NEW GOLD $3.02 (Toronto symbol NGD; TSINetwork Rating: Speculative) (888-315-9715; www.newgold .com; Shares outstanding: 509.1 million; Market cap: $1.4 billion; No dividends paid) has four mines: the Mesquite project in the U.S., Cerro San Pedro in Mexico, the Peak mine in Australia and the New Afton mine in B.C.
New Gold also owns 30% of the El Morro copper/ gold project in Chile, 100% of the Blackwater property in B.C. and 100% of the Rainy River project in Ontario.
In the three months ended June 30, 2015, New Gold’s cash flow per share fell 8.3%, to $0.11 from $0.12 a year earlier. That’s because the company’s gold and copper production fell, as did prices.
New Gold recently started building a mine at Rainy River; it aims to start production in mid-2017 at an average of 325,000 ounces of gold annually.
To help fund the project, New Gold has entered into an agreement with Royal Gold (Nasdaq symbol RGLD). Royal will pay $175 million U.S. for a small share of Rainy River’s gold and silver output.
New Gold has also just agreed to sell its El Morro stake to Goldcorp (Toronto symbol G) for $90 million in cash, 4% of El Morro’s gold output when a mine is built and the cancellation of a $93-million loan.
Prior to the Royal Gold and Goldcorp transactions, New Gold’s long-term debt was $879.3 million. That’s a high, but manageable, 63% of its market cap. It also held cash of $326.8 million, or $0.64 a share.
Like most gold firms, New Gold’s shares will be heavily influenced by the direction of gold prices. Meanwhile, its positive cash flow and rising production outlook give it speculative appeal.
New Gold is a buy for aggressive investors.
