Earnings call transcript: New Gold Q4 2024 sees stock dip despite revenue record

New Gold Inc. (NYSE:NGD) reported its fourth-quarter 2024 financial results, showing record revenue but missing earnings expectations. The company posted earnings per share (EPS) of $0.07, slightly below the forecasted $0.0754, and revenue of $262 million, which fell short of the $289.71 million forecast. Following the earnings release, New Gold’s stock price dropped by 0.52% in after-hours trading. According to InvestingPro data, the company maintains a strong financial health score of 2.91 (GOOD), with impressive revenue growth of 17.55% over the last twelve months.

Key Takeaways

• New Gold’s Q4 revenue set a quarterly record at $262 million.
• EPS of $0.07 missed analyst expectations of $0.0754.
• Stock price decreased by 0.52% in after-hours trading.
• The company increased its New Afton ownership and repaid a $100 million credit facility.
• Projected significant production and cash flow increases by 2027.

Company Performance

New Gold demonstrated solid operational achievements in Q4 2024, marked by a record revenue of $262 million. Despite this, the company’s earnings per share fell short of analyst forecasts. The company continued to strengthen its operational base by achieving commercial production at New Afton’s Sea Zone and increasing its ownership stake in New Afton to over 80%. Additionally, New Gold repaid a $100 million credit facility in the second half of 2024, reflecting its strong cash flow position. InvestingPro analysis reveals a healthy gross profit margin of 52.81% and sufficient cash flows to cover interest payments, indicating robust operational efficiency. Get access to 7 more exclusive InvestingPro Tips and comprehensive financial analysis with a subscription.

Financial Highlights

• Revenue: $262 million (quarterly record)
• EPS: $0.07 (below forecast of $0.0754)
• Cash from operations: $126 million ($0.16 per share)
• Free cash flow: $22 million
• Net earnings: $55 million
• Cash on hand: $105 million
• Total (EPA:TTEF) liquidity: $482 million

Earnings vs. Forecast

New Gold’s Q4 2024 earnings per share of $0.07 missed the analyst forecast of $0.0754 by approximately 7.2%. The company’s revenue of $262 million also fell short of the expected $289.71 million, marking a significant miss in market expectations.

Market Reaction

Following the earnings announcement, New Gold’s stock experienced a 0.52% decline in after-hours trading, closing at $2.88. This movement comes as the stock remains within its 52-week range of $1.10 to $3.25, reflecting a cautious investor sentiment amid the earnings miss. Despite the recent dip, InvestingPro data shows an impressive 150.43% return over the past year, with analyst price targets ranging from $2.60 to $4.00. Discover detailed Fair Value analysis and more with InvestingPro’s comprehensive research reports, available for over 1,400 US stocks.

Outlook & Guidance

Looking ahead, New Gold anticipates significant production increases, with projections for 2025 gold production between 265,000 and 295,000 ounces and New Afton production of 60,000 to 70,000 gold ounces. The company expects substantial free cash flow generation, potentially reaching between $1.7 billion and $2 billion over the next three years, driven by increased production and cost efficiencies. This outlook aligns with InvestingPro’s forecast of continued net income growth and profitability for the upcoming year, with an expected EPS of $0.19 for FY2025.

Executive Commentary

CEO Patrick Oden expressed optimism about the company’s future, stating, "We have entered a very exciting time for New Gold of increasing production and same time free cash flow generation." He emphasized the company’s strong team and commitment to value creation, highlighting the potential for cash flow to exceed $2 billion at current spot prices.

Risks and Challenges

• Potential for further earnings misses if operational targets are not met.
• Fluctuations in gold and copper prices could impact revenue projections.
• Operational challenges in expanding production at Rainy River and New Afton.
• Macroeconomic uncertainties affecting global commodity markets.
• Infrastructure and tailings capacity considerations at mining sites.

Q&A

During the earnings call, analysts inquired about potential expansions at the Rainy River pit and the company’s cost profile. Management confirmed that costs would align with production increases and highlighted ongoing infrastructure and tailings capacity considerations as key factors in future operational planning.

Full transcript - New Gold Inc (NGD) Q4 2024:

Vincent, Conference Operator: Good morning. My name is Vincent, and I’ll be your conference operator today. Welcome to the New Gold’s fourth quarter and full year twenty twenty four earnings call and webcast. All lines have been placed on mute to prevent any background noise. Please be advised that today’s conference call is and webcast is being recorded.

