Due to coming changes in the quality of ore being extracted from New Gold’s open pit mine north of Barwick, many have feared the Rainy River site could have a significantly altered lifespan.
But New Gold president Renaud Adams said there’s still lots of potential at the local mine to extract minerals underground while reprocessing lower grade ore.
The plan is to stockpile lower grade ore from the open pit until it is exhausted, so the mill can process it into the future while underground mining higher quality ore, which could start in 2020, according to Adams.
“What we know today and what we’ve learned over the last two years is there is an obligation for us to reduce the costs associated with depositing the [mine’s] tailings and depositing the waste and that comes from the geo-technical aspect,” he explained
“To do so, we’re no longer chasing what I call the ‘low grade’ in the pit.
“We’re redesigning the pit really to focus on the medium-high grades, but we will continue to stockpile some low grade,” Adams added.
The operation of the redesigned pit will start in 2020 and will cause its lifespan to shorten but Adams said the new lifespan will depend on how many tons of low grade ore they can stockpile from the open pit to process after it closes.
The projected life of mine is changing from the previously projected 2031 and the new timeline will be released around late November, to give a clearer picture of the mine’s future direction, according to Adams.
But he says he remains optimistic about what’s to come at the Rainy River site.
“The way I’ve done business in the past, is I don’t look at the life of mine today with the view that this is cast in stone,” Adams remarked.
“What I do is to create the span that we feel extremely solid about, that we can deliver, and then there is the organic growth, so we reinitiated in 2019 some exploration activities.”
“We’re going to do some drilling . . . so obviously the next years to come, there will be a need to be even more aggressive when it comes to exploration,”
The hope is to discover a satellite deposit that would come and replace some of the low grade tons of ore, if there are not as many as originally thought, Adams said.
“I’m a big believer in the importance of returning the drills at play and that’s the only way you could really bring the life of mine beyond in a quality way is to bring new resources,” he noted.
While there’s no firm plan in place, Adams said the objective is to start part of the underground mining operations in 2020.
Meanwhile, New Gold has seen bullish gains recently in the stock market and been able to increase its production significantly at the Rainy River mine over the last six months.
“I think the key driver would definitely be around the processing facilities because at the end of the day your production is linked to the capacity of the mill to process and properly recover gold out of the mined ore,” explained Adams.
An investment of approximately $200 million was made earlier in the year to complete all deferred construction of all infrastructure.
Adams also attributes New Gold’s success to the people hired at the mine over the last several months.
“I think we have moved the needle quite a bit since January,” Adams remarked.
“Our ability to put together a pretty good team, a experienced team, around the milling facilities has accelerated by far the reaching of our design criteria.”
From the fourth quarter of 2018 to the first quarter of 2019, New Gold’s focus was on identifying which aspects of the mine need to be corrected to increase the efficiency of the operation.
“When it comes to the process facilities, there was some corrections to be done on the equipment level, mostly mechanically, so we did that in the fourth quarter,” Adams explained.
“We did a lot in the first quarter, and we entered a second quarter really with the view that we think that the mill now is in capacity to operate and with the right people, so sure enough in June, for the first time we hit our design criteria.”
When looking at New Gold’s stock (NGD.TO), it dipped down to its lowest point at $0.84 in late May, before climbing to $1.95 in mid July.
It currently sits around the $1.60 mark and Adams attributes the gains to meeting their projections in the second quarter, delivering on what they said they would do, and the soaring price of gold.
“The gold price has been a tremendous factor to it, and New Gold, because of our debt, is extremely apposed in a certain way to the gold price.”
“I think what happened in the last while was a combination of delivering results, an increase of the gold price, and the confidence on our ability to address our financial situation.”
New Gold currently operates under debt so when the gold price increases, commodities increase and it creates further confidence from shareholders that the company is able to address their financial situation.
Near the end of May the price of gold sat between $1,275 and $1,300 USD, while gold currently is valued near $1,550 USD an ounce, which has certainly helped New Gold turn a larger profit.
Although, Adams noted that the company isn’t dependent on a high gold price to be successful.
“As a matter of fact the plan we did put in place did not consider such a high gold price for us to reposition New Gold,” he said. “We always look in the more consensus basis of what the market was saying in the mid to long term.”
“Everything is about managing risk in this business and we have tendency to believe that historically we’ve seen so much volatility in the gold price, the last thing you want is to design your business model on a too bullish view,” Adams added.
He told the Times as New Gold repositions its Rainy River mine, it will be able to survive at a price of $1,200 or below.
“The best is yet to come is what I like to say about Rainy,” Adams enthused.
“I really, am looking forward to maybe extend our resource base and bring in something new-that’s what really will shift this asset.”