New Gold Inc (NGD) 2021 Q4 法說會逐字稿

Good morning. My name is Chris, and I'll be your conference operator today. Welcome to the New Gold's Fourth Quarter 2021 Earnings Conference Call. (Operator Instructions)

I would now like to hand the conference over to Ankit Shah, VP of Strategy and Business Development. Thank you.

Thank you, Chris, and good morning, everyone. We appreciate you joining us today for New Gold's Fourth Quarter and Full Year 2021 Earnings Conference Call and Webcast. On the line today, we have Renaud Adams, President and CEO; and Rob Chausse, our CFO. Should you wish to follow along with the webcast, please sign in from our homepage at newgold.com.

Before the team begins the presentation, I'd like to direct your attention to our cautionary language related to forward-looking statements found on Slides 2 and 3 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. Slides 2 and 3 provide additional information and should be reviewed.

We also refer you to the section entitled Risk Factors in New Gold's latest MD&A and other filings available on SEDAR, 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.

With that, I will now turn the call over to Renaud.

Thank you, Ankit, and thanks, everyone, for joining us today for our 2021 and 2022 outlook and reserve and resources update. 2021 sure brought us part of challenges, but I'm extremely proud of our resilient team and the way we ended the year. On the operational side, both assets achieved a consolidated updated production and cost guidance. Q4 delivered the strongest production and the lowest cost in the quarter of the year.

At Rainy River Mine, the mine achieved its updated 2021 guidance while executing extremely well on its capital project achieving some savings in the tailings execution. We've also continued to advance the Intrepid zone with the view to bring some of the production -- the first production in the second half of 2022. The highlight of the year was at the year-end updated reserve and the resources, while we've seen a meaningful conversion of the mineral resources to mineral reserves, leading in the year-over-year increase in the gold mineral reserve for New Gold. At New Afton Mine, the asset achieved its 2021 production guidance, slightly a higher cost, but considering all the challenges that we -- the mine has to navigate through 2021, it was a an excellent execution at New Afton while we continue as well to advance our C-zone and advance on plan for delivery and start of production in the second half of 2022.

The B3 zone initiated with the delay in the permitting and continue to advance and ramp up during the second half of 2021. And we've seen some very encouraging exploration results as one in '21 and will follow up into '22. At the year-end, the company concluded its sale of the Blackwater gold stream for a total proceed of $300 million, bringing our cash balance to $482 million. While combined to our increased and extended credit facility has now position our liquidity at a meaningful mark of $850 million. So the crystallized value for the Blackwater has share positioned our company with a peer-leading balance sheet and financial capacity to execute on our strategy.

On that, I'll turn it over to Rob Chausse, our CFO, for the Q4 and 2021 review. Rob?

Thanks, Renaud. Good morning, everyone. Slide 6 provides our operating highlights. The details are consistent with our January production press release. During Q4, the company produced 111,500 gold equivalent ounces. The amount consisted of 14.2 million pounds of copper, approximately 68,000 gold ounces from Rainy River and approximately 13,000 gold ounces from New Afton, giving us a total of 81,000 gold ounces. The lower equivalent gold production as compared to the prior year quarter is primarily due to lower tonnes processed at both assets.

Our operating expense per equivalent ounce was higher than the prior year quarter due to the strengthening Canadian dollar, lower sales volume and the Canadian wage subsidy received in the prior period. Consolidated all-in sustaining costs for the quarter were $1,355 per equivalent ounce higher than the prior year quarter, primarily due to higher operating expense, as previously noted, that was partially offset by lower sustaining capital.

Turning to Slide 7 for our financial results and capital. Fourth quarter revenue was $202 million, driven by sales of about 78,000 gold ounces at an average price of $1,798 per ounce and sales of 14.2 million pounds of copper at $4.37 per pound. Q4 revenue was 2% higher than the prior year quarter, primarily due to higher metal prices, partially offset by lower sales volume. Our operating cash flow before working capital adjustments was $93 million or $0.14 per share for the quarter, in line with the prior year quarter. The company recorded net earnings of approximately $151 million or $0.22 per share during Q4 compared to a $0.03 loss of the prior quarter.

