BullMarketRun.com – Meet Newlox Gold Ventures (LUX, CSE)
May 14, 2020 – When Gold is merely a byproduct of environmental do-gooding.
“The Switzerland of Latin America”
Newlox is the only foreign precious metals company operating in Costa Rica. Location is a key attribute and differentiating factor. And if you’re going to be a successful speculator you’ve got to develop an ability for identifying differentiating factors. Then a successful speculator must attempt to figure out what the differentiating factors are worth, and what could they be worth in terms of market cap.
With just shy of 80 million shares outstanding LUX has market cap of $4 million. The stock’s been range bound with a slightly bullish bent, call it 3 to 6 cents for several years now.
What are the chances LUX becomes a 20-cent stock with a $20 million market cap sometime next year?
Not too shabby if you asked me, and I’m calling it our “20-20 in 2021 plan”!
Let’s consider how LUX gets there within the context of Newlox’s key attributes (their differentiating factors):
- Costa Rica
- Producing Gold with a positive environmental effect
Immediately, upon hearing the story people are intrigued by the location. Costa Rica? But with just a quick dig you find a lengthy history of high-grade Gold mining in Costa Rica. Hundreds of years, or more, and mining activity continues today at increasing rates. Knowing its located along the “Ring of Fire”, geologically speaking, the lengthy history of mining starts to make perfect sense.
With a hop skip and a jump one country north, Calibre (CXB, TSX) is doing a fine job of mining in Nicaragua. They recently signed a $45 million earn-in agreement with Rio Tinto.
Rio Tinto‘s interest in Nicaragua (possibly other parts of Central America too for that matter) tells me exploration potential in this part of the world remains great.
Regarding safety of mineral tenure and jurisdiction, politics, etc. I’m arguing Costa Rica, an uninterrupted democracy since 1948 (it’s practically a state) edges out Nicaragua and most everywhere else in both Central and South America.
Now then, touching on key attribute number two.
Producing Gold with a positive environmental effect!
About four years and $5+ million invested to date Newlox has an 80 tpd processing plant. It’s there now and ready to really start rolling. In fact, the Newlox team has nearly a year under their belts operating the plant at 10 to 20 tpd. Less than optimal, but they’re in the process of scaling up methodically (smartly). Recovery rates are nearing 90% now, which is about where the intensive UBC lab studies said recovery rates should be.
Here’s the real kicker some people have had a hard time believing…Newlox has a 9 g/t Au cut-off.
I know you know this but 9 g/t Au is better than almost every underground mine plan (worldwide).
If Newlox achieves even half of what they believe they can achieve LUX has a path toward 20 cents. You the savvy speculator then realizes if Newlox does everything they say they can do, what the business plan was designed and built to do, LUX could go way past 20 cents.
Here’s how it happens: Phase II of their growth plan scales up to 40 tpd. Using a 9 g/t Au cut-off and 90% recovery rate, at 40 tpd, you get 324 grams of Gold per day. A gram of Gold is worth $55 today so that’s $17,820 in revenue, daily. Assuming a 350 day work year, that’s $6,237,000 in annual revenue. Slap a 3 or 4 x multiple on those revenues, not unreasonable amidst a bull market, and we arrive at our $20 million market cap and 20 cents.
And again, the scenario outlined there is Newlox operating its 80 tpd plant at “half capacity”.
In full disclosure, aside from owning LUX, I’m a little more biased than usual on this one. I’ve joined Newlox in an advisory role to help them every different way I know how to. Led by Ryan Jackson, an environmental scientist and up and coming CEO in this industry, Newlox already has a solid team in place so I’m pleased to be part of their mission of creating shareholder value and protecting the environment.