Investors looking at Nexus Gold Corp. (TSX: V.NXS, OTCQB: NXXGF, Forum) today must be shaking their heads. Here is a Company with three, large prospective gold properties in Burkina Faso – Africa’s fastest-growing jurisdiction for gold mining.
All three properties have benefitted from recent drill programs. All have demonstrated robust gold mineralization. Nexus is fully funded, having just raised $3 million in an over-subscribed private placement. Yet here is a junior gold exploration company that is trading (as of this writing) at only roughly $1.5 million above its cash-on-hand.
Typically, market caps at this level are what investors expect to see with early-stage exploration companies that have not even begun any drilling program. So why are NXS shares currently available at such fire-sale prices?
Answering this question requires taking a look back. Just over a year ago, the Stockhouse audience was introduced to Nexus Gold in a full-length feature article from April 5, 2017. That article highlighted the Company’s coup in acquiring (at that time) two large land packages in Burkina Faso.
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Bouboulou, now NXS’s flagship project, became available when the previous owner (Roxgold) allowed its lease on this concession to lapse. Niangouela, an even larger land package, is only roughly 100 kilometers away from Bouboulou and the Company acquired this concession at the urging of Warren Robb, the Senior Vice President of Exploration for Nexus.
NXS reported some very strong intercepts, highlighted by an interval of 26.69 g/t Au over 4.85 meters. This strong upward momentum took the Company to an all-time high in its share price on February 9, 2017.
The share price softened over the summer (as often happens in the gold sector) before spiking again in September 2017 after news of the Company’s acquisition of its third Burkina Faso land package, Rakounga. Then disaster struck: a nose-dive in the NXS share price.
From its peak in February 2017; Nexus Gold’s share price plummeted roughly 90%. Why? There was no fundamental reason for the meltdown. Drill results from Bouboulou and Rakounga were strong. The second round of drilling at Niangouela was slightly disappointing – but that was only because the bar had been raised so high after the initial drill results.
In a conference call with Stockhouse Editorial, former Chairman and now President & CEO Alex Klenman tackled this question. The CEO noted the very “unusual trading activity” that took place with NXS stock over this period of time.
With such an aggressive share dump, it causes all sorts of collateral damage. Stop-loss is triggered, which automatically sells more shares into the slide, panic sellers dump without even knowing what caused the dump, and it just proliferates from there. When the fires of fear are stoked and the herd mentality kicks in the damage can be excessive. For us, it killed our market cap in a matter of a few days.
Klenman wasn’t the only one to notice. A November 2017 article on Nexus also alluded to this suspicious trading, referencing the “dark pools” of trading that can only be accessed by the market’s larger players.
It was a tragedy for the Company, and (of course) its shareholders. After closing out the year with a depleted treasury and a share price under $0.03, in the words of Alex Klenman, “Changes had to be made.”
For Klenman, his first task as the new CEO was to right the ship. Specifically, he focused on three initiatives to reinvigorate operations and restore confidence in the Company.
- Strengthening the Company’s leadership
- Restructuring Nexus Gold
- Bringing in a major institutional investor
On May 1, 2018; the day that Klenman was officially appointed President and CEO, he announced the appointment of J. Ian Stalker to the NXS board. For many mining investors, Ian Stalker needs no introduction.
In a mining career that spans 40 years, Stalker has served at the senior management level with household names in the gold industry like AngloGold Ashanti and Gold Fields Limited. These are two of the leading names in African gold mining. Ian Stalker knows the African gold mining industry, and when he took a look at Nexus’ holdings, he liked what he saw.
(Visible gold from Nexus sampling)
Stalker was so impressed that not only did he accept the invitation to the Company’s board, he participated in the private placement to recapitalize Nexus.
Concurrent with the financial restructuring of Nexus, the Company welcomed the support of Sandstorm Gold. A specialist in financing gold mining companies, Sandstorm also has a large presence (and expertise) in African gold mining.
After closely scrutinizing operations, Sandstorm acquired a total of 6 million common shares along with 3 million warrants. Upon exercising its warrants, Sandstorm could end up holding as much as a 19.99% interest in NXS. The participation in this financing by both a leading figure in African gold mining and a leading industry financial institution was a clear endorsement of Nexus Gold’s assets in Burkina Faso.
With support so strong for this financing, Nexus is currently conducting a second round to soak up this additional demand for NXS stock. In speaking with Stockhouse, CEO Klenman offered a ballpark figure of $1.5 million as the target for this next placement.