After adjusting for certain charges, net earnings were $24.7 million or $0.04 per share in the quarter, equal to the prior year quarter. Our Q4 adjusted earnings includes adjustments related to our gain on the Blackwater stream sale and unrealized adjustments on the Rainy River mark-to-market and free cash flow royalty at New Afton. Our MD&A has additional details on the non-GAAP measures that we've discussed here.

I'm still on Slide 7. Our total capital expenditures and leases for the quarter were $60.5 million, $33.6 million was spent on sustaining capital and $26.9 million on growth capital. Sustaining capital was primarily related to planned tailings work at both operating assets, capital strip at Rainy River and B3 mine development at New Afton. Our growth capital is focused on project development, specifically the C-zone and the thickened and amended tailings project at New Afton and the underground Intrepid zone at Rainy River.

Slide 8 provides details on our capital structure. During the quarter, we extended our credit facility, realizing lower interest rates going forward on that. Cash on hand at the end of the year, as Renaud noted, was $482 million as a result of -- primarily as a result of the proceeds received from the sale of Blackwater.

Slide 9, moving on to our guidance. In 2022, we expect to produce, on a consolidated basis, between 380,000 and 440,000 gold ounces at an all-in sustaining cost of between $1,470 and $1,570 per ounce. 55% of the annual production is expected to come in the second half of the year with all-in sustaining costs trending lower through the year, sustaining capital, which is primarily made up of capital waste tailings management and B3 activities is estimated to be between 180 and $225 million in '22 growth capital, which will be focused on C-zone development and underground development at Intrepid is expected to be between 115 and $155 million in the coming year.

With that, I'll turn the call back to Renaud.

Thanks, Rob. I'm on Slide 11 on the mineral reserve and mineral resources update. As mentioned in my opening comment, year-over-year net increase in mineral reserve for New Gold to 3.7 million ounces, up from 3.6 million at the end of 2020. This was led by a meaningful conversion of approximately 569,000 ounces of mineral resources to mineral reserve in the underground at the Rainy River, leading to a net increase of over 200,000 ounces of the gold ounces for the year.

This is including all depletions of the pit that took place from the mining to the negative reconciliation and mineability. So a net increase of 200,000 ounces of gold mineral reserve at the Rainy River. The East Lobe, which was the East Lobe area, which was really responsible for most of the additional depletion will be mined out at the end of 2023. And New Afton mineral reserve decreased by approximately 75,000 ounces of gold and 78 million pounds of copper, mostly due to the mine depletion, but also reflecting the closure of the List 1k as planned.

At Rainy River on Slide 13. The mine delivered its highest production and the lowest cost quarter of the year, achieving its updated 2021 production and cost guidance. The mine performed slightly below the plan at nearly 130,000 tonnes a day, mostly as a result of some drills availability issue, but also as we adopted the plan at the year-end to accommodate more 433 zone and just think our need for the East Lobe as we were working on optimization. The mill delivered approximately 24,500 tonnes a day, lower our 27,000 tonnes a day, but as I mentioned, with more 433 Zone harder ore process and also a 3-day shutdown that was originally planned for early '22 that was advanced into December.

Our overall strip ratio for the pit at 2.8% to 2.1% in the fourth quarter and in line with our overall year plan of 2.7% for the year. And the average gold grade, 1 gram net improvement over the previous quarter, gold recovery up at 92%. So a lot of very good things happened in Q4 at Rainy and we're going to build on that on optimization and operational excellence as we continue in 2022. The assets have delivered a very interesting free cash flow of $36 million in the fourth quarter, $46 million in '21. This is net of $27 million payment stream payments. The exploration activity resumed in the Northeast trend, and I'll discuss more of that in the following slides. So looking forward, really, it's all about continue to optimize the asset and the cost optimization and further derisk the grade control while we continue to execute on our entry bids in our capital plan.

