NuLegacy hits high-grade gold in Nevada

NuLegacy Gold (TSXV: NUG; US-OTC: NULGF) has found drilling success at its Iceberg gold deposit, a Carlin-type gold system in Nevada’s Cortez trend.

The junior discovered Iceberg on the Barrick property in June 2012, two years after it signed an option agreement to earn a 70% interest in the 66 sq. km property from Barrick Gold (TSX: ABX; NYSE: ABX). Under that contract, NuLegacy needs to spend US$5 million on exploration by end of 2015. NuLegacy’s 24-hole drill program this year, budgeted at US$1.3 million, should satisfy that obligation.

Nevada has huge gold potential, NuLegacy’s CEO James Anderson says. “With the Cortez trend, this is all Barrick Gold mining country.”

The gold major has three multi-million ounce gold assets on the Cortez trend, including the producing Pipeline and Cortez Hills deposits, and the 15.5 million oz. Goldrush deposit, sitting northwest of the Iceberg deposit.

“Goldrush is Barrick’s most important development project anywhere on the planet right now,” Anderson says. He notes 80% of the deposit’s high-grade material occurs in a mineralized horizon called the “Wenban stratigraphic unit.” That horizon is also one of the three horizons that occur under Iceberg’s Central, South and North zones. Unlike at Goldrush, it is much closer to surface and oxidized.

While the junior hasn’t intersected significant mineralization in the middle Wenban horizon under the Central and South zones, it has had recent success at the North zone.

Assays released on May 7 from the third and best hole in the North zone returned 25.2 grams gold per tonne over 4.6 metres within 41.2 metres of 3.9 grams gold, sending NuLegacy shares up 23% in two days. The hole was part of the first six holes reported from the 2015 drill program.

“That is quite exciting for us. There isn’t any historic drilling into this horizon … if you think of Goldrush, just across the valley, as being an analog, the question that some people have asked about our property is that ‘OK, you’re getting all this material here, that’s great, but where is the gold in the middle Wenban horizon?’ And now we may have answered that,” Anderson says.

Assays for the next six holes, which NuLegacy is finishing up, should be out in early June. However, given this high-grade interval in the North zone, Anderson says his team will reassess where to drill this year’s last 12 holes.

The plan of operation that NuLegacy received from the U.S. Bureau of Land Management (BLM) in February helps. The permit, covering 1,760 acres (7.1 sq. km), will allow more drilling and flexibility.

“We simply go back and give them notice that we are going to drill here, here and here, and unless there are comments from BLM, we just go ahead and do it 30 days later. That helps a lot in terms of our ability to plan and in terms of being malleable for an eventuality like this kind of hole, where you go, ‘Whoa, whoa, whoa, wait a second, let’s concentrate here now.’”

NuLegacy intends to wrap up the drill program in August, with the final assays expected by September. This will coincide with its 70% earn-in with Barrick, where the major has 90 days to exercise its right to buy back 70% of property by spending another US$15 million over five years, leaving NuLegacy with a 30% carried interest to production.

Anderson says he is confident that Barrick will rebuy the majority interest in the property, explaining that it sits next door to the major’s low-cost mines and is located in an identical geological setting.

“So from my perspective, I would be shocked if Barrick didn’t exercise their callback provision. Now to be fair, big companies make big mistakes,” he says.

Anderson says that if he is wrong, NuLegacy will end up with a 70% interest in a gold project that sits in the famed Cortez trend, which will likely draw the acquisitive eye of another major gold producer.

NuLegacy shares closed May 8 at 16¢, near its 52-week high of 17.5¢ last September.