New Gold, Inc. (NYSEMKT:NGD)
2014 Annual General Meeting Call
April 30, 2014 04:00 PM ET
Randall Oliphant - Executive Chairman
Bob Gallagher - President and CEO
Brian Penny - Executive Vice President and CFO
Good afternoon, ladies and gentlemen. And welcome to the 2014 New Gold Annual General Meeting of Shareholders. We appreciate so many of you coming out to both participate in the formal part of the meeting but also to hear the story and get an update on our company.
This meeting has been called to address the annual business of the company as well as certain special business that we have before us. My name is Randall Oliphant, I am the Executive Chairman of New Gold, and I would like to thank you once again for joining us today.
Before we commence for the good conduct of the meeting, I would like to ask that all phones, cameras, recording devices or other electronic communications be turned off because we can’t properly conduct the meeting with those lines.
The meeting will now come to order and I will act as the chairman of this meeting. Before I begin, I would like to introduce the members of the table up here at the front.
Starting on my extreme left, your right is Bob Gallagher, the President and Chief Executive Officer of New Gold and Bob is also a Director. Beside Bob in then the middle is Brian Penny, who is our Executive Vice President and Chief Financial Officer of the Company, and Brian will conduct the formal part of the meeting on my behalf. Lisa Damiani, is also at the Head Table, Lisa is our Vice President, General Counsel and Corporate Secretary and Lisa will also act the Secretary of this meeting.
Following the formal business of the meeting, I will present an overview of New Gold’s 2013 highlights after which we will have lots of time for any questions that you would like to ask.
Before I begin I would like to introduce your Board of Directors all of who are with us today.
In alphabetical order, David Emerson, thank you David; Jim Estey; Vahan Kololian; Martyn Konig; Pierre Lassonde and Raymond Threlkeld.
And during -- after the formal part of the meeting, I'll have more discussion about each of these guys and just how proud we are to have them as partners and what they bring to the company. Those gentlemen together with Bob Gallagher and me comprise the entire Board of New Gold.
For those of us joining on the telephone and the webcast, we anticipate the formal portion of the meeting to take about 15 minutes and then the presentation will follow that. With your consent, I will ask Computershare Investor Services represented by [Jaime Bazik] to act as scrutineer to this meeting.
I will now ask Mr. Penny to conduct the formal business of the meeting.
Thank you, Mr. Chairman. Good afternoon. On behalf of the Chairman, I report that we’ve been advised that the documents relating to this meeting required to be registered shareholder as of the record date of March 21st (inaudible) March 26th in accordance applicable law. Computershare has provided proof of service of such nailing and I direct that as such -- that a copy of such proof of service be annexed to the minutes of this meeting.
New Gold used to notice and access process for delivery of the meeting materials to shareholders including the annual financial statements and related MD&A. Under notice and access instead of receiving printed copies of the material shareholders were sent a notice that included instructions on how to access the meeting materials electronically or request printed copies to be sent to them by mail. Shareholders with existing instructions on their received printed copies of all materials.
The scrutineer has also advised that before the meeting proxies were received from the holders of a sufficient number of common shares to constitutive a quorum. With consent of the Chairman I declare the meeting to be regularly called and properly constituted for the transaction of business. I direct that the formal report of the scrutineer be annexed to the minutes of this meeting as a schedule.
As most of you are likely aware the Annual Meeting, the majority of shares are represented by proxies given to management. I'm advised by the scrutineer s that a substantial majority of the proxies received by management have been voted in favor each of the directed nominees and in favor of each of the other items on business. We thank you for your confidence.
I would like to take a moment to comment on the voting procedures to be used at today’s meeting. Unless the ballot is demanded voting will proceed by the way of show of hands except that voting for the election of directors of company and for the approval of the unallocated options under the stock option plan will proceed by a way of ballot.
If you are a registered shareholder or a proxy holder you should have received two ballots colored yellow and pink, when you checked in with Computer Share. If you are a registered shareholder or a proxy holder and you do not have a yellow and pink ballot please raise your hand. As a representative Computer Share will bring you the appropriate ballot of ballots.
Shareholders have already voted by proxy do not need to complete the ballot, only registered shareholders are duly appointed proxy holders can address this meeting.
Where a ballot is conducted as required by law Bob Gallagher as a management proxy nominee will vote all proxies appointing him as proxy holder the casting of his ballet will result in the approve of all matters quick before this meeting not standing the ballet been taken. For convenience Mr. Barry O'shea our Vice President and Corporate Controller and also a shareholder has ask to make various motions before the meeting today.
I now present to the meeting the audited consolidated financial statements of the company for year ended December 31, 2013 together with the auditor’s report to shareholders, copies of such documents have been previously mailed or made available to shareholders in accordance with regulatory requirements. It is not proposed that I read to the meeting primarily because it takes more than 15 minutes.
We would be please to deal with any questions regarding the financial statements during the general question period. The next item of business is the election of directors of the company as said out in the circular there are eight directors to be elected management nominee is, David Emerson, James Estey, Robert Gallagher, Vahan Kololian, Martyn Konig, Pierre Lassonde, Randall Oliphant and Raymond Threlkeld.
I will now ask that someone to move each of these individuals to be nominated for election as a Director of the company and to the company’s next Annual Meeting or until his successor is appointed. Are there any further nominations, since there are no further nominations I declared the nominations closed and we’ll now ask someone to move the resolution to elect each of the persons nominated to serve as the Director of the company until the company’s next Annual Meeting or until his successor is elected or appointed.
Each shareholder or proxy shareholders should report his vote with respect to the election of each director nominee by marking the appropriate box decide each directors name and by signing and printing his or her name on the yellow ballet. Once you have completed your yellow ballot please raise your hand and the scrutineers will collected from you. As I mentioned the substantial majority of the proxies received by management have been voted for each of the director nominees sufficient enough to elect all of the management nominees. Therefore I declare David Emerson, James Estey, Robert Gallagher, Vahan Kololian, Martyn Konig, Pierre Lassonde Randall Oliphant and Raymond Threlkeld to be elected as New Gold’s Board of Directors to serve in their capacity until the company’s next annual meeting or until their successors are elected or appoint.
Rather than hold up to business of this meeting for the final tabulation of the Board’s cast, I direct that the results of the poll for the election of directors, we included with the minutes of this meeting and filed on SEDAR.
The next step of a business is the appointment of the auditor of the company for the ensuring year and authorizing of the directors to fix their remuneration. I will now ask someone to move the following resolution, which I will read.
It result that Deloitte LLP are appointed as auditor of the company to hold office until the close of the next annual general meeting of the shareholders of the company and that the directors are authorized fixed remuneration of the auditor for its services to the company.
I would ask for a shareholder to raise his or her hands signifying moving that resolution. All shareholders and proxy holders in favor of the resolution please raise your hand. Contrary if any? With your consent Mr. Chairman I declare the resolution carry.
The next item of business is an ordinary resolution to approve all unallocated options under the company’s stock option plan, a summary of the stock’s option plan is contained in the information circular.
As described in the circular, certain amendments to the company’s 2011 stock option plan were adopted in 2014 to decrease the maximum number of shares that can be reserved for issuance under the plan from 5% to 3.5% of the company’s issued and outstanding common shares. Because the stock option plan does not have a fixed maximum aggregate of securities issued allocate options must be approved by majority of New Gold’s directors and by New Gold’s shareholders every three years. The stock option plan was most recently approved at the meeting of shareholders on May 4, 2011 as such the company must seek shareholder approval and authorization at this meeting for the unallocated options issuable pursuant for the stock option plan.
I will now ask someone to move a resolution the full text that which can be found on page 16, of the circular. I would ask a shareholder to raise his or her hand and signify moving that resolution. We are doing a great job here. Is there any discussion? The vote to approve this resolution is required to be taken by ballot and therefore direct that the poll be taken.
