Norsemont offers the upside leverage of a homerun exploration punt. It also offers the…upside protection of a known resource in the ground trading at 1/3rd its peer group average based on ounces in the ground. You’ll see my math below.
This is the gold stock coin flip I’ve always wanted…..
Heads I win, tails I win really big. That’s why I’ve bought the last two financings in Norsemont.
Norsemont’s prolific brownfield asset is a former gold-silver producer in mining-friendly Chile called Choquelimpie. It was the third largest gold producer in Chile in the early 1990s.
First off, it’s rare to get a brownfield asset this big—at any price.
But what they got for the equivalent of $10 million back on May 20 when they bought this was…incredible.
Roads are in place, water and mining permits are in place, office space, warehouse, lab—all there. Power lines are up–and they use that power every 90 days to start up the 3,000 ton per day (tpd) mill to keep it warm!! The mill was warm-stacked, not mothballed.
Who does that? Norsemont’s management estimates that the original capex is worth up to US$200 million! And don’t forget about the 1700 drill holes totalling over 125,000 meters used to develop that (non 43-101 compliant!) 5.5 million* ounce equivalent number.
(This historical non 43-101 resource*—done only three years ago—was by Amec Foster Wheeler Frontier, who were part of a multi-billion dollar global engineering firm that was subsequently bought out for $2.2 billion POUNDS.)
To top it all off, there’s at least 200,000 ounces of gold (6.7 M tonnes at 1.17 g/t) in waste dumps at Choquelimpie that management could use to generate quick cash flow—with very little capex.
By law, I’m not allowed to speculate on the cost per ounce or profit per ounce on that easily accessible gold with a mill in place…at $1900 gold…but you can.
(I can tell you that 3000 tpd would produce 3510 g/t per day and at $61/g gross revenue would be $214,000 per DAY).
I have NEVER seen an asset this big, this ready for production, go for so cheap—EVER.
Even at $2/share, Norsemont’s market cap is a mere $96 million. Multiply those 5.5 million* (non 43-101 compliant!) ounces* x CAD$58.50 that is the average valuation for developers (as per Haywood Securities weekly comp sheet (US$44 x 1.33)). NOM is trading at $17.45/oz. That’s if you give no value to the infrastructure.
If you high-grade that comp sheet to just the Americas, that average value in the ground is MUCH higher than CAD$58.50.
That’s why I say NOM-CSE is a two-foot, tap-in putt for gold investors. With this rising gold price, management doesn’t really have to DO anything for this stock to rise…but they will.
IMMEDIATE EXPLORATION POTENTIAL
Choquelimpie is exciting because of what we already know….5.5 million* ounces of (non 43-101 compliant!) resource in the ground. It is also exciting because of what we don’t yet know. The entire project has only been explored during times when gold was trading at $400 per ounce —— so there is a lot more to be converted to resource on site; right there in the existing pits!
Gold is now almost 5x that price at $1,900 per ounce and by all indications headed higher. Brownfield projects like Choquelimpie have massive amounts of resource that wasn’t profitable 40 years ago when gold was at a fraction of where it is today.
Previous operators (Shell, Northgate) drilled over 125,000 meters—but little of it below 70 meters. What drilling there was underneath—where Norsemont will focus now—ended in mineralization that was not economic at $400/oz gold.
But at $1,900/oz gold? There is an EXCELLENT chance all that deeper rock—and I mean right from the face of existing pits–could now be high margin production. That’s the real bet here. I expect management to start drilling in the existing pits to develop a larger resource very quickly.
Adding resource ounces here should be very simple. Everyone who knows Choquelimpie believes there is huge upside to that (non-compliant!) 5.5 million* ounce figure.
And nobody knows that better than David Laing—who was the legendary engineer who put Choquelimpie into production way back in 1988 when gold was $400 per ounce, and is now chair of Norsemont’s advisory board.
After 32 years he has returned to the project because he knows how big and profitable this asset will be with gold almost 5x higher at $1,900 per ounce.
I spent an hour on the phone with him going through the story and the asset from his vast experience. Millions and millions of ounces of more gold have his attention…and my attention.
The Rocks Haven’t Changed –
The Price of Gold Has Quadrupled
I’ve been focused on junior explorers in 2020….but a brownfield project like this is a much smarter way to make money in this gold market.
At today’s gold prices, a brownfield project like Choquelimpie can come back to life and be an immediate cash cow. In this case a cash cow that also has all of the exploration upside of a junior exploration punt.
This one is so easy, it is just common sense.
The rocks haven’t changed.
