New Found Gold Corp. (NYSE: $NFGC, TSX: $NFG): Lies, Misrepresentations, and a Professional Stock Promoter

Please refer to our disclaimer at the bottom of the report.

Summary of Findings

• New Found Gold Corp (NYSE: $NFGC, TSX: $NFG) is a Vancouver-based gold explorer. Since 2016, the company’s primary focus has been the Queensway property, located on the Canadian island of Newfoundland. Queensway is portrayed as an area with high-grade gold mineralization. However, the deposit, explored since the 1980s, has historically been plagued by a lack of continuity: the presence of gold and grades vary widely across the deposit. Many comparable gold projects have failed due to this problem.

• The company has conducted extensive drilling campaigns. As at 30 June 2024, the explorer has drilled 2,349 holes over 563 km. NFGC drills in certain zones, reports promising results, only to shift focus to other areas. Despite all the intensive drilling, there is still no mineral resource estimate. We believe that management is delaying the release of a resource estimate because continuity remains problematic.

• NFGC’s drilling data show that the best drill holes are concentrated in a limited area. This contrasts with peers where grades may be lower but over a much wider area, which makes economic extraction possible. 

• The company presents cross-sections of the ore body that are very difficult to read compared to peers. We have recreated the cross-section for what is likely NFGC’s most promising zone to illustrate the lack of continuity. 

• The British Columbia Securities Commission caught NFGC for smearing — practice of averaging high-grade sections with low-to-no-grade areas to hide the continuity issue — in April 2022. The regulator forced the company to revise assay intercepts in press releases to include additional sub-intervals of high-grade gold within areas of lower overall grade.

• In November 2021, independent consultants raised the alarm on issues with NFGC’s sampling process, when gold content results varied widely among the laboratories involved in quality control and assurance. The same consultants were replaced the very next year.

• In November 2023, the British Columbia Securities Commission took the unusual step of forcing NFGC to retract statements that suggested the company was transitioning from exploration to development. 

• The company generated significant hype with its first drill hole NFGC-19-01: reportedly intersecting 92.86 g/t of gold over 19 meters. The discovery was characterized as “incredible luck”. But this was really a case of drilling below a historic hole along the quartz vein and simply following the previous operator’s recommendations. 

• NFGC is led by CEO and Chairman Collin Kettell, a career stock promoter with a disastrous track record. Kettell was involved with at least 11 mining companies over the 2015-2023 period. The stocks of these companies are down by a median of 83% as at the date of this report. In some cases, announcements of high-grade gold discoveries were similar to those made by NFGC. 

• Cornerstone investor Eric Sprott has poured $260m into NFGC. While Sprott is regarded as a successful resources investor, he has a history of backing projects that later failed after making overly optimistic statements. 

• Shareholders can expect significant dilution as NFGC filed a shelf prospectus to issue up to $300m in securities. The company only has 8.8 months of cash and marketable securities after burning C$76.8m over the last 12 months. Drawing the remaining C$84m from its at-the-market facility would extend that runway to 21.9 months.

Presentation of New Found Gold

New Found Gold Corp (NFGC) is a Vancouver-based gold explorer with a US$551m market cap. Its shares trade on the NYSE under the ticker NFGC and on the TSX under the ticker NFG. Currently pre-revenue, NFGC’s primary asset is the Queensway Property, a 166,475-hectare land package located on the Canadian island of Newfoundland.

Queensway is an orogenic gold deposit that features nuggety occurrences, meaning the gold is found in irregular, discrete clumps or nuggets. Gold exploration at the area started in the 1980s, with previous operators such as Rubicon Minerals and Paragon Minerals, drilling a total of 224 holes across 27.1 km.

NFGC started exploration work in 2016. In January 2020, the company announced its first milestone – intersecting 92.86 g/t of gold over 19 meters at drill hole NFGC-19-01. The company has since drilled 2,349 holes over 563 km, with plans to increase drilling to 650 km by the end of the year, before determining next steps for the project. 