After the speakers’ remarks, there will be a question and answer session. I would now like to hand the conference over to Ankit Shaw, Executive Vice President of Strategy and Business Development. Thank you. Please go ahead.

Ankit Shaw, Executive Vice President of Strategy and Business Development, New Gold: Thank you, Vincent, and good morning, everyone. We appreciate you joining us today for New Gold’s fourth quarter and full year twenty twenty four earnings conference call and webcast. On the line today, we have Patrick Oden, President and CEO and Keith Murphy, our CFO. In addition, we have Luc Buchanan, Vice President, Technical Services and Jean Francois Brabanau, Vice President, Geology available to assist during the question and answer portion of the call. Would you wish to follow along with the webcast, please sign in from our homepage at newgold.com.

Before the team begins the presentation, I would like to direct your attention to our cautionary language related to forward looking statements found on Slide two of the presentation. Today’s commentary includes forward looking statements relating to New Gold. In this respect, we refer you to our detailed cautionary note regarding forward looking statements in the presentation. We are cautioned that actual results and future events could differ materially from those expressed or implied in forward looking statements. Slide two provides additional information and should be reviewed.

We also refer you to the section titled Risk Factors in New Gold’s latest Annual Information Form, MD and A and other filings available on SEDAR Plus, which set out certain material factors that could cause actual results to differ. In addition, at the conclusion of the presentation, there are a number of endnotes that provide important information and should be reviewed in conjunction with the materials. Slide four highlights some of the key accomplishments of 2024. We accomplished a lot of our objectives we laid out at the start of the year. By prioritizing health and safety through our Courage to Care culture, we delivered a low trigger and continue to improve year over year.

The company produced just under 300,000 ounces of gold and 54,000,000 pounds of copper at an all in sustaining cost of $12.39 dollars per ounce, heating the low end of our all in sustaining cost guidance range. The strong cost discipline led to increasing margins and delivering cash flow from operations of over $390,000,000 and free cash flow of $85,000,000 Throughout the year, we successfully delivered on key project milestones. At New Afton, we achieved commercial production at Sea Zone and commissioned the crusher and conveyor systems. At Rainy River, we mined the first development ore from the underground main zone. These milestones were accomplished on budget and ahead of schedule.

Last week, we released updated technical reports for both assets. These reports incorporated mine life extensions at both sites and increased our underlying net asset value. Our exploration efforts throughout the year successfully replaced mining depletion of reserves on a gold equivalent basis. We plan to maintain this momentum in 2025 to unlock additional long term value. Finally, in May, we increased our exposure at New Afton to over 80% following the transaction with Ontario Teachers, reducing their free cash flow interest from 46% to 19.9%.

Twenty twenty four successfully positioned our company and we look forward to building on this in 2025 to create significant value for our shareholders. With that, I will turn the call over to Keith.

Keith Murphy, CFO, New Gold: Thank you, Angus. I’m on-site of the sales which has our operating highlights. Q4 production was pre released back in early January, but it’s worth reiterating certain points. Q4 delivered the highest production and lowest cost of the year. Production totaled approximately 80,400 gold ounces and 14,500,000 pounds of copper.

The increase in gold production compared to the third quarter was driven by higher feed grades at both sites. Consolidated all in sustaining costs for the quarter were $10.18 dollars per ounce, a decrease of 15% over the third quarter. This is highlighted by strong cost performance at both operations with Rainy River continuing to decrease its all in sustaining costs and New Afton achieving an all in sustaining cost of negative $540 per ounce after considering the copper credits. Despite the slight miss in gold production compared to our updated guidance, strong cost management and discipline allowed the company to beat the low end of its original 2024 consolidated all in sustaining cost guidance. Our total capital expenditures for the quarter were $75,000,000 10 million dollars spent on sustaining capital and $65,000,000 on growth capital.

At Rainy River, sustaining capital is primarily related to capitalized waste and tailings. Growth capital for the full year is related to the underground development as the underground main and the Trevor Dump is continuing to advance. Full year total capital is below the 2024 guidance range of $145,000,000 to $165,000,000 due to efficient capital management, savings related to the execution of the Rainy River tailings dam raise and lower capitalized waste stripping with approximately $5,000,000 of growth capital deferred into 2025. At New Lacton, sustaining capital is primarily related to continuation of the tailings management and stabilization activities. New Lacton growth capital is primarily related to C zone underground mine development and Cape construction.

