New Gold Inc (NGD) 2022 Q3 法說會逐字稿

Good morning. My name is Eric, and I will be your conference Operator today. Welcome to the New Gold Third Quarter 2022 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference call and webcast is being recorded. (Operator Instructions)

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

Thank you, and good morning, everyone. We appreciate you joining us today for New Gold's Third Quarter 2022 Earnings Conference Call and Webcast. On the line today, we have Renaud Adams, President and CEO; Rob Chausse, our CFO; and Pat Godin, our COO. Should you wish to follow along with the webcast, please sign in on 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.

I will now turn the call over to Renaud.

Thank you, Ankit, and good morning, everyone. Before we proceed with our third quarter update, I do have some sad news to share. I'm deeply saddened to announce that Suresh Kalathil, General Manager at Rainy River, passed way in his home in Emo, Ontario late last week. Suresh has been with us for the past 2 years and made tremendous contributions during his time at the company. We extend our deepest condolence to Suresh family, loved one and colleagues during this difficult time. Our strong and committed team that Suresh worked to build and developed in these 2 years with us, we'll continue to execute on this vision for Rainy River with Mine Manager, Gord Simms stepping up as Interim General Manager and with the continued support across the whole New Gold organization. Thank you, Suresh.

Slide 5 provides a summary of our third quarter highlights. During the quarter, we continued to advance on our long-term priorities at any regard, we achieved a significant milestone with the start of underground production from the entropy zone. As we move forward, we're focused on ramping up from the mining from the main ODM zone and starting to feed the mill with underground material. At New often, B3 development was completed, and our focus now is to ramp up mining rates to 8,000 tons per day. Receiving the C-zone permit was a great milestone for the team in New Gold, and we continue to move all project activities along with first ore plan for the second half of the year.

In addition, at New Afton, the exploration results we previously released are very encouraging. During the next quarters, we will continue to advance our organic growth initiatives to further increase the value of our asset base. Lastly, the third quarter delivered to plan and significantly improved versus the second quarter in both production and costs, and we are on track to achieve our 2022 undated guidance. I will now pass it to Rob to provide an update on our operating and financial results. Robert?

Thanks, Renaud. And I'll start with Slide 7, which provides our operation highlights. Production details are consistent with our October production press release. During Q3, the company produced approximately 91,000 gold equivalent ounces. That amount consisted of 8.5 million pounds of copper, 58,700 gold ounces from Rainy River and 11,400 gold ounces from New Afton, giving us a total of 70,147 gold ounces. The lower gold production as compared to the prior year quarter is primarily due to the lower copper grade and tons processed at New Afton.

Our operating expense per equivalent ounce was higher than the prior year quarter, primarily due to lower production and therefore, sales volume. Consolidated all-in sustaining costs for the quarter were $16.37 per equivalent ounce, higher than the prior year quarter, primarily due to the lower sales volume at our operations and higher sustaining capital spend. We continue to invest in sustaining capital at our operations during the third quarter with the impact of sustaining capital spend per ounce being $460 in the quarter.

During Q3, we experienced inflationary challenges that have been experienced across the industry, particularly with regards to fuel, electricity, grinding, media and cyanide. The financial impact of these above-noted categories on inflation was approximately $100 per ounce or 6% on AISC for the quarter. As noted in previous quarters, we continue to work on minimizing any inflationary impacts and realize benefits with our currency, Canadian currency.

Turning to Slide 8 for our financial results. The third quarter revenue was $151.2 million, driven by sales of approximately 68,800 gold ounces at an average realized price of $1,727 per ounce and sales of 9.9 million pounds of copper at $3.42 per pound. Q3 revenue was lower than the prior year quarter, primarily due to lower copper sales volumes and prices. Our operating cash flow before working capital adjustments was $43.6 million or $0.06 per share for the quarter, again, lower than the prior year quarter due to lower sales volumes in metal prices. The company recorded a net loss of $4.2 million or $0.01 a share during the Q3 compared to a net loss of $0.02 per share in the previous year's quarter.

After adjusting for certain items, net loss was $13.4 million or $0.02 per share in the quarter compared to $0.03 earnings of $0.03 in the prior year quarter. The loss increase is primarily due to lower revenues. Our Q3 adjusted earnings includes adjustments related to our gains or losses, which include unrealized adjustments on Rainy River stream mark-to-market and the free cash flow royalty at New Afton and our MD&A has details on these non-GAAP measures. Our capital expenditures and leases for the quarter were $72.7 million, $42.4 million was spent on sustaining capital and $30.3 million on growth capital.

The sustaining spend was primarily related to planned tailings work at both operating assets, capital stripping at Rainy River and B3 mine development at New Afton. Our growth capital was focused on project development, specifically the C-zone at New Afton and underground Intrepid zone at Rainy River. Slide 9 provides details on our capital structure. Cash on hand at the end of the quarter was $247 million and liquidity was $620 million. The decrease in cash from the prior quarter is primarily due to the continued capital investments at our operations.

And with that, I'll turn the call over to Pat.

Thank you, Rob. Slide 11 provide a summary of third quarter highlights for our renewal mine. During the quarter, we opened (inaudible) 12,000 tons per day. This decrease over the prior year as we have shifted our focus to minimize the amount of free (inaudible) yield, we are feeding the mill and the impact from our evolving effort during the quarter. In Q3, 85% of the mill feed were direct or shipping from the open pit and the compliance plan was close to perfection at 97%. EBITDA average approximately 24,000 tons per day. This was lower than last year probably as a result of us part of the quarter from the notice.

