On Tuesday, Scotiabank has increased its price target on shares of New Gold (NYSE:NGD) to $3.25, rising from the previous $2.75, while reaffirming a Sector Outperform rating on the stock. The adjustment follows New Gold's recent announcement regarding its exploration activities at the New Afton mine located in British Columbia.
The exploration program at New Afton has yielded significant drill results, particularly in the K-Zone and HW Zone. In the K-Zone, drilling has encountered 2.83% copper and 1.90 grams per tonne gold over an 84-meter core length, which translates to an estimated true width of 30 meters. This includes a particularly high-grade section with 4.18% copper and 3.03 grams per tonne gold over a 50-meter core length. Additional findings in the HW Zone include 1.05% copper and 1.08 grams per tonne gold over a 51-meter core length.
New Gold has expressed their intention to invest an extra $3 million into the exploration program for New Afton in 2024. This investment is set to fund approximately 10,000 meters of additional drilling. The company also plans to announce an initial resource estimate for the K-Zone by the end of 2024.
Scotiabank's updated price target reflects the promising results from the ongoing exploration program, which suggest potential for further expansion at New Afton. New Afton currently accounts for 48% of New Gold's Asset Net Asset Value (NAV). The firm's analyst views the exploration results as a positive indicator for New Gold's stock, supporting the decision to maintain a Sector Outperform rating and raise the price target.
In other recent news, New Gold Inc. has reported robust financial and operational results in its Q2 earnings call. Increased net earnings were attributed to higher metal prices and the gain on derecognition of the New Afton free cash flow obligation.
Notably, New Gold's New Afton and Rainy River mines played a significant role in this financial boost. In addition, the company has made strategic additions to its board of directors, with Sophie Bergeron and Ross Bhappu bringing their expertise in mining operations, safety, and financial strategy.
Scotiabank has also reaffirmed a positive outlook on New Gold, maintaining a Sector Outperform rating following the company's successful diamond drilling program at the Rainy River mine. This exploration confirmed the extension of gold mineralization in multiple zones, leading to an increase in the company's investment in the exploration program.
InvestingPro Insights
In light of Scotiabank's price target increase for New Gold, it's worth considering some key metrics and professional insights from InvestingPro. With a significant 15.83% revenue growth over the last twelve months as of Q2 2024, New Gold is showing promising financial momentum. Additionally, the company's gross profit margin stands at a healthy 45.17%, underscoring efficient operations and cost management.
InvestingPro Tips indicate that New Gold's net income is expected to grow this year, aligning with Scotiabank's optimistic outlook. However, it's important for investors to note that the stock is currently considered to be in overbought territory according to the RSI, which might suggest some caution in the short term. For those looking for more comprehensive analysis, InvestingPro offers a total of 14 tips for New Gold, providing a deeper dive into the company's financial health and stock performance.
The recent returns have been impressive, with a 206.93% return over the last year and a significant price uptick of 82.35% over the last six months. While these metrics indicate strong past performance, investors should always consider the volatility and future outlook of the company, especially since New Gold does not pay a dividend, which could be a factor for income-focused investors.
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