Feb 14, 2020
Operator
Ladies and gentlemen, thank you for standing by, and welcome to New Gold Q4 Earnings Call and Technical Session. [Operator Instructions].
I would now like to hand the conference over to your speaker today, Anne Day, Vice President, Investor Relations. Please go ahead.
Anne Day
Thank you, operator, and good morning, everyone. We appreciate you joining us today for New Gold's Fourth Quarter 2019 Earnings Conference Call and Webcast as well as our Technical Session Webcast, where we will discuss the updated life of mine plans for both Rainy River and New Afton mines that we released.
Events will be as follows: Rob Chausse, CFO, will present our Q4 and year-end financial results, following which, we will open the lines for a brief Q&A. Once we complete the call, we will talk pause for a brief 5-minute period as we reset for the technical session.
The technical session will be led by Renaud Adams, CEO, along with other members of the management team. But before the team begins the presentation today, I'd like to direct your attention to our cautionary language related to forward-looking statements found in 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 this presentation.
You are cautioned that actual results and future events could differ materially from those expressed or implied in forward-looking statements. Slide 2 provides additional information and should be reviewed.
We also refer you to the section entitled Risk Factors in the New Gold's latest MD&A and other filings on SEDAR, which set out certain material factors that could cause the actual results to differ. And please note that all amounts are presented in U.S.
dollars. In addition, included in the presentation, there are a number of end notes that provide important information and should be reviewed in conjunction with material presented.
I'll now turn the call over to Rob Chausse.
Robert Chausse
Good afternoon, and welcome. I am going to touch on the 2019 year, and I'll do this in a brief fashion as I think the most important part of the day is looking to the future.
Slide 2, on our operating highlights, shows details that are consistent with our February press release, our preproduction press release. Both sites performed well with results with the guidance for the year.
And so I'll spend more -- a little bit more time on Q4. Overall, our quarter was impacted by planned lower grades as we shifted and spent the entire quarter in Phase 2 of the open pit at Rainy River and as we had exhausted Phase 1 of the pit, and that was released in our -- with our Q3 results and also higher sustaining capital.
Our capital intensity for the quarter was planned, and it came in at around $80 million of sustaining capital, and I'll get into more details on that on a slide shortly. And that is expected to continue, by the way, into the first quarter of next year.
So -- and I'll hit on that as well in our guidance presentation. During Q4, the company produced 101,000 ounces -- gold equivalent ounces, lower than 2018, primarily due to the lower grades that I just mentioned, higher costs resulted from those lower grades and the higher sustaining CapEx spend.
Again, on the year, we were in line with guidance on all consolidated production and cost metrics. Turning to Slide 3, our financial results.
Fourth quarter revenue was $139 million, driven by sales of 72,000 ounces of gold at $1,366 an ounce and 17.3 million pounds of copper at $2.69 a pound. Our revenue was 11% lower than the prior year quarter due to lower grades, offset by higher prices than the prior year term.
Operating cash flow before working capital was $0.06 or $39 million for the quarter, again, lower than the prior quarter, primarily due to lower grades and the higher strip at Rainy. Company recorded net earnings from continuing operations of $0.00 or $300,000 compared to a loss of $1.28 last year.
Last year's loss included an impairment charge at Rainy. Adjusted for certain charges, the net loss of $28 million or $0.04 a share compared to $0.01 in the fourth quarter of '18.
Our adjusted earnings include adjustments related to the inventory write-down that's been noted in our disclosure, along with other gains and losses, including an adjusted -- unrealized adjustments on our gold price option contracts and our stream mark-to-market. Lots more detail in our MD&A on any of those measures.
Our Capex, this provides a breakdown. As you can see, as I said, it was an intense quarter.
We spent $90 million. The majority of that work was finishing up some tailings and some wick drains, equipment components and also some camp and other refurbishments.
Our growth capital was -- primarily at New Afton focused on C-zone as we start to move and ramp up that project. Liquidity at year-end -- and cash balance was $83 million, with approximately $335 million in total liquidity.
This is our guidance as presented in our press release this morning, and we'll be talking to in detail in the next session. I'm not going to dig deeply into it as Renaud will be in a few minutes.
But as a company, we're expecting to produce between 465,000 and 515,000 equivalent ounces in 2020 at lower cost than in 2019. When compared to 2019, our sustaining capital is decreasing and our growth capital is increasing, again, due to work at C-zone.
More to come on guidance, as I've mentioned. And with that, that, I'll close out the year-end discussion and open the floor to questions.
I guess, I would look to see if there's any questions in the room first. And if there is just the microphones are on to the -- off to the side of the room.
And then we can open up to the phones if there is any.
Operator
[Operator Instructions]. Our first question comes from the line of Matthew Fields from Bank of America Merrill Lynch.
Matthew Fields
I wanted to talk about kind of 2020 guidance and CapEx spend over the period, understanding that it's going to be an intense period of a few years at New Afton, but you intend to be self-funding. I mean, I think throwing in your kind of 2020 consolidated guidance numbers into the model yields a pretty good free cash flow burn over 2020.
So I guess the answer is -- the question is, what do you think about your liquidity at this point? Are you comfortable?
Do you need to sort of raise more? And how would you go about doing that over the course of the year?
Robert Chausse
No, we're very comfortable with our liquidity and meeting our commitments for 2020 and beyond. We see a company, and again, I'll dip into the next session, we see two Canadian assets generating free cash starting next year at current pricing or at $1,300 and $3 gold -- $3 copper.
So our liquidity is fine. We can meet our commitments.
We can build our mines, and we can get ourselves into the position of generating free cash beginning at the end of this year at Rainy and stay neutral at New Afton as we -- neutral to better at New Afton, as we build C-zone. So our models are -- and our numbers are fine.
Matthew Fields
I'm just sorry. So at the mine level, you expect to be neutral at New Afton on a free cash flow basis at the mine level after this year?
You need to say the last part again.
Robert Chausse
No. Over the next four years, we're expecting to generate cash.
'21 is the year that we come closest to being neutral or slightly below. At current pricing, we're above.
But the years around that, we've got solid cash flow. And like I said, the project will be funded and will have positive cash flow over the four year period with '21 being the tightest of the four years.
Matthew Fields
And then at the mine level, you anticipate Rainy River to be free cash flow positive this year, too?
Robert Chausse
At the end of this year, yes.
Matthew Fields
At the end of this year.
Robert Chausse
At the end of this year, we expect it to turn, and we expect to be free cash flowing for the remainder of its life.
Matthew Fields
Okay. So starting in '21.
Okay.
Operator
Our next question comes from the line of John Tumazos from John Tumazos Very Independent Research.
John Tumazos
Thank you for your service to the company. The $700 million of debt, of course, is a good size number.
If you wanted to place a priority on reducing it, how would you rank the following five alternatives, I know they're not the only five, selling Blackwater, selling New Afton, selling Rainy River, selling stock or selling the company?
Robert Chausse
So we're selling everything. Well, I'll answer it this way.
It is...
John Tumazos
Some people don't like to live with a lot of debt.
Robert Chausse
There's two ways to solve for our balance sheet, and I'm going to talk to it. There's a capital markets alternative and a strategic alternative.
And again, I'm going to repeat myself later, but the strategic brings money from our heavy cash flowing years. And when you see our cash flows post '24, we're generating a significant amount of it.
The other way is to leverage capital markets and move your commitments forward into those cash flowing years. We're going to [Ttechnical Difficulty] and we're active.
Now that we have two plans in place that I can look to and show how we're going to deliver our business and our cash will solve our $700 million bond issue. The immediate issue is $400 million.
It's still due in '22. It's not imminent, but we're going fast, but we're not hurrying and dealing with that issue.
And so ranking, and it's just not something that I want to get into. There's a lot of alternatives beyond stripping out the company, and we're going to look to those to solve our balance sheet issues and the 22 bonds that we see.
Okay. That's it from -- with regards to the year-end call.
So we're going to, as I mentioned, shutdown for 5 minutes and then come back with a great tech session and explain our future. Thanks.
Operator
This concludes the earnings portion of today's call. Please standby for the technical session.
Renaud Adams
Welcome back. Renaud Adams, President and CEO.
We're going to open the technical session. And as Anne mentioned at the beginning, few other speakers would include Eric Vinet, Vice President, General Manager of Rainy River; and John Ritter, also General Manager of the New Afton operation.
Something very important in 2020. We really want the exploration story.
This is mining after all, and mining starts with the ability of discovering and adding and growing your resource base as we go. And we believe that we're poised as we advance in the future to reintegrate really what strategically should be doing a proper and strategic approach in term of drilling.
So Michele Della Libera, our Director Exploration, will entertain you for a few minutes on that. And very importantly, those plans, what does that mean for the next phase of this company?
We've been engaged in what we call a phased approach. 2019, beyond the cost and production guidance and meeting those guidance had a purpose.
And the main purpose was to position the company so we could effectively enter the next phase, where beyond the numbers and the costs and the capital and the AISC and the answers is a tremendous goal and objective to enter and fix and improve our balance sheet and financial and return this company to what it used to be a profitable and free cash flow. So Rob would entertain once we're complete on the technical side what does that mean for this company moving forward, why do we think that this plan really represents the best path forward which would allow us successfully the transition and improve and return in what was and used to be a very profitable company.
So before I go further and deep dive down into the 2020 LOM in on, let me just make a quick stop here on the 2019 year. Rob entertain you on the cost, the production, the meeting of the guidance.
But beyond this, which is very important because when we came in early in 2019 and presented our plan, it was absolutely paramount for us and in order to rebuild our credibility as operator. So when we present the plan we're going to present today, it comes with the confidence that we could beat this plan.
If we could put production and cost guidance at Rainy River after 3 years of -- 3 months of relooking at it and delivering in 2019 at a time where we were basically completing the construction of the asset and stabilizing, yes, we're pretty confident and confident and knowledgeable about the future. And yes, we believe that these plans are achievable and provide for further upside.
So in 2019, as I said, beyond the production in spite of the cost, which was really a transitional year transformationally was the successful approach and execution at both sites. So by the end of December and as we enter this next phase, both assets were perfectly positioned to enter this new phase.
At Rainy, most of the -- most of what we call the deferred capital was put behind us. Yes, we still have some work to do in the Q1, Q2 with trigger -- continue to trigger some higher cost.
But the fact that the asset and the group there diligently put in place those infrastructure, realizing a gold price superior to $1,300, that was our original plan, Eric and his team could prioritize the stripping of the asset. This is big.
Because now as of the end of December, the pit is now positioned so we could turn the corner in 2020. At the strip ratio of -- original strip ratio of 3:1, it would have taken beyond 2020 to reach our objective of turning the corner.
So we could prioritize the stripping, while maintaining and delivering on our cost guidance while we have significantly shift and position now the asset to turn the corner. We worked with the regulators.
We've reestablished our baseline. We understand the geotechnical, not the geotechnical as an engineering exercise, but the impact, what's good, what doesn't work, what should be in, what should be out, everything has been taken into account.