We expect to complete mining from the Norton in the first half of 2023. Quarterly production increased significantly compared to the second quarter and was in line with the last year. We remain on track to achieve our updated guidance. Both mining and development advance and plans during the quarter. We flagged the first stope in September gold grade from the first stope (inaudible) positively, and pension will ramp up over the coming months. Development advanced and action of 833 meters during the quarter with the main decline around reaching the 200-meter level ahead of plan.

During the final quarter of the year, our focus at New Gold will be ramping up open pit mining on the main ODM zone and getting the high-grade underground material fab into the mill. Slide 12 provides a summary of third quarter highlights for our new apelin. During the quarter, beyond average 6,500 tons per day. This decrease over the prior year due to the planned completion of if mining activities and the closure of the recovering level or (inaudible). As planned, the mill averaged approximately 7,700 tons per day, and we complete the processing of the lower grade surface that file to supplement the Gold Mine and in the beginning of the third quarter.

B3 development in drawbell construction is now complete. We're currently extracting ore solely from and expect mining rate to reach a target of 8,000 tons per day early in 2023. Season development advanced an additional 998 meters during the quarter, and we continue to remain on track for first ore from C-zone in the second half of 2023. Ramping up B3 and continuing to develop season on time remains new app and key priority for the remainder of the year. I will now pass it back to Renaud.

Thank you, Pat, and I'm on Slide 13, which provides a summary of our key priorities and concluding this presentation. So building off on the significant progress and milestones achieved in the third quarter, we continue to work very hard to assess all possibilities to increase the underlying value of our asset base, and we're focused on achieving all of our key catalysts for the remainder of the year.

This completes our presentation, and I will now turn it back to the operator for the Q&A portion of the call. Operator.

(Operator Instructions) Your first question comes from Trevor Turnbull with Scotia Bank.

I just wanted to ask for a little bit of clarification on the guidance. You mentioned at Rainy, the glacial material that you're stripping would be about 2.4 million tons. And it seemed like that would imply more like a 1:1 strip ratio. But then in the commentary, you said something about the strip ratio staying below 3:1. And I'm just wondering if I'm mixing something up there.

I think is the set ratio going forward is will be 3:1 and what is remaining to strip from the overburden is mostly the tonnage it's talked about 2.4 million, 2.5 million tons. It's something that will be completed if I just -- I think it will be around the second half of the year next year, it's something that we are pushing back as we are getting there. But going forward, what is more important for us is all the crawler equipment are working on ROC. So basically, it's the conditions of extraction of the overburden is pretty straightforward for us, and we are on our risk are totally eliminated compared to the last year where we were struggling with large stuff. So basically, we're still having 2.4 million, 2.5 million tons of forward burden material to it's part of the stripping ratio that is incorporated in our forecast.

I think heard the -- just to complete on this is like -- I think your question does (inaudible). The glacial form is not the whole rate, of course. I think the highlight here of the $2.4 million after battling like over 4, 5 years in mining that material is almost done. But of course, it's not the only and sole material waste materials. So moving forward that's the difference here.

And so, kind of the tons of ore mine is going to remain roughly consistent with what you've been doing?

Yes.

And then just one other quick question with respect to the copper, your copper output as we close out the year in Q4, is it correct to assume that now that the B3 zone is starting to ramp up production that production should start to trend a bit higher? Or are there great considerations that are potentially going to keep copper from being higher in Q4?

So, the copper production will for sure increase because actually, we are ramping up from 65,000 to 8,000 tons per day. And in the block cave, usually, when you start, we are looking on the reserves based on the mining division that is coming from the extraction of the case. But when we start keeping method, usually, the grade is much better because the division is coming from the external wall. And in addition to that, as I explained during the presentation, we totally exhaust the stockpile. The low-grade stockpile that we had on surface. So basically, actually, all the material that is going to the mill is high quality material.

(Operator Instructions) Your next question comes from Mike Parkin with National Bank.

With respect to New Afton, noticing that like your gold as well as your copper recovery rate for Q3 have been better than they've been for at least 2-plus years. Is that something that we could expect to continue into fourth quarter in 2023?

Well, if you recall, Mike, one thing that we like about the season as we move forward is how clean is the ore and so forth. So, we continue to believe that as we move forward with more material on the B3, but also the switching eventually to C-zone. I think the guys have been doing that absolute believe about job there at the mill. And yes, we continue to believe that we will benefit for an increased recovery as we move forward.

And with that, is that anything to do with the function of the lower throughput as you're kind of transitioning through this lower tonnage period and then as you ramp up C-zone, would that ease off in the recovery? Or would you expect that to actually sustain the more elevated levels versus where you've averaged kind of in the last couple of years?

We're definitely not pushing, as you mentioned, the mill to its max capacity. But to be very frank, if you compare with the last couple of years, we were not necessarily pushing the mill any way too. It has to do with the mineralogy of the ore that it will keep improving as we move forward. And also, the fact that the Supergene as well, we'll be reducing as you move forward.

There are no further questions at this time. You may proceed.

Thank you very much, and thanks to everybody who joined us today. As always, should you have any additional questions, please do not hesitate to reach out to us by phone or e-mail. Have a great day.

Ladies and gentlemen, this concludes your conference today. We thank you for participating and answers that you gave. Please disconnect your lines. Have a great day.