Canada’s New Gold (TSX:NGD; NYSE-MKT:NGD) has confirmed it is evaluating an underground expansion of its Rainy River gold mine in Ontario beyond 2028, when the asset is expected to cease operations.
The Toronto-based miner said it expects to increase production at Rainy River by 22% this year to between 270,000 and 290,000 ounces of gold, with full-year cash costs coming in at between $715 and 795 per ounce of gold equivalent.
“We will also evaluate the potential expansion of the underground mine beyond the current life of mine, focusing on organic growth opportunities and advancing the exploration program,” President and CEO Renaud Adams said in the statement.
New Gold is forecasting a drop in overall costs, mainly due to lower cash costs and sustaining capital requirements as all deferred construction capital programs were completed in 2020.
Adams said the company will build on the many accomplishments achieved over the past two years. Those include key transactions, such as the sale of the Blackwater project las year, to reduce debt and improve liquidity.
Analysts believe New Gold has succeed at optimizing operations and improving costs in past months. “The miner enters 2021 with a heightened focus on driving further operational, cost, and mineral reserves optimization,” BMO Precious Metals expert, Brian Quast, said in a note to investors.
The miner deferred guidance for New Afton, in British Columbia, after a deadly mudslide earlier this month. Some underground activity has restarted, New Gold said, with the mine currently operating at 3,000-5,000 tonnes a day and the mill processing material from underground and stockpiles.
Rainy River is located 65 kilometres (about 40 miles) northwest of Fort Frances, near the border with Minnesota. Last year, it produced 229,000 ounces of gold.
The gold miner also revealed that, effective December 31, 2020, its total reserves and resources decreased by about 1.2 million gold ounces as a result of the Blackwater project sale. When looking at only Rainy River and New Afton, New Gold’s reserves and resources are relatively flat year over year.