New Gold's CEO Hosts Investor Day Conference (Transcript)

| About: New Gold (NGD)

New Gold Inc. (NYSEMKT:NGD)

Investor Day Conference Call

February 5, 2013 10:00 am ET


Randall Oliphant – Executive Chairman

Ernie Mast – Vice President-Operations

Bob Gallagher – President and Chief Executive Officer

Mark Petersen – Vice President-Exploration

Kurt Keskimaki – Operations-Mining and Processing


Steven Butler – Canaccord Genuity

Randall Oliphant

Okay, well good morning ladies and gentlemen, thank you very much for taking time out of your schedule. I know how busy everyone is to join us for our 2013 Investor Day. This is always a proud day for our company where we get the chance to showcase, from my perspective a lot of our team, but also to talk about the results that we had for 2012 and perhaps even more important and that’s the outlook for 2013.

We have got a lot of New Gold people here today from many different disciplines in the company, so any type of question that you have, I am pretty sure that we will be able to help you with a quality answer. Before going on any further, just to introduce some of the people, Mark Petersen, my far right, your left is our Head of Exploration; Kurt Keskimaki will be talking today, Kurt is the General Manager of our New Afton mine. I was just talking to Kurt, we are so remarkably proud of him in terms of delivering this project, not only has he done that, but he has already started looking for ways to improve the value of New Afton, both through throughput rates, the mill mining rates and some of the exciting things that are going on that you will hear about from Mark in terms of our C-Zone explorations. Bob Gallagher, our President and CEO will be talking a lot about our sustainability, our community efforts and our development projects, and as part of the development projects, we’ve got three key members of the New Afton team with us, the Project Manager, Peter Marshall, Tim Bekhuys and Paul Hosford is also with us, so if you have more in depth questions on Blackwater, I think we will be able to help you out there.

Brian Penny, our CFO is with us sitting next to Bob and of course Ernie Mast, this is Ernie’s first year with us, at our Investor Day having joined us in July, which we think is the real key element in terms of further strengthening our team, you will have the chance to hear Ernie talk about both our operational performance for 2012, but also what he and his teams are going to be doing in 2013.

We are going to be webcasting this, so if you have a question, I’d appreciate that you speak into the microphones so the people on the webcast can hear us. I would like to extend a special welcome to those who are joining us by the web. We will try and refer to which slide we are on as we go through this so that you can follow along with the story.

Because of the webcasting, we will go through each section and then have a little Q&A period at the end of that, which will give people both the chance on some of the web to ask us questions and to answer them as well as everybody here in the room. But largely today’s overview is, I’ll an introduction of the company and some of the things that are new. Ernie Mast will go through our operating performance in 2012 and our outlook for 2013. Bob Gallagher will talk about Health, Safety and Corporate Social Responsibility, which is something that we take very seriously and has put us some good stead in terms of developing our mines and our local relationships. Then because so much of the company is in the future, Bob will talk a lot about our development projects.

Mark Peterson will talk about our Reserves and Resources, some of the updates from our exploration results from 2012, but even more importantly what we plan to do in 2013. Kurt, as I mentioned, we’ve got some exciting initiatives which I think were a pleasant surprise to all of us in terms of what’s going at New Afton. I mentioned earlier how the mine started up actually about six weeks earlier than was planned at the Millgate, and hit it’s throughput rate, 11,000 tons a day early. And Kurt can tell will you about some of the new initiatives that we got going on and then I will come back and wrap things up.

We hope that we will be finished before noon today, Julie Taylor who is with us has arranged for lunch for those of you who would like to stay and join us for some lunch and have a chance to speak with some members of the team and of course, Hannes Portmann and (inaudible) are the ones who really put all this together and we are proud of them in all of the efforts that they put into this.

As you know, lot of the statements that we will be making here are forward-looking and we have all the cautionary language on slides three and four.

On slide six, we try and outline what it is that we as a management team are focused on. First of all, try to enhance the value of each of the assets that we’ve got and I think we made important strides in 2012 towards doing that. We will tell you about some of the plans that we have for 2013. What we believe is a really strong team, we are always looking for ways to strengthen it, we have got a couple I think terrific additions in 2012 and we will talk about those guys. We’re always looking for how do we make New Gold stronger.

Our resources continue to increase in 2012 and most importantly on a per share basis, because that’s the metrics that we focus on. Our balance sheet is stronger and more flexible than it’s ever been before, largely thanks to initiatives that Brian Penny has undertaken by retiring some more restrictive debt and putting in place longer-term debt that gives the company a lot more flexibility, but we are now into a phase of generating a lot of free cash flow, which should continue to just make our balance sheet that much stronger.

Once again, Bob and Ernie and the team were able to deliver against the guidance that we provided last year and we think that we’ve established a track record of continuing to deliver against the production and cost targets that we set. I think our company is becoming distinguished in terms of low cost and what’s exciting to me is that our cost will be dramatically lower in 2013. I have been looking around, but I think that possibly New Gold could be the lowest cost gold producer in the world with the results that we’re going to have in 2013. What that will do is make our margins just that much larger and then in the fourth quarter of 2012, we had the highest margins in our history, but it will just grow again in 2013.

We are excited that we can more than double our production organically with the projects that we have and we are always focused on accretive per share growth. Over the course of the past 3.5 years, we have done one transaction and that was the one to get us Blackwater. We did another one which wasn’t really a M&A transaction, but as you know, our moral where we put the company in a more favorable position on more favorable terms from a financial perspective with a strong partner and our goal is always to focus on per share metrics.

In terms of 2012, our production of gold was up by 6% last year, but 2013 should be even better with our gold production growing by another 12%. Our cash cost came down by $25 an ounce and as you know there has been a lot of cost pressures in the industry, this has been quite topical in terms of operating cost, but the cost forecast were down by another $145 an ounce in 2013.

As I mentioned margins, our realized margins for 2012 was $1130 and based on prices around today, they should expand to $1325, so you’ve got both expanding production and increasing margins, which is why it’s going to have such a dramatic impact on the financial results of our company.

New Afton, I mentioned it did come on stream with full production ahead of schedule, which I think is again a real testament to Kurt and the team that he put together. It’s also a reflection of the location of New Afton, it’s the caliber of people that we can attract and the ease of operating there, but we’ve already started despite the fact of mills only been running for a few months is looking for ways to increase the throughput and Mark Peterson as I mentioned will talk a lot about the C-Zone exploration, where he’s already had some encouraging results.

We completed the PEA for our Blackwater and in 2013, our focus is on completing the feasibility study for Blackwater and Bob will have a lot more to say about that. On a per share basis, our measured and indicated resources were up by 10% last year and I think what was probably the most pleasant surprise to us was New Afton extending its life by another two years, because we really see that our own projects if we can add additional resources and the reserves and extend mine lives and look for ways to increase their productive capacity, that’s the lowest risk and most value creating thing that we can do as a company.

This year we look to increase the resources again at Blackwater, at New Afton, in the C-Zone and peak which year-after-year seems to just keep replacing what it takes out of the ground and did that again in 2012, we’ll look to do that further in 2013.

The company has a more liquid balance sheet and a greater cash balance than we have ever had in our history. We are always looking for ways to increase the flexibility and I believe that that will improve again in 2013. We don’t have any major financial initiatives planned, but rather just the free cash flow generation that will get from our mines, will make the company stronger and give us more options.

We talked about strengthening the team and I’ll introduce Ernie Mast. Ernie, for those of you who don’t know him, he is a very experienced miner and metallurgist and operational executive, most recently running the project for Inmet at Cobre Panama. And we think that with Ernie joining us, we've already seen how our team is just that much stronger. David Emerson joined our Board. David, who you may know was kind of Minister of Industry of Trade, he’s sort of Mr. PC to our company having been CEO of Canfor, head of Vancouver Airport Authority and given our increasing presence in British Colombia, both with new apps and starting up now the Blackwater project, we really think that he strengthens the team that we have.

Last year, our stock was up by 6% to 9%, depending on whether you look at Canadian or U.S. dollars; we outperformed the gold index by about 25%, but we believe that by continuing to execute, continuing to improve the NAV of our company, our goal is to continue, sort of deliver on our history of outperforming the various gold industries.

I talked a lot about our Board, David Emerson in particular; Jim Estey, one of our Directors is sitting over in the corner, but I think that we’ve got a terrific team of people both in experience in building mines, operating mines, building companies and ways to create value for shareholders, people have run bullion desk and together it is just a really wonderful complement of people.

Perhaps to differentiate some of the New Gold Board from other companies is the level of their investment. Collectively, our Board own about $125 million worth of stock, so when we talk about per share metrics and shareholder value and delivering and operating the company for shareholders, we are doing that as shareholders ourselves.

Talking about our resource growth on slide 11, I apologize to those of you who on the web I just said I would mention you to the slides as we go through them. You can see that over the course of the past few years, per share, our resource has gone up by above 42% and those of you who know the mining industry well know that that's the lifeblood of a company, because that's what will give us our future production and our future cash flows.

The company's assets are all in mining friendly jurisdictions. In brown, we have our operating mines which is of course New Afton and just outside the Kamloops, in British Columbia, the Mesquite Mines and open pit Heap Leach operation in California, Cerro San Pedro in Mexico that is before New Afton has been our biggest cash flow generator, because of the 1.5 million to 2 million ounces of silver that we get with it, that is virtually all of the costs. The Peak Mines in Australia that I referred to has always had an eight year life, but after mining for 20 years now has an eight year life again.

And then of course, we have our development projects. El Morro was 30% project that we have in partnership with Goldcorp who own 17% the upgraded and then of course Blackwater, which is 100% own project in central British Columbia, which I believe will become our flagship producing the order of 500,000 ounces of gold a year.

From a financial perspective; our cash balance at the end of the year was $688 million, we also had an undrawn line of credit, a revolver of $100 million, giving the company almost $800 million of financial flexibility. Brian Penny worked hard to increase the flexibility of the company in 2012. We now essentially have three pieces of debt, the first one not due until 2020, the others in 2022 and then of course is a small amount of El Morro project finance, which is carried by Goldcorp.

