New Gold Inc. (NGD, Financial) is falling on the American Stock Exchange.
The gold stock is 8.6% down over the last three days of trading to a share price of $3.43 on Thursday. New Gold has underperformed the VanEck Vectors Gold Miners ETF (GDX) by 6.4% over the same span of time.
The market is cold on New Gold’s improved figures based on 2017 gold production and outlook for 2018.
The Toronto-based intermediate gold mining company with operations in North America and Mexico, produced 430,864 ounces of gold in 2017 versus an output of 381,663 ounces in 2016. The production of copper was 104.3 million pounds, about 2 million pounds higher than 2016, while 1.2 million ounces of silver were milked from the company’s reserves during the year. The production of the grey metal was a 7.7% decline from full 2016.
In 2017, New Gold exceeded the guidance’s high limit on gold production and met expectations with regard to the production of the red metal.
The charts below illustrate the company’s production over the last 5 years. These are preliminary results.
New Gold’s annual gold production and sales volumes from 2013 to 2017:
Source of data: company’s reports
New Gold’s annual copper production and sales volumes from 2013 to 2017.
Source of data: company’s reports
New Gold’s annual silver production and sales volumes from 2013 to 2017.
Source of data: company’s reports
Indicators on New Gold:
- A market capitalization of $1.85 billion.
- A price-book (P/B) ratio of 0.78 times versus an industry median of 2.01 times.
- An EV-to-EBITDA ratio of 6.36 times versus an industry median of 10.14 times.
- An EBITDA margin of 48.4% versus an industry median of 22.8% at an average gold price of $1,274 per troy ounce on the London Bullion Market from Oct. 1, 2016, to Sept. 30, 2017.
For the 52 weeks ending Jan. 18, New Gold lost 25.2% and underperformed the VanEck Vectors Gold Miners ETF (GDX) by 28.4%.
Source: Yahoo Finance
The stock is down trending and a rising commodity is still not helping New Gold to gain momentum. On the contrary, the current market value, which is below the mid point of the 52-week range of $2.39 to $4.41 per share, could plunge even more since a RSI (14 days period) of 43.06 shows some signs of further down trends.
Proof that the miner is trading cheap is also shown in the chart below, where the price movement line of New Gold over the 52 weeks ending Jan. 18 is compared with the 200, 100 and 50-SMA lines:
New Gold has a recommendation rating of 2.7 out of 5. Credit Suisse issued the last rating of the stock on Sept. 29. The analyst maintained a neutral rating on shares of New Gold.
To date, 13 analysts surveyed have produced estimates on the price target. These estimates range from a low of $2.81 per share and a high of $5 per share. The mean of $4.05 indicates that, on average, the analysts believe the stock may appreciate of more than 30% on the stock market within the next 12 trading months.
A robust 30% growth in gold production is the catalyst to watch in 2018. The company expects to produce between 525,000 ounces and 595,000 ounces of the yellow metal in 2018, thanks to the support of Rainy River, which is at full year of production.
Hannes Portmann, New Gold’s President and CEO, commented:
"With our solid production growth and streamlined asset base, our focus will continue to be on further optimizing the performance of all of our operations and maximizing free cash flow to enhance our financial flexibility."
Source: New Gold’s News Release
Revenue and profits will benefit as well. For the full fiscal 2017 and its fourth quarter, consensus is for net earnings of zero cents per share and 5 cents per share. With reference to the same periods, analysts have set a quarterly revenue of $226.76 million and a yearly revenue of $727.77 million.
The date for fourth-quarter earnings announcement and other details is estimated for Feb. 21.
New Gold’s business is 70% gold and 30% copper. But with Rainy River mine entering full production this year and the sale of Peak Mines, which is expected to close before April 2018, the balance will slope more towards the yellow metal. Peak Mines asset consists of gold, silver and copper mineral deposits located in Australia.
The other assets of the company are Mesquite (fully owned) gold mine in U.S., Cerro San Pedro (100% owned) gold and silver mine in Mexico and New Afton (100% owned) gold, silver and copper mine in Canada.
(Disclosure: I have no positions in any security mentioned in this article.)
