Construction of the Rainy River open-pit gold mine in northwestern Ontario is progressing on schedule reported New Gold in its second quarter results.
The Toronto and Vancouver-based miner said the first major earthworks for the processing plant started in May with completion scheduled for the last quarter of this year. The first concrete pour the primary crusher foundation was finished on July 20.
The development, located 65 kilometres northwest of Fort Frances, is projected to produce 325,000 of gold annually. First production is slated for mid-2017.
Trucks and shovels are arriving in the third quarter with milling equipment showing up at the close of the year. Detailed engineering is 95 per cent complete.
Project spending during the quarter totalled $33 million, bringing the total project development capital costs through the end of June to $120 million. About 14 per cent of the total development capital estimate of $877 million was spent during the first six months of the year.
“Construction activity at Rainy River is advancing quickly and on schedule," said New Gold president-CEO Robert Gallagher in a release. "During the second quarter we had our official ground breaking…we had our first concrete pour for the processing facility, and over the next two months the initial equipment fleet will arrive which will position us to start the pre-stripping of the open pit later this year and construction of the tailings facility in early 2016."
In mid-July, the company announced it had entered into a US $175 million streaming agreement with RGLD Gold AG, a subsidiary of Royal Gold.
Under the terms of the agreement, Royal Gold will provide New Gold with a deposit of $175 million to develop the mine in exchange for a percentage of the future annual gold and silver production from the project. The deal calls for $100 million to be paid up front with remainder paid when 60 per cent of the project development capital has been spent, which is expected by mid-2016.
New Gold will deliver 6.5 per cent of the project’s gold production up to a total of 230,000 ounces of gold, and 3.25 per cent thereafter, and 60 per cent of silver production up to a total of 3.1 million ounces of silver, and 30 per cent thereafter.
"This transaction provides our company with an attractive cost of capital,” said New Gold executive chairman Randall Oliphant in a news release. "By partnering with Royal Gold we have been able to secure over 20 per cent of the remaining development capital for less than 6 per cent of the estimated future revenues. It increases Rainy River's rate of return to our equity holders by approximately 3 per cent. In addition, we have structured the stream in a manner that maximizes our exposure to both the continued exploration potential of the Rainy River district and long-term gold and silver prices."