These instruments gave us the flexibility to pay dividends, which we previously didn't have, the unsecured, which gives the company again lots of flexibility and of course with a much lower interest rates in the 10% notes that we retired that were due in 2017. We also forced conversion of convertible debentures that we have due in 2014, which again will lead to interest savings for the company and a lot more flexibility. At the end of 2012, we finished with $476 million common shares outstanding.

In terms of our quarterly production and annual production, you can see that, our gold production of 113,000 ounces in the fourth quarter was among the highest in the company's history. We haven't put out our financial results yet, but I'm pretty confident that it'll probably be our highest earnings quarter ever, our highest cash flow quarter ever and for the year, producing 412,000 ounces and New Afton was a key part of the company's performance in the fourth quarter and it was nice to have a full quarter of production there.

We also got into some better grades at our Peak Mines. I think one of the things that's most dramatic is, if you look at our operating cost, $254 for the quarter, really is an indication of what New Gold can do with New Afton in production, that’s down substantially from where were in the previous year. Our cost for the year was $421 an ounce, in line with our guidance, but I think if you start to look towards 2013, the fourth quarter is a good picture of New Gold with all of our operations in production. We had our highest ever quarterly margin of $1300 an ounce and $1100 an ounce for the full year.

Those of you who know the company well know that we take delivering against our operational guidance and our cost guidance seriously and that's why we always put up our track record of what we guided to what we actually delivered and again I think it's a real tribute to Bob Gallagher to Ernie Mast and all of the teams and people including Kurt of continuing to deliver against those targets.

But over the course of the past four years, we’ve gone from probably about in the highest quartile of operating cost for a gold mining company to today in the lowest quartile. But that’s just the start; in 2013, our gold production as I mentioned will be a up again by 12%, largely reflecting a full year of production from New Afton, but a lot of things that will change in the most is on the cash cost slide, our cost should be down to the range of $265 to $285 an ounce based on silver prices of $30 and copper of $3.50, both below where we are today.

This is a little more detailed on slide 16 of our production and what we expect in both our cost. Really, we're going to have the first full year of New Afton increase throughput and recoveries at our Peak Mine, our copper production should more than double, our copper and silver by-products as we've been demonstrating over the course of the past few years continue to act as an effective economic hedge, that can solve the cost pressures that are happening in the mining industry. I mentioned that, we have used $3.50 copper in these costs and $30 silver and is shown on the right-hand side of slide 16, our sensitivity to copper prices, to silver prices, but based on today's prices that we have in the market, our cost for 2013 would come in below $250 an ounce.

We talked about focusing on margins, it's well known you can see in the red line, how operating costs of gold produces have steadily been increasing over the course of the past few years and our forecast to be going up again in 2013 and I feel very fortunate at New Gold, because of the contribution that our mines are making in the silver and the copper that our costs are going in the opposite direction, which enables us to produce and generate about $450 of incremental margins to each ounce of gold that we produce.

On slide 18, we gave an early indication of sort of our All-in sustaining cash cost. I think most of you know that there is an initiative underway with the World Gold Council where all the good companies are involved to try and establish how are we going to report these costs, what’s included in sustaining capital, what isn't included in sustaining capital. And I think we have been pretty conservative here and largely from the kitchen sink added, so when these standards are better refined, I think that we might be able to improve on this. But when we take our cash cost, our G&A, our exploration, our sustaining capital, which is no other than Blackwater, we’ve included virtually all the capital of the company will be coming at about $875 an ounce.

But what's exciting to me is our sustaining capital, because we are doing a lot of work to continue the development of New Afton. It's going to go down by about $50 million a year for each of the next three or four years and what that means is that this per ounce cost is going to go down by over $100 an ounce each year as we go forward. So while $875 is quite competitive, I think as we continue to reduce our sustaining capital, probably our total cost will come in around the cash cost of the gold industry.

So in terms of where we're going from here, we talked about New Afton getting a full year of production there and of course we have got El Morro that Bob Gallagher will talk more about Blackwater, which will be the biggest contributor, which will take our production to in the order of 1 million ounces of gold a year, more than double of what we're producing now.

On slide 20, we show our stock-based performance on the right side, our gold production growth on the left side, how our margins have been expanding and I think that there is a clear link between our ability to grow our gold production, our ability to expand our margins and our ability to outperform both the gold price and the various gold indices. You can see at the bottom is 2010, 2011, 2012 and for the last three years all we have been able to do, and of course in 2013, we expect our production to be up again and our margins to be up again and that’s why we feel that we can continue to outperform.

So with that introduction, I am happy to take any questions that you at this point or if you prefer to just hand it off to Ernie Mast, our Vice President of Operations, the one who is the most intimate with all of our operations that we have and the people there and I think deserves a lot of credit for the results that we had in 2012, and where we are going in 2013. So we don’t have any questions, none on the web. Ernie?

Ernie Mast

Thank you Randall and good morning everyone, I am Ernie Mast and I have been with New Gold since July of this year as VP Operations. We are on slide 22, and we are looking at how we did in 2012 as Randall mentioned, 2012 was a successful year for us as we met our operational guidance and each mine met or was extremely close to guidance for the year. I should mention also not only that meet our guidance on gold, but we met the guidance on silver, copper, and cash cost as well. So to me that showed an extremely consistent and stable operation four mines which we do have are all run by very experienced mine teams and we have a very good hand alone what it takes to run those mines in those jurisdictions.

We compare 2012 versus 2013. As mentioned, we have an increase of 12% in gold production and a decrease of $146 an ounce in cash cost and this is mainly a result of having New Afton for the full year, and in the bottom of the table, we see the breakdown from each mine and again we continue to have very consistent operation from our four mines. I will get into more details on each of the mines in the following slides.

So now we are on slide 24 and we are talking about the Mesquite mine. The Mesquite mine will see a slight decrease in gold production next year. Our guidance is 130,000 to 140,000 ounces, the main reason is we are entering a lower grade zone in the mine plant as planned, and then as a result, we have lower production. Our recoveries at Mesquite and peak leach operations are tracking according to plan, so the difference is truly from lower grades feeding the pads.

On the cash costs, we are seeing an increase in cash cost. Few reasons for that; one of them is that we are budgeting a higher diesel price than we incurred in 2012. We are estimating a diesel price of $370 a gallon, and as well we did have some new accounting method used to calculate cash cost with inventory cost, we did have some higher cost run through into next year, and we are seeing that reflect in the higher cash cost.

We are looking at now the slide for Cerro San Pedro. CSP will see an increase in gold production next year as we enter higher gold producing higher gold grade zones and also zone with higher recovery and an oxide zone. There is an increase in cash cost and that’s mainly due to a decrease in silver production as a byproduct credit. The silver grades are going to decrease by 25% and again that plan is part of the mine plant. The key assumptions is that obviously with such a large silver byproduct credit, we are estimating over $30 an ounce for silver and Mexican Peso to U.S. foreign exchange rate of 13 to 1 and this mine is very sensitive to any fluctuations and silver price of $1 per ounce change in silver equals a $10 per ounce change in cash costs.

And again recoveries in that mine are tracking according to plan. We have an oxide zone and a sulphate zone and on the bottom of your page, you can see the recoveries for the oxides are questionably higher than the recoveries for the sulphates.

On slide 26, it’s Peak Mines; Peak are looking at most likely an increase in production in 2013 compared to 2012. The main reason for that is an increase in the throughput through the mill. We have also done some debottlenecking in the mine, and the mine has enough capacity to fed the mill, so the mill can run at its full capacity. The mill capacity increase also is a result of improved availabilities and some process control improvements in the plant, which have allowed us to increase instantaneous throughput.

Our copper production is similar due to similar grades, however slightly lower grades and we have reduction in cash cost, some of that is related to the exchange rate, which we are using in our budget of one for one, a $0.01 change in Australian dollars is about $10 change in the price of gold and right now the Aussie dollar is trading at about $1.05.

On slide 27 and 28 will discuss New Afton. New Afton mine will have a full year of production and therefore we can see the production levels of copper and gold double during the year as mentioned the mine had a spectacular start-up and later in the presentation Kurt Keskimaki will show month-by-month breakdown as a throughput to the plant. We will also see better grades and better recoveries through the year, better grades as we are now getting into the need of the deposit and we're not having any development ore mixed in with the processing ore, and as well we get better recoveries as we are debottlenecking some – we’re doing some modifications in the mill.

On slide 28, we have the cash cost for New Afton and we're showing also the total cash cost with byproduct, which is estimated to be negative $1,400 an ounce, but when we look at the mine on a co-product basis for gold and for copper we can see that the mine, as a gold mine, or as a copper mine is quite competitive, and when we combine the two and reflect in terms of cash costs the results are spectacular with those low very, very low cash costs, really what's affecting the cash cost is that copper credit or of $0.25 change in the cost of – and the price of copper results in the $220 decrease in the gold cash cost.

In terms of the capital expenditures that New Gold is going to incur in 2013, compared to 2012 there is a decrease of approximately $200 million, most of that is due to the finishing off of the New Afton mine and then as well there is much less intensive of drilling program at Blackwater. I will now go into a little more detail on each of the different assets.

So on slide 30, here we show the assets, there is two colors, which are shown for each of the capital cost of each of the mines and the colored portion and the white portion, the white portion is reflected as kind of a sustaining capital, and the colored portion can be considered kind of exceptional one-offs so that's what Randall mentioned when he said that our capital as a corporation are going to decrease by approximately $50 million in the following years because we do have some projects to do at each of the mines which then will go away, from New Afton for instance we're going to be constructing a total of 36 drawbells during the year and after this year we get into a kind of stable steady state, where we will be constructing about 15 drawbells a year which will result in a lot less capital.

