Q1 2024 New Gold Inc Earnings Call
Yes.
Good morning, My name is Laura and I'll be your conference operator today welcome to Eagle <unk> first quarter 'twenty 'twenty four 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, if you would like to withdraw your question. Please press Star then the number killed.
I would now like to hand, the conference over to Amit Shah Executive Vice President of strategy.
Developing thank you.
Ankit Shah: Thank you Laura and good morning, everyone. We appreciate you joining us today for new Gold's first quarter 2024 earnings conference call and webcast.
On the line today, we have Patrick <unk>, President and CEO.
Ankit Shah: A N bouchard, our COO and Keith Murphy our CFO.
Should you wish to follow along with the webcast. Please sign in from our homepage at new gold 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.
Ankit Shah: 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.
I cautioned that actual results and future events could differ materially from those expressed or implied in forward looking statements.
Ankit Shah: Slide two provides additional information and should be reviewed we also refer you to the section entitled risk factors in new Gold's latest Aif MD&A and other filings on SEDAR, plus which set out certain material factors that could cause actual results to differ.
Ankit Shah: 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, <unk> and good morning, everyone.
We had a good start to the year with the first quarter delivering as planned.
We continue to see excellent health and safety performance at both operations.
Our garage to care juncture campaigns.
Rainy River surpassed 3 million hours before the lost time injuries, and you often surpass 1 billion hours.
Ankit Shah: Our operation delivered on their quarterly plans.
All lines in our operational outlook, where these from February.
You often delivered strong first quarter published some results.
I remember made excellent progress on the planned waste stripping program, which will lead to on looking higher grade ore in the second half of this year.
Ankit Shah: We are one quarter away from securing the substantial increase in production and cash flow expected in the second half of the year.
We also made excellent progress on key growth projects, including the first concrete pour at CS AUM drudgery Crusher, and we set a record on the quarterly development advance rates that we need to reverse underground zone.
Ankit Shah: Our exploration efforts continue to ramp up as planned.
You often the company made great progress on the exploration drift, which is expected to be operational for drilling in me.
Ankit Shah: Q1 exploration focus on drilling diesel and starting drilling two zones from current infrastructures.
That's really river the exploration program is ramping up with newly identified target and an additional $4 million will be allocated for 'twenty into putting forward to drill these new targets.
Four drills are expected to be turning at twin River during Q2.
Ankit Shah: New gold is well positioned to achieve our guidance targets and deliver on our plan of system a system to free cash flow generation, starting in a matter of months.
There are entering in a very exciting period for new gold with that I will turn the call over to Pete.
Pete.
Pete: Thank you Beth I'm on slide six which has our operating highlights.
Pete: Q1 was another solid quarter, we produced 70900 gold ounces and $13 3 million pounds of copper.
Pete: Rainy River produced approximately 52700 gold ounces as planned which is based on our annual guidance breakdown, calling for a 40 60 split over the first and second half and while advancing waste stripping.
Pete: You often produced approximately 18200 gold ounces and $13 3 million pounds of copper.
Pete: This represents an 11% increasing gold and a 29% increasing copper production compared to Q1 2023.
At new Afton sustain.
Sustaining costs for the quarter up $241 per gold ounce were lower than the prior year period due to increased copper production and sales, we expect cost to trend lower throughout the year as copper sales catch up.
Pete: At rainy river costs will be higher in the first half of the year as the pit focuses on waste stripping in line with the plan.
Cost benefited positively from an approximately $8 million inventory write up gain driven by increased gold prices. This positively impacted costs at rainy river by approximately a $150 per ounce.
Pete: Turning to our financial results on slide seven first quarter revenue was approximately $192 million.
Q1 revenue was lower than the prior year quarter, primarily due to planned lower sales volumes, partially offset by higher gold prices.
Pete: Cash generated from operations before working capital adjustments was 73 million or 11 cents per share for the quarter.
The company recorded a net loss of approximately $44 million or six cents per share during Q1.
Pete: The increase in net loss as compared to the prior year quarter was primarily driven by lower revenues and a higher unrealized loss on the rainy River Gulfstream obligation and the new Afton free cash flow obligations.
After adjusting for certain other charges net earnings was 13 million or <unk> <unk> per share in Q1 compared to an adjusted net earnings of $18 million in the first quarter of 2023.
Pete: The decrease in adjusted net earnings were primarily due to planned lower revenues.
