New Gold starts up New Afton in BC

New Gold (NGD-T, NGD-N) has brought a fourth mine online with the timely start-up of its New Afton gold-copper mine near Kamloops, B.C.  

The Vancouver-based producer says the first ore from the newly minted underground mine was processed through the mill circuit on June 28.

New Gold’s president and CEO Robert Gallagher says he was pleased to deliver the project on schedule, and looks forward to New Afton becoming the company’s largest cash-flow generator.

The company predicts throughput at the mill will increase in the coming weeks, with commercial production set for August.

Commercial production as defined will occur when the mill operates at 60% capacity for 30 days, or at 6,600 tonnes per day. After this, the mine should ramp up to full production of 11,000 tonnes per day in early 2013.

Meanwhile, New Gold says the underground mining it started late last year is on track. So far, it has stockpiled 1 million tonnes averaging 0.88 gram gold per tonne and 0.94% copper, which could be processed for three months at full production.

The company outlines that the development cost to get New Afton up and running remains at $765 million. It adds that this amount includes revenue from gold and copper sales from pre-commercial production, which will be used to offset capital costs.

For 2012, the mine is forecast to churn out 35,000 to 45,000 oz. gold and 30 million to 35 million lb. copper, at co-product cash costs of US$630 to US$650 per oz. gold and US$1.35 to US$1.45 per lb. copper. If copper revenues are deducted, the cost of producing a gold ounce falls to negative US$1,200, to US$1,300.

The intermediate miner says both the co-product and by-product costs could noticeably improve as the mine reaches full capacity of 11,000 tonnes per day.

The junior forecasts gold and copper sales of 20,000 to 30,000 oz. gold from commercial production this year, and 20 million to 25 million lb. copper.

New Gold said in a presentation that expects the mine will generate an average cash flow of US$230 million per year.  

Over its estimated 12-year life, New Afton’s yearly output should average 85,000 oz. gold and 75 million lb. copper, with co-product cash costs of US$525 per oz. gold and US$1.15 per lb. copper.

On the exploration front, the Vancouver-based miner has budgeted US$5 million to test and define the C-zone, which occurs below and alongside the mine’s reserve block.

New Gold hopes its exploration efforts will extend New Afton’s mine life.

The other producing assets in its portfolio include Mesquite in California, Cerro San Pedro in Mexico and the Peak gold mines in Australia. Company-wide gold production for the year is slated at 405,000 to 445,000 oz.

The miner also owns 30% of El Morro in Chile, with Goldcorp (G-T, GG-N) owning the rest, and 100% of the Blackwater project near Prince George, B.C.

A preliminary economic assessment for Blackwater should be out by September.
At the end of March New Gold had US$326-million cash-in-hand.

On the mine start-up news, New Gold gained less than 2% to close at $9.71 a share.