New Gold Inc. (NGD-T)

Collection of Tier 2 assets. Never been fond of Ontario assets. He likes higher quality. Could do very well with a rising price for gold, which tends to favour the marginal over the lower-cost producer.

 NGD has had a nice run recently alongside the price of gold, and while its fundamentals are fairly strong we might expect a slight pullback here as it has run up ~65% in the past month. 
Debt levels are OK, its free cash flow can be lumpy, but it has a strong cash balance of $236.4M and an equity position of $959.5M. 
It is expected to report earnings in a couple of weeks and we would prefer to wait until earnings have been released and reassess the company's prospects at that time before jumping in.  
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Operational risks with its smaller operation. 

Chart shows a bunch of lower highs. The group of sellers are accepting lower and lower prices and are willing to sell. The buyers are sticking to a certain price (about $3.75 or $4) and are not willing to step up. Sellers are getting more aggressive and buyers are not. If he owned, he would be selling.

The knock against this is the climbing costs of their Rainy River mine that they would like to get into production. He prefers companies that have very robust projects to start with. Things like this one were not robust to start with, even before they acquired it. He is not interested in this.

He sold his holdings. Likes their operating skills, but doesn’t like Rainy River. Doesn’t understand the geology in Rainy River enough to understand the $1 billion price tag on it.

Well sponsored and has good management, but they are having problems the same as every other gold company. This one should be fine based on his gold thesis.

If there was a tight group of 5 companies that he would find investable right now, this would be in the next level up. Their projects are good, but he never gets a feeling they are super fantastic.

A gold producer with production of about 400,000 ounces. The main catalyst is the building of a new mine, a Rainy River project in Northwestern Ontario. The problem is the funding of the project. The balance sheet has been stressed. Ran into some problems in Rainy River with some issues on the concrete that was poured, and have had to redesign it, costing $40 million-$50 million more than expected. That has investors worried about the balance sheet and how they are going to fund that extra capital. Because of that, he is not looking at this at the moment. If you see this gold bull market continue to move higher, and the US generalist’s get pulled more into the space, this name could really re-rate and perform.

(Market Call Minute.) Probably one of the best of the 2^nd tier producers. Highly leveraged to the gold price and well-run.