Each shareholder of proxy nominees should record his or her vote in respect of his resolution by indicating whether the vote is in favor or against the resolution and by signing and printing his or her name on the pink ballot provided. Once you have completed your pink ballets please raise your hand and the scrutineers will collect it from you.
As I mentioned, a substantial majority of the proxies received by management have been voted for the resolution sufficient to pass this resolution therefore I declare the resolution carry. Rather than hold up the business of this meeting for the final tabulation of votes cast I direct the results of the poll for the approval of the unallocated options under the company’s stock option plan be included within minutes of this meeting and filed under SEDAR.
The next item of business is an amendment to the company’s long term incentive plan that will enable the company to satisfy payment obligations under a preferment share units by way of issuance of common shares from treasury including with respect to previous granted performance share units as well as some unallocated performance share units issuable under the long-term incentive plan.
A summary of the long-term incentive plan is contained in the circular and a copy of the long-term incentive plan is attached to the circulized schedule. Details of the outstanding performance share (inaudible) provided in schedule C to the circular.
I will now ask someone to move a resolution full text of which can be found on page 17 of the management information circular. I would ask for the shareholder to raise his or her hand, signify moving the resolution. Is there any discussion? All shareholders and proxy holders in favor of the resolution please raise your hand. Contrary if any? With your consent Mr. Chairman I declare the resolution carry.
The next item of the business is a non-binding advisory resolution accepting the company's approach to executive compensation. As described in the circular Board has adopted the policy that provides for an annual advisory shareholder vote on executive compensation known as (inaudible).
I will now ask someone to move a resolution the full text of which can be found on page 18 of the management information circular. I would ask for the shareholder to raise his hand, signify moving the resolution. Is there any discussion? All shareholders and proxy holders in favor of the resolution please raise your hand. Contrary if any? With your consent Mr. Chairman I declare the resolution carry.
Is there any further business. I ask someone to move a resolution that this meeting now be terminated. Is there any discussion? All shareholders and proxy holders in favor of the resolution please signify by raising your hand. Contrary if any? With your consent Mr. Chairman, I declare that the formal business of this meeting is now terminated and turning the floor over to Mr. Oliphant.
I like to thank Brian for doing such a good job of that. This is, I hope you founded this fascinating as I did. We sort of stage this, because the more boring he can be, the more interesting I look.
Of course, we will be making a lot of forward looking statements, because we want to let you know where our company is going, maybe I'll go back. Brian you want to read this?
But I mentioned how key I think your Board of Directors are to this company and maybe to speak about some of them a bit. David Emerson is our newest Director, for those of you who aren't familiar with David, he is a very decorated Canadian having been a Federal Minister of many different disciplines, but also has a unique experience in being CEO of Canadian companies as well, a very experienced Director and because of what we've got going on with both New Afton and now Blackwater in British Colombia, having a person who has an institution in BC and an advisor of Affairs of what's going on there, I consider to be a real asset of our company.
Jim Estey, is our Lead Director, Jim as it says on the slide use to head up UBS in Canada and I would say is probably our capital markets experts. He is very familiar with what's happening in trading and gold shares, valuations of equities, a very seasoned veteran and also a significant shareholder.
Bob Gallagher, our President and CEO. I think so many of the good things that this company does, Bob deserves all the credit for it. The successful building of New Afton which I'll talk a bit more about later in the presentation, what he has done with our local communities, the types of teams that he has built establishing New Gold as to what I believe the world's lowest cost producer as a shareholder myself, I feel greatly embedded to Bob.
Vahan Kololian is also a significant shareholder of New Gold, he is Toronto based entrepreneur and business man bring sort of general business ideas to our company and looks at things different than perhaps some of us who have spent so much of our careers in the mining industry.
