TORONTO (miningweekly.com) – TSX- and NYSE-listed New Gold on Thursday released the results of a feasibility study for its Rainy River gold project, located in Ontario, saying that when using the study’s base-case economics, the project was expected to have a pretax 5% net present value of $438-million, an internal rate of return of 13.1% and a payback period of 5.4 years.

Under the base-case scenario, New Gold used a gold price of $1 300/oz, $22/oz of silver and a C$0.95 foreign currency conversion rate against the US dollar.

The Vancouver-based company said that the study called for a 21 000 t/d operation over a 14-year mine life, combining an openpit that would produce about 19 500 t/d and an underground operation that would produce about 1 500 t/d.

The yearly output was expected to average 325 000 oz of gold production at a cost of $613/oz over the first nine years, starting in 2017.

Initial capital outlay was estimated at $885-million and sustaining capital at $348-million, or $102/oz, for total capital of $1.23-billion.

"The results of the study are entirely consistent with our expectations when we decided to acquire Rainy River Resources. The project provides our company with an asset that meets all of our key criteria, including: solid returns with strong leverage to higher gold prices, manageable capital costs, a robust, long-lived production base with continued regional exploration potential, below industry average costs, and location in a great mining jurisdiction,” New Gold executive chairperson Randall Oliphant said.

President and CEO Robert Gallagher added that in parallel with the feasibility study, the environmental assessment report had also been finalised and was scheduled for release in the coming days for regulatory agency and stakeholder review. “We look forward to progressing the project further through 2014," he said.

The pit-constrained Rainy River mineral resource, effective November 2, used a gold cutoff grade of 0.3 g/t for openpit resources and a gold cutoff value of 2.5 g/t for underground resources.

Globally, the deposit contains Canadian National Instrument 43-101-compliant measured and indicated mineral resources suitable for direct processing, from mine to mill, of 106-million tonnes at 1.54 g/t gold and 2.88 g/t silver, representing 5.2-million ounces of gold and 9.8-million ounces of silver.

The openpit measured and indicated mineral resources suitable for stockpiling and future processing also totalled 71-million tonnes at 0.43 g/t gold and 2.09 g/t silver, representing one-million ounces of gold and 4.8-million ounces of silver.

Analysts at Desjardins Capital Markets Research said they believed this project would likely be developed, despite the permits being outstanding, ahead of the larger Blackwater project, in British Columbia.

“Once this is in operation, we believe New Gold would plan to use the cash flow from Rainy River to fund Blackwater, which has an initial capital estimate of about $2.1-billion, but is nearly triple the scale of Rainy River. We estimate that Blackwater will start up in 2020,” the analysts said in a note to clients.