New Gold Inc.

Good morning. My name is Jean-Louis, and I will be your conference operator today. Welcome to the new Gold second quarter 2025 earnings call and webcast. All lines have been placed on mute to prevent any background noise. Please be advised that today's conference call and webcast is being recorded. After the speaker's remarks, there will be a question and answer session. If you would like to ask questions during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. I would now like to hand the conference over to Anik Shah, Executive Vice President of Strategy and Business Development. Thank you.

Thank you, Jean-Louis, and good morning, everyone. We appreciate you joining us today for New Vault's second quarter 2025 earnings conference call and webcast. On the line today, we have Patrick Godin, President and CEO, Keith Murphy, CFO, and Travis Murphy, Vice President, Operations. In addition, we have Luke Buchanan, Vice President, Technical Services, and Jean-Francois Ravenel, Vice President, Geology, available to assist during the question and answer portion at the end of the call. Should you wish to follow along with the webcast, please sign in from our web homepage 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 slide two of the presentation. Today's commentary includes forward-looking statements relating to Newgold. In this respect, we refer you to our detailed cautionary note regarding forward-looking statements in the presentation. You are cautioned that actual results in 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 NUGL's latest AIF, MD&A, and other filings available on CDAR+, which set out certain material factors that could cause actual results to differ. In addition, at the conclusion of the presentation, there are a number of end notes that provide important information and should be reviewed in conjunction with the material presented. Slide four highlights some of the key accomplishments during the second quarter. Through the first half of 2025, we have made excellent progress on advancing and completing many of the objectives presented at the beginning of the year. Safety, highlighted by a purge to care culture, continues to be a focus and strength for the company. During the quarter, we delivered a low total recordable injury frequency rate of 0.82, continuing the downward trend over the last three years. New Afton was awarded three safety awards during the second quarter for exemplary safety performance in 2024. The awards received included the J.T. Ryan Regional Award for British Columbia and Yukon, British Columbia's Safest Large Underground Mine, and British Columbia's Mine Safety Innovation Award. In the second quarter, New Afton also won British Columbia's Underground Mine Rescue Championship and the Rainy River Mine won Thunder Bay District Mine Rescue Championship, a true testament to our commitment to health and safety. During the quarter, the company produced approximately 78,600 ounces of gold and 13.5 million pounds of copper at an all-in sustaining cost of $1,393 per ounce. Gold production for the first half of the year was about 38% of the midpoint of the consolidated production guidance range of 325 to 365,000 ounces of gold, consistent with the planned 38% stated in the February outlook. The company generated more than $163 million in cash flow from operations and achieved a record of $63 million in free cash flow. Rainy River also recorded a quarterly record of $45 million in free cash flow. The company made significant progress on initiatives aligned with its three-year production growth and accomplished several key milestones during the quarter. At New Afton, C-Zone cave construction is now approximately 65% complete, supporting the progressive increase in processing rates towards the target of 16,000 tons per day by early 2026. An important development milestone was also achieved in May with the completion of undercutting, unlocking the remaining extraction drives for development and construction. At Rainy River, the PIP portal breakthrough was achieved in early April. Subsequently, completion of the ODM east ventilation loop and commissioning of the fresh air rays were accomplished later in the quarter. These key milestones are expected to facilitate increased underground development and production rates. Our exploration initiatives made significant progress during the quarter, highlighted by record activity at New Afton. Following the completion of the C-zone extraction level exploration drift, current efforts are concentrated on K-zones. At Rainy River, work is advancing on the Northwest trend open pit zone, as well as upgrading the underground ore inventory. We plan to provide an exploration update in September. In April, it was announced that Newgold would acquire the remaining 19.9% free cash flow interest at New Afton, consolidating our interest to 100%. In summary, we achieved the planned objectives for the first half of 2025 with a continued focus on generating meaningful value for our shareholders. With that, I will now turn the call over to Travis. Travis.