Our experience of '19 with regards to water treatment balance, managing water, we shifted completely the needle to another level. This plan takes into account the reality.
It takes into account an experience, understand the impact of the 30, 40 meters of bad tail on top of the pit and below the tailings and the impact and the waste down to a point that what does that do to keep chasing in a big pit and chasing a lot of waste when at the end of the day were triggered. Those base lines are in the suite.
At the mill, we've pushed the mill. There were some days up to 31,000 when the ore is soft.
We have some days below when the heart of the ore is hard. We understand better the recovery and the effects of [indiscernible] or type.
We've been capable to maintain at the 24, 24.5 for the fourth quarter. And as we move forward, missing as well the impact of what's going to be when we launch the pebble crusher.
We have just shifted this asset to a point where beyond pushing for tonnes and lower cost without cheating and without cutting turner, we've literally and significantly positioned this asset for success in the future. At New Afton, not a surprise, 6, 7, 8 years in a row, delivering the production and cost, which obviously serve the cause of this company with more than $80 million of free cash flow, again, generated helping the cause, the financial, maintaining liquidity and so forth, big achievement.
But when I look at New Afton, I look beyond that. I look at our ability to have launched a season and have significantly advanced.
So we've shortened the impact of not having started earlier. It's a great achievement.
Everything is ongoing now. We've initiated strategic procurement as well for the Teck component, the thickener, the amended tailings, key items.
But more importantly, we have significantly advanced our knowledge again technical. So in order now, with this plan, we believe that the knowledge in term of geotechnicality and subsidence an impact in tailings and stabilization is a true level now we could execute and permit and deliver on time and on budget.
So with that in mind, we've assembled an amazing group at both assets, both under the leadership of their respective general manager with the support of the technical services in the office, the financial team up to the CEO, amazing group of experts, Canadian, international, I'll spare you with all the names. There is a full slide showing you all the QPs and the wonderful people that have contributed to it.
We went out there, and we really truly partnered with who we consider would be truly experts. So we derisk, and not only we derisk but we put the plan forward.
I see a lot of commitment. I see a lot of teamwork.
I see a lot. And very importantly, in this case, creativity in those plans.
It takes guts. It takes thinking outside the box to come out with a plan today that has a significant reduction in ounces and still believing that we would achieve better profitability and free cash flow and NPV over the life of mine.
Those are our three core values of this company. So with that in mind, make a stop a little bit on the global thinking behind it, and I would spare you with the detail, as Eric and John will entertain you after in the detail of it.
But the full thinking of it when we said at Rainy River, the profitable operation at $1,275 gold price, we expect $1,275 gold price for our reserves -- gold price for mineral reserve. By definition, a cut-off grade is what creates and secure the breakeven.
But the most important thing is what does that generate in term of average grade. What is your business?
So the focus here was truly to deliver what we consider the most optimal profitability at $1,275. Meaning what?
Meaning that using the mineral reserve and a cut-off grade of 0.46 to 0.49 which is really based on the medium high grade, you would not only secure what we caught at this cut-off grade, the breakeven, but it would generate significant value. What happens is, as I like to say, each asset, each resource base has a unique -- something unique about it.
Sometimes it's good. Sometimes it's negative.
We've overbeated the negative side of this asset. But what was good in this exercise was the ability as you would look at the open pit by zone was to eliminate some area where you would significantly eliminate an amount of waste.
The strategy hasn't changed since 2018 in the sense that you would still feed the mill with the medium high grade, and you would still stockpile the low grade. The difference is you're not going to design and operate your pit chasing this low grade.
You would design and operate focusing on the medium high grade, and you would keep stockpiling the low grade. You have to mine it anyway.
And when you consider the knowledge and understanding today of the geotechnical aspect, and you understand what this over 400 million tonnes of waste that was reduced in a new plan means in term of operating costs, means in term of additional capital of mining equipment, maintenance, stabilization of waste down. Extra tailings, it truly takes the back of the envelope to realize that you're better under a higher gold price enjoy free cash flow and higher margins.
That was the spirit. For the underground, obviously, at $1,275, knowing that what is the most important aspect of what triggers the profitability is the ability to keep a low milling cost per tonne.
This is key. That's the reason why the importance of stockpiling the low grade and having low grade available so when mixed with the underground portion, you maintain an attractive milling cost per tonne.
So what is included there is $1,275. What makes sense?
At the end, you have some stockpile there, you bring the best stoping on top. But very importantly is the significant reduction of capital.
Rather than chasing this underground at the early stage forcing you from surface to go below the pit and engage in significant development capital costs, you would actually benefit and perfectly sequence your underground as you go down with the pit, and you would benefit some portal. I think the plan is a clever one.
I think the guys have used enormous creativity for that plan. And as a result, we're sitting now in the strip ratio of 253:1, and we still have an average grade of more than 1 grams over this life of mine somehow supported with some underground stope.
And you know the mining in Canada, and you know how attractive it is for any open pit at the 1 gram and a 2.5 strip ratio. Strip ratio is truly what drives the cost structure of an asset.
At New Afton, the self-funding aspect of it was absolutely premodel was the key of it. Yes, there were some, obviously, a lot of information that we gathered and improve on the geotechnical side.
And as John will entertain you, I think you would dissipate significant question mark of our ability to technically execute this plan. But a very important aspect of it was the ability to put forward a plan where at $1,300 and $3 copper -- $3 copper price, or a current spot price of $1,550 with $2.55 or any combination in between will secure the self-funding approach of it.
And not only that, and as we're going to see in a minute, it triggers the upside of even generating free cash flow during this period. And more specific for Rainy River, I thought it would be easier to look at it as a 2 phases.
There is a phase of '20-'24, and there is a phase of '25-'28. '20-'24 is the phase of the open pit, where slowly, you're going to ramp up your underground.
Your costs will remain higher in the first part of 2020 as you complete capital. Everything that was [Ttechnical Difficulty] last year, you push on your stripping, you really expose the ore.
And eventually, as you advance in this period, you're going to slowly ramp up the underground. The beauty about this period is at $1,300, we're very confident we're going to turn the corner towards the fourth quarter or before at better price and become free cash flow.
We're on a mission here. We initiated something in 2019, and we're not going to change our view under pressure because that's the right thing to do.
We still have a few quarters ahead of us to finalize, but we will turn the corner. The average, what I like about this plan as well is it shows 5 consecutive years of production growth and sustained growth, from the 250, achieving the 350 toward the '25 and sustained again '26, it's a very interesting.
And as you grow, your costs will go down with a significant milestone in '22 where the stripping of all this bad ground sitting on top of the pit will be over. And for the first time, the asset will benefit of mining, what I call, like any other Canadian one under pure hard rock with no bad ground to deal with, which should create a significant upside to the operation.
As a result, we see our AISC for that period towards the $1,000 per ounce and will trigger $1,300 of highest $250 million of cash flow, which significantly increase with price. The second phase has really to do with the underground portion of that.
So you ramp up between '20-'24 and you reach your peak between the '25 and '28. You enjoy some stockpile that you have, but on surface during the '20-'24, which will keep your milling costs down and will also trigger very attractive AISC cost of $773 estimated per ounce, obviously triggering significant free cash flow.
But what is really important in that aspect, if you're familiar with the previous plan, you see the growth capital of only $50 million associated with the underground. And you're looking at your sustaining capital in the period of '25-'28 of only [Ttechnical Difficulty].
It's a significant reduction in the April. Very important is, yes, there is some ounces that are left behind in the pit as a result of this new approach.
Some very good ounces are now in the movement and transfer, if you will, to the underground. A lot of the pre-reserve, mineral reserve established in the underground are now sitting in the resource category.
At $1,275 with no more stockpile, they may be sitting in the resource. But as we move forward and establish the underground beside the tremendous upside at a better gold price with or without the exploration to turn those resources into reserves.
So in short, a higher gold price in the period of '20-'24 will -- cannot change our mind to how we mine the pit. The pit shell will be locked and a higher gold price would just increase the free cash flow.
And the reason of that is trying to -- try to use a higher gold price and [Ttechnical Difficulty] and create a bigger pit will create in our view between $500 million to $600 million, $700 million of additional costs, and therefore, not worth doing it. It's better using and enjoying profitability and free cash flow.
However, in the underground, a higher gold price will trigger significant upsides to extend the life of mine. At New Afton, we've looked at about the same way.
We'll look at the period of '20-'24, and we'll look at the period of '25-'28. This is key when you match, and as Rob will show you at the end, how is the 2 period coincide and allowed us to engage deliver on our next phase.
So the '20-'24 is obviously the period where, as John will show you, we deplete the current cave, we entered a bit the B3 zone, we have some period where the production goes down a little bit, but which could be offset by keep adding some good resources and reserve from SLC zone or the surrounding. But nonetheless, and taking into account all these aspects, the '20-'24 remain very attractive in term of production and cost and cash flow which could be reinjected into the growth capital that we've estimated at $460 million for the season over that period with some sustaining capital.
If you take the combination of the sustaining and the growth capital for the whole plan, it has somewhat increased a bit from the last plan but -- the plan, but not significantly has a little more has been added to. Remember that over the years, the asset has been very successful to replace and maintain the level of reserve, which has triggered with time a little more sustaining capital and so forth.
Free cash flow of approximately $1 billion, if you're looking at a $3 copper in '13, if you're looking at $1,550 with $2.75 or any combination in between, including a potential total cumulative cash flow over $100 million during the period you built. The plan is very sound.
And very interestingly, as I said, we believe that we have pretty interesting exploration upside as we return to drill that play. With that in mind, I will turn it over to Eric Vinet, Vice President, General Manager, for a little bit more of detail regarding the plan and the year by year some aspect, key element on the technical side.
Eric?
Eric Vinet
Yes. Thank you, Renaud.
Thank you very much. Good afternoon, everybody.
I will sort of go through this slide of positioning a little bit some of the words that we're going to use in the presentation. When we're talking about the mill, it's located here with the offices; we're talking about the Intrepid portal, it's around here; crusher is there; the open pit.
And Phase II, we will be referring for Phase 2 position over here. And then regarding tailings management, water treatment plant, water management pond is in the back here.
Property is around 23,000 hectares. Renaud mentioned a few times free cash flow.
So these -- this new technical report and life of mine has two objective is to demonstrate that we can bring Rainy River back into the free cash flow position and that after the life of mine that we're presenting can generate the best NPV. Now in order to do so, and the question is always when can this happen?
And the question -- the answer is in Q4 of 2020, and we can sustain this all through the life of mine. Now we needed to look at the pit and to look at the underground.
By looking at the pit, we look at a smaller pit that as -- like Renaud mentioned, which is focused on medium and high grade, but very important is that we're leaving behind 150 million tonnes of waste. And when you take this amount with our fleet capacity, which is around 55 million tonnes, this is almost 3 mine -- 3 years of mining pure waste.
So we're leaving this behind, and this is going to help improving the NPV. When we're looking at the underground mine, and the colored blocks are the one that we will be mining, the fact that we're looking at the stopes and the zones that are very close to the pit reduces dramatically the development compared to previous plan, for which, we had a portal entering Intrepid and then going through all the way below the ODM zone.
