Earnings call transcript: New Gold Q1 2025 sees stable EPS, revenue beat

New Gold Inc. (NGD) reported its first-quarter 2025 earnings, meeting earnings per share (EPS) expectations and surpassing revenue forecasts. The company posted an EPS of $0.02, aligning with analyst projections, and reported revenue of $289 million, exceeding the forecasted $192.13 million. With a "GREAT" financial health score according to InvestingPro and an impressive 35% year-to-date return, the stock has shown strong momentum. Despite these positive figures, the stock saw a slight decline of 0.59% in after-hours trading, closing at $3.35, amidst a broader market downturn.

Key Takeaways

• New Gold’s Q1 2025 revenue exceeded expectations, coming in at $289 million.
• EPS met forecasts at $0.02, maintaining stability in earnings.
• The stock experienced a minor decline of 0.59% after earnings release.
• Significant exploration investments are planned for 2025, totaling $30 million.
• The company maintains a strong liquidity position with $590 million available.

Company Performance

New Gold’s performance in the first quarter of 2025 showed resilience, particularly in revenue generation, which surpassed analyst expectations. The company’s strategic focus on operational efficiency and exploration investments appears to be yielding positive results. Compared to the previous year, New Gold continues to demonstrate growth in both gold and copper production, aligning with industry trends of increasing demand for these commodities.

Financial Highlights

• Revenue: $289 million, exceeding forecasts and reflecting strong operational performance.
• Earnings per share: $0.02, matching analyst expectations.
• Cash from operations: $107 million, indicating robust cash flow.
• Free cash flow: $25 million, supporting ongoing investments and operations.
• Net loss: $17 million, with adjusted net earnings of $12 million.
• Cash on hand: $213 million, contributing to a solid liquidity position.

Earnings vs. Forecast

New Gold’s actual EPS of $0.02 met the forecast, while revenue significantly outperformed expectations, with a reported $289 million against the forecasted $192.13 million. This represents a substantial revenue beat, showcasing the company’s ability to capitalize on market opportunities and operational efficiencies.

Market Reaction

Despite the positive earnings report, New Gold’s stock saw a slight decline of 0.59% in after-hours trading, closing at $3.35. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value calculation, with analysts setting price targets ranging from $3.50 to $4.75. This movement reflects broader market trends and investor caution amid economic uncertainties. The stock remains within its 52-week range, with a low of $1.74 and a high of $3.86.

Outlook & Guidance

Looking forward, New Gold has set ambitious production targets for 2025, aiming to produce between 325,000 and 365,000 ounces of gold. InvestingPro data reveals strong growth potential, with analysts expecting significant sales growth and three analysts recently revising earnings estimates upward. The company is focusing on extending mine life beyond 2040 and plans to provide an exploration update in the third quarter. With projected free cash flow of $1.86 to $2.5 billion at current commodity prices and a low P/E ratio relative to near-term earnings growth, New Gold is well-positioned for future growth. For detailed analysis and more exclusive insights, check out the comprehensive Pro Research Report available on InvestingPro.

Executive Commentary

CEO Patrick Oden emphasized the company’s strategic focus, stating, "Our intent is not to be bigger to be bigger. Our intent is to be bigger to be better." He also highlighted the importance of reducing capital expenditures in tailings storage, stating, "We are looking at different possibilities to reduce the CapEx that we will have to invest in tailings storage facility." Oden expressed optimism about the company’s future, noting, "This is a very exciting time for New Gold with increasing production and significant free cash flow generation."

Risks and Challenges

• Potential fluctuations in commodity prices could impact revenue and profitability.
• Exploration and development costs may rise, affecting free cash flow.
• Regulatory changes in mining operations could pose operational challenges.
• Market volatility and economic uncertainties may affect investor sentiment.
• Competition in the mining sector remains intense, requiring strategic agility.

Q&A

During the earnings call, analysts inquired about the potential for open pit expansion at Rainy River and the company’s approach to mergers and acquisitions. New Gold indicated a preference for organic growth while remaining open to strategic opportunities. Additionally, the company is exploring new block cave studies set for 2026, highlighting its commitment to long-term development and resource optimization.

Full transcript - New Gold Inc (NGD) Q1 2025:

Chester, Conference Operator: Good morning. My name is Chester, and I will be your conference operator today. Welcome to the New Gold’s First Quarter twenty twenty five Earnings Call and Webcast. All lines have been placed on mute to prevent any background noise. Please be advised that today’s conference call and webcast is being recorded.

After the speakers’ remarks, there will be a question and answer session. I would now like to hand the conference over to Ankit Shah, Executive Vice President of Strategy and Business Development. Thank you.

