Gold, Nexus Gold (NXS.V) and a test of the prospect generator biz model

As of Friday’s close, gold is up 20% year to date (YTD), and is trading at its highest level in more than six years.

The GDX (GDX.NYSE), a popular ETF that replicates the price and yield performance of the NYSE Arca Gold Miners Index, is up a solid 40.5% YTD.

Select junior exploration companies are trading okay, but have yet to register the kinds of broad based gains we have come to expect when the metal behaves this way. Some might ask, and they’d be justified in doing so, ‘WTF… y’all?’

Nexus Gold (NXS.V), an ExplorerCo with considerable jurisdictional scope, dropped significant news in recent sessions. The company continues to move its extensive project portfolio forward, steadily… sensibly.

First, a few comments on gold. The metals fundamentals are rather compelling (largish understatement).

Read: Gold, TA, a breakdown in bond yields, and a few insights into Nexus Gold (NXS.V) and Cypress Development (CYP.V)

Read: Gold: the unbearable brightness unseen

With central banks around the globe debasing currencies at rates that defy desciption, not to mention a feckless protectionist fuck nut fighting a trade war he will in all likelihood lose, and lose badly, it’s difficult not being enamored by the metals glimmer.

Pic courtesy of IndiaToday

Danielle Lacalle, chief economist and investment officer at Tressis Gestión:

The most concerning danger in the global economy is the centralbanks have entered an unstoppable race that is creating larger and riskier imbalances.”

There’s also speculation that Trump has had enough of a soaring dollar and will take action in the currency markets buying the yuan in an attempt to drive the USD lower against the Chinese currency (a lower USD would make US goods more competitive overseas).

This is all speculation, of course, but the rumor is making the trading desk rounds.

Dollar Tumbles On Speculation Trump To Announce FX Intervention “Shortly”

There are enough cross currents in these markets to give even Cap’n Ahab a serious case of mal de mer.

Moby Dick pic courtesy of ‘In the Heart of the Sea’

A few more choice quotes that don’t exagerate the current situation (not even remotely):

Otavio Costa, global macro analyst at hedge fund Crescat Capital:

We are entering a period of monetary policy lunacy, and in our view, there has never been a better time to own gold. Precious metals are “one of the few pockets of this market offering tremendous value to hedge against extreme monetary policies, bursting asset bubbles, and record global leverage

The trade war is already lost, Trump is doomed and this investment is about to go ‘ballistic,’ strategist says

Euro Pacific Capital’s Peter Schiff:

Everybody is weakening their currency to create more inflation. Well, what’s going to happen? The world is going to drown in an ocean of inflation and gold is going ballistic.

For those with a technical bent, Peter Hug, global trading director of Kitco Metals regarding the metals current price trajectory:

I don’t see any technical resistance between here and $1,620 – it’s just air.

Here’s one of the big guns, Frank Giustra—Canadian businessman, mining financier, and philanthropist—a man who understands gold better than most:

There is a storm of stupidity taking place around the entire world today, and investors should be invested in gold until the dust settles.

Frank Giustra – Billionaire Investor says Biggest Gold Bull Market of All Time Starting Now

Image courtesy of Amazon

On the subject of ‘investing in gold until the dust settles’, Nexus stands out in my mind, both from a fundamental and valuation stand point.

On August 20, Nexus released a corporate update regarding its Dakouli 2 project in Burkina Faso, its McKenzie project in the Red Lake Mining Camp, and its New Pilot project in the Bridge River Gold Camp of southern BC.

The McKenzie Gold Project, Red Lake, Ontario

This 1,348.5-hectare chunk of prospective terra firma is located in the heart of the prolific Red Lake Gold Camp aka the High-grade Gold Capital of the World.

McKenzie hosts no less than nine documented historical gold occurrences. Only limited exploration been performed on the property to date—the project has significant exploration upside.

The project is strategically located adjacent to Newmont Goldcorp (NGT.T) on its east and northern boundaries, and Pure Gold’s (PGM.V) Madsen project on its southern boundary.

“In May and early June 2019 Nexus senior geologist Warren Robb, assisted by personnel from Rinimi Explorations, completed a first phase prospecting campaign designed to identify and verify locations of previous exploration activities and mineralization (see Company news release dated June 25, 2019). A total of seven samples were collected covering areas on McKenzie Island and in the St. Paul Bay area of the property.

Significant results were obtained from localities on McKenzie Island with samples returning 135.4 grams-per-tonne (“g/t”) gold (“Au”) and 9.3 g/t Au, respectively. The 135.4 g/t Au value was obtained from a select sample on a quartz vein hosted in igneous rocks of the dome stock, while the 9.3 g/t Au value was obtained in a select sample of a quartz vein hosted in felsic meta-volcanic rocks on the northern portion of the property.

