New Gold Inc. (NGD) Q2 2024 Earnings Call Transcript

New Gold Inc. (NYSE:NGD) Q2 2024 Outcomes Convention Name July 31, 2024 8:30 AM ET

Firm Contributors

Ankit Shah – EVP, Technique and Enterprise Improvement
Patrick Godin – President and CEO
Keith Murphy – CFO
Luke Buchanan – VP, Technical Providers
Jean-Francois Ravenelle – VP, Geology

Convention Name Contributors

Eric Winmill – Scotiabank
Anita Soni – CIBC World Markets
Jeremy Hoy – Canaccord
Mike Parkin – Nationwide Financial institution

Operator

Good morning. My identify is Ludy, and I will be your convention operator right now. Welcome to the New Gold’s Second Quarter 2024 Earnings Convention Name [Operator Instructions]. I’d now like at hand the convention over to Ankit Shah, Govt Vice President of Technique and Enterprise Improvement. Please go forward.

Ankit Shah

Thanks, Ludy. And good morning, everybody. We recognize you becoming a member of us right now for New Gold’s second quarter 2024 earnings convention name and webcast. On the road right now we’ve Patrick Godin, President and CEO; and Keith Murphy, our CFO. As well as, we even have Luke Buchanan, Vice President Technical Providers; and Jean-Francois Ravenelle, Vice President Geology, accessible for the query and reply portion of the decision. Must you want to observe together with the webcast, please sign up from our residence web page at newgold.com. Earlier than the crew begins the presentation, I would wish to direct your consideration to our cautionary language associated to forward-looking statements discovered on Slide 2 of the presentation. Right now’s commentary contains forward-looking statements regarding New Gold. On this respect, we refer you to our detailed cautionary observe concerning ahead trying statements within the presentation. You might be cautioned that precise outcomes and future occasions may differ materially from these expressed or implied in forward-looking statements. Slide 2 gives extra info and must be reviewed. We additionally refer you to the part entitled Danger Components in New Gold’s newest AIF, MD&A and different filings accessible on SEDAR+, which set out sure materials components that might trigger precise outcomes to vary. As well as, on the conclusion of the presentation, there are a variety of finish notes that present necessary info and must be reviewed at the side of the fabric offered. I will now flip the decision over to Pat for his remarks.

Patrick Godin

Thanks, Ankit. Earlier than discussing the quarter, I wish to take a second to debate final week’s occasions after we skilled the fatality on the Wet River mine. Extra particularly, we misplaced a colleague. Our ideas proceed to be together with his household and buddies. Each quarterly name, I begin by speaking about security. I discuss our braveness to care tradition. I do that as a result of I imagine that the important thing to constant and disciplined manufacturing begin with secure manufacturing. It begins with the braveness to look after our colleagues, searching for each other, stopping work if it is not secure and answering everybody goes on to their household and buddies safely on the finish of each shift. I have been happy with the well being and security efficiency by our operation and by the dedication of all staff. We’ve got been capable of have fun the awards and milestone collectively, however within the occasion, we mourn along with the household, buddies and colleagues who’ve been impacted by this tragic incident. I’ll now discuss our second quarter. The second quarter noticed New Gold ship one other quarter as deliberate. Throughout the quarter, our New Afton mine received two separate award for having the bottom complete recordable damage frequency charge in 2023. The primary being the most secure giant underground mine in BC offered by the BC Ministry of Power, Mines and Low Carbon Innovation and the second being the John T. Ryan Regional CT Award in mines in BC and Yukon, offered by the Canadian Institute of Mining. I am happy to take a second to acknowledge their accomplishments.

Operationally, we delivered on the quarterly plan with a robust adherence to our [personal] outlook launch from February. New Afton delivered robust quarterly manufacturing consequence at low value. Wet River made glorious progress on the deliberate waste stripping program and the open pit is effectively positioned to ship on our growing manufacturing profile for the second half of the 12 months. On our first quarter name, I do know that we had been one quarter away from securing the rise in manufacturing and money movement anticipated within the second half of the 12 months. I am happy to say that solely we entered that interval after we achieve this having completed the primary half of the 12 months with free money movement constructive. And with the corporate exiting the primary half of 2024 free money movement constructive, I am happy to say that New Gold has now entered a [sustained] free money movement era interval. We additionally made glorious progress on key development initiatives. Importantly, all key development initiatives stay on observe for completion within the second half of the 12 months. We made vital progress with our exploration effort at each operations within the second quarter. At New Afton, the corporate offered a constructive exploration replace on [K-Zone]. The crew there additionally accomplished the exploration drift early within the quarter and instantly started advancing precedence close to mine targets.

