New Gold jumpstarts development of Rainy River project in Ontario

New Gold, the mining firm headed by Executive Chairman Randall Oliphant and Chief Executive Officer Robert Gallagher, has the ball rolling on the Rainy River project in Ontario. For this year, it has already allocated $105 million in capital expenditures for the development of the mine which came with its acquisition of Rainy River Resources last year. Of this amount, more than half will be spent for the development of property, plant and equipment. The remainder will be spent for engineering, environmental monitoring and procurement of the necessary permits.

The Rainy River project is intended to combine open-pit and underground mining operations. In its projected 14- year life, the first nine years of the mine is expected to produce 325,000 ounces of gold annually. The cost to sustain the mine is set at $736 per ounce which is seen to provide a lot of margin for New Gold.

However, building a mine of this size from the ground up requires capital. The pre-development capital of the project is pegged at around $840 million. Thankfully, New Gold’s recent year filing showed that it had a working capital of $588 million. The very promising outlook of Rainy River will hopefully be able to shoulder the balance.

New Gold intends to get the needed permits for Rainy River by the first half of next year. If financing proceeds as scheduled, it is set to be commissioned late in 2016.

Given the huge potential of Rainy River, Oliphant and his team acquired the project for a bargain. A few years ago, Rainy River’s worth was more than $1 billion. However, last year’s slump gave a window of opportunity for New Gold. Buying it for only $310 million.

“Retirement Tsunami” Plagues Canada’s Oil Industry

A “retirement tsunami” is going to be a major problem in the oil industry of Canada. According to Graham Dodd, a principal at Mercer LLC, The “retirement tsunami” refers to the shortage of workers experienced by the country’s oil sector brought about by its aging workforce.

Dodd’s conclusions were drawn from the results of Mercer’s recent survey which illustrated that the “technical skills gap” was seen as a very serious issue by Canadian oil and gas firms. The data further showed that although more than half (56 percent) of these companies have put in place a process that is able to pinpoint the gaps, only 27 percent of them were able to give solutions to address these problems.

Apparently the shortage is taking place at the top levels of leadership. Fifty-five percent of the firms that participated in the survey said they were having problems hiring individuals that could take on management and leadership posts. The companies estimate that if these labor shortages are met, they could expect an increase of anywhere from 5 to 10 percent in their investment returns.

To address the current labor challenge, companies are poaching from each other. The survey showed that 70 percent of the new posts were filled by luring workers from other companies. Only 10 percent of new recruits were hired from colleges and universities. What makes the situation worse is that Canadian firms are also facing competition from firms in the US, Asia and Africa that are also looking for Canadian workers. 
Incidentally, Canada’s oil sector is not the only one beset with labor shortages. The liquefied natural gas (LNG), mining and power industries are also in need of new workers.