NevGold Corp NAUFF

FWIW, here’s a recent NevGold write up

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NevGold: A Potential for 800% Gains

(TSX-V: NAU) (OTC: NAUFF) (FRANKFURT: 5E50)

NevGold is a budding Canadian gold junior with rare upside potential. 

It owns the Limousine Butte and Cedar Wash gold projects in Nevada, the Ptarmigan silver-polymetallic project in Southeast BC, and has an option to acquire 100% of the Nutmeg Mountain gold project in Idaho. 

 

While the projects all have potential, let's focus on their most advanced project: Nutmeg Mountain.

 

Nutmeg Mountain

 

The Nutmeg Mountain (Nutmeg) project is a low-sulphidation epithermal gold-silver deposit with over 70,000 meters of historical drilling. 

 

The geology of this deposit is comparable to several other epithermal deposits found in the Western USA, home to some of the world's largest gold producers in history.

 

In fact, some of the most profitable mines in the Western USA and globally have been low-sulphidation epithermal (LSE) systems.

 

The attractive characteristics of LSEs are simple: they have the potential for large, open-pit, heap-leach tonnage at or near surface and the potential for large high-grade feeder structures at depths that can have bonanza-grade material. 

 

This gives you the best of both worlds as the near-surface, heap-leach ore can provide immediate cash flow while the bonanza grade system at depth is being advanced. 

 

Think of an LSE having two distinct parts of the system: 

 

1. The disseminated, consistent, near-surface heap-leach part of the system, which is amenable to heap-leaching
2. The high-grade feeder structure, which is the pathway where the gold at surface came from. 

 

In short, they're cheap to mine, make money in most gold-price environments, and have a minimal environmental footprint.

 

Nutmeg currently hosts an LSE resource of just over 1 million ounces of gold. 

But this resource could get much, much bigger.

You see, NevGold just announced an extremely important news release regarding the inaugural drill results from its Nutmeg Mountain project. 

 

Here are the highlights:

 

• High-Grade, Heap-Leachable Gold Intercepted from Surface: 0.72 g/t Au over 79.3 meters from 10.4 meters depth (heap-leachable), including 2.32 g/t Au over 13.4 meters from 25.6 meters depth (heap-leachable) (Hole NMD003), and 0.56 g/t Au over 23.9 meters from 24.1 meters depth, including 0.89 g/t Au over 11.4 meters from 25.6 meters depth with 4.33 g/t Au intercepted near the bottom of the hole (Hole NMD001, hole was lost in mineralization). The mineralization starts at surface with minimal stripping required, and exhibits positive, heap-leach characteristics with both free gold and oxidized material. 
• High-Grade Potential at Depth: Hole NMD003 intercepted multiple, large, vein/breccia zones at 251 meters and 469 meters depth, with assays pending, in an entirely untested area of the project. (Figure 1, Figure 4, Figure 5) The average historical hole depth at the project is only 75 meters, and the company sees significant resource expansion potential at depth. Hole NMD003 intercepted a material structure that will require follow up drilling as the quartz textures seen in the core indicate a potential high-grade feeder structure is present at depth. 
• Open, Near-Surface Mineralization Along Strike: a large step-out 140 meters from the nearest drill collar intercepted significant anomalous mineralization starting at 4.6 meters depth and extending to 93.6 meters depth with grades up to 0.43 g/t Au. (Hole NMD002) Mineralization is open in all directions and further drillholes are planned in this area to test additional targets identified by geochemical and geophysical data previously collected at the project. 

 

For geologists, these results are very promising. But what do they really mean for investors?

 

Let's break it down.

First of all, this release not only confirms that Nutmeg has a large, heap-leach gold system sitting at surface but also has massive high-grade potential at depth. 

What's exciting is that Nutmeg has historically only been drilled at surface, and the deeper part of the system was not properly tested. 

 

In fact, the project's historical average hole depth is only 75 meters, as noted by the news release.

 

It's no wonder the guys at Nevgold are excited. Not only do these drill results show significant potential for expanding the open-pit near-surface resource, but there is also the prize at depth which has remained elusive to date because no one has drilled that far down.

 

And based on the recent drill results, Nevgold now believes that the near-surface resource could double while still having the large, high-grade target at depth. 

 

Take a look:

And in just a few short weeks, we should have the results of the much deeper drilling (see "assays pending" in image above).

 

If those results come back positive also, it could be a game-changer for Nevgold.

Why?

 

The Two-Zone System Significance 

 

The intact, 2-zone LSE system at Nutmeg is very encouraging and not one that is seen often. 

 

Many times, the upper part of the system has been eroded over centuries due to weathering and or concealed by fault block movement. 

 

Normally these LSEs either have the top part of the system or the bottom part of the system remaining. Very rarely do you have both parts of the system intact, like at Nutmeg.

