Thursday June 07, 2012
by Gregory Dorsey, contributing editor The Complete InvestorThe junior miners are trading as if gold is at $1,000 an ounce. This makes them rare bargains in our eyes. And
New Gold (
NGD) is among the very best.
New Gold is a prime example of a mining company that is executing well even if its stock is not. Its output this year should exceed 400,000 ounces of gold along with nearly 2 million ounces of silver and 35 million pounds of copper.
Ultimately this low-cost mid-tier miner could be producing 1 million ounces of gold per year.
Its New Afton project in British Columbia is slated to come on stream this month, while the world-class El Morro project in Chile, in which it owns a 30 percent stake, is tar- geting a 2017 start.
New Gold’s Canadian Blackwater project also could become a strong contributor in the years ahead.
Recently the stock sold off sharply after Chile’s highest court temporarily suspended El Morro’s environmental permit and ordered the mining companies involved to consult with the region’s indigenous people.
We view this as a modest hurdle that is more than discounted in the current share price. The stock trades at very reasonable levels relative to assets, earnings, and cash flow. We would peg fair value to be at least in the mid teens.
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