New Gold Inc. (NGD) CEO Renaud Adams on Q4 2021 Results - Earnings Call Transcript

Feb. 23, 2022 1:40 PM ETNew Gold Inc. (NGD), NGD:CA
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New Gold Inc. (NYSE:NGD) Q4 2021 Results Conference Call February 23, 2022 8:30 AM ET

Company Participants

Ankit Shah - Vice President, Strategy in Business Development

Renaud Adams - President and Chief Executive Officer

Rob Chausse - Chief Financial Officer

Conference Call Participants

Josh Wilson - RBC Capital Markets

Fahad Tariq - Credit Suisse

Trevor Turnbull - Scotiabank

Anita Soni - CIBC World Market

Mike Parkin - National Bank of Canada


Good morning. My name is Chris, and I'll be your conference operator today. Welcome to the New Gold's Fourth Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Please be advised that today's conference call and webcast is being recorded. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to Ankit Shah, VP of Strategy and Business Development. Thank you.

Ankit Shah

Thank you, Chris, and good morning, everyone. We appreciate you joining us today for New Gold's fourth quarter and full-year 2021 earnings conference call and webcast. On the line today, we have Renaud Adams, President and CEO; and Rob Chausse, CFO. Should you wish to follow along with the webcast, please sign in from our home page at

Before the team begins the presentation, I would like to direct your attention to our cautionary language related to forward-looking statements found on Slides 2 and 3 of the presentation. Today's commentary includes forward-looking statements relating to New Gold. In this respect, we refer you to our detailed cautionary note regarding forward-looking statements in the presentation.

You are cautioned that actual results and future events could differ materially from those expressed or implied in forward-looking statements. Slides 2 and 3 provide additional information and should be reviewed. We also refer you to the section entitled Risk Factors in New Gold's latest MD&A and other filings available on SEDAR, which set out certain material factors that cause actual results to differ. In addition, at the conclusion of the presentation, there are a number of endnotes that provide important information and should be reviewed in conjunction with the material presented.

With that, I'll now turn the call over to Renaud.

Renaud Adams

Thanks everyone for joining us today for 2021 review and 2022 outlook, and reserve and resources update. 2021 should brought is part of challenges, but I'm extremely proud of our resilient team and the way we ended the year. On the operational side, both assets achieved a consolidated of data productions and cost guidance. The Q4 delivered the strongest productions and the lowest cost the quarter would the year.

At Rainy River Mine, the mine achieved its updated 2021 guidance while executing extremely well on its capital project, achieving some savings and tailing execution. We've also continued to advance the Intrepid Zone with the view to bring some the production, the first production in the second half of 2022. The highlight of the year was that the yearend updated reserve and the resources, while we see a meaningful conversion of the mineral resources to the mineral reserve, leading in a year-over-year increase in a go mineral reserve for New Gold.

At New Afton Mine, the assets achieve its 2021 production guidance, slightly a higher costs but considering all the challenges that the mine has to navigate through 2021, it was an excellent execution of New Afton while we continue as well to advance our C-Zone, and advance on plan for delivery and start of production in the second half of 2023. The B3 Zone initiated with the delayed in the permitting and continued to advance and ramp up during the second half of 2021, and we've seen some very encouraging exploration results as one in '21 and will follow-up in '22.

At the year-end, the Company concluded is fell off the Blackwater gold stream for pursuit of $300 million, bringing our cash balance to $482 million, while combined to our increase and extended credit facility does not position our liquidity meaningful market $850 million. So, the crystallized value for the Blackwater has shared position for company with a pure leading balance sheet and financial capacity to execute on our strategy.

On that, I'll turn it over to Rob Chausse, our CFO for Q4 and 2021 reviews. Rob?

Rob Chausse

Thanks Renaud and good morning, everyone. Slide 6 provides our operating highlights. The details are consistent with our January production press release. During Q4, the Company produced 111,500 gold equivalent ounces. The amount consisted of 14.2 million pounds of copper approximately 68,000 gold ounces from Rainy River and approximately 13,000 gold ounces from New Afton giving us a total of 81,000 gold ounces. The lower equivalent gold production as compared to the prior year quarter's primarily due to lower tons to process both assets.

