Q4 2023 New Gold Inc Earnings Call
Good morning, My name is Mark and I'll be your conference operator today welcome to new Gold's fourth quarter 'twenty 'twenty Free 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.
A question and answer session.
If you wish to ask a question. During this time simply press Star then the number one on your telephone keypad and if you'd like to withdraw. Your question you can press star and then the number two.
I'd now like to hand the conference.
Keith Chau Executive Vice President of strategy and business development. Thank you.
Thank you Mark and good morning, everyone. We appreciate you joining us today for new Gold's fourth quarter and full year 2023 earnings conference call and webcast.
On the line today, we have Patrick <unk>, President and CEO.
Bouchard, our CFO and Keith Murphy, our CFO. In addition, we have looked to Karen Vice President Technical services as John Prescott revenue, Vice President geology available for the Q&A portion of the call.
Should you wish to follow along with the webcast. Please sign in from our homepage at <unk> Dot com.
Before the team begins the presentation I would like to direct your attention to our cautionary language related to forward looking statements found on slide two 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.
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.
We also refer you to the section titled Risk factors in Nucor's latest Aif MD&A and other filings available on SEDAR Blessed.
Which set out certain material factors that could cause actual results to differ.
In addition at the conclusion of the presentation. There are a number of end notes that provide important information and should be reviewed in conjunction with the material presented I will now turn the call over to Pat for some opening remarks.
Thanks Chip.
And good morning, everyone.
2023 was an excellent year for new gold.
If you have a rising health and safety to our courage to care campaign led to an industry, leading total reportable incident frequency rate of 0.8.
We see if we achieved the top end of our production guidance range.
Which was a 20% increase over 2022.
And we met our all in sustaining cost guidance range, delivering an 18% cost reduction over 2022.
We delivered key project milestones on time, such as completing the first draw bell at new occupancy zone.
Well has advancing donlin raw menzel at rainy River.
And the operations well stabilize.
We're able to return our focus to exploration, which was highlighted by a 74% replacement of friendly reverse mineral reserves and the subsequent pipeline for mine life extension at New Afton.
In short new gold met or exceeded our objectives in 2023.
Okay.
Last week, we presented our three years' operational outlook as well as our long term strategic outlook, we thank everyone who participated in the webcast.
The presentation and webcast are still available on our website.
I encourage everyone was unable to participate to review.
Yeah.
I will reiterate the highlights from the roadmap we presented on slide five.
We are planning policy and grow for the next three years of 35% gold and 60% in copper as well as the corresponding 51% reduction in ASIC and 77% reduction in growth capital over the next three years.
Which will drive significant margin and cash.
Gotcha.
We also discussed our strategic objectives beyond 2026 targeting approach and platform.
600000 gold equivalent ounces per year with line of sight until at least 2030.
As well as our pipeline of opportunities and exploration upsides wisdom mine lives.
Well into the next decade very modest capital presents.
Before I pass things over to Keith I'll conclude on slide six.
First.
Our current liquidity position remains strong we added $186 million of cash at year end 2023.
And we have 373 million Andre AUM of our credit facility.
Based on the three Years' outlooks, we've opened last week.
Expect to generate significant free cash flow over the next three years with the inflection point taking place in the second half of 2024.
As a result.
We are incredibly well positioned.
To achieve our strategic outlook to at least 2030.
We will have the financial flexibility to repay our 2027 bonds.
And then several opportunities to add mine life beyond 2030.
To reiterate we are entering a very exciting period for new gold.
I will turn the call over to Keith.
Thank you Pat I'm on slide eight which added our production highlights.
Q4 was another solid quarter, we produced over 105000 gold equivalent ounces, which put us right at the top of our guidance range.
Rainy River produced approximately 63000 gold ounces, bringing full year production to approximately 254000 gold ounces, a 10% increase when compared to 2022.
New Afton produced approximately 16500 gold ounces and 12 million pounds of copper, bringing full year production to approximately 67000 gold ounces and over 47 million pounds of copper.
This represents a 46% increase in gold equivalent production compared to 2022.
Gold produce at new Afton also includes 553 ounces from the ore purchase agreements in the quarter and approximately 4800 answers for the year.
Slide nine outlines our cost highlights.
Consolidated all in sustaining costs.
<unk> hundred $75 per equivalent ounce for the quarter and $1545 for the year at the midpoint of the guidance range.