So -- and now the ventilation raises. We eliminated that, and now we're entering the different zones from the in-pit with 4 portal, closer, shorter.
Now the gray zone represents the resource, the resource that still can be mined, especially if you have development done and really close with the blocks and colored. The grays are thematic of what could be done to go and get these resources depending on the price at the time.
Now the general approach is that we need to use the cost, the actual cost that we're dealing with. And 2019 was a very good year for which we kind of understand and we've traced, and we followed with different stack chart our cost.
There's also the geotechnical from the site. We're dealing with wick drains, we're dealing with stoping, we're dealing with buttressing at the TMA.
So we needed to factor this in, and it wasn't in the past. Now of course, all of these -- up to all of these geotechnical challenges bring capital.
So we needed to re-optimize the capital, increases capital at certain places, but then we need to see how we can reduce it at other places. When we were looking at the underground as to go and to go where it's profitable.
Now there's a question of timing here of building the underground so we can maximize the head grade from the underground and the low grade towards the end of the life of mine. So it's a question of timing here.
So when we're looking at the open pit, what it does, it's that the strip ratio from the original project is going from 3.72 to 2.53. We're looking for it to construct a TMA that is going to take 92 million tonnes processed on instead of 120.
And we're also looking at an impact on closure cost because we're going to have like a smaller West Mine rock stockpile, little bit smaller TMA compared before. On the case of the underground, significant reduction by accessing five portals, four from inside the pit closer to the ore bodies.
We're looking actually for this higher grade to be factored in and added with the low grade towards the end. So LOM highlights.
We're looking at to produce 2.3 million ounces. Cash cost at $665.
Cash flow, $557 million. Capital, $586 million.
There's a $56 million, which is related to the underground portals, ventilation raises, [indiscernible], the ones that we will need for a different zone, 5% discount and NPV of $421 million. The mineral reserve, what we need to understand is what's the situation with the reserve.
Now the blue outlines the new pit, the orange outlines the old pit. So we haven't really lost the metal.
It's just that it's not economical to mine it. And when you look at all the white all around, this is the 150 million tonnes of waste that I'm talking about.
If we look across section, again, the in between, we can appreciate the big amount of waste that is everywhere in between the ore zones that we need to pull out. So if we don't push the pit from the blue line to the orange line, then we don't open it up on the sides.
If we don't open it up, then the reserve, the resource, the measured and indicated and the inferred, which are in between the two lines, are not going to be taken. So basically, this plan is looking at producing medium high grade for 46.3 million tonnes.
We're going to mine 21 million tonnes. Our peak stockpile is going to be in '20-'24 for the low grade.
We already have 5.9 on the property, for which 1.7 is medium grade. The underground is going to produce 4 million tonnes.
And so we were going to mine a total of 75 -- 77.5 million tonnes at 1.06. The impacts in between the 2 projects on the reserve is the cost.
The cost is the big driver. And the other one is recovery based on the metallurgical model.
But at the end, like Renaud mentioned, the reserve that we're going to mine with this pit will bring a stronger free cash flow starting in Q4 of 2020. Now if we're looking at the impact on the underground reserve, the small 2 blue lines that we have here and here are a transfer from the open pit reserve to the underground reserve.
But the gray is the underground reserve to the underground resources. So basically, from the original drawing that we saw, we could still go and get those resources.
It all depends on the price of gold so that we can actually continue this development. So we're looking at mining more profitable underground areas if it -- price of gold, and that was it.
Again here, measured and indicated and the inferred small drops. We're not pushing the pit towards the bottom.
We're not opening the site. We're leaving it behind.
Key milestone. We're looking through the life of mine.
2020 is a very important year. We're working with an optimization firm to improve on our process.
We can see that during the year, we're doing small raises at the TMA on every year. We're talking at about like one meter, 1.5 meters lift on 8.5 kilometers.
This is what we need to do. We've just started to address the geotechnical issues at the east mine rock stockpile with wick drains that we started towards the end of the summer.
We will complete this year. We will start a portal in the Intrepid rock.
We want to drive 600 meters and to go and see that ore body. And we want to discharge big, big thing this year.
We need to discharge water, like if it's a normal activity. The site hasn't discharged water yet.
We're always accumulating and we'll build into old water, and this is one of the problem. We need to start discharging, but we've put all -- a lot of the elements in place during 2019, and we're completing in 2020.
So we're in position to discharge water. We're looking at 2021, we will be mining and raising the TMA.
2022, overburden stripping. We will finish the overburden, so we'll be in a position just to mine rock like any other open pit.
And also, we'll have the first in-pit portal, which is going to be zone 17 that is going to free up. 2023, mined the open pit, start ramping up the underground production, raise the TMA again.
2024, third portal is going to open up as we finish Phase 2. We will be able to go at this 433 and HS zone from the underground, raise the TMA a little bit.
2025, this is where the pit is going to be exhausted, in Q1. We still need to do a TMA raise at that year, so we can process for 2026 to 2028.
Now when we're going to finish in '25 the pit, that's going to allow us to open up two other portal to go below and continue mining right under the pit. 2028, it's like a -- this is where we're going to process the low grade, and this is where the mine needs to be at its peak production, so we can use the best grade coming from the underground and mix it with the low grade.
For looking at mining, the assumptions that we used when we're looking at the mine physicals, okay, is that we need to use the current prices. Everything that is costing us at the moment, we need to use this, and this is what we're doing.
We're assuming productivity performance with a little moderate improvement. This is what we've used into modeling this.
Slope over -- sloping of the open pit was not really considered in previous report. It was done with shovel and trucks, and actually you have to put some dozers and bring it the 8:1.
So there's an increased cost here that we're addressing. The wick drains, and of course, in these conditions is that the pit can supply the NAG that we need to do the down slope buttressing of the TMA.
The pit is -- can supply all the life of mine. In 2019, we actually had to do a quarry just to supply this.
If we're looking at the underground, we had an updated cost that -- with AMC that we're working for -- with them on the underground. So the underground was factored with the cost of today, what's ongoing at the moment.
Looking at 5 portals, and we're using the same mining method as in the previous report. So we stayed consistent from one report to the other.
And again, we're looking at starting, this year, 600 meters of ramp to go and see the Intrepid. For this technical report, we did a new -- sorry, metallurgical model based on the hardness and the recovery.
So we're applying this new model through the life of mine on the process portion. A graph of the different head grade and the mining production is going to be followed by the table.
We can see the profile of the head grade of the pit as we're advancing towards 2025. Quite important here is in 2019, we can see the mine production in terms of ore.
So only at 6 million, 6.8 million tonnes. And then in 2020, we're going towards the 13 million and the 15 million, so we'll understand why a little bit later on and then the associated answers.
So we're creating a more profitable pit in the underground at $1,275 in these conditions. 2019.
We need to understand 2019 here because we produced 6.8 million tonnes, we have produced ex pit tonne at 43 with a strip ratio of 5.33. If we're looking at 2020, we're going out 13 million tonnes, and then 15 million and then 10 million, but we're looking at the ex pit of 55 million tonnes in a row.
And this is where the big difference is, is in 2019, we needed to mine what we've called Phase 1. I've reported several times on it.
So we had the equipment, have to go at the bottom of Phase 1. At the same time, we took out 16 million tonnes of overburden.
We needed to produce NAG for the buttressing of the TMA. The pit was not supplying that because going in Phase 1 is [indiscernible] country, and then we're in a -- we're overburdened, so nothing for the TMA.
So we actually mined 6.3 million tonnes outside of the pit as a quarry. And then since the pit produced only 6.8 million tonnes during that year, we needed to take 1.2 million tonnes from the stockpile.
So you've got all these big equipment during the year going from Phase 2 to Phase 1, to the quarry to back to the -- back to stockpile, and they were running around like that. So you're not set up to have really efficient mining and bringing some lower costs.
So 2019 was done, we had to do it. It is there.
When you're looking at 2020 and so on, we're looking at Phase 2. All the equipment this year is in Phase 2 and Phase 3 is right beside it.
So the equipment is actually working on benches -- big on benches, and we're just mining it like we should be mining instead of being having the equipment at 2, 3 places differently. So this is going to change, and this is why we can produce this 55 million tonnes during the year of ex pit because everything is at the same place.
This ex pit tonne also is going to help us with the tonnage factor, when the impact tonnage, for reducing cost is going to help us out also. Here, we're going to see a few slides similar to this one, which represents pit production -- pit sequencing.
They're all at the end of the year, for 2020 until 2025. So Phase 2 is this one, and this is the one that we're advancing this year.
And for the bulk of the mining in 2020 is going to come from this place, initiate the bottom and the back here, which is a little bit of Phase 3 at the same time. We're going to advance in 2021.
But then in 2022, that portion of the pit is going to be completed. We will be able to initiate our first in-pit portal for what we call the 17 zone, right here.
We're still continuing for the 433 and the HS zone in Phase 2, which is over here. So we're progressing.
And then in 2024, Phase 2 is completed, zone -- 433 Zone is available, we can start another portal and drive the underground mine from that base. And at the year-end, we finished the pit, the ODM.
We're in position to start the other two portal, go below the pit and take what's there. If we're looking at the underground physicals, we've said that we wanted to start the development so that we can maximize production, around 2025, and then do that 1 million tonnes a year in 2026.
So we will have to slowly ramp from '23 to '24, but we need to look at the nice upgrade that is going to come from the underground. And this is why we need to go there and then maximize this grade with the lower grade towards the end of the life in '26, '27 here.
Okay. The underground physical, mining -- same mining method.
That was what I said previously. We're mining for 4 million tonnes from underground.
Peak production is going to be 3,100 tonnes per day beginning of 2026. Average -- we saw the grade at -- the average grade for the life of mine is 4.17.
Our fleet is going to pick up, but the ore is going to come out from the underground portal. There is going to be a small stockpile.
And now the fleet is going to go where the lower pit and material and bring it to the crusher. Here, it's a planned view of the sequencing from the underground.
We have the Intrepid Zone on the right. 17 is going to start from the first one, from inside the pit, then 433 and finally, the ODM when the pit is going to be completed.
Cross-section of the same. Intrepid again, the two.
And this one, we're only showing what we are going to mine with this life of mine. But to remind you that in the original slide, the first at the beginning, all the resource that is there is below, and again, if the gold price is there, we will be able to continue mining depending on the condition at the time.
You're looking at mill production. Again, we can see that the head grade is 2020.
'20 is at 0.95 but slowly coming up. What's very important is it's maximizing throughput over the life of mine.
Mining -- milling this 9.5 million, 9.6 million tonnes steady for the 8 years is what we're shooting for. Now there's the uplift in the grade during '24, '25 and in '26, '27, mainly comes from the underground.
We're looking at the 2019 mill production. We did 8 million tonnes and we're going after that for 9.2 million, 9.6 million, maximizing the throughput here.