Our operating expense per equivalent ounce was higher than the prior year quarter due to the strengthening Canadian dollar, lower sales volume, and the Canadian wage subsidy received in the prior period. Consolidated all-in-sustaining costs for the quarter were 13.55 per equivalent ounce higher than the prior year quarter primarily due to higher operating expense, as previously noted, it was partially offset by lower sustaining capital.

Turning the Slide 7 for financial results and capital. Fourth quarter revenue was 202 million driven by sales and was 78,000 gold ounces at an average price of 17.98 per ounce, and sales are 14.2 million pounds of copper at 4.37 per pound. Our Q4 revenue was 2% higher than the prior year quarter, primarily due to higher metal prices partially offset by lower sales volume. Our operating cash flow before working capital adjustments was 93 million or $0.14 per share for the quarter in line with the prior year quarter.

The Company recorded net earnings of approximately $151 million or $0.22 per share during Q4 compared to a $0.03 loss of the prior quarter. After adjusting for certain charges, net earnings were $24.7 million or $0.04 per share in the quarter equal to the prior year quarter. Our Q4 adjusted earnings includes adjustments related to our gain on the Blackwater stream sale and unrealized adjustments on the Rainy River mark-to-market and free cash flow royalty at New Afton. Our MD&A has additional details on the non-GAAP measures that we've discussed here.

Still on Slide 7, our total capital expenditures and leases for the quarter were $60.5 million. 33.6 million was spent on sustaining capital and 26.9 million on growth capital. Sustaining capital was primarily related to plan tailings work of both operating assets, capital strip that Rainy River and B3 nine development at New Afton. Our growth capital was focused on project development specifically the C-Zone and the Thickened and Amended Tailings Project at New Afton and the underground Intrepid Zone Rainy River.

Slide 8 provides details on our capital structure. During the quarter, we extended our credit facility, realizing lower interest rates going forward on that. Cash on hand, at the end of the year, as Renaud noted was 482 million as a result of -- primarily as a result of the proceeds received from the sale of Blackwater.

Slide 9 moving on to our guidance. In 2022, we expect to produce on a consolidated basis 300 -- between 380,000 and 440,000 gold ounces at an all-in-sustaining costs of between 14.70 and 15.70 per ounce, 55% of the annual production is expected to come in the second half of the year, with all-in-sustaining costs trending lower through the year. Sustaining capital, which is primarily made up of capital a waste, tailings management and B3 activities is estimated to be between 180 million and 225 million in '22. Growth capital, which will be focused on C-Zone development and underground development at Intrepid is expected to be between 115 million and 155 million in the coming year.

With that, I'll turn the call back to Renaud.

Renaud Adams

Thanks, Rob. I'm on Slide 11 on the mineral reserve and mineral resources update. As mentioned in my opening comments, year-over-year net increased in mineral reserve for New Gold to 3.7 million ounces, up from 3.6 million by the end of 2020. This was led by a meaningful conversion of approximately 569,000 ounces of the mineral resources to mineral reserve in the underground at the Rainy River, leading to a net increase of 200,000 ounces of the gold ounces for the year.

This is including all deflations of the steps that took place or from the mining to the negative reconciliation and mine ability. For a net increase of 200,000 ounces of gold reserve at the Rainy River. The inflow which was the inflow barrier which was really responsible for the most of the additional deflation will be mined out at the end of 2023. At New Afton mineral reserve decreased by approximately for the 75,000 ounces of gold and 78 million tons of copper, mostly due to the mine deflation, but also reflecting the closure of the Lift 1 case as planned.

At Rainy River on Slide 13, the mine delivered is the highest production and the lowest cost quarter of the year, achieving its updated 2021 productions and costs and guidance. The mine that translates below the plan at nearly 130,000 tons a day, mostly as a result of some drills availability issue, but also as we adopted the plan at the year-end to accommodate more 433 zone and move adjusting our need for the East Lobe as we were working on optimization.

The mill delivered approximately 44,500 tons a day, lower at 27,000 tons a day. But as I mentioned with more for 33 zone higher or process and also with three-day shutdown that was originally planned for early '22 that was advanced in the December. Overall strip ratio for the pit at 2.8 to 2.1 in the fourth quarter and in-line with our overall year plan of 2.7 for the year, and the average gold grade of one grand net improvement over the previous quarter.