This represents a 15% decrease when compared to 2022, primarily driven by the increase in production and sales.
Operating expense per gold equivalent ounce at rainy River with the both the guidance range, primarily due to higher operating tons and lower strip ratio. This.
This is offset by lower sustaining capital, bringing rainy rivers all in sustaining costs in line with the guidance range.
At new Afton full year, all in sustaining cost was at the low end of the guidance range due to higher production and sales.
Turning to our financial results on slide 10.
Fourth quarter revenue was approximately $199 million.
Q4 revenue was higher than the prior year quarter, primarily due to higher metal prices and sales volumes.
Cash generated from operations before working capital adjustments was $65 million or <unk> <unk> per share for the quarter.
This was higher than the prior year period, primarily due to higher revenue.
The company generated $1 million of positive free cash flow in the quarter, which again continues to underscore that the company can generate free cash flow, while still investing in our growth projects.
Rainy River continued to deliver free cash so and generated $55 million in the year.
The company recorded a net loss of approximately $27 million or four cents per share during the fourth quarter.
The increase in net loss as compared to the prior year quarter was primarily driven by higher noncash unrealized losses on the revaluation of the rainy river at Gulfstream obligation and the new Afton free cash flow interest obligations, partially offset by the higher revenue.
After adjusting for certain other charges net loss was $4 7 million <unk> per share in Q4, an improvement when compared to an adjusted net loss of $6 3 million in the fourth quarter of 2022.
The improvements in adjusted net earnings were primarily due to those higher revenues.
Our Q4 adjusted earnings include adjustments related to other gains and losses.
Our total capital expenditures for the quarter were approximately $61 million with 24 million spent on sustaining capital and $37 million on growth capital.
At rainy River sustaining capital spend was below the low end of the guidance, primarily due to lower capital stripping with $25 million deferred to 2024.
Spend related primarily to the tailings dam raise and capital stripping.
Growth capital related to underground development.
At new Afton sustaining capital spend primarily related to tailings management and stabilization activities, while growth capital primarily related to the ongoing C zone development.
Total capital was at the low end of the guidance range.
Turning to slide 11.
We had cash on hand at the end of Q4, but $186 million, an increase of $7 million from the previous quarter driven by free cash flow generated at rainy River.
Which offset the investments we made in CSR.
The company's liquidity position was $559 million.
We continue to execute short term hedges on cat and fuel and are hedged at around 75% for Q1 2024.
To sum up our financial position is strong with an increase in cash and available liquidity following a solid operating quarter, all while continuing to continuing to invest in our growth projects.
Now I will turn the call over to Johan to walk through our operating highlights.
Well thanks Keith.
While commencing by reason of waiver on slide 13, <unk> continued to perform well achieving that out our quarter in line with plan as a result.
They've ever achieved the top end of the gold equivalent production guidance range for the year with an all in sustaining costs at the mid point of the cost guidance. The operation is well positioned to continue this trend into 2024.
The Q4 operating expenses and all in sustaining costs were higher than the full year 2023 average due to the noncash impact of processing stockpile and lower sales.
In Q4, the operation focused on mining the last benches of phase three which was completed earlier this year.
In the underground mine extraction from Intrepid is as planned and the development to the main zone is on schedule and we're getting ready to develop the main ventilation rates from surface.
Looking back at the full year, we are pleased with the processing and mining performances, the accretion demonstrated operational discipline, which gives us high confidence in the years to come.
Previously note. It is also worth mentioning that we replace that but he still mining by a factor of 74%.
Edison Ultimate enrollments are from the underground mine zone, and the West open pit expansion phase.
Page five.
Looking to 2024 on slide 14.
We are expecting a gold production of 250000 to 280000 ounces for the year compared to 264000 ounces in 2023.
As we discussed last week, approximately 60% of that drug Sandy are expected in the second half of the year, mostly because of the open pit mining sequence.
We are transitioning from phase three to phase four so will reclaim some lower grade stockpile tonnage through Q1 and Q2, while we obtained <unk> arc.
For the second half of the year.
For the same reason sustaining capital related to the waste stripping will be weighted in the first half of the year.
In the underground mine.
Lateral development meter will ramp up throughout the year as we access eddish additional underground mining zones and more adding become available as.
As a result about two third of growth capital is expected in the second half.
Turning now to new asset on slide 15.
The excellent production is supported by <unk> continuing to deliver above above 8000 tonne per day and the accretion is showing stable operating expenses and all in sustaining cost profile.
