Shares in Vancouver-based New Gold Inc. (TSE:NGD) (NYSE:NGD) opened down in Toronto Wednesday morning on the back of the announcement that the producer was suspending mining at its Cerro San Pedro mine in Mexico in the area of a pit wall movement, which occurred on August 23, 2013.
The news comes a day after the stock lost more than 6 per cent on its $8.50 open to close at $7.73 per share on the Toronto Stock Exchange on Tuesday.
As a result of the incident, New Gold anticipates production from the project to fall below original expectations, with an estimate of roughly 15,000 ounces of gold to be lost from the current calendar year.
No-one was injured in the incident, in which approximately 800,000 tonnes of material moved on the northeast pit wall, the company said in its release. Mining in the area below the pit wall movement has been temporarily suspended as a precautionary measure, although the company stressed that efforts to mitigate the impact of the pit wall movement and lower recovery rates are already underway.
The miner said it was working with geotechnical experts to evaluate the area and assess the impact on the company’s near-term mine plan and production at Cerro San Pedro, with the objective of safe resumption of mining in the area below the movement.
“Our primary focus is on ensuring the safety of our team and, as a result, we have stopped mining activity below the area of the ground movement,” said president and chief executive officer, Robert Gallagher.
“We are currently assessing the ground conditions and plan to adjust our mine plan to maximize our 2013 production, however, any ounces that cannot be accessed this year as a result of the slide are expected to be mined in the coming two years.”
Additionally, recoveries from the Cerro San Pedro leach pad for the last month have fallen below the company’s targets, with New Gold saying that it is evaluating various alternatives to restore the recovery rates to historical levels.
The company is to provide further details on the 2013 outlook for Cerro San Pedro in its third quarter results, including the amount of production forecast to be carried forward to future periods.
New Golds portfolio includes four producing assets and three development projects in Canada, Mexico, the United States and Australia.
The miner also owns 100 per cent of the Blackwater project and 97 per cent of the Rainy River project, both in Canada, as well as 30 per cent of the El Morro project located in Chile.