a week during the quarter, we completed a repurchase of 100 million a bonds in early October and with that we had a 135 remaining cash in approximately 420 and liquidity.
With that I'll turn the call back to Reno. Thank you Rob.
Now on slide 10.
The rainy River mine reported increase gold equivalent production metrics around 6092 ounces for Cropper and he is on track to achieved a lower and her Panama production guidance. Despite the lower grade plan for four quarters of between 0.8, and one grams per tonne lower throughput achieving October as a result.
Okay My name Jing watering the tailings area.
And as we continue to focused on a waste mining in order to better position the asset for the short term mid term objective.
Total cash cost per gold equivalent ounces of 922 for the quarter or 877 for the nine month period on track to achieve the annual guidance.
870, $950 per gold equivalent ounces.
Sustaining capital and sustaining prepayment increased to 46.3 million in the third quarter, a 110 million for the nine months superior spanning Cabot all in sustaining these payment or in Congress to made it to be between 175, and 100 100 $190 million for the year.
While we are disappearing approximately $20 million to 2020. We also very pleased that we have achieved and net reduction of approximately $15 million it related to the tailings area and re scoping out the maintenance in warehouse facilities.
As I mentioned in my opening remarks, we haven't will continue to maintain a disciplined approach with regards to capital of execution with focus on them to positioning the asset for the future. While we continue to manage our short term financial position.
As a result of lower estimated sustaining capital for a year, our all in sustaining capital and are expected to achieve the lower end or below the animal Gardner.
On slide 11.
During the quarter, approximately 1.7 million dollar town and 8.5 million waste stoneware mine at an average strip ratio of five to work.
Hi space to stripping concentrated to be prior price. Additionally, 2.6 million ton of outfit tomorrow.
Material warring in preparation for damn raise over the balance of the year.
The meal achieve a significant milestone in the third quarter, delivering or full quarter above the design criteria of 24000 tonnes per day, while maintaining the recovery up approximately 91%.
The efforts continue on achieving additional circuit optimization.
The operation experiencing African we're in the fall in the third quarter and into October .
During the month of October the mail operated at the lower capacity in order to manager water levels and the tailings area.
Also scheduled maintenance planned for fourth quarter were completed in October .
In late October the plan 2.5 million raise was completed which providing now approximately seven to 8 million cubic meters of additional capacity in the tailing area.
We're very pleased to report that the mill.
Earlier today managed to operate in approximately 18000 per diem October in isn't our expected to operate at full capacity over the balance of the year.
While we may not achieve a view, marking the fourth quarter, we remain very positive to achieve the potential 24000 tonnes per day, considering expected higher availability and throughput in November and December [noise].
On slide 12.
While the assets come to need to face some challenges, which regards to requires tripping over the next four years, which include dealing with over burden of 30 to 60 meters and related to create handling and need for additional work other ways down we are now turning our focus on significant unfortunately for improvement.
At this stage two dying raised nearly completed and the reduction or follow up that material requirement plan for 2020, the mild within the mine will now entering phase of optimization, which will include commissioning of the new for drill to improve performance the wider benches and in phase two and three.
Overall, the equipment utilization improvement in order to productivity to enhance the productivity from the mining fleet the mining fleet availability at maintenance performance and optimization of cost driver, including both operational and procurement practices.
We will remain focused on improving the mail availability should will which will result in a potential higher throughput from the current 24000 tonnes per day.
The company plans to use external consulting in 2020 to support all optimization efforts.
With regards to our strategic review and the new life of mine plans to be release, a delayed us in mid first quarter 2020, I will summarize the slides 13 and 14 that's follow.
We have now landed on the final scenario, which will include open pit and underground mine.
The elevated cutoff grade in order to focus on medium high grade ore, which strategic approach to recalibrate, the low grade or during the open pit mining, while the new pit shell will focus on a high medium grade some low grade mine or will be mine and effort will be made to benefit from them.
The maximizing of the high.
