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New Gold mine north of MN border running behind schedule, over budget

INTERNATIONAL FALLS, Minn. — An all-new gold mine under development 45 miles northwest of International Falls is running three months behind schedule and $195 million over budget.

Toronto-based New Gold Inc. said Monday, Jan. 30, that the first production from its Rainy River mine north of Emo, Ontario, is now slated to occur in November and that the total project now will cost $1.05 billion in U.S. dollars.

The open-pit operation, which will later include underground mining as well, was expected to start producing by July — an estimated 325,000 ounces of gold and 480,000 ounces of silver each year.

The company ran into delays and extra costs last year while trying to obtain permits to operate its tailings basin. The company has moved ahead with primary approval for a smaller waste rock site but still needs additional approvals by regulators for its full-sized tailings basin and other water-related issues.

Work is wrapping up at the site but several details have yet to be finished. In its quarterly report Monday, the company said about 24 million tons of overburden and waste rock have been mined from the open pit through late January, and the mining rate has increased to an average of about 100,000 tons per day.

New Gold said its costs would be $905 to $945 per ounce at the mine, with operations able to sustain itself with gold between $1,200 to $1,240 per ounce. Gold was trading at just over $1,200 Monday.

The New Gold operations are expected to employ 400 people.

The company said Monday that it's facing a $100 million funding gap to pay for its operating expenses and to start commercial production at its Rainy River mine in November. New Gold said it was looking at a number of options to plug the shortfall, including selling non-core assets and raising debt or equity.

Rainy River is one of the few mid- to large-scale gold mines being built worldwide as the industry pulled back from developments after gold prices began falling in late 2011.

"While management is evaluating a number of opportunities to raise the capital, we believe the market will respond negatively to the increased uncertainty caused by the announcement," Canaccord Genuity analysts said in a report.

Reuters contributed to this report.