At Wet River exploration drilling continues to make significant progress from each floor and underground. For the primary half of 2024, the corporate has drilled roughly 20,000 meters at Wet River testing numerous excessive precedence targets. We’re anticipating offering an exploration replace later within the third quarter. The corporate additionally achieved quite a few company milestone within the quarter. We introduced the publication of our 2023 ESG report, one thing the corporate has revealed yearly since 2015, in addition to our 2023 process power on local weather associated monetary disclosure report. All reviews can be found on Website online. Because the final level, I am extraordinarily happy to underline that we efficiently delivered an [accredited] transaction for our shoulder by growing our free money movement curiosity in New Afton to 80.1%. To sum up, the second quarter and the primary half of the 12 months met expectations and the corporate is effectively positioned to ship on steering and sustaining free money movement era going ahead. With that, I will flip the decision over to Keith. Keith?

Keith Murphy

Thanks, Pat. I am on Slide 6 which has our working highlights. Q2 was one other strong quarter, [produced] roughly 69,000 gold ounces and 13.6 million kilos of copper. Wet River produced roughly 50,300 gold ounces as deliberate, whereas advancing waste stripping. New Afton produced roughly 18,300 gold ounces and 13.6 million kilos of copper. This represented an 10% improve in gold and 13% improve in copper manufacturing in comparison with Q2 2023 as C-Zone ore processing is ramping up. Consolidated all in sustaining prices for the quarter had been $1,381 per gold ounce on a byproduct foundation in step with plan. We anticipate value to development decrease within the second half of the 12 months. At New Afton, all in sustaining prices for the quarter of unfavorable $433 per gold ounce was considerably decrease than the prior 12 months interval as a result of elevated copper manufacturing and gross sales. At Wet River, prices had been increased in comparison with Q2 2023 had been in step with plan and are anticipated development decrease within the second half as manufacturing will increase. Turning to our monetary outcomes on Slide 7. Second quarter income was roughly $218 million. Q2 income was increased than the prior 12 months quarter, primarily as a result of increased metallic costs and better copper manufacturing, partially offset by decrease deliberate gold manufacturing. Money generated from operations earlier than working capital adjustment was $90 million or $0.14 per share for the quarter. That is increased than the prior 12 months interval, primarily as a result of increased revenues and constructive working capital changes.

Firm recorded web earnings of roughly $52 million or $0.07 per share throughout Q2. The rise is primarily as a result of extra revenues ensuing from increased metallic costs and a web achieve on the [derecognition] of the New Afton free money movement obligation. In reference to the amended Ontario Academics’ Settlement, the legal responsibility associated to the unique settlement that was recorded at honest worth was extinguished. The up to date settlement didn’t represent a monetary legal responsibility for accounting functions, it was accounted for as a partial disposition of web mining pursuits. The web affect of this was a $42 million [gain]. After adjusting for sure different fees, web earnings was $17 million or $0.02 per share in comparison with adjusted web earnings of $12 million within the second quarter of 2023. Our Q2 adjusted earnings embrace changes associated to different good points and losses. Our complete capital expenditures for the quarters had been roughly $72 million with $32 million spent on sustaining capital and $41 million on development capital. At Wet River, complete capital elevated over the prior 12 months interval as a result of increased development capital spent. Sustaining capital is primarily associated to capitalized waste, capital parts, tailings administration and development. Sustaining capital is trending decrease as a proportion of waste tonnes are capitalized and the next proportion stays in working prices with no web affect on [ASIC].

Progress capital is expounded to underground improvement because the underground mine continues to advance. At New Afton, complete capital decreased over the prior 12 months interval as a result of each decrease development and sustaining capital spent. Sustaining capital is primarily associated to tailings administration and stabilization actions. Progress capital is primarily associated to the C-Zone underground improvement. On the finish of Q2, we had money readily available of $184 million with a liquidity place of $461 million. That is after growing New Gold’s efficient free money movement curiosity in New Afton to 80.1% for an upfront money cost of $255 million financed with a $100 million from our current revolving credit score facility and web proceeds from a concurrent fairness financing. We anticipate repaying the credit score facility with free money movement generated within the second half of 2024. To sum up, we stay in a really wholesome monetary place all whereas persevering with to spend money on development initiatives. As we efficiently executed on half one aims, we’ve entered the sustaining interval of free money movement era and we’re effectively positioned to leverage the upper metallic worth surroundings. Now I will flip the decision again to Pat to stroll by means of our working highlights.

