Shares in New Found Gold (TSXV: NFG, NYSE: NFGC) closed 5% weaker on Thursday after short-selling analyst Iceberg Research accused the explorer of misleading investors about its Queensway gold project in Newfoundland.
The Vancouver-based junior’s stock gained 2¢ on Friday morning in Toronto to $3.52 apiece, valuing the company at $707.9 million. It’s traded in a 52-week range of $3.21 to $6.30. The stock initially fell 8% after the report came out.
Iceberg Research, which doesn’t state where it’s based or who runs it on its website, is headed by Arnaud Vagner, a former analyst at Hong Kong-based commodities trader Noble Group, according to Reuters and The Financial Times. Vagner’s probe of Noble in 2015 slashed its stock market value by billions of dollars and led to a de-listing and debt restructuring.
New Found Gold has drilled the extraordinarily large amount of 563,000 metres since acquiring the project in 2016, Iceberg noted. But it has yet to release an initial resource.
That’s because the company is trying to hide the project’s lack of consistent gold mineralization and publishes difficult-to-read drilling program cross-sections to obscure the fact, Iceberg alleges. The researcher criticized CEO and chairman Collin Kettell as a stock promoter with a history of poor mining investments. It also noted the British Columbia Securities Commission has twice determined New Found Gold issued misrepresentative statements.
“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,” Iceberg concludes in its report. “This has led to endless drilling with little real progress.”
New Found Gold’s Collin Kettell didn’t immediately respond to an email on Friday seeking comment. In the past, the company has said it’s making progress in showing mineralization continuity. Analysts at BMO and Canaccord Genuity cover New Found Gold, but hadn’t issued new notes on Friday.
Newfoundland hotspot
Queensway, on a 1,662-sq.-km area accessible via the Trans-Canada Highway 15 km west of Gander, burst onto the exploration scene in 2019 with its first drill hole. NFGC-19-01 cut 19 metres at 92.86 grams gold per tonne. That and a series of high-grade drill results brought renewed interest to the region including investments by Labrador Gold (TSXV: LAB; US-OTC: NKOSF) and Exploits Discovery (TSXV: NFLD) among others.
This year, Calibre Mining (TSX: CXB) acquired Marathon Gold’s Valentine project in the region, though it is some 200 km west.
Gold bug Eric Sprott invested $260 million into New Found Gold. However, Iceberg criticized the serial gold project investor for indiscriminate funding and several failed projects.
The property where the Queensway project is located has had several owners over the past 40 years. They also drilled high-grade intercepts but couldn’t assemble a consistent deposit that made economic sense to mine, Iceberg said.
“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,” the researcher said.
Patchy gold
Iceberg said it’s shorting the company stock, betting it will fall, as investors digest its report. It redrew New Found’s drilling cross sections to “uncover a patchy gold presence,” it said.
The B.C. regulator in 2022 ruled New Found had engaged in smearing – averaging high-grade narrow intercepts over broader intervals with low or no grade. The aim was to portray gold distribution as more consistent than it actually is.
The regulator also made the company retract statements last year, which suggested it was moving into development from exploration, because it hadn’t prepared a resource or an economic study.
Disclaimer: The Northern Miner Group, which holds Mining.com, The Northern Miner and Canadian Mining Journal, is owned by EarthLabs, whose chairman and CEO, Denis Laviolette, is president of New Found Gold.
Brutal.
Interesting article…..thanks…..
While many of the comments about junior mining companies are valid, it’s important to ask whether they represent a “short” critique or simply a compilation of public observations and commonly held sentiments.
Most, if not all, of these statements could apply to a significant proportion of junior mining companies today. The prevalence of subpar quality press releases (per NI 43-101 standards) and overly promotional language is approaching the levels seen in the 1980s and 1990s. Regulatory staff just don’t have time to deal with all of them … so the focus on the “biggest (re: MCAP)” and most “egregious” (re: complaints).
What’s undeniable is that: i) a remarkable amount of money has been put in the ground, ii) there is an alarming lack of skill/oversight in management and technical aspects, and iii) there is a incomprehensible deficit of geological knowledge regarding deposits and ore controls, despite the wealth of available information.
The seismic fiasco (pun intended) supports these claims, and my conversations with management and senior technical staff have reinforced them as well. Asking a geology question is an exercise in futility (like painting a house with a Q-tip).
This company is poorly managed in terms of both capital stewardship and technical expertise. However, I would caution against completely dismissing it (are we still allowed to say “throwing the baby out with the bathwater”?).
The Sprott association is just an industry joke to be sure, but you can’t complain about lack of capital and support for Junior mining (relentless at Beaver Creek!?!?) and then complain about Eric’s mindless minions spraying cash to their Bay St. buddies.
Canada’s other favourite sons (not to be “O”verlooked) sprayed cash at carpet-bombing their project (in hopes of a buyout) and due to “paying the street”, garnered support that no “Short” would dare touch. Between them and the “Great Bear” model … well the “resource” requirement is something of an “inferred” target (you got it … pun intended).
So I hope the blame (if you will) falls appropriately on demonstrably poor management (top to bottom) and not poor old geology (i.e. first-order ore controls) … at least until the former is dealt with.
Are you kidding me with this “article”? You based the piece on a release from a company who is literally a SHORT SELLER, and who has a vested interest in making money off of the drop in stock price their release is hoping to generate. You use that as your headline, bury the fact that Iceburg is effectively a ghost company in paragraph 3, with no remark on how that would impact their views or the conflict of interest. Iceburg is a ghost company because no one knows where they are based or even who runs it. Even the founders name is a pseudonym (which is just fancy for “fake”). I’m not even sure this is an incorrect article in that NFG appears to be sketchy, but your reporting on it would have gotten me an F in a highschool language arts assignment.