Hi, a medium grade ordering the open pit mining well with potential ounces of high medium grade mine as an underground mining approach, which will support our overall strategic approach a significant reduction of waste mining requirement.
Reductions, our mining mailing and Gionee unit cost through cost reduction effort.
Focused on managing capital requirement to include the completion of 2019 construction project stripping requirements for open pit mining tailings requirement elimination of need for ways for the west waste dumps that realization.
And the capital component of open pit mining, while minimum capital requirement for underground will be a priority.
Reduce tend to reduce footprint for overall closure cost is also an area of focus.
And to be base on the reserve gold price, which will imply open pit scenario to be.
Locked in other reserve price and the upside on the gold price to be caps to enhance the profitability can be open pit scenario.
The underground. So now you have to include scenario upsides of higher gold price defining further DAP and capital intensity at higher prices.
On slide 50.
[noise] with regards to new Afton.
The mine produced 52807 gold equivalent ounces for the quarter and nearly 180000 gold equivalent ounces for nine months.
He is on track to achieve animal production guidance of 215000 to 245000 gold equivalent ounces the cash cost per gold equivalent ounces were 652 for the quarter of 596 for the nine months period.
While the gold and copper production, coupled with operating expenses for gold and copper basis remain well positioned to achieve our annual guidance the cash cost, but gold equivalent ounces are now expected to achieve their high in our financial guidance, mainly due to the lower copper pricing impact on a per gold equivalent basis.
Sustaining capital all in sustaining lease payment entries into third quarter, but are now expected to be slightly below our annual guidance of $45 million to $55 million due to the improved cost efficiency.
Realized on the development meter as well as deferral Odder capital project payment of this project in our expected in the first quarter of 2020.
The mining and milling performance work in line.
Planned later on and the gold and copper recoveries were caps are at or above 80% Mark Despite the lower grade achieved an inter quarter.
The lower grade achieve were mainly due some some sort of short term operational on the ground issues and the lower than anticipated performance or there are segregation during the quarter. The grades are expected to improve in the fourth quarter.
Girls capitals inquiries into third quarter, mainly due to improve the development rates, but the growth capital for the year are now expected to be slightly below our annual guidance.
40 to 45 million there, mainly due to realize cost efficiencies and development meter and some payment now planned for Q1 thousand 20.
On slide 16.
Our interim.
Our internal a key objective for 2019, the B three and C zone development rates significantly improved in the third quarter with a total of 2100 meters achieve showing some good cost efficiencies.
The mill recoveries continued to perform well with commissioning or face to upgrade plan for the fourth quarter in order to deal with Super Gene part.
Our scanner in order to improve their meal grade via our segregation was commissioned an improved performance our expected over the next quarters.
Worked on an updated life of mine plan continues in the third quarter would release plan at the latest mid first quarter 2020, the updated plan to focus on the Geo Technical study update with regard to this is tightens in corrective actions a tailing updates with use our fin.
Disposal using ticking in amend the tailings to increase the stability, while we would provide an update from stabilization of current and all tailings area, the updated permitting timeline and the capital capital in Opex costs.
Optimization.
On slide 17, there a reevaluation of the Blackwater project continues in the third quarter. Then you probably potential plan to include higher grade about one grams, a tonne while maintaining a low strip ratio targeted at 2.1, the lower operating cost structure on a per ounce basis, resulting from higher grade.
While mining costs with potentially continued to benefit from lower strip ratio.
Lower initial capital, resulting from potential revaluation of project slightly more to come on the Blackwater project as we advance and are in 2020.
I'll now pass the call over to retaliate Dilella graph director exploration for a quick review of our ongoing exploration America Geller. Thank you renewal and good morning, everybody.
Slide 19 is exploration program highlights a three year lever, we break on near term and mine opportunity and district level for Trinity.
Today, we have seven all on what we call the interactive nor the targets.
And we are now posing the reasoning because we had the mix as a result, and we need to re address them and we interpret the geology and data alterations system, there and we may resume deserving 2020 .
And we moved our exploration team on they do seek level a regional recall nine cents and.
