{"id":91164,"date":"2016-06-10T08:22:11","date_gmt":"2016-06-10T12:22:11","guid":{"rendered":"http:\/\/countingpips.com\/?p=91164"},"modified":"2016-06-10T08:22:11","modified_gmt":"2016-06-10T12:22:11","slug":"gold-is-the-new-gold-check-out-nvs-nulegacy-gold","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/06\/gold-is-the-new-gold-check-out-nvs-nulegacy-gold\/","title":{"rendered":"#Gold is the new #Gold, Check out NV\u2019s NuLegacy #Gold"},"content":{"rendered":"
June 10, 2016<\/div>
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By<\/strong>\u00a0<\/span>Peter Epstein, CFA, MBA \u00a0<\/span>EpsteinResearch<\/span><\/a>\u00a0\u00a0\u00a0epstein.peter4@gmail.com<\/a><\/span>\u00a0\u00a0 \u00a0<\/span><\/span><\/p>\n

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Are happy days here again?<\/span><\/p>\n

These days, positive sentiment prevails in the gold sector, and it only took 4.5 years to reestablish. That\u2019s right, in Aug-11 gold topped at US$1,917\/oz and then began an insidious decline, pausing in Jun-13 for two months, then down about 23% over the following 28 months to US$1,050\/oz in Dec-2015. From peak to trough, gold was down roughly 45%. Has the tide turned? From bottom, the gold price has bounced nearly 21% to US$1,268\/oz.<\/p>\n

I never talk about precious metal junior companies in the context of a rising gold price. Today might be an exception. The market seems different. Trading volume is up, share prices are up, M&A is up and investor sentiment has improved. Things feel different.<\/p>\n

Sentiment in the Gold sector has improved\u00a0<\/span><\/p>\n

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One need not believe that hyper-inflation is just around the corner, that stock markets will crash 30% next month, or that the gold price will end the year at US$2,000\/oz. US$1,400\/oz would make a world of difference. Gold is an attractive call option on a growing number of known gold-friendly scenarios, (global debt bubble, negative interest rates, China\/Russia\/U.S.relations, Donald Trump, collapse of Petrodollar paradigm) with tail risks like hyper-inflation, nuclear war, terrorist activity,\u00a0cyber-attacks, pandemic, currency or bank collapses thrown in for free. Complacency is arguably at dangerous levels. Are we approaching a\u00a0Minsky Moment<\/a>?<\/p>\n

Readers looking for ideas may be wondering if soaring shares prices have rendered the opportunity officially missed. My vote on that score is no. When the next wave of investment capital sweeps into the gold sector, there will be fewer juniors to absorb it. Evidence is mounting that a change in sentiment is at hand. Just today, it was announced that\u00a0Goldrock Mines\u00a0is being acquired by\u00a0Fortuna Silver\u00a0at a hefty premium. Goldrock is up 587% from its 52-week low. Five prominent gold Majors\u00a0are\u00a0up, on average, nearly 250%\u00a0from their respective 52-week lows.<\/p>\n

Stocks have soared from 52-week lows, but not so much from 2 years ago<\/span><\/p>\n

The chart shows that Goldrock is not the only one enjoying thrilling share price appreciation. Yet, despite recent gains, it\u2019s worth reminding readers that even after big rallies, the average gold stock, as measured by the GDXJ ETF, is pretty much flat from 2 years ago and\u00a0down 60%\u00a0from its 2012 high. Also, I can\u2019t justify a statement that gold juniors have moved too far too fast, when a gold\u00a0Major\u00a0like\u00a0Kinross Gold\u00a0is\u00a0up nearly\u00a0300%\u00a0from its 52-week low.<\/p>\n

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Circling back to Goldrock, I think this particular takeout is bullish for the sector. When the bottom dropped out of the gold market, giant low-grade heap-leach projects fell out of favor, (recall Allied Nevada\u2019s dramatic fall from grace, and the Midway Gold fiasco). The Goldrock deal signals a belief by Fortuna, and possibly other companies, that gold\/silver prices have bottomed and that the economics of a properly run bulk heap leach mine makes sense again. The transaction serves as a reminder that after 3 years of cost cutting, curtailments and asset sales, mid-tier & Major gold\/silver companies have holes to fill in their production pipelines.<\/p>\n

All of the above leads me to a company that warrants a closer look,\u00a0NuLegacy Gold. NuLegacy did an admirable job sustaining itself in the dark days from mid-2013 to late-2015. In fact, the Company did better then that, it prudently advanced the\u00a0Iceberg deposit<\/a>, in the highly prolific Cortez gold-trend of Nevada, earning a 70% stake in the project. Iceberg is\u00a0on trend with<\/a>\u00a03 of Barrick\u2019s largest, highest grade, lowest cost gold deposits (Pipeline\u00a0~21+ mm oz @ 2.2 g\/t,\u00a0Cortez Hills\u00a0~15+ mm oz @ 4.1 g\/t, and\u00a0Goldrush\u00a0~10+ mm oz @ 10.2 g\/t).<\/p>\n

NuLegacy has 4 large, strong backers in OceanGold, Barrick, Waterton Global & Tocqueville<\/span><\/p>\n

The earn-in required $5 million of qualifying exploration expenditures, an amount not easy to come by in the dark days, but\u00a0Chairman Albert J Matter\u00a0and\u00a0CEO James E Anderson<\/a>\u00a0got the job done.<\/p>\n