Gold recovery up at 92%, a lot of very good things happened in a Q4 at Rainy and we're going to build on that on optimization and operational excellence as we continue in 2022. The asset that delivered and very interesting free cash flow $36 million in the fourth quarter, $46 million in '21. This is net of $27 million payment has stream in payment. The exploration activity resume and the North East trend and I'll discuss more of that in the following slides. So looking forward, really it's all about continue to optimize the asset and the cost optimization and further the risk of control where we continue to execute on our Intrepid in all capital plan.

As I look on the Slide 14 at the operational outlook, the gold equivalent production is estimated expected of 265,000 to 295,000 ounces of gold equivalent. This is an increase over the prior year, mostly as a result of better grade, better ton mine and process as well as the commencing the extractions of the Intrepid underground zone in the second half the year. It will be just a like last year, a slightly higher production a ton mine and process in the second half of the year, as we will continue to take advantage of the winter for most of our stripping activity.

The ore from the East Lobe is expected to contribute to only 25% of the productions in 2022 and to be higher in the second half, as I mentioned due to the stripping prioritization in the first half of the year. The all-in sustained cost expected to be in a $1,270 and $1,370 per gold ounces equivalent. This is an net decrease over the prior year and it's mostly due to higher production, but also as an optimization and the last tons from the East Lobe and the better productivity in the mine.

The sustaining capital expected to be in this $125 million to $155 million, very similar to last year three main areas of execution including the capital waste in open pit, the annual tailings dam raise, and the maintenance program in other sustaining capital that would complete the targeted execution.

The growth capital expected to be in $15 to $25 million. This will combine with the roughly $12 million spent in 2021 will contribute at a very low preproduction cost to bring Intrepid into production.

On Slide 15, as a highlight of the year as mentioned, there's been a significant increase of total mineral reserve on the ground. The overall underground mineral reserve grew year-over-year from 672,000 ounces in end of 2020 to over 1.2 million ounces of the MS 2021. And this was a result of adding a nearly 569,000 ounces of mineral reserve from the central zone bringing and that's increase over 200,000 ounces of mineral reserve for the year.

The Intrepid Zone remained roughly at 200,000 ounces of mineral reserve. So as we advance and you could appreciate on the picture shown on the Slide 15. This is a significant improvement in the central zone. The lower cut off has also contributed to improve significantly the continuity on the lateral and vertical. And there's still a 1.3 million ounces of Measured and Indicated -- in the Measured and Indicated resources category, providing the asset with further potential of conversion as we continue to optimize and execute on our underground plan.

There will be a 43-101 a Technical Report that would be filed at the end of the quarter that would incorporate the new central zone and Intrepid and the integrated life of mine and looking forward to discuss further the details of our plan as we file the 43-101.

On the Slide 16, so the second phase of exploration drilling started at the end of 2021 and plan to continue to Q1 '22. There were roughly 13, 50, 100 meter drill in Q4 and will continue to towards the Q1 2022. And at which point some additional exploration activities also planned inclusive of geochemical survey, geological mapping, and trenching to validate and assess the result of the first phase program. A total of $5 million is planned for the year, and again mostly focused on assessment and interpretation in geological and then geochemical actually.

On the New Afton on Slide 18, the Q4 highlight great water for our New Afton, delivered the production and perhaps to achieve our production gold equivalent range of 165,000 to 195,000 ounces equivalent. As I mentioned slightly above the range of the cost within the 5% more than acceptable considering all the challenges that we had to face in 2021. The C-Zone development continued to advance well, and we're still expected to begin the production in the second half of '23.

And as you can appreciate the copper was great with slightly below the previous quarters of 0.67%. The gold remains at 0.41 gram a ton. Gold's recovery even though we're increasing on the surface edging on remains above the 80%. But as we prepared for the completions of for the Lift 1 as some mining activities in rank top to B3, we have seen now slightly lower productions as we continue to enter in 2022. I'll talk more on the guidance about it.

So we've seen as well as the completions of five holes on the Cherry Creek, completed three holes totaling 1,200 meters of testing artificial intelligence target, so very encouraging results in 2021 and really looking forward for the planning 2022. We've seen as well on the ESG of five, the introductions of the battery electric truck for the underground is combined with already the electric scoop, and we'll continue to assess the use of electric equipment for the C-Zone with the objective to contribute to the reduction of carbon emissions.

