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Message Boards | Canadian Stocks : Canadian Warrants Only -- Ignore is Off
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To: koan who wrote (15825) 11/11/2010 8:35:23 PM
From: calgarylady of 15828
Here is the info from the MD & A filed November 4th
B. CERRO SAN PEDRO MINE, MEXICO
The Cerro San Pedro Mine is located in the state of San Luis Potosí in central Mexico, approximately 20
kilometres east of the city of San Luis Potosí. The project property consists of 52 mining and exploration
concessions totaling 78 square kilometres in the historic Cerro San Pedro mining district. The mine was
acquired pursuant to the Metallica Resources Inc. acquisition on June 30, 2008. The current focus of
exploration is on the southern half of a two-plus kilometre San Pedro trend of gold-silver-zinc-lead
mineralization that extends south from beneath the Company’s current open pit mine operation.
The Cerro San Pedro Mine achieved ISO 14001 certification of its environmental management system. New
Gold’s Cerro San Pedro Mine has a record of compliance with Mexican and international environmental
standards. Despite the Company’s enviable record with Mexican and international environmental standards,
the Company has a history of legal challenges to its Cerro San Pedro Mine. In September 2009, a Federal
Court of Fiscal and Administrative Justice (FCFAJ) ordered SEMARNAT, the Mexican environmental regulatory
agency, to nullify the authorization of its 2006 Environmental Impact Statement (“EIS”) for the Cerro San
Pedro mine. The Company appealed the ruling. A hearing was held in the Third Federal District Court in
Mexico City in April 2010 and a negative decision was issued by the court in July 2010. The Company has filed
a further appeal to the Collegiate Appeals Court in Mexico City.
The First Federal District Court in San Luis Potosi has issued injunctions to ensure that operations at the Cerro
San Pedro Mine continue while appeals are heard related to the September 2009 order to nullify the
authorization of the Company’s EIS. The latest injunction was received on October 4, 2010. In August 2010,
the Company filed an expanded application for approval of an EIS with SEMARNAT. This application is
currently under review.
New Gold remains in continuous discussions with both SEMARNAT and PROFEPA, the Mexican government's
environmental enforcement agency, to work towards the uninterrupted operation of the Cerro San Pedro
Mine.
Three Months Ended September 30, Nine Months Ended September 30,
2010 2009 2010 2009
Operating Data
Tonnes of ore mined (000's) 3,450 3,467 7,838 9,081
Tonnes of waste mined (000's) 4,863 5,050 11,337 13,669
Ratio of waste to ore 1.41 1.46 1.45 1.51
Tonnes of ore processed (000's) 3,450 3,467 7,838 9,081
Average gold grade (grams/tonne) 0.66 0.42 0.64 0.46
Average silver grade (grams/tonne) 45.71 30.33 40.31 31.47
Gold (ounces):
Produced(1) 37,473 24,928 79,835 69,721
Sold 38,090 27,193 76,047 68,857
Silver (ounces):
Produced(1) 733,463 342,633 1,487,247 1,184,110
Sold 748,704 382,278 1,447,560 1,177,210
Realized prices(3):
Gold ($/ounce) 1,234 964 1,205 942
Silver ($/ounce) 19.25 14.83 18.66 13.75
Total cash cost per gold ounce sold(2)(4) 151 416 277 394
Financial Data
Revenues 61,433 31,894 118,628 81,079
Earnings from mine operations 29,967 8,510 47,685 17,591
(1) Tonnes of ore processed each quarter do not necessarily correspond to ounces produced during the quarter, as there is a time delay
between placing tonnes on the leach pad and pouring ounces of gold and silver.
(2) The calculation of total cash cost per ounce of gold is net of by-product silver revenue. If the silver revenues were treated as a co-product,
average total cash cost at Cerro San Pedro Mine for the three months ended September 30, 2010, would be $405 per ounce of gold (2009 -
$513 ) and $6.32 per ounce of silver (2009 - $7.89 ). For the nine months ended September 30, 2010 the average total cash cost at Cerro
San Pedro Mine would be $488 per ounce of gold (2009 - $503 ) and $7.56 per ounce of silver (2009 - $7.34 ).
(3) Realized price is a non-GAAP financial performance measure with no standard meaning under Canadian GAAP. See Endnote 2 at the end of
this MD&A.
(4) Total cash cost is a non-GAAP financial performance measure with no standard meaning under Canadian GAAP. See Endnote 1 at the end
of this MD&A.