Patrick Godin

Thanks Keith. Beginning with Wet River on Slide 9. Wet River continues to carry out effectively, attaining one other quarter in step with our plan. On the mining entrance, waste stripping was the main target through the quarter and elevated as deliberate from Q1. I am happy to say that the open pit is in glorious place as we begin the second half of the 12 months. Waste stripping is predicted to say no by means of the rest of the 12 months as we entry better portions of excessive ore. Within the underground mine, extraction from the interpret zones continued as deliberate and the event to foremost zone is scheduled for first ore from improvement within the second half of 2024. The [mill] carried out very effectively, progressing over 26,000 tonnes per day, 12% improve in comparison with the Q2 of final 12 months. We proceed to function above the guided mill throughput charge of 24,700 tonnes per day. The best facet of this slide outlines our 2024 outlook as offered in February and the beforehand guided break up between the primary and the second half of the 12 months. This info remains to be legitimate six months into the 12 months and effectively positioned to fulfill our steering manufacturing and value goal for 2024. We stay on observe for second half manufacturing, representing roughly 60% of our annual manufacturing, principally because of the open pit mining sequence. We are going to proceed to reclaim some decrease grade stockpile in Q3 whereas we launch our grade ore within the open pit for later within the 12 months. The [structured] ratio is to lower within the second half of the 12 months as deliberate, which lead to increased working prices and decrease sustaining capital. Nonetheless, decrease that affect on [ASIC], which can to development decrease within the second half of the 12 months with the upper gold manufacturing. Lateral improvement meters within the underground mine will proceed to ramp up by means of the 12 months as we entry extra underground mining zone and extra addings grow to be accessible.

Slide 10 outlines progress we’ve made underground. The underground foremost zone stays on observe for first ore from improvement within the second half of 2024. As beforehand talked about, the precedence for 2024 is to determine a major air flow circuit and entry a number of mining zone, as these two occasions might be key to ramping up mining charge to five,500 tonnes per day by 2027. The crew at Wet River did a wonderful job advancing underground lateral improvement. Underground improvement continues to extend quarter-over-quarter and I anticipate this development to proceed into Q3 and This fall as extra headings open and extra underground mining tools is delivered. The elevate boring of the 5 meter diameter, 420 meter lengthy recent air elevate commenced within the second quarter. On the finish of Q2, each the ODM is air flow to loop and the recent air methods had been roughly 50% full in step with the plan. As well as, I am happy to report that the development of the in-pit portal providing a second imply of egress and decreased waste all-in distance will begin in few days early August.

Turning now to New Afton on Slide 11. New Afton delivered to plan. B3 continued to ship above 8,300 tonnes per day and the season ramp up as being going to plan resulting in a 34% improve in tonne milled and a corresponding improve in gold and copper manufacturing in comparison with Q2 final 12 months. The elevated copper manufacturing is the first driver of the lowered all in sustaining value in comparison with the prior 12 months interval. Trying now on the info on the precise facet of this slide. Just like Wet River, the primary half delivered based on plan and we’re trending in step with the tip of our plan. We proceed to transition from the B3 cave to C-Zone and anticipate to see a continued ramp up in C-Zone mining charges all year long. We proceed to anticipate the iron mill throughput within the second half to be partially offset by the decrease feed grade because of the cave draw sequence, resulting in a reasonably constant quarterly gold and copper manufacturing profile as deliberate.

C-Zone progress is proven on Slide 12. Commissioning of the gyratory crusher and conveyor system is on observe for the second half of this 12 months. This may remove hauling requirement and affect positively on [task] going ahead. We’re on schedule to finish the C-Zone development section this 12 months, which embrace the C-Zone cave reaching hydraulic radius and commissioning of the gyratory crusher and conveying methods. Lateral improvement proceed to advance on plan with over 80% of the event meters now full. I am actually happy with the progress the crew has made and C-Zone improvement is not a essential path merchandise for C-Zone commissionings. These two milestones might be transformative for New Afton, growing manufacturing and lowering value to generate significant money movement. Simply to sum up, operationally, we delivered our first half as deliberate. We’ll proceed to ship on our said strategic objectives. For 2024, this embrace delivering on manufacturing and value steering. We’ve got now delivered eight consecutive quarters to plan. As I’ve stated earlier than, a secure manufacturing, technical excellence and operational self-discipline are New Gold’s keys to making sure constant quarter-over-quarter outcomes. Exploration continues to advance at each websites and we’ll share these outcomes with you within the coming months.

