Staff
New Gold announced Monday that its Rainy River Project, located north of Barwick, now is scheduled for first production this September.
That’s a three-month delay from the company’s initial target of July 1.
The company also revealed the estimated 2017 capital cost through commercial production, including contingency, is roughly $195 million higher than its previous estimate.
As well, the company said Monday that as a result of the development challenges encountered at its Rainy River Project last year, several personnel changes were made to further strengthen the team as the project transitions into operation later this year.
In addition to Ray Threlkeld’s active involvement in the project as interim chief operating officer, New Gold has moved Greg Bowkett, who previously was the general manager at the Peak Mines, into the general manager role at Rainy River.
Bowkett has been with New Gold since 2012.
New Gold also has engaged Pierre Légaré as the project director for the balance of construction.
Légaré has more than 30 years of experience in project development, including over 20 years in increasingly senior roles at SNC-Lavalin Inc., culminating in his role as vice-president, Projects, Mining and Metallurgy from 2011-13.
Since 2013, he has continued to provide project management services to mining and other large-scale construction projects through his consulting company.
Meanwhile, Peter Marshall, vice-president of projects for New Gold, will be leaving his position at the end of February, though he will remain with New Gold as a consultant on a part-time basis through a transition period.
New Gold expects to permanently fill Marshall’s role in the coming months.
According to a statement posted Monday on New Gold’s website, the team completed a thorough review of the project’s mining and construction plans in January, and expects to have all construction activities required for start-up completed in September.
It noted the three-month delay primarily is a result of the impact of the slower-than-planned ramp-up of the mining rate, which has extended the time required for construction materials, in the form of waste rock and clay, to be delivered from the mine to the construction team.
Roughly 24 million tonnes of overburden and waste have been mined from the open pit through late January, and the mining rate has increased to an average of about 100,000 tonnes per day.
The September start-up is based on an expectation that the mining rate will continue to increase to an average of roughly 120,000 tonnes per day over the next seven months, which includes both planned productivity gains and the impact of changing weather conditions through the spring.
New Gold said it will supplement its own fleet with contractors who will mine discrete areas, where mining can be performed more efficiently using smaller equipment.
Meanwhile, the company said all of the key structural components of the process facilities have been completed, and the setting of mechanical equipment and installation of piping, electrical, and instrumentation services is well advanced.
New Gold plans to complete the testing of the various components of the process facility using a staged approach, after which the company will complete dry and wet commissioning of the full process circuit.
The primary crusher and conveyor system are 80 percent complete and commissioning of the crusher is scheduled to commence in March.
Thereafter, the commissioning of the ball and SAG mills should start during the second quarter.
Finally, the refining portion of the circuit should be completed and ready to begin commissioning early in the third quarter.
The company said dry and wet commissioning of the full process circuit is scheduled to take place in August, which should leave about one month before targeted first production for any required adjustments to the circuit.
Based on the mine plan, the company will begin to stockpile a small amount of low-grade ore in the first half of 2017, which will be used during the commissioning of the mill.
At the time of the targeted September mill start-up, New Gold expects to have roughly 0.5 million tonnes of ore stockpiled, which is equivalent to about 20 days of mill feed at the design capacity of 21,000 tonnes per day.
After receiving approval to commence construction of the re-designed tailings management facility from the Ontario Ministry of Natural Resources and Forestry in mid-November, 2016, the company has remained in regular communication with the MNRF as it relates to its review of other operational permits and permit amendments appropriate for the project’s current stage of activity.
The company also continues to work closely with Environment and Climate Change Canada towards obtaining an amendment to Schedule 2 of the Metal Mining Effluent Regulations, required to close two small creeks and deposit tailings, which is targeted to be received in the third quarter of 2017.
However, as previously disclosed, New Gold’s re-design of the tailings management facility incorporated a starter tailings cell within the broader facility that does not require a Schedule 2 amendment from the federal government.
The inclusion of a starter cell is an approach that has been used at other Canadian mining operations.
Based on its location and scale, the starter cell would provide capacity for about six months of tailings.
Once the Schedule 2 amendment is received, New Gold would need about three months, in good construction weather, to complete construction of the tailings dam.
In the event the Schedule 2 amendment is not received on a sufficiently-timely basis to allow for the completion of the construction of the broader tailings facility before the starter cell is full, the company would have to consider other alternatives, which may include a slowdown or temporary suspension of operations.
Based on the company’s targeted September production start, New Gold expects total 2017 production at Rainy River to be 50,000-60,000 ounces.
Roughly 15,000 ounces are planned for the pre-commercial production period, with revenue for this production being credited against the development capital estimate.
Over Rainy River’s targeted two months of commercial production in 2017, the operating expense is expected to be $905-$945 per gold ounce, with all-in sustaining costs expected to be $1,200-$1,240 per ounce.
Both the operating expense and all-in sustaining costs are well above the levels targeted once Rainy River reaches full capacity.
Further, as New Gold has opened up the pit, the company has identified specific areas where there are layers of peat and basal till that can be more efficiently mined using smaller equipment.
As such, and in order to help support the targeted increase in mining productivity going forward, the company plans to hire contractors to complete this work, as well as the mining of a small outcrop to source additional construction rock at a total incremental cost of about $40 million.
The temporary construction camp also will be required for an additional three months at a total cost of about $5 million.
“With a new leadership team on site at Rainy River and a comprehensive review of the project’s remaining construction schedule and commissioning plan completed, we are committed to delivering on our updated plan at Rainy River,” said Hannes Portmann, New Gold’s president and chief executive officer.