Pete: Our Q1 adjusted earnings include adjustments related to other gains and losses.
Pete: Our total capital expenditures for the quarter were approximately $61 million with 26 million spent on sustaining capital and $35 million on growth capital.
Exploration expenditures totaled approximately $3 $5 million before exploration tax credits, which we received.
Pete: At rainy River total capital increased over the prior year period due to higher growth capital spend.
Sustaining capital is primarily related to capitalized waste capital components, and tailings management and construction.
Pete: Growth capital is related to the underground development as the underground main zone continues to advance.
At New Afton total capital decreased over the prior year period, primarily due to lower growth capital spent.
Pete: Sustaining capital primarily related to tailings management and stabilization activities, while growth capital primarily related to the CS on underground development.
At the end of Q1, we had cash on hand of $157 million and a liquidity position of $530 million.
We continue to execute short term hedges on cat and feel and are hedged at 75% for Q2 2024, 50% for Q3 and 25% for CAD in Q4.
Pete: To sum up we remain in a very healthy financial position, all while continuing to invest in our growth projects. Our operations are well positioned to leverage the higher metal price environment and generate significant free cash flow.
Now I'll turn the call over to Johan to walk through our operating highlights.
Pete: Okay.
Thank you Keith while starting with rainy River on slide nine really continued to perform well achieving another quarter in line with our plan.
On the mining front waste stripping was a focus during the quarter. This is expected to continue in the second quarter and will ultimately provide access to greater quantity of high grade ore early in the second half of the year.
Pete: In the underground mine extraction from the Intrepid zone continues as planned and the development. Two main zone is on schedule for first ore in the second half of 2024.
In fact, Randy achieved a record quarterly development advance rate of 950 meters in the first quarter.
Pete: The mill performed very well processing over 25000 ton per day, almost 12% higher than Q1 of last year.
The team has made tremendous progress improving mill performance at no additional capital requirements.
Pete: Okay.
Pete: The right side of the slide reiterates our outlook for 2024, and the previously guided split between first and second half.
This is excellent information to highlight that the first quarter performance was according to plan.
We remain on track.
Second half production, representing approximately 60% of all on road production, mostly due to the open pit mining sequence.
Pete: We have successfully transitioned from phase three to phase four and we will continue to reclaim some lower grade stockpile in Q2 wildly release higher grade ore in the pit for the second half of the year.
Sustaining capital related to waste stripping will be elevated in the second quarter before trending down.
Pete: Down in the second half of the year.
Yeah.
Lateral development meters in the underground will ramp up throughout the year and we access additional underground mining zone and more adding become available.
Pete: Okay.
Slide 10 outlines the progress we've made underground.
Pete: The underground means zone that remain on track for first ore in the second half of 2020 for.
The priority for 2024 is to establish the primary ventilation circuit and access multiple mining zones.
These two events will be key to ramping up mining rate to 5500 tonnes per day by 2020, southern so I'd like to take a moment to address each.
First the team at <unk> did an excellent job of advancing underground lateral development.
Our quarterly develop an advance rate of 950 meters was a quarterly record at the site.
As additional adding open.
An additional underground mining augment is deliver deadlock on rate are expected to increase throughout the year.
That ken's raise boring a sort of a five meter diameter 420 meter long the fresh air Reyes as commence in the second quarter.
In addition, the contraction of the in pit portal offering a second mean of egress and decrease offering this stance will commence in the second quarter of this year.
Turning now to new Afton on slide 11.
New Afton as a good start to the year B III continue to deliver above 8300 tonnes per day and the C zone ramp up has been going to plan, leading to a 25% decrease in ton milled and a corresponding increase in gold and copper production compare to Q1 last year.
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The increased copper production is the primary driver of the reduced all in sustaining cost compared to the prior year period.
Looking now at the information on the right side of the slide.
After one quarter, we're trending in line with the annual plan, we continue to transition from the <unk> two skus AUM and expect to see a significant ramp up in C zone mining rate throughout the year.
We continue to expect the higher throughput in 'twenty.
24 to be partially offset by lower feed grade due to the cave draw sequence.
Leading to a fairly consistent poorly gold and copper production profile as planned.
Pete: Q3 progressed as show on slide 12, while commissioning of the territory Crusher and conveyor system is on track for the second half of the year. This will eliminate hauling requirement and impact positively on cost going forward.
