New Gold Inc., which was formed in 1980 and is headquartered in Toronto, Canada, is a Canadian intermediate gold mining company with a portfolio of two core producing assets in Canada, namely the Rainy River gold mine and the New Afton copper-gold mine. The company also holds other Canadian-focused investments. The company acquires, explores and develops natural resource properties. It has over 1,300 employees.

The company operates in two business segments - the Rainy River segment, which comprises gold mining, contributed 61% of FY 24 sales; and the New Afton segment, comprising copper mining, made 39% of FY 24 sales.

Focus on exploration drilling

In Q1 25, New Gold embarked on a series of strategic initiatives to strengthen its operations and financial standing. The company focused its exploration drilling on expanding Mineral Resources at NW Trend and testing the down-plunge extension of ODM Main from the surface. Simultaneously, underground drilling aimed to delineate Mineral Reserves at the 17 East and ODM East zones, crucial for supporting the ramp-up in underground production.

Open pit expansion studies also made significant progress, exploring potential pushbacks to the south of the main pit and at NW Trend. Efforts to optimize underground mine design and sequence continued, alongside ongoing tailings and waste storage trade-off studies, ensuring efficient and sustainable operations. To enhance its financial flexibility, New Gold completed a new 2032 Senior Notes offering and amended and extended its revolving credit facility to 2029, both at lower rates. As a result, the company maintained robust liquidity position of US$590m, with US$213m in cash and cash equivalents and US$377m as undrawn credit facility as of March 31, 2025. These financial maneuvers significantly bolstered the company's financial position, setting a solid foundation for future growth and stability.

Positive outlook depicting production growth

New Gold anticipates a 38% increase in gold production, averaging over 400,000oz annually from FY 25-27. Copper production is expected to rise by 94% over the same period. This growth will expand margins and generate significant free cash flow, with a cumulative total of US$1.9bn and an average annual free cash flow of US$620m, translating to a free cash flow yield of 23%. These projections highlight New Gold's strong future performance and commitment to enhancing shareholder value.

Moderation in leverage levels

New Gold reported solid performance over FY 21-24, posting a revenue CAGR of 7.4% to reach US$924m. EBITDA surged 8.7% to US$428m in FY 24, with margins expanding by 175 bps to 46.4%, driven by operational efficiencies. However, net income fell at a CAGR of 10% to US$103m in FY 24, owing to loss on sales of assets.

The company generated consistent positive cash from operations over the same period, rising from US$324m in FY 21 to US$393m in FY 24. Total debt decreased from US$511m to US$400m in FY 24, resulting in a moderation in debt-to-equity to 38% in FY 24 from 53.5% in FY 21. In addition, ROA also improved from 3.5% in FY 21 to 5.2% in FY 24.

In comparison, Alamos Gold, a local peer, posted a revenue CAGR of 17.8% over FY 21-24, reaching US$1.4bn in FY 24. EBITDA surged at a CAGR of 18.6% to US$684m in FY 24, with margins expanding by 49.8% to 50.8%. Net income jumped at a CAGR of 62.1% to US$284m in FY 24.

Solid run in stock prices

Over the past year, the company's stock has delivered robust returns of approximately 118%, reflecting a positive fundamental trajectory. In comparison, Alamos Gold delivered returns of 76%.

New Gold is currently trading at a P/E of 11.1x, based on the FY 25 estimated EPS of US$0.38, which is lower than that of Alamos Gold (22.9x). Likewise, the company is currently trading at an EV/EBITDA multiple of 4.6x, based on the FY 25 estimated EBITDA of US$733.2m, which is lower than Alamos Gold’s valuation of 10.5x.

New Gold is monitored by nine analysts, who are generally positive towards the stock: three have ‘Buy’ ratings, three have ‘Outperform’ ratings, and two have ‘Hold’ ratings for an average target price of US$4.6, implying 10.8% upside potential from the current price.

Their views are further supported by an anticipated revenue CAGR of 22.6% over FY 24-27, reaching US$1,704m in FY 27. The analysts anticipate EBITDA CAGR of 41.6% over the same period, reaching US$1,220m with margin expanding from 46.5% in FY 24 to 71.6% in FY 27. In addition, analysts estimate net profit CAGR of 79%, reaching US$588.7m with margin expanding from 11.1% in FY 24 to 34.5% in FY 27, with EPS expected to increase to US$0.74 in FY 27 from US$0.14 in FY 24. Likewise, analysts estimate a revenue CAGR of 15%, EBITDA CAGR of 23.5%, and a net profit CAGR of 32.1% for Alamos Gold.

Overall, the company is focused on expanding resources and optimizing operations. Financial flexibility was enhanced through new notes and credit extensions. Future projections indicate significant production growth, improved margins, and robust free cash flow generation. However, the group is prone to few risks, including high project costs, project execution risks and dependency on gold price performance.