Despite this intensive drilling, Queensway has not yet prepared a mineral resource estimate.

The company is led by founders Collin Kettell (Chairman & CEO) and Denis Laviolette (President). Its largest shareholders are Palisades Goldcorp Ltd with a 27%-stake and resource investor Eric Sprott with 19%. Kettell is chairman and CEO of Palisades.

Part 1. NFGC’s PR campaigns can’t mask Queensway’s ~40-year major flaw: lack of continuity

NFGC regularly announces spectacular high grade intervals at Queensway across five zones: Keats Main, Iceberg, Keats West, Golden Joint, and Lotto Main (see below), which fuels excitement among retail investors. Keats Main is the most well-explored among these zones and holds the greatest promise.

Yet, the discovery of high-grades did not start with NFGC. As underlined in a 2021 filing, historical exploration campaigns for previous explorers saw “abundant indications of strong gold mineralization, with many gold grades well above 100 ppm in mineralized boulders, till samples and drill hole intercepts.” 100 ppm is equivalent to 100 g/t. However, the same 2021 filing added that “no one had been able to show, through drilling, that high grades in the bedrock had sufficient continuity and consistency to warrant further drilling and development”. A deposit is of economic interest only if it demonstrates continuity i.e. consistent grades across a large enough area to show potential profitability. Proving continuity was thus the challenge when NFGC took over in 2016. 

Mining history is filled with examples of gold projects that failed due to the lack of continuity. Some projects were very advanced, with some even commencing mining operations. Notable cases include Pure Gold (whose shareholder was also NFGC’s shareholder Eric Sprott) and Rubicon which we cover in the Appendix. In particular, the lack of continuity impacts minings projects in three ways: 

• Disappointing resources resulting from irregular and insufficient mineral deposits. 
• Room for manipulating grades. As we will show below, NFGC’s track record shows such practices have already occurred.
• Higher exploitation costs. The unpredictable gold distribution increases the risk of dilution i.e. waste is included in the ore and raises the cost of extraction, which negatively impacts project economics. Selective mining techniques used as a workaround are inherently less productive compared to bulk mining methods.
  

After drilling an impressive 2,349 holes over 563 km, NFGC now claims that it has made progress in showing continuity, which suggests the company can progress beyond exploration. A closer analysis tells a much different story.

1. Never-ending drilling and still no resource estimate

Gold has been prospected at Queensway for almost 40 years with NFGC on the scene over the last eight. During this time, the company has drilled more than 2,300 holes over hundreds of kilometers, and issued dozens of enthusiastic press releases. 

After so much drilling, the logical next step for NFGC would be to prepare a resource estimate to assess the quantity of gold in the deposit. Although a mineral estimate is not a guarantee that a deposit will be successful (see examples of such disappointment in appendix), it would in principle show some progress. According to NFGC’s technical report, the cost of this estimate would be only C$300k, a fraction of the C$41.1m spent on drilling in 2023. 

Technical consultants hired by NFGC have given the same recommendation for years. In 2021, RSC Consulting told NFGC to conduct 175,000 meters of drilling (Pg 216) under phase 1, then contingent on the success of this phase, to “carry out a resource drill-out program at Keats with the aim of estimating and classifying an inferred mineral resource” in phase 2 (Pg 215). No mineral estimate was prepared. The next year RedDot3D recommended an inferred mineral resource subject to conditions, mainly completing another 240,000 meters of phase 1 drilling (Pg 137). All drilling programs were executed but again no mineral estimate was prepared.

NFGC has already drilled 563 km and should have prepared a mineral resource estimate based on consultants’ recommendations. But the company plans to keep going and bring the total drilled distance up to 650 km by the end of the year. 

Furthermore, we see a pattern where NFGC drills extensively in certain zones, reports promising results, only to eventually shift focus to other areas. This shows in recent activity. In 1H24, little to no drilling work was done at core Queensway zones Keats Main, Keats West, Iceberg, Golden Joint, and Lotto Main.

