New Gold (NYSEMKT: NGD) will release its quarterly report on Tuesday, and shareholders have suffered the hugely negative effects of the drop in gold prices earlier this year on the gold miner's stock. Yet perhaps the biggest surprise for gold investors more familiar with giants Goldcorp(NYSE: GG) and Barrick Gold (NYSE: ABX) is that New Gold is expected to report revenue growth in its report.
New Gold has a wide variety of assets, including operating mines in the U.S., Canada, Mexico, and Australia as well as its Blackwater development project in Canada. But its 30% ownership of Chile's El Morro project, in which Goldcorp owns the remaining 70%, has gotten the most attention lately, as environmental concerns that have jeopardized the gold and copper project's viability could be giving way to new hope for the project to move forward. Let's take an early look at what's been happening with New Gold over the past quarter and what we're likely to see in its report.
Stats on New Gold
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Analyst EPS Estimate
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$0.04
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Change From Year-Ago EPS
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(56%)
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Revenue Estimate
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$218.88 million
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Change From Year-Ago Revenue
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12%
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Earnings Beats in Past 4 Quarters
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0
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Source: Yahoo! Finance.
Why are things looking up at New Gold?
Analysts have pulled back on their views about New Gold earnings in recent months, cutting $0.03 per share from their third-quarter estimates and more than double that off their full-year 2013 projections. The stock has continued its slide from earlier in the year, losing another 16% since late July.
New Gold has already given some positive news about its quarter, with its announcement last week that its New Afton mine had boosted its ore throughput by another 1,000 tons per day. The increase, which came three months ahead of schedule, led to sharp overall gold and copper production growth from the mine, with third-quarter jumps of 80% in gold production and 88% in copper production compared to the year-ago quarter.
New Gold's huge competitive advantage over most of the gold-mining industry comes from its rock-bottom cost structure. The company said it had its lowest-cost quarter in history, with all-in costs of $779 per ounce and total cash costs of $280 per ounce looking increasingly impressive. With guidance for 2013 all-in costs of $875 per ounce, New Gold is below even Goldcorp's and Barrick's relatively low cost structures. Cost advantages have helped New Gold weather the plunge in gold prices better than most of its peers.
Yet the best news for New Gold came just last week, when the Chilean Supreme Court restored Goldcorp's environmental permit covering the El Morro project. In reversing an earlier decision that granted the local indigenous community a more collaborative role in the permitting process, the Supreme Court decision gives new hope to Goldcorp and partner New Gold for the project's eventual success. With 6.7 million ounces of proven and probable gold reserves and 4.9 billion pounds of copper, success could bring huge profits to both companies.
New Gold has also moved forward with acquisitions of its own. The company completed its acquisition of Rainy River, having successfully received tenders of 97.5% of shares in August and acquiring the remaining 2.5% stake earlier this month. The acquisition will help give New Gold another promising play in Canada and add to its overall exposure even under tough industry conditions.
In the New Gold earnings report, watch for further signs of success at New Afton as well as news about its other mines. Under the right circumstances, New Gold's shares could recover even if gold prices don't rise as long as its operating mines and development projects keep providing good results.
The smart way to play gold
In the struggling gold-mining industry, keeping costs low is key, and New Gold has done a great job of doing exactly that.