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New Gold Surges on Strong Production

- By Alberto Abaterusso

New Gold Inc. (NGD) (NGD.TO) reported strong production results for the fourth quarter and full-year 2018 before Tuesday's opening bell.

Following the announcement, the stock soared 12.5% to $1.98 per share on the American Stock Exchange and 11.72% to 1.43 Canadian dollars ($1.08) per share on the Toronto Stock Exchange.

As a result of improved operations at the Rainy River mine in Ontario and solid performance of the New Afton mine in British Columbia, total gold production from ongoing operations increased 25.7% from the prior-year quarter to 97,428 ounces. As a result, the Canadian miner surpassed the midpoint of its production guidance range with 315,483 ounces of gold for the year.


Although fourth-quarter copper production from ongoing operations decreased 4.1% to 20.8 million pounds from the year-ago period, New Gold surpassed the upper limit of the guidance range of 75 million to 85 million pounds for the year. The miner delivered annual copper production from ongoing operations of 85.1 million pounds.

Gold and copper production from ongoing operations also incorporate the output from the Cerro San Pedro Mines in Mexico.

Including the sale of the Californian Mesquite Mine and the Australian Peak Mines in October and April, the miner reported total gold production of 455,448 versus guidance of 415,000 ounces to 480,000 ounces. Total copper production was 89.5 million pounds versus guidance of 75 million to 85 million pounds.

The company expects to continue posting strong operating results, which will create value for shareholders.

Based on these catalysts, Wall Street analysts have assigned an average price target of $4.01 per share, reflecting 271.3% upside from the closing price on Tuesday.

The average recommendation rating is 2.7 out of 5. Among a total of 13 analysts surveyed, two have a strong buy recommendation, three recommend buying, six say hold and two recommend selling.

The stock dropped 66% on the American exchange over the 52 weeks through Jan. 8 and is now trading below the 200-day simple moving average line but above the 50- and 100-day lines.

The stock has a market capitalization of $622.35 million and a price-book ratio of 0.34 versus an industry median of 1.74.

The stock declined approximately 64% on the Toronto Stock Exchange over the 52 weeks through Jan. 8, according to Yahoo Finance. The share price is now below the 200-day simple moving average line, but above the 50- and 100-day lines.

Source: Yahoo Finance

The stock has a market capitalization of CA$827.61 million, a price-book ratio of 0.49 and an EV-to-EBITDA ratio of 4.47 versus an industry median of 9.3.

Disclosure: I have no positions in any securities mentioned in this article.

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This article first appeared on GuruFocus.