NFGC has also ventured deeper into areas that require underground mining. Recent results for 11 drill holes were disappointing. The drilling reached up to 1,000 meters but only four returned grades. Of these holes, three had grades above the 5.0 g/t needed for economic viability at this depth but on very short intervals. The “standout” NFGC-24-2112 reported 10.98 g/t but most of that was confined in a narrow 0.5 meter sub-interval, which contained 57.12 g/t.

We believe that management is delaying the release of a resource estimate as continuity remains problematic. Before this report is released, NFGC should at least provide complete drill hole data to offer investors a clearer understanding of resource continuity and potential. Currently NFGC only reports partial interval data and forces investors to piece together information by combing through years of press releases.

2. High grades and long intervals tend to be located in a concentrated area 

NFGC’s press releases highlight the best drilling results, showcasing high grades and long intervals. However, when these results are compiled, they appear to originate from a concentrated area. For instance, we took the Keats area and marked the holes highlighted by NFGC in orange, which tend to be aligned along a band on the right.

This is also evident in the longitudinal section of the technical report, where drill holes shown in purple represent grades above 10 g/t. These high grades tend to correlate with longer intervals, frequently above 10 meters.

Outside this band, drill holes tend to show much lower grades, although they still represent grades of economic interest for open-pit mining (above 1 g/t). But the problem is that the gold-bearing intervals are significantly shorter, as can be seen in the longitudinal section (small circles indicating lengths shorter than 5 meters). Additionally, the company’s own technical report acknowledges that the true width for the “Keats Main” vein ranges from “less than 1 m to approximately 4 m”.

In other words, the area with the best intersections that NFGC highlights in its press releases is narrow. This contrasts with peers such as Great Bear, which was acquired by Kinross in 2022: gold mineralization can be consistently found over dozens of meters, often exceeding 100 meters, across a large area. Grades may be lower than the best NFGC intervals but they spread over a much wider continuous area, which makes economic extraction possible. 

Source: Great Bear Resources announcement

3. Re-drawn cross sections uncover patchy gold presence

Another illustration of the lack of continuity is the cross-section — a vertical slice through the orebody.

Let’s start with one of the most flattering cross sections that can be found in the technical report (Pg 187) and features 11 drill holes, including the spectacular NFGC-19-01 (19-meter interval with grades of 92.86 g/t).

The cross-section is impressive at first glance because of the apparent density of intervals showing high mineralisation, some with grades exceeding 10.0 g/t. 

However, the diagram is hardly readable compared to similar cross-sections from similar companies. So we redrew it using the same drill hole data disclosed in NFGC’s technical reports and press releases.

We can observe high grade intervals (more than 10 g/t) in purple, which makes it one of the best areas for NFGC. But one can see that mineralisation also changes across short distances. At one hole there are grades of more than 10.0 g/t but that falls quickly in neighboring drill holes. For example, the drill hole NFGC-20-25 is ~10 meters away from the much celebrated NFGC-19-01 hole, but grades are lower and over thinner intervals (e.g. 2.45 g/t over 2.4m, 7.31 g/t over 2.15 m).

Let’s keep in mind this part of Keats is probably the best picture that NFGC can give. We then created another cross-section 50 meters southwest (Line A), parallel to the Keats cross-section as shown below.

The results are worse as we see drill holes with either low or very low grades. Some holes do intersect high-grade gold but their lateral continuity with adjacent holes is inconsistent.

4. NFGC has been caught conducting smearing, misleading investors to give the illusion of continuity 

NFGC suffers from the “nugget effect”, where gold distribution is highly variable and concentrated in localized areas with large gold grains or “nuggets”. This feature can significantly affect sampling results. For example, a sample might assay at 50 g/t in one section, while a nearby sample could show only 0.1 g/t.

Junior miners have a strong incentive to hide this lack of continuity because they pose risks for resource measurement and economic extraction. One infamous way to create this illusion is through “smearing”. This refers to the practice of averaging high-grade narrow intercepts over broader intervals with low or no grade. The aim is to falsely portray the gold distribution as more consistent than it truly is.

