Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- New Gold Inc (NGD, Financial) achieved free cash flow positive status in the first half of 2024, entering a sustained free cash flow generation period.
- The New Afton mine won two safety awards for having the lowest total recordable injury frequency rate in 2023.
- Operationally, New Gold Inc (NGD) delivered on its quarterly plan with strong production results at low costs.
- Significant progress was made on key growth projects, all of which remain on track for completion in the second half of the year.
- Exploration efforts at both New Afton and Rainy River made meaningful progress, with approximately 20,000 meters drilled at Rainy River in the first half of 2024.
Negative Points
- A fatality occurred at the Rainy River mine, impacting the company's safety record and causing a temporary shutdown.
- Rainy River experienced higher costs compared to Q2 2023, although these are expected to trend lower in the second half of the year.
- The company faced a three-day operational halt at Rainy River due to the fatality, which could have minor impacts on quarterly performance.
- Capital expenditures at New Afton were lower than expected, partly due to delays in equipment delivery and project optimization efforts.
- Despite positive free cash flow, the company had to finance an upfront cash payment of $255 million for increasing its free cash flow interest in New Afton, impacting liquidity.
Q & A Highlights
Q: The mining cost per tonne at New Afton was down over Q1. Can you provide additional commentary on this and how you see mining costs evolving throughout the year?
A: As we continue to increase throughput at New Afton with C-Zone coming online, our cost per tonne will decrease. We have a lot of fixed costs at New Afton, and increased throughput will help lower these costs.
Q: Regarding the recent fatality at Rainy River, are there any broader implications for pit stability or other issues in the open pit?
A: The incident was not related to pit slope stability. It was an isolated incident involving a piece of equipment. There are no stability concerns or technical issues with the pit.
Q: How long was the downtime at Rainy River due to the incident, and has the operation resumed?
A: Operations were halted for about three days. We resumed smoothly on Saturday and are on track to meet our guidance for 2024. The downtime was necessary for investigation and ensuring the safety of our colleagues.
Q: CapEx at New Afton seems lower than the guidance. Is this due to cost savings or delays, and will it catch up in the second half of the year?
A: The lower CapEx is mainly due to delayed equipment delivery and optimization efforts. We are performing better on development and have delayed some openings to next year. This is not an underperformance but rather good management and planning.
Q: Both New Afton and Rainy River outperformed on unit costs. Is this a one-time occurrence or due to better optimization?
A: At Rainy River, we optimized the open pit operations, reducing haulage distances and improving productivity. At New Afton, we are managing performance well and expect further cost reductions once the crusher and conveyor system are operational.
Q: Can you provide more detail on the ramp-up at New Afton and when you expect to achieve the hydraulic radius?
A: We are trending to achieve the hydraulic radius by the beginning of Q4. We are on track to have 18 drawbells developed and functioning, which is necessary to reach the hydraulic radius.
Q: What is the status of the conveyor and crusher system at New Afton?
A: The conveyor system and crusher are on track for commissioning in the second half of the year. We are installing the last belt this week, and the focus will shift to the crusher in the coming weeks.
Q: What are the financial implications of the downtime at Rainy River?
A: The downtime was about three days, which we can absorb without impacting our guidance for 2024. The focus was on ensuring safety and gathering data for the investigation.
Q: How is the team managing the development and cost optimization at New Afton?
A: The team is optimizing net asset value by improving development performance and reducing contractor use. This has led to better unit cost optimization and slight deferrals in spending, which will catch up in the second half of the year.
Q: What are the next steps for the underground development at Rainy River?
A: The priority for 2024 is to establish the primary ventilation circuit and access multiple mining zones. We are on track for first ore from development in the second half of 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