Certainly, the Company has no lack of opportunities to deploy these funds. With Nexus now solidified on the corporate front, investors will be interested in a closer look at these golden assets.
As outlined in the original full-length feature on NXS, Burkina Faso is one of the few jurisdictions on Earth where new multi-million ounce gold deposits are being regularly uncovered. In this Burkina Faso “gold rush”, ten deposits of 3+ million ounces of gold have already been established. And Nexus Gold’s properties have the potential to add to this total.
What additional mining activity demonstrates the gold rush currently occurring in Burkina Faso? A multitude of orpaillages. An “orpaillage” is a French term that refers to artisanal mining operations.
Naturally, much of this mining takes place on concessions that are officially/legally held by gold mining companies. This means that these artisanal miners are essentially poaching gold off of the property of Nexus (and other gold mining companies).
But there is another side to this mining activity. Given the primitive operations, the total quantities of gold extracted are relatively modest. At the same time, these operations are like neon signs to mining companies, highlighting the known presence of gold mineralization. Nexus (and the Company’s shareholders) saves significantly on exploration costs by shadowing these gold “bird dogs”.
Bouboulou Project
Bouboulou is the most advanced of the Company’s gold Projects. Nexus has already established five zones of gold mineralization on this 38 square kilometer concession. The property was previously known as “Bissa West” under its previous owner (Roxgold Inc), in reference to Nordgold’s nearby Bissa Deposit, with a current resource of 3.4 million ounces Au.
Over 40 holes have been drilled at Bouboulou (including the “historical” holes previously drilled by Roxgold). Grades at Bouboulou are not spectacular – with the exception of occasional high-grade anomalies – but this is the nature of most Burkina Faso gold-bearing geology.
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This is generally lower grade/bulk tonnage mineralization. There are already producing gold mines in Burkina Faso with average grades below 1 g/t Au, typical of such bulk tonnage deposits. With most of the Bouboulou drilling yielding assays in the range of 1 – 3 g/t Au, grades at Bouboulou are comparable with many of the more advanced projects in this nation.
Exploration at Bouboulou has already established three mineralized trends that extend for 5 kilometers (on this property). While Nexus is still intent on advancing operations on its other two gold concessions, the Company’s top priority is to take the Bouboulou Project to the level of a resource estimate.
Niangouela Project
Niangouela is an exception to the general rule when it comes to gold mineralization in Burkina Faso. Niangouela has already demonstrated the potential for higher grades – evidenced by the initial drilling here. This is the product of a different geological formation.
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The key structure here is the “Sabce shear zone”. This is a gold fault formation. For Canadian investors, the nearest parallel would be the “Cadillac Break” fault structure, located in the world-famous Abitibi greenstone belt. While grades in this formation range much higher, mineralization is more in the model of narrow-vein/high-grade geology.
However, Niangouela is a much larger land package (178 square kilometers). Situated proximate to Bouboulou, there is also the potential to identify lower grade/bulk tonnage mineralization.
Rakounga Project
The newest of the Company’s gold projects, Rakounga is also a very large concession (250 square kilometers). The key to this acquisition is that this land package is contiguous with Bouboulou to the southwest – with two of the gold trends at Bouboulou extending onto this concesssion.
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Rakounga is particularly active with respect to artisanal operations, and Nexus wasted no time in moving in a drill rig to test three of these sites. The Company immediately produced robust intercepts, such as 34 meters of 1.00 g/t Au (including 4 meters at 5.57 g/t) and 32 meters of 1.01 g/t (including 2 meters of 5.65 g/t and 6 meters of 2.81 g/t). More importantly following the path of these artisanal operations – and projecting from its Bouboulou gold trends – Nexus has now inferred that these two mineralized trends extend for up to 16 kilometers.
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Nexus Gold has already demonstrated robust gold mineralization on three, large African gold concessions. Its operations are backed by heavyweights in the African gold mining industry. But there is blood in the water. This means, for the moment, that investors can acquire shares at prices that can only be viewed as pennies on the dollar.
Think of a general stock market crash. Those investors with the foresight (and courage) to wade in at the bottom inevitably prosper to a greater degree than those who wait until after it is clear that market conditions have returned to normal.
Nexus Gold: an advanced-stage junior gold exploration company available at a ground-floor price.
www.nexusgoldcorp.com
FULL DISCLOSURE: Nexus Gold Corp. is a paid client of Stockhouse Publishing.