The same amount of gold is in the ground. The difference is that with gold prices more than 4 times higher than where they were when Choquelimpie was first developed —— there are potentially millions of additional ounces that can be produced, right from the same pits as before!
And with all of the infrastructure already in place—the cost to get a brownfield project like this back up and producing is incredibly low.
The value of the infrastructure alone here makes Norsemont Mining’s current market valuation compelling. I can’t believe I found this stock so cheap!
And with permits already approved Choquelimpie is ready to roll……NOW!
This is economics 101….
1 – Gold prices have quadrupled
2 – There is almost no spending required on infrastructure if they choose to continue with the 3000 tpd mill.
That means exponentially higher revenues and very low costs. That is the recipe for success in every business. Higher revenue on lower spending. This is a two-foot, tap-in putt for investors. No high risk exploration, just value and growth at a ridiculously low valuation…for any business, not just for gold.
THIS SHOULD HAPPEN VERY QUICKLY
The gold sector is hot, hot, hot, hot…….
Doubles, triples in stock prices of junior miners happening in months.
But no gold stock that I’ve looked at in 2020 is set up as well as Norsemont Mining.
Marc Levy–has put this HUGE asset into a tiny company—there is only 48 million shares out!
Choquelimpie was only announced on May 20—two months ago. NOBODY KNOWS ABOUT IT.
The starting point here is 5.5 million ( 43-101 non-compliant!) ounces of gold equivalent, and both management and investors are hoping the end point could be multiples of that.
Marc Levy — the man behind Norsemont— has made a career out of building and monetizing companies for hundreds of millions of dollars for shareholders. There is no mystery how this one turns out. I’m sure his intention is to build, add value and cash-in.
The only mystery is how fast, and how big the size of Choquelimpie’s future (very compliant!) resource turns out to be after a drilling campaign using modern techniques at $1,900 per ounce gold.
SUMMARY—WHY I’M LONG:
1. Great starting point—5.5 million* (non 43-101 compliant!) gold equivalent ounces (it’s like starting on the 18th fairway!)
2. Low risk brownfield asset—literally hundreds of millions of dollars in infrastructure—that has been kept warm!
3. Huge exploration upside—much of it right in the existing pits
4. At $2/share, valuation is crazy cheap compared to peers
5. Tight share structure—48 M out
6. Marc Levy has built & sold a junior mining play before
7. This play is still new—only 2 months young. There are lots of investors who will hear this story in the coming 12 months.
I don’t know what else I can tell you.
Getting lucky on high risk exploration is Driving for Show. Brownfield assets like this is Putting For Dough—in this case, Big Dough.
*A qualified person has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves; and the Company is not treating the historical estimate as current mineral resources or mineral reserves. Additional confirmation drilling, metallurgical study, and modeling will be necessary to achieve a resource estimate which will be compliant with the requirements of NI 43-101
This report includes certain statements that constitute “forward-looking information or statements” within the meaning of applicable securities law, including without limitation, conducting exploration work on various projects, expand the resources, other statements relating to the technical, financial and business prospects of Norsemont Mining and its properties, and other matters. Forward-looking statements address future events and conditions and are necessarily based upon a number of estimates and assumptions. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance are not statements of historical fact and may be forward-looking statements. Forward-looking statement are necessarily based upon a number of factors that, if untrue, could cause the actual results, performances or achievements of the Company to be materially different from future results, performances or achievements express or implied by such statements. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which the Company will operate in the future, including the price of metals, anticipated costs and the ability to achieve goals, that general business and economic conditions will not change in a material adverse manner, that financing will be available if and when needed and on reasonable terms, and that third party contractors, equipment and supplies and governmental and other approvals required to conduct the Company’s planned exploration activities will be available on reasonable terms and in a timely manner. While such estimates and assumptions are considered reasonable by the management of the Company, they are inherently subject to significant business, economic, competitive and regulatory uncertainties and risks. Forward-looking statements are subject to a variety of risks and uncertainties, which could cause actual events, level of activity, performance or results to differ materially from those reflected in the forward-looking statements, including, without limitation: (i) risks related to gold and other commodity price fluctuations; (ii) risks and uncertainties relating to the interpretation of exploration results; (iii) risks related to the inherent uncertainty of exploration and cost estimates and the potential for unexpected costs and expenses; (iv) that resource exploration and development is a speculative business; (v) the possibility that future exploration, development or mining results will not be consistent with the Company’s expectations; (vi) risks related to current global financial conditions; and (vii) other risks and uncertainties related to the Company’s prospects, properties and business strategy. These risks, as well as others, could cause actual results and events to vary significantly.
Norsemont Mining has reviewed and sponsored this article. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.
Keith Schaefer is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity.