Stock Preacher

New Gold Inc. (AMEX: NGD)

New Gold Inc. (NGD) engages in the acquisition, exploration, extraction, processing, reclamation and production of mineral properties. The Company is an intermediate gold producer with a portfolio of global assets in Mexico, Canada, Australia, Brazil, Chile and the United States (Alaska). Its operating assets consist of the Cerro San Pedro (CSP) gold-silver mine in Mexico (the CSP Mine), the Peak gold-copper mine (Peak Mines) in Australia and the Amapari gold mine in Brazil (the Amapari Mine). The Company’s other development projects include the New Afton copper-gold project in Canada (the New Afton Project) and a 30% interest in the El Morro copper-gold project in Chile (the El Morro Project). Last year, NGD produced 272,046 ounce of gold, 8.2 million pounds of copper and 1.1 million ounces of silver at a cash cost of $549 per once of gold, net of by-product sales. For this year, the Company is expected to produce between 270,000 and 300,000 ounces of gold for the period of ownership, growing to over 400,000 ounces in 2012. During the second quarter of 2009, NGD completed its business combination with Western Goldfields Inc.

The Company is headquartered in Vancouver, Canada.

Source: Reuters.com, SEC Filings, FY ending December

Financial Summary

In its unaudited financial and operational results for the second quarter ended June 30, 2009, NGD reported adjusted net earnings of $10.6 million, or $0.04 per share, versus adjusted net loss of $4.7 million, or $0.05 per share, in the same period in 2008. Net loss came in at 202.8 million or $0.79 per share in comparison to a net loss of $4.8 million, or $0.05 per share, in the same period in 2008.

For the second quarter, the Company reported a goodwill impairment charge of approximately $189.6 million related to the business combination with Western Goldfields; a foreign exchange loss of $31.1 million; mark-to-market gains of $9.0 million on gold and fuel contracts; and realized and unrealized gains on investments of $9.7 million. It posted a 32% increase in gold production over the same period last year, while gold sales came in at 52,890 ounces at a realized gold price per ounce sold of $926.

At June 30, 2009, NGD’s cash and cash equivalents totaled $141.1 million.

Analyst Consensus

Source: Reuters.com

Analysts expect shares of NGD to “Outperform.” This is the consensus forecast amongst 11 polled investment analysts.

http://markets.ft.com/tearsheets/analysis.asp?s=NGD

Investment Highlights

Overview

In 2008, NGD became an intermediate gold mining company following the successful completion of a three-way business combination with Metallica Resources Inc. and Peak Gold Inc. As a result, the Company acquired three operating properties – Peak Mines in Australia, Cerro San Pedro Mine in Mexico and Amapari in Brazil, and two development projects: wholly owned New Afton in Canada and the 30%-owned El Morro in Chile, 70% of which is owned by Xstrata. The Mesquite gold mining operation, located in Imperial County, California, was acquired by NGD in June 2009 as a result of a successful business combination with Western Goldfields Inc.

NGD is pursuing an aggressive growth strategy that encompasses internal growth through development projects and continuous improvement at its existing operations and external growth through additional value enhancing merger and acquisition opportunities. Its goal is to be a low-cost, million-ounce gold producer by 2012.

Recent News

The Company recently announced a 16% increase in gold sales, attributable to higher production at both Cerro San Pedro and Peak mines, and a 17% decrease in cash cost in the third quarter of 2009. Gold sales rose to 77,645 ounces from 67,156 ounces in the same period in 2008.

As expected, the Company’s gold production at Mesquite mine for the third quarter of 2009 was a disappointment compared with the third quarter 2008, mainly due to lower gold grade, partially offset by higher tonnes placed on the pad. However, NGD president and CEO Robert Gallagher expressed optimism for the fourth quarter. “Mesquite has worked hard over the last two quarters to achieve operational results in line with the mine plan and with a strong performance in September, is on track to significantly increase production in the fourth quarter,” Gallagher stated in the press release.

Looking forward, the Company remains confident that it will produce between 270,000 to 300,000 ounces for the period of ownership, while its total cash cost forecast of $470 to $490 per ounce of gold sold, net of by-product sales, also remains unchanged.

On October 12, Barrick, the world’s top gold producer, entered into an agreement to purchase a 70% interest in the El Morro copper gold project in northern Chile for $465 million from Xstrata. NGD owns the remaining 30% of the project, which has a resource of 8.3 million ounces of gold and 6.3 billion pounds of copper. NGD has the right of first refusal to purchase Xstrata’s 70% interest and is reportedly reviewing options to maximize the value of its 30% stake. Some analysts expressed bullishness on NGD following the Barrick-Xtrata agreement, on speculation that the $465 million purchase price for the 70% stake is significant valuation for NGD’s stake.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui

Moving Average

NGD is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

MACD

The MACD for NGD currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Bollinger Bands

NGD’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, NGD is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

Source: http://www.scottrade.com

Comparative Analysis

NGD has a negative Return on Assets of -13.20%, compared with an industry average of 0.67%; and Return on Investment of -13.69%, compared with an industry average of -0.17%; and a Return on Equity of -18.71%, compared with an industry average of -5.44%. With cash flow positive operating assets, development projects and a solid platform for growth, NGD’s revenue and profitability outlook should remain positive.

Source: Yahoo! Finance, Analyst Estimates.

Insider Trading Activity

NET SHARE PURCHASE ACTIVITY

Data provided by Thomson Financial

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