With gold prices hovering near all-time highs, mining stocks have staged a remarkable comeback in the last 12 months. Valued at a market cap of $5 billion, New Gold (TSX:NGD) is a TSX mining stock that has more than doubled in the past year. Let’s see if you should own this Canadian stock right now.
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Is New Gold stock a buy, sell, or hold right now?
New Gold is emerging as a compelling investment opportunity in the precious metals sector. In recent quarters, it has delivered strong operational performance and is positioned for solid free cash flow generation across its dual-asset portfolio.
The Canadian miner’s first-quarter (Q1) results demonstrate an effective execution of its growth strategy. In the March quarter, it produced over 52,000 ounces of gold and 13.6 million pounds of copper at competitive all-in sustaining costs.
The New Afton mine continues to exceed expectations, with the B3 cave delivering higher-than-planned grades before exhaustion in Q2. Further, the C-Zone block cave construction is 53% complete, with a target of 16,000 tons per day production by early 2026. This ramp-up represents a fundamental shift in the mine’s production profile, supporting management’s aggressive growth projections.
At Rainy River, strategic positioning sets the stage for accelerated production. The recent pit portal breakthrough enables increased underground development rates, while advanced waste stripping positions the open pit for low-strip-ratio ore extraction throughout 2025. These operational improvements directly support higher production and lower unit costs in upcoming quarters.
New Gold’s recent acquisition of the remaining 19.9% free cash flow interest in New Afton for US$300 million represents exceptional strategic value. This transaction consolidates 100% ownership as the mine enters peak production phases, maximizing shareholder exposure to cash generation without equity dilution. The financing structure, which combines cash, credit facilities, and a gold prepayment agreement, demonstrates a sophisticated capital allocation.
Moreover, concurrent refinancing activities extended senior notes to 2032 and credit facilities to 2029 at reduced rates, significantly enhancing financial flexibility during the upcoming cash flow expansion period.
The K-Zone exploration program represents substantial upside potential, with management targeting indicated resources by year-end. The lower K-Zone drift advancement exceeds 65% completion, with drilling operations scaling to five rigs by Q2. Success here could extend New Afton’s mine life beyond 2040, fundamentally altering the asset’s value proposition.
Is NGD stock undervalued?
Management projects approximately US$1.86 billion in free cash flow over the next three years, based on current consensus commodity prices. In this period, its free cash flow could exceed US$2.5 billion at spot prices, representing over 90% of the current market capitalization.
This exceptional cash generation capability, combined with declining capital requirements as major projects complete, positions New Gold stock for shareholder value creation through operational leverage to precious metals prices.
Wall Street estimates that New Gold will increase revenue from US$924.5 million in 2024 to US$1.9 billion in 2026. During this period, adjusted earnings are expected to grow from US$0.20 per share to US$0.83 per share.
If NGD stock is priced at 15 times forward earnings, which is reasonable, it should trade around US$12.5 in early 2026, above the current price of US$4.70.