NFGC was caught using this tactic by the regulator. In April 2022, the British Columbia Securities Commission (“BCSC”) forced the company to revise assay intercepts in press releases to include additional sub-intervals of high-grade gold within areas of lower overall grade.

Before correction: Higher grade sub-intervals were not disclosed

Despite this, NFGC has yet to amend all misleading press info. As an example, NFGC reported 63.92 g/t of gold over a 3.25-meter interval in drill hole NFGC-21-351 (Keats Main). However, as shown in the technical report, this gold is concentrated in a 0.40 meter sub-interval containing 483.85 g/t of gold. The PR remains uncorrected. 

Using information from NFGC’s technical report makes clear that thin high-grade sub-intervals have been spread to wider areas to create a misleading impression of continuity (see bottom part of image below).

One way to reduce the risk of smearing is to remove outliers through grade capping. But NFGC chooses not to do so.

5. Sampling bias incident casts doubt on the reliability of high grades

Up to this point, we have assumed that NFGC’s reported high grades are reliable. However, there are reasons to question this hypothesis.

On November 4th, 2021, NFGC announced that independent consultants RSC Consulting — hired to write the 2021 technical report and look into quality assurance and controls for Queensway’s sampling program — had flagged problems with NFGC’s sampling process. From NFGC’s announcement: “As part of New Found’s ongoing technical and QA/QC work, independent consultants, RSC, recently submitted 30 half-core samples to Eastern Analytical (“EA”) for assay. The other half of these drill core intervals had previously been assayed by ALS Minerals (“ALS”) and incorporated into the Company’s reported drill results.” RSC found that gold content results varied widely depending on which laboratory analyzed the samples. Those sent to Eastern Analytical showed substantially lower gold levels than those previously sent to ALS Minerals with some major discrepancies. As shown in the scatterplot below, ALS (X-axis) reported that one sample contained ~300 g/t of gold, but a subsequent analysis by Eastern Analytical (Y-axis) indicated only ~45 g/t.

Source: NFGC Press Release dated 4 November 2021, extracted from Wayback Machine

Verification samples previously collected during RSC’s site visit also showed significantly lower results. The 2021 technical report states: “The samples confirm the general grade tenor and discrepancies are consistent with the expected natural inherent variability for orogenic gold deposits.” But most verification samples showed a significant downward revision. 

Half-core assays in nuggety deposits lend themselves to selection bias, as the company may send more promising halves to the lab based on visible gold content, and keep the lousier half at the company’s warehouse.

Executive Chairman Collin Kettell explained when discussing the discrepancies in the November announcement, “Queensway is a nuggety gold system which comes with significant challenges that are widely recognized in the sampling and assaying processes.”. He added that after consultation with RSC, NFGC would immediately move to whole-core assaying to reduce the variability of assay results and remove the possibility of bias. But NFGC never made the change. It continued with half-core assays, collecting a total of 16,116 half-core samples between February 2022 and April 2024 (Source: Pg 196 of the 2023 technical report and pg 256 of the 2024 technical report). 

In February 2022, management declared there was “no evidence of systematic bias in the company’s assay results” based on the opinions of two experts (Mohan Srivastav and Lynda Bloom). Yet, in a joint statement, the same experts acknowledged the complexities of exploration at orogenic gold deposits, and even highlighted the potential selection bias in NFGC’s sampling process.

It’s worth noting that RSC was replaced as the technical report author in 2022 by Srivastav’s firm, RedDot3D.

Since 2020, the company has engaged four different firms, highly unusual as miners typically prefer continuity where consultants are already familiar with their projects. 

According to the 2024 technical report, NFGC suspended sample testing at Eastern Analytical in October 2021 and only resumed sending samples in May 2023. ALS has remained a constant on the other hand. In 2020, ALS was embroiled in a major coal testing scandal in Australia, after admitting to manipulating thousands of coal export certificates over a 13-year period. 

