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Sunday, Feb 25, 2024
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.


New Gold anticipates gold production hike over the next two years

The company expects that higher production, lower costs and reduced capital spend will generate free cash flow

New Gold anticipates gold production hike over the next two years
The New Afton mine in British Columbia. Image via New Gold.

New Gold Inc. (TSX: NGD) (NYSE: NGD) intends to raise gold production by 35 per cent from last year’s total to 410,000 to 460,000 ounces in 2026.

The company said on Monday that this plan involves increasing output at its Rainy River in Ontario and the New Afton mine in British Columbia, and finishing growth projects.

The steady ramp-up of C-zone is expected to drive an approximate 60 per cent increase in copper production from 2023 to 71 to 81 million pounds in 2026.

The company anticipates this bump in productivity from a mix of overhead reduction and improved processes. These include higher production at both operations and a significant reduction in total capital with lower operating costs as the C-zone crusher and conveyor come online.

Additionally, the Rainy River project will complete Phase 4 waste removal and start mining from the underground Main Zone.

Furthermore, all-in sustaining costs are anticipated to decrease by over 50 per cent compared to the 2023 midpoint of guidance to between $650 and $750 per ounce in 2026.

The company expects that the higher production, lower costs, and reduced capital spend over the next three years will generate significant free cash flow.

“With our inaugural presentation of three-year guidance, the company has clearly defined the path forward to significant free cash flow generation,” Patrick Godin, President and CEO, said.

“This is underpinned by the work completed in recent years to prepare our operations for meaningful production and cash flow increases, as costs and capital spend decrease.”

Read more: Calibre Mining results at Valentine Gold Mine show project’s strong potential

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New Gold expects to beat last year’s gold production

In 2024, New Gold expects consolidated gold production to range from 310,000 to 350,000 ounces, compared to 321,178 ounces in 2023.

The company also anticipates strengthening its gold production in the second half of the year, with approximately 60 per cent of annual production expected during this period as it sequences waste stripping at Rainy River.

Copper production projections for 2024 are between 50 to 60 million pounds. This marks an approximate 16 per cent increase over 2023, driven by the heightened contribution from C-zone at New Afton.

Additionally, the company expects a 10 per cent decrease in all-in sustaining costs for 2024 compared to the 2023 midpoint of guidance. The range for this is between $1,240 and $1,340 per ounce, driven by lower total cash costs, higher production from both operations, and reduced sustaining capital primarily related to waste stripping activities at Rainy River.

“The company is set to successfully complete a number of key catalysts in 2024, including reaching commercial production at New Afton’s C-zone, and first ore from Rainy River’s underground Main Zone,” Godin said.

“Capital deployed in 2024, weighted to the first half of the year, will allow the company to enter a sustained free cash flow generation period. In fact, at current commodity prices New Gold is expected to generate approximately $75 million in free cash flow in the second half of the year.”

Read more: Calibre Mining secures largest undeveloped gold resource in Atlantic Canada through $345M Marathon Gold merger

Read more: Calibre Mining reports record year-to-date earnings in Q3 financials

Rainy River added 200K in open pit and underground mineral reserves

Rainy River successfully added 201,000 ounces of open pit and underground gold Mineral Reserves, replacing 74 per cent of the 2023 depletion. New Gold expects the extension of open pit mining to sustain mill throughput near full capacity until at least 2030.

In 2023, the company identified several high-quality open pit and underground exploration targets.  This includes extensions of existing zones and potential new zones. It conducted limited exploration drilling at Rainy River from 2017 to 2022. Consequently, numerous promising targets remain untested. In 2024, exploration at Rainy River will focus on drilling several of these targets from both surface and underground.

In October, the company presented a strategic pipeline for increasing the production profile and extending the mine life at New Afton. This included evaluating three promising opportunities for converting Mineral Resources to Mineral Reserves: C-zone Extension, East Extension, and D-zone. Infill drilling resulted in the conversion of a portion of Inferred Mineral Resources to Measured and Indicated Resources by year-end.

Furthermore, the company reported encouraging drill results from two potential new mining zones: K-zone and AI-Southeast. Development of an exploration drift is currently underway to provide better access for drilling these zones, accelerating exploration efforts. The company anticipates the first drill bay will be operational by the second quarter of 2024, with full completion of the drift scheduled for the third quarter.

After commissioning the thickened and amended tailings plant and in-pit tailings storage project in late 2022, New Afton has ample tailings capacity to double the remaining mine life with minimal capital.

New Afton mine located in BC’s Golden Triangle

The New Afton mine is located in British Columbia’s Golden Triangle. This area, encompassing the towns of Stewart, Dease Lake, and the Indigenous community of Iskut, boasts a long history of mining activity dating back to the late 1800s.

Some of the largest and most prominent companies in the world have set up shop in the triangle, right alongside promising mid-level and junior companies.

For example, Skeena Resources (NYSE: SKE) (TSX: SKE) focuses on advancing its Eskay Creek gold-silver project located in the Golden Triangle. The project has historically been one of the highest-grade gold mines globally, and Skeena is actively exploring and developing it further.

Additionally, Newmont Corporation (NYSE: NEM) (TSX: NGT) operates the Brucejack Mine, a high-grade gold underground mine located near Stewart, British Columbia. The mine has been in operation since 2017 and has contributed significantly to the region’s economy.

Also, Calibre Mining (TSX: CXB) (OTCQX: CXBMF) picked up the Gold Reef property, which covers approximately 12 hectares of claims near Stewart, British Columbia, in its recent merger with Marathon Gold.

In recent years the Golden Triangle has garnered significant attention for its prolific gold, silver, and copper deposits.

Its dramatic mountainous terrain, extensive glaciers, and abundant waterways characterize the region, offering a challenging yet rewarding environment for mineral exploration and development.


 Calibre Mining is a sponsor of Mugglehead news coverage


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