NEW GOLD $4.71 (Toronto symbol NGD; TSINetwork Rating: Speculative) (888-315-9715; www.newgold- .com; Shares outstanding: 504.0 million; Market cap: $2.4 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 Ontario’s Rainy River project.
In the three months ended September 30, 2014, New Gold’s cash flow per share rose 60.0%, to $0.16 from $0.10 a year earlier. Gold production fell slightly, to 93,367 ounces from 94,038. But an 8.2% rise in copper output from New Afton and lower overall costs increased New Gold’s cash flow.
Earlier this year, the company finished a feasibility study that projects a mine at Rainy River producing an average of 325,000 ounces of gold annually over nine years. The property could hold as much as 3.8 million ounces of gold, and production may start in 2017.
The company’s $871.9 million of long-term debt is a reasonable 36.3% of its market cap. It also holds cash of $416.1 million, or $0.83 a share. That gives it the funds it needs to keep developing Rainy River, which, combined with its four operating mines, could increase New Gold’s annual output to over 600,000 ounces within five years.
Like most gold firms, New Gold’s shares will be heavily influenced by the direction of gold prices. But meanwhile, its positive cash flow, strong balance sheet and rising production outlook give it considerable speculative appeal.
New Gold is a buy.