On New Afton, when it comes to operational outlook. I appreciate that the production guidance lower the originally plan for 2022. The original plan and as we continue to execute on the B3 and C-Zone was sure you not to exhaust and eventually closed at the Lift 1 case in the first half of 2022 and this remains the case. So nothing has changed in this aspect. The transition to in-pit tailing in 2022 was obviously forcing us to complete all activities and elect one before we would start depositing tailing.

We've been capable and continued to steps the use of the current tailing allowing us to recover the remaining recovery level or for the contribution in 2022, we'll be on the recovery level and the completions of the Lift 1 case on the with the near-term closure of the Lift 1 case. The plan was originally focused on bringing the B3 zone to a full capacity fully develop at the end of '21. But as I mentioned, the delays and the permitting and some other issues that we had to face in 2021 has not allowed us to achieve our original objective.

As a result of that, there'll be less ton from the B3 than originally planned for 2022. But looking forward, there's been no change and the B3, the C-Zone in term of total tons and the grade and metal available to us as we continue to execute. But there will be an impact on the total gold in production of lower than originate planned productions for '22, mostly as I said, as a result of the delay and the B3 execution.

The all-in-sustaining costs are expected to be at 1,695 to 1,795 again, higher than originally planned, also reflecting the lower productions for the year. And also in our higher sustaining costs for the B3, which we plan at 55 million to 70 million. The objective is to really complete the development of the B3 bringing the B3 at its max capacity towards the end of the year and allowing 2023 contribution for B3 at its maximum capacity.

The growth capital for the year is expected to be in 100 million to 130 million related to advancing the C-Zone project is as I mentioned, with the objective to deliver on time and on budget, the C-Zone in the second half of 2023, mostly a split of the investments between underground activities, development infrastructure, and surface such as TAT facility commissioning -- completing the commissioning, but also continue to progress on stabilization.

So, on the exploration for New Afton, so we've now completed -- on the surface side, we've now completed a two phase of reconnaissance drilling within the Cherry Creek area. Geological mineralization and alteration interpretation defined the patterns and we continue to see significant potential for porphyry system, but the source has not yet been intercepted so more work and more interpretation assessment and eventually more drilling require in Cherry Creek. The high grade goal was intercepted as well in one of the target, the interpretation of the alteration and the hosting structure defined as well the potential target for hybrid gold system within the Cherry Creek sheer zone.

What I very encouraging of is very interesting result of underground drilling in 2021, in particular, the underground drilling that comes in March '21 to explore for additional copper and gold mineralization within the New Afton underground footprint with three main priority target, generated our artificial intelligence and has already shown some very encouraging results. And we're going to follow up in 2022 with the objective to locate and unlock some potential higher grade that could contribute eventually to improving on our mine plan as we execute.

The drilling program all as well on the Upper Eastern Extension, located below the SLC zone has been planned for early '22 to define the extensions of the gold and copper mineralization discovered in 2019. So a lot of focus will be given on the underground while we continue as well on the Cherry Creek regional, but a lot of focus will be on an underground with the view to accelerate and a potential and corporations of how your grade mineralization in our mine plan. The $15 million a budget is planned for 2022 at New Afton.

So on that and as we continue to focus on operational excellence and delivered on our growth opportunity showing a 30% potential growth from the 23, 26 compared to the 22. We have an external position now for the -- on the financial flexibility. We're capable to execute our plan. We see definitely a lot of potential and unlocking values that the New Afton as we continued to deliver [indiscernible] and initiate the fees on which will bring significant free cash down the road.

The Rainy River has already generated free cash in 2021 and we see an improved plan year-over-year as we continue to unlock the maximum value of the remaining ounces in the pit with the plan capitalized trip to be complete it by end of '23, lowering our sustaining capital, moving forward in cooperation of the underground with potential for more ounce. So, operational excellence will be our mantra in 2022 while we continue to work hard and unlocking the full value.

So on that, this completes the presentation part of the call. And I will turn it back to the Operator for the Q&A portion of the call.

Question-and-Answer Session


[Operator Instructions] Your first question comes from Josh Wilson, RBC Capital Markets. Josh, please go ahead.

