|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
Introduction of Dividend Could Propel Shares of New Gold
Posted by: Yiannis Mostrous (IP Logged)
Date: June 8, 2012 11:20AM
Gold investments remain the best long-term hedge against the volatility now wracking world markets. The case for gold is strong: The euro zone crisis continues to unfold, while U.S. and European economies struggle.
Gold stock prices now offer good entry points; my favorite remains Canada-based miner New Gold (NGD). The company announced that it produced 99,274 ounces of gold in the first quarter of 2012, roughly equal to production in fourth-quarter 2011. Net cash costs averaged USD543/oz, a marginal improvement from USD553/oz in fourth-quarter 2011. The company forecasts between 405,000 and 445,000 ounces of gold production this year, with net cash costs averaging between USD410-430/oz.
In late April, the Chilean Supreme Court suspended the environmental permit for the El Morro project that New Gold is developing with Goldcorp (GG). The ruling came in response to an action filed against the Chilean governmental permitting authority, Servicio de Evaluacion Ambiental (SEA), by a local landowner group the Comunidad Agricola Los Huasco Altinos (CAHA), on the grounds that the SEA had neither adequately consulted nor compensated the indigenous people in the project area.
The 9 percent drop in New Gold’s share price in the wake of the court’s announcement is an overreaction. Goldcorp, which owns 70 percent of the project, is working with the SEA to address the issue and an eventual resolution is likely. The court delay shouldn’t last more than a year, with the project’s start date slated for 2018.
New Gold also is moving ahead with its New Afton project in British Columbia. New Afton will be an underground mine, annually producing an average of 75 million pounds of copper and 80,000 ounces of gold.
For this year, New Afton should produce 35,000 ounces of gold and 23 million pounds of copper. For next year, the project is expected to produce 91,000 ounces of gold, 148,000 ounces of silver and 67 million pounds of copper. New Afton is forecasted to generate free cash flow of around USD200 million in 2013.
The Blackwater project in central British Columbia is another of the company’s growth prospects, with initial production expected to begin in the first half of 2017.
The company has issued USD300 million in debt, of which USD200 million will be used to refinance old debt obligations. The new debt agreement permits the company to pay dividends; a decision on dividend policy is expected in the latter half of the year.
New Gold shares are an attractive value, as the company works toward lowering costs while increasing production. For more precious metals picks, check out my free Top Gold Stocks report.
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.