NGD - New Gold Inc. (NGD) Q4 2022 Earnings Call Transcript

New Gold Inc. (NGD)

Q4 2022 Earnings Conference Call

February 16, 2023 08:30 A.M. ET

Company Participants

Ankit Shah - VP, Strategy & Business Development

Patrick Godin - President and CEO

Robert J. Chausse - EVP and CFO

Conference Call Participants

Muhammad Siddique - CIBC

Trevor Turnbull - Scotiabank

Mike Parkin - National Bank

Presentation

Operator

Good morning. My name is Michelle and I'll be your conference operator today. Welcome to the New Gold Fourth Quarter 2022 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. Please be advised that today's conference call and webcast is being recorded. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions]. I would now like to hand the conference over to Ankit Shah, Vice President of Strategy and Business Development. Please go ahead.

Ankit Shah

Thank you Michelle and good morning, everyone. We appreciate you joining us today for New Gold's Fourth Quarter and Year End 2022 Earnings Conference Call and Webcast. On the line today, we have Patrick Godin, 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 annual information form, 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’ll now hand the call over to Rob.

Robert J. Chausse

Thanks Ankit and good morning. I'll start with Slide 5, which provides our operational highlights. The production details on this slide are consistent with our January production press release. During Q4, the company produced 97,800 gold equivalent ounces, this amount consisted of 6.9 million pounds of copper and approximately 69,700 gold ounces from Rainy River and 10,900 gold ounces from New Afton totaling 80,700 gold ounces. For lower equivalent gold production as compared to the prior year quarter is primarily in the lower tons mined and processed at New Afton.

Our operating expense per equivalent ounce was higher than the prior year quarter, primarily due to lower production and therefore lower sales volume. Consolidated all-in sustaining costs for the quarter were 1668 per equivalent ounce higher than the prior year quarter, primarily due to lower copper sales volume and higher sustaining capital spend. We continue to invest in sustaining capital at our operations during the fourth quarter with the impact of sustaining capital spend per ounce being $360 per ounce in the quarter.

Turning to our financial results slide on Slide 6, fourth quarter revenue was 162.8 million, driven by sales of 78,500 gold ounces at an average realized price of 1751 per ounce and sales of 6.8 million pounds of copper at 374 per pound. Q4 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 44.3 million or $0.06 per share for the quarter, lower than the prior year quarter. The prior year quarter -- prior year period included the sale of the Blackwater Stream. The company recorded a net loss of 16.9 million or $0.02 per share during Q4 compared to net income of $0.22 per share in Q4 of 2021. And again, that prior year period included the Blackwater Stream gain.

After adjusting for other certain charges, net loss was 6.3 million or $0.01 per share in Q4 compared to net earnings of $0.04 per share in the fourth quarter of 2021. Net loss increase was primarily due to lower revenues. Our Q4 adjusted earnings includes adjustments related to our gains and losses, which include un unrealized adjustments on the Rainy River Stream mark-to-market and the free cash flow royalty at New Afton. Our MD&A has further details on these non-GAAP measures.

Our total CAPEX and leases for the quarter was 74.3 million, 37.2 million was spent on sustaining capital and 37.1 million on growth capital. Sustaining spend was primarily related to the plants tailings work at both operating assets, capital stripping at Rainy River, and B3 mine development at New Afton. Our growth capital was focused on our project development, specifically C Zone at New Afton and the underground intrepid zone at Rainy River.

Slide 7 provides our capital structure, cash on hand as at year-end was 201 million and liquidity was 597 million. The decrease in cash from the prior year quarter is primarily due to continued capital investments at our operations. With that, I'll turn the call over to Pat.

Patrick Godin

Thank you Rob and good morning everyone. The Slide 9 provides a summary of our 2023 operational output. Golden equivalent production is expected to increase by over 30% to 365,000 to 425,000 ounces. Similar to last year we expect the production distribution to be more heavily weighted to the second of the year at approximately 55%. All-in sustaining costs are also expected to decrease by over [indiscernible] per ounces to 1500 to 1600. Costs are lower than last year due to the lower sustaining capital expenditures and higher productions. We expect the cost to trend lower in the second half of the year consistent with the production profile.

Sustaining capital is expected to be 140 million to 170 million. As mentioned, sustaining capital is expected to decrease versus last year primarily as we complete B3 development at New Afton. Growth capital is expected to be $150 million to $155 million, this is an increase over last year and it's primarily referred to the seasonal development in New Afton and underground development pass Rainy River.

Slide 10 provides further details on Rainy River 2023 outlook. Gold equivalent production is expected to increase to 235,000 to 265,000 ounces, primarily due to an increase in gold rate, ton mines, and process as well as the ramp up of the Intrepid zone. Similar to last year, we expect the production and distribution to be more heavily weighted to the second half of the year at approximately 55%. All-in sustaining costs are also expected to decrease to 1475 to 1575, costs [ph] -- last year primarily due to higher productions.

Sustaining capital is expected to be 125 million to one 135 million, primarily related to capital waste, annual tailing dam raise, maintenance program and in other sustaining capital related to the Intrepid development. Growth capital was expected to be 20 million to 30 million and primarily related to the development of the Intrepid zone and commencing development of the main underground zone below the pit.

Slide 11 provides further details on New Afton 2023 outlook. Gold equivalent production is expected to increase by approximately 30% to 130,000 to 160,000 ounces as B3 production achieves steady state mining rates and higher gold and copper grades. B3 mining rates are expected to -- was approximately 8,000 tons per day as all drop points are already completed. All-in sustaining costs are also expected to decrease to 1300 to 1400 costs, lowered than last year, primarily due to the lower sustaining capital spend with B3 development completed in higher production. Sustaining capital is expected to be 15 million to 35 million, primarily related to the stabilization activities and tailing management.

Growth capital was expected to be 130 million to 150 million and is primarily rated to the continued advancement of the seasonal project. We'll focus on -- which will focus on mind development and faster installation and stabilization. Slide 12 provides an update on the company's consolidated reserves. Consolidated dull mineral reserve decreased by approximately 285,000 ounces compared to last year, only due to the annual mind depletion from both assets, resource malleability at Rainy River and ounces from Sub Level Cave and East Cave Recovery at New Afton.

In closing, I just want to spend a few minutes to discuss health and safety at New Gold. The health and safety is our highest priority as our employees are the heart and soul of our business. In 2022 our total recordable injury frequency rate or TRIFR was 0.95 and significantly decreased by approximately 46% compared to 2021. We have implemented the Courage to Care campaign across our business to encourage and foster a safe culture for our over 1500 employees across the company. We are extremely proud of this achievement, and in 2023 the health and safety of our employees will continue to drive our success. This completes our presentations, so I will now turn it back to the operator for the Q&A portion of the call. Michelle.

Question-and-Answer Session

Operator

Thank you sir. [Operator Instructions]. Mr. Shah, there are no questions. Oh, my apologies. We do have a question. Your first question will come from Muhammed Syed [ph] of CIBC. Please go ahead.

Muhammad Siddique

Hi, Patrick and Tim. It's Muhammad Siddique from CIBC, on behalf of Anita. Sorry, jumping in from conference call to conference call here, but I just wanted to ask on the production profile for 2023 if we should expect any sort of seasonality as we go through the year? And then second question was just on your cost profile for 2023. I may have missed that part, but if you could touch on any inflationary impact that you've seen despite the -- that you incorporate in your guidance given the year-over-year lower guidance and I'm sure it's probably productive? Thank you.

Robert J. Chausse

Production profile is slanted more towards the second half of the year with basically 55% coming in the second half.

Patrick Godin

It's mainly related to the grade here, not the -- but the grade itself.

Robert J. Chausse

And as far as inflation, we have incorporated some inflationary impacts primarily related to diesel and grinding media, which are the biggest increases. But, as being a Canadian company we've also hedged our CAD exposure, but also hedged some fuel. So we're working hard to mitigate any inflationary pressures.

Muhammad Siddique

Sounds good. Thank you so much.

Patrick Godin

Pleasure.

Operator

There are no other questions at this time. I will turn the conference back to Ankit Shah for any closing remarks.

Ankit Shah

Thank you, Michelle. Again to everyone who joined us today, thanks again. If you have any follow-up questions, please reach out to us by phone or email. Have a great day.

Operator

Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank everyone for participating and ask you to please disconnect your lines.

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