New Gold's share price closed at more than a two-year-low on 11 July following a downward revision in 2022 production guidance and an upward revision to all-in sustaining costs—which has taken the mid-point to above the current gold price.
Closing the session at C$1.25 (US$0.96), the Canadian miner's share price dropped by 6% day on day to the weakest close since April 2020.
The stock—which spent the better part of the first four months of 2022 trading between C$2-C$2.5 -had already been under downward pressure from falling gold prices.
New Gold's consolidated gold-equivalent 2022 production is now expected to be between 325,000-365,000oz, which is down from the previous guidance of 380,000-440,000oz. The downward revision was made due to issues at the Rainy River gold mine and the New Afton copper-gold mine.
It followed the company's Q2 production falling 33% year on year to 70,514oz AuEq. That consisted of gold production of 52,431oz and copper production of 7.4 million pounds.
Canaccord Genuity Capital Markets analyst Dalton Baretto said the gold and copper production levels were below CG's forecasts by 27% and 28%, respectively.
"Rainy River experienced challenges during the quarter as the Fort Frances area saw extreme rainfall and flooding," New Gold's president and CEO Renaud Adams said.
Rainy River's 2022 production guidance has been dropped to 230,000-250,000oz from 265,000-295,000oz.
"During the quarter, New Afton focused on B3 and C-Zone development and closed the low grade-higher cost recovery level zone earlier than planned. As a result of the early shutdown, tonnes mined was lower than expected," the company said.
New Afton's copper production is now expected to be between 25 million-35 million pounds for 2022, down from previous guidance of 35 million-45 million lbs. Gold production is now expected to be at the low end of the annual production guidance range of 35,000-45,000oz.
"We note that this is the third year in a row of negative guidance revisions at Rainy River; this is the fifth year of production from the mine following a three-year construction period, and this mine has never lived up to expectations in either phase," Baretto said.
Meanwhile, the lower production expectations and inflationary cost pressures have led to New Gold lifting Rainy River's all-in sustaining costs to $1,620-$1,720/oz AuEq from $1,270-$1,370/oz AuEq and at New Afton to $2,210-$2,310/oz AuEq from $1,695-$1,795/oz AuEq.
Consolidated AISC has been lifted to $1,875-$1,975/oz AuEq from $1,470-$1,570/oz AuEq.
"We compare the mid-point of the revised AISC guidance range, $1,925/oz, to the current gold price of $1,731/oz," Baretto said.
Adams said: "I remain confident both [of the operations] are on the cusp of increasing production profiles leading to strong free cash flow generation for our company for multiple years to come".
"Concurrently, our exploration efforts have continued to focus on high priority targets with a planned exploration update expected in the third quarter. I believe there is additional value to unlock at our assets through substantial resource to reserve conversion and look forward to updating the market on our progress," he said.
New Gold has a market capitalization of C$852.64 million.