Meeting production targets have been difficult for this gold miner’s largest asset and that hurt its share price. But management is now planning to finetune the operations at its flagship mine by selling a lesser property to raise funds.
The company will also pay down debt to ensure greater financial stability and prepare for a brighter future.
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NEW GOLD $1.20 (Toronto symbol NGD; TSINetwork Rating: Speculative) (888-315-9715; www.newgold.com; Shares outstanding: 575.5 million; Market cap: $694.5 million; No dividends paid) continues to explore the possible sale of the company along with other options.
New Gold has struggled to hit production targets at its biggest mine, Rainy River. The shares are down along with most gold stocks, and that will make it more difficult to raise funds to fix operational problems at the mine.
Mining Stocks: Mine sale to bolster another mine and pay down debt
Meanwhile, to raise funds, the company will sell its Mesquite mine in California for $158 million. New Gold will use the proceeds for Rainy River. As well, it will use some of the money to pay down its long-term debt of $959.1 million U.S. That amount is a very high 1.8 times the company’s market cap.
Recommendation in Stock Pickers Digest: New Gold is still a buy, but only for aggressive investors.
Comments
Christine
I think New Gold is too risky a stock for most of us. Not much more than a penny stock and $158 m won’t make much of a dent in a $959 m debt. I traded gold stocks some in the past but find it harder to see a direction with them these days.
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I think New Gold is too risky a stock for most of us. Not much more than a penny stock and $158 m won’t make much of a dent in a $959 m debt. I traded gold stocks some in the past but find it harder to see a direction with them these days.
Thanks for your comment on this Stock Pickers Digest recommendation.