Well, we are developing and progressing our side of the agreed Joe Cameco surveys that we'd be done before winter to hold indeed and to refine a digital rising targets for 20 trend.
On slide 19.
Exploration program at New Afton.
The underground drilling done during.
These here that most companies that.
And.
So were was.
Relate that Weve, you feel Indonesian on the SNC sub level to cave.
Yes, weve good results and that will be incorporate the in into that 2019 muna.
Resource and reserve update.
The same time, we define anew.
Zone that is parallel to the B three sees on a.
No one clans.
Our body with the interesting result that we are planning to follow up excluding 2020 and we call desired. He's the extension target, but that is is becoming one of the key targets on the grounds for the next day here.
These own we drilled the five also complete the.
Indeed, the induce a week and we define.
The answer of democratization underneath C zone and Oh. So this was a little we'd be incorporated into an associate.
Thank you maintain.
On the region.
Exploration program.
Hi.
We are focusing on a day Cherry Creek already Doug reach as both potential for et cetera, gold close to surveys and underlying.
Deep for free and copper gold target.
The fine.
Weve coincident cameco and Joe FICO, a nominal is Matt.
Seven target.
Ready to drill and.
Planning to start dealing in the next weeks or.
And deforest seven hold we'd be the first phase.
Doing well they handle day here. Thank you and now I am so turning back to on day.
Thanks, Matt Kelley, where you're never going to move QNX section of this call. So I'm going to turn it back over to the operator.
At this time I'd like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad, well pause for a moment to compile the Q and a roster.
And our first question comes on line of Matthew Fields with Bank of America Go ahead. Please your line is open.
Hi, everyone. Appreciate the progress you've made on deleveraging the balance sheet in the quarter with the equity raise and that and they partial repayment on the 20 twos.
Slide eight still says additional debt optimization scenarios. Currently under review can you just give us an idea about what what additional plans you still have to to de leverage or or term out the balance sheet.
Yeah, and listen I think the.
As I've mentioned on previous calls and meetings.
We're looking at all strategic in capital markets options are available to us.
And assessing opportunities as they come one other things I'll say, an addition to that as you know we paid off $100 million, we've still got $420 million of liquidity available. So it allows us to be disciplined and prudent around any of the options, but again, we were looking at.
Many options and alternatives.
And how we can strategically use our assets or or.
Options within capital markets, but nothing nothing more specific than that.
Okay. As just a follow up is now that you've paid down 100 million do is to focus more on terming out.
Or for further absolute debt reduction.
The focus.
Our focus is to improve our balance sheet again, no. The market will will present options and we'll we'll decide as we move along but we would like to see.
An improved balance sheet as we move move along.
Okay. Thanks very much.
And again, if you'd like to ask a question press star followed by the number one on your telephone keypad.
Your next question comes from the line of Nick Jarmoszuk from Stifel. Go ahead. Please your line is open.
Hi, good morning.
Question for you on rainy River.
Great guidance was maintained for the for the year at 1.1 grams per tonne, that's lower than the what we're looking at year to date should we anticipate a decline going into the fourth quarter or.
Sure we expected to be relatively flat, what we've seen a year to date.
No. The are definitely we're planning a lower grade in the park water has as it was actually discussed after the second going towards the third and fourth quarter I didn't mention a I didn't mention in my remarks on the rainy River. So we see a potentially to fourq water.
On a 0.8 to one gram so on the overall a year we have maintained our 1.1 approach for from currently trending above but you had a one quarter below one and potentially below one and that were felt comfortable to maintain our 1.1 targets.
Yeah.
And then looking forward into 2020 granted a updated 43, one on ones aren't out yet, but when you think about the capital required for rainy river at new Afton and potentially them Blackwater do you view those projects the development there being funded through internally generated cash flows and liquid.
I'd that you currently have or do you think you're gonna have to go out and raise additional capital.
I wouldn't come in at this stage on their Blackwater because our obviously at this stage in our short term priority is definitely around our completing big the short term mid term capital execution them and we'll deal first of all too.