Coming back to what Renaud was mentioning, our gold production is going steady, steady -- increasing steadily from 2020 up to 2025, 2024, which will be in the 300,000. All of this is modeled with the new hardness and recovery model, as factored in here.
Okay. Now coming back to the TMA.
When we're talking about the TMA, we're talking of the north dam. If some people heard about it, the north dam is this section.
When we're talking about the west dam, this is that portion, and the south dam is this portion. The large gray zone is the buttressing that we need to do to maintain our safety factor of 1.1 - 1.5, sorry.
And when we're looking at the TMA, we've addressed in the past cell 1, cell 2, cell 3, but in the month of October of 2019, all of this is one big cell. So today, when we're talking of the TMA or the tailings management, it's one big cell.
Water management plan is at the south here. BCR 1 is here.
And BCR 2, which is our final stage for cleaning the water and having compliant water, is right -- is being constructed on the south here. Now tailings and management -- water management, this represents 30% of our capital.
Since we need to buttress and keep these slopes at 11:1, we need the rock from the pit. There is significant work that was done in 2019 to allow us to discharge the water.
Water treatment plant was commissioned in September, and we've processed up to 20,000 cubic meters of water per day in October. We've managed to install the diffuser in the Pinewood River late November, so this is one of the conditions for us to discharge, how it was done.
And BCR 2, which is the final treatment stage so we can have compliant water, was initiated at the end of 2019. And we're looking to complete this by spring of 2020.
Now the day that we will be able to control this water balance, and it's coming during this year because we need the discharge, we will be able to get back at the TMA and look at how we can reoptimize the slope because it's where, at the moment, the construction is done to hold water, because we're having discharge. But after this year, when we will be able to discharge water as a normal activity, we could go back and resee if we can reoptimize this TMA construction.
Operating cost. Now the cost of the open pit in 2019, we're talking of $3.32.
We factored, like I've mentioned, the improvement that we've already realized. There's going to be an impact tonnage, but there's also the managing and the optimization through contractors.
Contractors were used, but there's a moment for which we need to start working with our own team. And this is what we started to do with this life of mine, is to start manage and optimize our contractors in the different department.
So we're looking at this profile in cost for the open pit. It starts going up in 2024 because there's a portion of the underground that's factored in here.
So if you just want to look at the '20 -- the open pit portion is from 2020, '23. The table of -- supporting the graphs, the $3.32 of 2019, the open pit we're going for $2.74, $2.57, $2.84.
This is more of -- in line of what we're living at the moment and we're shooting for. If I go back to the 2019, and I take the work that was done in the east outcrop, the 6.3 million tonnes, and I bring back the cost that was done, I would have actually a cost more around $295 million.
The underground mining operation. 2022, '23 is in development.
So it's the higher cost, but after that, the objective is to bring in line mine production around 2025, like the graph is, and to produce this 1 million tonne per year. Of course, mining cost is going to go down as the development is finished.
A table for the underground mining, peak production again for 2025 that we're working for. Processing, since we're optimizing the mills with the maximum throughput through the life of mine.
And there's going to be the impact tonnage here through the life of mine, reducing the cost for us. Lost the effort and the work that was done on the reagents, the different grinding media, all the small optimization that is done, working with the contractor and reusing them helps us bring the cost down, but it's maximizing throughput is the big driver here.
Processing costs. Again, we're looking at passing from 8 million tonnes to 9.2 million, 9.5 million and the cost profile from $7.5 to $7.28 over the life of mine here.
Site G&A, mainly driven by processed tonnes, $4.25 in 2019, going to $3.50. There's a small reduction as we go, the difference we purchase the camp.
So we're not renting the camp anymore. And also, there's another reduction here but it's because even if though there is an increase in manpower for the underground mine, this is charged to the underground mine and not to the open pit G&A.
When we're looking at the capital spend, the $642 million, $301 million is for the open pit. So what's in $301 million?
We're talking here about BCR, the principal component repairs, it's track frame, motors, maintaining the fleet of dozer shovel trucks throughout the life of mine is in here. Everything that is overburdened, deferred waste is in here, sloping is in there.
So this is a cost that we need to have for the material -- to move the material, if it's not in the capital, it's in the operation. So we have to work with this one to move the material.
When we're looking at the underground sustaining is at $64 million. And then there's the underground, nonsustaining $56 million, which is mainly related to the ramp and the ventilation system passes.
Process and tailing, $185 million. Here, it's -- the several dam lift that we need to do, the butressing, the barge, the booster station that we need to install.
All of this is factored in here. Now when we will be able to -- when we will manage this water and we will be able to discharge, we will be able to come back and work on this $185 million, so we can design the dam differently and then improve the cost here.
Infrastructure is mainly related to completing the truck shop that we started warehouse and the wick drain campaign on these mine rock stockpile is included in the $26 million. When we're looking forward, at the moment, we're looking -- working with a firm, so we can improve the cost on the operation.
We already made significant improvements on the drilling, on the blasting, which improves also the cycle time. We're looking at heating, so we can have the trucks running for 11 hours, 11.5 hours and changing operators.
Overburden is going to be finished in 2022. And when we're going to have the new truck shop and the warehouse on-site, it's going to help us a lot in giving better availability to the equipment.
Looking at the TMA, the tailings, this year, too, again, we're focusing to finish this by spring and start discharging water, compliant water as our normal activity. We're going to be able to do that.
We'll be able to go back again and then work on the sloping and try to seek to improve this TMA construction. Concerning the underground, we saw in one of the slides the gray portion of the resource, depending on how it's going to be, the gold price, towards the end of the mine, the life of mine especially, where we can go back and continue and transfer some resources into reserve and mine these.
But this technical report is a window on 7 years, and this is right after those 7 years. Exploration.
I will not talk, I'll leave Michele when he's going to have his portion. Thank you very much.
I'll pass it to John for New Afton.
John Ritter
Excellent. Welcome to New Afton.
I'd like to discuss some key features that are important in this presentation. To the top, we see our current tailings facility which we call the New Afton Tailing Storage Facility, NATSF.
To the right of the page is our Historic Afton Tailings Facility, HATSF, and to the left is our historic pit. Over the past year, we've worked hard to further derisk C-zone, and there's 5 key items I'd like to discuss during this presentation.
We're going to talk about how we've fully integrated the B3 C-zone mine plant, talk about our geotechnical studies, our mine design, subsidence and tailings update, how we're going to dispose of our tailings in the historic pit, and how we're going to stabilize. Important to the success of this is our permitting time line.
And we'll go through capital and operating costs. Some key highlights of the technical report.
We have a low production period, 2021 through 2024, we'll talk a little bit about that. We've got some upside potential with further levels lower in the C-zone -- or SLC area, as well as C-zone production begins Q4 2024.
Most importantly, as Renaud mentioned, we're a self-funded project, creating $1 billion free cash flow dollars. Some highlights over life of mine.
918,000 ounces of gold, 746 million pounds of copper at an attractive price, 610 ounce equivalent gold and an NPV of $735 million. 2019 year-end reserves keeps us flush with 1 million gold ounces and 802 million pounds of copper.
If you could see on the chart on the right, we've managed to maintain a relatively stable reserve resource statement, which, as Renaud explained, exploration has some great upside potential. My colleague, Michele, will talk about SLC, D-zone, East extension.
We managed to convert some of these up -- near-term levels in SLC, convert them into the mine plan and going after them. This chart depicts the detail of our mineral reserves and resources fully vetted by our QPs.
Let's talk about mining. This chart shows our schedule.
On the left is our Lift 1 east and west case, ending around '21, '22. We've ramped up B3 during that period that we ramped C-zone up in late 2023 with full production and '24.
As I mentioned, this period here in the low production has some opportunity for SLC resources if we find them. Mine production.
I want to talk a little bit about the back story. To date, New Afton has developed 44,000 linear meters.
Important in 2019 here as we ramped up our development program. Our team -- dedicated team came through, met the total meters, and come in on cost and on schedule.
This is very important for our future success as we further drive the development period in 2020 through '24, bringing in C-zone. Lots of potential upside for incorporating any near-term or resources we find.
As the chart explains, we could see some great ounce production from 216,000 ounces here, 297,000 reaching 450,000 ounces in 2027, realizing almost 3 million ounces of gold equivalent. Talk about mine development.
2020 through 2024 is our key capital development period. You can see it dropping off in 2024, which plant it's in with our '20 -- with our C-zone ramp-up period.
This chart illustrates we'll be ending major capital development in 2023 and finishing off capital development in 2026. I want to talk about B3.
So B3 is our ore body that will utilize trucked ore through loading chutes up to our current gyro facility. It's anticipated with 61 drawbells.
It's got an optimized apex level and our standard undercut extraction and haulage. Let's talk about C-zone.
We've introduced the split level cave design on the north and south perimeters. This split level cave design lowers our horizontal stress ball further down to the bottom of the cave, leaving reduced geotechnical risk and less convergent risk as well as less potential rehab, which lowers our costs overall.
Talk about C-zone. C-zone is a dual access decline, 3 conveyors heading down to our main footprint, 142 drawbells are anticipated.
We removed the apex level in this design, optimizing that. I've mentioned we introduced our split level cave design on their perimeters.
We have a gyro crusher at the bottom here where we will transport the ore up. We've done extensive drilling and stress modeling to understand as we head down those declines into our lower footprint.
C-zone is located 550 meters below Lift 1. We'll have a chat about processing and tailings.
We understand our ore well since 2012. Our grind throughput recovery modules -- recovery models are great, hence, why we've set these mill rates to maximize our throughput through the life of mine.
Complementing that, we can look at the chart on gold recovery. We see values of 86% over the average life of mine, and copper reaching 90% with 2.6 million ounces recovered through the mill.
This chart illustrates our hypogene ore in blue. C-zone on the right has plenty of hypogene, ore-predominant, less altered minerals at the top.
The hypogene ore is well understood, easily processed, has great flotation characteristics. We know this because we have a nice plot of it and Lift 1.
We'll talk a little bit about our thickened and tails project we called TAT. Phase 1 comprises of a paste thickener on the left, and our mixing plant Phase 2 on the right.
This project is well defined, well planned, and we're breaking ground on Phase 1 in the near month. We've got a team of experienced professionals and consulting engineers that has helped us with this.
What is TAT? I know everyone's asking that.
So what we're doing is the paste thickener will bring our solids to a range of 58% to 61%. We will add a 1% binder amending it, thickened and amended tails, which brings this to a nonflowable state.
That's an important item to remember. Why this is important is our preferred area for depositing this is in the Historic Afton Pit.
We're taking advantage of this pit from the old tech days. So what we're doing is we're putting the entire C-zone volume, there's plenty of volume for C-zone and additional volume for D-Zone, SLC, et cetera.
An opportunity we're looking at is the percent ratio here in the future. We believe there's some potential savings of reducing that cement cost with some further work.
Putting this into the pit, improves worker safety and minimizes our environmental impact, the key item that we strive for in our sustainable program of mitigating, minimizing our environmental influence. So 2019.
We'll go through some sequences of 2019 until the place is fully stabilized. So back to our key features on the top is our Historic Pit.