As I look on the Slide 14, the operational outlook. The gold equivalent production is estimated expected at 265,000 to 295,000 ounces of gold equivalent. This is an increase over the prior year, mostly as a result of better grade, better tonne mine and process as well as the commencing the extractions of the Intrepid underground zone in the second half of the year. They will be just like last year, a slightly higher productions at tonne mined and process in the second half of the year as we will continue to take advantage of the winter for most of our stripping activity. The ore from the East Lobe is expected to contribute to only 25% of the production in 2022. And to be higher in the second half of the year, as I mentioned, due to the stripping prioritization in the first half of the year.

The all-in sustaining cost expected to be in the $1,270 to $1,370 per gold ounces equivalent. This is a net decrease over the prior year, and it's mostly due to higher production, but also as an optimization and the less tonnes from the east-lo and the better productivity in the mine. The sustaining capital is expected to be in the $125 million to $155 million, very similar to last year, 3 main areas of execution, including the capital waste in the pit, the annual tailings amass and a maintenance program and other sustaining capital that would complete the targeted execution. The growth capital is expected to be in the $15 million to $25 million. This will combine with the roughly $12 million spend in 2021 will contribute on a very low preproduction cost to bring Intrepid into production.

On Slide 15, as a highlight of the year, as I mentioned, there's been a significant increase of total mineral reserve on the ground. The overall underground mineral reserve grew year-over-year from 672,000 ounces in end of 2020 to over 1.2 million ounces at the end of 2021. And this was the result of adding nearly 469,000 ounces of mineral reserve from the central zone, bringing a net increase over 200,000 ounces of mineral reserve for the year. The intrepid zone remained roughly at 200,000 ounces of mineral reserve.

So as we advance and you could appreciate on this and the picture shown on the Slide 15, this is a significant improvement in the Central Zone. The lower cutoff has also contributed to improve significantly the continuity on the lateral and vertical -- and there is still a 1.3 million ounces of measured and indicated in the major indicated resources category, providing the asset with further potential of conversion as we continue to optimize and execute on our underground plan.

There will be a 43-101 technical report that would be filed at the end of the quarter that would incorporate the new Central Zone in Intrepid and the integrated life of mine and looking forward to discuss further the details of our plan as we file the 43-101.

On to Slide 16. So the second phase of exploration drilling started at the end of 2021 and plan to continue through Q1 '22. There were roughly 1,350, 100-meter drill in the Q4 and will continue towards the Q1 2022. And at which point some additional exploration activities, also plan inclusive of agiochemical served, geological mapping, entrenching to validate and assess the results of the first phase program. A total of $5 million is planned for the year and again, mostly focused on assessment and interpretation and geological and the geochemical equity.

On the new often on Slide 18. On the Q4 highlight, a great quarter for New Afton delivered the production and cost to achieve our production gold equivalent range of 165,000 to 195,000 ounces equivalent. So as I mentioned, slightly above the range of the cost within the 5% more than acceptable considering all the challenges that we had to face in 2021. The C-zone development continues to advance well, and we're still expected to begin the production in the second half of '23. And as we -- as you can appreciate, the copper was great was slightly below the previous quarter at 0.67%. Our goal remains good at 0.41 grams a tonne. Those Bos recovery, even though we're increasing on the circuit remain above the 80%.

But as we prepare for the completions of the lift on some mining activities and ramp up the B3, we have seen now a slightly lower production as we continue to enter to 2022. I'll talk more on the guidance about it. So we've seen as well at the completions of 5 hold on the Cherry Creek completed 3 holes at Tolling to 100 meters of testing artificial intelligence target. So very encouraging result in 2021 and really looking forward for the plan in 2022. We've seen as well on the ESG side, the introductions of the battery electric truck for the underground is combined with already the electric scoop and we'll continue to assess the use of electric equipment for the season with the objective to contribute to the reduction of carbon emission.

On New Afton,, when it comes to operational outlook, I appreciate that the production guidance lowered the originally plan for 2022. The original plan and as we continue to execute on the B3 and C-zone, I was sure you're not to exhaust and eventually close the Lift 1 case in the first half of 2022, and this remains the case. So nothing has changed in this aspect. The transition to the in-pit tailing in 2022 was obviously forcing us to complete all activities in the left one before we would start depositing tailings. We've been capable and continue to stretch the use of the current tailing allowing us to recover the remaining recovery level or for the contribution in 2022 will be on a recovery level and the completions of the Lift 1 case on the -- with the near-term closure of the List 1k.