Blackwater; of the $60 million a large decrease is a smaller drilling program this year compared to the past, we're going to be drilling approximately 40,000 meters, Mark Peterson in his presentation will go into much more detail on the drilling program planned for Blackwater, this year. At the Peak Mine the $30 million for underground development is a recurring cost, and we're looking at ways of decreasing that, we have a new mine manager at Peak Mines, he was recently with (inaudible) and worked extensively with them with their zinc operations in the U.S. and previous to that in Australia, and he has some extremely good ideas of how we can get our jumbo utilizations improve and find ways of getting better development metrics from the underground equipment which we have here.

And for Cerro San Pedro this year we have a significant pushback which is called Phase V and is where we're developing the last leech pads and that's $30 million of the $40 million and the $10 million is really for site maintenance and other improvements in the process plants in the (inaudible).

And finally with Mesquite, we have $20 million spend plant for the year. We are purchasing two trucks to increase the fleet size to 16, this is going to give us more flexibility in the mine and as well allow us to obtain higher production levels in the future, I mentioned earlier, Mesquite has a guidance between 130,000 and 140,000 ounces for this year, but in 2014 and onwards, we will be regularly in 140,000, 150,000 ounce per year zone.

And it’s worth noting that New Gold’s 30% share of the estimated El Morro capital is covered by Goldcorp and according to the financing structure, New Gold will pay back with the mines and profits in the future and Bob will talk about that later on.

And that’s essentially a summary of the operations of the 2012 performance and 2013 guidance. Are there any questions in the room? Or [Randy said] there are any questions from the web? Okay.

Question-and-Answer Session

Steven Butler – Canaccord Genuity

Steven Butler here from Canaccord. New Afton this year, for 2013 are you looking at head grades for gold and comparable low reserve rate still and recoveries below expected like mine plant? Thanks.

Ernie Mast

We are looking at recovery slightly below likes of mine plant for this year, as we continue with the commission into the plant and I believe head grades have more or less right on the resource.

Unidentified Analyst

Thanks sir. A question on the $90 million of I would say sort of work on (inaudible) and New Afton share, is that could it that been expenses in subsequent years, why do you choose to maybe to accelerate that? If you didn’t do that work on the [cap], would that maybe sterilized for two years of additional reserves that you added etcetera?

Ernie Mast

Yeah, that work could have been below however Kurt will show may be on his presentation, a profile or a side view of the – you also notified the higher grade oil in the eastern part of the oil body and by advancing those (inaudible) allows us to access that high grade oil earlier in the mine plant and then being the economics we have realized that it was (inaudible).

Okay, I will now introduce Bob Gallagher, the President and CEO for the next series.

Bob Gallagher

Thanks Ernie. I am going to cover a few areas, first, health, safety, corporate, social responsibilities and then into our development projects. These are health, safety, corporate, responsibility, we use to call it sort stuff or the outside the front stuff, but in this day and age of course it’s fundamental to the way we do business, probably the most immediate effect that we see is our ability to get into new areas and I will go through in my comments towards these aspects as we look at Blackwater.

Slide 33 is a sort of an overview of our governance if you will of this area. We are very much focused on executing in these fields at the sites, corporate provides guidance and some support particularly this year in the area of safety, we actually created a new position in the corporate office in safety field, we were really focused on standardizing what we do across all the sites and really adopting best practices from each one in the remaining mining sites.

Our next slide gives you a few of our accomplishments through the year, I won’t detail them all. And certainly rather than myself talk about our accomplishments, we have been recognized by a number of third parties and I will summarize those in our future slides, but probably the highlights are that achieving 1 million man hours without a Lost Time Accident at any site is a great accomplishment; we achieved that again at Cerro San Pedro on the course of the year. We have a corporate, we are committed to adopting the standards of the International Cyanide Management Code, and during the year the Mesquite mining was certified and we are well on our way to getting CSP this year and possibly peak at the end of this year or early in 2014.

Up here in British Colombia associated with the Blackwater project, we really are working hard to gain the support of the communities, both average and on non-average and one of the things we have done is, we have opened up an office in Vanderhoof, which is the nearest town to the project and unusually we because of the size of the drill program, we actually did much of the sample preparation ourselves by building a laboratory in Vanderhoof, which created about 30 jobs in the time really demonstrating our commitment to the communities. And of course, in New Afton, we continued our outstanding relationships with First Nations.

Moving to slide 35, this is historic in compared of performance on Lost Time Accident, the frequency rate, that’s number incidents per 200,000, nine hours and you can see that we have had a steady decrease; 2011 and 2012 looking at the dark color bars and for each of the sites, we show the comparative frequency for the jurisdiction where the site is for example in New Afton, that should be seen in incident. Industry average you can see in all jurisdictions were better and company wide, we are at 0.5 accidents per 200,000 men hours, which is about a quarter of international operation, so a great job by everybody out there.

This is a list of some of those third-party recognitions that we got, probably significant ones that we are most proud obviously first one that the Mining Sustainability Award that was given to New Afton; that’s granted by the Ministry of Environment, the BC and then the Viola R. MacMillan Award that will be delivered to us by PDAC later in the year. Their conference is coming up and so Cerro San Pedro we were rewarded (inaudible) and that’s the second safest mine in Mexico, so doing a great job there and again it’s people want to work for mines, so they are safe and communities want to have those in them.

Looking ahead of 2013, I will focus on a couple of these. Again it’s getting approval on the International Cyanide Management Code. Again this sets us up as a of the great demonstration of the way we do business and hope this was our permit here in Blackwater. Engagement with First Nations both in New Afton and Black Water has already narrow this for our industry if you are going to permit a mine based at fundamental, so you have to get the First Nations on your side.

We are really leveraging our success in New Afton and doing just that up in the Blackwater area and we have actually commenced the environmental impact assessment process in British Columbia with the delivery of our project description late in the year and we are well on our way.

So with that I will pause briefly and take any questions from the floor on this area.

Unidentified Analyst


Bob Gallagher

Yeah, the question was how do the First Nations and Black Water compared to those in New Afton? Probably the biggest difference is in natural capacity of bands themselves where these two bands, (inaudible) and particularly (inaudible) got a lot of experience dealing with businesses that have a basically a subdivision that they run on sort of Gulf Coast in it and they have been doing businesses with forest companies or pipeline companies for many, many years. You contrast that to the few principle bands up in Blackwater, (inaudible) they’re relatively isolated. They don’t have lot of experience with industry. So it’s taking us quite a bit of time to bring them up to speed. They commence on all of our applications from exploration. But we have actually taken advantage of the tenacity of the (inaudible) expense and they are experiencing good relations with us and we physically got the groups together, had a number of meetings both with [Tupans] and with the [Tupans] alone and that’s progressing very well.

We’ve got exploration agreements with the two principal brands up at Blackwater. And we’re now – started negotiating what we call an IBA or a participation agreement that cover the production periods. Really our fundamental thought is with First Nations, you’ve got to sit down early with them, show them everything you’re doing, and spend a lot of time with them. And they like, everybody else, they don’t want to talk to your consultants. They don’t want to talk to your low level management. They want to chief to chief and I spend a lot of time out in the bush and speaking about the First Nations. Any other question?

Okay, I’m going to move on to development projects and we’re really looking at starting on page 40. The two projects of course are the Blackwater and the 30% of El Morro we have. Both Randall and Ernie mentioned kind of our transition from – what we were four years ago as a collection of small assets relatively high cost to a much more world class assets. New Afton of course, is one of them and now we’ve got both Blackwater and El Morro. So they’re very significant in scale.

They’re largely versus large production rates and big cash generators. So and importantly with these two projects, basically we are fully funded with our cash on hand and our expected cash from operations, we can cover the Blackwater construction costs and of course, on El Morro, we’re fully carried by Goldcorp. They are important contributors to our measured and indicated resources. As you can see, roughly they contain half of our M&I resource. And once in production, they basically will double the company’s production rate and lower the cash costs.

Looking at detail in Blackwater; this is page 42. It’s an aerial photo of the site. The cleared area in the background is really the heart of orebody. The mineralized zone, the pit itself will extend well beyond that. In the center are the core sheds and the 250 men camp. In the foreground, the scale there that – that’s about a little over a kilometer east to west along the direction on the cleared area.

If you look at they topography and know a little bit about the area, really is ideal mine building area. It’s gently rolling as you can see. That ridge on the top is the top of the water shed. So we have a very little water to deal with on the ground. There is a very nice – you can see the start of it on the right side which is a basin, which is ideal for our tailings, we’ll put our tailings off to the west outside.

We will have a net negative water balance which again is very positive in terms of building the mine, operating the mine. And this is readily accessible by all weather, all year around road that was put in by the (inaudible) companies.

This slide, you can see where we’re located. It shows up a little better on your hard copies. I’m on page 43. Blackwater is – as I mentioned the nearest town is Vanderhoof. That’s where the roads come down from. It’s in south central BC, moderate climate. This is not the far north. This is not snow heavy snowfall or rainfall area.

It’s a great location. We have – our BC hydro has transmission line with a spare capacity north of us, runs through Vanderhoof. We acquired this from the Richfield resources in the middle of 2011, and we’ve conducted an aggressive, a very aggressive drill program, we beat the 19 drill rigs last year. The site is, I mean is about a $130 million in exploration and engineering studies in the course of 2012, which got us through our preliminary economic assessment in September and now we have an update on the resources which I’ll go through here shortly.

The target now is to get the feasibility study out by 2013 which is the main focus of our work in this year. This is a quick map of our land holdings. And Mark will talk a lot more about this and what’s the potential for further gains in resources are in the area. This is about almost 1,000 square kilometers and you can see the Blackwater resource is really a postage stamp and near the center of it, about 30 kilometers west, we have the (inaudible) where we also have a resource identified there. So it’s a great line position that the team has put together.

I’m now on page 45, just summing through the achievements for 2012 and I’ll touch on a couple of these ones. As I mentioned, we are very important in getting this mine permitted as our relations with the First Nations, we’ve got agreements in place and continuing to develop further agreements. And non-Aboriginal, we have a lot of support from the community all around the corridor in the area. It’s an area that was infected by the pine beetle. So there’s kind of a cliff coming off in the forestry industry. There’s lots of people looking for work in the future. So we’re pretty popular up there if I may be seeing myself.