We proceed to concentrate on each extending our mine lives and [adding] new potential targets to attain our strategic goal of a sustainable place platform of roughly 600,000 gold equal ounces per 12 months. We delivered an accredited transaction for our shareholders by growing our free money movement curiosity in New Afton to 80.1%. At New Afton, we’ll obtain business manufacturing at C-Zone and fee the crusher and conveyor. At Wet River, we’ll set up a air flow system and the second imply of egress whereas persevering with getting ready the mining stock main us to first ore from foremost zone improvement this 12 months. We exit the primary half of the 12 months free money movement constructive with the free money movement inflection level behind us. We’ve got now entered a sure money era interval. This proceed to be a transformative 12 months for our firm and our shareholders and we sit up for offering extra constructive updates on our third quarter name later this fall. This completes our presentation, I’ll now flip it again to the operator for the Q&A portion of the decision.

Query-and-Reply Session

Operator

[Operator Instructions] And your first query comes from the road of Eric Winmill with Scotiabank.

Eric Winmill

Perhaps only a fast query right here on New Afton. Mining value per tonne was down over Q1. Any extra commentary there by way of one time gadgets that may have prompted that, or how are you occupied with the mining prices right here all year long? Clearly, ought to form of stabilize these decrease ranges because the cave ramps up.

Keith Murphy

As we proceed to extend the throughput at New Afton with C-Zone ore coming on-line, we’ll lower our value per tonne and lots of fastened prices at New Afton and we’ll leverage that elevated throughput. In order we proceed to extend throughput that value per tonne will proceed to come back down.

Eric Winmill

And simply turning to Wet River for a second. Clearly, within the shutdown final week, my condolences on the fatality there. Any form of broader learn throughs we must always assume by way of pit stability or every other points within the open pit at Wet?

Patrick Godin

So sure, it was not a straightforward week for all of us and it is nothing in comparison with the household, however this stay an ongoing investigation. And in respect of the method [Indiscernible] not going by means of the precise element of the incident. So what I can verify to you, nonetheless, is that it is not associated to pit slope, it was associated incident with a chunk of kit. It was tools that was loading a crack. So we’ve no stability concern, no technical points or nothing concerning the infrastructures of the pit or no matter. So if I can ring sense the incident, it is associated to the operation of an tools.

Eric Winmill

I do know not a straightforward scenario. After which so clearly, form of per week of downtime, is that what we must always anticipate right here and I assume, the operations have resumed roughly?

Patrick Godin

However we — first, we began the operation when the incident occurred within the morning of final Wednesday,and we begin on Saturday. So mainly, we stopped principally over three days. And so after we ramp up after that as easily on Saturday, the operation, however we’re on observe to ship steering. So it is principally three, 4 days, is the vary that we will take in and to ship our — within the vary of our steering for 2024. So we’re not impacted for this, simply we took the suitable time to do the primary, I’d say, to collect the info for the investigation. And it could be — and so we’re all the time doing an investigation with one thing like this. So irrespective of the incident that we face and after that we’re doing [Indiscernible] this. So it was necessary for us to collect all the info. We collaborate with the Minister of Mine, the Chief Inspector and in addition we’re doing the investigation in partnership with our staff and of our crew. So within the time to collect all this to type it out and to look after the household and to care additionally to restart the operation with our individuals. So we principally misplaced 3 days, however I am not seeing that as a loss, I am saying that as a look after my colleague.

Operator

And your subsequent query comes from the road of Anita Soni with CIBC World Markets.

Anita Soni

So firstly, my condolences on the lack of life at New Afton — at Wet River. After which my query, I will begin with the CapEx at New Afton. It appears that you are a little underspending there relative to the information. Is that on account of value financial savings or are you just a bit bit behind on the spend, will that catch up within the again half of the 12 months? I feel the information was extra like $130 million to $145 million for development capital and also you guys are type of averaging extra sub $120 million thus far?

Patrick Godin

So it is primarily associated to 2 gadgets. So the primary merchandise is we’ve a little bit of, I’d say, offset the quarter-to-quarter for the supply of the tools for the extraction zone and the rehandling of the crushers, nevertheless it’s not having an affect on our operation as we’re utilizing the earlier tools really, so tools supply. And the opposite merchandise is as a result of we’re actually happy with the truth that the Yohann with the crew listed below are working actually arduous to optimize web asset worth. So we make investments lots of effort and time to optimize the developments. We’re performing higher on improvement. And we delayed some openings to subsequent 12 months, so a slight adjustment as a result of it is solely the — good administration within the planning of the event on a well timed method, scale back the variety of contractors and lowering our prices and enhancing our productiveness. In order that’s primarily the 2 explanation why we’re on the development standpoint and the CapEx standpoint, we barely delayed however we should spend this cash in a well timed matter, simply offset [Multiple Speakers] from 1 / 4 to 1 / 4 — not quarter, nevertheless it’s not an additional expense, it is simply — it is not an underperformance, it is an awesome efficiency.

