New Gold Financing Suggests M&A Option

| About: New Gold (NGD)

With New Gold Inc. (NYSEMKT:NGD) announcing a recent equity financing worth about $100-million, Wellington West has some theories about what the company is going to do with the money.

One possibility is a merger or acquisition, although there appear to be few targets.

"Given New Gold's objective of becoming a million-ounce producer by 2012, M&A is ... possible (e.g. asset swap involving El Morro for a smaller gold asset)," Steve Parsons, analyst, said in a note Monday.

El Morro is a New Gold project in Chile.

Other options including extinguishing some $64-million in debt attached to its Mesquite mine in California and unwind associated gold hedges of 360,000 ounces at $800 an ounce.

Mr. Parsons maintains a Buy rating on the company with a $4.20 target price.