New Gold to benefit from strong growth, falling costs, says Bank of America in double upgrade
New Gold Inc. (TSX:NGD) received a double upgrade to 'Buy' from 'Underperform' and a 50% increase in its price target to C$5.45 ($3.90) from Bank of America, as the company’s operational turnaround gains momentum.
The upgrade comes as the company sees strong growth in both gold and copper production, falling unit costs, and an inflection point in free cash flow generation.
Bank of America analysts also cited the company’s strong jurisdictional exposure, solid valuation, and an attractive investment profile following recent site visits to New Gold's mines.
Key developments at both New Gold's New Afton mine in British Columbia and Rainy River mine in Ontario were highlighted, showcasing substantial progress in waste stripping, underground development, and mine optimization. The analysts noted that these improvements position the company for robust free cash flow generation moving forward.
“A lot has been accomplished to set the mine up for a period of free cash flow generation, including investments in waste striping, underground development and operation stabilization and optimization,” Bank of America analysts wrote following a site visit to Rainy River.
Of New Afton, Bank of America analysts see “excellent potential to extend mine life through resource conversion and exploration.”
As a result, the bank increased its net asset value (NAV) estimate by 19%, driven by new life-of-mine plans, and raised its NAV multiple to reflect New Gold's “superior investment qualities,” analysts wrote.
The analysts also upgraded their earnings forecasts for the next few years, with expectations for 2025 EPS increasing to $0.33 from $0.15 and 2026 EPS rising to $0.58 from $0.32.
New Gold's valuation remains attractive, trading at a discount compared to mid-tier and junior gold production peers, despite its strong relative investment features, according to Bank of America.
The company is forecasted to increase its gold production by 18% year-on-year in 2025 to 351,000 ounces, with all-in sustaining costs (AISC) declining by 25% to $1,049 per ounce.
For 2026, production is expected to rise by 32% to 464,000 ounces, with AISC improving further to $624 per ounce, positioning New Gold as one of the top performers in its sector.
Toronto-listed shares of New Gold moved around 3.7% higher in Wednesday trading while its New York-listed shares were also up 3.7%.
Source: https://www.proactiveinvestors.com/