I have been following NuLegacy Gold (TSX-v: NUG) / (OTCQB: NULGF) for nearly 3 years — they have been an advertiser on my investment website for most of that time. The Company was formed in 2009 and has been actively drilling its 100%-owned Red Hill property in the world famous Cortez Trend of north-central Nevada since 2013. Despite pockets of exploration success, the massive property holding (98 sq. km / 38 sq. miles) has not yet shown conclusive evidence of a substantial Gold (“Au”) deposit. But, NuLegacy’s current drill program could be a game changer….
Yes, there are reasons to believe that a meaningful Au deposit could be on the verge of being found. Most notable is NuLegacy’s close proximity to Barrick Gold’s 2 most significant and valuable mines, Pipeline (21 M+ ounces) & Cortez Hills (15 M+ ounces). These mines, alongside Barrick’s development-stage Goldrush project (10 M ounces @ 10.2 g/t Au) are directly on trend and adjacent to NuLegacy’s Red Hill project. [Goldrush is slated for initial production in 2020].
Importantly, NuLegacy benefits from, “close-ology” to Barrick Gold’s Nevada franchise. Readers should note that NuLegacy’s Red Hill is not merely 50-100 km from a decent operating (or past producing) mine, in a decent jurisdiction — it’s 10-20 km on trend, adjacent to 2 of the best active gold mines in the world (low cost, low operating & geopolitical risk, long-lived, large-scale, high-grade).
Over the past few weeks I’ve spent a lot of time speaking and emailing with management & Board members. I believe they’re as excited and optimistic as I’ve ever heard them. [Notice by the way that CEO James Anderson acquired 93,5000 shares in the open market on Sept. 24th]. Why the buzz? A drill hole announced on August 27th … a 100 meter step-out (west of the highly prospective Serena zone)…. not only one of the best drill holes in NuLegacy’s history, but likely a confirmation that the team’s understanding of the gold deposit is advancing.
Management Spent the Past 9 Month Re-Logging Key Drill Holes…
How good a hole was it? 8.7 meters at 16.9 g/t Au, (equal to 0.544 troy oz.) within a broader interval of 22.1 m at 6.6 grams/t. That’s an attractive find at moderate vertical depth (258 m), especially if it’s the start of more good results to follow.
Ed Cope (Independent Director) was quoted in the August 27th press release as saying,
“This is an outstanding result for several reasons, first it signals that the Serena zone is wide open to the west towards the geophysically well-defined Western Slope anomaly that has minimal previous drilling. Second, the grade is excellent, reminiscent of the grades Barrick found while drilling Goldrush several years ago. Finally, it is proving the concept that following newly recognized ‘mineralizing’ low angle fault structures to the west to where they intercept the best stratigraphic host rocks is working. We will continue to refine this work in the fall.“
The August 27th drill result could prove to be a game-changer. To be clear, a sizable/high-grade endowment might not come in the form of a maiden mineral resource estimate, but perhaps in subsequent resource updates.
Is New Understanding of Mineralization a Game Changer?
As mentioned, there have been several moderately high-grade intercepts over the years. Why might this time be different? To understand this important consideration, I urge readers to invest just 7 minutes viewing this excellent video clip (not overly technical) from June 2018. A new, more advanced and detailed view of Red Hill has been developed over the past 9 months. This enhanced understanding may be responsible for the success seen in the most recent drill hole, and, if true, may lead the technical team to even bigger and better outcomes in coming months.
In the above image from the 5-minute mark of the video, CEO James Anderson explains how management determined that the highest-grade gold is most likely to be hosted in the Devonian Wenban 5 unit (“Dw5”). This finding is critically important because up to 85% of the gold found at Goldrush is in the very same Dw5 unit!
It’s the wider beds of Dw5, intersected with low-angle structures and carrying much higher grades that is now the principal target. Based on drilling, geologic mapping, and 3-D modeling in the Serena, Iceberg & Avocado zones; it is virtually certain that the Wenban & Horse Canyon formations, and low-angle faults responsible for the gold mineralization, extend into these untested areas. NuLegacy’s Fall season drill program will test several of those areas.
Also noteworthy, after decades of gold production, Barrick’s mines & projects in Nevada are getting better and better. Management recently announced additional blockbuster-grade discoveries at Fourmile, a multiple km extension of Goldush.
The initial Fourmile discovery was made 2 years ago under the leadership of Ed Cope (then VP North American Exploration for Barrick, now an Independent Director of NuLegacy), with the efforts of Charles Weakly (then Regional Geo for Barrick, now District Geo for NuLegacy). These seasoned professionals see a number of key similarities between Red Hill and the 7 km Goldrush/Fourmile area.