Thank you, Ankit. I'm on slide six, which has our operating highlights. As Ankit noted, Q2 delivered production and costs on plan. Production totaled approximately 78,600 gold ounces and 13.5 million pounds of copper. This increase in gold production compared to Q2 2024 was driven by planned higher feed grade at Rainy River, partially offset by lower plan fee grade at New Afton. Consolidated all-in sustaining costs for the quarter were $1,393 per gold ounce on a byproduct basis, in line with Q2 2024, but a substantial improvement over the first quarter of 2025. Costs will continue to trend down throughout the year as production increases. New Afton delivered an excellent order as the B3K continued to over-deliver compared to the plan set out at the beginning of the year. As a result, New Afton achieved an all-in sustaining cost of negative $537 per ounce after considering the copper credit. Rainy River delivered on plan as a mill transition from low-grade stockpile material to processing higher-grade open-pit ore. All-in sustaining costs were $1,696 per ounce in the quarter, a substantial improvement compared to the first quarter. Costs should continue to trend lower throughout the year as production ramps up. Our total capital expenditures for the quarter are approximately $92 million, with $34 million spent on sustaining capital and $58 million spent on growth capital. At New Afton, sustaining capital is primarily related to mobile equipment, while growth capital primarily related to construction, growth mine development, tailings, and machinery and equipment. At Rainy River, sustaining capital is primarily related to open pit stripping and tailings facility expansion, while growth capital related to underground development, machinery, and equipment.

Turning to the assets, starting with New Afton on slide seven, New Afton delivered another strong quarter.

The B3 cave continued to over-deliver and C-zone ore production continued its ramp up following commercial production and crusher commissioning early in the fourth quarter of 2024. Through the first six months of the year, production represented approximately 54% and 49% of the midpoint of guidance of 60,000 to 70,000 ounces of gold and 50 to 60 million pounds of copper respectively, higher than the first half guidance provided in February due to the B3 outperformance. The B3 cave is now expected to exhaust in the middle of the third quarter and annual production is expected to be in line with the guidance profile previously provided. With increased production at lower cost, New Afton generated an impressive $33 million in free cash flow while continuing to complete the construction of the C-Zone Block Cave. Through the first half of 2025, New Afton has generated over $85 million in free cash flow. In terms of development, the C-Zone Cave construction continues to advance on schedule. Undercutting was completed in May, which consisted of the last stage of production blasting and mucking and was a significant milestone achieved in the development timeline. Cave construction progress is 64% complete as of the end of June. D-Zone remains on track to ramp up to full processing capacity of approximately 16,000 tons per day beginning in 2026. Turning now to Rainy River on slide 8. Gold production in the second quarter was 61,600 ounces of gold at an all-in sustaining cost of $1,696 per gold ounce sold. The first six months of production represented approximately 34% of the midpoint of guidance of 265,000 to 295,000 ounces of gold, slightly behind the first half guidance of 37%. This is driven by a one-week delay in the sequencing of the higher grade open pit material in May, which led to an increase of approximately 5,900 ounces of golden circuit inventory at the end of the quarter. What this effectively means is we mined and processed the 5,900 ounces, but were unable to pour it into our final product by the quarter end, which would have translated to a consolidated production of approximately 84,000 ounces of gold. Production was substantially higher than the first quarter as we successfully transitioned from stockpile ore and started processing the higher grade open pit ore. As Hank had mentioned at the top of the call, June was a record production month with over 37,300 ounces produced at an average grade of 1.44 grams per ton. The mill also demonstrated the ability to process higher grade material at high throughput rates. with over 40% of the days in June processing over 30,000 tons per day. As a result of the increased production, Rainy River generated a quarterly record $45 million in free cash flow. Following the successful breakthrough of the pit portal in early April, the Rainy River underground mine achieved another important milestone, with fresh air raised commissioning and the completion of the ODM East ventilation loop. Underground development and still production from several new mining zones can now progress as they come online in late 2025. To sum up, we made excellent progress in the second quarter and remain on track to deliver our 2025 stated objectives.

With that, I'll turn the call over to Keith. Keith? Thanks, Travis.

