Portion of PR Text I Find Most ConcerningIn my view, the most disturbing portions of NFG's Nov. 4 press release are those I put in boldface below (with the rest of the text provided for context):
"Two test programs have been designed by RSC with input from the Company to identify the potential sources of bias.
The first program will test whether there is a bias between the two labs and will involve submitting 167 half-core samples to ALS for crushing and splitting into two equal lots. The two splits are to undergo the standard metallic screening process at the two respective labs, EA, and ALS.
If a statistically significant bias is demonstrated in test program one, test program two will determine which laboratory produced the bias by collecting two sets of 60 half-core samples where one set was originally assayed at ALS and the other by EA and submitting these 120 half-core samples to a third “umpire” laboratory.
If testing program one does not indicate a bias between the labs, then the bias is likely to have been introduced during the sampling of the core in the core yard.
Both programs will run concurrently to limit further delays and the results are expected in approximately eight weeks’ time. The time line for completion of this work will depend on turnaround times at the assay labs, so there may be some variability in this time line. The Company and RSC are putting all their efforts into getting this program completed as soon as possible.
In the event that the test work determines that a bias was introduced in the sampling process, the remaining half-core samples still held by the Company will be sent for assay and a weighted average of the two half-core samples will then be used to determine an updated assay."
My opinions regarding the above:
1) Assay results are the lifeblood of a junior gold exploration-stage company. NFG has been rewarded given the investment community assumed that all assay results reported to date were accurate and thus priced NFG shares accordingly. If this review process results in a downward re-statement of past assay results, I would not consider this a minor bump in the road - even if those downgraded assay figures are still stunning vs. other junior exploration companies (and I suspect they still will be), NFG shares were bought and sold based on the original publicly-released numbers, not the possible revised downward assay figures that may result when the review programs are complete.
2) How many assay result figures from past press releases may be affected with revised numbers? The more that are impacted in a negative way, the worse it will be.
3) It looks like the company will be in limbo for the next two months as these programs are implemented and results / conclusions are determined.
4) If it's one or more of the labs that are at fault, it's hard to blame NFG for this as it's the labs that would be where the problems occurred, though this is not much of a consolation for those investors who purchased shares at higher prices by taking the initially-reported numbers as fact. However, if it turns out that "....the bias (had) been introduced during the sampling of the core in the core yard", then it would appear it may have been NFG employees who made the mistakes, which would be much worse in my view with perhaps much more serious fallout. Were the staff in charge of doing these jobs propertly trained and supervised? Was their work checked / verified by a more senior person before sending portions of cores to labs? If not, why not? It would seem to me that this portion of the assaying process is critical in ensuring that returned assay results are solid so you don't have to go through what NFG and its shareholders are having to deal with currently.
4) If the more reputationaly-harmful investigation conclusions do in fact become reality once the review process is complete and investor trust is damaged, this November 4 press release may be significantly more impactful for a longer period of time than statements such as a minor glitch or a small mis-step that will be handled and forgotten in short order..........time will tell...........