Our current facility is where we're depositing tails right now. And to the left, bottom left is the Historic Afton Tails facility.
2020 tailings operations brings us in the blue zones. We start stabilizing these areas for our B3 operations.
First half of 2021 and 2022, we bring our thickener online, we start bringing thickened tails up to our New Afton Tailings Facility. This is advantageous as we could remove more water, which will help in our ultimate dewatering effort.
We further advanced on the Historic Pit in the blue shaded area and increased stabilized zone. Looking at a close look, this illustration, not to scale, gives us an idea of B3 in first half of 2021 and '22.
B3 area will be stabilized. And this is a contemplated zone for C-zone stabilization.
So we'll be taking a swath of the current facility and making that non-flowable. Bringing it all together, in 2022, we'll have our current facility stabilized on the lower right, the Historic will be stabilized to -- for C-zone production.
We'll be depositing our thickened and amended tails into the New Afton pit. Subsidence.
Illustrated on the left and right are subsidence influence zones. We received an updated back model, January 2020.
They're our modeler for this program. The modeling demonstrates on the left, there will be no interaction to the tailings facility due to Lift 1 operation.
On the right, B3 shows no potential interaction with the dam. This needs to be further vetted with our EURs and consulted systems product reps.
We're still not sitting on our laurels here. We'll continue dewatering as if we're going to have that interaction earlier contemplated in the design.
Are these important? This really helps us with our design, scheduling and operations sequence and maintaining the stability of our dams, safe -- safety for our workers.
Our modeling correlates well with our actual field measurements. So the purple here is our model and in blue, blue diamonds are our actual results.
This is important to understand. Again, when we anticipate interaction and setting back our milestones and sequence for stabilization.
Our subsidence areas are well instrumented, as you can see. These are tied into real-time data.
Why is this important? It helps us understand our modeling, our actual results correlation.
It helps our scheduling of stabilization and keep -- most importantly, keeps our dams, the solid workers safe. We've done an extensive program of subsurface monitoring, understanding and improving on our geological structure data.
This is important, tied to the bedrocks subsidence on the surface, geological structures helping tie that in. As I mentioned, permitting, we have 2 key permits, B3 permit, which we expect to receive first half of 2021 and our C-zone permit, first half of 2022.
How are we going to do this? While we've been working hard with early and intentional, transparent engagement with our First Nations group, our very important partners, and our key stakeholders.
We've got a positive relationship with our government. Positive, I say, as our recent newly appointed BC Minister of Mines came to our site last week, committing to keeping our operating mines operating and our BC mines competitive.
We went through our permitting needs and further commitment to take back to his office, to work hard on permitting in a timely fashion, meeting our anticipated needs for the milestone dates. I want to go through -- this is a smidgen of a list.
As Renaud mentioned, we've reached, nationally, internationally, for the best consultants, engineers that we can to help us make this project successful. We'll talk a little bit about our mining costs during the period 2020 to 2024.
As I mentioned, the costs are higher due to the volume decrease during that production period as well as we're trucking for B3. We can see we level off in 2024 to a stable, attractive mining rate and cost structure.
As I mentioned, 2021, we see a change in our cement addition due to thickened and amended tails here, which remains relatively flat, slightly decreasing through the life of mine. This is the opportunity we're going after to drop that cost structure down.
The numbers, we could see supplies and consumables, '21 to '22, we go from $1.82 to $3. That's the opportunity we're going after.
G&A costs remained relatively stable over the period, a slight increase due to the lower production period and volume accordingly. Let's talk about capital, $635 million, $460 million nonsustaining.
We can see during the 2024 through -- 2020 period through the 2024 period is our largest spend. I want to talk about the mine development.
Mine development costs are 33% of that. And as I mentioned before, we've done 44,000 meters of development.
So we're confident in the cost and the certainty of this. Combine that with our projects, we've got excellent integrated operations and projects team.
This is important to ensure the best capital certainty that -- and success of our capital allocation during this period. We can see tapering off 2024 through life of mine.
Other opportunities. Focusing in on TAT, we're going to go after our cement.
That's a big contributor to our OpEx costs. We're going to go after that and reduce that.
Subsidence and stabilization, we have opportunity to look at the area of stabilization closely and the mechanism of how we're going to stabilize. Importantly, one of our key values is innovation and creativity as well as minimizing our impact to the environment.
So we're going electric with C-zone. This is going to reduce our carbon footprint at least 50% or more, and we're going to automate this thing.
So thank you. I'd like to introduce Michele.
Michele Della Libera
Thank you, John, and good afternoon, everybody. With that -- with the exploration slide to see what we advanced during 2019 in both assets.
At Rainy River, we are still in the [indiscernible] step of the exploration activities. So we are still in the reconnaissance level and was done during 2019, combined with the historical data shakeout, two important and priority targets for follow-up drilling on the northeastern side of the New Gold's broader tenement, an area that we call northeast trend and is related with approximately 15 kilometer of shear zone.
But we are trying to define a completely different mineralization than the volcanic massive sulfide deposit that is Rainy River and focus on unlock a potential for high-grade shear zone or a shield type of deposit. New Afton.
New Afton is a lot more mature as exploration. We never pulled our activity during the last years.
And with the fastest [indiscernible] for -- and definition of C-zone, then in the past year, we are now entering in a new phase to see additional potential for a certain resource to expand the life of mine at New Afton. This year, we had two targets underground near mine and one on the district space.
And we had another one that I will go through in the next few slides. The first one of the target was a delineation infill program, but we had to improve the confidence of the SLC mineralization.
We were successful to both delineate the reserve and resources that were as a target, and we succeed and we increased twofold the volume of the SLC. As John mentioned before, have already 3 lift add to the life of mine.
We develop more resources. And what we also designed is a new set of mineralization.
The core of SLC is high grade for both copper and gold. Second target was exploration down plants to the C-zone.
To define the new called D-zone is a tricky architecture structurally, and we were drilling from the available drill bay underground, so not at the really best angle to achieve the target. We drilled 5 holes and one even from surface that was abandoned for technical problem.
What we have seen through the drilling and the asset result is that the body is pinching, and we couldn't get through -- and the depth of the drilling is around 1,500 meter below surface. So we postponed additional drilling to 2021 when the development of the mine reach the base of C-zone.
But something interesting and is related with the historical data we have. Underneath the days of the C-zone development or the block cave that is planned, we already have inventory of mineral resources in M&I and inferred that is around 10 million tonnes with average ore grade like C-zone and is within the dash line underneath C-zone.
This is the area where we have this inventory, and we still opened up that. Another target that I mentioned before wasn't really the target that we had at the start of the year.
It's what we call the SLC Deep, and now we changed to Extension. It's a new mineralization that we have defined that is beneath SLC and the parallel to the east of the C-zone and D-zone.
It's an area that is in plan 300 meter by 40 and with a column to that -- that we know right now is 700 meter. What is interesting, the upper zone that we drilled after having good result from all the SLC, all that expanded down deep.
The mineralization is similar as SLC. And again, we have really a high-grade curve for both gold and copper, and you can see the highlight of the result on this slide.
What happened after we defined this new zone, this East Extension? We have -- we went back and tried to define and refine our geological model.
The geological model at New Afton was related with the tabular body that was starting from surface on the old tech open pit down to the D-zone. With the new data and the definition of the East Extension zone, we are trying to remodel, and obviously, we need a lot more data to define and refine this model.
But as to date, we are thinking that instead of being 1 tabular body, we have 2 parallel dilatation zone, one with the pit is caved as a C and East zone, East Extension zone, and another one that is containing the West Cave, B3, C-zone and D-zone. And you can see on the slide both the long section and the plan view with 2 interpreted dilatations.
And why it's important is because if this is the case and we will assess the model, is that if we have 2 dilatation of some parallel open to the East, a possibility for a repetition and so to find a new mineralization. And last, at New Afton, an important target that we are chasing is -- at a distant scale, is a 12-kilometer-long structural trend called Cherry Creek trend and is only 3 kilometer away from the mill at New Afton, so has a potential for discovery and so a potential to add life of mine.
The work done so far was inclusive of geochemical survey, all through the land package and the geophysical survey. The interpretation of both data and -- has defined several anomalies, both for -- across the surface, epithermal gold and deep-seated copper and gold porphyry, similar to New Afton.
Thank you very much. I will now turn to Rob.
Robert Chausse
Thank you very much. I guess my job here now is to take all of that detail and distill it into my favorite thing, cash flow.
So this is a chart that shows 2 lines, and really, it speaks to how we're looking to solve the balance sheet issue that we face, and that is a $400 million bond maturity in '22 and a $300 million bond maturity in '25. Bottom line, under each of the scenarios that are there, on a base case scenario, at $1,300 gold, $3 copper, we generate over $1.6 billion of operating free cash.
And at a optimized case or the expected -- or sensitivity pricing case, the expected cash flow generation is over $2.2 billion. And that's sort of the -- this chart itself is -- the bar chart is done at base, with the dark color being New Afton and the -- or the lighter blue being Rainy River.
You can see in both cases, post '21, as I said earlier today, we've got two assets in Canada that are generating free cash in those scenarios. This chart is, again, bringing together some of the bits and pieces that the guys I've presented earlier.
I think I'll point out just a couple of things here, in the '20 to '24 time period, all-in sustaining costs at Rainy are just over $1,000 and just under $800 at New Afton. As we move along and some of the sustaining capital gets removed and gets cleared out of the way, we see our all-in sustaining costs dropped dramatically, coming to our life of mine cost of under $1,000 in both sites.
The -- one of the key pieces of this is when you look at sensitivity versus base case, Rainy River's NAV and cash flow is double or more than double. So very, very elastic to gold price.
New Afton, not so much the case. The trade-off between copper and gold kind of keeps them -- it's positive, but it keeps them in the same range.
So I'll go back to the slide that I just presented and speak to it a little bit. But really, as I look at our balance sheet and what we need this all for, it really comes down to the 2 alternatives and arrows that are on there.
And that's -- there are strategic alternatives and there are capital markets alternatives. The strategic alternatives obviously have us bringing back cash flow from the big years into this year and utilizing it to take care of that $400 million.
Alternatively, the capital markets alternative has us moving some of that $400 million into later years to match up with our cash flows. And just as a side note, capital markets alternatives don't include equity in this piece.
So I can tell you that we're working very hard on this. There's not a happier guy on earth that have 2 plans that I can speak to, and I expect that there will be solutions that combine both of these alternatives in the near term.
We're not going to let this go until 2022 and have -- and talk about our balance sheet consistently from here until then. With that, I'll turn it back to Renaud.
Renaud Adams
Okay. Hope you can -- looks like there is maybe a problem with the -- back with a microphone.
What we just heard over the last 1.5 hours or so, which, take for granted, of course, we'll be filing our technical report within the next 45 days, so we believe that this presentation and any other information, you can find in our website. We'll provide a lot of details for everyone that's here, with a few analysts in the room here today.
