New Gold Ups Production And Lowers Costs

VANCOUVER– New Gold’s (NGD-T, NGD-X) third-quarter results show primarily increased production and decreased cash costs at its three operating mines.

The company produced 79,531 oz. gold over the three-month period at an average cash cost of US$470 per oz. In the third quarter of 2008, the company’s average cash cost to produce an ounce of gold was US$565; the decrease of late is attributable to a significant increase in silver revenues at Cerro San Pedro, an increase in copper revenues at the Peak mine in eastern Australia, and a favourable Australian-dollar exchange rate.

Earnings from mine operations were also up, totalling US$22.6 million and leading to net quarterly earnings of US$4.1 million. Cash flow from operations came in at US$6 million, helped along by increased gold production at Cerro San Pedro and the Mesquite mine in California, a 10% increase in the average realized gold price per oz., and increased byproduct revenue.

In the first nine months of 2009, New Gold sold 185,932 oz. gold at an average price of US$935 per oz.

Cerro San Pedro contributed 68,857 oz. gold to that production, compared with 64,182 oz. produced in the first nine months of 2008. Silver production was also up from last year, totalling 1.2 million oz. compared with 800,000 oz. silver in the first nine months of 2008. The increase in silver production is due to higher silver head grades and the benefits of secondary leaching, which began in the first half of 2009. The boost in silver byproduct credits helped keep the cash cost of gold production at Cerro San Pedro low, at US$416 per oz.

At Mesquite, New Gold is having a more difficult time keeping cash costs down. The California mine produced 27,594 oz. gold in the third quarter, bringing its 2009 production to 87,647 oz. Cash costs are sitting at US$662 per oz. gold, kept high by temporary factors such as the use of a mining contractor to catch up on waste stripping, lower grades than expected in the Rainbow pit, and costs stemming from abnormal maintenance needs, such as the one-time changeover from bias ply to radial tires for the entire haulage fleet.

And at the Peak mine in Australia, New Gold has produced 22,858 oz. gold and 3.8 million lbs. copper in the third quarter. Copper production was up 119% over the same period in 2008 because mining shifted to zones of higher copper content. The increased copper levels pushed the cash costs to produce an ounce of gold down to US$302, compared with US$560 in the third quarter of 2008.

New Gold is also developing the New Afton gold mine, which is west of Kamloops in British Columbia. Once operational in late 2012, the underground mine is expected to produce 85,000 oz. gold, 75 million lbs. copper, and 214,000 oz. silver annually. So far this year, New Gold has spent US$51.4 million on development at New Afton.

New Gold maintained its 2009 production guidance at 270,000 to 300,000 oz. gold, at an average cash cost of US$470 to US$490 per oz., net of byproduct credits.

New Gold has a very healthy bank account. In September the company, with $140 million already in the treasury, raised $115 million in a bought-deal offering at $3.75 per share. As of the end of September, the company had US$242.6 million.