In the mining game, price is the only consideration. How much does it cost to get the commodity out of the ground and how much can it be sold for. If the numbers don’t add up, there is no activity and no company. Some companies, however, work more efficiently than others and can get the commodity out of the ground at a lower cost. If an investor can find companies like this, there is profit to be made.
New Gold Inc., a mining development company, works to develop and exploit mineral properties primarily in Central and South America. The company also owns mining properties in Australia and Canada. In the company’s most recent quarter, it beat earnings estimates by $0.03 per share.
Although the acquisition of Western Gold Fields and the inactivity of a Canadian property that Western controlled forced a good will charge during the last quarter, the company reaffirmed that it is on track to maintain its 340,000 to 360,000 ounce production levels for the year. In this respect, the company’s ability to reduce extraction costs has also aided in boosting revenue expectations for the year and helped with share earnings. The company’s gold sales were also up by approximately 30%.
Currently, New Gold Inc. is operating three gold properties. Two of the properties are heap leach operations while the third is an underground gold and copper operation. The third underground operation is perhaps the more prolific of the three and continues to extend its life expectancy and output levels. Although there is a certain amount of copper being produced at this location, it is, for the most part, producing gold. Through the past two years this mine (the Peak mine) has produced 100 thousand ounces of gold and is expected to continue this trend into the future.
Many mining operations in this price range are developmental exploration type companies. New Gold Inc. is not of this type. It is well developed and producing stable and consistent amounts of gold and other base metals. As it continues to reduce extraction costs and operates well above required capital production costs, it is a company that is well suited for further research.