Ankit Shah, Executive Vice President of Strategy and Business Development, New Gold: Thank you, operator, and good morning, everyone. We appreciate you joining us today for New Gold’s first quarter twenty twenty five earnings conference call and webcast. On the line today, we have Patrick Oden, President and CEO, and Keith Murphy, our CFO. In addition, we have Travis Murphy, Vice President of Operations Luke Buchanan, Vice President of Technical Services and Jean Francois Ravanel, Vice President, Geology available to assist during the question and answer period. Should you wish to follow along with the webcast, please sign in from our homepage at newgold.com.

Before the team begins the presentation, I would like to direct your attention to our cautionary language related to the forward looking statements found on slide two of the presentation. Today’s commentary includes forward looking statements relating to New Gold. In this respect, we refer you to our detailed cautionary note regarding forward looking statements in the presentation. You’re cautioned that actual results and future events could differ materially from those expressed for implying forward looking statements. Slide two provides additional information and should be reviewed.

We also refer you to the section entitled Risk Factors in New Gold’s latest AIM, MD and A and other filings available on the SEDAR plus which set out certain material factors that could cause actual results to differ. In addition, at the conclusion of the presentation, there are a number of endnotes that provide important information and should be reviewed in conjunction with the material presented. Slide four highlights some of the key accomplishments during the first quarter of twenty twenty five. Over the first four months of the year, we have made excellent progress on advancing and completing many of the objectives we presented at the beginning of the year. Safety, highlighted by our Courage to Care culture, continues to be a focus and strength for the company.

During the quarter, we delivered a low total recordable injury frequency rate of zero point five five, a 40% improvement compared to the first quarter of last year and continuing the downward trend over the last three years. During the quarter, the company produced just over 52,000 ounces of gold and 13,600,000 pounds of copper at an all in sustaining cost of $17.27 dollars per ounce. First quarter gold production represented approximately 15% of the midpoint of the consolidated production guidance of 325,000 to 365,000 ounces of gold, slightly ahead of the planned first quarter guidance of 14%. The company generated over $107,000,000 in cash flow from operations and $25,000,000 in free cash flow, with New contributing an impressive 52,000,000 in quarterly free cash flow. The company successfully achieved several critical path items, which will enable us to realize the increased production profile throughout the year.

At New Afton, cape construction progress is now more than 50% complete, facilitating the ongoing ramp up in the mining rate towards the target of 16,000 tons per day by early twenty twenty six. At Rainy River, the first four months of the year have focused on waste stripping. The pit is now positioned to deliver ore at a low strip ratio through to the end of the year. In the underground mine, we achieved an important milestone with the pit portal breakthrough, allowing for increased underground development and production rigs. As a result, Rainy River is on track to deliver higher gold production and lower costs in the upcoming quarters, in line with our 2025 guidance.

The quarter was also successful improving our financial flexibility. The company refinanced and extended its senior notes to 02/1932 and amended and extended the revolving credit facility to 2029, both at lower rates, thereby increasing New Gold’s financial flexibility. And lastly, in April, we announced that New Gold would acquire the remaining 19.9% free cash flow interest at New Afton, consolidating our interest to 100%. We successfully delivered the first quarter as planned with the primary goal of creating meaningful value for our shareholders. Before getting into the quarterly details, I would like to take a moment on slide five to reiterate the April transaction where we announced that New Gold would acquire the remaining 19.9% free cash flow interest on New Afton held by Ontario Teachers for 300,000,000 The transaction will be funded with a mix of cash on hand, our credit facility and 100,000,000 GOLD prepay.

This was an excellent transaction for New Gold and its shareholders for many reasons. There was no equity dilution and no due diligence risk. We consolidate 100% of the free cash flow as we enter a period of strong free cash flow at both New Afton and at New Gold. And it provides the company with full exposure to the significant exploration upside and mine life extension possibilities at New Afton. This transaction concludes a five year journey that sees New Gold’s free cash flow interest return to 100 percent.

The initial transaction in 2020 was one of the critical first steps to improve New Gold’s balance sheet. Following two successful transactions for our shareholders, we enter an incredibly exciting period of free cash flow generation with a strong balance sheet and financial flexibility to continue to build from here. We would also like to thank teachers for their support and partnership over the last five years. With that, I will now turn the call over to Keith.

Keith Murphy, CFO, New Gold: Thank you, Ankit. I’m on slide seven which has our operating highlights. As Ankit noted, Q1 delivered production and costs on plan. Production totaled approximately 52,200 gold ounces and 13,600,000 pounds of copper. This decrease in gold production compared to Q1 twenty twenty four was driven by planned lower feed grades at both sites.

