new afton project
The New Afton development project, slated for production start up in the second half of 2012, is an exciting example of the organic growth at New Gold. This project alone holds the potential to more than double the company's cash flow at current metal prices.
BACKGROUND
The New Afton Project is located ten kilometres from Kamloops in south-central British Columbia, Canada and is directly accessible from the Trans-Canada Highway. There is a successful history of mining in the area and Kamloops acts as a hub for mine sites within the region. New Afton is New Gold's primary development project and is expected to commence production in the second half of 2012. The project will be an underground block cave mine and flotation concentrator, which will produce an annual estimated average of 85,000 ounces of gold and 75 million pounds of copper.
SAFETY AND SUSTAINABILITY
New Afton continued to build and maintain its dedicated Health, Safety & Training Team to provide advice, services and support across the operation. With the transition from contractor to owner mining, new mine rescue team members were trained and emergency procedures enhanced for the continuation of underground development. The New Afton mine rescue team participated in the BC Provincial mine rescue competition in June and won the prestigious "Best in Obstacle & Recovery" award for an underground team.
New Afton continued to work with First Nations to build upon the Participation Agreement that was signed in 2008. The Joint Implementation Committee under the agreement met on a regular basis to discuss ongoing opportunities for the partnership with the Tk'emlúps Indian Band and the Skeetchestn Bands. Some contracting opportunities were made possible during 2009 and other benefits are expected in the future. New Afton also supported three local First Nations students with post-secondary education scholarships.
2009 RESULTS
During 2009, we delivered on our development goals on time and on budget at New Afton. The New Afton team completed 1,708 metres of underground advance, continued surface infrastructure work, including completion of the exterior of the mill building, received key long-lead equipment items, and moved forward with project engineering to 92% completion. Another milestone in project development in 2009 was the breakthrough of the conveyor decline and the main surface decline, which creates a secondary access to the mine and facilitates development efficiencies. In terms of underground development, we met the objectives of the revised development plan announced in November 2008 which included ramping up mining crews to enable continuous seven-day-per-week development.
Project spending for 2009 was in line with budget at $50 million, with approximately $410 million in capital expenditures remaining for 2010-2012. We expect New Afton's development cost to be funded internally from existing financial resources and operating cash flow.
FUTURE UPSIDE
In 2009, we completed a NI 43-101 update, which indicated very minimal capital cost escalation at the project and further confirmed its potential to have a significant economic impact on the company as a whole. At metal prices similar to those being realized at year-end 2009, New Afton is expected to generate in excess of $200 million in operating margin each year. However, the full potential of this project has yet to be delineated. We see potential for additional blocks containing similar mineralization below those currently included in the mine plan. We expect to evaluate this potential once the current mine development enables establishment of underground drill platforms.
AT A GLANCE
| PROJECTED STARTUP - SECOND HALF OF 2012 | |
|---|---|
| Estimated annual life-of-mine production: | |
| Gold: | 85,000 ounces |
| Copper: | 75 million pounds |
| Co-product Total Cash Cost(1): | $359 per ounce gold, |
| $0.90 per pound copper | |