Too just to add to land on what could be the potential scenario for Blackwater. So we're not there yet we will come to New York Blackwaters to improve our plans has we have mentioned 2020, which regards through a rainy to rainy and new Afton I will be a mix of for use our current liquidity and also in turn.
<unk> cash flow, what I've been at new Afton. This remains our priority on objective.
That's all I had thank you.
Thank you.
Your next question comes from the line of Anita Soni with C.I.B.C.
I had please your line is open.
Thank you good morning, guys.
My question is with regards to rainy River just looking at slide 11, where you've got some of the 2019 estimate and you're showing your year to date numbers Im just trying to understand.
I'm sure.
Getting those estimates like if you look at ore tonnes mined it was sort of a 31000 tonnes per day, and you're running I guess closer to like 18 to 20.
Thousand tonnes per day.
And.
Just wondering how that plays out for the course of the year.
And secondly in terms of where the lower strip ratio that you have this year how does that.
Again, how does that work into the fourth quarter should be targeting that it overall that it averaged 3.1 or you know we've got some that stuff pushed out into 2020.
Thanks, I need after four to drive this question and now the help me to clarify.
I've mentioned actually on the last there from water so to be precise known we would not have reached required. So our short term object to about a at rainy is definitely to better position the asset so.
As as we continue to target to meet our cost in production.
Guidance.
Any additional capacity to be Frank will be and continue to be focused on on waste stripping. Because this is really worked will better position de asset. We we understand the extra costs in the short term, but again I'm very pleased to see it out so far after three quarters, we have been managing.
To increase our waste stripping exovir rating, the a and B R.
Positioning if you will our mining for 2020. So are we will continue to our focus on a waste stripping into fourq water.
Should we see any drop and that grade we have always the ability to maybe focus a bit on their heart, but don't expect cadthree point unwind as much as a as much as we would like to be on or reduce we believe that they would benefit to us in the future with regards to overall rate.
That has been a systematically below the 128000.
Oh, yes, you're absolutely right in the short term, we have not met our objective, but when you add the significant amount of rock that we have mine outside of the pit and you combine both on the global basis, we have achieved quite a good mining rate on a global but as you know.
Oh can or can't let go the effort on on the tailings and and 2019. There was also our priorities so and as I mentioned in my I'm very confident down the road that you would see a significant improvement in India undermine the expense on mine to be Frank as we walked.
Are you from the need for.
Our material for R&D, the tailings, Oh, I'm really expecting and the use of for council kind of optimization and I'm very confident we're going to see a significant improvement.
Okay and then so that leads me to my next question. So if you're doing the waste stripping and you're focusing on that.
This year can we think about the tons that.
It should have in mind and you know next year in thereafter, as being already done and we shouldn't be worrying about that those for next year.
Then the mining rate are you going to be backing off of doing any the tailings or is that the some similar kind of expectations are happening next year.
Yeah, well there I think do is a you know when we initiated 2019, we initiated you're now using the current plan.
So in the current plan was ER was should for to shoot for a much higher mining rate down the road because it was based on our on before they expand that pit shell scenario.
We are now moving towards a a reduced pitch al or reduce total mining requirement, so and the short term even though we've been managing you know we've been mining below the 128000, we absolutely do not see any impact whatsoever on the our short term plans because the new.
Plans will be up to reviews need.
With regards to their rock a this year, we've done a significant amount. This stage to require man will be completed there next year not too late.
I believe that arc total requirement for 2020 with regards to material out it will be last.
For the material for the tailings won't be less than a million tons and will be internally managed from the pit per se and pretty much potential to know needs.
On slide a bit pit than 2020.
Okay. Thank you very much.
Thank you [laughter].
And there are no further questions at this time I'd like turn call back over to mistake.
Thank you operator, thanks, everyone for joining us today should you have any additional questions. Please feel free to reach out to us I thought with that we will close the call. Thank you.
This concludes todays conference call. Thank you for your participation you may now disconnect.