Consolidated all in sustaining costs for the quarter were $17.27 dollars per ounce per gold ounce on a byproduct basis due to the lower planned production in Q1. Costs will continue to trend down throughout the year as production increases. New Afton delivered an excellent quarter as the B3K continued to deliver strong grades better than planned. As a result, New Afton achieved an all in sustaining cost of negative $687 per ounce after considering the copper credits. Rainy River delivered on plan with the focus on waste stripping to set up the open pit for low strip, high ore extraction for the balance of Phase four.

All in sustaining costs were $2,758 in the quarter and should trend lower throughout the year as production ramps up. Our total capital expenditures for the quarter were approximately $75,000,000 with $42,000,000 spent on sustaining capital and $33,000,000 on growth capital. At New Afton, sustaining capital is primarily related to equipment and vehicles while growth capital primarily related to C zone underground mine development and cave construction. At Rainy River, sustaining capital primarily related to capitalized waste, tailing dam raise and capital components, while growth capital related to underground development of Underground Main and Intrepid. Turning to the assets starting with New Afton on Slide 8.

New Afton delivered another strong quarter. The B3K performed better than planned and C zone ore production continued its ramp up following commercial production and crusher commissioning early in the fourth quarter of twenty twenty four. First quarter production represented approximately 2825% of the midpoint of guidance of 60,000 to 70,000 ounces of gold and 50,000,000 to 60,000,000 pounds of copper respectively, higher than the quarterly guidance of 20% due to those higher B3 grades. The B3 cave is expected to be exhausted by the end of the second quarter and annual production is expected to be in line with the guidance profile previously provided. All in sustaining costs for the quarter decreased substantially compared to the prior year period, driven by lower operating expenses, lower sustaining capital spend and higher by product revenues.

With increased production at lower costs, New Afton generated an impressive $52,000,000 of free cash flow while continuing to complete the construction of the C Zone Block Cave. Turning now to Rainy River on Slide 9. Gold production in the first quarter was in line with plan producing 33,900 ounces. First quarter production represented approximately 12% of the midpoint of guidance of 02/5000 to 02/5000 ounces of gold, slightly ahead of the quarterly guidance of 11%. Production in the first quarter was lower than prior period as planned, as the majority of ore processed was from the lower grade stockpile, while Phase four stripping was advanced.

With the quarter delivering as planned, production is expected to step up meaningfully going forward and we remain on track to deliver our production and cost guidance for the year. Our financial results can be found on Slide 10. First quarter revenue was $2.00 $9,000,000 higher than the prior year quarter due to higher metal prices and higher copper sales, slightly offset by lower gold sales. Cash generated from operations before working capital adjustments was $90,000,000 or $0.11 per share for the quarter. This was higher than the prior year period, primarily due to higher revenues.

New Gold generated quarterly free cash flow of $25,000,000 as higher revenue was only partially offset by the higher capital expenditure as key growth projects were advanced. The company recorded a net loss of approximately $17,000,000 or $02 per share during Q1. After adjusting for certain of the charges, net earnings was $12,000,000 or $02 per share in Q1. Our quarterly adjusted earnings include adjustments related to other gains and losses. Turning to Slide 11.

Q1 was a very productive quarter as we continued to strengthen our balance sheet and increase our financial flexibility. In March, we completed a $400,000,000 senior notes offering with an interest rate of 6.875% and due in 02/1932. This was used to tender approximately $289,000,000 of the $400,000,000.20 27 senior notes, with the remainder to be redeemed in mid July when the call price steps down. This five year extension as well as the lower interest rate significantly enhances our financial flexibility. We also executed an amendment to our existing revolving credit facility with strong support from our syndicate of lenders.

Under the amendment, the term has been extended by four years, now maturing in March 2029. An accordion feature has also been added, which will allow the principal amount of the credit facility to be increased by up to $100,000,000 subject to certain conditions. Lastly, as Ankit mentioned, after the quarter, we announced plans to acquire the remaining $19,900,000 free cash flow interest in NuAften. This is expected to close in the coming days. And as part of the financing, New Gold entered into a gold prepayment in mid April.

The company has agreed to deliver approximately 2,771 ounces of gold per month over the July 2025 to June 2026 period at an average price of $3,157 per gold ounce. We will utilize cash on hand and the revolving credit facility to pay the remaining $200,000,000 with the expectation that the credit facility will be fully paid off by year end from the meaningful free cash flow we expect to generate throughout the year. At the end of Q1, we had cash on hand of $213,000,000 and a liquidity position of $590,000,000 with a credit facility undrawn. Sumo, we are in a very healthy financial position by utilizing our balance sheet to consolidate our interest in New Afton to 100. With that, I’ll turn the call over to Pat.