Martyn Konig has lots of experience in gold and many different dimensions. He run the bullion desk in London for Rothschilds, for Goldman Sachs, for UBS knows a tremendous amount probably as much as anybody in the world but how all of that works. But also I think from a shareholder perspective was the Chairman, President and CEO I think seems to do all the jobs at European Goldfields but successfully sold that for $2.5 billion at the height of the gold equity market to El Dorado which I think shows both his sense of market timing and is ability to create value.
Pierre Lassonde who as some of you were here last year know that I forgot to introduce. And then clean that he required no introduction, he still doesn't of course the legend in the gold business, tremendous value creator and also the Chairman Franco-Nevada.
And then our friend Ray Threlkeld this year with us. Ray and I have worked together in many different contexts, but of course most recently Ray was the person able to advance Rainy River to the point that New Gold have the conference to step forward and buy it. And I'll talk more about Rainy River, but we highly value his insights into geology, project development because in terms of people I know, I don’t know anyone who has built as many as gold mines as Ray has.
So reflecting back on 2013, it was a pretty good year for our company, we set a bunch of records. But frankly it was probably the first year in the history of New Gold after four consecutive years of meeting or exceeding our production guidance and cost guidance, where we had to revise our outlook for the year. It wasn’t something we were proud of, but I believe that we have taken the right steps to get things back on track, and while we’ve been in this room we have put out our first quarter earnings results which I’ll talk about a bit later in the meeting, but I think that you will see that New Gold is solidly back on track.
Last year we produced almost about 400,000 ounces of gold at $377 an ounces which is the lowest cost in our company’s history and of course we reported all in sustaining costs of $899 an ounce. And we probably didn’t talk about all in sustaining costs last year. And some of you may not be familiar with what that is, but really it was a movement by the entire gold industry in the analytical community and all of the investors. So say what’s more a truer cost of mining gold. So our cash cost maybe familiar to you of course mining companies into our exploration cost, administration cost, sustaining capital cost and then sort of throwing everything in, it’s about $899 an ounce. So well below weather price of gold is and what that enabled us to do, is it generate about a quarter of a billion dollars of cash flow in 2013.
We finished the year with $414 million of cash so with a solid position. We also of course don’t have any debt due until 2020 well after most of our pipeline and projects is build and generating cash. I think the couple of very significant things happened last year, one is the acquired Rainy River, which we think will be another key asset for our company and our largest goal producer of what when it comes on stream of what we have and of course Black Water will fall after that, that will produce even more, but also the key asset of our company probably are most valuable asset and are biggest cash flow generator.
New Afton continue to just perform better and better than what is was advertised to do what was in the feasibility study producing more gold, more copper and than a higher throughput rates than it was design to do, and this is really Bob and his team who delivered this project.
As you may know capital cost of control in our industry and Bob brought us in within about 7% or 8% of budget about six weeks early hitting commercial production and performing better then what have been design to do, which I think makes some a pretty unique guy in this industry.
Looking at our gold copper and silver production you can see the numbers there, well we did have lower production and our Mesquite and San Pedro peak actually step it up the more importantly New Afton came in, to really deliver better than what we thought and I have already talk about our cost.
In terms of Rainy River I think of course gold shares traded down a lot last year and our shareholders lost half of their investment and our Board where I showed a $75 million investment by the board members of this company at the beginning of 2013 that was worth about a $150 million. So we have been in the same boat as the shareholders of our company, but what we did as we saw unique opportunity to be able some assets as everybody was scared.
There is so many development projects out there, that in 2011 have been so highly valued and on balance it was an 80% off sale, yet companies were encourage to not buy anything, not build anything, but we knew that if we could have first pick of probably 20 projects that we've been following to be able to step forward and not have competition to buy it. When this project was advanced, 2011 it was worth billion dollars, we are able to buy it in 2013 to $300 million after the project it had another $100 million spent on it and had reserves had a feasibility study and was two years closure to production. So we saw that this is a perfect fit for new goal that was right on strategy in terms of politically secure jurisdictions, it was something that would be a very meaningful producers to us.