Historical work on the McKenzie property has resulted in several significant prospecting discoveries, with bonanza-grade samples returning up to 313 g/t Au. A new showing on the southwest corner of McKenzie Island, located in the northern portion of the project area, was also discovered and returned multiple high-grade samples ranging from 9.37 g/t Au to 331 g/t Au. This newer discovery lies approximately 100 meters west of a historical showing where gold values of up to 212.8 g/t Au have been reported in provincial government files. Quartz veining and sulphide mineralization are also reported in multiple locations on McKenzie Island, within the northern portion of the property boundary. Sampling conducted in 2017 returned up to 18.02 g/t Au in grab samples from the vein exposure.”

The company is currently in the midst of a detailed prospecting program, supplemented with ground geochemical and geophysical surveys.

The application of modern target defining technologies and methodologies will go a long way towards increasing the odds of success when a drill rig is mobilized to the project early next year.

New Pilot Gold Project, Bridge River Gold Camp, BC

The 509-hectare New Pilot Gold project is located in the Bridge River Mining Camp, approximately 180 kilometers north of Vancouver, and 10.5 kilometres west of the village of Gold Bridge.

Between 1992 to 1994 Cogema Canada conducted a detailed prospecting and sampling program where it collected 99 grab samples from three distinct zones.

  • Three samples showed values of 102 g/t Au, 106 g/t Au (with visible gold), and 111g/t Au.
  • An additional three samples showed values of 17 g/t Au, 21 g/t Au, 33 g/t Au.
  • A further 14 samples returned values in excess of 1 g/t Au.

In addition to the above, 59 soil samples, 229 rock samples, and 66 core samples (from a small 108-meter diamond drill program) were also obtained. Significant values from this program included 4.03 g/t Au over 10 meters in chip samples, and 1 g/t Au over 10.5 meters in drill core.

The company put boots to the ground for several weeks in June and July of this year conducting a comprehensive ground reconnaissance program that included mapping and sampling of historical occurrences.

Results of this program are due in the coming weeks.

Dakouli 2 Gold Concession, Burkina Faso, West Africa

Nexus’ 100%-owned 9,800 hectare Dakouli 2 exploration permit is located roughly 100 kilometers due north of the capital city Ouagadougou.

Dakouli 2 lies immediately south of, and contiguous to, the company’s Niangouela Gold Concession, which has been subjected to ongoing exploration over the past three years.

Drilling at Niangouela has returned significant high-grade intercepts including 26.69 g/t Au over 4.85 meters, inc 132 g/t Au over 1 meter, and 4 g/t Au over 6 meters, inc 20.5 g/t Au over 1 meter (see news releases dated March 7, 2017 and April 5, 2017).

In late 2018, the company conducted a comprehensive ground reconnaissance program to the west and south of the main orpaillage (artisanal zone) and identified new near surface workings being explored by artisanal miners.

Rock samples collected from these new zones contained various concentrations of visible gold, including coarse nuggety samples.

Twelve samples were taken from artisanal shafts and pits along the Northeast Zone at between 8 and 18 meters below surface. Six samples registered values between 2.90 g/t Au and 29.5 g/t Au, including 27.5 g/t Au and 12.4 g/t Au from samples containing visible gold (see news release dated January 8, 2019).

Of the first 25 samples collected, 11 returned values greater than 1 g/t Au.

Five samples contained concentrations of coarse, nuggety, visible gold, returning assay values greater than 11 g/t Au.

All 25 samples taken to date at Dakouli 2 have tested positive, with several returning significant gold values.

The company has also identified two new mineralized zones and a secondary vein structure just south of the primary Northeast Zone (see company news release dated January 15, 2019).

“The secondary vein structure identified is located 70 meters south of the primary Northeast Zone. The new workings are parallel to the primary orpaillage being worked and three samples taken 17 to 40 meters below depth returned gold values of 1.74 g/t Au, 3.68 Au and 17.6 g/t Au, respectively. The 17.6 g/t sample exhibited coarse visible gold. The workings of the Northeast Zone on the Dakouli 2 property now cover an area measuring 400 meters along strike enclosing two parallel gold bearing structures 150 meters wide.

An additional new zone, located on the western boundary of the Dakouli 2 permit, has returned two samples from workings located there of 2.72 g/t Au and 11.1 g/t Au. This second orpaillage, termed the Boken Vein Zone, consists of gold in quartz veins located proximal to a granitic plug. The samples were taken from workings at 25-meter depths.

Based on these results the Company initiatied a 150-line kilometer soil geochemical survey covering the northern half of the Dakouli 2 property and southern portions of the contiguous Niangouela property. This survey identified three prominent gold geochemical trends (see Company news release dated June 11, 2019).”

The primary gold trend at Dakouli 2 parallels the Sabce fault zone and extends for roughly 10 kilometers in a northeast-southwest direction.

The Sabce shear zone is the dominant geological feature underlying multiple gold deposits in the area, including the 3 million ounce-plus Bissa deposit currently being mined by Nordgold approximately 20-kilometers to the northeast.

This important geological structure bisects the property from the north east corner of the property to its western boundary.

During this survey, a new area of artisanal workings was identified. Gold values of 11.3 g/t Au, 1.08 g/t Au, and 1.03 g/t Au were generated at a depth of 40 meters. These artisinal workings extend for some 200 meters and are located at the southern edge of the survey area.

