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Investing.com -- Moody’s Ratings has revised the outlook for New Gold (NYSE:NGD) Inc. from stable to positive and assigned a B3 rating to the company’s proposed $400 million senior unsecured notes due in 2032. New Gold’s existing B3 senior unsecured rating remains unchanged and will be withdrawn once the notes have been paid. The company’s B2 corporate family rating and B2-PD probability of default rating were also affirmed by Moody’s.
The proceeds from the new note offering will be utilized to fund the tender and repayment of New Gold’s outstanding 7.5% senior unsecured notes due in 2027. Moody’s Ratings analyst, Jamie Koutsoukis, stated that the positive outlook change is due to the expected increase in free cash flow following the completion of two major projects by New Gold.
New Gold’s corporate family rating is positively influenced by the company’s operations being situated in a favorable mining jurisdiction, Canada, and its low financial leverage coupled with good liquidity. However, the rating is restricted by a potential decline in production after 2027, a shorter seven-year mine life at New Afton, a nine-year mine life at Rainy River, and a somewhat smaller production profile. The company’s rating also takes into account the sensitivity to gold and copper prices that can fluctuate.
The B3 rating on New Gold’s $400 million senior unsecured notes, one notch below the B2 corporate family rating, reflects their subordination to the unrated secured revolving credit facility. New Gold has solid liquidity with sources of $800 million against minimal uses through the end of March 2026.
The positive outlook is based on the expectation that New Gold will generate meaningful free cash flow and increase gold production above 350 thousand ounces per year. The ratings could be upgraded if New Gold increases its scale and operational diversity, successfully ramps up production from the New Afton C-Zone, and maintains a low adjusted debt to EBITDA.
On the other hand, the ratings could be downgraded if New Gold experiences sustained negative free cash flow, material operational issues at one of its mines, or if the adjusted debt to EBITDA is sustained above 3.5x, among other factors.
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