Rainy River project update
New Gold (NGD) offers a strong production growth potential. In 1H16, it completed ~60% of its planned 2016 exploration program. Rainy River, located in Canada, is currently the company’s most important project. At its full capacity, it is expected to produce as much as all of New Gold’s other mines.
New Gold projects that production from the mine will begin in mid-2017. A timely start on this project could be a big catalyst for New Gold’s stock.
New Gold (NGD) is hugely competitive as far as its cost base is concerned. The company reported AISC (all-in sustaining costs) of $682 per ounce in 3Q16, which is lower than many senior gold miners’ (GDX). Its 2016 cost guidance is $750–$790 per ounce. Many of New Gold’s peers (RING) (GDX), such as Newmont Mining (NEM), Eldorado Gold (EGO), AngloGold Ashanti (AU), and IAMGOLD (IAG), are developing projects that could lower their overall costs.
New Gold (NGD) had $151 million in cash and a $400 million undrawn credit facility available at the end of 3Q16. The company’s investment policy is to invest its surplus funds in permitted investments such as treasury bills, bonds, notes, and other debt instruments. Its liquidity should be sufficient to fund Rainy River’s remaining capital development requirement of ~$425 million. As Rainy River is a very important project for the company’s revenue and earnings going forward, any further updates are keenly awaited by investors.