We'll be out there telling our story, of course, and answering questions over the next few weeks down the road. Beyond this presentation, as you heard today, is the tremendous opportunity as we entered in a new phase to improve on our balance sheet, returning to the profitability and free cash flow, which will position this company for a very interesting and exciting time down the road.
At Rainy River, you heard Eric detailing his plan. The priority obviously at Rainy River will be to turn the corner somewhere in 2020, and should the price remain higher, the gold price, there is obviously an opportunity to turn the corner earlier.
We expect the costs to remain high in the first half of the year as we complete and put the capital behind us. But once we turn the corner into Q3, Q4, we will remain at a price of $1,300 and above.
We will remain at free cash flow. And quite frankly, as you saw as well, the cost going down as we advance in the period of 2024.
This will position Rainy River in a very attractive free cash flow, which will allow, at the same time, to improve and our impact in the community as well. We haven't talked much about it.
This is a technical fashion. We haven't talked much about the sustainability aspect and what it does and our tremendous commitment to our people and the community and extending the life of mine.
While in the short term, it may look like a reduced life of mine, it actually provides a profitable path forward, which is the basic of returning money in the ground and providing stability around. And only stability and profitability creates opportunity.
So we believe on the sustainability side in all aspect of the people, the employee and stakeholders, another very important core value of this company. This plan will significantly shift and move the needle as well.
We haven't talked much about -- we're not saying at all in the Blackwater. I just want to touch a quick base on the Blackwater.
In 2019, we've completed an internal scoping, which stop me and limit me to talk about the result of it as it was not a 43-101 compliant, but a pretty detail. For those of you that know me, I'm usually not saying too much unless it's official.
And we dived down pretty deep and the opportunity of -- and learning from the Rainy River exercise where you could benefit and improve grade and lower waste, lower strip ratio. The question of Blackwater was always, could you make it higher grade while you would not lose the most important aspect of it, which is the strip ratio?
So we're very pleased with the result we've seen internally. And over the few months as we advance, there will be some decision made.
What's the next step? As we enter this next grow and fix and improve our balance sheet and we become profitable and free cash flow, while I'm not saying I'm here to tell you today, we're going to announce them all, we're going to build Blackwater and inject a billion.
But when we open a tremendous door, what do we do with 8 million ounces that we think when we thought could generate something interesting? With the view that Blackwater and this 8 million ounces currently valued at best, and there is an institute, is the best optionality of this company.
So we'll start paying much more attention. And as you know, in '19, we have -- we received a tremendous support of our partners, First Nations and government, and we shifted significantly with the approval of the Federal, Provincial.
And unfortunately, with the situation we were before, there was not much we could do in the short term. And as we advance and improve through partnership with others, there could be some interesting opportunities.
Too early stage. You heard Rob.
We still have the transitional of improving our balance sheet. I just want to remind everyone that eventually, we will be talking over the best optionality of this company moving forward.
In short, this presentation was a huge update to our story. We definitely come here today as a day 1 of a new phase of where we're going historically for this company.
We've been struggling for a few years. And now we feel that we're turning the corner.
And on that, I would open the floor for some Q&A.
Renaud Adams
[Operator Instructions].
Unidentified Analyst
Maybe I'll start on the financial side. On Slide 123 is -- there's some pretty good details here.
Just to understand, are the free cash flow projections here net of corporate items, including interest expense, G&A?
Robert Chausse
The only things that are here are G&A and finance charges. So our Rainy River streams, all that sort of stuff, are included.
Unidentified Analyst
Okay. So in a -- in the current situation where not the full sort of expenses are included, and you know you have $400 million debt in 2022 and you'll be generating less than that, what do you think is a realistic outcome at that point with the result, the debt situation, each of that versus maturity?
Robert Chausse
Like I said, I'm not going to get into details, but there is a lot of strategic and capital markets options available to us. So we're not waiting until '22 to solve it, and we're working hard in the near term to take care of it.
Obviously, you're right. It's not coming out of our immediate cash flow.
So that's where the model of how do I leverage later cash flow or move that further down. Ultimately, we don't want to see the same level of debt either in -- as part of the answer.
We're not just going to kick and don't expect to kick the full $400 million down and sit in our business with $700 million of debt. So our solution includes a reduction and maybe a combo of those capital markets and strategic alternatives.
Unidentified Analyst
And when you think about sort of managing the cash balance, what would you say the minimum requirements are for the business going forward?
Robert Chausse
$50 million to $100 million and that's really centered around our concentrate sales and the working capital issues around that.
Unidentified Analyst
Okay. And then on Slide 102, there's a sort of timetable on the milestones upcoming for New Afton's permits.
How does the permitting for the in-pit tailings tie into these items? Or is it included within those milestones listed?
Robert Chausse
Maybe John can answer.
John Ritter
Yes. The B3 permit includes the in-pit as well as stabilization activities.
Unidentified Analyst
Okay. And sorry, just to clarify, so when would B3 production -- B3 production will start second half of 2021, and the latest possible point to receive the permit would be that first half of 2021?
Or is there a offer period that exists in there?
John Ritter
Yes. There's a buffer period built in that line.
There's some [indiscernible] in there.
Unidentified Analyst
And then for Rainy River, there were -- there's a bunch of different tables of unit mining costs, processing costs and G&A costs, and there were declined forecasts for 2020 over 2019, roughly, on the order of 10% to 15%. What's driving those changes for that schedule?
Renaud Adams
Eric?
Eric Vinet
Yes. Well, the big is the impact in the ex-pit tonnes.
If you're looking at the mine portion, there's a significant difference between 43 million and 55 million on the ex-pit. Mine unit in 2019, we did 6.3 million outside of the pit that is not considered in the ex-pit tonne.
So this drives 2019 up towards comparing to 2020. Now if you're looking at milling, it's the same thing.
You're milling 8 million tonnes in 2019, but then you're going to 9.2 million tonnes in 2020. So impact done is to solve the other small efficiency and tweaks that we've updated during 2019, whether it's with the gravity circuit or talking about like cyanide consumption, SO2 consumption.
All of these that we've worked on during the year, all factors in, in reducing the costs. But the big driver is the impact on it.
That's the same for the G&A also.
Renaud Adams
And what I could maybe add, address is you know like this ramping up in stabilization period, I'd like to say that a successful ramp-up in commissioning should happen within 12 months, right? And then you start from the 12 into 13 month, it becomes your optimization period.
And unfortunately, at Rainy, it did take way too long, and we have expanded toward the 12, 14. And I must say, and as much as I appreciate with single one person, external services that has come and helped us, it has expanded way too long.
It is time now to do our things ourselves. And I think now with the stabilization that took place, this will provide a reconnaissance in Rainy now with a focus on doing our things internally, and removing a lot of service -- external services will also be a big driver.
Unidentified Analyst
And last question. In terms of the tailings dam water management items, there were some discussion about focusing on that in just Rainy River.
What is the outlook for that sort of risk in 2020 versus some of the issues that came out in 2019?
Eric Vinet
Yes. It's a good question because 2019, when I arrived in April, wasn't ready to manage the water, me, myself.
But the work that was done during summer of 2019, okay, to address, and the way we're preparing for 2020, we did 1.5 kilometer ditch on the northwest, on the northeast side to deviate water. We did another 680-meter ditch.
BCR2 is almost ready. We've looked at the -- diffusing the river because we need to install this, so we can discharge actually in the river.
We're in a much better situation to address the volume. There's a big volume that is coming from the outside on the property because you didn't have these ditch.
So the principle of keeping water clean wasn't really applied then. So everything that was coming from the surrounding mountains were coming inside the TMA.
So now we're delineating this. Before that, we used a pit during the year four to pump back some water.
But since the site can't discharge, then you have to accumulate the water. So if you want to accumulate the water, then you have to build your dam higher than required.
You build your dam for the flood, for the water, the CDF. But since you can't discharge, then you go higher.
And this is the situation for which we're in. Now looking at the BCR2, which was the final event or the final, I'd say, system to treat the water to bring it compliant, then we're in much better shape in 2020.
But then you go back at the beginning of 2019, the water treatment plant was not done, and we only commissioned this in the month of September and started to process water in October. So you weren't ready in the past to address the water.
So if you don't have a water treatment plant, I can't discharge, can't discharge because I don't have BCR2. So then I'm keeping this water in the system.
Now we've built the dam in 2019 to be able to hold the water. And when you're looking at the construction up to the life of mine, it is still factored that way because we haven't discharged.
So I'm not going to factor in cost saving on a future improvement if I've never realized it, and it's the same for the operating costs. So if I can achieve something, I can say, "Oh, I can optimize here even more, and I have achieved that, and I'm applying this cost."
But I'm not forecasting an improvement if I haven't at least touched it once. So it's the same for the TMAs.
When we're looking at the TMA, there's upside to bring the cost down eventually, is because if we can manage this water, like we're talking about, then I'm not going to -- I'm not creating a lake, I'm creating a tailings facility. At the moment, I'm creating a lake, and I'm keeping the lake, but I don't want to do this.
Renaud Adams
And you said, Josh, the -- something key before I pass it to Anita, but something key here. I mean when you design a project, okay, with all the best and the good, there's a lot of estimated value in it.
One of it was the water balance. And I think what we've learned in 2019 is, to Eric's point, the estimate was that you really need for discharging would occur in 2020.
And with these massive flooded dams -- and we're seeing things today that you better plan for more room, and that's exactly what we're doing. There was a lot of catch-up, but it was a lot of as well because everything was designed as only discharge in 2020 were the reality.
That's what I was saying in my opening comments. The same with the geotechnical.
There was no, at the start, the need to stabilize waste down. Today, we know we do.
Those are the adjustment and all new baseline that we have built in '19, and it's all now properly weighted in the new plant.
Anita Soni
So just going back -- so Anita Soni from CIBC. Just going back to the mine plans that you have for Rainy River.
I'm not sure which slide it is, but it's the one where you talk about the mining cost per tonne. And there's -- I think the last 3 years, there's like $30 million spent each year.
Is that the rehandle? I'm just wondering if you could find it.
[indiscernible]
Renaud Adams
[Indiscernible] spending the last three years, the rehandle? And the mine one?
You're talking about Slide 46.
Anita Soni
Yes, 46. So you've got 24, 21 and then 3.6 million tonnes.
Is that the rehandle for the stockpile?
Renaud Adams
[Indiscernible].
Anita Soni
So I like to ask a question at the time.
Renaud Adams
Yes. Yes.
[Indiscernible]. It's a bit of a challenge.
Yes. So now is [indiscernible] later.
Anita Soni
You were talking the top line open pit net mining costs, millions of bucks? 21, 23?
Renaud Adams
Yes, it's B3. And it's rehandle, and...
Unidentified Company Representative
Yes. It's for rehandling of the stockpiles at that time as well as some dewatering, et cetera, to keep the pit clean while they're still drilling underground.
Anita Soni
Okay. So then moving backwards, any rehandle is embedded within that top line for prior years, right?
Unidentified Company Representative
Yes. Exactly.
So we've tried to include that second line below. That includes the rehandles and shows the net impact of rehandles each year.
