New Gold Inc. (NGD-TSX, NYSE American) shares were down almost 30% Tuesday after the company released an operational update for its Ontario and British Columbia mines, that includes sharply higher costs and lower production forecasts.
The company said total tonnes mined from the open pit at its Rainy River mine in Ontario during the second quarter of 2022 were below expectations as flooding in the pit due to unfavourable weather impacted the mining rate, the mine sequencing and access to higher grade ore planned for the second half of this year.
â€œThe Rainy River Mine therefore utilized the low-grade ore material during the quarter, resulting in both lower grades processed and lower gold ounces produced,â€™â€™ the company said in a press release.
Gold equivalent production at Rainy River this year is now expected to be between 230,000 and 250,000 ounces. That compares to a previous target of between 265,000 and 295,000 ounces. Due to lower production and inflationary cost pressures, operating costs are now forecast at between US$960 and US$1,040 per ounce, up from the earlier target of US$730 to US$810 per ounce.
All-in-sustaining costs are expected to be between US$1,620 and US$1,720 an ounce. The previous target was US$1,270-US$1,370 an ounce.
On Tuesday, New Gold shares plunged 28% or 35 cents to 90 cents on volume of 2.35 million. The shares are currently trading in a 52-week range of $2.57 and $1.25.
Rainy River operation will continue to process low grade ore during the second half of 2022.
New Gold is a Canada-focused intermediate gold mining company. Itâ€™s two core producing assets are the Rainy River mine and the New Afton copper-gold mine, which is located in British Columbia. The company also holds a 5.0% equity stake in Artemis Gold Inc.Â [ARTG-TSXV], a company that acquired the Blackwater Project in central B.C. from New Gold in August 2020.
The company produced 418,933 gold equivalent ounces (AuEq) (including 286,921 ounces of gold, and 61.7 million pounds of copper) in 2021. AuEq production at Rainy River was 242,961 ounces in 2021, consisting of 234,469 ounces of gold and 611,433 ounces of silver (open pit only).
Prior to the latest operational update New Gold was forecasting total AuEq production of between 380,000 and 440,000 ounces this year. Consolidated gold equivalent production is now forecast at between 325,000 and 365,000 ounces.
The company has also revised its production forecasts for the New Afton mine. Following a revised copper production forecast, New Afton is expected to produce between 95,000 and 115,000 ounces of gold equivalent this year. That compares to the previous forecast of 115,000 to 145,000 ounces. The latest forecast includes 25-35 million pounds of copper production, down sharply from the previous target of 35-45 million pounds. All-in-sustaining costs at New Afton are forecast at US$1,875 to US$1,975 an ounce. That marks an increase from US$1,470 to US$1,570 an ounce.
During the second quarter, New Afton focused on B3 and C-Zone development and closed the low-grade higher cost recovery level zone earlier than planned. As a result of the early shutdown, tonnes mined was lower than expected.