May 2, 2022
Operator
Good morning. My name is Michele, and I'll be your conference operator today.
Welcome to New Gold's First Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
And please be advised that today's conference call and webcast is being recorded. After the speakers' remarks, there will be a question-and-answer session.
[Operator Instructions] I would now like to hand the conference over to Ankit Shah, VP of Strategy and Business Development. Please go ahead, sir.
Ankit Shah
Thank you, Michele, and good morning, everyone. We appreciate you joining us today for New Gold's first quarter 2022 earnings conference call and webcast.
On the line today, we have Renaud Adams, President and CEO; and Rob Chausse, our CFO. Should you wish to follow along with the webcast, please sign in from our home page at newgold.com.
Before the team begins the presentation, I would like to direct your attention to our cautionary language related to forward-looking statements found on Slides 2 and 3 of the presentation. Today's commentary includes forward-looking statements relating to New Gold.
In this respect, we refer you to our detailed cautionary note regarding forward-looking statements in the presentation. You are cautioned that actual results and future events could differ materially from those expressed or implied in forward-looking statements.
Slides 2 and 3 provide additional information and should be reviewed. We also refer you to the section entitled Risk Factors in New Gold's latest MD&A and other filings available on SEDAR, which set out certain material factors that cause actual results to differ.
In addition, at the conclusion of the presentation, there are a number of endnotes that provide important information and should be reviewed in conjunction with the material presented. I'll now turn the call over to Renaud.
Renaud Adams
Thanks Ankit and good morning everyone. So before I pass it to Rob to discuss our quarterly financial results, I just wanted to take a moment to discuss some of the changes we've made at our company, and the challenges we've experienced, like many of our peers during the quarter.
Over the past two years, our teams have adapted quickly to make changes in light of COVID. I'm very proud of our group, and the health and safety focus at our operations.
Like many of our peers, we've also experienced a higher level of COVID cases earlier in the year, which impacted productivity levels to start 2022. But despite this our teams were resilient and we delivered a good quarter.
Inflation has challenged many of us in the industry, and we're no exception. We felt the same pressure as our peers, mainly on diesel, consumables, but also electricity at Rainy River.
But I've been able to partially offset this higher prices with the benefit of having two Canadian assets in the period of weakening of Canadian dollar. We continue to evaluate potential optimization and assess cost reduction initiatives in an effort to mitigate these pressures.
We remain committed to delivering on our guidance. During the quarter we also continue to advance on our longer term priorities.
At Rainy River, Intrepid development advanced, and we look forward to initiating mining later this year. I'm also very pleased with the updated Rainy River technical report we completed in March, which has expanded our mine life to 2031.
I will discuss this later in the presentation, but this is a significant accomplishment for the team and a positive milestone for our business. At New Afton, the B3 ramp up continues, we've made good progress on the C-Zone development and we completed a commission of our Thickened and Amended Tailings facilities.
I'm very pleased to welcome Patrick, Pat Godin, as we knew, and you knew him as the new COO of New Gold. Pat brings extensive technical, operational, and capital execution experience in the mining sector and I'm sure his addition to our team will be invaluable, and as we continue to advance key projects of our company and unlock potential organic opportunity.
I'm really looking forward to hearing from Pat in our Q2 on our review and more to come as we move forward. I'm looking forward to building on our first quarter and continuing to deliver value for all our stakeholders.
And with that, I will now pass it to Rob Chausse, CFO. Rob?
Rob Chausse
Slide 5 provides our operating highlights for Q1. Production details are consistent with our April production press release.
During Q1, the company produced 87,600 gold equivalent ounces, the amount consisted of 8.2 million pounds of copper, and approximately 58,800 gold ounces from Rainy River, 9,267 ounces gold ounces from New Afton for a total of 68,100 gold ounces. The lower equivalent gold production as compared to the prior year is primarily due to lower grade and tonnes processed at New Afton.
Our operating expense per ounce was in line with our prior quarter. Consolidated all in sustaining costs for the quarter were 1,778 per equivalent ounce, higher than the prior quarter primarily due to higher sustaining capital spend, and lower sales volume at New Afton partially offset with higher sales volume at Rainy River.
As Renaud mentioned, during Q1, we experienced inflationary challenges that have been experienced across the industry particularly with regard to fuel prices and with the benefit of a Canadian -- a weaker Canadian dollar as well as optimization in cost reduction initiatives we are offsetting a good portion of the inflationary pressures. Going forward, we'll continue to work on minimizing any impacts.
