What happened

Shares of New Gold (NYSEMKT:NGD) rose as much as 12.9% today after the company continued efforts to improve its balance sheet. Earlier this week, the gold miner announced the sale of the development-stage Blackwater mine to Artemis Gold for roughly $142 million in combined payouts. It will retain exposure to the mine through an 8% gold-streaming agreement.

Today, New Gold announced it will sell $400 million in senior debt notes due 2027. The proceeds will be combined with cash on hand to redeem outstanding debt notes due 2022. The transactions will effectively extend the maturity date for the company's debt by five years.

As of 3:03 p.m. EDT, the gold stock had settled to a 12.1% gain.

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So what

New Gold has been struggling with high production costs due primarily to declining gold grades at its mining assets. In the first quarter of 2020, the business reported an all-in sustaining cost (AISC) of $1,446 per gold equivalent ounce (GEO). That compares to an AISC of $1,083 per GEO in the year-ago period and an AISC of $1,310 per GEO in all of 2019.

Investors have been more willing to extend the benefit of the doubt to the business in light of steadily rising gold prices, which are over $1,720 per ounce and within reach of an all-time high. New Gold has wisely taken advantage of the strong market conditions to de-leverage and position itself with greater near-term flexibility. The transactions this week will surely provide financial relief -- and are injecting more confidence into investors -- but they won't mean much if the company doesn't reduce operating expenses.

Now what

Shares of New Gold are approaching their highest level since mid-2018. That's not saying much considering the stock price is sitting at about $1.50 per share, but the trajectory is a sign of growing confidence in the business. Nonetheless, while healthy gold prices will provide a steady tailwind for the gold miner, investors have to remember that market conditions alone won't overcome relatively inefficient operations in the long run.