The plan was originally focused on bringing the B3 zone to a full capacity fully developed at the end of '21. But as I mentioned, the delays in -- the delays and the permitting and some order issues that we had to face in 2021, has not allowed us to achieve our original objective. As a result of that, there will be less tonne from the B3 than originally planned for 2022. But looking forward, there's been no change in the B3, the C zone in terms of total tonnes and the grade and metals available to us as we continue to execute. But yes, there will be an impact on the total gold in production at lower than originally planned production for '22, mostly, as I said, as a result of the delay in the B3 execution.

The all-in sustaining costs are expected to be at the $1,695 to $17.95 again higher than originally planned, but also reflecting the lower production for the year. And also on a higher sustaining cost spend for the B3, which we plan at $55 million to $70 million, with the objective to really complete the development of the B3 bringing the B3 at its max capacity towards the end of the year and allowing 2023 contribution for B3 at its maximum capacity. The growth capital for the year is expected to be in $100 million to $130 million related to advancing the C-zone project, as I mentioned, with the objective to deliver on time and on budget the C-zone in the second half of 2023, mostly the split of the investments between underground activities, development, infrastructure and surface such as TAT facility commissioning, completing the commissioning, but also continuing to progress on stabilization.

So on the exploration for New Afton. So we've now completed -- on the surface side, we've now completed 2 phase of reconnaissance drilling within the Cherry Creek area. Geological mineralization and alteration interpretation defined the patterns, and we continue to see significant potential for porphyry system, but the source has not yet have been intercepted. So more work and more interpretation assessment and eventually more drilling required in the Cherry Creek. The high-grade goal was intercepted as well in one of the target. The interpretation of the alteration and the hosting structure defined as well a potential target for high-grade gold system within the Cherry Creek C-zone.

What I are very encouraging of is our very interesting results of the underground drilling in 2021. In particular, the underground drilling that commenced in March '21 to explore for additional copper and gold mineralization within the New Afton underground footprint with 3 main priority targets generated by artificial intelligence and has already shown some very encouraging results, and we're going to follow up in 2022 with the objective to locate and unlock some potential higher grade that could contribute eventually to improving on our mine plan as we execute.

The drilling program as well on the Upper Eastern Extension located below the SLC zone, has been planned for early '22 to define the extensions of the Gold and copper mineralization discover in 2019. So a lot of focus will be given on the underground while we continue as well in the Cherry Creek regional. But a lot of focus will be on an underground with the view to accelerate the potential incorporations of higher-grade mineralization in our mine plan. A $15 million budget is planned for 2022 at New Afton.

So on that, and as we continue to focus on operational excellence and delivered on our growth opportunity showing a 30% potential growth from the 23%, 26% compared to the 22%. We have an excellent position now for the -- on the financial flexibility, we're capable to execute our plan. We see definitely a lot of potential in unlocking values at the new after continue to deliver on a B3 and initiate a season which will bring significant free cash flow down the road. Rainy River has already generated free cash flow in 2021, and we see an improved plan year-over-year as we continue to unlock the maximum value of the remaining ounces in the pit with the plans capitalized strip to be completed by end of '23, lowering our sustaining capital moving forward in cooperation of the underground with potential for more ounces. So operational excellence will be our mantra in 2022, while we continue to work hard in unlocking the full value.

So on that, this completes the presentation part of the call. And I will turn it back to operator for the Q&A portion of the call.

(Operator Instructions) Your first question comes from Josh Wolfson, RBC Capital Markets.

First off, for the Rainy River reserves update, previously, there was some discussion about an optimized mine plan that would incorporate some ability, I guess, to extend the mine life, I guess, by supplementing the underground or with additional material given the difference between the plant throughput is high and the underground throughput is low. With the updated reserve, though, it looks like that kind of duration for the open pit versus the underground has sort of been even sort of even larger in terms of difference. So how should we think about the mine life after the stockpiles are depleted for the open pit?

