As we have been following Nevada-focused exploration company NuLegacy Gold (NUG.V) for almost two years now, a lengthy introduction to the company and its assets isn’t necessary. NuLegacy is still fully focused on its Iceberg gold project in Nevada, and made remarkable progress in 2016.
In this report we will briefly look back at the achievements last year, and will explain what you could expect from the company in the current year.
The recent share price developments are disappointing…
Let’s start with the biggest ‘issue’ that seems to keep people busier than the exploration results of the past exploration season: the share price. After starting the year at just 10 cents, excellent news from the exploration and corporate front pushed the share price to just over 50 cents by the end of September, and NuLegacy was one of the hottest stocks on the market.
And its management was smart enough to capitalize on its strong share price. On October 4th, NuLegacy announced it wanted to raise up to C$9M in a private placement priced at 45 cents per share. The lead order was provided by the Tocqueville Gold Fund, which acquired an additional 9 million shares and increased its stake in the company to 9.9%.
Unfortunately the gold price (and gold equity market) collapsed during this financing, and no second tranche was completed after raising the first C$4.5M. Some would think that not completing this placement was disappointing, but we have a different opinion. First of all, the simple fact that a world-renowned gold focused investment fund like the Tocqueville Fund was willing to put several additional million dollars in this exploration-stage company should be seen as a huge vote of confidence. Additionally, even though the momentum on the gold market was falling off a cliff during those first two weeks in October, Tocqueville had no problems to complete its investment at C$0.45 per unit, whilst so many other institutional investors would have tried to negotiate a re-priced placement with the company. So, Tocqueville putting in additional cash despite the deteriorating situation on the market is a double thumbs up as far as we are concerned.
Secondly, the timing of the placement was almost perfect, right after reaching a multi-year high of both the share price and the gold price. And let’s face it. If NuLegacy would have announced the placement just two weeks sooner, it very likely would have been able to raise the entire C$9M.
After the most recent capital raise, NuLegacy has a total of 293 million shares outstanding, which means the cash position is almost 6 cents per share. Whereas the share price dipped to just 8 cents in January 2016, the company now has 75% of its 52wk low in hard cash on the bank account.
… But NuLegacy made tremendous progress in 2016
Whereas the company’s treasury was getting a bit low (the cash position at the end of 2015 was C$1.4M), NuLegacy made some important changes in the past 14 months. Not only did it move to a 100% ownership of the Iceberg project, but Barrick’s EVP of Exploration and Growth, Rob Krcmarov joined its board of directors. Needless to say it usually is a positive sign when someone with a great reputation in the industry, working for the world’s largest gold mining company, joins a junior company’s Board of Directors.
And indeed, NuLegacy Gold didn’t disappoint with its 10,000 meter drill program. We won’t repeat all interesting drill results (and invite you to read up on our intermediate updates on NuLegacy’s exploration progress here), but it’s clear the company has been able to add ‘body’ to the mineralized envelope which has now increased to ‘sizeable’ proportions.
It was not the Central or North zone of the Iceberg project, but the Avocado zone that caught investor attention in September when NuLegacy announced assay results with an interval of almost 200 meters of 0.26 g/t gold, with several higher grade intervals with in excess of 1 g/t gold over distances of 10 and 13 meters. This discovery could be a real game changer for NuLegacy and the company has now completed a core hole to get a better understanding of the geological structure at Avocado. Exciting times are ahead, and 2017 could be action-packed (see later).
Even though the main task of a junior exploration company is to explore, the most noteworthy endorsement of its strategy didn’t come from the drill bit, but from the ongoing support from the deeper (and smart) pockets in the industry.
After Barrick Gold accepted a payment in shares to allow NuLegacy Gold to earn a 100% stake in the Iceberg property, NUG was able to attract two additional important players in the gold sector. OceanaGold (OGC.TO), which will produce in excess of half a million ounces of gold in 2017, agreed to invest C$6.7M in April, followed by the Tocqueville Gold Fund which now owns a total stake of 9.9% in NuLegacy Gold. Interesting fact: OceanaGold has been increasing its footprint in the USA with the acquisition of Romarco Minerals, and its strategic stake in Gold Standard Ventures.
After these transactions, approximately 27.6% is being held by Miners, 21.2% is held by Institutions, whilst NuLegacy’s management team owns an additional 17.0%. This means approximately 65% of NuLegacy’s stock is in strong hands.
2017 will be kicked off with the assay results of the Avocado core hole
The core hole at the Avocado discovery has now been completed after reaching a depth of approximately 625 meters. NuLegacy’s team on the ground sounded satisfied with the drill hole and the recovery of the core, even at a substantial depth, was still really good.
Interestingly, deeper portions of this drill hole contain oxidised material. Whilst that might be surprising at a depth of 600 meters, we would like to remind you Barrick Gold also encountered oxidized material at a depth of several hundred meters. At the nearby Cortez Hills gold mine, Barrick gold encountered high-grade oxide material (5-7 g/t gold) at a depth of 1,000 meters, so finding oxide material at depth isn’t unknown in this part of Nevada.
The drill core has been shipped to the lab, and we are expecting to see the assay results literally any day now, as NuLegacy Gold thinks it will be in a position to update the market in January.
NuLegacy will then probably also update its exploration plan for 2017, and it sounds like the company will be completing an additional 10,000 meters of drilling at Iceberg. As its strategy to complete a drill program in batches of 10 holes focusing on both expansion drilling and drilling some wildcat holes seems to have been successful in 2016, we would expect the company to do more of the same in 2017.
Not only will the newly discovered Avocado zone be subject to more drilling, NuLegacy will very likely also drill several holes on the West zone, Jasperoid Basin, and its VIO claims to get a better understanding of the geological systems in those areas.
With C$17M in cash on the bank, NuLegacy Gold is funded for three additional 10,000 meter exploration seasons and despite the recent weakness in its share price, the company is in a much better shape than it was just 365 days ago. Approximately 1/5th of the current share price is backed by cash, and after adding Barrick Gold, Tocqueville and OceanaGold to its list of shareholders (who are all impressed by the company’s systematic exploration approach and are fully backing NuLegacy’s ‘plan of attack’), NuLegacy Gold has become one of the most followed exploration companies in Nevada, undoubtedly helped by some excellent drill results from Gold Standard Ventures (GSV, GSV.V).
Exploring has never been easy, but NuLegacy’s team has done a great job, and the monetary backing from OceanaGold and Tocqueville supports this view. More work still has to be done at Iceberg, but we hope the company will be in a position to release its maiden resource estimate at the end of the 2017 exploration season.
The author has a long position in NuLegacy Gold Corp. The company is a sponsor of this website. Please read the disclaimer