Patrick Oden, President and CEO, New Gold: Thanks, Keith. Slide 13 reiterates our three years outlook. We expect continued growth in gold and copper production over the next three years. With the increase in production, unit cost per ounces of gold are expected to be reduced significantly. Toxicity and growth capital costs are expected to taper off over the next three years.

This is probably due to the completion of major projects and the reduction in open distributing at Trinity River. With the increase in production combined with the reduction in unit costs and different capital costs within extra years, the company is well positioned to deliver significant cash flow. I want to reintroduce the free cash flow It was a focal point of our operational outlook presentation back in February. This has been updated to include new goals, 100% free cash flow interest in New Afton. We continue to expect to generate significant free cash flow.

At current consensus commodity price, this translates to approximately a US1.86 billion dollars in free cash flow over that period. At current spot prices, the figure exceeded $2,500,000,000 over 90% of our market cap. Touching on exploration briefly on Slide 15. At New Athan, the lower key zone exploration drift is progressing as planned with more than 65% of advancement. And I’m happy to report that we start drilling for the first exploration day and we’ll have four additional drills in the drill by the end of Q2.

Key zone drilling activities will therefore ramp up significantly throughout the year with the objective of defining key zone integrated resources by year end. In addition, we are conducting exploration drilling surface to develop new near mine targets. During the quarter, we also continued to advance technical studies on potential new mines that will not currently include in our primary life of mine plan. These are key zones, hanging wall zone, and D zone. The focus continues to be on utilizing existing infrastructures and advancing growth projects to maximize net asset value and extend the mine life to 02/1940, generating significant free cash flow and value for our shareholders.

At Rainy River, a version focused during Q1 was on the Northwest trend, which based on last year drilling has the potential of presenting open pit reserve in the short term and still show growth opportunities. Effortion drilling also targeted the down plunge extension from surface as part of the company’s strategy to explore for additional high grades underground. This year’s program at the Northwest Trend include a combination of diamond drilling to test the down dip extension of the current zone and RC drilling to infill and drove the zone along strike, speeding up exploration and saving on cost. We continued our work in open pit expansion the mining potential additional studies on underground mine design transition as well as ceiling storage also continued to make progress. In closing, Q1 was positive for new gold, and we continue to deliver on our stated strategic goals.

We will continue to build on these goals from here. This includes production and cost guidance with the same attention to health and safety. Our continuous our total reportable incident frequency rate performance is a direct indicator of the support from our employees for the Coverage to Care future. At New Afton, we will ramp up C zone and advance the development of its extension. At Rainy River, we’ll continue to ramp up the underground mine, mining phase four and advanced phase five open pit development.

Lastly, we are continuing to increase our exploration effort at both sites with a combined $30,000,000 of investment for 2025, targeting further reserves replacement. This is a very exciting time for New Gold with increasing production and significant free cash flow generation in a robust community cycle. Combine that with our safe, well established mining to reduction and exposure to what we view our preferred metal in gold and copper, and New Gold offers a compelling investment opportunity. The remainder of 2025 will see the company build on first quarter results, which is expected to create meaningful value for our shareholders and provide increased financial flexibility and optionality for new gold moving forward. Before I turn the call over to questions, I would like to just take a minute to welcome Travis Murphy to our team.

Travis joined the New Gold team as our VP of Operations in late March and has spent his first month at site. Travis will take a more active role in our quarterly calls as he settles in. But for now, I hope you will join me in welcoming him to our team. This completes our presentation. I will now turn it back to the operator for the Q and A portion of the call.

Operator?

Chester, Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer Should you have a question, please press the star followed by the number one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to cancel your request, please press the star button followed by the number two. If you are using a speakerphone, please leave the handset before pressing any keys.

One moment, please, for your first question. First question comes from Michael Ciparco from RBC Capital Markets. Please go ahead.

Michael Ciparco, Analyst, RBC Capital Markets: Thanks very much for taking my question. Maybe starting with the New Afton exploration update that you provided. And in the context of the a two part question, guess, the context of the additional consolidation of New Afton getting up to 100% and maybe the gold price as well over the last few months. Does anything change in terms of how you’re approaching that exploration and the outlook for the K Zone and the potential next block cave? And the second part is, can you give us maybe an indication of the cadence of what we should expect in terms of a potential for a resource study?

How are you mapping that out over the next little while?

