Topic: Mining Stocks

Three gold operations generate growing cash flow and revenue for New Gold

Improved performance at a troubled mine led to a 19% jump in its output in the most-recent quarter.

Its overall gold production rose 3.9% as it continues to develop another key project in British Columbia.

The stock trades at just 2.5 times the miner’s 2019 cash flow forecast.


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NEW GOLD (Toronto symbol NGD; www.newgold.com) has three established mines: Cerro San Pedro in Mexico; New Afton in B.C.; and Rainy River in Ontario, which started up last year.

The stock is up over 50% since the start of 2019. That’s in large part due to the improved performance of its troubled Rainy River mine in Ontario.

Rainy River started production in 2017 and New Gold has been plagued by cost overruns for its construction as well as grade and recovery issues for its operations.

However, gold production for the mine jumped 19.3% in the latest quarter to 66,765 ounces

Mining Stocks: New open pit project shows promise

In addition, New Gold owns 100% of the Blackwater gold/silver project located in B.C. The proposed $1.8-billion open-pit gold and silver mine has just received an environmental assessment certificate from the province’s regulators.

“The ministers are confident that Blackwater will be built, operated and closed in a way that ensures that no significant adverse effects are likely to occur,” said the ministries of Environment and Climate Change Strategy, and Energy, Mines and Petroleum Resources, while including 43 conditions that must be met by the company.

In addition, on April 18, 2019, the company entered into a trilateral Participation Agreement with the Lhoosk’uz Dene Nation and Ulkatcho First Nation, the two Indigenous groups whose traditional territories overlap the project’s mine site. Consultation with other First Nations continues.

The Blackwater mine is located about 110 kilometres southwest of the B.C. town of Vanderhoof.

In the three months ended June 30, 2019, the company’s cash flow per share fell 16.7%, to $0.10 from $0.12. (All figures except share price and market cap in U.S. dollars.) A higher level of waste rock at Rainy River offset higher overall gold production.

New Gold’s long-term debt of $781.9 million U.S. is a very high 1.05 times its market cap. Still, its strong cash flow lets it keep paying down that debt and continue developing Blackwater.

Meanwhile, the stock trades at just 2.5 times this year’s forecast cash flow of $0.52 U.S. a share.

Recommendation in Stock Pickers Digest: New Gold is a buy.

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