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Ron Hera, founder of Hera Research, LLC, and the principal author of the Hera Research Newsletter holds a master's degree from Stanford University and is a member of Mensa and of the Ludwig von Mises Institute. A native Californian, Ron is a self described "escapee" from Silicon... More
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  • Analyst Report: New Gold Inc. (TSX:NGD / NYSE:NGD) 2 comments
    Jun 19, 2012 10:43 AM | about stocks: NGD

    With three producing gold mines and three development-stage projects, New Gold Inc. (TSX:NGD / NYSE:NGD) is a growing mid-tier gold producer. The company's currently producing assets, located in the United States, Mexico and Australia, together with its New Afton mine, located in British Columbia, Canada, are expected to produce more than 400,000 ounces of gold in 2012. The New Afton mine will begin production in mid-2012 and in 2013 the company expects to produce between 450,000 and 500,000 ounces of gold.

    As of the first quarter of 2012, the company's average cash cost per ounce of gold produced was $543, yielding an average cash margin of $1,032 per ounce. Net of byproduct credits, the company expects its cash costs to fall to between $150 and $200 per ounce of gold produced in 2013, assuming a $30 per ounce price for silver and a $3.50 per pound price for copper.

    The company's 100% owned, development stage Blackwater project, located in British Columbia, is estimated to contain 7.8 million ounces of gold and 37 million ounces of silver in all categories. Additionally, the company holds a 30% stake in the El Morro project located in Chile, while Goldcorp Inc. holds a 70% interest. New Gold's 30% represents 4.7 million ounces of gold and 3.9 billion pounds of copper in all categories.

    New Gold has shown consistent execution and growth in resources and production, has a strong balance sheet and growing cash flow. The company is in a strong position to make additional strategic acquisitions. High volatility in the gold price and in the stock market recently led to an indiscriminate sell off in gold mining shares. The company's share price recently fell to a new 52-week low. Insiders are buying shares in the open market.

    New Gold's share price has been affected by a lawsuit and by a permitting delay at the El Morro project in Chile. The issues are of a temporary nature and if the El Morro project were subtracted entirely, New Gold would remain undervalued.

    New Gold Inc. (TSX:NGD / NYSE:NGD)

    Disclosure: I am long NGD.

    Stocks: NGD
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