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mesquite mine

Consistent with the company's mine plan, the Mesquite Mine had a record fourth quarter and robust future outlook. With the mine now meeting expectations and higher-cost inventory diminishing on the leach pad, we expect unit costs to decrease in 2010 and 2011 and production and sales to increase.


The Mesquite Mine is an open-pit, heap-leach operation located in Imperial County, California, an area with a storied mining past. New Gold acquired the mine in June 2009 as a result of a successful business combination with Western Goldfields Inc. (WGI). Prior to the business combination, WGI acquired the Mesquite Mine from Newmont Mining Corporation in 2003 and subsequently completed a positive feasibility study in 2006. The study confirmed the excellent potential to increase reserves at Mesquite and return the mine to full production. WGI commenced production at Mesquite in January 2008.


To the credit of its employees, Mesquite achieved over one year without a lost-time accident in 2009. Safety activities during the year included improved employee safety training programs. Mesquite's exemplary safety performance was recognized with a major safety award — the American Red Cross "Real Heroes" award from the San Diego/Imperial County Chapter. This annual award is given to only one company in the Chapter, which represents a population of over 5,000,000 people and thousands of businesses.

On the environmental front, Mesquite updated all major management plans and completed a third-party energy audit and carbon footprint evaluation that will serve as a guide for future improvements.

The Mesquite Mine is a welcome neighbour in its region, providing jobs and engaging suppliers in nearby towns that have been historical partner with the mining industry. The operation is also working cooperatively with the Los Angeles County Sanitation District (lACSD), which operates a landfill adjacent to the Mesquite Mine site.


During 2009, New Gold focused on enhancing operations at Mesquite and positioning the mine for continued improvement in 2010 and beyond. Gold sales at Mesquite during 2009 totaled 143,509 ounces at a total cash cost(1) of $596 per ounce. This compares with 2008 gold sales of 110,880 ounces at a total cash cost(1) of $508 per ounce. During 2009, Mesquite incurred additional costs due to lower truck availability. As a result, maintenance and repair costs increased during the period and a contract miner was utilized to assist with waste stripping in the Rainbow mining area. The waste stripping completed in 2009 is expected to have a positive impact on the operation going forward.

As outlined in the mine plan, production at Mesquite increased in the month of September and continued this trend in the fourth quarter, providing the highest production levels for the year. We expect unit costs to decrease in 2010 and 2011, coupled with a continued focus on production increases.


Opportunities exist to further enhance value at Mesquite. At the end of 2009, we updated our reserve and resource estimates to reflect a higher gold price assumption of $800 per ounce, which resulted in an additional 0.5 million ounces of reserves net of 2009 depletion. There is an additional sulphide resource below the current design pits. With additional exploration, there is potential to expand this resource to a level that could significantly extend Mesquite's mine life. Currently, the company is evaluating alternate processing methods for the sulphides and expects to conduct additional exploration drilling to expand the sulphide resource.


2009 PRODUCTION (including prior to period of ownership)
Gold: 150,002 ounces
Total Cash Cost(1)/oz: $596
Gold: 145,000 to 155,000 ounces
Total Cash Cost(1)/oz: $540 to $560

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