Turning to Slide 6, first quarter revenue was 175 million, driven by sales of approximately 70,500 gold ounces, at an average realized gold price of 1,897 per ounce, and sales of 9.2 million of copper at $4.53 per pound. Q1 revenue was 6% higher than the prior quarter primarily due to higher metal prices partially offset by lower copper sales volume.
Operating cash flow before working capital adjustments was 66.4 million or $0.10 per share for the quarter in line with the prior year quarter. The company recorded a net loss of 7.8 million or $0.01 per share during Q1, compared to net earnings of $0.02 per share in Q1 2020.
After adjusting for certain charges, net earnings were 10.3 million or $0.02 per share in Q1 compared to net earnings of $0.01 per share in the first quarter of '21. Our Q1 adjusted earnings includes adjustments related to our gains and losses related to unrealized adjustments on the Rainy River stream mark-to-market and the free cash flow royalty at New Afton.
Our MD&A has more details on these measures. Capital Expenditures.
Our total capital and leases for the quarter was 78.4 million and 55.5 million was spent on sustaining capital and 22.9 million on growth capital. Sustaining cap -- sustaining spend was primarily related to planned tailings work at both operating assets.
Capital stripping at Rainy River and the B3 mine development at New Afton. Growth capital was focused on project development specifically, the C-Zone at New Afton and the underground Intrepid zone at Rainy River.
Slide 7 provides details of our capital structure. During the quarter, we announced that we will be redeeming the remaining 100 million of our 2025 senior secured notes in mid May.
And cash on hand as at March 31, '22, was $432 million. The decrease in cash from the year-end is primarily due to interest paid and cash settlements on noncurrent derivative financial liabilities.
With that, I'll turn the call back to Renaud.
Renaud Adams
Thanks, Rob. I will now make some additional remarks on operational performance in the first quarter.
I'm on Slide 10. The Rainy River mine had a lighter quarter in terms of total tons mined mainly due to higher COVID cases and that started the quarter, which improved as the quarter progressed.
We had a strip ratio of approximately 5:1 and this was in line with our strategic approach to use winter months for the main capitalized waste, which focused on positioning the face for mining. The lower ton mine did not have a meaningful impact on grades and the total productions of nearly 60,000 gold equivalent was up from the same period of 2021 to 2020.
The milling rate was impacted by additional downtime -- 2021. The milling rate was impacted by additional downtime related to crushing and conveying 6 circuit in adverse weather conditions impacting also the stockpile movement, all of which was back to normal as the quarterprogress.
All-in-all, the team was very resilient and navigated around adverse conditions that delivered a good quarter. Despite the inflationary pressures, the team delivered lower operating expenses compared to the same period of 2021 and a free cash flow of approximately $15 million for the quarter.
Rainy River continues to work on seeking ways to reduce costs, improve productivity, so such increase in fuel and consumables can partially to fully being mitigated. For example, the mining team delivered an improved tire life year-over-year of nearly 40% offsetting current potential and further increase of tire prices.
The efforts continue in improving other consumable uses such as grinding [indiscernible] and cyanide. And we continue to see potential improvement in our overall pit operational efficiency, with objective to achieve production with use of less truck for example, so we reduce operational and maintenance costs present and future.
Bringing the mill back to expect it 27,000 tons a day mark, we’ll also have a huge contributor -- would also be a huge contributor to our overall cost performance. I have just returned from Rainy and I remain very positive on our ability to deliver on our 2022 plan.
The Intrepid development continued in the first quarter with over 500 meters of total development achieved. We are now developing an ore on level 175, 150 and 125 in prep for first long-hole stopping to take place in the second half of the year.
And the reconciliation today is in line with the resource model. On Slide 11, I'm very pleased with the result of our updated technical report at Rainy River which has extended the mine life to 2031.
Updated mined plan illustrated an attractive average production profile of 310,000 gold equivalent ounces over the period of 2020 to 2027 and over 250,000 gold equivalent ounces for a whole life of mine with full transition from open pit to underground during the period of 2021, '26 for an estimated growth capital of only $71 million to complete the underground pre-production work for both Intrepid Zone. A very attractive cost approach using in-pit portal design to access mineralization with minimal development required.
For the open pit portion, significant reduction of strip ratio and sustaining capital post 2023, when all capitalized stripping is complete, reducing total mining and maintenance requirements. So overall life of mine all-in sustaining costs of nearly 1,050 per gold equivalent ounce, bringing excellent margin and free cash flow as we deliver on our execution.
On Slide 13, in New Afton, in line quarter at New Afton as the lower ton mines were perfectly aligned with the planned completion of the Lift 1 activities. With the exceptions of recovery level, which will continue until we initiate in-pit tailing disposition plan for later this year.