I think, Josh, the upcoming 43-101 we'll clarify. What we are doing now is we're currently incorporating this new Central zone from the -- as I mentioned, that grew by 569,000 ounces. And this has been incorporated in the fully integrated mine plan together with the full Intrepid zone. This we'll clarify on the year-by-year on the time grade zone mine metal production. And -- but the plan hasn't really changed in a way that the -- if you remember the current 43-101 has already incorporated the upper part of the central zone in the Intrepid and the increase of the -- up to the completions of the stockpile, as you mentioned, the increase in the total ounces in the mineral reserve would allow the mine to extend beyond the 2028. And again, all the details will be provided in the upcoming 43-101.

Okay. Should we think about the underground throughput as something that could be increased from its current level given, I guess, the grade changes year-over-year? And maybe as a larger ore body, if you can have more mining faces or is that -- is the throughput sort of more stable?

Yes. We'll clarify, of course, on the details of the throughput. But as you pointed out, if you compare the Central Zone, year-over-year, you've seen a reduction of the cutoff, the reductions in the overall way but a significant increase in total tonnes targeting volumes over selectivity and providing with the more ore to increase on the throughput, as you mentioned. But again, the details on the year-over-year and impact of it will be in our upcoming plan. But that was the strategy behind the relooking at 1,400 having a solution for the milling to support the conversion of the reserve post stockpile targeting volume in the central zone.

Okay. And then moving on to New Afton. One of the key aspects for the seasonal project still is permitting. It's hard for us to project or estimate when these deliverables are going to be achieved. So thinking about how permitting has affected the B3 zone, what would be the effect if you were to look at C-zone permitting timeline to be slightly adjusted?

Yes, if that would be the case, I think the risk will be, to a certain degree, similar. There would be no impact on the total tonnes grade, mineable on the life of mine, but there will be a shift in the overall production in the short term, pushing the recovery of those metal and the law and the highest deferred stage, if you will. Now on the permitting side, understanding that the B3, there was a delay in the B3 first in-pit tailings, operational in-pit tailings was permitted stabilizations, allowing for more subsidence as we mine. All those aspects were addressed in the B3.

So on the pure technicality, if you will, of the C-zone, there is really nothing new more than more stabilization, more in in-pit tailing and a bit more of subsidence, but all of which were very well addressed in the B3 permitting as well. And again, '21 was a very challenging year as well in DC and including for our host community and a tremendous wake up for Canada as well. So there's been a lot of things that happens in '21 on the technical side of addressing the permitting that led to believe that the season permitting will be on time.

Okay. And then last question. In terms of the C-zone deliverables in terms of overall spend and time lines, I noticed the numbers were reiterated. When I look at what the original projections were for 2021 in terms of the development rates and overall spending versus what was achieved, there was a slight variance. And then industry-wide, we're obviously seeing a huge degree of inflation. So how comfortable are you with the existing time lines and capital numbers or how much, let's call it, will go room or buffer is there for these items?

We feel very good, and we appreciate in '21 was a challenging year and somewhat like a complicated mine plan. As you exhaust the Lift 1K and the rehabilitation and the pillar recoveries and all those activities at a very low productivities and the ventilation site, if you help between the different activities. And if you look at it now, I think our mine plan is significantly simplified with the recovery level been in the soft case, fully remote. And with the closing of the Lift 1 as well, significantly improving the ventilation down. So there will be a lot of focus in '21 to really execute on the C-zone and the B3 at the optimal capacity possible.

So on that, we continue to be very confident to deliver on the productivities of our plan. As you mentioned, there's been some challenges on the cost side. But I think overall, if you look at our execution in 2021, including Rainy River, where we actually saw some savings on the execution at Rainy River. The adjustment in the capital for the B3 has much more to do with extra development cost, the experience of the Lift 1 of exhausting Lift 1 and the impact at the end of the cycle, seeing the impact on the rehab and the pillar recovery and the inability to go back in some zones. So we've made more effort at the early stage to improve on the ground control to avoid those situation down the road. So very few of the capital increase is a result of mega inflation, if you will. So we feel very strong.