Charles Weakly also commented,
“Everything we saw at [Barrick’s] Goldrush exists on the Red Hill property. The results of SR18-02C confirm two things: that high grades over significant widths exist at Red Hill – in the Serena Zone – and likely other areas; and that our methodology for finding higher grades is improving constantly.“
A primary risk with NuLegacy has been that as a junior, even if there is an elephant deposit, it will take too much drilling (time/money) to establish an attractive resource. With #SR18-02c that risk has been reduced, albeit not eliminated. Make no mistake, management needs to find more holes like #SR18-02c, and (hopefully) some wider intercepts. With that in mind, the Company is planning to drill (and is fully funded for) at least 4 follow-up holes in and around the Serena zone as part of a 10-12 hole program beginning this month.
There’s a lot of excitement over the upcoming drill program. If Mr. Cope and Mr. Weakly are correct in thinking that their targeting ability has improved, we could see some good results reported in the 4th quarter.
A tremendous amount of painstaking work was conducted by NuLegacy’s technical team over the past 9 months. The effort appears to be paying off. Due to an improved understanding of Red Hill, a new interpretation has been established for the location of the Iceberg fault, which is vital to gold deposition at NuLegacy’ North & Central Iceberg zones.
It is interpreted that this conduit for gold bearing fluids lies significantly west of previous NuLegacy drilling in the Avocado area. Holes to test this exciting new target are in the process of being permitted; the company plans to drill test this area in October.
As NuLegacy’s expert technical team zeros in on Wenban & Horse Canyon, an important question comes to mind. Is there enough favorable host rock at Red Hill to potentially contain millions of ounces of gold? Management believes the answer is Yes. Where it is undisturbed, the DW5 formation is probably not thick enough to host a large gold deposit.
However, prior to the gold mineralization event, the rocks at Goldrush and Red Hill were folded and faulted such that DW5, as well as the other rocks surrounding it, were stacked-up, creating a much thicker section of good host rock. Locating the intersection of over-thickened DW5 with gold-bearing faults is the core of the Company’s exploration targeting.
NuLegacy Gold’s Valuation vs. peer Nevada Juniors
Gold Standard Ventures is an interesting investment analog, a prominent Nevada junior with strong financial backers. While NuLegacy has Barrick, OceanaGold & Tocqueville as top shareholders, GSV has OceanaGold & Goldcorp. Both GSV (147 sq. kms in Carlin trend) and NuLegacy (98 sq. kms in Cortez trend) have giant land holdings in world-class areas. Both companies enjoy significant blue-sky potential, but GSV is arguably 2 years ahead of NuLegacy and it has a 3.5 M Indicated & Inferred ounce gold resource — valuing the Company at nearly C$170/oz. in the ground.
At C$170/oz., NuLegacy would have to deliver a resource of roughly 320k ounces to be valued the same as GSV. In my opinion, the Company could have 3x-4x that amount delineated in a NI 43-101 compliant mineral resource estimate by the end of next year. GSV’s market cap @ C$600 M is 10x that of NuLegacy Gold’s @ C$55 M. I believe the valuation gap could close, (perhaps by a lot) in coming months.
A recently completed acquisition helps demonstrate the premium companies are willing to pay to lock down high-quality gold assets in Nevada. Coeur Mining paid C$117 M for Northern Empire, a company with a 709,000 Inferred ounce (2.2 g/t Au) heap-leachable resource located on a 143 sq. km land package within the Walker Lane trend. That’s C$165/oz. To be clear, Coeur expects to find a lot more gold on that property.
A key takeaway from GSV’s C$600 M market cap and Coeur Mining’s M&A activity is that interest in Nevada (and in the U.S., where the corporate tax rate was slashed to 21%) is growing. Interest not just from established Nevada Majors like Newmont, Barrick, OceanaGold, Goldcorp, Kinross, Agnico Eagle, but also North American mid-tiers like SSR Mining, Hecla, McEwen Mining & New Gold.
NuLegacy Gold (TSX-v: NUG) / (OTCQB: NULGF) is not one of a slew of new entrants in Nevada, they’ve been at this for years. I would put the Company’s management, Board & Technical Advisors up against any junior gold explorer (pre-PEA stage) in North America. Near-term catalysts are hugely important in gold exploration and drill results are the biggest catalysts imaginable. NuLegacy has results coming in the 4th quarter. If they are good, we could be off to the races. Readers should keep a close eye on this story.
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