At season on the FERC Bill was completed earlier too far and the project is on track to ramp up to 5000 tonnes per day at year end 2024.
Supporting the production profile that was presented last week and the guidance and outlook presentation.
The stabilization of the new Afton tailings storage facility is progressing above expectation with consolidation happening much faster than predicted by our model, which is very good.
Most of the investment related to the stabilization is behind US and the project is on time were comfortable contingency to accommodate that C zone production profile.
Looking forward at new Afton on Slide 16, we arent trying to sending from <unk> to <unk> zone. The year of 2024, we will see a significant ramp up in two zone mining rates achieving commercial production in the second half of the year.
Though most of their production will still come from the three.
The crusher in <unk> system can be Shinning, a schedule in the second half of the year. This will eliminate all of the new requirement and impact positively on cost going forward.
Throughout the year B three will provide a stable mill feed of approximately 8300 tons per day.
As we establish the Cape footprint and as previously mentioned.
<unk> is expected to ramp up to about 5000 tons per day by by the end of the year.
Overall, we're looking at a 27% decrease in bank process compared to 2020.
The higher throughput in 2024 will be partially offset by lower feed grades due to the cave dropped sequence.
Total gold production for the year is expected to be 60 to 70000 ounces.
Copper production is expected to be 50 to 60 million pounds with.
With production expected to be relatively stable throughout the year.
I will now turn to call back to Patrick.
As I observed last week's presentation I can see we have certainty and confidence that operationally, we have made incredible price.
We will continue to deliver on our stated strategic goals.
<unk> 2024 this includes delivering on production.
We have the same attention.
Yes.
At New Afton, we will achieve commercial production at C zone, and commissioning of the crusher and conveyor.
Rainy River, we will reach first ore from the unit wrong zone.
We will increase our extrusion affords targeting reserve replacement.
'twenty 'twenty four will be about a year, but it will be a transformative one for our company our stakeholders.
My teammates.
Our shareholders.
This completes our presentation I will now turn it back to the old Burger for the Q&A portion of the call.
Thank you if you wish to ask a question. Please styles saw and then the number one on your telephone keypad ounce enter the queue. If you wish to remove yourself from the key you can do so by Don in that store and then.
Our first question comes from the line of any to Sony.
<unk> wealth market. Please go ahead your line is open.
Hi, Good morning, Patrick and team and thanks for taking my questions. So last week you hosted a very comprehensive.
Three year outlook and thank you for that so a lot of the questions I think that we would have apps on this call have been answered, but I guess, what I was looking for what this report was where Q4 costs came in and how that would calibrate with cost going forward and maybe look largely in line with my expectations, but at new Afton. The costs came up in Q4 and I'm just trying to.
I understand how those are going to come down over the course of the next three years I know, there's a lot of moving parts with.
Mining from different zones, but could you give us sort of a.
I don't know.
Directional and qualitative is whereas as well as the quantitative indication of.
Both production, sorry, both mining and processing cost at new Afton.
Yeah.
Any thoughts you want to hear thanks for the question.
Just wanted to see here I mean that.
Basic fee our unit cost per tonne basis are pretty much. The same nothing changed Barry This is mostly related to grade and by tonnes that we pushed through the mill in Q4, and it goes I would say as well that goes as well for 2024 cents.
Based on the mining the extraction sequence, we're going to see kind of a lower grade.
And.
But that's going to be offset by higher throughput over the year. So I would say and I think that was.
Put a comment on that on that aspect, but.
Overall this is what.
You should I would say that we've actually got a breakthrough model lower grades higher throughput.
Well great talent in the presentation and to answer your question going forward above that longer term.
Sure.
As you know what I mean, we are going to commission that crusher and conveyor circuit at the end of this year and based on that we're going to see a drastic decrease in operating cost in 2025, So I am expecting basically either.
Cash cost the operating cost to go down in 2000 <unk> significantly.
Overall, if you assume that.
Are you going to ramp up too.
About 14500 to 15000.
The impact going to be massive.
I'll put it up to answer your question.
Yes, so I guess what.
What I would get from that is that in the processing side in the back half of 2024 as you ramp up.
The throughput, perhaps your processing costs will come down and there'll be a dramatic decrease in 2025 when you.
Commission, the crusher and conveyor.
Got that.
Yes.
That is correct in Utah.