Full year total capital is below the 2024 guidance range of $145,000,000 to $165,000,000 with approximately $15,000,000 of capital deferred into 2025. I’ll touch on operations starting with Rainy River on Slide 7. Gold production in the fourth quarter was impacted by unexpected mechanical downtime on the crushing conveyance system in December. Despite the lower gold production, the team did an excellent job to control costs. All in sustaining costs were $13.27 dollars per ounce for the fourth quarter, which resulted in the operation achieving the original full year all in sustaining cost guidance range.

This is an impressive effort from the team and resulted in $90,000,000 of free cash flow generated in 2024, while setting up the operation for a sustained period of free cash flow generation. Turning now to New Afton on Slide 8. New Afton delivered another strong operating quarter with an increase of 19% gold production and 15% copper production over the third quarter. The B3K performed as planned and C zone ore production is ramping up following commercial production and crusher commissioning early in the fourth quarter. Bulk production beat the top end of the original 2024 guidance range with copper production achieving the midpoint.

All in sustaining costs for the quarter and the year decreased substantially compared to the prior year period driven by lower operating expenses, lower sustaining capital expense and higher byproduct revenues. As a result, full year all in sustaining costs per gold ounce sold was well below the 2024 guidance range. The operation generated $24,000,000 in free cash flow while completing the key infrastructure required to enter a period of sustained free cash flow going forward. Both operations exit 2024 well positioned to generate significant free cash flow. I’ll wrap up with our financial results on Slide 10.

Fourth quarter revenue was $262,000,000 which is a quarterly record. Q4 revenue was higher than the prior year quarter primarily due to higher metal prices and higher copper sales slightly offset by lower gold sales. Cash generated from operations before working capital adjustments was $126,000,000 or $0.16 per share for the quarter, higher than the prior year period primarily due to higher revenues. New Gold generated quarterly free cash flow of $22,000,000 due to higher revenue, partially offset by higher capital expenditures in the quarter as key growth projects milestones were achieved. Company recorded net earnings of approximately $55,000,000 or $0.07 per share during Q4 and increased due to higher revenues.

After adjusted for certain of the charges, net earnings were $59,000,000 or $0.07 per share in Q4, a significant increase compared to an adjusted net loss of $5,000,000 in the fourth quarter of twenty twenty three. Our Q4 adjusted earnings include adjustments related to other gains and losses. At the end of Q4, we had cash on hand about $105,000,000 and a liquidity position of $482,000,000 with the credit facility undrawn. In the second half of twenty twenty four, we repaid the entirety of the $100,000,000 drawn on the credit facility related to the Ontario Teachers Buyback transaction with cash on hand and during a capital intensive period for both operations. This is made possible by the operational excellence and cost discipline both of our sites showed during the year.

Summup, we remain in a very healthy financial position. With that, I’ll turn the call to Pat.

Patrick Oden, President and CEO, New Gold: Thanks, Keith. Glad you haven’t summarized our three years outlook we released last week. We expect continued and significant growth in gold and copper production over the next three years. Both operations are currently due to production increase under the realization of coal that were completed in 2020. Oil production is expected to increase from 300,000 ounces in 2024 to a midpoint of 410,000 ounces in 2027, ’30 percent increase over three years.

Copper production is expected to increase from 54,000,000 pounds in 2024 to 100% of more than 5,000,000 pounds 90% decrease over that period. With the increasing production, we think cost for ounces of coal are expected to be reduced to the same. By ’27, the consumable data that all in sustaining costs is expected to be $400 to $500 per gold ounces, a 64 reduction compared to 24%. Softening in growth types of costs are expected to cover up significantly over an extra years. This is primarily due to major project and the reduction of shipping at Ready River.

20 20 5 estimates consider the carryover of some capital that was not spent in 2024. With the increase in production combined with the reduction in unit costs and tapering capital costs over the next three years, the company is well positioned to deliver significant free cash flow. Based on our updated outlook, we expect to generate significant free cash flow over the next three years following the inflection point reached in mid-twenty twenty four. At current consensus commodity prices, this trended over a $1,700,000,000 free cash flowered network. At current spot price, the figure exceed US2 billion dollars over 80% of our market cap.

At New Afton, Twenty Twenty Five production will look a lot like 2024 as we continue transitioning from the B3 cave to the seasonal cave. Total gold production for the year is expected to be 60,000 to 70,000 ounces, while copper production is expected to be 50,000,000 to 60,000,000 tons. These own mining rates will continue to ramp up throughout the year towards 16,000 tons per day. The increased rate is offset by lower grades in SB3K that’s exhausted in the first half of twenty twenty five and seasonal grades gradually increased throughout the year. Production is expected to significantly strengthen in the second half with the first quarter representing approximately 20% of the annual production, again driven by lower grade that’s between years and of scale pipes.