Like for smearing, removing outliers through grade capping would lower the risk of such manipulation. But NFGC has not adopted this practice. Instead, the company includes extremely high-grade samples to calculate gold content at Queensway.

Part 2. FGC’s History of Misinformation and Sensationalism

1. The securities regulator forced NFGC to retract statements about exploration progress

In November last year, the securities regulator took the unusual step of forcing NFGC to retract claims that the company was transitioning from exploration to development. The BCSC determined that NFGC had not done enough work like resource estimates or economic assessments to support these claims. The company had to correct its investor presentation and republish promotional materials on industry media platforms such as The Northern Miner and Mining.com. NFGC also had to remove a video on its website. 

2. The not-so-miraculous bonanza drill hole 

Decades of exploration have established the presence of gold at Queensway, but the deposit’s size, continuity, and economic potential remained elusive when NFGC took over. What the company needed to revive investor interest was excellent drilling results.

NFGC announced in January 2020 that the bonanza-grade intercept NFGC-19-01, drilled in the Keats Main Zone, contained 92.86 g/t of gold over 19 meters. “This is like the story from a novel,” said CEO Kettell who could not hide his enthusiasm when speaking to the Financial Post. “The very first hole we drilled, is the one that hit the bonanza intercept — just incredible luck, remarkable.” NFGC even compared Queensway to the high-grade, low-cost Fosterville mine in Australia. 

In reality, the luck was hardly incredible. The drill targeted a vertical quartz vein right below (50 meters) an existing high-grade hole from 2008, according to NFGC’s 2020 technical report, which stated that the “vein intersection is the extension of the zone encountered in drill hole LG08-48 (50m above)”.

This historic hole was drilled by Paragon Minerals (Pg 49), and funded by Sprott Resource Corp, where 19%-investor Eric Sprott served as chairman. Notably, at the end of 2008, Sprott Resource withdrew from the project, stating it no longer fit “their corporate strategy”.

NFGC’s decision to drill beneath LG08-48 appears driven by the recommendation of Paragon’s geologist from that time.

Sean Zubick, a co-founding investor at NFGC, confirmed in a June 2021 tweet that Eric Sprott provided $500k to “drill under the historic hole at Keats”. 

Part 3. CEO Collin Kettell-linked investments show a pattern: Heavy PR promotion, followed by exits, then falling share prices

1. Collin Kettell

Thirty-three-year-old NFGC chairman and CEO Collin Kettell markets himself as a successful resource entrepreneur and investor. His track record tells a very different story. 

In 2013, while still in his twenties, Kettell founded a firm that specialized in promoting TSX-listed penny-stock miners. The table below highlights the stock performance of 11 mining companies where Kettell was involved as an investor from 2015-2023, either directly, or through firms Palisade Global — a now-dissolved Kettell-related entity — and Palisades Goldcorp.

As a first step, Kettell/Palisade became insiders in these companies (meaning their equity stakes rise above 10%). This period saw a sharp increase in the number of press releases: the average number of PRs issued rose from 8.4 per year in the three years before Kettell/Palisade’s involvement, to 18 during their tenure. The stocks rose by an average of ~16% during this time. 

Subsequently, Kettell/Palisade reduced their equity interest below 10%. PR frequency dropped and the performance of these stocks saw sharp deteriorations. As of this report’s date, apart from Tartisan Nickel (C$24m market cap), all other stocks are down 83% on average. The combined market cap for all companies is ~C$145m and none have reported any revenue over the last decade.

Kettell is also the founder of TSX-listed Earthlabs which owns mining news providers The Northern Miner, Mining.com, and Canadian Mining Journal, all of which were acquired in December 2023. NFG’s co-founder and president Denis Laviolette is currently chairman and CEO of Earthlabs, while Eric Sprott is Earthlab’s largest investor with a 17.2% stake. To further complicate matters, Earthlabs held roughly two million NFGC shares worth C$6.1m as at 30 June 2024. This creates clear potential conflicts of interest for these specialized media outlets. 

