New Gold (NGD-T) is seeking cash. The company is selling 93.75 million shares at $1.60 per share through a bought-deal placement led by BMO Capital Markets. The financing, which could raise a total of $172.5-million if the underwriters exercise their 15-per-cent overallotment option, is expected to close by the end of the month. The offering price is at a discount -- and as usually happens, the market closed the gap: New Gold fell 17 cents to $1.55 on 12.17 million shares.
Mr. Pierce, chairman, and Mr. Adams, the company's $600,000-per-year president and chief executive officer, say that the cash will be used to strengthen the balance sheet, repay debt and for general corporate purposes, and if that was not general enough, to "enhance financial flexibility." That phrase conjures up images of an injured athlete seeking physiotherapy, and it is an apt analogy. New Gold lost just over $1-billion (U.S.) last year and it dropped another $36-million (U.S.) in the second quarter.
At the end of June, New Gold had about $150-million (U.S.) in working capital, but its current account surplus has been dwindling steadily over the last few years: At the end of 2017, the company had about $275-million (U.S.) in working capital. Just last week, Mr. Renaud cheered his company's "current liquidity position" of $395-million (U.S.), but the liquidity is rather viscous: The company's credit facility accounted for $285-million (U.S.) of it.
New Gold has given investors quite a ride this year. It dipped as low as 82 cents in May, but briefly popped above the $2 mark in mid-July as the market warmed to the notion that the company was finally getting its Rainy River gold mine on track. The company had scaled back its optimism when it set its 2019 production forecast for Rainy River, predicting between 245,000 and 270,000 ounces, a target that it says remains in reach. Mr. Adams is excited with the progress made this year -- a year he describes as "pivotal and transformational." The new equity will help with the transformation without the need to pivot deeper into debt. |