As you can see, we only diluted our shareholder by about 5%, but it should add about 80% to our production profile. You can see that it’s now 21% of our gold reserves. And although, we're very focused on low costs relative to where we expect to be this year at $825 an ounce or Rainy River and then in sustaining cost basis should be about $100 less than that.
In terms of our portfolio of assets, this is what you call it the world according to New Gold because it sort of defines where we do business, we're very focused in politically secured jurisdictions. As you can see our assets are in Canada, the United States, Mexico, Chile and Argentina. I'd like to mentioned a couple of our mines Mesquite in California is an open-pit heap leach operation that produces on average about 150,000 ounces of gold a year and it does it on a pretty low all in sustaining cost basis, because there is no mail and there is very little sustaining capital.
Cerro San Pedro, is again an open pit heap leach operation that located in Mexico, it tends to be lower cost than Mesquite, because it has about 1.5 million ounces of silver that come up each year as a byproduct credit. Cerro San Pedro unfortunately probably only has a couple of years left of active mining and then some residual leach. But this mine really did its job, I think it cost about $90 million a year to build it gave us net cash flow in most of the its years of over $100 million a year and probably provided the majority of the money that enabled us to build New Afton.
We also have the Peak Mines in Australia, it's an underground mine produces about 100,000 ounces of gold a year, but also 12 million to 14 million pounds of copper which makes it one of the lower cost Australian mine. We don't really know how long Peak will last and the reason why we say that is it was built by Rio Tinto, brought on stream in 1992 with an 8 year mine life and after 21 years of mining it has a similar life ahead of it now as we seem to be able to replace on average each year what of we take out of the ground. But the good job of those mines is to continue to generate cash to enable us to build our portfolio.
New Afton is the key asset of this company, it was designed to be 11,000 tons a day, it average 12,000 tons a day last year, we think it will be 12,500 tons a day this year and we're looking at expanding it up to 14,000 tons a day. This will cost about $45 million to built, it should be completed and up and running in the middle of 2015, but to put the $45 million in perspective, it should increase our annual cash flow by about $30 million a year. So it's somewhat a no brainer in terms of make expenditure to make.
It also shows the optionality that we have on projects once you've got them build to be able to increase value. Because not only can New Afton produce more cash flow than almost design to do with very minimal investment, but also we found something call the C-zone which is down into the side of where the main reserve is, which is called the B-zone.
And the C-zone resources that we've identified are actually higher grades than what we have in the B-zone, which will likely lead to an extension of mine life at New Afton.
So, we've been able to achieve two things at the same time, one is both I believe we can increase the annual cash flow through this expansion and secondly at the same time extend the mine life.
As you can see, well New Afton had a good 2013 and it should produce more gold, more copper in 2014 and then what they benefited the expansion produce even more in 2015.
Rainy River, of course is the, the company and the project that we acquired is located up in Northern Ontario, this is a story that we've been following probably since about 2008, When Ray and I wearing a different company banner, first not the board of Rainy River and thought that it was a project that sort of met our criteria or something that has quality, lots of exploration potential, expansion potential and of course located in the very politically secured place.
We were delighted to be able to get control of the company and you can see some of the metrics of what we think this will do for us. About 325,000 ounces of gold a year, it's a very significant capital investment of about $840 million. The economics of this have been enhanced with the devaluation of the Canadian dollars, since the time that we bought the company, but you can see the cash cost and all in sustaining cost probably the most important number being even lower than what we have today.
It’s in a wonderful location to build the mine. There is no significant challenges from a geographic perspective. We have great local support from the communities. And we are dealing through Bob and Ray very constructively with a lot of our partners in the neighborhood, some of who are with us today.
In terms of the gold resource, you can see 6 million ounces of which 3.8 million are in reserve. I think it’s important, this is one of the newest gold districts in Canada. And I believe that we’ll be finding additional ounces of gold here for decades.