Patrick Oden, President and CEO, New Gold: I think the first question, you know, we consider teachers as a partner and the way that I think we start to know each other, Mike, the way that I’m working and I’m not out pregnant, I’m working and I’m fully engaged. And so, the other team will not change to bring the mine life of New Afton beyond 02/1940. So, our investment where so we cannot spend more money for now than what we are doing because we are mainly limited by the drift itself and our capacity to add more drills outside. But we are pretty aggressive and will continue to be aggressive. Key zone for us is the potential to we want our objective is to find another C zone there.

Jean Francois with the team outside is all working extremely hard for this. The drift is going as expected. Need to intersect the ore body and to go deeper and to go more East, we need to push this drift. Will be I think we originally, we plan to have three drills in the drift. We’re going to push to five drills this year and believe to complete the drilling as much as we can for the beginning of Q4 to be able to have unscheduled resources in key zone for year end.

That we are doing, but in parallel, Jean Francois and the team are looking for other targets. So I hope that before year end, we’ll be able to disclose few of the discovery if we have. But we still have a lot of financial on our property and we want to maximize that. And we will an exploration update probably at the end of Q3. It’s mostly we’re targeting that for September.

Michael Ciparco, Analyst, RBC Capital Markets: So, would it be reasonable, I know I’m skipping ahead of it here, but would it be reasonable if you have, let’s say the success that you think you’ll have at K Zone and under the C Zone, would it be realistic to think about maybe an initial study in 2026? Or how are you thinking about that pacing?

Patrick Oden, President and CEO, New Gold: So, depending on our success, it’s what we are, we contemplate, yes. We also have an hanging wall where we have indicated we also have an hanging wall with something that we don’t want to park. It’s just behind the upper lip that we mined between 2012 and 2022. We have indicated resources in the new wall. So we want to the main objective for the team is for Jean Francois and Luc is to look at the to have an holistic approach of the resource that we have.

If we’re just adding one target and we run after this, yes, we’ll generate an EV. But if we put the tree and we align them one after the other, what is the good order to generate the maximum in EV and reduce the capital allocation to make sure that because one of the objective, personal objective that it’s our objective that we have is to be to continuously then generate cash flow at New Afton. And based on that, I think if we do our job appropriately, we’ll be able to balance our capital allocation and the revenue generation and the NAV for shareholders. So I think for now, Jean Francois and the team are blasting the exploration, if I can say that, to bring us and our objective, as I said to you, is to find another C zone there. And consequently, I think we can easily bring this mine beyond 02/1940.

So, target studies for we target resource update for the end of this year. So we provided an update to the market for exploration work at the end of Q3. We want to have new and scheduled resources for year end and we will probably blast we’re already doing work. So, Luke is working extremely hard with the team. We’re already doing prep works to have studies for 2026.

Michael Ciparco, Analyst, RBC Capital Markets: Okay, makes sense. And then just one follow-up on M and A then. I mean, it sounds to me like you’ve got a lot of optimism about New Afton. There’s the upside at Rainy River, again, in the context of the consolidation from 50% to 100% of New Afton. Are you thinking much about growth opportunities outside of the portfolio?

Or do you think for now you’ve got more than enough on your plate to look at longer term growth?

Patrick Oden, President and CEO, New Gold: The first thing is what we control is our organic growth. That’s something that we cannot control what is in the ground with exploration. But the thing is we control our destiny through if we develop our resources and develop our assets. So, it’s what we can control and it’s where we are investing the majority of our effort in capital allocation in terms of organic growth. For M and A, it all will depend on the opportunity.

As I explained to you before, our intent is not to be bigger to be bigger. Our intent is to be bigger to be better. And we are prudent in our approach and our focus is to increase value per share. And it’s mainly what this takes our action here.

Michael Ciparco, Analyst, RBC Capital Markets: Okay, perfect. Thank you very much. I’ll pass it on.

Chester, Conference Operator: Thank you so much for that question. The next question comes from Lawson Winder from Bank of America. Please go ahead.

Lawson Winder, Analyst, Bank of America: Thank you, operator, and good morning, Patrick and team. Thanks so much for the update. Thinking of Rainy River and the future there, so with the gold price where it is, to what extent might you now consider a more significant layback on the open pit to continue to access additional ore there as opposed to just focusing on underground? And then in thinking of that, what are your options for tailings?

Patrick Oden, President and CEO, New Gold: Yeah, I think Luke and I, we can answer to this. But the new is we are looking at this because we already have indicated resources. We have a part, we have gains that we can have if we put the open pit and we have part of the ounces that will be transferred from underground to the open pit mining method. What we are looking at actually is the CapEx allocation, not necessarily for the pushback itself, but for the tailings storage facility. So we for the 4,211 that we present the market in the beginning of Q1 of this year, The thinning storage facility is close to its maximum capacity.

