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Follow The Money With NioGold Mining
NioGold Mining (NOX.V)
Every once in awhile you come a cross a gem… A company that is extremely undervalued and positioned to grow well into the future at current prices and is almost a no brainer multi bagger, if there is such a thing. A company that is cheap, which already has ounces in the ground and is sitting beside a major that has a multi million ounce gold project. A company that is positioned well for the future, with low risk, and is just beginning to spread the story about what they have and what they are doing. A company that has done a major deal with a well established mid tier producer that virtually takes almost all the risk and potential dilution out of their hands.
NioGold Mining (NOX) is looking like that diamond in the rough, and at only a $23 million market cap is cheap for having almost 1 million ounces in all categories on the past producing (600k oz’s) Marban Block. One way to be successful in investing in exploration is by following the money. The money is pouring into NioGold’s Marban Block Property which sits near Osisko’s 9 million ounce Malartic Project.
I have followed Osisko since they boldly stated back in 2006 that they were coming up with a 5 million ounce resource, and almost 5 years later they have done much better than that. On trend to and near such a major recent discovery in a major gold camp that has produced 170 million ounces since 1908, makes NioGold’s properties very attractive. NioGold’s properties, including the Marban Block (which was recently jv’d to Aurizon) are truly something special covering 20km of gold mineralized fault system in the heart of the Cadillac, Malartic and Val d’Or mining camps. It certainly gives NOX leverage to a major discovery and I am not the only one to think this.
Earlier this summer NioGold struck a deal with Aurizon Mines and Aurizon has paid a steep price to get into just the Marban Block which is only 10% of NioGold’s total holdings in the area. Being beside Osisko’s Malartic, the potential here is absolutely blue sky in nature.
Why do they like it?
To date NioGold has drilled 72,000 meters and come up with an existing resource of960,000 oz’s in all categories. This includes open pit resources as well as underground resources and both have very good potential to expand at depth and near surface. There is also significant upside potential as only 20% of this trend has been drilled and Aurizon plans on funding 200,000 meters of drilling over the next 3 years. NioGold’s Marban Block truly has blue sky potential. If gold mineralization is consistent along this trend and does continue at depth, NioGold can indeed prove their near term objective of…
“Outlining resources/reserves of several million ounces of gold through the generation of new geological concept models, focused exploration and definition drilling.”
Aurizon, just to get a 50% interest in the Marban Block project (which is only 10% of NioGold’s land position) has to pay $20 million in exploration expenditures over the next 3 years with a minimum of $5 million the first year, including be responsible for the N43-101. They can also earn 10% by delivering a feasibility study and another 5% by arranging financing. Now some might think that this deal is giving away a great treasure, already having 1 million ounces near Malartic, but this joint venture works great for both companies. NioGold will not have to go through any dilution over the next 3 years. This deal assures minimal dilution to NioGold and at current share price… $20 million could have effectively more than doubled the dilution of the company over the time period anyway, effectively giving away 50% of the company to the public. This way they get to keep it in the family, save dilution, keep the share structure relatively tight and still get paid per oz discovered on top of retaining at least 35% of the project, if they do delineate a multimillion ounce deposit.
Not including that, are costs required in delivering an independent feasibility study and trying to arrange financing. They mitigate all these risks by having a great partner in Aurizon, risks which are better suited for a company that is producing and has skills at bringing projects into production. NOX is an exploration company and suited at exploring, not bringing a project into production. Plus they will get paid for 50% of total ounces, so they are not giving them away in the jv. $30 - $40 per ounce for indicated resources and $20 - $30 per ounce for inferred, depending on POG.
Aurizon has given NioGold’s management a huge vote of confidence as well, having NioGold run the jv over the 3 year opt in period. Actions speak much louder than words and this speaks volumes about management’s expertise and qualifications in the area. Most companies throwing that kind of money at a project would insist that they be the operators, and seeing ARZ defer to NioGold as operators over that period tells me everything I need to know about NioGold’s management team. In addition, NioGold hasn’t given up all their exploration potential in the area retaining 100% interest in 90% of the properties, giving NOX blue sky potential with other discoveries in the area on what they call the Golden Highway in Quebec.
NioGold in my opinion has the best of both worlds. What are some other advantages to hooking up with Aurizon? The fact that if they do find a major deposit similar to Malartic, it almost guarantees NOX being swallowed up by Aurizon or doing a friendly deal, they get to rely on Aurizon’s technical expertise, and have a solid partner for the future.
High Growth potential…
Here is an example of the potential of NOX… 10 million ounces (test case)… with gold above $1560 3 years from now (no brainer) assuming Aurizon earns all options…
- 3.5 million oz’s at $150 minimum takeover price… $525M value
- 5 million oz’s at $40 max…. $200M value
Total estimated value at best case scenario 10 million ounce discovery… $725 million.
At current fully diluted prices that would be almost $9 per share. Now depending where the price of gold is 3 years from now, the $150 takeover price for the 35% could be much higher than that… I just suggest that price as a test case.
Here is the thing… Even if they only come up with 2 million ounces… which is a very good chance they will…
- 700,000 oz’s at $150… $105 million
- 1,000,000 oz’s at $40… $40 million
A total of $145 million market cap.
NOX’s value at $150/oz takeover price is still $145 million capex and at 82 million fully diluted shares is valued at $1.75 /share which is currently much higher than .30 cents NOX commands in the open market. I have no doubt they come up with at least 2 million ounces.
This is not a statement that NOX has 10 million ounces at the Marban Block, I am just trying to show you the potential that NOX has, that this company is both undervalued and has extreme high growth potential. The blue sky for this company is limitless if they hit big like OSISKO has done across the highway. The potential NOX has in a worst case scenario is still much higher than it is currently valued and that the deal works out well for both companies in the long run. I believe NOX’s Marban Block is positioned well for discovery, but in the end only the drill bit can prove what is in the ground.
This is truly an undervalued high growth opportunity, which is the best of both worlds in the investing community.
- Limit exploration risk
- Part of deal works on price per ounce discovered… NOX isn’t missing out
- Technical Expertise of Aurizon
- Partner increases chances of buyout if successful
- Partner has expertise to bring Marban Block into production
- NioGold still retains 90% of land and 100% exploration potential of another discovery along the Golden Highway
- Aurizon is only interested in developing Marban Block
Following the money in this industry can make you big money and just like other articles where I have mentioned to follow the money, it is paying off… I am sure it will pay off big here as well. In fact, this project has much less risk than my other follow the money pick as they haven’t drilled a hole into the TPK property and that company is worth much more, yet NOX have drilled 72,000 meters and have a resource here. NioGold is truly a undervalued explorer and is going much higher over the coming months. What adds even more value to NioGold is there 100% owned Malartic block, which adjoins the Marban Block to the West, is on trend with Marban and is easily 3 to 4 times the size of Marban. NioGold is positioned better than any one else in this historic mining camp for the next major discovery.
Follow the money with NioGold and I am sure you will be well rewarded owning a piece of this historic gold belt. At .30 this company is ridiculously cheap and are as much a lock as it gets in exploration.
NOX is in a proven and historic gold camp, is in one of the most favorable provinces for mining, no political risk, will receive a premium in a takeover because of the district and is already positioned to be on the verge of a major discovery with potential for other material discoveries in the area. NioGold comes in as a top pick when analyzed on a risk vs. reward basis.
Happy Trading :)