As you can see the picture, we are making excellent progress. The first foundation four took place in February and Wisconsin to build on our progress since then.
We also continue to expect that the cave to reach hydraulic radius in the second half of 2024.
These two milestone will be transformative for new afton, increasing production and decreasing cost to generate a substantial cash flow.
I will now turn the call back to Pat.
Pat: Thank you your AUM, so just to sum up.
Operationally, we have made excellent progress and delivered the first quarter as planned.
Pat: We will continue to deliver on our students rather to goals.
For 2024 does include delivering on production and Cogs guidance.
This result marks the seventh consecutive quarter that we have delivered to our plant.
Technical excellence and operational discipline, our new goal is key to ensuring consistent quarter over.
Over a quarter result.
Thank you.
To be consistent it means that it's been more than talent. So I'm really proud of their commitment their teamwork and their leadership so.
Just wanted to say thank you for that.
Pat: Exploration continues to advance on both sides, we have the exploration drift progressing as planned at the Westin.
And really ramping up.
Pat: The river.
We continue to focus on both extending our mine lives and in finding new prospective target to achieve our strategic objective of our sustainable production platform of approximately 600000 gold equivalent ounces per year.
Pat: With regard to our new often buyback we continue to have ongoing discussions with teachers.
Pat: We are within that where buyback period.
We expect to provide market clarity with regard to the new Afton buyback later this quarter.
Do often we will achieve commercial production at <unk> zone, and commissioning of the crusher and come to the year.
Pat: Ashwin River, we will reach first ore from the underground meso.
Pat: As I said at the start of the presentation. We are one quarter away from pushing the company for substantial and sustainable increase in production commencing in the second out of the year.
Pat: This is transformative year for our company and our shareholders.
This completes our presentation and we'll now turn it back to the operator for the Q&A portion of the call.
Pat: Barbara.
Barbara: Thank you Sir.
Barbara: Ladies and gentlemen, you may begin the question and answer session should you have a question. Please press star followed by the number one on your Touchtone phone UFC Tony.
John Tom acknowledging your request should you wish to decline from the polling process. Please press star followed by the number too.
Barbara: You are using a speaker phone please lift your handset before pressing Alex.
Speaker Change: One moment. Please for your first question.
Your first question comes from the line of Mike Parkin from National Bank Go ahead. Please.
Hey, guys I may have missed it but could you just.
Recap, how many draw bells you have complete.
C zone, and maybe where are you hoping to be around.
Mike Parkin: And Q2, it can be a range that works and congrats on a good quarter to you by the way.
Speaker Change: Yeah. Thanks. Thanks for the question here I mean as of the end of Q2, we had about fault draw bells, I mean bill and.
Speaker Change: We have I think about Tam that already I mean to be billed daily fleet. So we are following the.
Speaker Change: We are basically following the plan on that aspect.
Speaker Change: The block nine seems to be <unk> at a time as well so we're trending really well so.
Speaker Change: There's a little delay basically.
Speaker Change: As of the end of Q1.
Speaker Change: Okay. Thanks very much.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Eric <unk> from Scotiabank go ahead. Please.
Speaker Change: Yes.
Eric: Oh, Hey, Pat and team. Thanks for taking my question and nice to see the strong results this quarter maybe.
Eric: Maybe just a question for me on the rainy River exploration, obviously, great to see the exploration budget, increasing there when it comes to open pit targets any additional comments here on things like ODM East and how that compares maybe to the potential pushback on the phase five and how are you thinking about the open pit targets.
Eric: Neuro is what we are we're progressing well on this we did a we redo the models or goes did the older. The work prior to initiate the drilling so and.
Eric: We will initiate drilling it wouldn't be a mix of diamond drilling in RSV drills and the drills. We were mobilizing the question a few weeks out there in the in the two weeks from now.
Eric: And we will probably being more quality during Q3.
Eric: But we.
Eric: We initiated a program as we're slowly Netherlands.
Speaker Change: Okay, great. Thanks for that and maybe just on the crusher at new Afton. So obviously concrete works are ongoing any other sort of critical path items or milestones here in terms of getting that up and running.
Speaker Change: Yeah.
Speaker Change: Yeah, I think that's one here.
Speaker Change: I think it's running really well within the first four of the timber originate fund and ready well, we're still working.
Speaker Change: I mean, we still have to do one in Q2 and we should be done. After that then we're going to pass, but they're going to pass that putting the starwood.
