FREE SAMPLE REPORT – NEW GOLD (NGD)
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AMEX:
NGD
DIV:
Nil
RECENT:
$5.88
9/30/12**
ASSETS
Prod Au Eqv Net Cash
6/30/13
(1)
Cash
$647.6
$562.5 (1) Period Prod/oz Cost/oz*
23.4
Tot 09
302K
$465
Accts Rec
67.6
Tot 10
383K
$428
218.3
Inventory
158.0
Tot 11
387K
$448
Other
54.7
200.4
3,202.8
Net PP&E
3,053.4
1Q12
99K
$543
4,207.4
TOTAL
3,981.3
2Q12
95K
$472
LIAB'S
3Q12
105K
$443
Curr Liab
243.2
4Q12
113K
$254
88.4
Tot
12
412K
$421
—
Curr Debt
0.0
855.5(2)
95K
$485
LT Debt
897.5
(2) 1Q13
Other
449.0
2Q13
505.8
102K
$430
2,757.7
EQUITY
2,391.6
3Q13
502.2mil(1)
# Shrs Cmn 462.5
mil
4Q13
Tot
13
# Fully Dil
509.3
mil (3)
541.0mil(2)
Fin Notes: *NGD takes Ag & Cu revs as by-prod credit for net cash/oz. $150 mil undrawn credit facility. (1) Not adjusted for Aug-13 acquis of Rainy
River except for # of shares
(2) $293 mil 7.0% notes due Apr-20, $72 mil 4.6% El Morro loan from Goldcorp. $491 mil 6.25% notes due Nov-2022.
(3) Incl 11.1 mil options at C$5.78 and 35.7 mil wts at C$15.
New Gold has four operating mines with total prod of 412K oz Gold/yr in 2012.
New Afton boosts Gold prod to 460K/yr in 2013. With projects Rainy River, El Morro and Blackwater will
double prod to over 1 mil oz/yr in ~2018 w/cash cost below $400/oz due large copper by-product.
New Gold Inc. 200 Bay St. Suite 3120
Toronto, Ontario, Canada M5J 2J4
www.newgold.com Ph: 416-324-6000
Exec Chair: Randall Oliphant Pres: Robert Gallagher
EVP-CFO: Brian Penny VP Op’s: Ernie Mast
IR: Hannes Portmann 416-324-6014
www.GoldStockAnalyst.com
© 2013 GOLD STOCK ANALYST
New Gold Properties
Rainy River
1
New Gold P+P and Mnrliz
Gold
Gold
Copper Silver
P+P oz Other oz P+P lbs P+P oz
Mesquite
2.3 mil
4.0 mil
—
—
San Pedro
0.8 mil
1.8 mil
—
26 mil
Peak
0.6 mil
0.4 mil
0.1 bil
1 mil
New Afton
1.1 mil
1.4 mil
1.1 bil
4 mil
El Morro
2.9 mil
1.3 mil
2.1 bil
—
Blackwater
0.0 mil
9.2 mil
—
—
Rainy River 4.0 mil
4.3 mil
—
—
TOTALS
11.7 mil 22.3 mil
3.3 bil
31 mil
Reserves at $1,300/oz Au, $3/lb Cu and $24/oz Ag.
Site
New Gold – Page 2
© 2013 GOLD STOCK ANALYST
www.GoldStockAnalyst.com
MINES: NEW AFTON: British Columbia. Former Teck Open Pit
New Afton
mine restarted as UnderGround block caving operation. Targeted
11K tons/day rate reached Sep-12. 2012 saw prod of 37K Au oz
and 28 mil lbs Cu lbs at –$1,043 cash cost/oz due copper by-prod.
Co sees recoveries improving to ~90% by optimizing Mill circuit. Drilling in B and C zones below main pit to expands mnrliz
and increases prod and life-of-mine (LOM). Fcsts 80K Au oz prod
at -$1,400 cash cost/oz in 2013 due 80 mil lbs Cu by-prod.
MESQUITE: 150 miles east of San Diego, CA. Shut by Newmont in 2001 due low Gold price, re-opened 2008 by Western
Goldfields which was bot by NGD in May-09. Three pits Rainbow,
Big Chief and Vista for heap leaching. Prod 142K Au oz in 2012 at $690 cash/oz. Co sees cash costs up to $840 in
2013 and prod lower at 135K oz due to low grade cycle. Prod resumes historical avg ~170K Au oz in 2014.