Also listed here are some of the studies that we completed for both the environmental assessment, kicking off the environmental assessment and getting the preliminary economic assessment done and many of them now are related to the feasibility study. So we did add some 466 holes to our data base and updated our mineral resource and this is summary tables compared in current year end resource to the PEA mineral resource from September. And we’ve completed basically all of the infill drilling now.

It’s pretty much drilled off and in-filled, down to about 200 meter depth. And we now have 9% of the gold as measured and indicated and 33% of the gold as measured, and that basically covers our – that will be our pay back period on the investment for the project. The in-filled drilling and updated geological resource constraints since the PEA did result in the decline in the overall resource inventory. However, it’s very much offset by the significant increase in confidence.

So in assessing the updated mineral resource estimate, we focused on the highest quality tons. We’re really looking at maximizing profitability rather than just maximizing our global resource inventory. As part of the feasibility study, we’ll continue looking at mining schedules, looking at elevated cut-off grades as we build stock piles in early years to maximize the mill fee greater.

So the real focus going forward now with this resource is to come up with the optimum mine plan. This potential for stock our piling material below 0.4 gram per ton, sort of treated at the end of mine life and this well all being incorporated into our feasibility study. Just generally I’m looking on page 48 now. The works that’s under weighing now towards the feasibility study since the PEA came out.

Basically, the capital of cost estimate of $1.8 billion remains unchanged. We’ve done a lot of work out in the tailings area and have been very positively surprised by our findings there, and basically confirmed our cost estimates out there.

Trade off studies continue, probably the most concrete position we’ve got now is on our processing method. We arrived at [a hole each], which is a little lower cost than what we contemplated in the feasibility study – I’m sorry, the PEA and we’ll continue those studies. Mining costs and G&A costs remain unchanged.

I mentioned in the mine plant and the strip ratio, it is pretty much in line with our PEA. The 2013 plans and initiatives going forward, again we’ve pretty much settled on our flow sheet. There are some optimizations in the actual equipment selection and sizing particularly in the grinding circuit. And we will incorporate these studies in getting the feasibility study out by the end of the year.

By the end of the year, we also should have the environmental assessment report completed which will then be delivered to the of course, the federal and the provincial governments for approval. And we will, should have by the end of this year participation agreements with IBAs with principal first nation up in the project area.

One of the things that we’re all very conscious of this is the lack of success shall I say in major resource capital projects in all of the resource industries, mining as well as others. And we did very well at New Afton. The statistics are apparently at about 85% of major capital projects coming either over budget behind schedule or they have a real trouble ramping up.

And we’ll rather than, like so many have done as get into that predicament and then seek help to get out of it. We’re actually sort of getting ahead of the ball game where we’ve got McKinsey & Company consultants in working with us and really developing what we call our implementation plan. What has gone wrong in other projects, the projects they can call intel fix, what do we have to do when to stay on budget and timeframe?

New Afton, we pretty much did that. But New Afton has the advantage of being next to a major city. Blackwater is not isolated, but not beside a city. So we’ve really been focusing on four areas. First of all, the model selection and that’s the delivery model selection. How are we going to build this? And we really arrived at EPCM for the major mill components and then engineering procurement contracts for the infrastructure that dam the roads water supply and we’ll manage that construction as we did in New Afton.

Project team, we spent a lot of time into what positions do we need and when and actually we started recruiting for that and hiring for that already. Reporting metrics is how much have you spent, have you got what you expected to get for to spend, how are you controlling your modifications and that kind of thing is a key to set that up ahead of time. Probably, the biggest impact on all our projects is the labor.

There is a shortage of labor. The labor you get is traditionally being worked at lower than expected productivity. How are we going to address that? And we’re really looking at transportation and rotation, camp accommodation and the food you deliver to the people on the camp. We want to make Blackwater a place where contracting people who want to come and build a site and we think we can do that and basically bring back a lot of people who have moved out of BC to work in the oil sands et cetera.

The other one is for [human] strategy governance mismanagement are also on the list and we’re working on that. The whole key here is we want to get ahead of these things before we start building it and that’s how we’ll stay online.

Page 51 is a project schedule and it’s a – key dates there are – this hasn’t really changed since, I guess over the last year-over-year. We’re really looking in 2013 keen on getting the environmental assessment reports done for the government approval and the feasibility study, so we can start engineering in long-term procurement.

We still estimate we will get this things up and running in 2017. I’ll talk a little bit about El Morro. Again, this is a huge deposit, represents 3 million ounces and 2 billion pounds in our reserve basis. Goldcorp is the operator. There are really two deposits out there and before I get into that, let me go on to page 54 and talk about the funding of the project.

The 2011 feasibility study came in at $3.9 billion or 30% share of that is $1.2 billion and that will be funded by Goldcorp. It shows on the left side of the cycle before. And the right side is cash flow. Once you are up and operating, 30% is New Gold’s. We’ll use 80% of that to repay our project financing and interest from Goldcorp. But from day one of the project, we will get 20% of our 30%, and it’s something in the order of five years depending on metal prices for us to repay that financing and then we’ll go to the full 30% of the cash flow.

There’s actually two deposits known at this time in El Morro. And one other thing we’re really excited about is the exploration upside on this thing. It’s big now. We think it’s going to get a lot bigger. And there’s two areas is the depth at the existing feasibility study ore body and secondly at the El Morro ore body, our deposit itself.

But El Morro, the name sake deposit is not where the feasibility study is at. It’s at La Fortuna which is about four kilometers the east of the original discovered El Morro deposit. The development plan has a mill located almost exactly in the center of (inaudible) deposits. And although the first discovery was made at El Morro, the geology is much higher in the system. The exposure at El Morro has been eroded at La Fortuna, so the mineralization is closer to surface. And after about 12 holes with some good intercepts, Noranda who was early into the project at that time, drilled over La Fortuna where there was an old million mine, supergene mine from the 30s and immediately hit some real good high grade. And since that time basically, all the explorations have been done at La Fortuna.

So Goldcorp is getting ready to go back to El Morro. We’re excited about what the potential for discovering that. Relatively shallow holes drilled at El Morro did not encounter the par fee system, that’ the source of all this system that’s the source of all this mineralization. So that’s a good thing to look for there. La Fortuna – this is slide 56, shows you a cross section. The upper area of course is the mineralized zone where our share, our 30% represents 3 million ounces and 2 billion pounds of copper.

But underneath that, sort of purple color is the inferred resource and again this is – our share of that is 1.3 million ounces and 1 billion pounds of copper. There has been a conceptual engineering study done at looking at the blockade down there. Goldcorp will be drilling more holes down there and doing more explorations and engineering studies and we’ll be able to bring that in as part of the inferred category going forward.

That little block down there is a 1.3 million ounces and 1 billion pounds to us in our reserve share of it. So lots of excitement there as well, coming up. Just quickly for an update on the – an overview of the feasibility study, it was completed in December 2011. Capital cost is $3.9 billion or share $1.2 billion. 17-year mine life and our share of production would be 90,000 ounces of gold and 85 million pounds of copper which is a little bit more than New Afton. So it’s another big great deposit for us, for us to 190 million in EBITDA.

And with that I’ll pass and take any questions.

Question-and-Answer Session

Unidentified Analyst


Robert Gallagher

Yeah, the Environmental Assessment Certificate is temporarily suspended. A group of engineers, landowners are claimed that they had not been adequately consulted that their complaint was supported by the courts and so they’re under going a process now of consulting with those people. Those conversations are scheduled to start in March and Goldcorp anticipates by the end of the year. That permit will be reestablished.

Unidentified Analyst


Robert Gallagher

They’ve got a full team on it. So right out there was a rest of their project there have been updating all the concepts. Engineering is continuing as I go through this review of the consultation. So this is breakdown from (inaudible).

Unidentified Analyst


Robert Gallagher

I’ll repeat your question.

Unidentified Analyst


Robert Gallagher

Yeah that’s the resources constrained by $1,400 share.

Unidentified Analyst


Robert Gallagher

Yeah, I don’t have those numbers. Mark, you have those?

Mark Petersen

I don’t have them Andy, but it’s on the order of 900,000 ounces equivalent.

Unidentified Analyst


Robert Gallagher

The question was at 23 cut off, what is the additional ounces? And the M&I at 0.4 is 8.4 million at 0.3, it’s 9.3.

Unidentified Analyst


Robert Gallagher

My memory is not good. I anticipated the question as noted. Anything from the webcast Hannes?

Hannes Portmann

Okay, with that and I’ll turn it over to Mark.

Mark Petersen

Thanks Bob and good morning. Moving on to our reserve and resource update; I’m on page 59 of our presentation. And when we look at where we’re at and how we’ve ended out 2012 on our global mineral reserves and resources. On two key reserves, we are seeing about a net decrease of 200,000 ounces and this is in spite of mining 620,000 ounces to produce 412,000 ounces.

And that the reason we’d narrow that that delta is in part from resource to reserve replacement drilling, a very successful program. At Peak, we also had small program in the third quarter that it was done in New Afton drilling off the bottom of the historic New Afton pit that brought in about roughly two years of new reserves into the reserve over the last year. So that was a nice way to win to end the year.

We’ve also of course got the impact of higher metal prices working for us on all of our reserves. So overall, we ended them up about netting out its sales and paid drill replacing production there due to the higher metal prices and then positive impacts at Peak, New Afton and El Morro, both from additional drilling at Peak and New Afton as I mentioned, and in higher metal prices at El Morro.

On mineral resources, our M&I inventory as it’s already been mentioned is increased by about 2.6 million ounces. That’s almost all from the aggressive drilling campaign to convert our inferred inventory at Blackwater up in M&I category, so quite successful there. That is, when you go down into the invert resources category that additional drilling did drawdown that inferred inventory. But we have moved it up in the resource classification category to support the feasibility study that Peter and his team are working on right now.

