Q2 2021 New Gold Inc Earnings Call
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Good morning, My name is Sylvia and I will be your conference operator today welcome to day, New Gold's second quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. Please be advised that today's conference call and webcast is being recorded after the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad and if you would like to withdraw. Your question. Please press Star then the number two and I would like to turn the conference over to and Quechua VP of strategy and business development. Please go ahead Sir.
Thank you Sylvie and good morning, everyone. We appreciate you joining us today for new Gold second quarter, 2021, and earnings conference call and webcast on the line today, we have Renaud Adams, President and CEO and Rob shows Hey, our CFO.
And you wish to follow along with the webcast. Please sign in from our homepage at new growth Dot com.
Before we begin the presentation and I'd like to direct your attention to our cautionary language related to forward looking statements found on slides two and three of the presentation. Today's commentary includes forward looking statements relating to new gold in this respect we refer you to our detailed cautionary note regarding forward looking statements in the presentation here.
Cautioned that actual results and future events could different differ materially from those expressed or implied in forward looking statements slides two and three provide additional information and should be reviewed we also refer you to the section entitled risk factors and new Gold's latest MD&A and other filings available on SEDAR, which set out certain material factors that could cause actual.
Our results to differ.
In addition at the conclusion of the presentation. There are a number of and notes that provide important information and should be reviewed in conjunction with the material presented I will now turn the call over to Rob Rob. Thanks, Ed.
On slide five provides our operating highlights for Q2 production details are consistent with our July production press release.
During Q2, the company produced approximately 105700 gold equivalent ounces. The amount consisted of $18.2 million pounds of copper and 52900 gold ounces from rainy River and 14088 gold ounces from new Afton totaling approximately 66000.
900 ounces gold ounces higher equivalent gold production as compared to the prior year quarters, primarily due to higher tonnes and grades at rainy River and higher copper production at new Afton on.
Operating expense per equivalent ounce was higher than the prior year quarter due to planned higher cost of new Afton and strengthening Canadian dollar and the Canadian wage subsidy received and the prior period and <unk>.
Holiday and it all in sustaining costs for the quarter were $50.51 per equivalent ounce higher than the prior year quarter, primarily due to higher operating expenses previously noted and increase and sustaining capital at new Afton turning to our financial results on slide six.
Second quarter revenue was $198 million driven by sales of 68000 gold ounces at an average realized gold price of $18.17 per ounce and sales of $16.9 million pounds of copper at $4.43 per pound Q2 revenue was 54% higher than the prior quarter and primary.
Really due to higher sales volumes and metal prices operating cash flow before working capital adjustments was $84.7 million or <unk> 12 per share for the quarter higher than the prior year quarter, primarily due to higher sales volumes and metal prices. The company recorded a net loss of $15.8 million and <unk> per share during the quarter.
Compared to a loss of <unk> <unk> per share and.
And the prior year quarter.
After adjusting for other certain items net earnings were $26.7 million or <unk> <unk> per share and Q2 compared to a net loss of $3.3 million or zero cents per share and the second quarter of 2020 difference is driven by higher sales volumes and metal prices. Our Q2 adjusted earnings includes adjustments related.
<unk> to unrealized adjustments on our rainy river stream mark to market and the free cash flow and royalty at new Afton. Our MD&A has additional details on the non-GAAP measures discussed here.
Next slide covers sorry on the bottom of this slide covers the capital expenditures, our total capital expenditures for the quarter were $82.4 million $49.2 million was spent on sustaining capital and $33.2 million on growth capital.
Sustaining spend was primarily related to plant tailings work at both operating assets and B III mine development at New Afton growth capital was focused on project development, specifically and the C zone, and the stick and and amended tailings project at new Afton and the underground and Tropic zone at rainy River.
Slide seven provides details of our capital structure at June 30.
2021, we had $138 million and cash and 464 million and liquidity, adding to liquidity will be the receipt. This month of the remaining $50 million CAD payment related to the Blackwater sales with that I'll turn the call over to Renaud.
Thank you, Rob and again, thank you and everyone for joining us today I'm on slide mine on rainy River. So let me start by saying that there are currently no active COVID-19 cases operating.
And the mine continued to to use and rapid testing and has also implemented vaccination clinic at site.
The asset perform extremely well during the second quarter and and it was a very well position at quarter end to end per second half per year, which works to be focus on high grade and the lower strip ratio.
The mining operations continued to execute very well during the quarter with over 158000 tonnes per day mine our third consecutive.
Water at or above the operational target off for 151000 tons per day. So the focus really remain on their further our operations and cost optimization as we move forward and advance.
