Newmarket Gold reports
On April12,2016 Newmarket Gold made it's first report as the new entity which was formerly Crocodile Gold plus the old Newmarket Gold structure.Blogdaleupsome has covered the old company with its' agreement with Aurico Gold in the blog of January6,2015. And it covered the new structure with Newmarket Gold in the blog of July31,2015.The agreement with Aurico Gold was also covered in the blog of Workathon of January 4,2016. This has been a very well executed agreement because Crocodile Gold was trading around $.25 per share before the new Newmarket Gold was formed and now the new shares trade at $2.40 per share. Apparently the new market structure was sufficient to increase the market capitalization of Newmarket Gold.
Highlights of the Quarter
Newmarket reports that it's consolidated production from all three mines was 58,000 ounces.This is only a slight increase from the same quarter last year and comprised of 38,000 ounces from the Fosterville mine and 16,500 from the Cosmo mine plus 8,500 ounces from the Stawell mine.However Fosterville had a record grade of gold of 7.34 grams per tonne while Stawell had only 1.34 grams per tonne.The grade in the Fosterville mine has increased over 2014.
Newmarket reports that their total debt is only $1.5 million while their cash balance is about $52 million.In addition, their guidance for 2016 is 205,000 to 220,000 ounces of gold to be produced.This is a very small increase in guidance.This is surprising as even with the same amount of ore mined as in 2015 the increase in the quality of gold should show a 15 to 20% increase in total production.
The Price Increase in NewmarketGold
My blog on Blogdaleupsome of January6, 2015 discussed the net cash flow agreement that Crocodile Gold had with Aurico Gold see Blogdaleupsome (January6,2015) to see details.It shows how Crocodile Gold increased it's reserves for the Fosterville mine up to 2.5 million ounces.This did not even include gold from the Lower Phoenix structure.This structure contains it's highest grade of gold.But the net cash flow agreement was not working well for Aurico as Crocodile was spending a lot of money on each of it's mines to reduce cash flow.At the same time this reduced net income for Crocodile shareholders.This blog concluded that a production royalty was in the best interests of both companies.
The new Structure
This however did not happen; instead Crocodile bought a shell called Newmarket Gold.There really were few assets in this company at that time.My blog of July31,2015 showed that the market capitalization of the new entity was about $130 million and this was an increase from the combination of the two companies see Blogdaleupsome of July31.2015 for details of the new co.At first blush ,this combination appears to have been a tremenduous idea as the stock has catapulted in value to a market capitalization of about $450 million.It also appears to have ended the conflict with Aurico Gold.
The question is how can this new structure support a share price of $2.50 to $3.00 per share?Obviously investors believe that the price of gold will go up and that production will go up.This blog believes that both will happen.Earlier blogs on Blogdaleupsome observe that the reserves at the Fosterville mine could be as large as 5 million ounces.And now Newmarket reports that they have found two new structures (Eagle and the East Dipper) arising from the Lower Phoenix structure.This may make the total deposit bigger than 5 million ounces and the grade rising.It is difficult to tell but it appears that Newmarket is only extracting gold from the Central and Phoenix gold structures.These are the areas with the lowest grade in the Fosterville mine.Production is likely to be greater as well as the grade of ore.Some investors may be asking if it would be beneficial to start a Fosterville north and a Fosterville south mine.Even without a new mine shaft Newmarket is likely to hit $4.50 a share by mid summer. see Blogdaleupsome for analysis of resource stocks
Highlights of the Quarter
Newmarket reports that it's consolidated production from all three mines was 58,000 ounces.This is only a slight increase from the same quarter last year and comprised of 38,000 ounces from the Fosterville mine and 16,500 from the Cosmo mine plus 8,500 ounces from the Stawell mine.However Fosterville had a record grade of gold of 7.34 grams per tonne while Stawell had only 1.34 grams per tonne.The grade in the Fosterville mine has increased over 2014.
Newmarket reports that their total debt is only $1.5 million while their cash balance is about $52 million.In addition, their guidance for 2016 is 205,000 to 220,000 ounces of gold to be produced.This is a very small increase in guidance.This is surprising as even with the same amount of ore mined as in 2015 the increase in the quality of gold should show a 15 to 20% increase in total production.
The Price Increase in NewmarketGold
My blog on Blogdaleupsome of January6, 2015 discussed the net cash flow agreement that Crocodile Gold had with Aurico Gold see Blogdaleupsome (January6,2015) to see details.It shows how Crocodile Gold increased it's reserves for the Fosterville mine up to 2.5 million ounces.This did not even include gold from the Lower Phoenix structure.This structure contains it's highest grade of gold.But the net cash flow agreement was not working well for Aurico as Crocodile was spending a lot of money on each of it's mines to reduce cash flow.At the same time this reduced net income for Crocodile shareholders.This blog concluded that a production royalty was in the best interests of both companies.
The new Structure
This however did not happen; instead Crocodile bought a shell called Newmarket Gold.There really were few assets in this company at that time.My blog of July31,2015 showed that the market capitalization of the new entity was about $130 million and this was an increase from the combination of the two companies see Blogdaleupsome of July31.2015 for details of the new co.At first blush ,this combination appears to have been a tremenduous idea as the stock has catapulted in value to a market capitalization of about $450 million.It also appears to have ended the conflict with Aurico Gold.
The question is how can this new structure support a share price of $2.50 to $3.00 per share?Obviously investors believe that the price of gold will go up and that production will go up.This blog believes that both will happen.Earlier blogs on Blogdaleupsome observe that the reserves at the Fosterville mine could be as large as 5 million ounces.And now Newmarket reports that they have found two new structures (Eagle and the East Dipper) arising from the Lower Phoenix structure.This may make the total deposit bigger than 5 million ounces and the grade rising.It is difficult to tell but it appears that Newmarket is only extracting gold from the Central and Phoenix gold structures.These are the areas with the lowest grade in the Fosterville mine.Production is likely to be greater as well as the grade of ore.Some investors may be asking if it would be beneficial to start a Fosterville north and a Fosterville south mine.Even without a new mine shaft Newmarket is likely to hit $4.50 a share by mid summer. see Blogdaleupsome for analysis of resource stocks
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