In 2025, we are still adding sustaining capital for the construction of the dry mill itself and the draw points. This that these construction will be completed at the end of 2025 and 2026, it will mostly be extraction normally. So this is why going forward when he's probably 2025 will be.
Please.
Since we'll be mainly just <unk>.
Okay and then another question I guess the other the other one that I had was on.
On the online.
Jade, so just drilling a little bit onto the copper grade it seems a little like the grade that <unk> guidance it seems a little low.
If you just throw in the tonnage that recovery and the great that you've provided you'd be at the very low end of the copper guidance range is there something that you're sort of holding back a little bit in terms of the grade like positive grade reconciliation or potential to have better recovery rates are a little on the conservative side of that is that fair to say.
I think I think the way to think about that.
But a block cave.
The mining sequence.
Is really dictated basically by by the shape of your cave. So I mean, but we didn't change the reserve grade, we don't feel that the model needs to be adjusted.
The low grade that we see for a short period of time is really.
Do you buy the extraction sequence.
But we don't expect we don't we don't we don't experience any additional dilution at this moment is just this is just what we get from the model.
I'd say when we compare.
I'd say the extraction model versus reality.
Pretty much spot on but we have a pretty high predictability on that.
Alright, Okay. Thank you that's it for my questions.
Okay. Thank you.
Thank you. Our next question comes from the line of Don Demarco at National Bank Financial. Please go ahead. Your line is open.
Thank you operator, and good morning <unk> team.
Couple of questions.
Free cash flow projected to increase over the next couple of years could you give us some some indications in your plans for capital allocation and how that may change or a shift from investing internally or are considering other options.
Last week, we highlight.
Capital investment.
For the next three years.
For sure this year, we need to complete major projects, new Afton the C zone.
We are developing.
You want to explain that.
In terms of a growth capital, we're deploying more and more money and really river at the second half of this year, mainly because we will have more earnings and more importantly, due to speed up the development.
And after that.
The capital expenditures will decrease going forward and so that's the key of <unk> 26. So you have a gravitation of our investment in the next three years.
Mostly I think because they don't know what.
Thank you.
We when we did the split between bauxite than we did the flip between sustaining and growth.
Nothing nothing nothing is different today than it was last week.
Okay. So I mean, you've got a little bit that's pretty manageable would you be targeting with the additional free cash flow and strengthening the balance sheet, maybe targeting paying down some of that debt or looking at dividend options.
Or potentially expanding the season looking ahead, a few years, rather expanding eastern expansion looking ahead.
Yeah, and this is Keith Murphy.
I think over the next couple of years, you know, we're really focused on that data.
Operating ramp up and you see that free cash flow profile that we presented over the three years with that that's going to give us a lot of financial flexibility to look at it.
At all of those options.
Okay great.
Look for clarity on that I guess in the quarters to come.
Now one of.
The items on the last slide there was that you provide market clarity on features buyback.
Can you give us any any updates on that with regard to maybe the timing of the <unk>.
Clarity and and what that clarity might involve.
Hey, Doug Hey, Joe.
Got it thank you.
Yeah, and last week at our presentation and we did provide some clarity on that.
So the timing of the buyback before year Anniversaries March 31, and then we have a 60 day window after that period.
So we plan to provide clarity to the market on our intention in the second quarter of this year I think it should be noted.
Worked really hard at getting our leverage to the position of that and we're really focused on maintaining our financial flexibility. So any decision that we make in the second quarter and come to the market, we'll have that in the back of our minds as well.
Okay. Okay. Thanks, so basically.
We expect maybe an update from the company within the 60 day period that follows the end of Q1 does that it so it would be sort of within the first 60 days of Q2 is that when you might provide an indication for example, whether or not you choose to.
Buyback a portion of their free cash flow interests.
Yes, John I think there's a 60 day window and a 30 day financing periods.
Some timing you said the second quarter.
Okay fair enough.
So much guys and good luck with 'twenty 'twenty four.
Thank you.
Thank you once again, Mr already the questions. Please styles of star one on your telephone keypads now.
Okay that seems to be no further questions on the phones at this time, so I'll hand that small speakers for the closing comments.
Alright, Thank you Mark and thank you to everyone, who has joined US today as always should you have any follow up questions. Please don't hesitate to reach out to us by phone or email have a great day.
Thank you. This now concludes the conference. Thank you very much for attending you may now disconnect your lines.