CERRO SAN PEDRO: Central Mexico. Prod 138K Au oz in 2012; 1.9 mil Ag oz by-prod gave net $232 cash/oz.
Sees Au prod increasing to 145K Au oz ‘13, but higher $380 cash cost due lower 1.5 mil oz Ag prod.
PEAK: Australia. 96K Au oz in 2012 at $764 net cash cost/oz after 14 mil lbs Cu by-prod credit. Sees 96K Au
oz prod at lower $680 net cash cost/oz due easing Aussie inflation.
DEVELOPMENT PROJECTS:
EL MORRO (30%): 650 km north of Santiago, Chile. Goldcorp
is 70% owner with NGD 30%. Great deal for New Gold as its 30%
share of $3.9 bil total capex is funded by Goldcorp and repaid by
NGD from 80% of its 30% share of cash flow. Based on revised
Jan-12 feasibility, NGD’s net 30% = 90K Au oz and 85 mil Cu lbs/
yr prod at –$700/oz cash cost w/prod in 2018.
Early-12, protesters demanded stricter enviro protection and
wider distribution of benefits. Chilean court suspended EIS Apr-12
due need to compensate locals. GG halted work to focus on amending project. Consultation on deficiencies due complete late 2013.
BLACKWATER (100%): British Columbia. Located ~100
miles from New Afton. NGD paid $513 mil in shares Apr-11 for Richfield Ventures w/90% of project and 3.8 mil
oz Au mnrliz grading 1.3 g/t and later gained 100% w/$138 mil purchases in 2011/12. Project now holds 9.1 mil oz
Au and 119 mil Ag oz mnrliz.
Sep-12 Pre-Feasibility Study saw $1.8 bil capex for 60K t/d mill and 543K Au
oz/yr at $467 cash/oz (net of 2 mil oz/yr Ag by-prod), w/prod start mid-17. Co drilled 250K meters in 2012 further
defining Blackwater reserves and exploring large (10K km2) land package including Capoose deposit (from SilverQuest) already w/net 1.0 mil oz Au and 56 mil oz Ag mnrliz. New Gold spends $45 mil completing Feasibility
Study by end-13. Plans funding project’s capex from cash balances.
RAINY RIVER (100%): Co spent ~$310 mil cash/shares in August-13 friendly acquis of Co w/Full Feasib Study
showing 4.0 mil oz Au P+P and 4.4 mil Other Au oz. Study shows $713 mil capex for 21K t/day mill to prod 225K
Au oz/yr at $468 cash/oz, net for 500K oz/yr Ag for 16 years. If permits issue 3Q14, production seen by end-16.
NGD now had two projects on nearly the same development timeline w/prod in 2017. Co will continue to
advance both to a “ready to build stage” and let permitting and/or funding needs determine which goes first.
New Afton
El Morro
Rainy River
Blackwater
2
New Gold – Page 3
© 2013 GOLD STOCK ANALYST
www.GoldStockAnalyst.com
Mine
Metal
2013
2014
2015
2016
2017
2018
135K oz
150K oz
150K oz
150K oz
150K oz
150K oz
Mesquite
Au Prod
145K oz
140K oz
140K oz
140K oz
140K oz
140K oz
Cerro San Pedro
Au Prod
100K oz
95K oz
95K oz
95K oz
95K oz
95K oz
Peak
Au Prod
80K oz
85K oz
85K oz
85K oz
85K oz
85K oz
New Afton
Au Prod
—
—
—
—
9K oz*
18K oz*
El Morro*
Au Prod
—
—
—
—
250K oz
500K oz
Blackwater
Au Prod
113K oz
225K oz
Rainy River
Au Prod
—
—
—
—
14 mil lb
14 mil lb
14 mil lb
14 mil lb
14 mil lb
14 mil lb
Peak
Cu Prod
75 mil lb
75 mil lb
75 mil lb
75 mil lb
75 mil lb
75 mil lb
New Afton
Cu Prod
—
8 mil lb*
17 mil lb*
Cu Prod
—
—
—
El Morro*
2.0 mil oz
2.0 mil oz
2.0 mil oz
2.0 mil oz
2.0 mil oz
2.0 mil oz
Cerro San Pedro
Ag Prod
—
—
—
—
1.0 mil oz
2.0 mil oz
Blackwater
Ag Prod
—
—
—
—
0.3 mil oz
0.5 mil oz
Ag Prod
Rainy River
Total Gold Production
460K oz
470K oz
470K oz
470K oz
842K oz
1,213K oz
2.0 mil oz
2.0 mil oz
2.0 mil oz
2.0 mil oz
3.3 mil oz
4.5 mil oz
Total Silver Production
89 mil lb
89 mil lb
89 mil lb
89 mil lb
97 mil lb
106 mil lb
Total Copper Production
$308/oz
$304/oz
$304/oz
$304/oz
$363/oz
$387/oz
Au Cash Cost (net by-prods)
$548 mil
$562 mil
$562 mil
$562 mil
$956 mil
$1,351 mil
Total Operating Cash Flow
27%
26%
26%
26%
18%
14%
Copper % of OCF
541 mil shrs
541 mil shrs 541 mil shrs 541 mil shrs 541 mil shrs 541 mil shrs
Full Diluted Shares Out
$1.01/shr
$1.04/shr
$1.04/shr
$1.04/shr
$1.77/shr
$2.50/shr
OCF/Share
$7.80
$8.00
$8.00
$8.00
$13.61
$19.22
Average 7.7X Multiple**
Gold: $1,500/oz
Prices Used:
Silver: $25/oz
Copper: $3.00/lb
*Prod based on 20% of NGD's 30% share due capex payback of 80% of OCF.
