stockwatch.com Gold Summary for May 14, 2024
2024-05-14 19:01 ET - Market Summary
by Stockwatch Business Reporter
New York spot gold rose $20.50 to $2,356.20 on Tuesday. The TSX Venture Exchange rose 3.03 points to 599.88 while the TSX gold index added 2.92 points to 326.32. Word that gold recoveries exceeded expectations led Hudbay Minerals Inc. (HBM) to a strong first quarter, sending its stock up $1.69 to $13.71 on 11.47 million shares.
Well, that did not play well with the market. Patrick Godin's New Gold Inc. (NGD), a $2.75 stock Friday, dropped to $2.55 Monday and dipped to an intraday low of $2.38 this morning. After yesterday's close, the company delivered news that might suggest why. New Gold is increasing its interest in the New Afton gold and copper mine in British Columbia to 80.1 per cent by paying the Ontario Teachers' Pension Plan $255-million (U.S.) for a portion of its interest in the mine. (The pension plan currently holds 46 per cent of the mine, but that will drop to 19.9 per cent.)
New Gold ended today down four cents to $2.51 on three million shares, but the grumpiness is not because of the purchase -- it is because of how the cost will be covered. Yes, New Gold will cover some of the payment from cash on hand and its revolving credit facility, but it is also selling new shares -- a lot of them and at a fire sale price. The company is offering 87.3 million shares at $1.72 (U.S.) per share -- $2.34 in Canadian dollars -- for $150-million (U.S.).
Mr. Godin, president and chief executive officer, cheered the arrangement as "an excellent transaction" in which New Gold can increase its free cash flow exposure to a copper and gold asset it already owns and operates. The deal should allow New Gold to "grow accretively with no diligence risk and increase [its] free cash flow interest at New Afton," Mr. Godin enthuses, applauding that the mine is on the verge of attractive production growth and cost improvement that he and his crew believe will lead to -- in case you missed it -- increased free cash flow generation.
New Gold provided a three-year forecast for New Afton earlier this year, calling for the mine to produce between 60,000 and 70,000 ounces of gold and 50 million to 60 million pounds of copper this year. With the C-zone being ramped up for production late this year, the forecast increases thereafter. In 2026, New Gold expects New Afton to yield between 95,000 and 105,000 ounces of gold and 71 million to 81 million pounds of copper.