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New Gold Inc. (NGD, TSX & AMEX)


drbubb
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New Gold Inc. (NGD, TSX & AMEX)

 

The Company's goal is to become a million gold equivalent ounce producer with lower than industry average cash costs by 2012

 

Summary

My initial interest in New Gold was a result of a merger which took place last year with three solid intermediate gold companies. Peak Gold, New Gold and Metallica Resources who came together in a $1.2 billion all stock merger. Each one of these companies brought something unique to the table to create a much stronger intermediate sized producing gold company with a depth of production in the pipeline that will provide future growth. New Gold's portfolio of plays is spread across Alaska, British Columbia, Mexico, Chile, Brazil and Australia.

 

Though New Gold had their head handed to them last fall when the market collapsed, the smart money came in to snap up shares soon after. The stock bottomed out at $1.06 in October, at about the same time a resurgence into quality, growth oriented gold stocks helped push New Gold back up to $3 recently.

The company's objective of becoming a million ounce gold equivalent producer with one of the lowest cash costs in the industry is a statement easily said but not easily done. Few companies could make such a claim and actually mean it. Considering that New Gold has a management team consisting of the Who's Who of the mining industry, I feel confident they will bring increased shareholder value to this stock going forward.

 

Heading into 2009 New Gold will be producing gold from three mines; The Cerro San Pedro mine in Mexico, the Peak Mine in Australia, and to a lesser extent, the Amapari mine in Brazil.

 

New Gold's future potential as a growth stock will come from their new developing mines. To that end, they have the New Afton mine in British Columbia which is due to start full production by mid-2012 and the El Morro mine in Chile which is awaiting a mining permit that is expected to come over the next 12 to 18 months.

 

On the management side of the business, at the start of this year New Gold was able to reduce $50 million of debt via a buyback of senior secured notes which cost them $30 million. This purchase and cancellation of senior secured notes has reduced their total debt from $237 million to $187 million with an associated saving of $5 million in annual interest payments. This transaction will also show up on the books as an estimated pre-tax gain of about US$14 million in Q1. As of September 30th, 2008, New Gold reported cash and equivalents of US $251 million.

 

The capital gain potential of New Gold lies with their two new developing mines at New Afton and El Morro plus any acquisitions they may make

 

http://www.vanguardsolutions.ca/i/pdf/09-0...NGD_Winston.pdf

 

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I do.

I nearly added some at $1.00.

I think it coudl get back to $3.00 or higher in the next major move up in gold

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