Why New Gold (TSX:NGD) Stock Sank Nearly 32% Last Week

Its recent operational outlook will likely keep NGD stock extremely volatile in the near term.

| More on:

What happened?

New Gold (TSX:NGD)(NYSE:NGD) stock tanked by 31.6% last week, posting its biggest weekly losses since March 2020. By comparison, the TSX Composite Index ended the week with 3.3% gains as fears about a near-term recession continue to haunt investors. After last week’s massive selloff, NGD stock just became the lowest-priced TSX Composite component, as it now trades at $0.91 per share.

So what?

Last week’s big crash in New Gold stock came after the company announced its disappointing second-quarter operational results and lowered its 2022 operational outlook.

On July 11, the Vancouver-based gold mining company revealed that heavy rainfall and flooding around the Fort Frances area in northwestern Ontario badly affected its operations at the Rainy River Mine. As a result, the mine “utilized the low-grade ore material during the quarter, resulting in both lower grades processed and lower gold ounces produced.” Similarly, New Gold’s production at its New Afton mine also remained lower than expected due to an early shutdown of its low grade-higher cost recovery level zone for B3 and C-Zone development.

Given these obstacles, the Canadian metals and mining firm cut its 2022 gold production outlook range to 260,000-290,000 ounces from its earlier guidance of 295,000-335,000 ounces. New Gold also lowered its copper production guidance range to 25-35 Mlbs from 35-45 Mlbs and increased its total operating expenses guidance. These factors badly hurt investors’ sentiments, triggering a big selloff in NGD stock last week.

Now what?

After last week’s massive selloff, New Gold stock is now trading with 52% year-to-date losses. Its president and CEO Renaud Adams said that “while we’ve announced revisions to New Afton’s copper guidance for the year, the priority remains on the B3 ramp-up and advancing C-Zone development, which remains on time for first ore in the second half of 2023.” He added that the company remains focused on high-priority targets and expects to provide a planned exploration update in Q3.

While New Gold stock is heavily oversold at the moment, conservative investors still may want to avoid it for now, as the recent changes in its guidance and its operational challenges might keep it extremely volatile in the near term.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

A plant grows from coins.
Stocks for Beginners

1 Canadian Stock Ready to Surge In 2025

First Quantum stock is one Canadian stock investors should seriously consider going into 2025, and hold on for life!

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

Franco-Nevada Stock: Buy, Sell, or Hold in 2025?

Franco-Nevada's Q3 reveals the power of streaming amidst record gold prices. Its zero debt balance sheet, US$2.3 billion in capital,…

Read more »

coins jump into piggy bank
Dividend Stocks

A 10% Dividend Stock Paying Out Consistent Cash

This 10% dividend stock is one strong option for long-term income, but make sure you get a whole entire picture…

Read more »

analyze data
Metals and Mining Stocks

Why This Magnificent Canadian Stock Just Jumped 13%

This Canadian stock is one of the best options out there, with shares rising, still offering a discount, and more…

Read more »

nugget gold
Metals and Mining Stocks

Better Gold Stock: Barrick Gold vs. Franco-Nevada

Franco-Nevada vs. Barrick Gold: Which gold stock deserves your investment dollars in 2025? I'll compare Q3 results, business models, and…

Read more »

bulb idea thinking
Metals and Mining Stocks

The Smartest Canadian Stock to Buy With $3,500 Right Now

A small investment in this high-growth stock can double or triple in 2025.

Read more »

nugget gold
Metals and Mining Stocks

2 Premium Canadian Gold and Silver CEFs for Your TFSA

Gold and silver ETFs are a fantastic way to expose your portfolio to the precious metals asset class.

Read more »

Tractor spraying a field of wheat
Metals and Mining Stocks

Nutrien Stock: Buy, Hold, or Sell in 2025?

Choosing the right time to let go of a stock can be just as crucial for your returns as identifying…

Read more »