The B3 development and production ramp up continued in Q1, and all efforts are being made to accelerate completion of development ahead of schedule, which is currently planned for the fourth quarter of this year. The C-Zone development continue to advance in the first quarter, with nearly 930 meters of total development achieved and the successful commissioning of the newly built TAT facilities, months ahead of initiation of our intensive position.
During the quarter, we've completed 32 diamond drilling hole totaling nearly 10,500 of underground infill or an artificial intelligence target that we drilled last year, and also one hole in exploration on the Cherry Creek Trend. The company intends to release an exploration update in the latter part of the second quarter, which would also include an update on our exploration efforts at Rainy.
On Slide 14, and as I conclude on the presentation portion of this call. At Rainy River, we continue to build on our recently filed updated technical report, and while we continue to seek opportunities to improve margin on remaining open pit ounces, we are not turning our strategic efforts on delivering a strong transition to underground mining.
We're bringing first Intrepid in production. At New Afton completion of the B3 development and ramp up remains our key priority, while we continue to deliver the C-Zone on time and on budget, which include receive of the permit in the second half of '22.
I want to thank all our employees and contractor for their restless efforts and commitment and executing on our 2022 guidance, and a very special thanks to our board of director, community partner and shareholders for their continued support in such challenging time. In my opening remarks, I made a comment that Pat is joining us and his first day sitting right next to me today.
And I would ask you Pat, if you have just one first comment, and welcome.
Pat Godin
Thank you, Renaud. And I’m really pleased to join the New Gold.
I have exploring -- working experience with Rob to work together in the past, and to join Renaud and the team, it's really exciting for me. Well, mainly authorize the Open Pit approach, I think it's something of value that is crucial for me.
So the guys are doing -- the team is doing the job on site, but I will do my best to reinforce that, to provide safe working place, the workers is crucial for new roles. And also, to continue to be in compliance with total performance and to maintain and improve our relationship with our local stakeholders and First Nation Group for supporting us and both assets, I think for me, it's crucial.
At the beginning my main invest -- I will mainly invest my time to stabilize and to serve -- to be sustainable in operation for NGD to deliver guidance. And I think I’m very excited to work with the team.
Renaud Adams
Thank you so much, Pat. And as I said, we'll be hearing from Pat in our second quarter review.
I will now turn it back to the operator for the Q&A portion of the call. Michelle?
Operator
[Operator Instructions] Your first question comes from Mike Parkin of National Bank.
Mike Parkin
To speak on labor availability at the assets during shutdowns, are you noticing any kind of challenges staffing contractors for shutdowns? Are you pulling from further and further away cost pressures, that kind of thing?
Renaud Adams
Thanks, Mike, for your comment and questions. So, as I mentioned, on the operational side, of course, it was a tough start.
We did not have really big maintenance shutdown plan during that period. So that's good.
We usually plan our shutdown way ahead of schedule, so that gave a lot of flexibilities to our contractors to adjust and adapt. And so I wouldn't say on the shutdown, it has been on the rail to impact but when it comes to own plant shutdowns, if you have some issues and so forth, of course you operate, in any COVID situation, it may impact and may slow down a little bit but -- re-activeness of that.
But all-in-all, I believe that it hasn't really impacted on the maintenance and shutdown side, but more like on the regular operations, mostly around the mine at the start of the quarter. I think that improved significantly as we advance in the quarter.
Mike Parkin
And then Slide 14 just notes that you're looking to receive the C-Zone permit in the second half of 2022. Is there any wiggle room on that, like that drifted out into early 2023?
Is there any issues with receiving that a little later if for whatever reason it got delayed through maybe the government says kind of backed up with various COVID delays?
Renaud Adams
I appreciate that because as everyone knows, we were impacted with the B3, we had some delays. COVID was -- but at the same time too, the B3 needed to address, the in-pit tailings needed to address, sterilizations and the watering of tailings all of which were included in technical discussions.
There were some longer of course, conversations and consultations with our partner, First Nations, at the very challenging times for them, for their provinces, all that. So everything is -- basically happened during the B3.
When it comes to C-Zone, I like to say that there is nothing really new about the C-Zone, its a little bit of the more of everything we have already permitted. And the process is advancing extremely well, our first round of questions on time answering it, and then comes the second round.
And quite frankly, we're not expecting -- we've completed our conversations internally as well and support as well from our partners and communities are in -- is in place. So now we feel very strong that the process is following its due course.
And that we could -- we could put this to bed not too late in the second half of the year.
Operator
Your next question comes from Lucas Pamatat of Canaccord.