The mill and perform at a slightly lower availability this quarter, but but we expect the milk to deliver its maximum impairment capacity of 27000 tons, a day and the second half of the year. The processing milling rate has been maintained net and interesting average and Italy.
Our 26500 tonnes and tonnes per day over the last four quarters. This compare with the permit of 27 tonnes and tonnes a day.
Very important is on the Amtrust and chip bids on either first or underground <unk> are located in east.
So the answer could decline advanced by another 616 meters. We have now reached the second level and aura.
And there were and the process now too.
And to implement more definition drilling has we resume and they build up on the orange.
The ramp will come too new to advance and the third quarter would be objective and relate to have a full firsthand all totally David lucht and or prior to any shape. Our productions and later part of 2022, while we went up also advanced.
Second on panel.
So parallel to to enter bid development.
And defaults that API would eventually target.
Conversion and that's a significant portion of their resources and to a reserve from their resources located below the pit the amateur bed.
Previously discussed.
And <unk> zone, and what is now incorporated and the reserve ended December on them.
And then 'twenty.
And and.
And we have now completed a more a detailed mine plan that would be incorporated on our next generations and flattening of mine.
And so we're now busy to do to <unk>. The current fair reserve as of December 2020, contemplates on lead the our proportion of the on the ground our resources located below the pit and.
And in the process and the use of the <unk> hundred dollars reserve price.
And to complete the study to prove the conversion on those resources and to reserve for them and.
And corporations are and Max life of mine, which is targeted to increase and life of mine and devaluation and b.
And.
I will now refer you to a short extract on our far MDA MD&A and.
And <unk>.
Press release with regards to the situation.
And the challenge, Okay, Great and July 2021.
And in July 2021 that production was primarily from the eastern area of the ODM call the east low.
And our realized gold grade from this area was below the expected gold grade and this period.
So the east low represent approximately 50%.
<unk> production for the second half of 2021.
And so if the realized gold grade counts and need to try and below the expected gold grade.
And would make actively and pack the amount of balances, we expect to produce and the second half of 2021 for.
To the extent of the impact is not yet known but there is a risk that rainy river and may not achieved on lower and our physical equivalent and production guidance range of two 2070.5000 to 195000 ounces.
On the high end on fits all in sustaining and Carl's guidance range or if you're alive and 25 to $12.25 per gold equivalent ounce.
So I'm now turning to slide 10, and we appreciate that.
<unk> of July is very recent.
But I would I would like to provide some additional comments that this disclosure.
So let me start by giving a bit of the background here. So the resource is separate and they are categorized into three groups. The.
And the high medium and low grade the call the HVO mgo and announce ago. So the combination of the <unk> and mgo firm, what we would call that Derek the direct feed to the mirror <unk> stockpile for future use.
So in other word the combination of <unk> Mgo is really what you are targeting to feed the mill at a 27000 tons a day, while the AGL, our stockpile for future brand and with the underground as we move and transition to the underground and so the reconciliation of <unk> Mgo is really what drive.
The performance of the mine.
So as you can see on the table historically that mine has.
And <unk> extremely well and with the.
With the agencies on the Mgo and the last three years as you could see.
We have successfully.
Line and deliver on them.
And neutral to positive reconciliation to total ounces when comparison and the resource model, so with that and mine.
The planned 2021 production was done using the reserve on the December 2020, which was based on of course, the resource and.
Great and.
The reconciliation.
And so has mentioned the east low represent about 50%.
At the time to be mined and the second half so as we initiate the second half of the year at the higher grade plan.
And that the production was primarily from from the <unk>.
And is low and that represents a 50 per effective.
On page two so of course this situation was highlighted.
So the situation the situation of 2000 and July 2021, and is very early stage or there is still quite a bit of work and could be done on it.
I'd like to mention that the east low per represented approximately on the 15% and one 515% of their remaining open pit and.
<unk> post 2021, so we're not talking about something.
2% range and all and the remaining life of mine, but this represent a significant portion of the H two and therefore.
Duration is taking obviously extremely seriously.
It is really early stage to predict the behavior of the EPS low and the future months to come on.
And we've been and situation very similar and in the past so not because we have re comps on that.
Every day basis extremely well and the last three years that average every day every month every moment wise.
Was perfect. So we have been and saturation before where we've seen similar.
And similar situations, where we had some reconciliation on a sporadic basis, but again because of the importance on the east will open in the second half disappoints highlighted and the early stage.
Total.
And like as well to notice that.
The RFP and drilling was incorporated to our strategy in 2020 and fully incorporated into our operational strategy and 2021.
And so I'd like to mention as well, but the RC drilling that took place below the 433 and now with the M. Earlier. This year has become standard sources last plan.
