New Gold Inc

New Gold Inc (TSX: NGD) is a mining company based out of Canada. It is engaged in the business of exploration and development of gold. The group owns assets in the Mexican region and Canadian region, which include, Cerro San Pedro Mine, New Afton Mine and Rainy River mine. The Company also owns the British Columbia based Blackwater Project.

Recent News

On 9^th June 2020, New Gold announced the signing of a definitive agreement with Artemis (Artemis Gold Inc) for divestment of its British Columbia based Blackwater Project. The Group will receive a cash consideration of CAD 190 million.

Financial Highlights – First Quarter of the Financial Year 2020 (31^st March 2020, USD, million)

(Source: Quarterly Report, Company Website) 

In the first quarter of the financial year 2020, due to lower revenue from Rainy River mine and New Afton mine for the period, the revenue stood at USD 142.3 million as against USD 167.9 million in the Q1 of the financial year 2019. Due to increased operating expenses for the period, the group reported an operating loss of USD 5.9 million in Q1 FY2020 versus an operating profit of USD 13.8 million in Q1 FY2019. The company reported an LBT (loss before tax) of USD 23.1 million in the first quarter of the financial year 2020 versus an LBT (loss before tax) of USD 9.7 million in Q1 FY2019. The net loss stood at USD 28.3 million in the first quarter of the financial year 2020 versus a net loss of USD 13.4 million in Q1 FY2019. The group’s basic and diluted loss per share stood at $0.04 in the first quarter of the financial year 2020 versus a basic and diluted loss per share of $0.02 in Q1 FY2019. The cash balance increased to USD 400.4 million as on 31^st March 2020 versus a cash balance of USD 83.4 million as on 31^st December 2019.

Share Price Performance

Daily Chart as of 10^th June 2020, before the market close (Source: Refinitiv, Thomson Reuters) 

New Gold Inc shares were trading at CAD 1.86 at the time of writing before the market close on 10^th June 2020. Stock's 52 weeks High is CAD 2.03 and Low is CAD 0.55. 

Conclusion

The Group introduced new technologies and techniques to upgrade its portfolio of services and products to meet the requirements of the faster pace commodity market. The Company is well-positioned to take benefits from growth trends across the energy and industrial markets. The Company has shown a decline in financial performance in the first quarter of the financial year 2020. The top-line and the bottom-line performance have declined, with profitability remained in the negative zone. The recent increase in the gold prices in the global markets will improve financial performance and bring operational stability. The liquidity position of the company remained strong with the well-positioned balance sheet. The Group operations are impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening its balance sheet and return with capital discipline and reducing its costs to preserve cash. The commodity market is extremely volatile, and on the lower side, and the Company has taken additional measures to improve the business’s long-term sustainability.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of CAD 1.86 (as on 10^th June 2020).

Disclaimer

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