Your next question comes from Fahad Tariq, Credit Suisse.

On Rainy River, can you just give us some more guidance on the grades for this year? Is it right to think that grades will be lower in the second half, but tonnage will be higher in the second half versus the first half?

Yes. I appreciate that we're so close to the 43-101. So of course, the first year of the 43-101 will be updated. But roughly, if you look at our guidance of 260,000 to 290,000 ounces of gold, is basically reflect an overall grade at 27,000 tonnes a day mill between 0.9 and 1 gram. That's basically the way to look at our guidance. And as you mentioned, with slightly higher in the second half as we prioritized the strip prioritized in the wintertime, some stripping. And so about 55% of the ounces in the second half and 45% in the first half, roughly.

Okay. And just on the cost optimization at Rainy River, can you just give us more details on where you're seeing opportunities to lower the cost?

Yes. The biggest opportunity is to target, of course, where you spend the most money, which is in the pit. So if you look at our overall OEE efficiencies and execution in the pit from 2019 to 2020, remember that late 2018, we were mining still in the $3-plus a tonne mine. And we've managed to reduce this significantly in the $250 to $270 a tonne mine as we improved our cycle. But nonetheless, even though we've seen some improvement in the OEE from '19 to '20 to '21, we still believe that there is some room for optimizing our OEE, which will automatically contribute, of course, beside better productivities.

It's like if you want to do your 150,000 tonnes a day, but with less equipment and effort, if you will, in reducing your cost to achieve the same production. So OEE is the target #1. There's still some cost drivers such as tires and others that still could be improved to meet the best-in-class, if you will, for that kind of operation. The 27,000 tonnes a day will bring as well on a per tonne basis, reductions in the milling and the G&A. The improvement of the OE should -- you can achieve a significant improvement in OEE could lead you to even parking some equipment, which also will have an impact on the maintenance cost as you and overhaul required.

So it's a complete exercise and we're using, of course, external resources as well. And we're in the phase now to complete detailed plan for it. But we still see some good opportunity here.

Okay. And then maybe just one for Rob. Can you just remind us on gold hedges? Are there any hedges in place for 2022 on the gold price?

No. No, we're on hedges on metals.

Your next question comes from Trevor Turnbull, Scotiabank.

Just a little bit of a follow-on, I guess, to the last question about the grades at Rainy River. I can appreciate you've got a new technical report coming. And I was just looking back at the old technical report, I think it was from 2020. And it indicated that the grades from the open pit would really start to pick up starting this year on the order of 1.2 or something like that grams relative to, say, the 1 gram that you're talking about for this year. And I just wondered if you could give us a bit of color on why the grade is so much lower than the original tech report and perhaps when we would expect that open pit grade to start to come back towards those levels originally envisioned a couple of years ago?

The -- going back to the mineral reserve update slide, there's a comment that they're looking forward. So one contribution to a contributor to it is the applying of a factor of 85% for the remaining East Lobe ounces. So as a result of the experience of 2021, the mineral resources and reserve for the remaining low open pit has been applied a factor of 85%. So that's one. The timing and the execution and the contribution of the underground ounces as we incorporate and underground from '22 to '26 and the timing of it and the amount of ounces to the plant is also somewhat a contributor to it.

So other than that, if you compare the plan, the original plan with that one, the slope has been incorporated in the factor. And there is -- in 2022, less slightly were around 10,000 ounces from the Intrepid zone. There was also some more ounces originate plans. So it's not about rushing the gun, but doing the right things that -- and really control the execution of it. So as we continue, we're going to complete the East Lobe in '23. The 433 Zone as well, which has been heavily used the last year would eventually also be completed in '22.

So as you advance -- most of your open pit bill be focused on the main zone, which will bring better efficiencies in the mining and also the overall reconciliations and performance in the ODM Main zone was the best and remain the best. So there's still some optimization, if you will, and challenge as we execute R22, but as we advance in '23 depleting towards the '26, the plan gets simpler and more focused on the main -- as you say, the main higher grade zone and more underground as well make its way to the mill.

