Do not fall for the BS being spammed about RBC price target of $4. on NGD being posted on multiple BB's...
(416) 842-3804
mark.mihaljevic@rbccm.com
Outperform
AMEX: NGD; TSX: NGD
Price Target $9.00
WHAT'S INSIDE
Rating/Risk Change Price Target Change
In-Depth Report Est. Change
Preview News Analysis
Scenario Analysis*
Downside
Scenario
6.00
20%
Current
Price
7.51
Price
Target
9.00
20%
Upside
Scenario
10.50
40%
*Implied Total Returns
Key Statistics
Shares O/S (MM): 477.2
Dividend: 0.00
NAVPS: 6.03
BVPS: 0.00
ROE: 4.1%
Float (MM): 477.2
Debt to Cap: 25%
Market Cap (MM): 3,584
Yield: 0.0%
P/NAVPS: 1.2x
Tr. 12 ROE: 7.40%
Avg. Daily Volume (MM): 3.46
Strategic Ownership:
RBC Estimates
FY Dec 2012A 2013E 2014E 2015E
Adj EPS - FD 0.39 0.23 0.33 0.35
Prev. 0.27 0.40 0.37
P/AEPS 19.3x 32.7x 22.8x 21.5x
CFPS - FD 0.46 0.65 0.83 0.80
Prev. 0.76 0.91 0.85
P/CFPS 16.3x 11.6x 9.0x 9.4x
FCFPS - FD (0.58) 0.06 0.47 (0.62)
Prev. 0.16 0.51
P/FCF nm nm 16.0x nm
Adj EPS Q1 Q2 Q3 Q4
2013 0.04A 0.03E 0.07E 0.09E
Prev. 0.08E 0.05E 0.06E 0.08E
2014 0.09E 0.08E 0.08E 0.08E
Prev. 0.10E 0.10E 0.10E 0.10E
CFPS
2013 0.12A 0.12E 0.22E 0.20E
Prev. 0.19E 0.17E 0.19E 0.22E
2014 0.23E 0.18E 0.23E 0.18E
Prev. 0.23E 0.23E
All values in USD unless otherwise noted.
May 2, 2013
New Gold Inc.
Q1 Review: Production light, no red flags raised
Our View: New Gold reported a weaker than expected quarter, but with
grades expected to improve through the remainder of the year, guidance
was reaffirmed. Overall, we saw no red flags within the company’s earning
release or heard anything on the call that would lead us to challenge the
company’s full year production forecast.
Key Points:
Weaker grades take a bite out of first quarter results
Due to lower grades at New Afton, Mesquite and Cerro San Pedro,
production was lower across the board. Gold production was 95 Koz
versus our forecast of 107 Koz and 113 Koz the previous quarter. Copper
production was 16 Mlb versus our forecast of 20 Mlb.
As a result of lower than expected gold and copper production as well
as sale of higher cost inventory at Peak, by-product cash costs averaged
$485/oz during the quarter versus our forecast of $326/oz. On an all-in
basis, total cash costs are estimated at $1,134/oz, which was higher than
the $865/oz we had forecast given higher operating costs and higher than
anticipated capital expenditures during the quarter.
Given the weaker operational result, adjusted EPS was $0.04 compared
to our forecast of $0.08 and consensus of $0.10. Prior to working capital
adjustments, fully diluted CFPS is estimated at $0.15 versus our forecast
of $0.19 and consensus of $0.19.
Operational guidance reaffirmed
With grades expected to improve at New Afton, Cerro San Pedro and
Mesquite, New Gold reaffirmed full year production guidance of 440-480
Koz at a by-product cash cost of $265-$285/oz. Although we expect the
company to achieve production guidance, we highlight the risk for cash
costs to come in above plan given weaker copper and silver prices relative
to the prices assumed by New Gold for the year.
Well positioned given financial flexibility
With $670M in cash and $800M in long dated debt (2020/22), New Gold
has a strong balance sheet. Given lower all-in costs combined with capital
flexibility (capital for Blackwater not yet committed), New Gold appears
well positioned to weather lower gold prices if need be.
Assuming spot commodity prices and draw down of $150M revolver, we
estimate the gold price would have to fall immediately below $1,350/oz
for New Gold to require additional funding for Blackwater. The required
gold price drops to $1,250/oz if Blackwater is deferred 1 year, $1,200/oz if
deferred 2 years and $750/oz if the project is not built.
Price target and rating unchanged
As we have not made any significant changes to our operational or
financial forecasts, we maintain our $9 price target and Outperform rating.
Priced as of prior trading day's market close, EST (unless otherwise noted).
For Required Non-U.S. Analyst and Conflicts Disclosures, see page
rbcinsight.com
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