Moving next slide 60; this is just another way of looking at our M&I resource change from year ago until now, about a 600,000 ounce mined volume of reserves drawn down. But again the biggest increase to M&I coming in Blackwater. And then the incremental increases at our operations, CSP, Peak, New Afton and Mesquite.

Moving on to slide 61; this just gives an indication of how we done over the past four years on our M&I inventory. And on a per share basis, we’re seeing about a 10% increase measured and indicating gold, gold ounces per share, and actually absolute terms that’s about a 49% increase in Blackwater M&I and a 14% increase in the New Afton M&I. This fourth consecutive year, we’ve managed to maintain this growth profile and I hope we can continue that as we go forward.

Moving on to this last page on our resource statement, page 62; this just shows the relative contributions to revenue coming out of our M&I inventory and this is scaled to the respective contributions at current metal prices for our principal products gold, silver and copper.

Moving on to our exploration program for this year; on page 63, this slide provides an overview of what our program companywide looks like, and it’s a balance program between exploration in Blackwater and then at our sites New Afton and at Peak. It’s about 40,000 meters at Blackwater, the same about that much drilling at New Afton, a little bit less at Peak. And we provided you with some breakdown earnings already touched on some of the capitalized exploration expenditures at Peak and at Blackwater, but also included here are the expensed exploration estimates as well.

One thing I’ll just point out is that in Blackwater, because it’s a remote site camp-based project the cost to do the exploration is higher and it’s earlier stage. So the breakdown on that 30 million capitalized plus the expense is approximately a third, just going into direct camp and logistical support costs, and then about 14 million or so on drilling and the related activities. But also build into that and I’ll get into this in a few more slides is about 6 million in exploration to continue our reconnaissance target generation program, because it is a very early stage project and we’re really just getting started exploring the rest of our ground in our 1,000 square kilometer holding.

New Afton, $10 million that’s pretty much all underground drilling, a bit of surface drilling, we’ve also got as a reconnaissance drill program plan for this year, outside of our principal mine lease on some of our other claim holdings in the (inaudible) district area. Peak it's pretty much broken down between resource delineation and reserves development drilling capitalized and then ongoing exploration to identify and discover new resources both in and around the existing deposits as well as further out along our fairly substantial regional claim holdings.

So moving into Blackwater here, I just go back to this map that Bob showed previously, the one thing Bob mentioned it and I'll just kind of reiterate it here. Blackwater the resource sits roughly in the center of our claim block, the resource sits within about a 3 square kilometer area about two by 1.5 to two kilometers east-west by 1.5 north-south. And that's only three out of 1,000 square kilometers. The property extends roughly 40 kilometers from the south-east end off to the north-west up there where we have the Capoose prospect.

And I guess I just sum that up by saying we're really just getting started exploring this exciting new discovery in central BC. Those of you have seen some of our presentations out in the past may recall that much of the area is extensively covered by post-mineral glacial till, so it’s a bit of a challenge who are looking for discoveries through line discoveries through subfascial color, but we’ve had some good success with that. And I’ll just show you some of those results in another slide or two.

But first going to Slide 65 here, let's just zoom in a bit of Blackwater immediate Blackwater area geology, because in addition to the drilling we did to upgrade the resource up into M&I categories for the feasibility study we also did a fairly extensive exploration program over the development area, which is outlined in the yellow outline, it's a little bit hard to see, but essentially the purpose of that drilling was to determine the suitability of the proposed site facilities that Peter and his team came up with was issued in the PEA.

This map and the colors that you are looking at this is actually a bedrock geology map, it’s a level slice through basically a horizontal level slice cutting in just kind of may be 100 or so meters below the gravel or the till cover. The area in grey that is the remanence of glacial tools that show up at level/ the area to the north eastern Huawei and you can see the drill holes or label there and why is that post glacial till sands and gravels, but we really got three rock types we’ve got in purple post-mineral and the side rocks and in green of the Blackwater host volcanics. And then just to the west our older sedimentary siltstones and sandstones all of the three units did moderately of to the north-east.

The key thing, key takeaways from this slide that we did know year ago, but is really coming out very clearly now from the drilling that we've done beyond the deposit. One the Blackwater deposit

, which is just in the center, the lower center part of the slide and outlined in that green hatcheted pattern. It’s sitting at a major fault intersection; north-east and north-west trending fall.

And the other thing that comes away or comes out of this is our favorable host rocks that close to deposit, we now know extend well beyond where the resources itself. And so using that looking forward, we now have a very useful targeting criteria, the combination of those favorable hose trucks where we can identify them, and the major regional structure or intersections that will be a focus as we develop targets in the future.

And then the last comment I'll just make here is that the overall objective of this program was, yeah I was exploration, but it was also really to test whether or not there was mineral potential in the immediate areas where Peter and his team are planning some of the key site facilities and right now we can say that it's confirmed that where these facilities are proposed, and I'm just going to turn the slide here.

The Slide 65 this is just a quick snapshot I pulled out of the PEA just as a reminder of where those facilities are and the resource is down and the lower center right of the diagram and the tail end facilities up to the north and northwest and proposed mine slight right adjacent to the pit. So I think we’re just still got a little bit of combination drilling to go right around the immediate area of the deposit, but for the most part I think we are good to go in confirming the currently envisioned site footprint.

Now, moving out and looking at the rest of our property, and going to Slide 67. This is again our claim block over the entire region, and what shown here in the yellow stars are actually geochem anomalies that are coming out of the glacial till from the property wide till sampling program that we did this past year. And what’s emerged here is, numerous areas not just around Blackwater, but in area after the east we call Auro and a couple of areas after the west Fawnie and we move bulk of Capoose, but what's interesting in some we are seeing anomalies to gold geochem and materials extending well for the south west of Capoose in an area that we call Van Tine.

The red lines that are shown over some of these areas, these are proposed geophysical and geochem grids that we are planning to complete this year as we do the next phase of work to identify drove specific targets on some of these earlier stage areas. Likewise that Capoose we did do some drilling last year and we're just going to get back out there as soon as snow melt probably in late May and resume our drilling to see what we can do to expand the resource there at Capoose.

Effectively our program for 2013 at Blackwater its three tiered strategy, near-term targets we are continuing to do some drilling within the Blackwater posit to try to push out the limits or some of the deeper intercepts that are at the bottom of the resource we've got some couple of deep holes in progress now. That work will be finished in the first quarter along with the remenance of the condemnation program that began last year.

Mid-term objective obviously want to get right back out on Capoose and see if we can step out and expand that resource, and we will be focusing on where we are seeing more gold rich zones in the deposit, one of the things that I reminded out when I look at how Blackwater was discovered, it started out as a silver prospect once a product of time (inaudible) resources was in there exploring, and they turn out there were exploring now see what was in the northwest part of the deposit, and wasn't until the when Richfield made a discovery they realize that its own deposit and there is a goal core where we’re developing now.

What I don't know about Capoose, but can really (inaudible) is may have the same situation going out there, right now its predominately a silver resource, but we see a lot of alteration and geology extending at least another 1 kilometer to 2 kilometers north of where the historic drill it was and good indications to the south. So Capoose it's an old prospect, it’s been around the long time, it out crops, but I think we really just getting started on understanding.

And then the Van Tine area to the south over and above what we see in terms of gold geochemistry and materials there, we are also getting reports from the consultants they guided us through that work that we’re also seeing good strong indications from some of the other indicator minerals characteristic of the area we got some peculiar guidance on some other minerals that we like to zero in on.

Turning to Page 68 just too quick start of Peak. One of the new developments in terms of our exploration targeting they came out of peak last year was the recognition of a dual physical signature, it’s a [recent activities] signature that came out of reprocessing some historic data. And we’ve now got a signature that tags itself to the non deposits and we’re seeing other areas where that same signature is appearing. One of these sits in-between Perseverance and Peak, and if you look up on the long section, that’s off to the left hand side of the Peak Mine corridor.

The scenario is that we’ve remained (inaudible), there is a drill on it now initial indications are they are starting to see the operation. These are very narrow kind of loss in shaped oil bodies. So as far as it may be to imagine, especially when you look at a 2D view in long section, that something like that could have been missed, it’s actually quite conceivable. So if we have any success there, that particularly is obviously very ideally suited to leverage off existing underground infrastructure between Peak and Perseverance.

Likewise, well in the far right of the long section at Great Cobar. We have a surface drill program planned to see what we can do to extend the Great Cobar resource at depth. That’s a historic copper mine, it does have a gold credit, but it’s stopped mining about World War II, effectively at the water table we do, there is some drilling that was done, that we’ve done in the past few years indicating the system the load is well open at depth. Our plan for this year is to get back, and get after that. And then else where distributed along the Mine corridor, we have essentially programs targeting the down plunge extensions of our non-ore bodies New Cobar, Chesney and over there to the south at Perseverance.

Now going to New Afton this is our most recently started drilling program, now that the development work is largely finished and the mine is under production, we were able to get back an underground with some drills in the start of the third quarter. And there’s really some pretty exciting results coming out of this.

This slide on page 69, this is a long section looking North of the New Afton deposit. There is few things I’ll point out to you. Based on that just refers to the historic open pit at [techmind], what we refer to as the B-zone and the B3 block, and there’s also the reserve block is called the B2 reverse block. That’s effectively the resource as it sits above the 4,900 meter elevation. That elevation is currently the deepest level of planned development. The B3 block I think comes in right now, at the end of the current mine plan, the development hasn’t been done yet, but it is fully factored into the current plan.

The reason the B3 block extraction level is where it is essentially because all of the historic drilling that was done to flush out the resource and the reserve being mined now, was done from surface. And there were some deeper holes that helped flush out the deeper C-zone which I’ll talk about in a minute. But for the most part where it could drilled off to measured and indicated status, it went down to about that level of that B3 block extraction level.

So the current drill program that we’ve undertaken now, again three-tiered strategy with a near term objective to fill in some gaps just below that plan B3 extraction level, fill in some gaps in the block model to see if we might be able to pull some, the remanence that are inferred up into the M&I category. And really test whether or not we can lower that level and capture convert more of the resource blow into reserves. That drilling is done, we got that done at the end of last year, in the early – late third quarter early fourth quarter.

