Introduction New Gold (NYSEMKT:NGD) was one of the market’s darlings in the past 12 months as the company was getting closer to start the Rainy River gold project. Unfortunately, the company has now postponed the commercial production at the project by three months after identifying (yet another) $195M cost overrun. This also causes a cash crunch, and it’s needless to say the market isn’t happy about this at all. What’s the reason for the big drop today? New Gold announced pretty decent production and all-in cost results, but reduced the expected FY 2017 gold production rate as the Rainy River project will be delayed by an additional three months. And of course, investors are getting tired and impatient as this is yet another disappointment. Whereas the original price tag for the construction of Rainy River was expected to be $885M and subsequently revised to $1.05B, the updated capex will now come in at $1.24B, or approximately $350M higher than originally anticipated. Not only is this a blow to the credibility of the writers of the feasibility study and the company’s previous guidance, it also means the Net Present Value of Rainy River will be pretty close to zero. After all,… Read full this story
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