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New Gold (NGD) on Rainy River: I knew they'd say that

New Gold (NGD) filed its Q4 this evening and the bit that catches the eye is this on its company-maker project, Rainy River:
"The combination of our year-end cash, the remaining stream deposit and the amount available on our credit facility provides us with total liquidity of $595 million," stated Brian Penny, Executive Vice President and Chief Financial Officer. "Combining this liquidity with our expected free cash flow, based on the prevailing gold and copper prices and foreign exchange rates, leaves us well positioned to fund the remaining development of Rainy River."

And yeah I thought they'd say something like that. Here's one small segment of the larger anal ysis on NGD from IKN350, dated January 24th, the summing up that comes after the numbercrunch:

So here’s my bottom line on Rainy River:

  • It’s going to get built and move into production, period. When it does you remove the sunk costs from the project economics and are left with a mine that would be very profitable at current gold prices. It’s one thing worrying about a mediocre IRR before a project is green-lighted, quite another when the capex is paid and you watch very decent free cash flow move through and pay off the financial debts quickly.
  • As things stand today, NGD covers all costs and RR happens with no further share dilution or financial burden placed on the company.
  • The risk from here is a 2016 of low gold prices and a capex bust for the project. If those happen, NGD may not be able to cover the capex.
  • I think that risk is low, but admit that it may look tight for a while. Even so, NGD won’t have any trouble in bridging any near-term liquidity issue as it has various options that could cover the final hurdle before  commercial production is declared.

And yes, The IKN Weekly called buy on NGD that weekend. And I got mine at U$2.06.