Our financial results can be found on slide 10. Second quarter revenue was $308 million, higher than the prior year quarter due to higher gold prices and gold sales slightly offset by lower copper prices and sales. Cash generated from operations before working capital adjustments was $161 million, or $0.20 per share for the quarter, higher than the prior year period, primarily due to higher revenues. New gold generated a record quarterly free cash flow of $63 million, as higher revenue was only partially offset by the higher capital expenditure as key growth projects were advanced. The company recorded net earnings of approximately $68 million or $0.09 per share during the second quarter. After adjusting for certain other charges, net earnings was $90 million or $0.11 per share in Q2. Our Q2 adjusted earnings include adjustments related to other gains and losses and other non-recurring items. Turning to our balance sheet on slide 11. At the end of Q2, we had cash on hand of $226 million and a liquidity position of $452 million. Post quarter, the remaining $111 million of the 2027 senior notes was redeemed as planned and previously announced and paid for with cash in hand. In order to fund the New Afton buyback transaction announced back in April, $150 million of the credit facility was drawn in the quarter and a gold prepayment was entered into in mid-April. The company has agreed to deliver approximately 2,770 ounces of gold per month over the July 2025 to June 2026 period at an average price of 3,157 per gold ounce. To sum up, we are in a very healthy financial position with a significant free cash flow profile ahead of us. With that, I'll turn the call to Pat.

Thanks, James. Touching on exploration briefly, I am on slide 30.

The new Afton Exploration Program centered on Key Zone and nearby targets is currently at an all-time high with one surface drill targeting the Key Zone trend along Strike and six underground drills actively targeting the core of the zone and testing its footprint. With the C-Zone level exploration drift complete and the LIFT-1 level drill completed last year, We now have two distinct exploration drifts separated by more than 400 meters in elevation to better explore and fill key zones. At Trinity River, the company is advancing open pit and underground exploration in parallel. During Q2, this includes drilling the Northwest Trent open pit zone to infill part of the inferred resources and test potential pit extension. Exploration drilling also focuses on testing underground ore growth opportunity at ODM main front surface. We continued our work on open pit expansion studies with the goal of keeping the mill fully utilized for longer. As shown, studies on underground mine design and optimization also continued to make progress. As I have said previously, we expect continued and significant growth in gold and copper production over the next three years. The second quarter performance was an excellent indication of the expected trajectory to come. As production volumes increase, the unit cost per ounce of gold is projected to decrease substantially. As a result, we continue to expect to generate significant free cash flow over the next three years. At current consensus commodity prices, this translates to approximately $1.86 billion in free cash flow over that period. At current spot prices, the figure exceeds $2.5 billion, over 70% of our market cap. In closing, the second quarter was positive for New Gold as we continue to deliver on our stated strategic goals. We will continue to build on these goals from here. This includes delivering on 2025 production and cut guidance with the same attention to health and safety. Our continuous improvement with our preferred performance is a direct indicator of the support from our employees and colleagues for the courage of the care culture. At New Afton, we will ramp up C-Zone in advance of the development of East Extension. At Rain River, we will continue to ramp up the underground main, mining Phase 4, and advance Phase 5 open pit development. Lastly, we are continuing to increase our exploration efforts at both sites with a combined $30 million of investment for 2025 targeting future reserve replacement. New Gold offers a compelling investment opportunity with increasing production and simple and free cash flow generation combined with our safe, well-established mining jurisdiction. Increasingly compelling exploration upside and exposure to what we view as preferred metal in gold and copper. We were confident in our ability to deliver additional websites. The remainder of 2025 will continue to build from here, both operationally as well as project and exploration candidates, which is expected to create meaningful value for our shoulders and provide increased financial flexibility and optionality for new goals moving forward. This completes our presentation. I will now turn it back to the operator for the Q&A portion of the call, Charlie.

Thank you. If you have a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, simply press star 1 again.

One moment, please, for your first question.

Your first question comes from the line of Lawson Winder of Bank of America. Your line is open.

Thank you very much, operator. Hello, gentlemen. Thank you for the update. Can I please start off by asking for a little additional color on the split in production between Q3 and Q4 of 2025? Thank you.

So we're mostly in Q3 and Q4. We are targeting to have the same production mostly.

And is that consistent across both Rainy and New Afton in terms of gold?

Yeah, so in terms of gold, it's mostly yes. Rainy will generate the majority of the cash because we'll produce a lot of gold as planned. And we're ramping up new atoms. So we'll exhaust the B3 cage. And we will ramp up C-zone. And C-zone, so we still target to produce the metal that we forecast in the guidance.