Blackwater is located just north of New Afton Central British Columbia; it’s a similar project to Rainy River except bigger on every scale whether it’d be capital, cost, production, but this again is a brand new gold district. When we bought the company Richfield, it had about 4 million ounces in reserves, today it’s about 8 or 9 million ounces in reserves. But as I mentioned it’s about twice the capital cost of Rainy River.
So we’ve decided to do although both Rainy River and Blackwater and permitting, our intent at this point is to develop Rainy River first and then use the cash flow from our operations and Rainy River to fund the development of Blackwater because we're very sensitive about dilution to our shareholders.
But being a new district, we don’t know where all the gold came from, it seems statistically unlikely that you have such a huge deposit, probably the biggest viable gold deposit in Western Canada, and that there isn’t something else around.
So we’ve assembled a land position of about 1,000 square kilometers as we believe that there will be additional gold, and to be able to take advantage of the all infrastructure that we're going to put in, similar to what happened at New Afton, there could be very profitable ounces that we find there.
El Moro of course is only the joint venture that we have, Gold Corp is our partner, they own 70%, we own 30%. We have a pretty unique funding arrangement where Gold Corp puts up all the capital costs, New Gold never puts another dime into this projects but has the benefit reflecting cash flow from the minute of mine starts.
You can see that it’s a massive project, it’s about $3.9 billion of capital but to put that perspective at today’s prices, would probably generate about $1 billion a year of cash flow. Gold Corp are figuring out what to do with this project at the moment. We just had some good news, yesterday or the day before that we’ve got in our release that there was a an injunction against the environmental permits there which make Gold Corp unable to advance the project further and those have all been lifted in the courts. So now we have all the permits back and that’s just that news is just a day or two old.
So, in terms of where we are going in the near term and then further down the road. We are going to get the expansion from New Afton, we’ll see Mesquite return to its traditional production profile, will bring Rainy River on stream but at the same time we will be seeing Cerro San Pedro slowly winding down, but the new projects and all the growth far outweigh any impact of Cerro San Pedro.
Then further down the road of course we’ve got Blackwater coming on stream, our interest in El Moro. So, we are pretty excited about the profile that we have because we can take our product from where it is today 2.5 or 3 times just based on the projects that we have in house, without ever having to do anything else.
And of course shareholders, what does that mean from a financial perspective. You can see that growing production and decreasing our cost at the same time to continue to build on our cash flow. This is sort of an amazing chart to me because we have been through so many ups and downs in gold prices and currencies and difficulties in the mine industry, we look bit like a machine when I look at this. But we expect our cash flow will be up this year and up again before taking a big step up in 2017.
So as shareholders ourselves one of the things that we do is we reflect on how much is the market paying for our company, what is the market say Black Water and El Moro and then our operating mines in Rainy River, how much value are they scribing to that. And we feel quite comfortable, because based on -- and this is just on $1,300 gold where we are today, we don't believe that our company will be trading at 3.8 times cash flow once we have all of these expansions done and Rainy River on stream.
In terms of 2014, our production will be about the same level as what it was in 2013, but with additional copper that will take our already low costs down even further to about $330 for all in sustaining costs to about $825, down about $75 from what they were last year. And part of this is the increase in copper production which we expect to come from New Afton.
In terms of our first quarter, which I mentioned that we announced shortly after 4 o'clock, and we've got copies of our news release outside if you like to see them. Our production was about the same as it was in 2013, our costs actually dropped to the lowest they've ever been at $254 ounce all in sustaining costs $674, which I believe are the lowest costs of any gold company I'm aware of in the world. And of course one other things the fueled that was record gold production, record copper production at New Afton. We also announced in the first quarter of course the expansion of New Afton and I was talking about we updated the Rainy River feasibility study, Blackwater’s environmental assessment continued to advance. So we feel like we're in a very solid position.
