El Morro decision will hinge on power solution - New Gold

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Tuesday, October 29, 2013

Securing a source of power will be key to any decision to go ahead with the El Morro gold-copper project in Chile's northern region III, Vancouver-based New Gold (TSX, NYSE MKT: NGD) executive chairman Randall Oliphant told a conference call to discuss the company's Q3 results.

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Prospects for advancing El Morro, a 30:70 JV with compatriot Goldcorp (TSX: G, NYSE: GG), took a major step forward earlier in October when the project's environmental impact study was approved by Chilean authorities after being suspended in April 2012.

But the following day Goldcorp CEO Chuck Jeannes put the project on the back burner, saying the company needs to "go back to the drawing board" and update its "stale" feasibility study before any decision can be taken, as well as looking into possible power solutions.

NO TANGIBLE SOLUTION

Solving the lack of power will be key to a positive decision on El Morro, according to Oliphant. "Although there are lots of alternatives being discussed there is no tangible solution being put forward at the moment, but I'm sure one will come," he told the call.

"But I believe this will be the gating item to making a decision to build this project. It's not that [the power source] has to be installed but they just need to know where it's coming from."

It remains unclear whether a solution will come from connecting the grid in northern Chile with the central region or from construction of a new power plant or plants, CEO Robert Gallagher added.

Power was originally to have been supplied by Brazilian company MPX's US$4.5bn Castilla coal-fired plant project. Chile's supreme court ordered a new EIS for that project last year and the future is unclear.

El Morro, which had an initial capex estimate US$3.9bn, has proven and probable reserves in the order of 8.17Moz gold y 6.12Blb copper.