Newcore Gold Ltd. (NCAU) Earnings Call Transcript & Summary

Hello, and welcome to The Assay TV. Today, I'm here with Luke Alexander, President, CEO and Director at Newcore Gold. So Luke, thanks for joining me today.

Yes. Thanks a lot, Amy. Nice to see you again.

It's always great to have you here with The Assay. And so to kick things off, you've recently announced the first set of drill results from a 10,000-meter drill program that is currently underway at your Enchi Project. So what are some of the key highlights and takeaways that you'd like to share with us?

Yes. So the 10,000-meter drill program that we announced, we are kicking off in July of this year is really focused on a couple of key things. Firstly, it's focused on resource conversion, which is one of the requirements for us to move from a PEA to a PFS is converting ounces, but then also because of the district scale exploration that we've got on the project, we also want to highlight the resource growth potential that we've got as well as over time, continue to grow that resource with additional drilling. So this first set of results that we put out, it's about 800 meters out of the 10,000-meter program that we've got. So it's 6 holes. So lots of additional results to come, but it's really accomplished what we've been hoping, which is -- we've had some good results in between the sections, which were in line with our current resource as well as within Hole 288, we pushed that hole a little bit deeper, and we actually hit some very nice higher-grade material that sits outside of the pit. So that Hole #288, we intercepted 62 meters of 1.96 grams per tonne, which actually, if you look at all of the drilling that we've done historically over the project, so over 200,000 meters of drilling, that's actually the second best hole that we've had. So over 100 gram, meter per gram interval. So that's a great result from that perspective. So we've confirmed ounces that sit between the sections. But then also, we've expanded the potential size of the pit by extending that hole beyond the current pit constrained resource. So we're really pleased with the results that we put out. It is only the first batch of results, but it's accomplished both of the goals that we're looking to continue to accomplish as part of this 10,000-meter drill program.

Sounds great. And I mean, maybe you can go a little bit more into some of the goals that you had with this current drill program. Can you drill a bit deeper into that?

No pun intended. Yes. So again, converting ounces is one of the key elements of this program and then looking to grow the overall size of the resource. So if you look at our resource today, it comes from 5 different areas, and we've identified over 25 different targets across the property. So of those 5 resource areas, all of them do remain open along strike and at depth. So the opportunity for us to continue to step out and systematically add ounces near surface is something that we will continue to do. We've also identified a number of high-grade structures, parallel structures that sit along the main shears that we've identified on our property. So doing some additional drill work on those with the goal of making new discoveries, but also widening and growing the overall size of the pits. And then this Hole #288 that I've talked about a little bit, it's a great example of us being able to push some of these holes a little bit deeper outside of where the current mineralization sits within the pits and having some very good results. So that's something that we will also continue to focus on is looking to grow the resource beyond the current pits that constrain our resource today.

That's great. And so you've -- with your most recent economic study for this Enchi project, you showed the potential to build quite a robust mine. Maybe you can touch on some of the key takeaways from the PEA results that were released earlier this year and the importance of that study for Newcore overall?

Yes. So at the end of April, we put out a PEA, which outlined a very simple open pit, heap leach project. And that was run at an $1,850 gold price, so almost $800 below where the gold price is today, and that outlined some very strong economics for the project. If we look at it at a $2,350 gold price, which I still think is relatively low compared to where we are today, the economics of the PEA had an after-tax NPV of $632 million, after-tax IRR of 92% and just over a 1-year payback. So again, those are extremely robust economics for a project like ours. On the back of that, we've obviously kicked off this 10,000-meter drill program. We recognize how valuable this project is, and we want to move it from a PEA to a PFS. So part of the drilling that we're doing is obviously looking to convert ounces that are required to move to that PFS, as well as a lot of additional derisking work that we're doing on the project. If we look at that project value of $630 million and you now compare that to our market cap today, which sits at about USD 50 million, we're currently trading at less than 0.1x the NPV of the project. So we see a real fundamental re-rate opportunity for investors as the market starts to recognize the value and properly -- of our project and properly price that into the stock of the company.