OK. With regards to reserves and resources, just looking toward year end, and first of all, I guess just generally, do you expect to replace reserves in 2025? And then a little more specifically with the Northwest trend resource conversion to indicated, do we expect that to show up in reserves and resources? And then just thinking about gold price assumption year end 2024 was 1650 we're nearly double that now 1980 i think you guys use for resources um how are you thinking about a a gold price assumption for calculating reserves and resources at your end yeah so first in the in terms of

In terms of new often, in terms of reserve renewal, our target for this year, as we discussed, was to increase our indicated resources, ultimately to produce probable reserve or feasibility studies. That's the main purpose is to have the sufficient drilling ground to convert resources in reserve and studies in 2026. So it's what we plan. For concerning the Rainy River, the intent is to to define, complete the definition drilling to pre-classify Northwest Trend and to transfer that in reserves. So it's our objective. And also we have some excellent targets on the ground that we will, as we explained in February, is our objective is to increase reserves on the ground where we plan to already, we already plan to have infrastructures to reduce the capex and increase the NAV for the company. And actually it's what we are doing. So it's, I don't think that when you revert to be objective and rational that we will renew the totality of what we mined, but it will be significant for us. So for one thing. Second thing concerning the gold price, every year we're benchmarking of our peers, what our peers are doing. So it's not coming out coming from for the corner office, so obviously we're going to use this price. But basically, for sure, with the current consensus, the price for reserve calculation, we have a high probability that it will increase. So maybe turn around $1,900 to $2,000. Probably it's something that is actually the trend that the industry is looking at. But basically, it's what we'll look for. But when you're at 20 rivers, so it can provide some value for shareholders.

Okay. Thanks for that. And if I could just squeeze in one more question, thinking about your capital allocation priorities vis-a-vis the very strong expected inflection higher in free cash flow, is there any thought to being active or putting in place a buyback, thought about a dividend, where are the priorities vis-a-vis those two options and debt repayment? And then if you could just comment on your thoughts on acquisition. So does it remain a strategic objective to add a third core asset? Thank you.

Hey, Lawson, and thank it. No, shareholder returns are definitely something that we evaluate. In the near term right now, I guess Keith mentioned, we ended the year with just over 200 of cash. Subsequent to quarter, we paid down the debt from the original bond offering. So bringing down our cash balance We still have $150 million on our credit facility that we expect to pay by the end of the year. And we are also ramping up two significant projects with the C-Zone, the underground main, sorry, the underground development, plus our exploration program is also back half-weighted. So I would say for 2025, our focus is very internal and organic. And as we hit this free cash flow inflection point and kind of come towards the end of the year, that will be something that shareholder returns will be definitely top of mind. In terms of M&A, I think as Pat's mentioned on previous calls, I think we did our best transaction with consolidating new Afton over the last year, able to consolidate an asset that we own at sub one times NAV in a rising gold price environment. We will continue to evaluate other opportunities, assuming they improve the profile of new gold based on our internal criteria. So that's something that we always evaluate, but we'll be very prudent in our M&A strategy.

Okay, fantastic. Thanks very much, guys.

Your next question comes from the line of Michael Ciperco of RBC Capital Markets. Your line is open.

Thanks very much, guys. A quick question on New Afton. With the B zone being extended, can you just clarify on how we should expect the transition to primary C zone mining to go and Is there a transition period or should we just see a smooth uptick in throughput and grade? And sort of when does that manifest in the second half?

In terms of the B3 is, you know, for us, we are really pleased by what is happening in B3 because it's the result of the discipline draw management that we are having in front of us. So we always plan for the worst and wish for the best. And in terms of actually what is nice with the B3 is we will reconcile extremely well. And we are marking because the dilution is actually less than expected. So going forward, it's excellent and the grid is good for us. It just delays C-zone in terms of, we will not delay C-zone, sorry, but it will extend the mine life of C-zone by the additional tonnage that are coming from B3. But at the beginning of C-Zone, I just want to remind to you, Michael, that it was planned like this and all the bottom part of C-Zone, we localized that to optimize the recovery. So the grade, the average rate is lower than the grade in the lower part of C-Zone is lower than the average rate of the blockade by itself. It's planned. It's what we have in our plan. It's what we plan in the middle produce in 2025. And we're sticking to our plan mostly. So basically is what we're not expecting due to the good news that we are extending the mile level B3 to change our metal production guidance for June 4, 2025. We're back on. The objective is to, and for us, it's a pros more than a cons, because the way that we'll accelerate the cave of C-zone, it will be more flat than to be more aggressive in the center and less on the wings of the blockade. So it means that we'll have a better draw management looking forward. So it's extremely positive for us to have additional funds from B3.

