After years as a strong performer in New Gold’s suite of assets, Mesquite was another significant contributor in 2013. However, it faced an operational setback in the third quarter when grades in the western, deeper areas of the pit did not reconcile well with our model and annual production guidance was reduced in October as a result. The team moved adeptly to meet the challenge, conducting infill drilling to support mine planning, and positioning Mesquite to achieve higher production in 2014.
Consistent with the Company’s expectations, the fourth quarter was the strongest of the year as the gold grades processed were more in line with what had been expected for the full year. Mesquite produced 34,893 ounces of gold in the fourth quarter of 2013 at total cash costs of $841 per ounce. Full-year production was below expectations due to the average grade processed being 0.06 grams per tonne below the mid-point of the originally targeted range.
Mesquite’s 2013 operating costs were in line with expectations; however, the lower production base negatively impacted the total cash costs for the year.
In 2014, Mesquite’s gold production is expected to increase by approximately 10 percent to 113,000 to 123,000 ounces, driven by planned mining of higher grades. Mesquite’s 2014 guidance has taken into account the grade-related challenges encountered in 2013 as well as additional data from the late 2013 infill drilling program that was conducted in the areas scheduled for mining through 2014. Higher average gold grades are expected to be partially offset by lower ore tonnes placed on the pad as the mine plan provides for opening a new area of the pit in 2014, resulting in a higher stripping ratio for this year.
Mesquite’s 2014 total cash costs are expected to be slightly higher than those incurred in 2013 due to an increase in total tonnes moved.
Sustaining capital expenditures in 2014 are estimated to be $40 million, which includes $15 million for four new haul trucks, and $13 million for a leach pad expansion required as a result of the increase in Mesquite’s mineral reserve base since the mine restarted production. This is the last expansion anticipated in the mine’s life. Another $10 million is slated for replacement of major equipment components. The addition of new trucks provides additional haulage capacity and will enhance the team’s flexibility in accessing Mesquite’s multiple ore zones which should result in increased production in future periods. Mesquite’s all-in sustaining costs are expected to peak in 2014.
With a team focused on increasing production and minimizing costs, Mesquite has a bright future as a key contributor.