Somewhat unexpectedly, newly diluted partner\u00a0Barrick Gold\u00a0declined to clawback a majority ownership position in Iceberg, leaving NuLegacy with 100% of a materially de-risked deposit. In my opinion, this was the best thing that ever happened to the Company, as it led to\u00a0OceanaGold\u00a0acquiring a 19.9% stake and sparked a revaluation of the Company, a process that\u2019s ongoing.\u00a0As an aside, I would argue that the 52-week low of 8c\/shr, for 70% of Iceberg, could be adjusted to 11.5c\/shr, for 100% of Iceberg. That suggests to me that instead of being up 306% from its 52-week low, the shares are arguably up 182%.<\/em><\/p>\n

\"Screen<\/p>\n

All told, there are not 1, not 2, not 3 but 4 large, important shareholders, the other two are\u00a0<\/span>Waterton Global\u00a0&\u00a0<\/span>Tocqueville Gold Fund.<\/span>\u00a0These 4 own 54.7% of the Company.\u00a0Each has done considerable due diligence, especially Barrick, who\u2019s exploration team knows the deposit extremely well. Barrick\u2019s and NuLegacy\u2019s technical teams compare notes on NuLegacy on a regular basis. NuLegacy Independent Director\u00a0Rob Krcmarov\u00a0l<\/span>eads Barrick\u2019s global exploration team. Suffice it to say that he would not be on NuLegacy\u2019s Board if not for Barrick\u2019s continued interest.<\/p>\n

NuLegacy has C$8 million in cash, a 2 year liquidity runway. A LOT can happen in 2 years<\/span><\/span><\/span><\/p>\n

Pro forma for warrant exercise proceeds, NuLegacy\u2019s cash balance stands at ~C$8 million. A solid\u00a0drill campaign<\/a>\u00a0is underway, with drill results due out this summer. 9 months ago, NuLegacy was a very high risk gold explorer. While the Company is still a high-risk explorer, it\u2019s less risky than it was and has much more flexibility. The Company\u2019s new found cash liquidity has effectively extended by 2 years the embedded call option on the price of gold. During that time, dual paths to increased valuation could unfold 1) higher gold prices 2) finding more ounces & getting them into a NI 43-101 resource estimate.<\/p>\n

Readers should be reminded that the Iceberg deposit is worth a lot more to a larger player that has a lower cost of capital and a portfolio mining assets where economies of scale and synergies could play an important role. Iceberg potentially has great strategic value as well, a theme that will be investigated though the drill bit over time.<\/p>\n

Disclosures<\/u>: The contents of this article are for informational purposes only. Readers fully understand and agree that\u00a0nothing\u00a0contained herein,\u00a0<\/em>including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is to be considered, in any way whatsoever, implicit or explicit investment advice. Further,\u00a0nothing\u00a0contained herein is a recommendation\u00a0or solicitation to buy, hold or sell any security. The content is not directed at any\u00a0individual or group. Peter Epstein and \u00a0Epstein Research<\/a>\u00a0[ER]\u00a0are not\u00a0responsible, under any circumstances whatsoever, for investment actions taken by the reader.\u00a0Peter Epstein and \u00a0[ER]\u00a0have never been, and are not currently, a registered or licensed financial advisor or broker\/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and they\u00a0do not\u00a0perform market making activities. Peter Epstein and\u00a0[ER]\u00a0are not\u00a0directly\u00a0employed by any company, group, organization, party or person.\u00a0The shares of\u00a0NuLegacy Gold\u00a0<\/em>are highly speculative, not suitable for all investors. Readers understand and agree that investments in small cap stocks\u00a0can result in a 100% loss of invested funds. It is assumed and agreed upon by readers of this interview that they will consult with their own licensed or registered financial advisors before making any investment decisions.<\/em><\/p>\n

At the time this interview was posted, Peter Epstein owned shares of NuLegacy\u00a0<\/em>and the Company was a sponsor of<\/em>Epstein Research<\/a>.\u00a0Any comparison between or among stocks is for illustrative purposes only and should not be taken as fact or relied upon.\u00a0Readers understand and agree that they must conduct their own due diligence above and beyond reading this interview. While the author believes he\u2019s diligent in screening out companies that, for any reasons whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful.\u00a0Mr. Epstein &\u00a0[ER]\u00a0are not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for its\u00a0completeness. Mr. Epstein &\u00a0[ER]\u00a0are\u00a0not expected or required to subsequently follow or cover events & news, or write about any particular company or topic.\u00a0Mr. Epstein and\u00a0[ER]\u00a0are not experts in any company, industry sector or investment topic.\u00a0<\/em><\/p>\n<\/div>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By\u00a0Peter Epstein, CFA, MBA \u00a0EpsteinResearch\u00a0\u00a0\u00a0epstein.peter4@gmail.com\u00a0\u00a0 \u00a0 Are happy days here again? These days, positive sentiment prevails in the gold sector, and it only took 4.5 years to reestablish. That\u2019s right, in Aug-11 gold topped at US$1,917\/oz and then began an insidious decline, pausing in Jun-13 for two months, then down about 23% over the following […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-91164","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/91164","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=91164"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/91164\/revisions"}],"predecessor-version":[{"id":91165,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/91164\/revisions\/91165"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=91164"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=91164"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=91164"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}