Okay, great. That makes sense, puts it in good context.

One more question for me, if I could, and then I'll pass it on. On M&A, broadly speaking, I guess the quarterly update, if you can provide one, but with the consolidation of New Afton now out of the way, and also the, I think, substantial organic growth potential at New Afton, which is set to maybe get some more visibility over the next six to 12 months. How are you thinking about growth now versus maybe exiting Q1?

Well, first, we did an excellent M&A in Q2 with features. It's something that we're really proud of. And you will understand in the short future why we were so excited to do this, to consolidate our own asset. I think it was the best M&A opportunity for us. And actually, as my colleague said, we focus on the organic growth first. It's what we can control. And it's where we can generate a lot of value for shareholders without a lot of capital to invest. We are remaining active because we're looking for opportunities. We think that with the cash flow that we'll generate, we can create value for shareholders. If we don't, we cannot provide an investment opportunity for shareholders without to return capital to them. But basically, I think we are disciplined. I'm having my colleagues around me at the table this morning, and we are disciplined. We don't want to be big to be big. We want to be bigger to be better. And so we'll work so hard to generate this capital, this cash flow, that we don't want to put that at risk. So we are diligent in our approach, but we're still looking, we're still active, and we are vigilant.

Thank you.

If you would like to ask a question, again, it is star 1 on your telephone keypad. Your next question comes from the line of Anita Soni of CIBC. Your line is open.

Good morning, Pat and team. Most of my questions have been asked and answered, but I just wanted to understand. On Rainy River, I think you said there was a weak delay in some of the high-grade material in the open pit. Is the expectation that you'll get that back in the second half of the year?

Yes, so we are still guiding to the guidance, and so it will not change our guidance for a year.

Okay, and so you're still gearing towards the sort of middle end or sort of like the original. Your expectations are still intact is what I'm trying to say.

Yeah, so for this time is what I've explained is we produce these answers. But, you know, we're not able to strip it from the circuit at the end of the quarter. So it's mainly what happened. If not, we're going to deliver what we get. So it was not in a bar. It wasn't solutions or badly so. But we expect to have this that will waterfall in the second half of the year.

And then can you just provide an update on what the next deliverables are for the K zone, like when you expect to have an update on that?

So we want to do an update in the first half of September on all our exploration activities at both sites. And our objective, you know, is because what is interesting with geology is more the drill or the adding value, but our objective is to, as much as we can, to present for the first time and get the inferred resources and key zone for Pointe du Bigot for the reserve and resource report of 2026.

Okay. All right. Thanks and congratulations on a strong result.

Thank you very much.

Your next question comes from the line of Mohamed Sidaid of Citibank. Your line is open.

Thanks, Patrick and Tim, for taking my question. Most of my questions have been answered, but just following up on Rainy River and the strong performance in June with the 37,000 ounces at 1.44 grams per ton, can you maybe give us some color into the grade profile into the second half of the year, please?

Thank you.

Yeah, so with the transition to that steady feed grade that we've seen in June, we can expect a similar high profile, a similar grade profile in the back half of the year in order to come into that guidance range. The majority of the feed, just as a reminder, is coming from the open pit, and that will bring us in line with the guidance range for the end of the year. Right. Thanks.

Well, we can follow up post-call as well with more detailed discussion of the second half.

What we are confident here is, you know, remember that last year we had some reconciliation issue and we did the new model, but we, as a study myself, Jean-Francois and his team, and the mine site, they did a new model and we applied a cap on the high grade. And so a cap of three grams per ton. And basically we are, we test this high grade zone in Q2 and we reconciled extremely well. So we are extremely confident for the second half of the year. And the second half of the year, we will end the year with a 3 million ton of ore stockpile at the REM collar. And so of the pit I'm talking about here, and basically the strip ratio going forward would be one-to-one this year at phase four. So we'll be well positioned to execute and to de-risk. So it's now we are thinking that Travis is coming in the right time, so he's enjoying the ride.

Great. No, that's very helpful. And then Ankit, for sure, I'll take you up on that offer. Thanks a lot, guys. Thanks, Mark. There are no further questions at this time.

I'd like to pass it back to Enkit and the team for closing remarks.

Great. Thank you very much. And thank you to everyone 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. Have a great day.

This concludes today's conference call. You may now disconnect.