In terms of what that means financially. Despite the significant decrease in gold prices, copper prices, silver prices, our increased production of copper left us with about the same revenue as what we had in the first quarter of last year, our adjusted earnings were similar to 2013, despite lower prices, about $18 million. But amazingly, our operating cash flow is $81 million for the quarter, 39% higher than what it was last year.
Now we'll have a conference call tomorrow morning to going to a lot of detail on the quarter, although we're happy to answer any questions that you have now. Really what happened was our admin costs were down, our exploration costs were down, our operating costs were down and because we're earning so much money in Canada with New Afton and we have new projects in Canada, our cash taxes were down by about $10 million.
So, our plan is actually very improved. And despite the fact we’ve started building Rainy River, our cash balance actually went up in the quarter by $24 million. So, our cash balance went up, cost went down and we couldn't be more pleased with where we are, but again this is all attributable to Bob and the operating teams and so many of the people who work with us, who aren't with us in the room today.
So, I think to sum up, I like where New Gold is. We like having assets in politically secured jurisdictions. I think we've got the right team from both a Board of Directors perspective and a management team who have a lot of experience in this business, who are shareholders themselves and think about this company as shareholders rather than corporate stewards. We like having low cost, because we think that positions us to be able to take advantage of opportunities like Rainy River when prices come down and things become cheap. We like the pipeline that we’ve got and we're not aware of any other gold company that can have, that kind of exponential production growth that we offer.
And at the same time while 2013 was not a good year over history we faded a lot of value for shareholders of this company. I don’t think we’ve ever been better positioned than we are today to be able to do that going forward.
So I appreciate your patients and listening to our story, we sincerely do welcome any questions that you have. Anything is fair game whether it’s 2013, or the beginning of this year or anything else that is of interest to you. So thank you.
Mr. Oliphant, my name is Paul Green looking at it from a common sense standpoint, not specialized account, if the price of gold, average price of gold last year was north of $1,200 and all in costs were $899, why is there a $191 million loss for the year?
Yes, that’s a very good question.
Your profit between $899 and $1,230.
You are right. What we did is we reviewed all the carrying recurring values of our mine, we sold some (inaudible) with the one that of course has a shorter mine life and with lower metal prices, we rolled that down by about $200 million that gave rise to the loss.
Okay. So this is the difference between cash and accrual accounting, I believe. Isn’t it?
Yes, that’s right. I mean the cash flow as you saw was about $0.25 billion and we spent some capital that would be deducted from that and the $200 million was non-cash but we still take it very seriously.
Okay. Just one other question. It will be a fast one, what’s the date on the first ounce support Rainy River?
Well that is an excited question, because it’s just around the corner probably 2.5 years from now, we expect the mine to hit commercial production very late in 2016, have a full year production in 2017.
Thank you. There some more questions? Anything is fair game.
Yes, first of all thank you for you guys effort to do the business and second I have a question. And I’d like to know what are the reasons that made the price of new gold drop from $13 something in 2011 to $5.50 something to-date? Thank you.
Yes. As a shareholder that’s a very reasonable question. And it is something, I think the main reason is the gold price went down a lot as you know it was up around $1,900 an ounce and finished the year, in the order of $1,300 an ounce. I think our industry did a lot of things to shake investor confidence in terms of the type of deals that were done and gold shares generally lost a little over half of their value just in 2013 alone ignoring the drops that they had in 2011 and 2012.
As a company we were fortunate that our stock was up in 2011 was up again in 2012. But I think between the drop in the price of gold how our industry was doing and some of the operational difficulties we had, our stock price was cut in half. So I think that’s a fair assessment and anyone has the different view I welcome, but not, it was a terrible year for investors in gold stock.
You are welcome.
Good evening. Keith [Bleizman]. Just a comment we really appreciate the partnership we have at Rainy River with partners there to-date. We really appreciate that and is that going to continue in the future?