**Multiple based on GSA average since Oct-08.
Gold Prod oz
Net Cash Cost/oz
ANALYSIS: New Gold’s Board of Directors includes Pierre Lassonde (Franco Nevada), Ian Telfer (Goldcorp) &
Randall Oliphant (ex-CEO of Barrick). These industry legends turned Wheaton River into Goldcorp & Silver
Wheaton. And like Goldcorp, NGD will use Cu by-prod to lower cash cost/oz and generate $500+ mil operating
cash flow/yr to grow Gold production to 1.2 mil oz/yr in 2018.
The long term is bright, but Co faces two minor short term challenges (See graphic below):
1) Flat production 2013-2016. In 2013 New Gold’s production rises to 460K Au oz, but remains steady at
~470K Au oz/yr through 2016 as major projects Blackwater, Rainy River, and El Morro do not come online until
2017 and jump prod to 1.2+ mil oz in 2018. Mr Market gets bored while mines are being built.
2) Too much Copper, at 26% of total revenue from 2013-16. When Base Metal revenues exceed 20% of total
revenues, miners begin losing their Gold premiums. NGD’s latest mine, New Afton in prod from mid-12, raises Operating Cash Flow (OCF) to $548 mil in 2013, but heavy Cu component (63% of total mine revenue) increases Cu to
~26% of total NGD revenue through 2016 (see table above and chart below). Fortunately, this too is cured over
time as Blackwater and Rainy River are mostly Gold (w/total 2.5 mil oz/yr Silver by-prod), so copper falls to 14% of
total revenues in 2018, an acceptable level for Mr Market.
Blackwater and Rainy River will need a total $2.5 bil for capex to produce ~750K oz/yr. As seen in above table,
this is handled by Co’s $550 mil operating cash flow
New Gold's Au Production Growth
$500
for next 4 years. Coupled with the current $560 mil 1,400K oz
cash balance, they both can be internally financed.
1,200K oz
GG pays for El Morro, so it’s not a capex concern.
$450
But we would not be surprised by a deal that 1,000K oz
added 100+K oz/yr of production to fill the flat pe$400
800K oz
riod thru 2016 (see graphic) and keep Mr Market
Net Cash Cost/oz
excited about NGD.
600K oz
$350
Flat
Production
for
4 years
The table at top is GSA’s fcst for NGD prod thru
2018, but we are more comfortable using 2017 as a
400K oz
the year for our target price. Based on $1,500 Gold,
$300
200K oz
$25 Silver and $3.00 Copper, we see Operating Cash
Flow (OCF) at $1.77/shr. Using the industry’s 7.7X
$250
0K oz
2013
2014
2015
2016
2017
2018
average OCF multiple since the Oct-08 market botPrices Used: Gold $1,500/oz, Silver:$25/oz, Copper:$3.00/lb
tom, we see a $13.61 target for New Gold. RoundRainy River
Blackwater
El Morro*
ing to the nearest 50 cents, NGD remains GSA Top
New Afton
Peak
Cerro San Pedro
10 with a $13.50 Target Price. Buy!
Mesquite
Total Net By-Prod Cash Cost
3