Opinions Jon Case
New Gold Inc.NGD.TOCOMMENTMay 30, 2014
Jon CaseStock price when the opinion was issued
As of Mar 23, 2026. Market Open.
You might be interested:
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.
Unlock Premium - Try 5i Free
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.
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.
A midsize gold producer, mostly focused around the Americas. Production is around 400,000 ounces a year. Current production is not so important; it is really expectations of future production. You really have to get comfortable with development assets because they have a suite of very large development assets in Canada. He is not looking for companies that have to plow a lot of cash and capital into the ground to keep production growing and generate free cash flow. This company is caught up in that position, where most of their cash flow right now is going to be reinvested to bring on new assets. Great for adding value long-term, but for him, he is looking for free cash flow and there is not a lot. Fairly valued now. Management team is probably one of the best in the business.