Josh Wilson

First off for the Rainy River reserves that dates, previously, there was some discussion about an optimized mine plan that would incorporate some ability I guess to extend the mine life. I guess by supplementing the underground or with additional material given the difference between the plant throughput is high and the underground throughput is low. With the updated reserve though, it looks like that kind of duration for the Open Pit versus the underground has sort of been either sort of even larger in terms of difference. So how should we think about the mine life after the stockpiles are depleted for the open pit?

Renaud Adams

I think Josh the upcoming 43-101 will clarify. What we are doing now is we're currently incorporating this, the new central zone from the, as I mentioned that grew by 569,000 ounces. And it's been incorporated in the fully integrated mine plan together with the fully Intrepid zone. This will clarify on a year-by-year on the term grade zones a mine metal production. And, but the plan hasn't really changed in a way that, if you remember the current 43-101 has already incorporated the upper part of the central zone and the enter pit and the increase of the up to the completions of the stockpile as you mentioned. The increase in the total ounces and the mineral reserves would allow the mind to extend beyond the 2028. And again, all the details will be provided in this upcoming 43-101.

Josh Wilson

Should we think about the underground throughput as something that could be increase from its current level, given I guess the great changes year-over-year? And maybe as a larger ore body if you can have more mining faces, or is the throughput sort of more stable?

Renaud Adams

Yes, we'll clarify of course on the details of the throughput, but as you pointed out, if you compare the central zone year-over-year, you've seen a reduction with the cut offs or reductions in overall weight, but a significant increase in total tons targeting volumes over selectivity and providing with the more ore to increase on the throughput as you mentioned. But again, the details on the year-over-year and the impact of it will be in our upcoming plan. But that was the strategy behind the relooking at 1400, having the solutions for the milling to support the conversion of the reserve or total stockpile, targeting volume and the central zone.

Josh Wilson

Okay. And then moving on to New Afton, one of the key aspects for the C-Zone project still is permitting. It's hard for us to project or estimate when these deliverables are going to be achieved. When we still thinking about how permitting has affected the B3 zone. What would be the effect, if you were to look at C-Zone permitting timeline to be slightly adjusted?

Renaud Adams

Yes, that would be the case, I think the risk will be to a certain degree and all similarly would be no impact on the total tons grade mineable and the life of mine, but there will be a shift in the overall productions and in the short-term pushing the recovery of those and metal and the law and at the highest use of the differed stage, if you will. Now, on the permitting side, understanding that the B3, there was a delay in the B3, first in pit tailings, operational into tailings was permitted, as stabilizations allowing for more subsidence as we mined.

All those aspects for addressing the B3, so on the pure technicality, if you will of the C-Zone, there is really nothing new more than more stabilization, more in-pit tailing, and a bit more subsidence, but all of which were very well addressed in the B3 permitting as well. And again, '21 was a very challenging year as well in B3 and including for whole community and a tremendous wake up for Canada as well. So there's been a lot of things that happens in '21, on the technical side of addressing determining that led to believe that to the C-Zone permitting will be on time.

Josh Wilson

And then last question in terms of the C-Zone deliverables in terms of overall spend and timelines. I noticed that the numbers were reiterated, when I look at what the original projections were for 2021 in terms of the development rates and an overall spending versus what was achieved. There was a slight variance and then this industry-wide we're obviously seeing a huge degree of inflation. So, how comfortable are you with the existing timelines and capital numbers or how, let's call it, wiggle room or buffer is there for these items?

Renaud Adams

We feel very good, and we appreciate in '21 was a challenging year and somewhat like complicated mine plan, as you exhaust the Lift 1 case and the rehabilitation and fill our recoveries and all those activities at a very low productivities and the ventilation fight, if you will between the different activities. And if you look at it now, I think our mine plan is significantly simplified. With the recovery level, I've been in the soft gaze for the remote and with the closing of the Lift 1 as well, significantly improving the ventilation down.

So, there'll be a lot of focus in '21 to really execute on the C-Zone and to B3 of the optimal capacity possible. So, on that we continue to be very confident to deliver on the productivities our plants. As you mentioned, there's been some challenges on the cost side, but I think overall, if you look at our execution in 2021, including Rainy River, where we actually saw some savings on the execution that at Rainy River.

The adjustment in the capital for the B3 has much more to do with extra development cost. The experience of the Lift 1 of exhausting Lift 1, and the impact at the end of the cycle saying the impact on the rehab and the pillar recovery and the inability to go back in some zone. So, we've made more effort at the early stage to improve on the ground control to avoid those situations down the road. So, very few of the capital increase is a result of mega inflation, if you'll. So, we feel very strong.


