While gold prices (GCM24) are hovering near all-time highs, gold mining stocks have trailed the precious metal's performance by a wide margin. Typically, the performance of gold mining stocks is tied to the price of the yellow metal. But in the current market environment, investors remain worried about rising interest rates and inflation, as these headwinds tend to weigh heavily on capital-intensive mining companies.
However, the relative underperformance allows you to buy quality mining stocks at a discount and derive outsized gains when market sentiment improves. New Gold (NGD) is one cheap gold mining stock to scoop up right now.
An Overview of New Gold Stock
Valued at $1.3 billion by market cap, New Gold is a Canada-based intermediate mining company. Generally, intermediate gold miners are smaller in size and operations compared to senior gold miners, but they are also larger and more established than their junior mining counterparts. New Gold has two core-producing assets in Canada: the Rainy River gold mine and the New Afton copper-gold mine.
Thanks to the recent strength in gold prices, NGD stock has surged 34% on a YTD basis, and is up more than 127% from its 52-week lows set in October.
Longer term, though, New Gold stock has lost over 60% of its market cap in the last decade.
So, is this gold miner a good value buy in 2024? Let's take a look at the numbers.
How Did New Gold Perform in Q1 of 2024?
In the March quarter, New Gold produced 70,900 gold ounces and 13.3 million pounds of copper. The Rainy River mine produced 52,700 gold ounces, while New Afton produced 18.2000 gold ounces - both in line with management's estimates. This suggests the company increased gold production by 11%, while copper production was up 29% compared to the year-ago period.
New Gold’s AISC (all-in sustaining costs) totaled $1,396 per ounce, while production costs are forecasted to move lower in the second half of 2024.
In Q1, New Gold reported revenue of $192 million, down from the year-ago period on lower sales volumes, which were partially offset by elevated prices. It ended the quarter with an operating cash flow of $73 million, or $0.11 per share, indicating a margin of almost 40%. Its adjusted earnings fell to $13 million, or $0.02 per share, compared to $18 million in the year-ago quarter.
New Gold spent $61 million on capital expenditures, of which $35 million was allocated for growth projects. The rest was spent on sustaining capital. According to New Gold, sustaining capital is related to capitalized waste, components, and tailings management and construction.
The company ended Q1 with a cash balance of $157 million and total liquidity of $530 million, providing it with the flexibility to tide over an uncertain macro environment.
New Gold has a healthy financial position as it continues to invest in organic growth. Its operations are positioned to leverage the higher metal price environment, which should result in free cash flow.
What's the Target Price for New Gold Stock?
Out of the nine analysts covering New Gold stock, two recommend “strong buy,” two recommend “moderate buy,” three recommend “hold,” one recommends “moderate sell,” and one recommends “strong sell.”
The mean 12-month target price for NGD stock is $1.92, which is below the stock's current price. The Street-high target of $2.36 is a premium of about 20% to current levels.
Analysts tracking New Gold expect sales to rise by 16% to $912 million in 2024 and by 14% to $1.04 billion in 2025. Its adjusted earnings are forecast to expand from $0.07 per share in 2023 to $0.12 per share in 2024, and $0.23 in 2025.
So, priced at 15.6 times forward earnings, New Gold stock still looks cheap - even with the shares up roughly 5% in today's trading.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