Yes. We most certainly win and I appreciate you coming and bringing two of your colleagues with you. Maybe I can say something about and then ask Bob to comment, we take our partnerships in communities in which we operate remarkably seriously. I think Bob I find to be so refreshing in that so many companies say do we have to deal with these guys and whatnot and Bob seems to take the attitude of we have been here for thousands of years, we are in a common bigger whole for 20 or 30 years and then it’s back over to you.
So we just think it’s appropriate that we operate in partnership and with respect. I think in terms of tangible evidence as opposed to what I say, I think if you look at what happens at New Aston where about a quarter of our work force if First Nation’s where we have tremendous local support where I think we have cut a very fair deal. We see it as an opportunity where we could now win together. And we have seen there is an auction there, we’ve got the ground work laid at Blackwater. And we appreciate the cooperative relationship with you. But Bob you actually the expert in this field, I'm just talking so.
I know you said them very well. I’ve worked all over the world and I found that resources underground there development in the mines are a great opportunity not just for the company and the shareholders but for the people in the area. And we have an opportunity with Rainy River in this case to really create some what we would call sustainable impacts beyond the life of the mine, we're talking about training people in the area in jobs that they can carry on beyond the life of the mine, we're talking about creating businesses that will perhaps start with the project, but then there will be of a nature that they can go on and whether it work for other mines or the rail (inaudible) et cetera.
So the mining resources out there are a great opportunity and I think one mining companies and its nations sit down and work together and figure out how they're going to accomplished those things it's truly a win-win situation and I love doing that it's kind of the part of the business after 40 years that is still refreshing and I (inaudible) kingdom.
We started a good relationship and we're going to end Ray with Rainy River. So started at before or less it's going very, very well and we look forward to a fabulous development and relationship with everybody in here.
Okay. Thank you, Wayne. Thanks again for making the trip. Are there any more, I knew you would have one.
Fine get you know I get you later.
Let me know.
Other than the price of gold increasing substantially. The warrants that are outstanding if they are in the money in the next two or three years, consequently before they expire. What factors are under your control? How do you feel it? The warrants would achieve that or the share price would achieve it which is $15 a share. I would say, probably 80% of the price of gold isn’t it, but what other factors are under your control? Because this you will be able to payout from half your debt. The current debt, if they would exercised.
For those of you who aren't familiar, we have a series of $15 warrants that come due in 2017. And if that was to happen, it was Brian about $400 million, $500 million of cash would come into the company.
Okay. That's why we're so lucky to have such a great CFO. I bet you really want the money to don't you? But I think the factor that of course gold will have a huge influence on it. But I think beyond that, what we've shown is during that period, even at today's price we should be able to grow our cash flow to about $600 million a year, which is up considerably from the $250 million that we had in 2013.
So, with cash flow more than doubling, what will that do to our share price? How many more ounces will we find at Rainy River? How many more ounces will we find at Blackwater? What about the C-zone at New Afton?
What we found is as we advanced projects and derisk them and we saw this happen exactly with New Afton as we moved it towards cash flow and the market went from being concerned in New Afton's case, about block caving and will this mine come on budget and on time and all that sort of thing, there was tremendous value creating, and that’s what we are trying to do with our other development projects.
So I think number one, maintaining our credibility through meeting our operational and production guidance, advancing our projects, showing that these things can perform, or outperform what we’ve advertising to that they are going to cost about what we think they will in terms of construction cost, those are the things under our control that will work diligently to deliver with some help from the gold price that will make our life a lot easier.
But I’m pretty confident that we can create a lot of value in even today’s gold price.
Well there is no more questions I’d like to sincerely express my appreciation for you spending an hour with us this afternoon for your support as shareholders of this company to know that we are align with you in terms of trying to create value, the best return that we can with the lowest amount of risk.
Our Board of Directors will be around for a while if there is anything you want to ask them about, we have a lot of members of our management team who want to know questions about tax or what we do with our money or your money, where its invested, we’ve got people for that and of course Bob and Brian and I would be happy to answer any questions that you might have. Please or probably would to. But thank you very much for coming.
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