(Operator Instructions) Your next question comes from Anita Soni, CIBC World Market.

I have similar questions about grades and tonnage at New Afton. If you could give us some clarity on what we would be seeing there? That would be greatly appreciated.

Yes. The -- we did not provide the breakdown. But basically, to what you should be expecting is because of the delays in the B3 zone or the use of the stockpile of course, contributes to a higher proportion of the mine -- the total tonnes processed. So if you look at the overall production of -- in the guidance, there'll be the B3 zone will be the main lead, targeting about like the 4,000 tonnes a day. Grades are provided when the reserve resource is stable. That would be the main lead completing the recovery level as well will be the second lead and the overall year.

But there will be as well a use of the low-grade stockpile on surface as well to supplement the mill, which also is the biggest impact. There was always the use of the stockpile and the plan the difference that B3 was supposed to be at basically double the tonnes compared to what it's planned for. So that is the main contributor here. But B3 with follows a mineral reserve average grade, but basically less half the tone and higher contribution from the stockpile.

And would you still be expecting tonnage, I guess, in the 14,000, 15,000 tonne per day mark? Or is that...

No, we -- that would be less than that. If you recall, the original plan even on the original plan, it was always -- showing that in the transitions, once you close the Cavene, there was a clear dip like in the lower production as we transition to the season. So that was always even in the original plan, that was one of the highlights of the plan. But at some point in time, you would use the stockpile to transition. What happened now in '22 is just the transitions between the B and C zone considering the delay in the B3 has lowered even further the productions for '22 hasn't changed a total metal recoveries of the plant but has deferred and creating even more so. But even in the original plan, it was always a dip in the production as we transition and close the gate 1 in '22.

Okay. So what I was driving at was just how full will the mill be this year?

The overall -- we will be -- I haven't -- we'll be between the 8,000, 9,000, 10,000, depending on how good we're going to do with the B3.

Okay. And then just in terms of the Rainy River, a little bit more detail. You mentioned what your strip ratio is overall, but can you give us the operating number, the operating strip numbers, so I can try to reconcile the cash cost?

There would be about $3.2 billion, 3.2 plan for 2022 and that compared to about 2.7% overall 2021.

Okay. So all of the -- so the $3.2 billion is the -- is what gets -- the $3.2 billion is the operating strip. That's what contributes to the cash cost? Or it is something like…

Yes. Some of the way -- so the way I look at it is on the total execution. So from the 55 million tonnes, some of the ways are comfort operating waste and some is capital rising quite frankly, it's only an accounting here, looking at Rob here. It's only an accounting situation here. So I look at it as a global execution, 55 million tonnes, strip ratio overall of $3.2 billion of the plant. And some, as I said, depending on the specific quarter-over-quarter, some is capitalized, some is operations, but it doesn't really change the execution globally at an for a year.

Yes. I'll probably take the last one with Rob said because I don't want to -- you guided to $60 million in waste stripping. So I don't want to be double counting that, but what I'm trying to drive that here.

And cash plus are lower as a result of that as well. So that's why I'm looking at it as an all-in sustaining cost approach. And sometimes, and you've seen it in the past as well, there is some shift depending on the execution of where. But on the global, the plan is 55 million tonnes or so at the 3.2%. But yes, please reach out to Rob, if you…

Sure. Yes. I don't want to penalize you twice there. Okay. The last question I have is with respect to the tonnes that were added at Rainy River, I think Josh was driving at that a little bit, but when do you expect -- how full do you expect the mill to be when you're processing the underground material?

It's going to go with the C zone. I mean, to really have -- On the ground to yes. Yes. I won't really put like any details on this. Let's wait for the update. So everything that has to do with the underground. The -- as I mentioned, we're in the process to integrate all this. It's going to be a full details on a year-by-year zone by zone and the ramp up in total and tons mill and so forth. But I can already tell you that to achieve that, you have a mill that could be a use as batch. You have a lot of capacity. So you're targeting much higher volume than originally planned in the original 43-101.