THIRD QUARTER OF 2010 COMPARED TO THIRD QUARTER OF 2009
Gold production for the third quarter of 2010 increased by 50% to 37,473 ounces, compared to 24,928
ounces produced in the same prior year period. The increased gold production was a result of mining of
higher grade ore per the mine plan sequencing and leach pad recoveries returning to more steady-state
levels during the third quarter of 2010. Silver production increased to 733,463 ounces compared to 342,633
ounces in the same prior year period. The increased production resulted from highly favourable ore grades
quarter on quarter and improved silver recoveries from the leach pad.
Revenue for the third quarter of 2010 was $61.4 million, which was a 93% or $29.5 million increase over the
same prior year period. The main driver for this was an increase in gold sales of 10,897 ounces and an
increase in the average realized price. The average realized gold price per ounce during the third quarter
2010 and 2009 was $1,234 and $964 respectively, which corresponds well to the average London Metals
Exchange PM gold fix price of $1,227 and $960 per ounce, respectively. The average realized silver price per
ounce during the third quarter 2010 and 2009 was $19.25 and $14.83 respectively, which also correlates to
the average London Metals Exchange silver fix price of $18.96 and $14.70 per ounce, respectively.
Total cash cost(1) per ounce of gold sold in the third quarter of 2010 was $151 per ounce compared to $416
per ounce in the same prior year period, representing a decrease of 64%. The decrease in total cash cost(1) is
due to optimized mine planning, lower mining cost per tonne and the benefit of higher by-product revenues
resulting from higher silver volumes and higher realized silver price during the third quarter of 2010 when
compared to the same prior year period. These benefits were partially offset by the appreciation of the
Mexican Peso as well as higher processing consumables costs, incurred in an effort to optimize recoveries,
during the third quarter of 2010 when compared to the same period in 2009.
The increased gold sales, coupled with a significant reduction in total cash cost(1) per ounce of gold sold, net
of by-product sales, resulted in Cerro San Pedro generating $30.0 million in earnings from mine operations in
the third quarter of 2010 compared to $8.5 million in the same period of the prior year.
Cash flow relating to capital expenditures totaled $2.3 million and $0.7 million for the three month period
ended September 30, 2010 and 2009, respectively. Capital expenditures in 2010 were primarily associated
with a leach pad expansion.
FIRST NINE MONTHS OF 2010 COMPARED TO FIRST NINE MONTHS OF 2009
Gold production for the nine months ended September 30, 2010 was 79,835 ounces compared to 69,721
ounces produced in the same period in 2009. The increased gold sales and production in the first nine
months of 2010 were attributable to the mining of higher average grade ore and improved leach pad
recoveries and were partially offset by the mining of fewer ore tonnes as a result of the delayed receipt of
the explosives permit in the first quarter of 2010.
Revenue for the nine months ended September 30, 2010 was $118.6 million compared to $81.1 million in the
same prior year period. The average realized gold price(2) during the first nine months of 2010 of $1,205 per
ounce compares favourably to the average London Metals Exchange PM gold fix price of $1,177 per ounce. In
the first nine months of 2009, the Cerro San Pedro Mine recognized an average realized gold price(2) of $942
per ounce of gold sold. The average realized silver price per ounce during the first nine months of 2010 and
2009 was $18.66 and $13.75 respectively, which also correlates to the average London Metals Exchange
silver fix price of $18.07 and $13.68 per ounce, respectively.
Total cash cost(1) per ounce of gold sold for the nine months ended September 30, 2010 was $277 per ounce
compared to $394 per ounce in the same prior year period. The decrease in cash cost(1) was driven primarily
by a combination of improved mining costs per tonne planning and higher by-product revenues in the first
nine months of 2010. These benefits were partially offset by the appreciation of the Mexican Peso and higher
consumables costs during the first nine months of 2010 when compared to the same period in 2009.
As a result of the lower costs and higher realized gold prices, Cerro San Pedro generated $47.7 million in
earnings from mine operations in the first nine months of 2010 compared to $17.6 million in the same period
of the prior year.
Cash flow relating to capital expenditures totaled $7.8 million and $1.7 million respectively for the nine
months ended September 30, 2010 and 2009. Capital expenditures in 2010 were primarily associated with a
leach pad expansion.
IMPACT OF FOREIGN EXCHANGE ON OPERATIONS
The Cerro San Pedro Mine was impacted by changes in the value of the Mexican peso against the U.S. dollar
in the third quarter of 2010 relative to the third quarter of 2009. The value of the Mexican peso increased
from an average of 13.27 to the U.S. dollar in the third quarter of 2009 to 12.81 to the U.S. dollar in the third
quarter of 2010. This had a negative impact of approximately $18 per ounce of gold sold.
The value of the Mexican peso increased from an average of 13.66 to the U.S. dollar in the first nine months
of 2009 compared to 12.73 to the U.S. dollar in the first nine months of 2010. This had a negative impact of
approximately $43 per ounce of gold sold.
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