CA - Is New Found Gold Worth Its 'High' Price Tag?

2023-03-07 15:13:08 ET

Summary

• New Found Gold Corp. is a $600+ million gold explorer focused in Newfoundland, Canada.
• The company has been making some of the best gold discoveries in Canada, striking high-grade gold close to the surface.
• Given the risks associated with gold exploration and development, some investors are understandably hesitant to pay its price tag.
• But New Found Gold may be worth its current price, as I argue below.

New Found Gold's Price Tag: A Risky Bet Or A Golden Opportunity?

This article is a follow-up to my previous coverage of New Found Gold Corp. ( NFGC ), a top-tier gold explorer with a primary focus on the Queensway project located in the Central Newfoundland Gold Belt. Despite some NFGC stock price volatility, the company has continued to make significant high-grade gold discoveries and invest heavily in exploration.

New Found Gold has had a successful exploration campaign at Queensway, with the recent discovery of the high-grade Iceberg Zone being a standout development. The zone, located 300 meters northeast of Keats Main along Appleton Fault, spans a strike length of 50 meters and is open in all directions and at depth, suggesting the potential for further expansion.

New Found Gold's exploration efforts have not helped boost its stock price yet, but they have yielded more gold discoveries across its property. And a significant portion of its 1,650 square kilometer property remains unexplored.

"Iceberg" Zone Drill Results A Game Changer?

Recently, New Found Gold reported new drill results from a high-grade zone that's being called Iceberg, which is located 300 meters northeast of Keats Main along Appleton Fault.

For some background, Keats has been the source of New Found Gold Corp.'s most prominent gold discoveries, including the initial game-changing assay of 92.9 g/t gold over 19 meters (pre-IPO), and follow-up holes at Keats West which include 42.64 g/t over 32 meters . Other nearby targets, including Lotto (41 g/t over 4.75 meters) and Golden Joint (430 g/t over 5.25 meters), have also returned outstanding drill holes.

But the latest drilling results show that Iceberg is a new high-grade discovery starting at surface, spanning a strike length of 50 meters, and is open in all directions and to depth.

Highlights of the drilling include:

• 15.3 g/t gold over 10.75 meters;
• 72.2 g/t gold over 9.65 meters ;
• 19.7 g/t gold over 5.65 meters.

These are excellent drill holes, as they all exceed the 100 mark for "grams per ton X meters" - a metric to consider when analyzing drill results. In particular, the 72.2 g/t over 9.65 meters hole returned an exceptional 696.73 GxM.

Additionally, the company reported that its intercepts are shallow and occur at depths of less than 30m from the surface. For example, the aforementioned 72.2 g/t hole starts at just 36.35-meter depth; the 15.3 g/t hole starts near the surface at just 7.70-meter depth.

These shallow, high-grade drill holes results indicate that Iceberg - along with Keats and other nearby targets - may be amenable to low-cost, open pit mining.

According to New Found Gold, the Iceberg Zone shares the same orientation to Keats Main and is composed of multiple intersecting veins that concentrate high-grade gold mineralization.

While it's still early, the company says this zone is believed to be the eastern continuation of Keats Main. More drills have been mobilized to the Iceberg Zone to ramp-up exploration efforts.

Greg Matheson, COO for New Found, says the discovery of Iceberg "renews the enthusiasm around the highly prolific Keats-Baseline Fault Zone." He commented that Iceberg has similar geological characteristics to those observed at Keats Main, such as "significant quartz veining over several-meter-wide intercepts that start at surface and are hosted by the KBFZ."

What's next for New Found Gold? 2023 Plans

It's going to be more of the same for this aggressive gold explorer as they continue turning the drills. The company is in the process of completing a massive 500,000-meter drill program, which is and it also has 51,500 meters of core with pending assay results.

With its new Giga-Shack core facility (pictured above) now in operation - which logs and processes its drill core - I expect a steady stream of news flow in the coming months, especially if we get more top-notch drill holes reported from Iceberg.

With ~$72 million working capital (cash and marketable securities), New Found Gold has more than enough cash to not only complete this drill program, but perhaps also expand it this year, before it needs to tap into the equity markets again.

The company also recently announced it will launch a 3D seismic survey at Queensway, covering 47km2 along the property, including the Keats Zone, Keats West, Iceberg, Golden Joint, and Lotto, plus other unexplored areas. The goal of this geophysical survey is to identify new gold zones and drilling targets. I'm looking forward to seeing what this survey surfaces.

New Found Gold: Is it Worth its Valuation?

New Found Gold may not look cheap to many investors here as it carries a $612 million market cap. As a pre-resource gold explorer with no cash flow from operations, the company is still at least a year away from its initial resource, several years away from mine construction, and probably several more years away from initial production. Given the risks associated with gold exploration and development, some investors are understandably hesitant to pay such a high price for a company at this early stage.

But New Found Gold is not your typical gold explorer, and its exceptional high-grade gold discoveries at Queensway suggest that this is a unique opportunity. These discoveries continue to expand, and while it's difficult to accurately value the company's potential, there is still substantial exploration upside at its properties.

New Found Gold's current valuation looks attractive in my opinion, given the potential for Queensway to host a multi-million ounce, high-grade, near-surface gold resource that can be mined via open pit. (Investors should also keep in mind that this company once carries a $1.6 billion market cap at the peak of the gold market in 2021).

Moreover, Queensway is located in one of the world's top mining jurisdictions, which should increase the company's future valuation. Its location makes it an even more compelling future M&A candidate, particularly after B2Gold's ( BTG ) recent $1+ billion acquisition of Sabina ( SGSVF ) for its Goose River project in Nunavut, Canada. Besides Osisko Mining ( OTCPK:OBNNF ), there are few top-tier gold projects in Canada remaining outside of the hands of a senior gold miner.

While New Found Gold Corp. is still several years away from attracting M&A interest, I believe it's likely to be a highly sought-after target for companies looking to add a high-quality project in a top-tier jurisdiction to their portfolios.

Overall, while New Found Gold Corp.'s valuation may not appear cheap at first glance, the company's unique position as a gold explorer with significant high-grade gold discoveries at Queensway suggests that it may be a worthwhile investment in the long run.

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