But.
And RC drilling program for the East low was not yet completed and will be advantaged as b.
And Thats on part time over the next.
So over the next week.
And we'll keep we'll keep and formats and the information comes to US and there is some potential quantification on the mine plan as well if needed to mitigate a portion of that 2021 impact, but again early stage and more analysis require.
And then and time.
Great.
Like to move on to slide 11, and the new Afton.
Okay.
So globally.
Im extremely extremely pleased with the new Afton solid performance on the on the second quarter with approximately 58500 gold equivalent ounces per deal with.
When including our copper production of $18.2 million pounds on.
Unfortunately, we had to re active cases of Covid on new Afton, but basically the mine.
Operating at the highest water assets zero active cases, I'd like to mention as well as you've probably following and the news on.
On the wildfire situation and British Columbia remain active and at this time there has been no impact to the operation and new Afton are to supply chain and.
New Afton has an active fire management plan in place and the number.
As a precautionary measure has been implement and in the event the risk to our employee contractor community and infrastructure and increased concentrate virtually.
And again, we're monitoring the situation we have a very strong plan, but no impact has been known to date.
Sure.
So the mine and mill performed within the plan, while the copper grade to outperform and the second quarter, resulting in a very strong quarter for us the fees on development advance by 919 meters during the quarter and a flight counts are new to focus on delivery.
Our future on time and on budget.
While later.
And while later than originally planned debates re permit was received during the quarter and the extraction and started and will continue to ramp up over the second quarter of 2021 and 2022.
But as a result of the delay they will be last on <unk> available and our second half per year, and therefore, a portion of VR will be replaced by lower grade ore from the lift one and ore stockpile.
But overall, we continue to expect to meet our.
And our gold equivalent and guidance.
With a strong is it mid point of the copper guidance.
A point as well too to know a very important point that new Afton is that the reserve of December 2020, which serve of course for the 2021 mine plan.
We're estimating using a gold price of 440 and $100, but also our copper prices low and $2.75 a pound.
So with the current metal prices significantly above the reserve pricing new Afton is evaluating a potential for additional short term, we're fortunate to using and lowered cutoff grade. So we come to new to maximize and total value of the assets as we transition to the CFO and <unk>.
And in 'twenty three.
So this completes the presentation on portion of the call and I would now turn it back to the operator for the Q&A portion operator, Thank you Sir.
Ladies and gentlemen, if you do have any questions. At this time. Please press star followed by one on you touched on something you will be on here a suite on comp acknowledging your request and if you would like to withdraw your question. Please press star followed by two.
Using a speakerphone and we do ask that you. Please lift your handset before pressing and Keith. Please go ahead and press Star One now if you do have any questions and just.
First question will be from Anita Soni of CIBC. Please go ahead.
Hi, Thanks for taking my on.
And my question or no.
And thank you for the disclosure on the reconciliation.
Low can you just give us an idea.
And what greed.
And then what your I guess, if you talk to the grade that was expected we can.
Figure out what youre actually getting on.
Can you reconcile with you, but I just want the actual relative the reference point.
So I'm glad you were expecting and Nissan.
We've never we never really know.
Disclose on a detailed basis, but what I can say as you know we've been performing and the point I have.
Raging and on <unk> eight to eight five and the first half and we're expecting a full year around a one gram. So obviously, we are expecting and the second half.
Something along the.
The 112 grams, a tonne and a 50% of the times and now to achieve that is from the east slow and so again without breaking down and that the detail.
The performance of <unk> slope, and achieving one to one two grams and the second half of the year contributes for about 50% on that.
Okay. Thank you and then just moving on to the new apps and with the B III and.
Development rates indicated on the second half of this year and you're a little bit behind on that.
Can you just give us an idea of what kind of ore sources, and what kind of on grades and we should perhaps be.
Thinking about going into Q3, and then is it fair to say that.
Can you just give us an idea on how far behind.
And just to proceed and the permit was and I'm looking at the technical report and I think it.
You were supposed to have started and developing at the beginning of this year. So I would estimate and that three or four months behind and is that a fair assumption.
Got it.
And maybe three of them.
Yes.
Alright assumption I mean, like we were as low.
And those priory and all privately disclosed so we were hoping for the first.
For the beats repair and met and the first quarter.
Of course, and our last year, where we're really hoping for early in the year and then as you know we were hit with the fatality and and quite frankly, I mean, our communities and BC government has been extremely challenged over the last.
Short, while so we knew that there were some pending conversations to cloud so we're.