Green River is expecting gold production of 265,000 to 295,000 ounces for the year, a 20% increase compared to the 226,000 ounces produced in 2024. The increase is driven by 20%, twenty five % increase in gold rate as the underground mining rate increased during the year. Approximately 11% of production is scheduled in the first half in the first quarter and 37% in the first half of the year. This is due to the open pit mining sequence. We are currently completing with stripping in Phase four and we’ll primarily forecast somewhere in the 5,000 tonnes in Q1.

From Q2 onwards, we will release higher grade, low strip ratio ore from the open pit. For the same reason, sustaining capital is weighted for the first half of the year. The underground mine is well positioned to deliver 846,000 ounces in 2025 as a result of the development completed in 2024. Lateral development is consistent throughout the year. Both capital allocation is higher in the first half of twenty twenty five due to the commissioning to commissioning the fresh airways, funds which will be completed in Q2 of this year and the purchase of mobile equipment.

In closing, 2024 was a challenging year, but an important year and 2025 will be another important one. We will continue to deliver on our stated strategic goals. This include delivering on 2025 production income guidance with the same attention to health safety. Support from our employees for the Core Registered Care program has contributed significantly to our health and safety performance as I joined the company. At New Afton, we will ramp up C zone and advance the development of East Extension.

At Trinim Rivera, we will continue to ramp up the underground mine in advance space five open pit development. We will continue to increase our exploration effort at both sides targeting future reserve replacements. We have entered in a very exciting time for new gold of increasing production and same time free cash flow generation in a robust community cycle. Combine that with our safe well established mining jurisdiction and exposure to what we view our preferred metals in gold and copper and new gold offers a compelling investment opportunity. I strongly believe we have a team dedicated to value creation.

As demonstrated last week with the delivery of two new technical report and mine life extension at both of our assets. 2025 will be a busy year, but we look forward to building on free cash flow inflection point achieved in 2024 to create value for our company, our stakeholders, my teammates and our shareholders. With that, we will open the floor up to questions.

Vincent, Conference Operator: Thank you. Ladies and gentlemen, we will now begin question and answer session. Your first question comes from Eric Windle. Please go ahead.

Eric Windle, Analyst: Yes. Good morning, Pat and team. Thanks a lot for taking my question. Nice to see the company generating cash flow here despite investing in the assets. Just question on Rainy River, I want to follow-up from the tech session and again the MD and A.

You talk about the opportunity for additional pit pushbacks with minimal drilling there. Just sort of wondering what you need to see or how those might ultimately get into the mine plan? Any color would be appreciated. Thanks.

Patrick Oden, President and CEO, New Gold: Thank you for that. So we as we present I think we present the Phase five with an extension the west side of the pit. We are actually in the northwest trend with an extension to the west of the Albany. So we are currently doing this. It’s an opportunity for us to extend the buy light.

But we’re also having can extend the Phase five to Phase six with some of the it’s depending on few things. So we have the drilling that is mostly completed there. It will be driven by the cost price, the whole price for sure. But also, we have to complete the next step, we need to confirm the ultimate capacity of our tailings storage facility. So 100% of technical report is something that is fully attached and feasible.

So I’m totally supported by the infrastructure that we have. If we want to extend or push back the pit, we have to determine our capacity to handle the tailings by itself. And it’s something that we are currently working out.

Eric Windle, Analyst: Okay, fantastic. I really appreciate that. And just a question, as we look out into 2025, obviously, back half is setting up pretty strong. Q1 is going to be lower production. Any comments on the costs and how we should think about all in sustaining costs throughout the early quarters of the year?

Keith Murphy, CFO, New Gold: Yes, it’s Keith. Yes, similar with the production profile that Pat outlined, we expect Q2 or the second half of the year to be stronger and we expect our cost profile to follow that. So it’d be decreasing towards the end of the year as our production profile increases.

Vincent, Conference Operator: There are no further questions. Please continue.

Ankit Shaw, Executive Vice President of Strategy and Business Development, New Gold: Great. Thank you, Vincent. And thank you for everyone who joined us today. As always, should you have any additional questions, please do not hesitate to reach out to us by phone or email. Thanks and have a great day.

Vincent, Conference Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.