And that was the whole purpose of redoing this at the lower cutoff is to target volume. But I'll leave the details to later in March, and we'll definitely engage with the market once we have all the numbers.

Okay. And last question briefly. I didn't catch exactly what you said about the tailings capacity at New Afton. Can you just quickly summarize again what you did there that you're striking on.

As a safety aspect, like if you look at the Lift 1 and the proximities with underneath the pit. So the original plan was by summer to transitions from conventional tailing into in-pit tailings. And as a result of the fatality last year, we -- the opportunity here is to not leave any recovery level behind. And the team has been capable to optimize the use of the conventional tailings, and we see probably late in the year now with extended months, and I think we'll be capable to accommodate most of 2022, if not all, into the conventional tailings and not rushing the transition into in-pit, which would limit our ability to mine the remaining recovery level on.

Your next question comes from Mike Parkin, National Bank of Canada.

Just a couple of questions. You're obviously sitting on a fair bit of cash. And then the sale of the gold stream brings in a lot more. What's your thoughts in terms of -- like you've got some good notes there in terms of what your premium is on the senior notes, if you call them, seems quite reasonable. Should we kind of expect a potential calling of those notes?

Yes. Listen, I think that our current balance sheet provides significant optionality. So as we work through '22 and in the near term, our focus will be to deliver on our business plans of both specifically with C Zone and the underground. But beyond that, we will be looking at debt repayment, specifically the 25s and then other shareholder initiatives. So Yes, we're looking at that.

All right. And then on the underground, Rainy, you've got, obviously, a pretty impressive reserve update this morning. Where is it in terms of the deposit in terms of being open at depth and what kind of depth do the reserves kind of terminate now. Where do you kind of see the potential of being able to push deeper using a ramp?

Yes. The -- if -- I was just looking at the slide to bring back you to -- sorry about that. Slide 15. So you appreciate like the 431-101 will provide way more. But if you compare the debt, the debt or the depth of the total resources -- the total resources MI and inferred as shown on the top figure compared to the bottom figure, which is the end of '21. It remains pretty much the same, and it's mostly data constraint. As you can imagine, as you go deeper, you lose the drilling spacing and the tightness of the drilling, allowing you to really appreciate and convert.

So it remains open at depth. But as you could appreciate on the picture, around a neighborhood of the 1.2 or the 1 million ounces of the Central zone, you still have some very close by answer. There is another 1.3 million ounces in the MI category, and that is not a result of having extending the debt more than we've converted a significant amount, but there's still a lot of ounces remaining that with optimization, maybe more drilling, more tightness, optimization of the plant could lead to eventually more as you go deeper, as you execute your plan and as you lower over time, there is no doubt in my mind, there will be a tremendous opportunity to come to look at a dipping of the at the depth of the mineralization and potential extension as basically the whole central zone is a data content.

Okay. And then I remember from chatting with you in the past that in terms of the tailings facility at Rainy River, I remember the old design used, I think it was 11 to 1 width versus heights ratio. This is applied it across the entire length of the dam. And from our past conversations, you felt there was optimization potential there where there are parts that come into bedrock, which could use a much kind of more normal ratio, which could obviously save a lot of material movement. Is that something that has been factored in? Or is that something that's still some upside to what the latest numbers that are publicly available are based on?

Yes. The answer to that is our plan continue to be used at the full 11:1. And there is definitely some potential optimization down the road, but we prefer to look at -- still look at this on 11:1 with some buttresses. The difference is, over the last couple of years, there's been a significant advance in instrumentations and monitoring on a basically 100-meter basis, allowing us to -- as we advance and we see proper dissipations of the pressure, there could be a potential down the road for the subsequent phases to optimize. But as we speak, the plan still reflect reflecting the 11:1 building, which was the case for '21, by the way, '21 was fully executed on the 11:1 strategy.

There are no further questions at this time. I would now like to turn it back to your host for closing remarks.

Thanks, Chris, and thanks to everybody who joined us today. As always, if you have any additional questions, please don't hesitate to reach out to us by calling our e-mail. Thanks very much, guys. Have a great day.

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.