Core Thesis - New Gold Inc. (NGD) is viewed as a compelling investment opportunity in the materials sector, which is often overlooked, comprising only 1.9% of the S&P 500 [2] Company Overview - NGD operates two major Canadian gold mines: Rainy River in Ontario and New Afton in British Columbia, producing approximately 300,000 ounces of gold annually along with copper as a byproduct [2] - The company is currently highly profitable, with significant growth expected from 2024 to 2027 due to recent capital investments [2] Production Growth - NGD anticipates a 38% increase in gold production and a 94% increase in copper production during the growth period, which will drive lower costs and generate around $2.5 billion in free cash flow, equivalent to 65% of its market capitalization [3] - The company currently trades at a 25% free cash flow yield, significantly higher than the ~8% average for its peers [3] Cost Management - The New Afton mine is crucial to NGD's growth thesis, with production costs expected to decline from $1,239/oz to $400–$500/oz by 2027 as the C-Zone ramps up [4] - Capital expenditures (Capex) are projected to decrease from $120 million to $10 million, enhancing cash generation [4] Strategic Moves - NGD recently acquired the remaining minority interest in New Afton from Ontario Teachers' Pension Plan for $300 million, which is seen as an accelerated buyback that increases exposure to its own assets and reflects management's confidence [4] - Rainy River continues to generate cash but lacks the same expansion potential as New Afton [4] Investment Potential - The combination of low-risk Canadian operations, exceptional growth potential, and high free cash flow yield makes NGD an attractive investment in gold equities [5] - With limited uses for excess cash beyond capital returns, shareholders could benefit from operational expansion and potential buybacks [5] - Assuming a 10x price-to-free cash flow multiple, NGD shares could reach approximately $12, indicating significant upside relative to current valuations [5]