New Gold Inc.
Q1 2021 Earnings Call Transcript

Published: 5 May 2021

[Operator:]

Hello and thank you for standing by, and welcome to the New Gold First Quarter 2021 Earnings Conference Call. Please be advised that today's conference is being recorded. I'd now like to hand conference over to your speaker today, Ankit Shah, VP of Strategy and Business Development. Please go ahead.

[Ankit Shah:]

Thank you, Michelle, and good morning, everyone. I appreciate you joining us today for New Gold's first quarter 2021 earnings conference call and webcast. On the line today we have Renaud Adams, President and CEO; and Rob Chausse, CFO. Should you wish to follow along with the webcast, please sign in from our home page at newgold.com.

[Rob Chausse:]

Thanks very much Ankit. And good morning, Slide 5 providers our operating highlights for Q1. The production details are consistent with our April production press release. During Q1m the company produced 96,000 gold equivalent ounces. Amount consisted of 13.8 million pounds of copper, 54,600 gold ounces from Rainy River and 11,994 ounces of gold from New Afton. Total of 66,650 gold ounces lower gold production as compared to the prior year quarter is primarily due to lower grades and lower throughput at New Afton. Our operating expense per equivalent ounce was higher than the prior year quarter due to lower sales volumes and a strengthening Canadian dollar with regards to the impact of the US dollar CAD FX rate in the first quarter against our FX rate, our guided FX rate of $1.28 impact was around $2 million. Going forward and sensitivity basis a $0.05 change in the US CAD FX rate represents about a $9 million impact on our operating cash flow. Consolidated all-in sustaining costs for the quarter were $1,550 per equivalent ounce, 7% higher than the prior year quarter primarily due to lower sales volumes. Turning into our financial results on slide 6; first quarter revenue was $164.9 million driven by sales of approximately 63,500 gold ounces at an average realized gold price of $1,788 per ounce, and sales of 13.3 million pounds of copper at $3.83 per pound. Q1 revenue was 16% higher than the prior year quarter due to higher metal prices. Our operating cash flow before working capital adjustments was $63.7 million or $0.09 per share for the quarter, higher than the prior year quarter primarily due to higher metal prices. Company recorded net earnings of $15.1 million or $0.02 per share during Q1 compared to a loss of $0.04 per share in Q1 2020. After adjusting for other certain charges, net earnings were $8.1 million or $0.01 per share in Q1 compared to a net loss of $18 million or $0.03 per share in the first quarter of 2020, differences driven by higher revenue and lower depreciation.

[Renaud Adams:]

Thanks, Rob. And thanks again, everyone for joining us today. I'm on slide 9 as for additional comment on sustainability and ESG. Beside our health and safety, global efforts, the New Gold has four sustainability focused area, indigenous people, tailings management, water and climate, all of which will be fully addressed in our upcoming sustainability annual report. We have adapted our sustainability effort to align with the most pressing ESG issues facing our company in the mining industry. As we look forward, it is not about presenting a new way of operating but looking at what we are currently doing and looking for area to improve we can build on. We are currently working on our 2030 roadmaps with ambitious goal to reduce our emissions. While continuing to create value to our host community in the area we operate. Our side, I've implemented employee driven programs that help generate ideas for energy efficiencies to help achieve our overall carbon footprint, both slides have environmental management systems and include water, climate, tailings risk on our operation. Operation actively seeks our partnership and work with local communities to understand the cultural and traditional aspect for progressive reclamation and environmental monitoring on an ongoing basis. Going forward, we will implement a more comprehensive climate action plan that also outlines opportunities for electrification and energy efficiencies. This will help us achieve our emission reduction goal. Meanwhile, New Afton has already added its first electric equipment to its underground mobile fleet. Our objectives continue to be very clear. We want to create value, minimize environmental impacts, and do our part in achieving larger goal, global objectives of climate, water, tailings management and indigenous relations, all while to continue to prioritize the health and safety and well being of our people and the people in the community in which we operate in.

[Operator:]

Your first question comes from Trevor Turnbull from Scotiabank.

[TrevorTurnbull:]

Yes, thanks Renaud. I had a question I guess on the way your accounting for expenditures for Rainy River underground. I read through it pretty quickly. So I might have missed it. But it looked like you had something on the order of a $1 million in gross expenditures for the underground with the intrepid zone and so forth. But it seems like you've done more work than that. And I'm just wondering is it the way you're accounting for it? Or am I missing something in the way you're going about the work at intrepid.

[RenaudAdams:]

No, it's really all captured in gross capital. And I guess the booking and the timeline when the execution but it's all has a gross capital. And as you previously disclose our guidance we are expecting between the -- within guidance on the gross capital. There was -- the very interesting part now that you mentioned beyond the $1 million of expenses is we're very pleased with the same result. And I just take advantage of your question here just to clarify that our first level in ore has responded extremely well compared to our block model. And we see some even gain here on the total ounces. And we'll continue to execute our plan. So as we move forward, you will see starting in the next quarter, the expenses will pick up and we're expecting to within our plan for the year and continue to develop there

[TrevorTurnbull:]

And you talked about having I think 16,000 tonnes -- put able to add to a stockpile. Are you looking to process any of the material that you do develop this year? Or is all this going to be stockpiled for sometime in the future?

[RenaudAdams:]

It's really a stockpile but definitely this is something we eventually, we'll see how many tonnes I mean, you can imagine when you processed 27 average a day, the first quarter of 15,000 - 16,000 tonnes is not a lot to impact result, if this is where we're going. But the truth is, we're currently stockpiling and we'll see later in the year. There are some precautions to be taken, as you can imagine. It comes with some metals and from the underground. So we got to be sure we're well equipped has we decided to do initiate processing.

[TrevorTurnbull:]

And obviously because of the higher grade it's going to be a bit of a shock in a way to the mill the way it's been operating. Is there some sort of plan maybe when the stockpiles built up a bit more to maybe actually batch process a bit just to see how it reacts in the mill or will you probably just blend it?

[RenaudAdams:]

At this stage, we're actually continuing in on our study, as previously disclosed we're working on extension of, potential extension life of mine bringing more, we're looking at the milling aspects so far, our intentions will be eventually to blend. Would it be any opportunity to improve result by maybe batching? We're not there yet. Our plan is the basic case is just to blend.

[Operator:]

At this time, we have no further questions in the queue. I will turn the call back over to our presenters for closing remarks.

[Ankit Shah:]

Thank you, Michelle. To all of you who have joined us today. Thank you again. As always, should you have any additional questions, please do not hesitate to reach out to us by phone or email. Have a great day. Thanks very much.

[Operator:]

Thank you, everyone. This concludes today's conference call. You may now disconnect.