Anita Soni
Okay. In the stripping, you've got 2.53 as your overall life of mine.
That includes capitalized...
Renaud Adams
Everything. Overburden and capitalized and [indiscernible].
Anita Soni
So if you were take out that -- the capitalized tonnes, that's included in the $159 million that you have in the capital, right?
Renaud Adams
What would be the separation if you -- if we move the capital...
Anita Soni
No, I can calculate that from what you have. I'm just wondering if the capital number that you have that's quoted, I think you said $159 million, was capitalized stripping.
Is that encapsulating what you've recorded there?
Unidentified Company Representative
Yes, it does. $124 million of capitalized stripping costs [indiscernible].
Anita Soni
$124 million? And then just in terms of -- I guess you've got significant cost drops coming through in process and mining.
You've touched upon the process cost improvements. I guess my question is, when exactly are you going to get -- start to do owner-operator rather than contractors and [indiscernible]?
Renaud Adams
There would be already an impact in the first quarter as we speak. Everyone is engaged.
We also -- something we haven't mentioned much, but back in December, we brought a [indiscernible]. And now since January 1, we're fully engaged in an optimization program, not ramping up what's there, now fully engaged in a reduction operating and improvement of operation.
And as much as January is usually a tough month to start kick up a winter and so far, but we've already seen pretty interesting things happening in the mine and kind of mining rate and slowly start seeing some impact on the operating costs. As we advance, we're not taking ownership of everything as we speak.
But if you recall, we bought some new drills last year as well, which slowly -- every meters you drill yourself, it allowed you for some opportunity. So you'll see some impact in -- already into Q1.
And as we advance, of course, in the year, we would position [indiscernible].
Anita Soni
Okay. Then my last question, I guess, would be the mining rate that you have for this year.
I noticed Q3 was 136 [ph]. I know you've talked about the ex-pit tonnes and the tailings impact, but you've got -- you're doing 151,000 tonne, which you said that was the capacity of the fleet, right?
It's right at capacity for the entire year. It doesn't leave a lot of room for a ramp-up over -- in a tough winter, of a freeze-thaw cycle of the spring, as we all know, happens in April and May in that part of the -- in that part of Ontario.
So you got to hit the ground running on the mining rate. How are you doing right now on those?
Eric Vinet
On the mine, we're doing more than 151.
Anita Soni
151.
Eric Vinet
Yes.
Renaud Adams
Yes. And the key thing that Eric mentioned, and it's not even close to be an excuse is a fact.
All of '19, with all the mining outside of the pit and the in and out and equipment, inefficiency is driven by that, with the drilling issues we had compared to -- you could see it in the Q4 that something was happening. We didn't reach the plateau in Q4.
We just took off. And like I said, and they said like we're in a pretty tough month, and we're already seeing very, very encouraging progress.
Anita Soni
And then one last one on Rainy, but it's more philosophical question. I mean you talked to the entire year about stockpiles, and when you have these stockpiles, they're at surface and you don't want to mine stockpiles that are going to be there until the end of time, they never get processed, but you do have 3 years at the end of the life of mine that it's smaller but similar to the original Rainy River mine plan.
So why did you stick with mining that 0.35 material?
Renaud Adams
Because the problem is not that it doesn't make sense when it's time to process. What doesn't make sense is to design your pit and operation and chase that and pay extra 150 million tonnes of waste to go to chase them to accommodate, while now you have to mine them anyway with them a design to medium high grade, which is completely different.
The challenge again has never been it doesn't make sense to reprocess stockpile, the problem is you are driving losses and tremendous costs in the 2026 period to accommodate longer life of underground through that stockpile. Now we continue with the strategy of the 2, 3 years of stockpile, which will contribute to lower but will not drive $1 extra from '21 to '26 to put it there.
You have to mine it. You have to stockpile it.
It's no extra cash. 0.
While before, they were driving extra cash because they were designing towards mining it. That's the huge difference.
I think the strategy has always been very, very good. The question is, what are you encountering as extra cost to do it?
Now, you do it.
Unidentified Analyst
Maybe a little more color on the Pinewood River discharging and what the critical path items are. And can it handle another 100-year event like we seem to get for the waterfall?
Eric Vinet
In the spring, you mean?
Unidentified Analyst
Yes.
Eric Vinet
Or the question is for fall or the spring coming?
Unidentified Analyst
Well, there's two elements to it. One is, can you handle with the existing setup a high rainfall spring?
And then you're shooting for a Q3 discharge into Pinewood. What are your critical path elements to get to a Q3 as opposed to we have seen many times delays, what happens if it gets to late 6 months or 8 months?
And what might be the cause?
Eric Vinet
Q3 2020?
Unidentified Analyst
Yes. Correct.
Eric Vinet
Okay. Well, the big thing is BCR2.
BCR2 is a final treatment stage to bring water compliant. We're working on this, and we want to complete this by spring.
So when you have BCR2 online, water treatment plant then goes to water management pond, which is holding the water, gets to BCR2. After that, water should be compliant according to the model, and then you can start discharging, okay?
But then there's a ratio with the Pinewood River. You can discharge with the Pinewood flow.
Now to accumulate, it's -- at the moment, the dam is designed with the 99% plus CDF. So we've got like a buffer on top of a buffer at the moment.
This is why we're doing this big dam because we haven't been able to discharge. So with the last lift that we did and that we completed in the month of November, we've created like 7 million cubic meters of space that we're still really filling at the moment.
So I'm pretty confident arriving in spring that we will be able to absorb this water. But we don't want to absorb it, we want to discharge it.
Now with the 1.3, 1.5 kilometer ditch that surround us, and the other 680, this alone in the fall, we estimate that it deviated about 700,000 cubic meters of water that would have entered the TMA, but that went around with the principle of keep water clean, okay? So these ditch are in place, and they're there for us in the spring.
So yes, we will probably hold some again, but we have the capacity. Now the dam lift of this summer is another 2.5 on the south dam, and it allows us another 5 million cubic meters of space that we're adding with the dam lift of this coming summer.
So we're in much better shape.
Renaud Adams
So the answer is yes, we can handle the volume. But as Eric said, we're not building dam to hold on water.
This is not the practice, right? You need to discharge.
Proper practice is to keep your dam dry with tailings and no water. Again, it's nothing that I'm pitching here more than there was a site situation in '19.
Fortunately, in spring, we could not use the [indiscernible]. If you recall, for the first 2 years, the operation was doing by [indiscernible].
This would all disappear now, and it's all one big thing very soon. But we could not use the [indiscernible] in the short term.
The commitment for tailings is a factor safety of 1.5 at the end of the construction. And you know the job is technical situation.
So we have to do more extra work. And eventually, I mean, it was a catching up type of thing, with the priority that we would stop the milling if we have to, to protect the integrity, of course, of the operation.
We knew that it was a matter of time. The team at [indiscernible] -- Eric is a humble guy.
He wouldn't put too much importance, but oh my goodness, the unbelievable amount of work that was done there. And not just with the construction team.
The relationship and how we work technically with the regulators as well, I am sure we have significantly shifted the understanding as well at the regulator level. So it was a ride itself, but unbelievable, knowledgeable year.
And as a CEO, actually piped with that help of answering that question. It's a very exciting mine.
Very good. I think we're very well positioned now.
Unidentified Analyst
So just to clarify then, the BCR2 is the key item...
Eric Vinet
It's the last one.
Unidentified Analyst
And do you need any other permits once you've got it built?
Renaud Adams
Yes. It's not so much of the permit more than it's complete.
And then you let them know there is an [indiscernible] something. And then we're not going to open the valve and discharge this like that.
But everything is in place. There is no -- nothing extra.
It's compliant with the plan before we discharge it.
Unidentified Analyst
And then just on top of Anita's comments -- questions. When you look at the processing costs, you have basically $1 drop per tonne because of outside services being cut off.
I mean is it as easy as that?
Renaud Adams
Economy of scale is one, right? Remember that last year, our maintenance cost, there was a lot of things that were extraordinary that should not be there.
Just like mining and G&A were going through optimization, we're comfortable we can get there. But we need stability, stabilization, right?
So these costs, to be clear, you can achieve these costs when you do your things yourself and you run 90%, 92% of the time. What really killed the cost structure last year was every time you're down, your trigger dollar is flying through the window.
And there was so much to do, you couldn't do it yourself. Stabilization, optimization bring cost reduction, no doubt.
Unidentified Analyst
And then lastly on New Afton. You talked about a Beck model and subsidence, and you've got a task in there.
Could we get sort of a layman's description of the issues related to subsidence, what it is you're dealing with and what you have accomplished with all the studies that you've done, something that doesn't just try to draw upon diagrams from a Beck model?
Renaud Adams
Yes, yes, yes. John?
John Ritter
You got the perfect layman to answer that. So subsidence originally wasn't contemplated to interact with the dam way back in 27, 28 -- 2007, 2008.
So essentially, as part of the caving process, the subsidence creates a two-lip bowl as we draw the cave down. This two-lip bowl has also latched into the overburden area near the particular dam.
That's what's in the works over the past year, was tying the bedrock and the overburden layers together. The bedrock layers have always been well modeled.
So being able to latch into that modeling, which is why we got Beck, has really given us the confidence that we can understand the interactions due to subsidence. Good?
Unidentified Analyst
So you're tying in your overburden and your bedrock. So the study has been to, what, look at to what extent one supports the other or...
John Ritter
We have our EoR right behind it [indiscernible]. Have a chat, Chris.
Renaud Adams
Maybe you introduce yourself.
Chris McKane
Yes. Sure.
So my name is Chris McKane. I work for BGC Engineering.
I represent the engineer record for the New Afton tailings facility. I guess to explain a little bit more about the subsidence that Beck is trying to model, there is -- there's -- I mean, as John was mentioning, there's a bedrock, and there's a soil component, and what Beck is trying to do is he's trying to have a model that integrates both.
Prior to that, there wasn't a good -- it wasn't as good an integration of those things. And what we were monitoring on surface -- John showed lots of monitoring.
What we're monitoring on surface wasn't matching very well the modeling. So now that's been rectified with Beck's model.
Just to take it a step further, we are very concerned with subsidence. Or I should say, as the engineer, we're very concerned that the intent of the dam -- or the dam is doing as it's supposed to do, which is to contain the tailings.
And so as subsidence approaches the dams and causes deformation, bad things can happen. So we're very keenly monitoring and trying to understand what is the subsidence behavior, and we can come up with some defensive strategies, namely stabilization of tailings, in case the subsidence and the TSFs interact.
Renaud Adams
So just to summarize, the original modeling was bedrock only. Never contemplated the soil layer.
So the modeling has tied them together, which has given us a better understanding of the interaction of -- if subsidence draws down, and the soil level reacts accordingly and how it goes potentially to interact or not the dam, that's the key difference. The original modeling was bedrock only.
Chris McKane
[Indiscernible].
Renaud Adams
It's not really a buttress layer. It's just -- Chris?
Chris McKane
Yes. I guess it was a way of gaining confidence to what we were seeing on surface, what was in the model.
