New Gold launches ramp-up at Rainy River, Ontario
New Gold Inc. [NGD-TSX, NYSE American] said Friday April 3 that its Rainy River Mine in northwestern Ontario has begun a systematic ramp-up of operations. The move follows the completion of a voluntary 14-day suspension to adhere to provincial and federal COVID-19 guidelines related to out-of-country travel that impacted a significant portion of the local workforce.
“As the health and safety of our employees and communities remains our number one priority, operations will steadily ramp-up over the coming weeks with the overarching priority of ensuring we provide the safest possible environment for our employees,” the company said Friday.
“Rainy River Mine management will continue to work with surrounding Indigenous and local communities to implement and coordinate actions that will reduce the risk of the spread of COVID19,” the company said.
New Gold is a Canada-focused intermediate gold mining company which produced 486,141 gold equivalent ounces in 2019 (comprised of 322,557 ounces of gold, 596,452 ounces of silver, and 79.4 million pounds of copper). It’s key operating assets are the Rainy River Mine located northwest of Fort Frances, Ontario and the New Afton Mine located west of Kamloops, British Columbia.
Of the gold equivalent ounces produced in 2019, 257,051 ounces came from Rainy River, while New Afton delivered 229,091 ounces.
New Gold’s portfolio also includes the Blackwater development project southwest of Prince George, B.C., which hosts 8.2 million ounces of gold and 60.8 million ounces of silver reserves.
On Friday, New Gold shares were unchanged at 80 cents and trade in a 52-week range of 56 cents and $2.03.
New Gold said Rainy River management will continue to work with surrounding Indigenous and local communities to implement and coordinate actions that will reduce the risk of the spread of COVID-19. It will initially utilize the local workforce during a progressive ramp-up of operations. This initial phase will be followed by the gradual reintroduction of the rotational workforce.
Additional details of the ramp-up and an update on New Gold’s mid-term operational plan will be provided along with its first quarter operational update expected to be released in mid-April.
On February 13, 2020, New Gold released an updated life-of-mine plan for the Rainy River Mine. It envisages average annual gold production of 289,000 ounces at an all-in-sustaining cost of US$967 an ounce.
Full depletion of the open pit is expected in early 2025. Underground mining is expected to begin in 2022. Peak production is expected to occur from 2025 to 2027.
There remains the potential to extend the underground mine life beyond 2028 should the prevailing gold price support the development of additional mining areas during that period and/or exploration efforts increase the resource inventory.
New Gold recently announced a $300 million partnership with the Ontario Teachers’ Pension Plan that gives Ontario Teachers’ a stake in its New Afton Mine in British Columbia.
Under the terms of the strategic partnership, Ontario Teachers’ has agreed to acquire a 46% cash flow interest in New Afton and will retain an option to convert the 46% interest into a joint venture stake in four years or have the cash flow interest reduced to 42.5%. In return, New Gold will receive $300 million, money that will be used to improve the mining company’s flexibility and to reduce debt, New Gold said in a press release.
However, New Gold retains the option to potentially re-acquire 100% of New Afton. The mining company will also retain 100% of the exploration claims outside the New Afton mining permit area. But under the deal, it has granted Ontario Teachers’ an option to acquire its proportionate share of these claims upon conversion into the joint venture interest.