When comparing NevGold Corp. (TSXV:NAU) (OTCQX:NAUFF) to other oxide gold, heap-leach projects in the Western United States, NevGold should trade at a premium because of its higher oxide gold grades, its extremely low-to-low stripping ratio and its experienced leadership team.
At the current approximate $25 million market capitalization, NevGold is trading at a significant discount and less than $15/oz of gold resources in the ground compared to peers trading at more than $70/oz as seen below:
Read more: NevGold issues $1.5M in shares to GoldMining Inc. for Nutmeg Mountain project
Read more: NevGold’s oxide gold drill program in Nevada finds positive results
An important differentiating factor to consider is that comparable companies have a grade profile of less than 0.50 g/t Au while NevGold ‘s is over 60 per cent higher at 0.80 g/t Au (Limo Butte).
Gold Standard Ventures (GSV) was acquired by Orla Mining Ltd. (TSX: OLA) (NYSE: ORLA) for over $242 million in August 2022. NevGold currently trades at an approximate $25 million valuation, which is approximately one-tenth of GSV’s value at the time of acquisition.
GSV owned the Railroad-Pinion project in Nevada that had a Feasibility Study completed in February 2022, highlighted in the following figure:
There are a few key similarities and differentiating factors between GSV (Railroad-Pinion) and NevGold, all of which further re-iterate the value proposition of NevGold today when compared to GSV and several other Western USA comparable companies.
Many of the Western USA comparable companies have a grade profile of less than 0.50 g/t Au which is outlined in Figure 2 below, and this is an important differentiating factor to consider. Remember, grade is king.
The difference between 0.50 g/t Au and 0.80 g/t Au (which NevGold has at Limo Butte, Nevada) is over 60 per cent, and this is one of the many reasons NevGold should trade at a premium compared to peers:
GSV was the most recent acquisition of an oxide gold, heap-leach project in the Western USA, and shares many similarities with NevGold including:
Similarity – size/grade. GSV project had 6 million ounces of gold at 0.684 g/t Au, and million ounces of silver at 4.79 g/t Ag. GSV was one of the highest-grade, undeveloped, oxide gold, heap-leach resource projects not owned by a major company (Figure 2).
GSV was a prime acquisition target because it had higher-grade oxide gold and the company even attracted large strategic investments in the past from groups like Goldcorp Inc. (now Newmont Corporation (NYSE: NEM) (TSX: NGT) ) and OceanaGold Corporation (TSX: OGC).
There is a lack of oxide gold, heap-leach projects with grades of over 0.6 g/t Au and larger than one million ounces in the Western USA. NevGold has two of them:
- One million ounces of gold from a 2020 resource at Nutmeg Mountain at +0.65-0.70 g/t Au (there is grade upside in resource modelling techniques) and the project has significant upside growth potential (+2-2.5 million ounces).
- Path to +1-1.5 ozs of Au at Limo Butte at +0.80 g/t Au
- Both Nutmeg and Limo would be in the top 10-15 per cent grade profile of undeveloped oxide gold, heap-leach projects in the Western USA.
Similarity – cut-off grade. GSV had a cut-off grade ranging from 15 g/t Au to 0.30 g/t Au and had an average grade profile of 0.684 g/t Au.
- Limo Butte – a cut-off of 0.15 g/t Au will be utilized. The 0.15 g/t Au cut-off grade is the same for many oxides, heap-leach projects in the Western USA, and most of the projects have a grade profile of 0.40-0.50 g/t Au (see Figure 2). With Limo Butte grade at ~0.80 g/t Au, the resource grade of the project will be over five times more cut-off grade.
- Nutmeg Mountain – cut-off of 0.20 to 0.30 g/t Au; the resource grade is around 0.70-0.75 g/t Au (there is an upside from what is currently reported), which would be over 2.5-3.5x cut-off grade.
- With the significantly higher grade profile compared to the cut-off grade at both Limo Butte and Nutmeg Mountain, NevGold should trade at a premium to peers as the ore/gold from both projects have significantly higher margins/economics.
Similarity – recovery/oxide. GSV had a Run-of-Mine (ROM) gold recovery of 64.5 per cent.
- Limo Butte – the past-producing open pit at Limo Butte had ROM recovery of ~60-65 per cent, and one-stage crush recovery of 85 per cent. The recovery profile/leach kinetics are very similar between GSV and NevGold.
- Nutmeg Mountain – based on historical metallurgical test work, crushed ore has an approximate recovery of 70-80 per cent via heap-leach, which again compares very positively to other heap-leach projects.
Positive Difference – NevGold has a much lower strip ratio. The strip ratio at GSV is 4.10:1. A high stripping ratio adds a lot of upfront capital and operating costs to a project because a lot of waste rock needs to be removed before getting to the ore/gold. The NevGold deposits in Nevada and Idaho are closer to the surface and should require significantly less stripping and likely have much lower costs.
- Nutmeg Mountain mineralization starts at the surface, meaning minimal to no stripping (Figure 4).
- Limo Butte mineralization at Resurrection Ridge starts at 20-35 meters below the surface (Figure 5), and if it goes into production, Resurrection Ridge will likely be the first of the deposits to be mined as it is right next to the past-producing pit at the project (Cadillac Valley would be the second deposit mined).
- Current estimates at Resurrection Ridge show a 1-1.25:1 strip ratio, and Cadillac Valley would have a strip ratio of 5-3.0:1; both of these strip ratio profiles are significantly lower than GSV.
Read more: NevGold starts drilling at Nutmeg Mountain property
Read more: 2023 will be a ‘very strong’ year for gold mining: NevGold
NevGold has a path to extract this value and believes that, based on many of the above factors, it should be trading at a premium to peers – not a discount.
The value will be daylighted to the market through further drilling and project advancement, and there is significant upside potential to generate exponential returns from today’s current valuation.
In summary, NevGold should trade at a premium because:
- NevGold has higher oxide gold grade compared to other projects (Limo:+0.8 g/t Au, Nutmeg:+0.65-0.70 g/t Au), and this works out to over 5x the cut-off grade at Limo Butte and 5-3.5x at Nutmeg Mountain, which drives the thesis that both Limo Butte and Nutmeg Mountain are in the top 10-15 per cent of projects and could have significantly higher margins/economics compared to peers.
- NevGold has an extremely low-to-low stripping ratio at both Nutmeg and Limo (very positive for economics).
- NevGold has a simple permitting and land situation in both Nevada / Idaho compared to other projects.
- All of the ground is either patented mining claims or unpatented BLM (Bureau of Land Management) claims. A BLM mining claim is a parcel of land for which the claimant has asserted a right of possession and the right to develop and extract a discovered, valuable, mineral deposit.
- The leadership team composed of the executive team and the board of directors has operated in the Western USA for multiple decades and knows how to get business done, efficiently and cost-effectively.
- Priority drill rig(s) and contractor relationships.
- Very quick assay turnaround times (4-5 weeks) which is similar to larger companies/preferred clients like Newmont/Barrick/ Kinross. The team has processed over 1.5 million feet of drilling (around 500,000 meters) through American Assay Lab in Reno, Nevada and they have a very deep-rooted relationship built over many decades.
NevGold is a sponsor of Mugglehead news coverage and a director currently owns shares at the time of this writing.