In the fourth quarter, we ran really once to full bore and to exploring the deeper C-zone, below that 4,900 meter level. And we are really just getting started with it. We do have some drill results, I’ll show them to you on another slide here, but the main, the key point here is that most of what we’ve got and drilled on the C-zone came in after we had to close off our database for the year end resource update. So this is only the first three holes that we got drilled in the third quarter that made the data cutoff and everything that we drilled since then will go into future resource updates.

Also just note on this slide just below the label for the A-zone shows where we did a small program during the third quarter off the bottom of the pit a small drilled program that converted some inferred resources out on the fringes of deposit into the [M&I] category, and Kurt and his team have very effectively pulled those into the reserve for the end of this year.

So I think and I hope that’s the start of a trend that we will just continue to do each year, but looking going after new mine opportunities to pull resources into the mine plan as we go forward. Again, the result, that little bit of drilling plus the impact, improved mine planning and impact to metal prices essentially added two years to our reserve life at New Afton and we’re only six months into the production there.

Turning to Page 70, this is just an overview of some of the results I’ve already talked about. And so I won’t read through all of this, but again I think it highlights the point that we’re really just getting underway exploring around New Afton. Now, talking a little bit more about the C-zone in particular and how it compares to what we already know, we have in reserves. On page 71, we put together some comparison tables which just show what we have in reserves now, 52.5 million tons, 0.65 grams, about 0.93%copper.

The C-zone resource and this is essentially the resources that stood at the end of the year based on historic drilling that we had before, plus a few new holes. What you can see there is comparable grades and I’ll just point out that this resource is supported by historic holes that were drilled from surface, so really didn’t cross cut the zone very effectively, because it’s steep dipping zone and you’re drilling holes from surface. We’re able to do a much better job now that we are drilling from underground.

And I think you can see that on this next slide on page 72. There is two cross-sections there, the one on the left is a mere South cross section looking East and you can see the drilling, the underground drill plan is cutting the zone much more effectively from underground. The hole traces in black are the ones that have been completed, the hole traces in grey are holes that are planned. The section on the right is again that same long section, what’s highlighted also on here are some of the most recent drill intercepts that have come out of the C-zone program and there some of our highlights for six or seven holes are in the table down below there. And again, none of these results are in the current resource estimate for the updated C-zone.

I’ll also point out that some of these holes in the C-zone don’t have any red bar showing where there is mineralization in them. The tag with blue, each one has a blue asterisk at the end of it, those are holes that were just completed in the latter half of Q4. And there’s still assays pending, I really don’t like the assays pending piece, but what I can say about those holes is, they are filling in gaps, the one on the far left is just a step off from the existing grade drill. So we’re looking forward here to some good results from those holes probably pretty soon.

And the last thing, I will just mention is, just inside a box, there’s also some historic drilling used to be called the deep sea zone or a couple of intercepts, good intercepts 122 meters a gram gold, 1.23% copper, there is another one 92 meters at similar grades. Those are not in any of the currently stated resource, but what they do tell us is the system is alive, and well know at those steps and we will get some drills down to those levels during the first half of this year.

So just to recap on our exploration objectives at New Afton. We plan to continue drilling after near mine targets and as a placeholder we're looking at about 5000 meters of surface drilling or drilling from underground whichever is strategically the best way to go. 30,000 meters of continued exploration drilling of the C-Zone primary objective there is to determine by the end of this year whether or not we can increase the overall resource from its current level of about 17 million tons all in two or three times. And as Kurt reminded me yesterday, he would much rather if we're going to lower the B3 extraction level, we much rather lower several hundred meters than a few, and so if we can flush something out that it looks like it's going to hang together, I think will be well under way by the end of this year in doing that.

Also we do have a small program for district reconnaissance drilling plant, and one of my senior geologist who is based in Kamloops has been the past two years looking at all the rest of our claims and he is come up with some interesting drill targets beyond our immediate mine area that will be getting out and testing as well.

So going to the last slide in the exploration section on 74. This is just an overview of the plan for this year broken into the first half and second half, I won't read through all of that, but I think the main point I want communicate to you today is that we’ve designed a fairly balanced program among our three sites, I like three-tiered strategy that has for near, mid and longer objectives to it in order to just continue to replace reserves, but also go after that next stepwise change and adding value to our company.

And as I think we've done a good job demonstrating last year. We're ready to aggressively pursue any new positive results that come out. So if we have a discovery anywhere, whatever you're looking at now in terms of scope of program will certainly be updated once we have at that point.

I guess with that I'll just pass in case there are questions.

Question-and-Answer Session

Unidentified Analyst


Mark Petersen

Yeah, as you know with resource modelling, it's never just one thing gone there are multiple variables in play. One thing is simply with more drilling in-fill drilling some of the zones that we are model this higher grade at the 50 meter and 100 meter spacing, diminishing grade with in-fill drilling a bit, so we probably saw a decrease on the order of about 400,000 ounces just from the additional drilled, the additional in-fill drilling.

Also some of the deeper higher grade pods that we are hanging off at the bottom of the older – the previous resource model if you recall and if you go back to previous presentations we had, we had indications of higher grades down at depth, but all hanging off just one of small handful of holes so they were inferred with more deeper drilling around those holes we also saw a decrease from that additional drilling.

And there is a slight change just in the shapes of the resource pit shells between the PEA pit shell, and the year-end pit shell. But the one thing that I can say on top of all of that is, we’ve converted just about all part from the decreases in the inventory, the inferred inventory we’ve converted vast proportion of that up into the measure and an indicated categories.

Unidentified Analyst


Mark Petersen

There is two kinds of dilution when you ask me about dilution. That grade represents what's call it natural dilution just because there's more data, so just as you’re estimating the grade of the material above cut off, you are also doing a better job estimating the grade of a lower grade material. But it does not represent dilution that will come in with mining in a detailed mine plan, because we don't have that ready yet.

Unidentified Analyst

Mark on slide 72 where you’ve highlighted these six folds, obviously given you some pretty good grades of gold and copper well above the historical resource, is that – these are the best of six of the 26 holes maybe you can comment or you getting through the expect near to be an uptick in resource and (inaudible) you see some or not necessarily?

Mark Petersen

I'm not sure, I'm not sure Steve. What I can say that is out of the 26 holes, three went into the year end resource, six are presented here with highlights, six are pending assets and the other holes they either didn't intercept mineralization, because they were all on the fringes and mostly above and off to the left of that kind of lower left of that B3 block, but we did have some shorter intercepts in some of the other holes, I just didn't put them on here for this table.

Are there any questions from the web? Okay. Thank you very much. With that I will hand it over to Kurt.

Kurt Keskimaki

Kurt Keskimaki, General Manager at New Afton, I’m going to talk a bit about our 2012 successes, and what our plans are for 2013 today are going to increase throughput from the mine, from the mills optimized and mine plan, basically also will be working through the year and probably into really [working] to what we anticipate to be additional oil reserves that may happen with the C-Zone drilling that Mark is doing pretty exciting stuff. We want to run New Afton that above nameplates tonnage and we want to optimize, we want to extend the life of New Afton. We’ve already extended the two years, but we want to extend it more.

So basically we are starting to mill ramp in late June you can see that we ramped up rather quickly on July I’m on Slide 77 here. We ramped up quickly in July, August, September, October, it looks like we told in October and naturally went down here in November, December. And the reason we did that as the mill is consuming our stockpile that we have set aside such a rate that we are going to eventually run out of stockpile before the gyratory crusher tandem to production and so we tail back on the mill the real highlight, we saw that we ran the mill on October 16 to the rate of 13,840 tons and without any real optimization attempts we really got a lot of tonnage through our mills, and we know that it’s got capability well beyond the 11,000 tons of days you can see from our graph. Our challenge now is to optimize it.

Before we can really increase the mill production, the mine has to get up to rates to sustain that, our stockpile has gone and we are basically operating directly feeding that the mill from the mine as we said here on February 5 today. So what we’ve done last year, as we’ve built many additional and there’s two draw points for drawbells that allow us access in to the cave. We’re ahead of schedule on our drawbells development. We’ve tested our underground conveyor system, well everyone else in the world those watching Super Bowl on Super Sunday and Super Sunday for us, Matt, we crush and conveyed 14,455 tonnes, pretty amazing date for us. So we know we’ve got crushing and conveying capacity and we’ve got haulage capacity in the mine. So we may have a better tweaking to do to make sure that that continues, but we definitely on our way to increasing above the 11,000 ton a day sustained for New Afton.

I am on slide 79 now, we’ve finished 50 drawbells back in November, 50 was kind of our, we thought pretty much the amount of drawbells we needed to get to on sustaining 11,000 tonnes per day. We’ve finished out the year at 54 bells down. Right now, we’re sitting at 58 drawbells. That was accomplished with about 9.5 kilometers of drifting last year. This year was scheduled for about 6 kilometers and that decreases in the future. 2014 was likely to about half of that 2013 number.

The amount of drawbells, we did 44 last year scheduled for 36 this year and that will decrease in the future as Ernie mentioned probably to about 15. So anyway we’re in our peak of development was certainly behind us. We’ll be slowing down as we go forward. But we’ve taken advantage of the leach we’ve got to optimize the mine plan, the mine engineers are constantly working at the best way to mine this deposit and that’s coming along nice.

So, I would say this with our 14,300 tonnes the other day, I think that puts New Afton in first place as a largest tonnage underground metal mine and in Canada, I am pretty sure it does. Someone drop by and correct me, if I am not correct on that assumption, but we think it is as far as a present operating underground mines and more probably else for the most efficient underground mine because of the ability to move tonnes easily out of the block cave and crush and convey it to the mill. Anyway, we’ve got a highly efficient operation there and we intend to make it more efficient.