 

This not only means that there will be more near-surface gold to find, but they also have a deeper high-grade feeder structure at approximately 300-500 meters below surface.

 

And with a known 1.1 million ounces of gold at surface already, it's like having a cake with icing and a large cherry (potential high-grade zone at depth) on top (or, in this case, on the bottom). 

 

The known expression of the recently completed (2020) 1.1 million ounce resource boundary at Nutmeg is already 2,300 meters long by 650 meters wide and over 100 meters thick. 

 

That's a very large mineralized system!

 

And given the recent drill results, the NevGold team now believes that there is another 100 meters of vertical thickness not included in the current resource, as well as significant untested lateral extent. 

 

In other words, the team at Nevgold thinks they can easily double, or even triple, the 1.1 million ounce resource. 

 

But that's not all.

 

Some of the deep drilling results from NevGold's latest release indicate that NevGold may be close to the source of all of the fluids and that source is usually related to the high-grade feeder structure which is part of the system NevGold is exploring.

 

In Hole 3, NevGold hit two separate vein/breccia zones over 11 meters and 7.5 meters wide, respectively, that could be part of that high-grade feeder structure. Assays are pending for these two areas – (results within the next month), so they're onto it.

 

As NevGold learns more about the deeper part of the system, they could potentially hit a feeder system that could host grades as high as 1oz per tonne, with widths between 5-20 metres!

 

Which leads us to the next topic: grade.

 

Grade is King

 

As our readers know, when it comes to mining, grade is king.

 

While the gold grades intercepted in the Nutmeg resource, ranging between 0.7-0.75 g/t Au, don't seem spectacular, they are actually considered high-grade for heap-leach projects.

 

More significant is that NevGold recently intercepted 79.3 meters at 0.72 g/t Au from 10 meters depth, including 13.4 meters at 2.32 g/t Au from 26 meters depth. 

 

Those are very good numbers.

 

For comparison, many projects in the Western USA have grades less than 0.5 g/t Au (see below figure). 

Strip Ratio

 

Another important consideration is the strip ratio and how close the gold is to surface. 

 

The strip ratio refers to the amount of waste material (overburden) that must be removed to extract a given amount of valuable material (ore). It is defined as the ratio of the volume of waste material to the volume of ore in an open-pit mine.

 

For example, if a mine has a strip ratio of 3:1, it means that for every 3 units of waste material that must be removed to access the ore, only 1 unit of ore can be extracted. 

 

A higher strip ratio generally means that the mining operation is less profitable, as more resources must be expended to remove the waste material before reaching the valuable material.

 

The gold at Nutmeg starts at surface, which means less material to remove to get the gold out.

 

When you combine gold grade with strip ratio, Nutmeg's profitability prospects get even better.

 

The average project in the Western USA has a strip-ratio adjusted grade of 0.24 g/t. The strip adjusted grade at Nutmeg is 1.18x (over 4.9x), and Limousine Butte (Nevgold's Nevada asset, more in a bit) is 0.62 (over 2.5x), potentially making NevGold's projects much more profitable compared to its peers. 

 

When we adjust grade for strip ratio at other projects in the Western USA (see below figure), Nutmeg has some of the highest grades around. 

Looking at comparable projects in the US, many of them are either producing gold now, or have recently been acquired. In fact, two of the above projects (North Bullfrog and Pan) belonged to our past (Corvus Gold) and present (Calibre Mining) Equedia Portfolio companies.

As such, you can see why we are shareholders of Nevgold.

 

These numbers further build the case that the current Nutmeg resource is a high-grade, heap-leach project in the Western USA with a strong potential to get much bigger.

 

NevGold inaugural drilling at Nutmeg just commenced this year, and these are only the first batch of results. 

 

But another three holes are completed, and more assays are still pending from the initial holes. We could be in store for some fireworks in the coming weeks.

 

And this is only one of Nevgold's projects.

 

Limousine Butte, Nevada 

 

NevGold has another flagship project, the Limousine Butte project in Nevada. 

 

Limousine Butte is a gold exploration project (6,650 ha or 66.5 km2) that sits approximately 65 miles (104km) to the northeast of Ely, Nevada. The project was a past producer with the Golden Butte mine, which yielded approximately 100,000 oz of gold in 1989-1990.

 

Last year, NevGold drilled nearly 10,000 meters at Limousine Butte, returning exceptional near-surface oxide gold results. 

 

In fact, the team has told me they are well on their way to delivering a potential 1.25-1.5 million ounce resource here.

 

Limousine Butte is a traditional Carlin-type gold deposit that is seen all through Nevada - a jurisdiction that almost always carries a premium. 

 

The one differentiating factor is that much of Limousine Butte has not been drilled out, and the project's footprint is growing with each drill hole.

