Newmont backs junior Headwater on 3rd Nevada project

Newmont (NYSE, ASX: NEM; TSX: NGT) has agreed to earn control of Headwater Gold’s (CSE: HWG; US-OTC: HWAUF) Jupiter gold project in Nevada by covering exploration costs and completing a prefeasibility study, just over three months after the junior staked the ground.

Newmont committed to spend $30 million (C$42 million) for three quarters of the28-sq.-km Jupiter in Nye County, roughly 370 km southeast of Nevada’s capital, Carson City. Headwater will manage the work, the companies said Thursday.

“Headwater recognized the potential for Jupiter to represent one large contiguous district that had not been explored at the district-scale context by previous operators,” CEO Caleb Stroup said in a release. “The scale of the exploration commitment under this agreement provides an opportunity to systematically test that thesis.”

For Headwater, the deal turns a newly staked prospect into its third Newmont-backed Nevada project without forcing the junior to fund most of the early exploration itself. That gives Headwater exposure to several gold targets while shifting much of the cost and risk of testing them to the world’s largest listed gold miner.

Headwater’s Toronto-listed shares last traded at C53¢ apiece, after gaining 56% over the past 12 months. It has a market capitalization of C$46 million.

Third tie-up

Newmont already backs Headwater’s Spring Peak and Lodestar projects in Nevada. The state’s biggest gold miners are consolidating and expanding their holdings as the metal’s price recovers from a six-month downturn. Newmont and Barrick Mining (TSX: ABX; NYSE: B) this week agreed to fold Fourmile, Mike and Fiberline into Nevada Gold Mines, creating a nearly 100-million-oz. gold complex.

Newmont is planning to spend $2.5 million over the first two years. It can earn an initial 51% by spending $10 million within four years. Another $20 million over the following three years would lift its interest to 65%.

Reaching 75% would require a prefeasibility study based on at least 1.5 million oz. gold or gold equivalent and granting Headwater a 2% net smelter return royalty. Headwater will collect a 10% management fee during the initial earn-in, while Newmont will reimburse $250,000 of the junior’s earlier spending.

Headwater’s wider portfolio includes three Nevada projects funded by OceanaGold (TSX, ASX: OGC) and an Idaho project backed by Centerra Gold (TSX, NYSE: CG). The Spring Peak and Lodestar projects are early stage. At Spring Peak, hole SP22-13 cut 2.38 metres grading 15.92 grams gold per tonne from 275.3 metres downhole within a broader 34.7-metre zone averaging 2.73 grams gold. At Lodestar, about 2,950 metres of drilling outlined the 600-by-700-metre Meridian alteration zone, but has yet to produce a comparable gold intercept.

Gold targets

Headwater staked 352 unpatented claims at Jupiter on federal land in May. The property covers a roughly 5-by-8-km zone of altered volcanic rock that the company interprets as part of a large epithermal gold system. Previous operators explored the area intermittently from 1981 to 2020, generally with shallow drilling.

Historical hole JURC0001 cut 9.1 metres grading 1.1 grams gold per tonne from 112.8 metres downhole. Surface rock samples returned as much as 3.1 grams gold per tonne. Headwater has not independently verified the historical results.

Headwater plans more mapping, surface sampling and geophysical work before an initial drill program late this year or early next year. Jupiter lies about 110 km northeast of AngloGold Ashanti’s (NYSE: AU; JSE: ANG) Arthur project, which includes the Silicon-Merlin gold deposits.