Your next question comes from Fahad Tariq, Credit Suisse. Fahad, please go ahead.

Fahad Tariq

On Rainy River, can you just give us some more guidance on the grades for this year? Is it right to think that grades will be lower in the second half but higher in the second half versus the first half? Thanks.

Renaud Adams

Yes, I appreciate that we're so not the 43-101, of course the first year of the 41 will be updated, but roughly if you look at our guidance of 260,000 to 290,000 ounce of gold, it's basically reflect an overall grade at 27,000 tons that now between 0.9 and 1 grand, that's basically the way to look at our guidance. And as you mentioned with slightly higher in the second half as we prioritize in the winter time, some stripping and so about 55% of the ounce in the second half and 45% in the first half roughly.

Fahad Tariq

And just on the cost optimization at Rainy River, can you just give us more details on where you're seeing opportunities to lower the cost? Thanks.

Renaud Adams

Yes, the biggest opportunity is to target of course, where you spend the most money, which is in the debt. So to you look at our overall OEE efficiencies and execution in the pit from 2019 to 2020. Remember that late 2018, we were mining still in the $3 plus dollars a ton mine, and we've managed to reduce this significantly and the $250 to $270 a ton mine as we improve our cycle.

But nonetheless, even though, we've seen some improvement in the OEE from '19 to '20 to '21, we still believe that there's some room for optimizing our OEE, which will automatically contribute, of course, at the slide better productivity. It's like, if you want to do your 150,000 tons a day, but less equipment and effort, if you will, and reducing your cost to achieve the same production.

So OEE is a target number one, there's still some cost drivers, such as tires and autos and that still could be improved to meet the best-in-class, if you will from that kind of operations. The 27,000 tons a day will bring as well on per ton basis of reductions in the milling and the G&A.

The improvement of the OEE should you can achieve the significant improvement in OEE could lead to even parking some equipment, which also will have an impact on the maintenance costs as you and overhauls are required. So it's a complete exercise. And we're using, of course, external resources as well. And we're in the face now to complete details of plan for it, but we still see some good opportunity here.

Fahad Tariq

Okay. And then just maybe just one for Rob, can you just remind us on gold hedges? Are there any hedges in place for 2022 on the gold price?

Rob Chausse

No. No, we're on hedges on metals.


Your next question comes from Trevor Turnbull, Scotiabank. Trevor, please go ahead.

Trevor Turnbull

Just a little bit of a follow on I guess to the last question about the grades at Rainy River. I can appreciate you've got a new technical report coming and I was just looking back at the old technical report. I think it was from 2020. And it indicated that the grades from the open pit would really start to pick up starting this year on the order of 1.2 or something like that grams relative to say the 1 gram that you're talking about for this year. And I just wondered, if you could give us a bit of color on why the grades so much lower than the original tech report? And perhaps when we would expect that open pit grade to start to come back towards those levels originally envisioned a couple years ago?

Renaud Adams

Going back to the mineral reserves update slides, there's a common that the looking forward. So, one contribution to a contributor to it is the applying of a factor of 85% for the remaining East Lobe ounces.

So as a result of the expense of 2021, the mineral resources in reserve for the remaining East Lobe open pit has been applied a factor of 85%, so that's one. The timing and the execution and the contribution of the underground ounces as we incorporate and underground from 22 to 26, and the timing of it and the amount of bounces to the plant is also somewhat a contributor to it.

So other than that, if you compare the plan, the original plan with that one, the East Lobe has been incorporated in the factor and there is in 2022 less and slightly well around 10,000 ounces from the Intrepid Zone. There was also some more ounces originally planned. So, it's not about rushing the gun but doing the right things that really control the execution of it.

So as we continue, we're going to complete the East Lobe in '23 the 433 zone as well, which has been heavily use the last year would eventually also be completed in '22. So have you advanced, most of the open pit be focused on the main zone, which will bring you know better efficiencies in the mining and also the overall reconciliations and performance and the ODM main zone was the best and remained the best.

So there's still some optimization if you will, and in terms as we execute our '22 but has we advanced and '23 deflating towards the '26 the plan gets simpler and more focused on the main, as you say, the main higher grade zone and more up underground as well make its way to the ground.


