NexGold Mining Corp. (NEXG.V:TSXV; NXGCF:OTCQX) gained additional research coverage with Red Cloud Securities' recent initiation on it with a Speculative Buy rating and a CA$1.80 target price, reported Ron Stewart, managing director and mining analyst, in a Sept. 6 research note. NexGold resulted from the July 2024 combination of Treasury Metals Inc. and Blackwolf Copper and Gold Ltd.
"The merger strengthened the leadership, balance sheet and capital markets capabilities, allowing it to execute a strategy to drill, develop and deal its way to become a midtier gold producer," Stewart wrote.
Undervalued stock, 169% upside
Red Cloud's target price on NexGold implies a return for investors of 169% given the gold explorer-developer's current share price is about CA$0.67, noted Stewart. NexGold is trading 13% below the average value of peers.
"It is one of only three companies that has posted a year-to-date gain in its share price, suggesting the market recognizes the potential value in advancing its assets," Stewart wrote.
Assets at a glance
Stewart presented the factors that make NexGold an attractive investment opportunity.
NexGold has a handful of assets, at various stages, in the U.S. and Canada. Goliath, the company's current focus, is a 3,000,000-ounce (3 Moz), development-stage, open-pit and underground gold project in Ontario encompassing the Goliath and Goldlund-Miller properties that together span 34,719 hectares (34,719 ha).
Niblack is an advanced copper-gold-zinc-silver volcanogenic massive sulphide project covering 2,524 ha in southeast Alaska.
NexGold's other assets, all prospective exploration properties with gold discovery upside, offer optionality, wrote Stewart. They include Hyder, also in in southeast Alaska, consisting of five properties: Texas Creek, Mineral Hill, Rooster, Cantoo and Casey. Others are Weebigee-Sandy Lake and Gold Rock in Ontario.
In pursuit of growth
NexGold has a clear, three-pronged growth strategy, which Stewart explained.
1) One way is to advance Goliath to production quickly. In that vein, the company intends to complete a feasibility study on the project by Q1/25, start construction as early as Q1/26 and commence gold production as soon as Q1/28.
Goliath already has a resource, but it likely could be expanded. The combined resource consists of 67,000,000 tons (67.7 Mt) of 0.98 grams per ton (0.98 g/t) gold in the Measured & Indicated category and 32.5 Mt of 0.75 g/t gold in the Inferred category. The combined reserve is 30.3 Mt of 1.3 g/t told.
For an operation at Goliath, Red Cloud models it producing 1.176 Moz over a 13-year life of mine at an all-in sustaining cost of US$1,269 per ounce. This would result in an after-tax net present value discounted at 5% of US$331 million (US$331M), an internal rate of return of 21.2% and a payback period of 3.4 years.
"We anticipate this to be a starting point for NexGold," Stewart wrote. "We expect ongoing exploration at the GGP to have the potential to enhance the production profile and overall project economics."
Already the federal government has approved the environmental assessment for the Goliath project. Also, NexGold and the Wabigoon Lake Ojibway First Nation have a relationship agreement in place, in which each party commits to collaborating with and supporting the other.
2) The second way is to expand the current Goliath resource and identify new resource centers. As such, NexGold plans a 25,000 meter (25,000m) multistage drill program at the project. The first 4,000m, targeting the 25 kilometer area between the Goliath and Goldlund deposits, are underway.
3) The third way is to prospect for and acquire gold projects to expand its production base.
Catalysts for the stock
Coming up, investors can expect a flow of drill results over the near term from the current exploration program at the Goliath project, noted Stewart.
In 2025, key catalysts include a feasibility study in Q1, receipt of provincial permits and an Impact Benefit Agreement, a construction decision in Q3 and project financing around year-end. Start of construction is targeted to follow in about Q1/26.
Leadership is a key differentiator
Stewart pointed out that the experienced management and technical team of NexGold gives it a competitive edge. These "seasoned mine builders and operators," with extensive careers in the industry, include Chairman James Gowans, Chief Executive Officer Jeremy Wyeth, President/Director Morgan Lekstrom, Project Director Floyd Varley and Vice President of Human Resources and Sustainability Rachel Pineault.
Further, the company has two strategic advisers with proven track records of creating shareholder value: Frank Giustra, a principal investor, and Shawn Khunkhun.
Ownership and share structure
Management and insiders own 9.2% of NexGold, reported Stewart.
The Top 10 investors hold roughly 37%. They include Frank Giustra with 10.1%, Sprott Inc. with 9.9%, Extract Advisors LLC with 9.3% and First Mining Gold Corp. with 4.3%.
NexGold has 76.2 million (76.2M) basic shares outstanding along with 15.6M warrants, 2.8M options and 3.5M restricted stock units.
The company's market cap is CA$51.1M. Its 52-week trading range is CA$0.46−1.07 per share.
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