That's great. Absolutely. And it's certainly a good story to be sharing. And so are there other kind of key development work that Newcore is planning for the near term to continue to derisk the project further?

Yes. So we've talked thus far about the drilling that we're doing, but there's a lot of additional work that we're doing beyond that. So metallurgical work is something that's crucial for our project and for any project out there. So we're continuously doing met work across our projects. So we've got a half-dozen column tests going at the moment. We're doing additional met work on both the oxide transitional and sulfide material. The results that we've had thus far are very encouraging in terms of the recoveries that we're getting from a heap leach from the column tests and the bulk scale tests that we've done on the material, but we are continuing to do additional work from that perspective. We're then also doing condemnation drilling. We're doing hydrogeological work. We're doing geotech drilling. We're doing additional social and environmental baseline work across the project. These are all key elements that are required to move us from our PEA stage today to that PFS. So lots of that work is going on in the background, and we'll be excited to share the results from a lot of that work as we get it back.

All right. Sounds great. And I'm wondering if you have an approximate time line for when investors should be kind of on the lookout for further results?

Yes. So if you look today or I guess, the results that we just put out, that's 6 holes or 800 meters of a 10,000-meter drill program. So you can expect lots of additional news flow from a drilling perspective. What we've historically done and what we've done this time again is as we get batches of results back, we typically will put those out to the market. So expect a steady flow of drill results every month or 2. Then again, we're also doing additional met work. So as those results come back, we'll get that out to the market as well. So we're expecting lots of news flow over the next 6 months.

All right. Sounds good. Definitely a lot for us to be on the lookout for moving forward. And so we focused so far on the development potential of the Enchi project, but it is located in elephant country. Can you touch on some of the longer-term growth potential of the project and both near service potential, also the exploration potential at depth. So what excites you most about the longer-term potential as well?

I think the thing that excites me the most is, thus far, we've really just scratched the surface at our Enchi project. I mean if you look at the average vertical depth of the pits that constrains our resource today, we're only down to an average of 75 meters. If you look at the other producing mines and deposits along the Sefwi-Bibiani Belt from us, including Chirano to the north, Bibiani and then Newmont's Ahafo mine, these are all 5 million, 6 million ounce plus endowments, Newmont being a 20 million-ounce deposit. If you look at the depth that they've drilled down to on those projects, you're down to 1, 1.2 kilometers. So at 75 meters, we've really just scratched the surface. Again, back to the results that we just put out, that Hole #288, as we push that hole a little bit deeper outside of the pits, we've hit some very nice high-grade material, 2.23 grams over 28 meters. So again, those kind of results are extremely encouraging for that opportunity at depth. We did put out an underground resource as part of our updated resource, and that outlined underground material from 3 of our different deposit areas. So we feel that we've identified some of these high-grade shoots that will warrant additional deeper drilling to ultimately add ounces over time. But we also aren't going to lose focus on the fact that also, as I mentioned, all of our deposits do remain open along strike. So systematically stepping out and looking to add near surface oxide ounces that can then be fed into the mine plan is something that will extend overall mine life and create a lot of value for the project going forward. And then beyond that, again, as I mentioned earlier, we've identified over 25 targets across our project of which 5 of them currently feed our resource. We have 4 other discoveries that we've made that warrant additional follow-up drilling given the success we had from a first pass drilling perspective. And then beyond that, another dozen-plus targets that we're doing earlier stage work on. So soil sampling, trenching and working those up to really prioritize, which ones we want to add in the queue from a drilling perspective.

Good. And so you started to touch on some of the other nearby projects. So looking at West Africa, it has a very strong record of discoveries and other mines being built. Can you talk a little bit about what makes Ghana within the continent of Africa overall, a more favorable district?

