Today we look at a penny stock that has adopted an ambitious growth strategy. Newmarket Gold recently merged with another gold mining firm to boost its annual production to 200,000 ounces. Newmarket also has room to increase the reserves at its three mines and is prepared to acquire more gold producers at distressed prices. Not least, the company has taken a further step to inspire confidence by attracting two major figures in the gold industry to its board of directors.
Newmarket Gold (symbol NMI on Toronto; www.newmarketgoldinc.com) has its shares listed in Canada, but its three 100%-owned operating gold mines—Fosterville, Cosmo and Stawell—are in Australia.
Newmarket recently merged with Crocodile Gold. The combined company has more than 200,000 ounces of annual production.
In the three months ended June 30, 2015, Newmarket’s revenue fell 4.6%, to $66.0 million from $69.2 million a year earlier (all figures except share price and market cap in U.S. dollars).
The company earned $12.1 million, or $0.10 a share, up sharply from $3.9 million, or $0.03. Cash flow was $24.2 million, or $0.21 a share, a 55.1% increase from $15.6 million, or $0.13, a year ago. The gains came from lower costs and improved efficiency.
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Penny stocks: Notable names on Newmarket board of directors enhance penny stock’s appeal
In the latest quarter, Newmarket produced 55,998 ounces of gold, up 3.7% from 54,024 ounces. However, it sold its gold for an average of $1,196 an ounce, down 7.4% from $1,291. It forecasts 2015 output of 205,000 to 220,000 ounces.
The company holds cash and bullion of $38.8 million, or $0.29 a share. Its long-term debt of $23.4 million is a low 12% of its market cap.
Newmarket has room to increase the reserves at its three mines, and their location in Australia, where there is little or no political risk, is also a plus. Meanwhile, Newmarket aims to acquire more gold producers selling at distressed prices.
The company’s board of directors includes Lukas Lundin, chairman of Lundin Mining, and Randall Oliphant, executive chairman of New Gold and formerly president and CEO of Barrick Gold.
Newmarket Gold is okay for highly aggressive investors to hold.
Inner Circle recommendation: HOLD for highly aggressive investors
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