Anita Soni

So a bit bit of higher unit value optimization, a bit little bit of deferral and a bit little bit of catch-up spend within the again half. Is that…

Patrick Godin

Sure.

Anita Soni

After which that truly leads me to my subsequent query. Each of the — each New Afton and Wet River outperformed not simply on the mining value however on the entire unit value. Is that — was that one thing that was only a onetime factor or is that higher — good optimization on behalf of Yohann and his crew?

Patrick Godin

I feel, first, I can say to you that we’re — as a result of Yohann really is at Wet River, for this reason I am taking his a part of the decision, he is caring for our colleagues there. However he’s actually happy with this achievement at Wet River, as a result of on a complete value standpoint, we mine extra tonnes for much less cash. So we’re at some extent that we optimize the open pit. We absolutely maximize the truth that we’re not utilizing the waste dump anymore as a result of we’re doing in pit dumping for the waste, scale back all the gap, optimize the drilling within the blasting. So we’ve a brand new mine supervisor in place that’s enhancing — is a giant — he is a component together with his crew — is a giant a part of the success, too. It is a crew work however we improved drastically the productiveness within the pit. So we mine extra tonnes for much less cash. So we’re actually happy by this, actually happy. And for Wet River — for New Afton, as I stated to you, we managed very well our efficiency. And so we’re pushing actually arduous to ship our crushing and materials dealing with upfront. So we’re upfront really on the schedule. And the day that we are going to begin it up, it’ll scale back our OpEx as a result of we remove all of the trucking as a result of we’re trucking up all the fabric from C-Zone to the mineral sizer, so we’ll — not have to try this anymore. So by way of manpower, gas, operational tools, upkeep of the tools, it will likely be a direct achieve for us.

Operator

And your subsequent query comes from the road of Jeremy Hoy with Canaccord.

Jeremy Hoy

Condolences for you colleague at Wet River. I feel I will contact on the ramp-up at New Afton. After we had been there again in Might, the progress of the mission was going fairly effectively. I feel you had 4 drawbells accomplished and we’re seeking to full them at a charge of about 4 monthly. So with hydraulic radius being 18, we’re attaining that doubtlessly August or September, I imagine. May you guys give a bit extra element on once you anticipate to attain it, as a result of issues appear to be transferring at fairly an excellent tempo?

Patrick Godin

So for the hydraulic radius, it is really on — as a result of we’ve expertise with [blockade], the fourth one. In principle, we have to obtain — to have 18 drawbells improvement and performance to succeed in the hydraulic radius and truly, we’re trending for the start of This fall. So we’re doing effectively on that. We’re nonetheless trending to have three drawbells for 12 months finish and in order we mentioned — and we’re in plan. So we’re trending — it will possibly begin the equipment by itself with 17, it will possibly begin with 21. So it is not a precise science however really we’re trending for the start of This fall. So actually happy by this, as a result of — and in addition for the conveyor system and the crusher. So I feel that we current some — an image of the ore fixing the underside a part of the gyratory crusher. It is a image of that. So really, the manpower on this half are most likely in place, so it is value trying extra. So we’re principally — as an alternative to take a look at the tip of This fall, we’re trying center This fall, so it is glorious for us, doing effectively.

Jeremy Hoy

And my subsequent query was going to be on the conveyor and the crusher. So I recognize the element there as effectively. That is it for me…

Patrick Godin

So we’re putting in the final belt this week. So mainly, the [Indiscernible] is in place below the BIM. So I feel it is — we’ll most likely type it out in shortly. So the subsequent merchandise by way of infrastructure and — the development of infrastructure would be the crusher. So it will likely be the main target from the next weeks as much as the tip — in November. So we’re very well positioned, the fellows did an excellent job, we did additionally a secure job. So I used to be there with them on Sunday and nothing so as to add there. It is excellent.

Operator

And your subsequent query comes from the road of Mike Parkin with Nationwide Financial institution.

Mike Parkin

All my questions have been answered. So thanks.

Operator

And there aren’t any additional questions at the moment. I would like to show it again to Ankit Shah for closing remarks.

Ankit Shah

Thanks, Ludy. And to everybody who joined us right now, thanks once more. As all the time, ought to you may have any extra questions, please don’t hesitate to succeed in out to us by telephone or e-mail. Have an awesome remainder of your summer season.

Operator

Thanks, presenters. And women and gents, this concludes right now’s convention name. Thanks all for collaborating. Chances are you’ll now disconnect.