NuLegacy Gold (TSXV: NUG; US-OTC: NULGF) is standing at a crossroads, after fulfilling its 70% earn-in on the property in Nevada that hosts its flagship Iceberg gold deposit.
The Reno, Nev.-based junior discovered the Carlin-type gold deposit on the coveted Cortez trend in June 2012, two years after it signed an earn-in agreement with Barrick Gold (TSX: ABX; NYSE: ABX).
Under the agreement, NuLegacy had to spend US$5 million exploring the 60 sq. km property by the end of 2015.
It did this by September 2015, leaving Barrick with 90 days to decide whether to earn back 70% of the property by investing US$15 million over the next five years — giving NuLegacy a 30% carried interest to production — or stay as a 30% minority working-interest partner.
Barrick has three world-class gold assets on the Cortez trend, including the low-cost producing Pipeline and Cortez Hills deposits, and the 15.5 million oz. Goldrush development project, just north of the Iceberg property.
NuLegacy’s CEO and director James Anderson says the amount Barrick has to spend under the earn-back option fits “comfortably” with the gold major’s annual global exploration budget of more than US$100 million.
Two ways forward
If Barrick picks the earn back option, NuLegacy will look at selling its 30% carried interest in a streaming or royalty agreement to an interested party.
But if Barrick stays at the 30% level, NuLegacy will either try selling its majority interest, or buy Barrick’s minority interest to consolidate the ground.
“This is such a big fork in the road for the company,” Anderson admits. The major’s 90 days are up at year-end. Once it responds, NuLegacy can pick which avenue to pursue.
Anderson reveals that Barrick has sent a couple of representatives to examine NuLegacy’s core and rock chips from its recent drilling. It also has access to the junior’s electronic data room.
On Sept. 30, NuLegacy reported the latest eight holes from its 2015, US$1.3-million drill program on Iceberg, of which seven holes hit gold mineralization. “That is a remarkably good hit-miss ratio in a Carlin-type deposit,” Anderson says.
Six of the holes were drilled on the deposit’s North zone, with all but one returning encouraging gold results, including 5.11 grams gold over 13.7 metres, within 33.5 metres of 2.46 grams gold. The other two holes intersected slightly lower grades on the Central zone.
Before this year’s drill program NuLegacy explored Iceberg’s Central and South zones, but this changed after it reported its best hole on the North zone in May. The hole returned 25.2 grams gold over 4.6 metres, within 41.2 metres of 3.9 grams gold. “That was a bit of a game changer,” Anderson says.
Over the past three years, NuLegacy has completed a total of 74 holes along with numerous geophysical and chemical surveys on the Iceberg deposit, establishing a National Instrument 43-101 compliant exploration target of 90 to 110 million tonnes grading 0.9 to 1.1 grams gold per tonne.
The junior aims to start a NI 43-101 compliant resource estimate on Iceberg next year, regardless of Barrick’s decision, Anderson says. “I think we will in either case. But, we would like to see the whites of the eyes of Barrick before we embark on that.”
NuLegacy shares closed Oct. 23 at 12¢, up 33% from 2014’s close. With 160 million shares outstanding, the firm as a $19.2 million market capitalization. In the past 52 weeks the company’s shares have traded between 6¢ and 17¢.