Patiently waiting, but unfortunately really we were planning for maybe the first quarter and that was expanded to the second quarter. So your assumption is good and you know there is a three to four months of ramping up that we were hoping and 'twenty, one and did not happen.
And.
Which which extend and basically.
But on the other hand and that has been mentioned as well there is numerous supports and happy here too to re look at some draw point that we're at the east to lift one.
That was.
Stock.
And our.
Mining and back and time on.
On the use of the lower metal prices so.
So that Tom and will probably come to new to come from lift one Anita and the lift one and there has been performing very well and the first two quarters as you could see some low grade copper grade and there is obviously an unfortunate day to continue to fall beyond their reserved line towards the resource line remember that this block.
<unk> has a massive resource envelope around their reserves.
No.
All of that for 2021, you know, we're very confident and so in term of grade. If you do if you do the math and you look at our production. So we definitely see that.
The goal of that would probably dropped yet and when the point.
And late second and all.
On late.
And that late but.
And between maybe the point and 35 to 40, and so we were fine to drop the gold grade from the <unk> 43, you've seen we're fine to drop the copper now noted that the copper grade and this and the first half has been on part performing as well and very pleased but but.
Our performance so that gave us the force anything as I said, you know to go and the other area and average may be more like a point and six five or so.
As it was maybe more original client. So so a lot a lot of reports and it is but there is no point income to new you know and.
Tried to stretch it out to the higher grade and lethal fortunate thing behind so so the first two quarters without us too.
To maximize to maximize the use of a lower grade for the second happens still would be well positioned and our guidance.
Okay, and the long answer, but a lower compensated targeted and did that also pulling from lower gold grades as well.
Yes, we'll do as well because you cannot decouple both so.
By pulling on the lower but but you're still going to be and you're still on.
Still expect to meet the gold the gold low and.
With the combination.
And I'll remind.
Remember as well that are equivalent.
And on Ingalls are calculated using a $3.50 copper as well so we're taking everything into account and we believe that the right thing to do is to maximize the value of the assets as we transition to seize them.
Okay, and then would that imply that maybe perhaps on the mill higher than the run rate, so far and I think that the run rate that you've had.
Contingent upon.
On the grades that you were.
And new miserable.
And as always.
And the higher tonnage going through as well.
On that one that would be very prudent and to say that as much as we want to maximize the extractions and.
On the ground and and extract the maximum value.
We continue to be managing our email.
In parallel to the tailings as well capacity and managing of the water and storage and remember that.
And as we transition next year to the to be and pet tailing wear and dania and all of the life of the firm's storage. So it's very important that we do not try to push beyond and then have to manage some tailing situation. So I would say and I'm less frenzy, and only and pushing the mill more than.
And pushing them on.
Okay and last question and then I'll pass it on but this is more of a big picture.
And then key theme has been inflation and inflationary pressures could you talk about on your relative exposure in terms of.
NRG at both assets are labor and.
And other consumables and what kind of questions you're seeing there at this stage.
Going into 2020 hour hour and pass it onto Rob, but just on the labor side per se and all I wouldn't say that we feel we feel that pressure like and they all the mines and on like we are.
We were very focused on on.
And controlling our turnover and that kind of things, but no I wouldn't see that we feel pressure on the cost of labor, but Rob I think the two other areas.
And look at it and not the case and our fuel and certainly the exchange rates.
And when we look at fuel.
Rainy River is the site is primarily impacts and that's where we use most of our consumer most of our fuel sales.
The impact.
On an annual basis, there is about $3 million to $4 million when we compare what we the pricing of fuel came into at the beginning of the year, so approximately around $10 an ounce and.
And as far as FX.
Right now we're at about 125, our guidance was 128 and that Delta that change represents about $30 an ounce for the remainder of this year.
Or maybe put another way <unk> change and the CAD is around a 10 million dollar impact.
On the gold.
Okay, and then is there any difference on the Capex.
Questions that youre seeing on.
Or impact on on the Capex funding and closing.
Nothing nothing.
Nothing material.
The majority of our for instance steel and.
And we're thinking and amended tailings for instances and.
And as past, we received a lot of that material, so no major or material impact on our capital projects.
So we shouldnt expect the seasonal and development can be escalated to the next day.
No Okay alright, thank you.
Thanks. Thank you once again as a reminder, ladies and gentlemen, if you do have any questions. At this time. Please press star followed by one on your Touchtone phone.
And at this time gentlemen, we have no further questions. Please proceed.
Thank you Sylvie and thank you, everyone, who joined US today as always should you have any additional questions. Please do not hesitate to reach out to us by phone or email and we hope you enjoy the rest of your summer.
Thank you ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
Yes.
Okay.
Yeah.
Okay.
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