So we have all the infrastructure that we all the production profile that we present in the clinical report is will be stored in the data facility, but we are close to the maximum capacity. So, we are looking at different possibility to reduce the CapEx that we will have to invest in data storage facility if we want to do the pushback. And it’s all this balance that Luke is working on. Do you want to add something?

Luke Buchanan, Vice President of Technical Services, New Gold: No, I think that covers most of it. I think just to add that this exploration drilling that we’re doing in Northwest Trend is providing the opportunity for a potential small pit in Northwest Trend as well. And if that works out, then that also provides an extra opportunity for in the future as well. So we’re looking at lots of different scenarios and different options at the moment.

Patrick Oden, President and CEO, New Gold: Yes, but you’re right. It’s the capital is behind us in the mill. We have trained people who are trained and qualified to do a bit bit mining. We have motivated people. We improved drastically our performance in outcome safety.

We improved drastically also our mill availability with the maintenance in the mill. So we want to maximize that as much as we can. And also for the first time this year, also we are investing Jean Francois is looking for targets on our land package at Rainy River. So with the vision that our vision is ultimately at the end of the when we’ll exhaust the mining reserve that we have is that we have a pit that will be a really low and no cost saving storage facility. So, if we can find another pit and we are connected to the national grid, we have a really efficient mill that is performing extremely well in terms of recovery compared to the grade that we are feeding the mill with, I think it’s what we’re looking at.

We are initiating work for the first time on the property to find additional resources this year.

Lawson Winder, Analyst, Bank of America: Intriguing. Yes, looking forward to hearing more about that. Can I follow-up on Mike’s question just about growth and your desire to get bigger? When you think about the ideal asset to add to the portfolio, do you think of a project and operating mine? And then when you think of jurisdiction, I mean, you primarily focused on Canada?

You’ve mentioned The Americas in the past. Maybe you could just elaborate on what your thinking is in terms of jurisdiction as well.

Patrick Oden, President and CEO, New Gold: Well, you know, because we are a company with two assets, actually, we are pretty agile. We have a head office that is, I would say extremely fast, we are modest. But we have experience in The Americas. So, it’s something that if we have to look back, it’s something that we will, we are to be opportunistic we’re looking at. But it’s difficult to find a project that is perfect.

We have expertise in open pit. We have expertise in underground. We have myself, I built two mines and two companies from scratch, but you know it was prior. So, today it’s a bit different. Have the capital risk is different.

But in terms of it’s difficult to get to be really precise on this. And so, we look at the safety of people first and we are looking at stability first. We cannot afford to invest time and effort and capital in the project and in the government where we are looking, we are doing business and scotting back the permits. We cannot afford that. And also for me personally, the security of my people is the most important thing.

And I don’t want to compromise the security of people who are doing works. So, maybe it guides and we know where we want to play, and I think it’s where we’re looking at.

Lawson Winder, Analyst, Bank of America: Now, just the other part of my question was kind of project versus operating line. Is there a strong preference between the two?

Patrick Oden, President and CEO, New Gold: I think the perf is becoming small. So, it’s my preference will be to have a mine that is operating with cash flow and subsequently to build something. But we’ll have to see. Again, we want also our company is we add to my predecessor, they did an amazing work to readdress the balance sheet of this company, and I don’t want to get back in the same position. That’s why we want to be presenting that.

So, if we can, the priority will be to add to both to our two asset, a productive asset that is in production that is generating cash and subsequently is to build something. You know, the last time that I checked on Amazon, it was not possible to find this, you know.

Lawson Winder, Analyst, Bank of America: Yes. Not easy. Okay. Thanks for that color, Patrick. Thanks.

Much appreciated.

Patrick Oden, President and CEO, New Gold: Thank you. You’re welcome.

Chester, Conference Operator: Thank you so much for that question. And for the next question, we have here Eric Windmill from Scotiabank. Please go ahead.

Eric Windmill, Analyst, Scotiabank: Hi, Patrick and team. I appreciate you taking my question. Just new aft, and I wonder if you could elaborate a little bit. So you’re doing the the flow cleaner circuit upgrade here to bump the recoveries. I know you’re saying it’s commissioning in Q3.

Just wondering what some of the key milestones we should be looking for there. If you could please remind us on the CapEx. And then I guess second part, are you seeing any challenges in the supply chain here as it relates to geopolitics and tariffs and what we’re seeing? Thanks.