[Operator Instructions] Your next question comes from Anita Soni, CIBC World Market. Anita, please go ahead.

Anita Soni

I have similar questions about grades and tonnage at the New Afton. If you could give us some clarity on what you would be seeing there?

Renaud Adams

Yes, we did not provide the breakdown. But basically, what you should be expecting is because of the delays and the B3 Zone for the use of the stockpile, of course, contributes to higher proportion of the mine or the total tons process. So if you look at the overall productions in the guidance, there will be -- the B3 zone will be the main lead targeting about like the 4,000 tons a day. Grades are provided when the reserve resources stable, that would be the mainly completing the recovery level as well will be the second lead and the overall a year.

But there'll be as well, the use of the lower grade stockpile on surface as well to supplement the mill, which also is the biggest impact. There were always the use of the stockpile, and within plan for the difference that B3 was supposed to be at basically double the tons compared to what is planned for. So that is the main contributor here. But the B3 was follow is a mineral that reserve average grade, but basically less half the time and higher contributions from the stockpile.

Anita Soni

And would you still be expecting tonnage, I guess in the 14,000, 15,000 ton per day mark or is that?

Renaud Adams

No, we, that would be lag and if you recall the original plan even and the original planning was always showing that in the transitions. Once you close the cave one, there was there was a clear dip like in the lower cut options as we transitions to the season. So that was always even in the original plan, that was one of the highlights of the plan, that at some point in time, you would use the stockpile to transition.

What happened now in '22 is just the transitions between the B3 and C-Zone considering the delay in the B3 as lower even further to productions for '22 hasn't changed at total metal recoveries of the plants, but has deferred and creating even more so. But even in the original plan, there was always a dip in the production as we transition and close the cave one in '22.

Anita Soni

What I was driving, I was helpful will be the mill with you?

Renaud Adams

The overall will be, I have them, we'll be between the 8,000, 9,000, 10,000, depending on how good we're going to do with the B3.

Anita Soni

And then just in terms of the Rainy River a little bit more detail. You mentioned what your strip ratio is overall, but can you give us the operating number, the operating strip number, so I can try to reconcile the cash costs?

Renaud Adams

That would be about 3.2 or 3.2 plan for 2022 and that compared to about 2.7 overall for 2021.

Anita Soni

So, the 3.2 is what gets -- the 3.2 is the operating strip that what contributes to the cash cost? Or it does some of that?

Renaud Adams

Some of the ways, so the way I look at it is on the total execution, some of the 55 million tons, some of the ways are considered operating waste and some with capital wise. And quite frankly, it's only an accounting here. It's only an accounting situation here. So, I look at it as a global execution, 55 million tons strip ratio overall of 3.2 of the plant. And some, as I said, depending the specific quarter-over-quarter, some may capitalized, some is operations, but doesn't really change the execution verbally at 2.2 for the year.

Anita Soni

Yes, I'll probably take it offline with Rob, but I don't want to -- you've you guided to 60 million in waste stripping. So I don't want to be double counting that that's what I'm trying to drive at here.

Renaud Adams

And cash costs are nowhere as a result of that as well. So that's why looking up as an all-in-sustaining cost approach, and sometimes and you've seen it in the past as well. There is some shift depending on the execution of work, but on the global the plan is 55 million tons or so at the 3.2. But yes, please reach out to Rob if you.

Anita Soni

Yes, we don't want to penalize you twice there. And then lastly, okay, I'm not going to. The last question I have is with back to the tons that were added at Rainy River, I think, Josh was driving at that a little bit, when do you expect -- how do you expect the mill to be when you're processing the underground material?

Renaud Adams

It's going to go with the C-Zone. I mean to really have -- sorry about that.

Anita Soni

Underground that.

Renaud Adams

Yes, I want to really put like any details on this. Let's wait for the updated. So everything that has to do with the on ground, as I mentioned, we're in the process to integrate all this, it's going to be a full details on a year-by-year, zone-by-zone, and the ramp and total tons and tons million so far. But I can already tell you that to achieve that you have a meal that could be used as batch, you have a lot of capacity, so you're targeting much higher volume that originally planned in the original 43-101. And that was the whole purpose of redoing this at the lower cutoff is to target volume. But I'll leave the details to later in March and we'll definitely engage with the market once we have all the numbers.

