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Shares of New Gold (NYSEMKT: NGD) slumped on Thursday, falling as much as 10% by 11:00 a.m. EDT after the company updated the market on its first-quarter financial and operational results.
New Gold reported adjusted net earnings of $9 million, or $0.02 per share, which beat the consensus estimate by $0.01 per share. Meanwhile, gold production came in at 89,327 ounces, which was in line with last year's first quarter as higher production from the Mesquite and Peak Mines offset lower output from New Afton and Cerro San Pedro. Meanwhile, copper production slipped 6% year over year while silver output also fell as expected due to the transition of Cerro San Pedro to residual leaching. Overall, these results came in right where the company expected, leading it to reaffirm full-year production guidance.
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On a more positive note, all-in sustaining costs dropped more than $160 per ounce of gold during the quarter, pushing that metric to an all-time low for the company. Because of that, New Gold reduced its full-year guidance for this metric. It also announced that it sold its gold stream in the El Morro project to Goldcorp (NYSE: GG) for $65 million. That transaction will provide additional cash to finance its Rainy River project while Goldcorp was able to unlock further upside potential in that mine by purchasing the stream.
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Speaking of Rainy River, New Gold noted that it remains on schedule and on budget with that project. After spending $126 million in capex during the quarter, it has about $389 million of remaining spend to bring the mine into commercial production this November. With $350 million in cash and $177 million of undrawn capacity on its credit facility, the company has enough liquidity to complete this project. That said, it can't afford any cost overruns or delays given its tight financial situation while it works to bring Rainy River on line.
While New Gold's first-quarter report wasn't disappointing, the market seemed to want more than it provided. The biggest concern remains the completion of Rainy River given that the company will use most of its remaining liquidity to complete the project, leaving it with minimal breathing room to cover any potential problems. If the company can deliver as promised, however, this project could drive production and cash flow for years to come.
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