Patrick Oden, President and CEO, New Gold: Yeah. We have a few questions. I’ll try to, if I’m missing some points, you let me know. So, on CapEx, we’re bang on. So, I think what we present in the technical report, what we present to you in the guidance, we are so, we’re doing our forecast for year end.

We are buying and we’re progressing extremely well because this year we have in the capital allocation is for the stabilization of the tailings, we are a year in advance. And when we did the vetsimetry of the tailings storage facility, we have 20% less water than expected. So, we are really well positioned to stabilize that more than a year in advance. So, we are really satisfied. We have an investment in the mill that will increase the recovery in our concentrate that is just replaced flotation cells.

It’s going extremely well. We are buying on time and slightly under budget. And for underground, we are exactly where we want to be in terms of the progression of the conversion of the cage. So we are 53% progression in the cave. We expect to be at 94% at year end.

So, we’re still adding two drawbills to build in Q1 twenty twenty six as planned. And actually we are bang on in terms of CapEx. So, the next milestone is what is exceptional for NewAptam is in Q1, we overperformed B3 in terms of recovery and in terms of grade. So it was excellent. And also the progression, progression of it helped because we slowed down the progression of C zone to go forward with B zone because we have more tons to extract.

And also the progression of C zone is as planned and will reach slightly more tons. So, it is and in term of tons that will come date, so we’re still expecting to be at 60 tons per day by the end of this year. And we will do the exploration update that is a major milestone at New Afton in Q3. We’ll have our new reserve at the beginning of Q4. And so I think it’s the major milestone that we’re going have there this year.

So, the mine is we’re really pleased. It’s performing as expected. It’s not better than expected, mainly at B3. And we’ll complete the extraction of B3 in Q2 of in this quarter, in Q2 twenty twenty five.

Keith Murphy, CFO, New Gold: And Eric, it’s Keith on supply chain. Yeah, we’re not really seeing a material impact right now. And there’s a relatively small portion of our cost profile that comes from The U. S. And is subject to tariff.

We have seen some pressures in sales overall on supply chain, but our team has done a really good job to mitigate that. We haven’t seen any impact on critical supplies, right. So a little bit, but not much impact at the moment.

Eric Windmill, Analyst, Scotiabank: Okay, fantastic. Yeah, I really appreciate all the added color. Maybe just on the flow cleaner circuit upgrade, any specific milestones we should be looking for there as it comes into service in Q3?

Luke Buchanan, Vice President of Technical Services, New Gold: Hi, Eric. It’s Luke here. So we just finished the major shutdown in the plants at New Afton this month, which is planned. So as part of that, we completed the bypass of the third stage of cleaners. So that’s put us in position to complete the project in Q3 without any major delays or interruption to the operation.

So that’s the really major milestone which was just completed. And the fabrication of the actual Jameson cell is also gone. That’s everything on track there.

Eric Windmill, Analyst, Scotiabank: Alright. Great to hear. Really appreciate it. So, yeah, congrats on a good start to the year. I’ll hop back in the queue.

Cheers.

Patrick Oden, President and CEO, New Gold: Thank you.

Chester, Conference Operator: Thank you for the question. And for our next question, that would be for Jeremy Ahoy from Canaccord Genuity. Please go ahead.

Jeremy Ahoy, Analyst, Canaccord Genuity: Thank you, operator. Hi, Pat, Ankit, Keith. Thanks for taking my questions, and and welcome to Travis. Just two questions from me. You guys completed a milestone at Rainy River in the underground development as the breakthrough of the pit portal.

Two other key items that you had talked about was the fresh air raise and the vent loop. Can you comment on progress there and if those are still expected to be complete in Q2? And my second question is on grades in D3. I know that’s going to be culminating this quarter, but just wondering so far if we’re seeing elevated grades as that cave tails off.

Patrick Oden, President and CEO, New Gold: Just for maybe the first point for the fresh air rays, you know, the excavation, the risk boring is completed. It was completed last year. Raise is cast for But we think we’re close to receive all the components and our objective is to commission that during mid June and to be fully operational for June. So I think it’s going to be in Q2. That’s an important milestone for us.

And the vent loop, think we’re still having 170 meters of development to complete. We are ramping up and we are working for both sides of decline and we’re ramping up. And we plan to complete the event loop for it again in Q2 this quarter. So, basically, there’s two major milestones and a lot of possibilities to speed up the development too. In the portal, we are using the portal actually and We are holding the material for the waste from the development to the pit, and we rebuild that from the pit to the storage facility.

Ankit Shah, Executive Vice President of Strategy and Business Development, New Gold: Okay, great.