And like I said before, we didn't have good agreement between the bedrock model. We didn't have -- the deformation that was modeled before at the top of the bedrock was not transposing onto the surface.
So we weren't -- like those two things weren't lining up. And so that's why the new model was resolving that.
Renaud Adams
Yes, part of the soil layer was the old tech working, which they dump their waste rocks from the old pit. So tying back waste rock, the soil level, bedrock and how the dam is constructed near and on those layers is the important connection required.
It is a challenging topic. And there's a lot of technical and work and years of analysis to it.
But any following questions, we could [indiscernible]?
James Huntington
James Huntington from Scotia. I was just wondering if you could give some more color on the stabilization and what the actual work is involved.
It's -- I was just getting a bit lost in how the thickened tailings get deposited on. Is there extra works going there as well to ship the whole tailings?
Renaud Adams
There's a number of plans to stabilize the dams, dewatering wells. 2014, '15, we did a stabilization program on the historic Afton facility where we have bought in wet drains, induced a large load and essentially squishing the tailings and squishing the tailings, precipitate the waters on it and we're able to dewater.
Similarly, we're looking at the historic Afton facility in different manners. But essentially, we're going to be dewatering through wells or some type of low feature.
And additionally, to your point, why is the thickened, amended tailing [indiscernible]?
Eric Vinet
We brought thickened and amended tails in -- predominantly to recover excess water for our process needs. So as we add cement, we need water.
So part of our sustainability program was to introduce the paste thickener to recover the water. Thickened tails will advance out earlier than the amended tails, which is the cement, to -- it helps the whole dewatering plant because we're not sending out as much water.
And eventually, we will be putting thickened and amended into the historic [indiscernible]. And that's part of the -- it's -- there's less cost required to buy a paste thickener than to keep the current tails eventually and add a whole bunch of cement to make it not global.
So that's the rationale for the paste thickener. It minimizes the cement position.
James Huntington
And then just one question for Rainy. Could you just give some more color on the underground mining method there, like transversing and stoping a longitudinal, stope sizes, that sort of detail?
Eric Vinet
The way it's considered is [indiscernible] system mining method, okay, for which you mine longitudinal, okay, not transversal but longitudinal, where you go from the top and then -- you mind top down, basically, and you're putting in. Now different optimization in this deal would be to, in your case, the body's width can -- you can mine downhole.
And the last, you can go transverse if it's wide enough, okay? And then you could look at going 25 meters in between instead of 20.
These are all different optimization that you could do. So you had mined longitudinal 2 levels, and then third level, transverse.
This is different things that you could be looking at. But then you need at least only good 6, 7 meters so you can enter, okay?
If you're 2, 3 meters wide, you're going to go [indiscernible] and stay longitudinal.
Renaud Adams
And that's the beauty in what could potentially contribute an extended life of mine for the underground. Like at this stage, it wasn't too important spending like so much time and effort and try to understand right away with detail because we got some time, as you could imagine, right?
At this stage, it is important with what we know that -- to have the stockpile component. And basically, if you look at the plan, the underground stuff when the stockpile stop because the main assumption at this stage is the increase of milling costs as we do that.
As Eric mentioned, we continue to optimize down the road. One of the priority is, "Okay, how do we do it kind of a stand-alone?
Is it possible to make it a stand-alone?" And then, of course, you have to look at the milling, which is a big thing.
It's a monster compared to what we would need. But it doesn't mean over the next few years, we won't find a clever way to make it a stand-alone.
Should exploration, unfortunately, does not provide any additional resources of [indiscernible], we are already committed to extend this beyond. And one is improving in a mining method, finding a way to reduce your costs, more productivity, how do you eventually shift the milling and make it work at a reasonable concept kind of thing.
Currently, our assumptions are pretty high. If you would try to turn this mill and accommodate low throughput, you're talking about a pretty high cost of that type of machine, right?
But we have a lot of upside.
Eric Vinet
There's another thing also, the fact that you're mining from 2, 3 portals, okay, prior, you only had one portal to mine 2,500 tonnes a day. Now with 2, 3 portal, the ease of mining 2,500 up to 3,100 tonnes per day, it is quite different, mind you that.
You always have to have the service moving [indiscernible] then the geologists, people going up and down. So then you have to block this ramp to actually move the material.
Now when you have two, three portal for which you can work with, it gives you a little bit more flexibility to increase this tonnage and our -- at least to ensure it. With one portal, it can be maybe challenging with the requirements of a full 24 hours when you bring material underground.
John Ritter
I want to introduce Ken Brower, who's our other EoR back there, who's working extensively with the thickened and amended tails program. So he's available as well as Chris on subsidence if you want to really get into the nitty-gritty.
Unidentified Analyst
Just on the thickened and amended tails, actually, on New Afton. So as I recall, was the original plan eventually to let that -- when you're depositing into the historic Afton open pit, does it eventually subside and cave into the old mine workings like A -- zone A, B and SLC.
Or is that -- will that be stable up at top?
John Ritter
It will be stable up at top. Lift 1 and B3 and C-zone does some latching in but minimally.
We don't expect it to travel or connect through to the B3 or C-zone cave.
Unidentified Analyst
Okay. And then just in terms of -- going back to the Rainy River underground that you were talking about.
What kind of mining fleet are you envisioning? And where is that cost within the capital spend?
Can you break out the underground? Like the cost, you've got $56 million and underground of $64 million.
So I'm just wondering what's associated -- I would assume, the $64 million, that's in sustaining its development work and the $56 million is fleet.
Eric Vinet
Well, the underground fleet that you're looking at is like jumbo and small trucks. Now you want to know when -- where is it in terms of where is...
Unidentified Company Representative
No...
Renaud Adams
No, there's a...
Unidentified Analyst
Just a breakout of like what fleet and what's development work capital budgets there.
Eric Vinet
Just have to look to give you how to break it out there.
Renaud Adams
But the -- in the nonsustaining, as you mentioned, a portion of it is the predevelopment preproduction, if you will, so it's not just equipment or so forth. So there is also some development cost.
And eventually, as you start producing, it turns into sustaining. Lauren [ph] is doing a lot of numbers here.
If you want to go to the next question, if you do, we'll get your detailed answer.
Unidentified Analyst
I didn't really have another one. I'll have to make one up now.
Renaud Adams
You always do.
Unidentified Analyst
No.
Unidentified Company Representative
Okay, sorry. So yes, there is about $56 million in the nonsustaining bucket.
So that is initial portal infrastructure and the initial capital development prior to a production for a portal. After that, we, in sustaining capital, we have $39 million related to continued development of those underground portals and then $25 million for subsequent infrastructure and equipment.
So it's kind of captured in 3 different types of buckets.
Unidentified Analyst
Sorry. $25 million for infrastructure and...
Unidentified Company Representative
Post sustaining. Yes, it's like postproduction.
Unidentified Analyst
And fleet.
Unidentified Company Representative
Yes.
Brian Quast
Maybe on a similar line. It's Brian Quast from BMO.
I just was doting with interest that you're looking to put the -- or to deploy some electric or battery technology down in New Afton, and there's some savings there on ventilation. Has that all been incorporated in the capital budgets that we're going to see in terms of both the savings and the cost of the new fleet?
Or is -- are we going to see a capital budget that sort of reflects traditional equipment and there's possible savings or sustainability benefits on the back of that?
John Ritter
We did a feasibility update this year including a study of diesel versus electric, and they've come in within the error. So within a marginal error, electric slightly a couple of million bucks higher.
So that's incorporated in the budget as well as we have reduced the diesel consumption in the outer years. That's savings.
Brian Quast
Okay. So you're saying it doesn't really make much of a difference with that put in.
John Ritter
No, no.
Brian Quast
Okay. And I guess now that I've seen a dead horse, I want to kick it.
So I'm going to get back to the subsidence stuff. I don't know why.
I guess I'm a glutton for punishment.
John Ritter
It's a fun word to say.
Brian Quast
Yes, I guess that's true. Just having a quick look here at the two pictures on Slide 96.
Obviously, the one on the left is smaller than the one on the right. That's my layman's terminology for subsidence, I guess.
But I do note that at the bottom -- underneath that picture on the right, it mentions that there's SLC mining incorporated in that. And SLC is incorporated as sort of an upside throughout the document.
Would we be pretty safe in incorporating an SLC mine mining in our models today? Or how do we look at that given that you're obviously incorporating it into subsidence models but not in your mining model at the moment?
John Ritter
Yes, the SLC representation there are the 3 upper levels that we've incorporated in the mine plan, so we haven't -- we need more drilling from Mekele [ph] for the lower levels before we can add it to this particular model. And this is aligned with the tonnes in the plan there.
Brian Quast
Okay. So this is just what we've got on the SLC.
And I guess, and for lack of a better way to go about it, does it look different when you put the C-zone in as well? Or I mean...
John Ritter
Yes, the C-zone, if we go to -- C-zone, we go to Slide 94. So we see C-zone production will take a swap out of the current Afton facility that needs to be stabilized.
The particular model we're looking at here would be a much larger concentric ring into the dam that's showing below.
Renaud Adams
Another way, I mean, I'm surely not an expert in this, but I'm looking at this is like, how do you manage the risk of this? I think the way to look at it, I mean, the sequencing, by the time it's going to initiate the C-zone block cave, the stabilization would have taken place.
The question was really when initiated on the B3. And even though we will be in parallel the watering, it was quite a potential breakthrough to see that you would not have potentially defensive action, right?
Once you get to the C-zone, the difference is you would have already prestabilized, which is very different.
John Ritter
Stabilized additions complete end of 2022. That's what's seen in -- and we start wrapping C-zone up in 2023.
So it's a very flex time.
Renaud Adams
There is no doubt that the C-zone will start interacting with the facilities. The difference is with the time line.
Brian Quast
Okay. And I'm just trying to find the page here and I'm just going to be overly pedantic, I guess, on this.
There's a comment on there saying that you have enough NAG material, and you've touched on this a few times of having to do some quarrying in 2019. If there's enough NAGmaterial to do the buttressing coming from the pit, there's no need to touch that quarry again.
Is that -- would that be a fair statement?
Robert Chausse
Yes, it is.
Brian Quast
Okay. And that's all of the life of mine as we currently understand it.
Robert Chausse
Yes, yes.
Brian Quast
But before we would incorporate any additional potential low-grade resources that may be required eventually to mine additional underground material to keep the mill full, then perhaps there would be another need to go back for more NAG material from some other source and...
Renaud Adams
And then that would be a nice problem to have.
Brian Quast
Yes, for sure.
Renaud Adams
Good. So I believe this is going to -- I think we just took the last question.
And on that, if there is no more questions from the floor, we would end this technical session. Appreciate your presence or anyone who is listening in from home.
And if you need anything, please reach out to Anne Day, Investor Relations, as you go. This is day 1 of a new phase, and I'm sure we'll have more than one opportunity in the near future to talk about our plans.
On that, thank you very much. Safe travels.
Thank you. This concludes today's conference call.
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