Bank of America Calls New Gold A Buy, Lifts Price Target By 50%

Bank of America upgraded Canadian intermediate gold miner New Gold NGD from Underperform to Buy. The double upgrade saw the bank’s analysts raise the price target by 50%, to $3.90, citing strong production growth, lower costs, and increasing free cash flow.

Analysts who see a substantial operational upside increased the company’s net asset value estimate by 19%, reflecting revised mine plans and improved cost efficiency. They also raised its valuation multiple from 1.00x to 1.25x, citing investment profile and potential for higher margins.

New Gold operates two primary mining assets: the Rainy River Mine in Ontario and the New Afton Mine in British Columbia. In 2024, the company produced 298,303 ounces of gold and 54 million pounds of copper, achieving all-in sustaining costs of $1,239 per ounce, which was below the original guidance.

Still, the firm posted healthy financials, generating $85 million in free cash flow despite significant capex for mine development and expansion efforts.

This success made analysts take notice, as investments in underground development and waste stripping at Rainy River have enhanced operational stability, reducing long-term costs while improving efficiency. The mine is expected to benefit from ongoing optimization initiatives to reduce all-in sustaining costs further and extend its production life.

Meanwhile, at New Afton, the C-Zone project reached commercial production in late 2024 and is set to drive significant production growth. The company also increased its stake in New Afton to 80.1% after repurchasing Ontario Teachers' Pension Plan's free cash flow interest.

For 2025, gold production is projected to grow by 18% to 351,000 ounces, while all-in sustaining costs are expected to decline 25% to $1,049 per ounce.

By 2026, the bank expects the output to increase by 32% to 464,000 ounces, with all-in sustaining costs dropping to just $624 per ounce, among the lowest in its gold sector coverage.

Earnings estimates have also been revised upward, with 2025 earnings per share forecasted at 33 cents, up from the previous 15 cents, and 2026 earnings per share rising to 58 cents, nearly double the prior estimate.

Bank of America recently lifted its gold price targets to $3,063 per ounce in 2025 and $3,350 in 2026, citing ongoing geopolitical risks and central bank purchases. The firm believes a 10% increase in investment demand could push prices to $3,500 over the next two years.

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