Gold Developer Secures US$17M Financing to Drive Exploration and Increase Potential Production Profile

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NexGold Mining Corp. (NEXG.V:TSXV; NXGCF:OTCQX; TRC1.F:FRA) and Signal Gold Inc. have announced the upsizing of their previously announced concurrent financing to a total of CA$17 million due to strong demand. This financing is related to NexGold's acquisition of Signal Gold and will advance both companies' gold projects. The hard-dollar portion of the financing will now raise up to CA$9 million. There is an additional option of CA$1.35 million. Flow-through units of Nexgold will raise an additional CA$8 million. The net proceeds are expected to fund debt repayment, exploration, and corporate purposes.

As per the news release, completion of the financing is anticipated for early November 2024, subject to regulatory approvals and other conditions, including shareholder approval from Signal Gold's investors. Finder compensation is expected for eligible finders in connection with the transaction. This financing aligns with NexGold's strategic goals, as the combined entity aims to accelerate the path to gold production from its projects in Ontario and Nova Scotia.

Digging Into The Gold Market

On October 17, 2024, Barchart highlighted the sustained upward momentum in the gold market. The report noted that gold had reached a record high of US$2,708.70 per ounce in September 2024. As it went on to point out, "Gold's latest record high of US$2,708.70 per ounce in September 2024" signaled the ongoing strength of the bull market. This is driven by a combination of inflation and geopolitical concerns. Barchart emphasized the inflation-adjusted value of gold's 1980 peak, which in 2024 terms stood at over US$3,340 per ounce, suggesting further room for growth as inflationary pressures continued to rise.

As Technical Analyst Clive Maund wrote on October 10, the merger between NexGold and Signal Gold was seen as "a major positive development for both companies."

As Ahead of the Herd wrote on October 18, the gold mining sector had been attracting growing attention. The report stated that gold stocks were "on the verge of being noticed by much-broader groups of speculators and investors."

The report suggested that gold miners remained undervalued relative to the current high gold prices, which were driven by strong fundamentals and market psychology. The article predicted that a potential rally in gold stocks could occur as these miners start to catch up with rising gold prices, marking a "crucial psychological tipping point" for the sector.

That same day, in a Reuters report, Alexander Zumpfe, a precious metals trader at Heraeus Metals Germany, observed that "investors are flocking to gold, a traditional safe-haven asset," amid rising geopolitical tensions, particularly in the Middle East. The conflict between Israel and Hezbollah had intensified, driving gold prices above the US$2,700 per ounce threshold as investors sought refuge in the metal. The report further mentioned that the ongoing U.S. presidential election and expectations of looser monetary policy also contributed to gold's appeal during this period of heightened uncertainty.

On October 21, Money Metals reported that "gold shattered records multiple times this year," with prices rising over 30% year-to-date, bolstered by expectations of central bank rate cuts and continued global instability. The report stressed that gold's rise had been driven by a combination of factors, including inflation concerns, geopolitical instability, and the metal's role as a safe-haven asset amid market volatility.

What's Driving NexGold?

According to NexGold's September 2024 investor presentation, the company has positioned itself for growth through its strategic assets and strong balance sheet. NexGold's Goliath Gold Complex is estimated to produce 116,000 ounces of gold annually over the first seven years, with a life-of-mine average production of 90,000 ounces from its 13-year mine life.

With low capital intensity, the project is projected to generate substantial returns, boasting a net present value (NPV) of US$652 million and an internal rate of return (IRR) of 41.4% at a gold price of US$2,150 per ounce. Additionally, the company's exploration upside remains strong. This creates significant potential to expand its resource base, driving further long-term value for shareholders.

Third-Party Expert Analysis of NexGold

As Technical Analyst Clive Maund wrote on October 10, the merger between NexGold and Signal Gold was seen as "a major positive development for both companies," particularly because it positioned the combined entity to become one of Canada's most advanced near-term gold developers with 4.7 million ounces of Measured and Indicated gold resources. Maund rated Signal Gold as an "immediate strong buy" following a bear market that had brought the stock down to an attractive entry point, highlighting the significant upside potential from the merger.

Ron Stewart, in an October 11 analysis for Red Cloud Securities, also provided a favorable view of the merger. Stewart noted that the deal would create a multi-asset company with over 6 million ounces of gold resources, stating, "This acquisition would achieve that goal on favorable terms." Stewart maintained a "Buy" rating for NexGold and indicated that the company was well-positioned to expand production to over 200,000 ounces of gold annually following the merger. Stewart also emphasized the potential for improvements in Nexgold's financial position, with plans for a financing round and restructuring of credit facilities to support future growth. 

Ownership and Share Structure

The company notes management and insiders own 3.4% of NexGold.

Institutions own 17%.

Strategic investors own 37.4%. Frank Guistra owns 10.1%. On a partially diluted basis, Extract owns 14%. Sprott owns 9.9%. First Mining owns 4.3%. Matrix owns 1.9%, and Teck own 1.9%.

NexGold has 76 million shares and a market cap of CA$57.16 million.