New Gold Q1 2025 slides: New Afton acquisition and optimistic three-year outlook

Introduction & Market Context

New Gold Inc. (NYSE:NGD) presented its Q1 2025 earnings results on April 30, 2025, highlighting continued free cash flow generation despite mixed operational performance. The company emphasized its strategic acquisition of the remaining interest in New Afton and presented an optimistic three-year outlook projecting significant production growth and cost reductions.

The miner’s stock closed at $3.35 on April 29, 2025, with a 0.89% gain in after-hours trading. The company’s shares have been trading in a 52-week range of $1.74 to $3.86, reflecting overall positive market sentiment despite quarterly challenges.

Quarterly Performance Highlights

New Gold reported consolidated gold production of 52,186 ounces in Q1 2025, a significant decrease from 70,898 ounces in Q1 2024. Copper production showed a slight improvement at 13.6 million pounds compared to 13.3 million pounds in the same period last year. The company highlighted its safety performance with a Total (EPA:TTEF) Recordable Injury Frequency Rate (TRIFR) of 0.55, representing a 40% improvement compared to Q1 2024.

As shown in the following operational results table, the company faced higher costs during the quarter:

The decrease in gold production was primarily driven by Rainy River, which produced 33,908 ounces compared to 52,719 ounces in Q1 2024. This decline was attributed to planned lower grades and ongoing waste stripping activities. All-in sustaining costs (AISC) at Rainy River increased to $2,758 per gold ounce sold from $1,638 in the prior-year period.

New Afton’s performance remained relatively stable with gold production of 18,278 ounces (compared to 18,179 ounces in Q1 2024) and improved AISC of negative $687 per gold ounce sold (compared to $241 in Q1 2024), benefiting from strong copper by-product credits.

Strategic Acquisition of New Afton Interest

A key strategic move highlighted in the presentation was New Gold’s acquisition of the remaining 19.9% free cash flow interest in New Afton from Ontario Teachers’ Pension Plan for $300 million. This transaction, expected to close in early May, consolidates 100% ownership of the asset as it enters a period of significant free cash flow generation.

The following slide details the transaction and its benefits:

The acquisition was funded through a combination of a $200 million credit facility, cash on hand, and a $100 million gold prepayment facility. Management emphasized that the transaction provides full exposure to New Afton’s upside potential while maintaining financial flexibility.

Financial Analysis

New Gold reported its fourth consecutive quarter of free cash flow generation, with $24.9 million in Q1 2025 compared to negative $14.9 million in Q1 2024. Revenue increased to $209.1 million from $192.1 million in the prior-year period, while operating expenses decreased to $103.4 million from $106.8 million.

The company’s financial highlights demonstrate improved cash generation despite operational challenges:

Despite the positive cash flow, New Gold reported a net loss of $16.7 million ($0.02 per share) in Q1 2025, though this represented an improvement from the $43.5 million loss ($0.06 per share) in Q1 2024. Adjusted net earnings were $12.0 million ($0.02 per share), slightly lower than the $13.1 million ($0.02 per share) in the same period last year.

Cash generated from operations more than doubled to $107.5 million ($0.14 per share) from $54.7 million ($0.08 per share) in Q1 2024, reflecting improved operational efficiency despite lower gold production.

The company’s balance sheet and liquidity position were strengthened through refinancing activities:

Three-Year Outlook and Growth Projects

New Gold presented an optimistic three-year outlook, projecting significant improvements in production and costs. The company expects gold production to increase by 38% and copper production by 94% from 2024 to 2027, while all-in sustaining costs are projected to decrease by 64%, leading to margin expansion of 156%.

The following chart illustrates the company’s growth projections:

This improved operational performance is expected to drive substantial free cash flow generation over the next three years:

New Gold projects cumulative free cash flow of approximately $1.86 billion from 2025 to 2027, with average annual free cash flow of around $620 million. This represents an average annual free cash flow yield of approximately 23%, based on different gold and copper price scenarios.

The company is advancing exploration and growth projects at both New Afton and Rainy River to support its long-term outlook:

At Rainy River, exploration drilling in Q1 focused on expanding mineral resources at the Northwest Trend and testing the down-plunge extension of ODM Main. Underground drilling aimed at delineating underground mineral reserves at the 17 East and ODM East zones to support the ramp-up in underground production.

Forward-Looking Statements

New Gold’s 2025 strategic goals focus on delivering on production and cost guidance while maintaining safety performance. For New Afton, priorities include ramping up the C-Zone and advancing development of the East Extension. At Rainy River, the company aims to ramp up the underground main zone and advance Phase 5 open pit development.

The company’s outlook for 2025 includes gold production of 265,000 to 295,000 ounces at Rainy River and 60,000 to 70,000 ounces at New Afton, with copper production of 50 to 60 million pounds at New Afton. Capital expenditures are expected to remain elevated in 2025, with sustaining capital of $90-100 million at Rainy River and growth capital of $65-80 million, while New Afton’s sustaining capital is projected at $5-10 million with growth capital of $110-125 million.

These projections align with the company’s previous guidance from Q4 2024, where CEO Patrick Oden expressed optimism about New Gold entering "a very exciting time of increasing production and free cash flow generation." The current presentation reinforces this outlook, highlighting the potential for significant value creation as both mines advance through their development phases toward higher production and lower costs.

Full presentation:

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