Here are two examples of companies that share disturbing similarities with NFGC. 

a) Mexican Gold

Mexican Gold is a Canada-listed company focused on the Las Minas gold exploration project in Mexico. Kettell got involved after Palisade Global acquired a 22.5% stake in March 2017. Then two months later in May 2017, Mexican Gold engaged IR firm Relations Publiques Paradox to develop a “comprehensive investor relations program”. The company’s news output surged, with over 100 releases published between Mar 2017 and Dec 2021, versus just 30 from Feb 2007 to Feb 2017.

Like NFGC, most Mexican Gold announcements were highly promotional (see below), from frequent announcements about drilling activity, to high-grade gold discoveries, and even a proposed reverse merger with NFGC that was eventually terminated.

In January 2020, the same month that Palisades Goldcorp acquired Palisade Global, Kettell said that “Mexican Gold provides an incredible opportunity to capitalize on what we believe to be an impending bull market in junior resources.” 

In December 2021, Palisades disposed of its stake by distributing Mexican Gold’s shares to its investors, soon after the company released a PEA. This made Kettell (Palisades’ largest shareholder) a major shareholder in Mexican Gold. However, his ownership in the company fell below the 10% threshold required for ownership disclosure under Canadian regulations in March 2023.

The Las Minas project has gone nowhere. Mexican Gold has not released any project-related announcements since Palisades’ exit. And according to the company’s filings for the quarter ended 31 March 2024, Las Minas is on care and maintenance. Its market cap is now C$1.3m.

b) Triumph Gold Corp (previously known as Northern Freegold Resources)

The same fate befell Triumph Gold, another Canada-listed explorer, whose flagship project is the Freegold Mountain Project in Yukon, Canada. Triumph was previously known as Northern Freegold Resources. Then its name changed at the start of 2017, around nine months after Palisade Global acquired a 12.4% stake in April 2016.

Just like Mexican Gold, Triumph’s press release numbers jumped, with around 60 issued from April 2016 to July 2020, compared to just four over the preceding ten-year period (March 2006 – March 2016). Even the headlines closely mirrored those of Mexican Gold and NFGC i.e. samples with extremely high grades.

In July 2020, Palisade Global’s ownership fell below the 10% threshold required for mandatory disclosure.

Freegold shows little promise of ever turning viable. For the quarter ended 30 June 2024, Triumph reported C$3.7m in exploration assets, while exploration costs dropped ~57% YoY to C$31K. The stock is down 93% since July 2020, and the company now has a market cap of C$7.4m.

The stories of Triumph and Mexican Gold underscore Kettell’s role as a career stock promoter, rather than a successful entrepreneur or investor. 

2. Investor Eric Sprott’s high risk/high returns means failed investments despite overly optimistic statements

Central to NFGC’s investment case is Eric Sprott’s presence as an investor. Marked as the largest investment in his career, the “billionaire resource investor” has ploughed a total of $260m into the company since 2019. His face is impossible to miss on page 4 of NFGC’s investor presentation. 

This video shows Sprott selling NFGC to investors in April 2023. Sprott by his own admission is a risk taker who has no interest in big gold miners. His approach is to invest in early-stage projects that he perceives as undervalued. This has earned him notable success with his early investment in the Fosterville gold mine, and has attracted a large following of retail investors. But this high risk/high return strategy has also come with its expected failures, despite Sprott’s very vocal early optimism. Here are two examples.

a) Pure Gold Mining

Sprott was a major shareholder in Pure Gold with a 6.7% stake. Like NFGC, this was a nuggety deposit. Sprott was described as a cornerstone investor. At the time, he expressed confidence in Pure Gold, stating it had “all the attributes I look for in a company – location, grade, size, and growth”. When the company later filed for creditor protection, Sprott remarked in an interview with The Globe and Mail, “I don’t think I lost $100 million, but it could very well be.”