Two secondary gold trends, which extend for approximately 6.5 kilometers each are oriented in a northwest to southeast direction and bisect the primary trend. All three gold geochemical trends are coincidental to geophysical trends identified from the national regional airborne geophysics.

This surface sampling program and geochem work have generated several compelling targets that the company intends to drill in the coming months.

It won’t be long before we’re into significant drill hole newsflow. And the timing couldn’t be better with gold looking to extend its gains going into the 4th-qtr.

Gabon, West Africa

Nexus is currently conducting a due diligence review, under a Letter of Intent (LOI), to potentially acquire up to 4,102 square kilometers of prospective terrain in this country.

Under review are three different concessions, each encompassing between 1,200 and 1,500-sq kms.

Throughout the concession areas gold mineralization appears to have strong structural controls, concentrating along lithological contacts and structural breaks. Two styles of gold mineralization have been observed: A pyrite-rich massive sulphide sitting at the contact of a deformed mafic volcano-sedimentary sequence and a thick black shale unit.

Historical results along the main mineralized trend include:

  • 9 metres grading 7.6 g/t Au; including 3.85 metres grading 15.7 g/t Au;
  • 13.5 metres grading 1.5 g/t Au; including 1 metre grading 7.5 g/t Au;
  • 3 metres grading 3.3 g/t Au; including 1 metre grading 4.5 g/t Au;
  • 15 metres grading 37.7 g/t Ag; including 4.5 metres at 61.4 g/t Ag

Roughly 1,000 metres of core drilling was completed in the central gold-in-soil anomaly where high-grade gold mineralization in a 120-metre-wide deformational zone was encountered.

Results from this zone included two metres grading 5.3 g/t Au (including 1 metre at 9.5 g/t Au) and 2.2 metres grading 4.5 g/t Au (including 1 metre at 9.1 g/t Au). “High-grade intersects occur in a sheared amphibolite and amphibole-rich dioritic gneiss with related brittle-ductile deformation.

The Project Generator Biz Model (PGBM)

In a recent Guru offering on the subject of Nexus and the ‘Prospect Generator Business Model’, we speculated, correctly:

Having tied up a considerable amount of acreage in numerous geological sweet spots around the globe, Nexus may decide to tear a page outta the ‘Prospect Generators’ playbook for one or more of its projects.

Importantly, entering into a deal of this nature negates the need for what can turn into and endless succession of dilutive financings. To say that mining is a capital-intensive affair is a huge understatement.

And this retained minority interest, typically 25% to 30%, ain’t peanuts if we’re talking about a multi-million oz gold resource at the end of the day. It can be argued that the prospect generator biz-model gives shareholders a much greater bang for their buck.

Nexus president and CEO, Alex Klenman, on the subject of putting other people’s money to work:

“Nexus now has a large and expanding project base that we feel will help grow the company well into the future, as well as providing important jurisdictional diversity. We obviously have priority projects, and we are committed to their development. But we have other projects in our inventory, and we will look to bring on partners in the future to help unlock the potential value. We feel the Company can benefit significantly by introducing project generation to our already well-established exploration model,”

Testing the PGBM on their Canadian project portfolio

The Nexus project portfolio now has a total of nine highly prospective prospects, four in Burkina Faso, four in Canada, and one (potential) in Gabon, West Africa. Management plans to focus its efforts on three or four core projects while pursuing joint venture and earn-in arrangements to move the remaining projects forward.

On August 23, the company dropped the following piece of news:

Nexus Gold Signs Letter of Intent with Hawkmoon Resources to Evaluate Potential Joint Venture Opportunity of Canadian Project

This is also a letter of intent, one that will look at the possibilty of Hawkmoon acquiring outright, or an interest in, a project in Nexus’ Canadian project portfolio in exchange for funding the ongoing development of said project.

If Hawkmoon were to acquire a 100% interest in one of these highly prospective projects, it would likely leave Nexus with a fat royalty, one that would kick in when (if) Hawkmoon reaches a production decision.

A joint venture agreement would set the stage for moving the project forward with Hawkmoon’s funds. Nexus would likely be carried for the ride.

Never heard of Hawkmoon? The company isn’t listed yet, but they have a ‘go-to-the-market’ plan. They also have a website.

CEO Klenman on this test of the PGB model:

“We’re pleased Hawkmoon is serious about potentially taking an interest in one or more of our Canadian projects. We feel adding project generation is a strategically important move for Nexus. This letter of intent with Hawkmoon is a first step in establishing this as a viable addition to the current exploration business model.”

These are interesting times for Nexus shareholders.

Final thoughts

Gold is currently trading $14.00 higher in overseas trading as I edit this piece, extending its gains into multi-year high territory.

Those looking to position themselves in ground-floor, asset rich opportunities that only high-quality ExplorerCos can dole out would be best advised to look closely at companies like Nexus.

END

—Greg Nolan

Full disclosure: Nexus Gold is an Equity.Guru marketing client.

Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

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