This gold miner increased production in the last quarter to improve cash flow. But it has also entered into two important deals to expand its production and lower debt.
NEW GOLD (Toronto symbol NGD; www.newgold.com) has moved up 43% since the start of the year on higher gold prices—and its strong operating performance.
New Gold 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.
In the three months ended December 31, 2015, New Gold’s cash flow per share rose 7.1%, to $0.15 from $0.14 a year earlier. (All figures in U.S. dollars.) Production rose 24.2% in the latest quarter, to 131,700 ounces from 106,000. That offset falling gold prices in 2015.
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To help fund the project, New Gold 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 also 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 give it speculative appeal.
Recommendation in Stock Pickers Digest: BUY for aggressive investors.
For our recent report on one of the companies that made a deal with New Gold, read Goldcorp conserves its cash.
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