Anita Soni

And last question briefly, I didn't catch exactly what you said about the tailings capacity at New Afton. Can you just quickly summarize again what you did there? You said you were stressing me out.

Renaud Adams

As a safety aspect, like if you look at the Lift 1 and the proximities with underneath the pit, so the original plan was by summer to transition from conventional tailing into in-pit tailing. And as a result of the fatality last year, we, the opportunity here to not live in a recovery level behind. And the team has been capable to optimize the use of the conventional tailings and we see probably late in the year now with extended months, and I think we'll be capable to accommodate most of 2022, if not all into the conventional tailings and not rushing the transition into Intrepid which would limit our ability to mine the remaining recovery level.


Your next question comes from Mike Parkin, National Bank of Canada. Mike, please go ahead.

Mike Parkin

Just a couple of questions. You're obviously sitting on a fair bit of cash, and then the sale of the gold stream brings in a lot more. What's your thoughts in terms of like, you've got some good notes there in terms of what your premium is on the senior notes, if you call them seems quite reasonable? Should we kind of expect a potential calling of those notes?

Renaud Adams

Yes, listen I think our current balance sheet provides significant optionality. So, as we work through '22 in the near-term, our focus will be to deliver our business plans, both specifically this C-Zone in the underground. But beyond that, we will be looking at debt repayment, specifically the 25 and then other shareholder initiatives, we're looking at that.

Mike Parkin

And then on the underground, at Rainy, you've got obviously a pretty impressive reserve update this morning, where is it in terms of the deposit? How in terms of being open at depth and what kind of depth do the reserves kind of terminate now? Where do you kind of see the potential of being able to push deeper using a ramp?

Renaud Adams

Yes, the, if I were just looking at the slide to bring back to you too. Sorry about that, Slide 15. So you appreciate like the 43-101 will provide way more, but if you compare the depth, the depth sorry, the depth of the total resources, the total resources EMI and inferred as shown in the top figure compared to the bottom figure which is the end of '21, it remains pretty much the same and it's mostly data constrained as you can imagine, as you go deeper, you lose the drilling, spacing and the tightness of the drilling, allowing you to really appreciate and convert.

So, it remains open and that but as you could appreciate, and then the pictures around our neighborhood of the 1.2 million or the 1 million ounces of the central zone, you still have some very close by ounces. There's another 1.3 million ounces in the MI category. And that is not a result of having extended the depth more than we've converted a significant amount, but there's still a lot of ounces remaining that with optimization maybe more drilling, more tightness, optimization of the plan could lead to eventually more.

As you go deeper, as you execute your plan and as you lower over time, there is no doubt in my mind it will be a tremendous opportunity to comes to look at a dip in the debt of the memorization and potential extension has basically the whole central zone is the data announcement.

Mike Parkin

And then I remember from chatting with you in the past that in terms of the tailings facility at Rainy River. Remember the old design used, I think it was 11 to 1 with versus heights ratio. There is applied it across the entire length of the dam. And from our past conversations, you felt there was optimization potential there where there are parts that come into bedrock, which could use a much kind of more normal ratio, which could obviously save a lot of material movement. Is that something that has been factored in? Or is that something that's still some upside to what the latest numbers that are publicly available are based on?

Renaud Adams

Yes, the answer to that is our plan continued to be used at the fall 11 to 1, and there is definitely some potential optimization down the road, but we prefer to look at still, look at this on the 11 to 1 with some buttresses. The difference is, over the last couple of years, there's been a significant advance and instrumentations and monitoring on a basically 100 meter basis, allowing us to as we advance and we see proper anticipation of the pressure. There could be a potential down the road for the subsequent phases to optimize, but as we speak, the plant still reflecting the 11 to 1 building.

Mike Parkin

That's it for me. Thanks very much.

Renaud Adams

Which was the case for 21 by the way, 21 was fully executed on that 11 to 1 strategy.


Thank you. There are no further questions at this time. I would now like to turn it back to your hosts for closing remarks.

Ankit Shah

Thanks, Chris. And thanks everybody who joined us. As always, if you have any additional questions, please don't hesitate to reach out to us by phone or email.

Thanks very much, guys. Have a great day.


Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that please disconnect your lines.

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