Take physic, pomp

New Gold (NGD) on Rainy River: I knew they’d say that

New Gold (NGD) filed its Q4 this evening and the bit that catches the eye is this on its company-maker project, Rainy River:
“The combination of our year-end cash, the remaining stream deposit and
the amount available on our credit facility provides us with total
liquidity of $595 million,” stated Brian Penny,
Executive Vice President and Chief Financial Officer. “Combining this
liquidity with our expected free cash flow, based on the prevailing gold
and copper prices and foreign exchange rates, leaves us well positioned
to fund the remaining development of Rainy River.”
And yeah I thought they’d say something like that. Here’s one small segment of the larger anal ysis on NGD from IKN350, dated January 24th, the summing up that comes after the numbercrunch:

So here’s my bottom line on Rainy River:

  • It’s going to get built and
    move into production, period. When it does you remove the sunk costs from
    the project economics and are left with a mine that would be very
    profitable at current gold prices. It’s one thing worrying about a
    mediocre IRR before a project is green-lighted, quite another when the capex
    is paid and you watch very decent free cash flow move through and pay off
    the financial debts quickly.
  • As things stand today, NGD
    covers all costs and RR happens with no further share dilution or
    financial burden placed on the company.
  • The risk from here is a 2016 of
    low gold prices and a capex bust for the project. If those happen, NGD may
    not be able to cover the capex.
  • I think that risk is low, but
    admit that it may look tight for a while. Even so, NGD won’t have any
    trouble in bridging any near-term liquidity issue as it has various
    options that could cover the final hurdle before  commercial production is declared.

And yes, The IKN Weekly called buy on NGD that weekend. And I got mine at U$2.06.

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