Speaker Change: Starwood together, but it's we have basically.
Speaker Change: Thinking that we're slightly ahead on schedule on that one but.
Speaker Change: It means we're going to be ready in time, and we have all the equipment on site as well that's no problem in lead time on the equipment. So we feel really good and we're hitting the milestone one I said the other on that so there's no stress there.
Speaker Change: Okay, that's great to hear thanks for the color I appreciate it so congrats on the quarter I'll hop back in queue.
Speaker Change: Ladies and gentlemen, just a reminder, should you have a question. Please press star followed by the number one on your Touchtone filing.
Speaker Change: Our next question coming from the line of Amit <unk> from.
Amit: Please go ahead Sir.
Amit: Hi, Good morning, Patrick. Thank you. So my first question.
Amit: At rainy River.
Amit: The tonnage was a little light on the or is that going to pick up.
Amit: In the second and third quarters, I assume just because of the.
Speaker Change: Some of the sorry, the weather related events, there that you have.
Amit: And he thought.
Speaker Change: We're not like thanks for the question.
Speaker Change: Impacted by the weather at all actually.
Speaker Change: For any.
Speaker Change: I mean for sure I mean as you as you know what I mean in Q2.
Speaker Change: <unk> limited amount of ore run off mine I would say that come from the open pit and we have to mix wet.
Speaker Change: The stockpile on surface and.
Speaker Change: C Q2 going to be better than Q1, but overall I mean.
Speaker Change: We don't see any concern that aspect in fact.
Speaker Change: We see basically extraction rate, increasing I would say.
Speaker Change: In Q2 above expectation and thats going to puts us in excellent position to deliver on the.
Speaker Change: I'll now, 40% 60% ratio.
Speaker Change: This year and I guess, hopefully is going to put us a little bit ahead of the game at the end of this quarter, but so getting good I think we're managing that risk for the well.
Speaker Change: I think that I don't want like to have that that's I mean, when do we start up our safety is Florida events were smaller now we got bigger and bigger bands. So productivity is much better and as well to move with the drill around its easier and we're also having better drilling performance with our semi equipment. So I think that.
Speaker Change: The tough stuff the toughest part I mean to start.
Speaker Change: That phase was really behind us.
Speaker Change: Okay and then.
Speaker Change: Another question with respect to the.
Speaker Change: The inventory adjustments at rainy River.
Speaker Change: We did that is that going to recur.
Speaker Change: In the following quarters or was that just a one time adjustment.
Speaker Change: Yeah.
Speaker Change: Yes that was an adjustment in the first quarter and due to the value we assigned to the low grade stockpile.
Speaker Change: And we use a <unk>.
Speaker Change: Term price, we don't expect ATB and mark to market adjustments significant to the rest of the year.
Speaker Change: Okay, and then lastly on new Afton.
Speaker Change: Tonnage is running just slightly ahead of I guess, what I would have expected it seems like if you.
Speaker Change: Continued to delivering even an even year in terms of production guidance.
Speaker Change: Quarter over quarter, Youre going to end up near or a little over the top and on new Afton do you expect Q2 to moderate a little bit. So that you are closer to that 50 50 or right now are you sort of.
Speaker Change: Is the plant operating better than expected you know could there be gearing towards the top end.
Speaker Change: Yeah.
Speaker Change: In our view I mean for sure we're going to see some fluctuation quarter over quarter, but not so much but basically we see a stable production at new Afton I mean between the second and the first on the second half of the year.
Speaker Change: Okay. Thank you that's it for my questions and also don't forget I mean, we have we do have processing capacity I mean, I mean, so I mean, if we have we.
Speaker Change: We can really like mayonnaise, our grade and throughput and be able to hit the target production without any problem.
Speaker Change: Okay. Thank you very much and congrats on a good quarter.
Speaker Change: Thank you too.
Speaker Change: Thank you there are no further questions at this time I would now like to turn the call back over to Mr. Shah for final closing comments.
Shah: Great. Thank you Laura and to all of you who have joined US today. Thanks again as always should you wished. It should you have additional questions. Please do not hesitate to reach out to us by phone or email have a great day.
Speaker Change: Thank you, Sir ladies and gentlemen, this concludes your conference call for today.
Speaker Change: We thank you for participating and ask that you. Please disconnect your lines have a lovely day.
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