 

The focus of the 2022 drilling was on the Resurrection Ridge and Cadillac Valley target areas. 

 

Resurrection Ridge was a past producer and mined about 100,000 of gold in 1989-1990. And as gold miners know, there is no better place to find more gold than right next to a mine.

 

And that is exactly what NevGold did in 2022. 

 

They drilled a large number of positive holes at both the Resurrection Ridge and Cadillac Valley target areas with key intercepts including 61.6 meters at 2.19 g/t Au oxide including 11.6 meters at 8.51 g/t Au oxide (Resurrection Ridge) and 44.4 meters at 1.30 g/t Au oxide including 11.1 meters at 3.11 g/t Au oxide (Resurrection Ridge), and 175.2m @ 0.86 g/t Au oxide, including 58.2m @ 2.13 g/t Au oxide, also including 5.9m @ 12.32 g/t Au oxide (Cadillac Valley), and 126.2m @ 0.83 g/t Au oxide (Cadillac Valley). 

2022 Resurrection Ridge Drill Results

2022 Cadillac Valley Drill Results

Those are high-grade numbers with long intercepts, especially for a near-surface oxide gold project. It's no wonder the district around Limousine Butte is heating up.    One of the world's largest copper producers, Freeport-McMoran (NYSE: FCX), is conducting a large drill program adjacent to NevGold's southeast, and they think they are onto the next large copper discovery in the Western USA. This could be a complete game-changer for the district.

NevGold believes they control the strongest land position next to its neighbours, which is a great position to be in. 

 

How to Value Juniors

 

For those new to junior explorers, let me give you a quick 101 on how the market values these stocks.

 

If you had to put a fair price tag on an average S&P 500 company, you'd probably use an earnings multiple, such as P/E or EV/EBITDA. These metrics weigh the company's earnings against its stock price, which is useful for the likes of P&G or Coca-Cola.

 

In the world of junior miners, things are different. 

 

The mines aren't that far along in development to project cash flows or earnings. 

 

So, at this stage, the miner's valuation is not so much about how much money it's raking in as it is about how much gold they are potentially sitting on.

 

For those reasons, investors often use a metric called EV/oz to value junior miners. The metric takes the company's enterprise value and divides it by the total resources of gold in the ground.

 

What does that mean for NevGold?

 

NevGold is trading at an approximate C$25 million market cap today, or less than C$15/oz in the ground. 

 

Peer companies with gold resources in the Western USA trade at C$70/oz in the ground. 

That's a massive difference and provides a strong argument for a re-rate of its share price.

But that's not all.

 

NevGold plans to drill Nutmeg and Limousine Butte this year in an attempt to hit the 3-million-ounce mark.

 

If they're successful, the company could rise to a C$200 million valuation based on comps.

That's 8X where it trades today! 

 

And that's assuming gold prices don't go higher. 

 

No Risk, No Reward

 

Of course, like every investment, there are risks – and Nevgold is no different.

Gold prices could fall, and drilling might miss. 

 

Ultimately, junior exploration companies are mostly negative cash flow businesses. That means Nevgold will likely be diluted further as the company will need to raise additional capital or issue more stock to achieve its goals.

 

Furthermore, junior companies are less liquid than their large-cap counterparts, which means a little bit of buying can send shares higher, and a little bit of selling can send shares lower. 

 

It's important you conduct your own due diligence and value Nevgold based on your own assumptions.  

 

As we have always said, success is defined by risk. And with risk comes the potential for failure but also the potential for success. 

 

The higher the risk, the higher the reward. 

 

As long-time Equedia readers know, large gains are not uncommon when you bet on early-stage miners at the right time.

 

Timing the Market

 

What's happening now is eerily reminiscence of what happened nearly 50 years ago: devaluation of the dollar, rise in oil prices, UK in a recession (almost), real GDP growth decline, rise in inflation, and money printing.

 

In the year prior to the 1973 crash, stocks were doing incredibly well, with the DJIA gaining 15% in twelve months.

 

We're seeing the same thing now.

 

As stock markets peaked in 1972, the bears kicked in, and stocks fell dramatically during that time. While stock markets rebounded eventually, the recovery was a slow process. The United States didn't see the same level in real terms until August 1993: over twenty years after the 1973-74 crash began.

 

While stocks lost nearly half their value during that time, many gold mining shares easily quadrupled in value – some of them far more than that. The surge in the gold and silver sector was dramatic, and it changed the lives of the investors who took the risk to participate when no one else would.

 

Recent market events are pointing to a major surge in gold mining stocks in the next few years, and as a result, this year may be one of the best opportunities in the last decade to own them.

 

The next few weeks will be critical for NevGold. Don't blink. You may miss something big.

 

Nevgold

 

Canadian Trading Symbol: NAU

US Trading Symbol: NAUFF

German Trading Symbol: 5E50