Yes, there's a few different things. One is it's politically, it's a very stable jurisdiction. I mean, free and fair elections. If you go look at any of the international groups that monitor that, you'll see that Ghana is a standout within Africa, and I would say is a standout globally. And then from a security perspective, it's a very safe country. But what we always say is, at the end of the day, don't listen to me, I'm a single asset CEO and -- but look at what the major mining companies are doing. You've got 3 of the top 10 largest gold producers on the planet with significant operations in Ghana. You've got Newmont investing another $1 billion into Ghana, that will take their Ahafo project to over 1 million ounces of production per year, making it their second largest producing mine globally. So I think that can give investors a lot of comfort in terms of what a great jurisdiction it is. And you've got a government who wants to see mines being built, they recognize it's extremely important for the economy. It's important for the tax base. It's also very important for jobs. So what we're seeing in a lot of parts of the world is people don't want to see mines being built. But in Ghana, they're hungry to see mines being built. In the next 2 years, Shandong is going to bring the Namdini asset into production actually in November of this year, 2024, that will be a mine that produces 370,000 ounces. The Newmont Ahafo north project, that will bring another roughly 300,000 ounces of production on next year as well. So you've got these big mines that are being built, and that's really because you've got a government who's keen to see them in production because they recognize the benefit it is for the country.

Absolutely. And so let's pivot a little bit. Newcore has had a really busy couple of months. You've recently completed a $5.5 million equity financing in September, prior to which you received CAD 3.3 million in warrant proceeds this summer. So can you touch a little bit about this financing and how Newcore's balance sheet is positioned to further develop Enchi?

Yes. So maybe I'll just start with the warrant proceeds. That was CAD 3.3 million, as you mentioned, that came in. Those were 80% -- those warrants were 80% owned by our institutional investors as well as management and Board, they were well in the money on the back of the PEA that we released. So that really created an internal financing for the company, which allowed us to kick off that 10,000-meter program. Once we got that drill program going, we saw an opportunity to raise some additional capital to ultimately be able to fast track some of the drilling and other work that we're doing on the project. So we went out with a $5 million financing, that was oversubscribed. So we increased it slightly so that we didn't have to cut people back too much. And that was really driven by a number of institutional investors. So we brought 6 new institutional investors onto our register. So that really complements our existing 45% institutional ownership as well as management and Board participated in the financing as well. So if you look at institutional participation along with management and Board, about 85% of the financing was taken up by those groups. So again, I think it really speaks to the quality of the project, the huge upside that there is that we continue to have such strong institutional support from deep-pocketed long-term focused mining investors as well as management and Board are truly aligned with shareholders. So we own about 18% of Newcore, and this is money that myself and others on the Board and management team have invested alongside investors over the last number of years. So we're truly aligned from that perspective, which I think is crucial as well for Newcore, but really for any company out there.

All right. Sounds great. And maybe you can round things up just talking a little bit further about the company and some near-term milestones for investors, and why Newcore should be on their radar moving forward?

Yes. So Newcore Gold, I mean, we've got a management team and Board that we've touched on is truly aligned with shareholders. We see the huge upside that there is in the company. You've also got a company that is fundamentally underpinned by a project that outlined extremely robust economics. If you look at, again, where we're trading at today, we're trading at less than 0.1x the NPV of the project at a $2,350 gold price. We've also then beyond that, have true district scale exploration upside. We talked about over 25 targets that we've identified across the project. The fact that the average vertical depth of our pits and our resource today is only down to 75 meters. So you've got a company that's fundamentally underpinned by a PEA with very robust economics, that, in my view, is undervalued and warrants a re-rate as the project starts to get properly priced into our share price, and then you've got the big exploration upside that sits on top of that. Our institutional investors recognize that, and that's why we've had such tremendous support from the institution who follow the mining sector, who follow the precious metal sector. Again, 45% institutionally-owned, which I think speaks to the opportunity for big growth from a share perspective. So those would be a couple of things that I'd highlight. And then Ghana, we've touched on that as well. It is a Tier 1 jurisdiction to be operating in. Don't listen to me, but look at what the major mining companies are doing in country.

All right. Sounds great. And well, Luke, I want to thank you for joining me here today. And for our viewers, you can find out more about Newcore Gold in the upcoming precious metals edition of The Assay, which is going to be coming out in just a few weeks or at our upcoming London event. So Luke, I look forward to seeing you in London as well.

Yes. Thanks a lot, Amy.