Okay, I got a block caving slide here on the number 30, I mean slide 80 and everyone knows that I am a passionate caver. This is a slice down that E centerline of the E Bell and you can see red is good that’s high grade. We are developing cave in two parts, the West Cave as virtually down and if you look at the plan view that’s squiggly line, to the left of it is the West Cave. We will have our development complete by the end of second quarter there and we will be starting up the East Cave on the right hand side. And basically, we’re on grade optimization. And flexibility we’re going to have two caves to draw from and I am sure that we can produce what we have plan to in terms of metal from New Afton.

The question of dilution comes up occasionally and where you get dilution in a block cave is around the parameter draw points, drawbells and the ore columns and at the top of the ore column. So far we’re low on the column you can see the height of draw mid left side there is a blue line there. We’re low on the column we haven’t experienced any dilution of the draw column. Once, we start to reach draw near the top of the ore columns, we anticipate dilution to into the ore column at that point with model that around 14% of the reserve that’s in our estimate. And I think that that’s a good safe number as we said here. We don’t anticipate any issues around dilution, but it isn’t the factor yet as at this point in time.

Okay. Moving on to slide 81. Just a week ago, yesterday, we had a milestone of, as a week ago today, the first truck dumping into the Gyratory crusher. You can see we had quite a crowd down there, just watching the big event. We had dump some more into the crusher with one of our 12-yard scoops prior to this time, but that was a 45-ton truck and I’m happy to report that crusher is working very well.

At the setting we had it at with fairly fine material and the truck it went through virtually one ton per second. That’s a pretty large crusher, why did we put in a crusher that large? Well that’s a smallest Gyratory that you can buy, so it’s oversized for New Afton but it will prove that the crusher won’t be the bottleneck.

In the picture below the Gyro, we have our jaw-crusher. And we’ve been able to operate that at a sustained level of 7,000 or 8,000 tonnes per day. It was put in early. We commissioned it about a year ago for a development crusher. And it served its purpose really well and the clever guys that we have working for us have figured out how to operate the development crusher in combination with the gryo-crusher. And we’ve got a lot of crushing capacity. If we take one down from maintenance, the other one is there. So for our size operation it’s a real luxury to have a gyro underground and being backed up by a beast inside is jaw-crusher that’s got a year of experience behind it.

Over in the right picture you can see the underground conveying system. We’ve been operating it for about a year and we’ve been fine-tuning it. Rated at 14,500 tonnes a day, we ran 14,300 throughout already. So, we anticipate that the conveyor system has got additional upside if we would ever require it.

Moving onto slide 82. We can check off our first bullet on commissioning gyro, that’s been running for a week. Since February 1, we’ve averaged 12,200 tonnes a day through the crushing system up the conveyor belt. VR7 is a actually after we bought it, we ended up having to go in and rehab at before we spray it with shotcrete. That will finish up in the first quarter. It allows us to implement our ventilation system as push/pull, which has the advantage for us of gaining us about an hour a day of additional work time, because we’re not going to work and they blast gases.

When we are blasting a drawbell or an undercut, there is a fair amount of smoke comes from that, basically, nitrous oxides and the products of blasting. So that will be an additional improvement that allows us to increase or make our day more efficient, provide better air quality for them, the mine underground as well. We’re studying how you increase the air flow at New Afton, basically it probably be a potentially changing our fans to a higher horsepower unit. They are variable frequency, or variable speed drives not on them and we can tweak the. Once we get our push/pull going, we’ll look at what we need to do if anything to increase the overall ventilation rate to match increasing mine production rates.

Second quarter, we’re going to plan to run the mine at a 11,500 tonnes a day and really just work to optimize our new system that we brought into operation. And by the end of the quarter that West Cave will be totally complete and we’ll be in the early stages of lasting drawbells in the East Cave, Q3 more of the same. And for Q4, we have budgeted to get the mining rate up to 12,000 tonnes a day and we’ll finish the year we think at about 90 drawbells completed.

Okay. Good news around the mine, good news around the mill was well. So on slide 83, we mentioned that the mill team has run as much as 13,800 tonnes through it. We averaged 12,250 tonnes in October. So that was really in the early stages of that optimization efforts. What are we going to optimize? Will we use it? We’ll use our expert systems to optimize grinding and that should help us liberate the metals from the ore better and increase recoveries.

We got a few points to recovery but we’re working on improving. And flotation capacity optimization for the products we’re feeding it those ahead. We have adequate concentrate filtration for the additional tonnage we plan to run through the mill. The tailings pumping systems are designed for additional water. So all in all, we’re going to debottleneck the mill. We’re going optimize the mill. We don’t know what our bottlenecks are, obviously we will always be optimizing recovery, but we continue to come up the curve on both and it will be fun to see what the mine providing additional lower ore while we can land, but for budgeting purposes, we anticipate at least 12,000 tonnes a day through the mill by fourth quarter.

So we want to build up our stockpile on the surface in case we have a crush and convey interruption. So first quarter, we’ll hold the mill at a 11,000 tonnes a day, build up the live pile out there a bit, trying to get it maximize. I’d like to have several days at least in that stockpile if not more maybe some more in addressable stockpile to the dozen in live pile.

Q2 ramp up, Q3 we need to keep going on our efficiency improvements and the mill metallurgists and the project team are constantly working on that. Ball Mill trammels, pebble crushers, screen deck, cyclone impact, just really optimizing grinding and flotation and recoveries and during that while we’re increasing tonnage through the mill.

So with that it’s good news sorry for New Afton. I take questions from the audience. Yes, ma’am.

Question-and-Answer Session

Unidentified Analyst


Unidentified Company Representative

The question was what is the mine operating at with 54 drawbells, actually its 58 drawbells at the end of the January, well, as of today we have 58. We run the mine at 12,200 tonnes a day for the first three days of February that I have reports for, I don’t have report on this morning at. So that’s what the mine has been producing at.

Unidentified Analyst

What your site cost looking like in terms of mine mill and G&A?

Unidentified Company Representative

Our site costs are overall above $24 a ton. We’ve been pretty well matching what we are using in our ore reserve. That’s not a detailed number, but it’s matching very well with what we anticipated. I think more importantly, Steve, one of the things we could say is how are we going to get it lower. We are going to get it lower through increased throughput, more efficient operation. Basically if we use a same team of guys up there, it’s going to help drive the cost down if we got that denominator up there bigger as far as our amount of copper and gold that we produce from our operation.

Unidentified Analyst


Unidentified Company Representative

No, as far as the actual cost savings I– we are so new to this operation, I mean I could guess out but I am not going to sit. There is certainly an opportunity for lower cost if we can increase above the 11,000, [11.5, 12], if we can go beyond that believe me, we’re not. We didn’t show you what our 2014 goals are but we would intend to keep increasing throughput and debottleneck the plant where we find it. So if you can get proportionate decreases, your operating cost isn’t going to come down exactly by the ratio of the additional throughput, but it will drop. You’ll have some fixed cost with around supplies, if you are going to consume writing media, and power and those types of things.

Unidentified Analyst


Unidentified Company Representative

No, the grade varies some by year and as we are optimizing this mine plan, we are certainly cognizant of delivering high grades to the mill site and these cave will allow us to continue to do that and actually increase the grade for a period of time. So we are continuing to optimize the mind plan as we go forward, but…

Unidentified Analyst

(Inaudible) in doubling or tripling of the C-Zone do you have the capacity to expand significantly in the more or less (inaudible) tonnes a day? You talked about a time in the over high pressure in the entire quarry. You’re going to look out, take more (inaudible) tonnes a day?

Unidentified Company Representative

Don’s question is if Mark successful on the C-Zone, can we really increase throughput, well beyond what we have today. Certainly there would be bottlenecks to increase it. I mean we run in the high 13s in the mill and we’ve seen 14 on crushing and conveyors, there is undoubtedly some upside on that. Don’t know how much as we sit here, if we were to start up a third cave down below, could we increase throughput? Sure, if we add an additional leg to the conveying system and we maybe change it out – the drives on the conveyor or something like that to speed it up as you say, higher horsepower motors potentially and optimize it.

I am sure we could increase it some by – we haven’t done those feasibility studies but the experience in the past as we could increase, throughput rates that there was the right decision to do that, or is it run at what we can optimize around this plant without drawing the thing. We have to do those trade-offs but we are going to look at it and we’re going to see what’s best.

Unidentified Analyst

Is there anything that you see in the way out of (inaudible) is it more of the same?

Unidentified Company Representative

Well. I haven’t studied C-Zone enough to say that it’s more problematic. If we are going to block caving it, we need an adequate size or body to do that. That means horizontal dimensions X and Y and vertical dimensions of Z. Ideally the Z dimension is as great as we can make it, because when you put in your infrastructure at the bottom do at one time, if possible, if it makes sense to do that, and we have to have the capableness. So as you increasing depth you got increasing rock stresses that so far at mining at 600 meters depth, with our New Afton style of under cutting and block caving we’ve done really well in controlling the stresses down there, compared to most block caves we’ve had have some repair work, but minimal. Yes.

Unidentified Analyst


Unidentified Company Representative

The question is, can you have a (inaudible) not a if you are operating in that areas B, but our intent would be to – the operating ore in the central and east side of B while were caving in C which is kind of offset to the west.

Unidentified Analyst


Unidentified Company Representative

That’s right. The question is, can we lower the elevation of Block 3 to include the C-Zone and ideally we’d like to do that. I mean if you can develop that from a single level instead of from two levels. it helps you lower capital costs overall and you don’t have to pull the ground supports field through the lower cave unless you got a deal of brass deal and with rock bolts and things we’d rather not have to take out of the ore stream. I am familiar with doing that at my previous life in Colorado block caving, but if we can do it in (inaudible) take of those as a single weft that’s the most economic and probably the best way to do that.

Unidentified Analyst


Unidentified Company Representative

Right if we could make it a continuous block that would be ideal. Just the C cave but it’s too preliminary to say we can do that. We don’t know enough about it at this point in time, but that will be the mining engineers’ ideal plan through New Afton.

And it says no other – one more question.