We present more details on why the erratic distribution of gold led to the company’s failure in the Appendix. 

b) Garibaldi Resources

In October 2017, Sprott invested in nickel explorer Garibaldi Resources, after reading comments on an online chat board. At the time, he drew bold comparisons between Garibaldi’s E&L project and Voisey’s Bay, one of Canada’s largest nickel discoveries. Strangely, Garibaldi’s own CEO Steve Regoci remarked about Sprott “I keep thinking why would a guy invest that much?” he said. “He didn’t know anything.” 

The project never took off and still has not gone into production as of today. Sprott sold 23.7 million Garibaldi shares at C$0.45 per share in March 2021, likely suffering a ~50% loss from his initial investment of around C$0.92 per share in October 2017. Today, Garibaldi’s shares trade at C$0.05.

Part 4. Cash analysis: NFGC has 8.8 months of cash left without further drawdown of ATM

NFGC’s liquidity is under pressure with cash and marketable securities of C$56.1m and cash outflows of C$76.8m over the last 12 months, as at 30 June 2024. This means just 8.8 months worth of cash, or 21.9 months if NFGC has used the remaining C$84m (US$62m) on its at-the-market facility after 30 June.

Shareholders should expect significant dilution. To secure additional funds, on 1 August 2024, the company filed a shelf prospectus that allows it to potentially issue up to $300m of securities.

Conclusion

NFGC’s management has been actively re-marketing this old deposit, but we believe the same issues that plagued previous operators — above all a lack of continuity — remain unresolved. This has led to endless drilling with little real progress.

The company’s history of lies or misleading information raises serious doubts on the company’s representations. Any attempts to bring Queensway into production are likely to face major obstacles, and relegate the deposit to the ranks of other nuggety projects that didn’t live up to investors’ expectations. One of the worst signals for gold investors is the fact that NFGC is helmed by a promoter with a disastrous track record in the mining sector.

We are short NFGC.

Appendix: Examples of failed nuggety projects

1. Pure Gold Mining

Pure Gold Mining Inc was a Canadian miner with high hopes for its Madsen Gold Project in Red Lake, Ontario. The company’s now defunct website shows that the ore body was expected to contain 1.0 million ounces of probable gold reserves at 9.0 g/t. Madsen was described by the company as “the highest grade development stage gold deposit in Canada today, and will be in the top 8% globally when in production”. 

The project began commercial production in August 2021. However, reality fell short of expectations. The gold distribution within the deposit proved to be far more erratic than predicted, leading to lower-than-expected ore grades and higher operating costs.

Pure Gold tried to access higher-grade ore by building more stopes. But this caused opex to exceed initial estimates by more than 100%. The financial strain became unsustainable and Pure Gold was forced to halt operations and eventually file for bankruptcy protection in October 2022.

2. Rubicon Minerals

Rubicon Minerals Corp, similar to Pure Gold, looked like a promising investment. The company was listed on the TSX and boasted a gold discovery with spectacular grades (see below) in Red Lake, Northern Ontario, and even reached the milestone of pouring first gold in June 2015.

Source: WayBackMachine

Based on its 2011 preliminary economic assessment, the Phoenix Project appeared lucrative with 1.03 Mt at 14.5 g/t of indicated resources, and 4.23 Mt at 17.0 g/t of inferred resources. 

However, problems emerged about 5 months after the company went into production. In November 2015, the company announced the temporary suspension of the project due to the complexity of ‘the narrow-vein, underground gold deposits’. Further analysis was deemed necessary to fully understand the mineralization. Rubicon also laid off 87% or 330 of its employees. 

Rubicon slashed both the quantity and grade of gold for the project in January 2016. The news triggered a 60% drop in the stock price C$0.05, down about 99% from its C$5.82 peak. In February 2016, the company issued a revised technical report that highlighted the inherent difficulty of mining nuggetty deposits. The report noted that ‘any future mining plan must accommodate a complex deposit that is relatively discontinuous, somewhat disseminated in nature, has weak visual indicators, and a strong nugget factor’.

In Oct 2016, the company filed for creditor protection. 

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