Keith Murphy, CFO, New Gold: And then Jeremy with the grades, yeah, as we said, we continue to see the B3K progress well. As I said, we expect that to be completed and exhausted in Q2. And then we’ll be in that transition period between C zone and B3 grade. So, we do expect the production profile to be aligned with what we guided previously.

Patrick Oden, President and CEO, New Gold: The other reason for me is on the grade in the block cave is we simulate that. We’re using sophisticated software. We call that PCBC to do the model of the grade. And at the end of a block cave, usually you have more dilution because you have less material in the stope and the dilution is coming from the wall. So, we plan for the worst and we wish for the best.

And in this situation, we got the best because we had less dilution. So, the grade is higher than expected. It’s mainly what is happening.

Jeremy Ahoy, Analyst, Canaccord Genuity: Yeah. Well, it was a nice little surprise for the quarter.

Luke Buchanan, Vice President of Technical Services, New Gold: Okay, great. So

Patrick Oden, President and CEO, New Gold: sometimes it’s good to have some positive, you know.

Jeremy Ahoy, Analyst, Canaccord Genuity: Yeah, absolutely. I’m in agreement there. And if you can’t find any assets on Amazon, maybe you can look at Tmall.

Eric Windmill, Analyst, Scotiabank: I hear cheese prices are cheaper there as well.

Patrick Oden, President and CEO, New Gold: Thank you.

Chester, Conference Operator: Thank you for that question. And for our next question, that would be for Mohamed Siddiqui. Please go ahead.

Mohamed Siddiqui, Analyst: Thank you, Patrick and Tim. Thanks for taking my question. So just to follow-up on Jeremy’s question, I guess, at New Afton undergrades. I just wanted to focus maybe on the split. So you mentioned that we can still, I guess, model that 45% in the first half of twenty twenty five and New Afton, does that imply basically a weaker Q2 with grades coming down there?

Keith Murphy, CFO, New Gold: Yeah. As I said, the Q2 with the B3 coming off and C zone ramping up, there is that kind of transition point with the caves and with the start up of the C zone cave, we did expect them and we do expect that to be lower grade. So yes, we’re still in line with that production profile that we have lined at the start of the year.

Patrick Oden, President and CEO, New Gold: And also, what I mentioned, this is the bottom part of C zone, we have some lower grade that is expected because it’s part of the reserves itself. It’s not homogenous. So with the lower part and also we have some drawbills who are in waste and the ore is over and above. So it’s planned. So in 2025, we will process more tons than we did in 2024 to produce the same metal more or less.

And really because the beginning of C zone, the grade is lower. And it’s what is in the plan. It’s what we forecast.

Mohamed Siddiqui, Analyst: Great. Thanks a lot for that color. That’s pretty helpful. And just the second question on the capital allocation priority. I think or Alan already touched on the M and A front, but I was just wondering if as part of as you look over the next three years and the amount of free cash flow you’ll be generating, if there is any thinking around maybe potential capital returns to shareholders or that’s really not top of mind currently?

Thank you.

Patrick Oden, President and CEO, New Gold: It’s something that so we are working on that. So, for now, for sure, for this year, we have to so just the buyback of the 19.9%. We didn’t want to dilute our shareholders. It was our strategy. So, yes, we have the prepay and we have the revolver that we want to refill for year end as much as possible.

And we want also to maintain a minimum of cash based on what happened with COVID. COVID can be happened or it’s mining. So we want to make sure that we have sufficient capital. I’m not talking to add $1,000,000,000 but was there $150,000,000 in cash in the bank account to react appropriately to what we have to face and to be opportunistic. And after that, if the projects are not if so we have our project that we want to support, if they are providing value for shareholder, if not, for sure, if we have we’ll have to return the money to the shareholders and something that with the Board, we are really vigilant and we know that the cash flow that we’ll generate and we know that it’s shareholder money.

And so it’s why we’re working for. And so we will probably look at this in the medium term for sure.

Mohamed Siddiqui, Analyst: Thanks a lot, Patrick, and congrats on a good quarter.

Patrick Oden, President and CEO, New Gold: Thank you.

Chester, Conference Operator: Thank you for that question, Mohammad. And since there are no further questions at this time, I’ll be transferring the conference again to Mr. Ankit Shah. Please continue.

Ankit Shah, Executive Vice President of Strategy and Business Development, New Gold: Thank you. And thank you to everybody who joined us. As always, should

Chester, Conference Operator: you have any additional questions, please do

Ankit Shah, Executive Vice President of Strategy and Business Development, New Gold: not hesitate to reach out to us by phone or email. Have a great rest of your day.

Chester, Conference Operator: This concludes today’s call. Thank you for participating. You may now disconnect.

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