Unidentified Analyst

All right. (Inaudible)

Unidentified Company Representative

Well, basically everything was designed around the 11,000 tonnes per day making sure that it had the adequate capacity that we’re going to meet that as you can see from our graphs we’ve easily mapped that. The ore zone that we are in at the bottom of the block 1 and 2 blocks is grinding very easily.

It doesn’t consume as much as grinding Medias as a fee study said. There is probably some other harder zones than we may run into through the life of New Afton, but the good thing about the block cave is, you got a broad basal area and you can blend or that’s harder with or the softer and keep throughput rates up even if we do had a harder zone as we go. As indicated, they have a few zones in the open cut or a bit hard, but we don’t anticipate and negotiate as what’s knowing that, that’s what the mill is designed for and we’ll have plenty of attrition as this material comes down in the black cave and it’s journey down as much as 350 meters into the drop point and gets ground up fairly well in order.

Unidentified Analyst


Unidentified Company Representative

I wouldn’t say that the mill has as much capacity as the crushers, I mean the crushers right now are, they’re certainly not going to be a bottleneck and anything we envision. So, the mill probably [inclusion] conveys us that may prove to be a bottleneck somewhere at high production rates and we’ll find out what it does and work on, eliminating the bottleneck with either twining a piece of the equipment or changing something. Okay. Thank you. We’ll bring Randall back up to close out.

Randall Oliphant

Well, thank you very much Kurt. Excellent presentation and thank you very much to all of you for your patience. Just to bring all these things back together, I don’t think our company is ever having more solid foundation, whether it would be Bob and Ernie continuing to deliver on our operational guidance, our costs have never been lower, our production never higher, we’ve got this organic program, which is significantly derisk from where we were 12 months ago in terms of the definition of Blackwater having delivered on New Afton and we can see how there is lots of more good stuff happening there.

Our balance sheet has never been stronger, whether it’s by cash or various ratios of EBITDA to our debt, and really I hope you’ve gathered from today, why we’re still excited about these organic programs. I know there is also, it’s a rumors about New Gold getting involved in every deal that happens to come up, but we can really see or we can create the most value by focusing on what can we do with all the initiatives that you’ve heard from Mark and Kurt at New Afton what can Mark deliver at Blackwater, and also just our other mines continuing to replace and extend their resource basis.

We feel fortunate that we’re one of the few companies in the gold space that actually has declining costs and that they’re going to continue to go down, which will just expand the margins and delivery that much more for our shareholders. We feel fortunate, but the copper and the silver that we’ve got, because they are a key part of offsetting increases in diesel costs, appreciating commodity currencies, many of the other pressures in our industry. A lot of those pressures are because of the strength in the metal prices.

Now, again we’re very focused on per share metrics and delivering per shareholders the shareholders ourselves. Our primary focus is, what can we do to increase the NAB of each and every one of our shares. We’ve been growing our resources on a per share basis, and we feel fortunate that if we continued to do that, that we’ll continue to outperform from a share perspective.

We like the team that we’ve got. I mentioned some of the additions to our board and management team, we’re always looking for ways to strengthen that team, but again, our Board is primarily involved in this company as shareholders themselves wanting to deliver four shareholders.

The relationships that we have I think are really important. And Bob Gallagher is the guy who leads this. The relationships that is established with First Nations is since you respect for the people that we deal with, is patience and in explaining what we do, I think is real differentiate either to New Gold and Bob is a great asset to this company.

Sometimes, when we step back and we say, look what we accomplished in the past year. We mentioned now we have 1,780 people working with us. We tend to; we’ve been hiring about 100 or 200 people a year, we’ve been delivering for our shareholders; we’ve been good stuff in our communities and in this year we’ve been paying an off a lot of taxes. And as we continue to try and grow this company and we’re always looking for ways to how can everybody win, because we don’t see that one has to come with the expense to the other.

We said when we promised you were New Afton started up that we thought it to double the company’s cash flow and coincidentally, New Afton should represent 50% of the cash flow being generated by New Gold in 2013. And again, we talked about this will be a year where we step up the free cash flow of the company, but again the sustaining capital going down by about $50 million each year for the coming years. The free cash flow again should grow by that amount. And then of course that’s why when you look at half of the company’s cash flow coming from New Afton that’s why we’re so delighted. First of all we’ve extended the mine life by two years and also by what Mark and Kurt can deliver in terms of, what can we do to increase that cash flow and extend the mine life at the same time.

And we talked about M&A. New Gold has been in this current form for about three and a half years now. We’ve done one transaction in that period and that was buying Blackwater. Hannes and his team look at every deal that’s available in the gold space and ones that aren’t for sale just as Richfield wasn’t for sale when we first approached that. In three and a half years we found one thing that we thought was truly compelling, where New Gold was the logical owner.

The reason why we felt we are the logical owner as it was in British Columbia, where we permitted mines where we have First Nations relations, operational teams have built New Afton and we really said New Gold is the logical owner of this asset. While we look at everything that we see, we are not interested in scale. We’ve in fact think that that dilutes our growth profile that we’ve got ahead of us.

We don’t want to give the upside of the C-zone of New Afton or whatever Mark might find in addition that Blackwater away to other people. And when we look at what’s traded in that three and a half year period other than Richfield, we can’t see anything that we wish that we had done, and in fact everything that we’ve been looking at is actually lower price now than it’s been over that period. So what we were looking at everything that trades really adding assets for just additional scale as not of interest to us.

We talked about I showed on earlier slides at the beginning. How growing our margin curve for each ounce that we produce in growing our gold production has led to higher share prices. We think that that adding to the NAB of our assets is also contributed. You can see that our three operating mines excluding new New Afton, our value now in the market by analysis both double what they were three and a half years ago. I think that’s a function of them moving from higher quartile cost to lower quartile cost. Mines like Peak extending their mine lives and frankly just the operations continuing to deliver probably at a better rate than even we expected three and a half years ago.

New Afton went from an undeveloped blockade mine in an under funded company to now into production generating cash flow. But we believe that some of the initiatives that you heard about today you can continue to improve Dan Av at New Afton because of we can speed up that cash flow and extend it for a longer period of time, it can add significant value to the company.

El Morro, Bob talked a bit about El Morro and the potential that we see there and you may not be aware that Mark Petersen was on the first drill hole, around the first rig that that drilled the first hole at El Morro. So we know this project pretty well.

We believe as we get through sort of this temporary suspension of the environmental permit as Goldcorp has a chance to get on with drilling and further refine the plants that, El Morro, we can see generating in the order of $300 million a year cash flow for us, 17 years in the feasibility study, but now the reserve is even bigger and that doesn’t even consider what’s in this Blackcave section.

There’s one of the things that we didn’t mentioned is that the gold grade in that Blackcave is about double the reserve grade. It’s 0.7% copper as opposed to the reserve and 0.5% and to us, it’s got as much gold and as much copper as New Afton does just for our 30% share and Goldcorp having seen what’s happened at New Afton, we’d love to have somebody like Kurt involved in the development of this Blackcave mine.

Blackwater, I mentioned that we bought this in the middle of 2011. In order to acquire all the other companies and Black and Richfield itself, we spent about $600 million. We’re delighted that that’s now considered to be worth more than double that, but I believe that through the efforts that Mark is going to undertake and as we continue to derisk this program, we can just make it more valuable.

So in terms of catalyst, things to look forward to in 2013, we’ve delivered our guidance in terms of our resources, our production and our cost. Blackwater, we’ll have lots to say about the reasonable exploration that will be taking there. And as we’ve said to Mark, he can have as much money to spend on this as he can spend well. And so, really the challenge is to identify those targets and figure out what can we go after aggressively.

We’ve talked about the C-Zone. There will be more exploration updates there. We’ll also have the completion of the Blackwater feasibility study. I mean, it gives us great comfort that as we’ve been working on this for months since the PEA that Peter Marshall and this team have identified that the capital costs are going to be about where we thought they were going to be, the operating cost both from a processing, mining and G&A cost per ton.

We appreciate that they are focusing on the most profitable ounces. That was the reason for increasing the cut-off grade is we’re not out to chase the biggest deposit we can find. And we’ve got this other 900,000 or 1 million ounces that are still between the 0.3 and 0.4 grade, that’s a double process later in the mine life. So in the first 10 years what we’re looking at is production very similar or exactly the same and total as what we had in the PEA. It’s just more level though, which I think makes for steady 0.5 million ounces of gold production a year, but there’s lots of opportunities to optimize that and I suspect by the time we get to that point, Mark will have something else that we can feed into the mill to continue to enhance the value there.

New Afton, again we’re going to have a study that we’re doing this year to see just what can this mill do, what can the mine do, how does that fit in with the C-Zone and I think that those will be some interesting announcements as we go forward. Goldcorp expects that the temporary suspension of the permit at El Morro will probably be done in September, but certainly by the end of this year, which will enable them to get going and again we’ll all these results of the New Afton study.

So we put it all together. We think we’re going to have a pretty exciting year in 2013. We really appreciate the Board and the team that we’ve got. We’re always looking for opportunities to strengthen it. The company, Brian has got us in better shape than we’ve ever been in terms of fully funded with a strong balance sheet. The asset base is all in politically secured jurisdictions and we particularly appreciate that. It’s nice to have local mayors as shareholders of New Gold as opposed to fighting us.

There’s lots of organic growth opportunities, lots of medal optionality, lots of room to expand to our margins, ways that we think we can improve the value of all of the assets that we’ve got and there should be lots of catalysts in the coming year. And putting it all together and that’s why we’re very pretty excited about our company. That’s why we are significant shareholders in our company because we believe that when we get together 12 months from now we’ll be on the more solid footing than we are today.

So with that I’m happy to answer and everybody is happy to answer any more questions that you might have about anything. [Anis], do we have anything from the web? I guess people are more interested in lunch than what I have to say.

So with that, I’d like to thank you very much for coming and spending the morning with us. We do have lunch and we’ll all be around and you can get to know better the people who are leading Blackwater, talk to Kurt [more], Mark, Bob, Ernie, anybody, but thank you very much for being with us. We appreciate it.

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