Lucas Pamatat
So just thinking about costs at Rainy River, obviously, the cost this quarter were above your guidance, and I believe you had also guided to lower costs in the first half of this year. So how should we think about those going forward for the rest of the year?
Renaud Adams
We did not really guided by half. So we mentioned at the time of the guidance is the first half just like last year at the Rainy River.
So the first quarter is a higher strip ratio, more waste, slightly lower grade. And the second half, which represents about 55% of the production is -- will be at the less strip ratio, so less cost to achieve higher production.
So yes, with some inflations in -- pressure and all that, but all in all, we're following our strategic approach of more waste -- and more pushback. So no, we did not [Indiscernible] for quarter, so strategically, we executed as planned.
Lucas Pamatat
And then just a follow-up, so you mentioned in your prepared remarks that the B3 Zone is on track for Q4 of this year. Do you have any idea of how many tons we can expect from that area this year?
Renaud Adams
So if you look at the B3 technical approach, so once you have completed all your development and all your draw point and delve now are done, and that -- the caving takes place in its max capacity, we're talking about anywhere between the 8 and 2 potentially up 5,000 to 10,000 tons a day. And so there's about like, roughly, we're about like, 40% right now.
And as we advance we hope to -- the beauty of the objective and the accelerating, and I'm sure path will be a lot on this with the team at the New Afton to accelerate and complete the development ahead of schedule would allow the gravity to take place, and the ramp up to the full capacity taking place earlier and hopefully achieve it before the end of the year rather than early next year. So that's really what is at stake here, and accelerations and completions of development ahead of schedule will have a big impact and would allow more caving to take place this year.
Operator
Your next question comes from Anita Soni of CIBC World Markets.
Anita Soni
The first question that I have is, with respect to the unit mining cost per ton at both New Afton and Rainy River. So at New Afton, the -- from quarter-over-quarter it jumps pretty significantly, I think it was around 11 to 26.
Is there something that --- could you provide some clarity on why it went so high this quarter on the mining cost?
Renaud Adams
It's really the type of mining are needed. So, the fact that we've shut down the Lift 1 activities, so that free, what I would call that, free caving draw point picking is out now.
The recovery level is all remote. And as a result of the accident last year, has increased safety and SOP operating protocols and practices and so forth.
And the B3 -- the B3 tons that comes basically just from the early stage in the B3. So it's a transition zone, there is no doubt in my mind as we progress and ramp up and put the B3 development behind us, then we are basically benefiting as well as at the B3 under pre-caving as the cost flow come back.
But it's a transition. It's all related to the transitions.
The same with the sustaining capital, you're spending sustaining capital at B3 but you're still not benefiting the tons and the ounces coming from. So transition, it’s difficult but it's temporary and eventually we'll establish ourselves and our cash flow return to proper structure.
Anita Soni
And then so remind me again, when the B3 Zone complete?
Renaud Adams
We have normally, if we would follow, let's call it the four value in our minds, we will be completing this in the fourth quarter and the opportunity here is to really increase this at this point, even more looking --
Anita Soni
And then on Rainy River, similar question, except in this case, costs were similar, I guess, mining cost per ton were a little bit higher. But the process costs were similar versus last year.
But I guess my question is, relative to the technical report. You guys were looking at, I think process costing $7 per ton for this year.
And I'm just trying to understand the discrepancy between the 9, mid-9s versus the 7, in the mid-7s that you were expecting in the process, given the technical report that was just released a few weeks ago?
Renaud Adams
Yeah, and it's all about the -- and the first quarter it's all about the maintenance. And yes, there were some extra installations and consumables and electricity went up as well this quarter.
But globally speaking is when you have at 27,000 tons a day and you operate at 24, so the difference in between is usually related that when you're stopped, you're spending money and -- So I know we have absolutely the capacity to bring this cost back -- back to the mark, but it's instability and it's -- we need to bring the mill down back to the 27 at the planned maintenance and cost and the planned operational efficiency costs as we highlighted in our 43-101. But those costs per ton that you referred to, that were included in the first quarter where it was -- that were achieved back in 2021.
So it's not something that we haven't achieved, we have achieved those, but Q1 was somewhat unstable. But those costs are absolutely achievable.
Operator
Ladies and gentlemen, there are no further questions. I will turn the conference back to Ankit Shah for closing remarks.
Please go ahead, sir.
Ankit Shah
Thank you, Michelle. And thanks again to everybody who joined us today.
As always, should you have any additional questions please do not hesitate to reach out to us by phone or email. Thank you and have a great day.
Operator
Ladies and gentlemen, this concludes your conference call for this morning. We would like to thank you for participating and ask you to please disconnect your lines.