With gold recently nearing record highs, it’s a good time to revisit a gold stock pitch. This time, it’s from Jason Williams’ premium newsletter, Future Giants ($1,999/year, with a 90-day refund policy). What’s being teased by Jason Williams for Future Giants?
Here’s how he sets up the story:
So, who is this about?
This refers to Eric Sprott, the founder of Sprott, Inc., a major Canadian asset management company that specializes in natural resources (managing several ETFs and private funds). Today, they handle assets worth around $25 billion, and Eric Sprott is a well-known figure in the gold investment community. However, this reputation hasn’t necessarily translated into extraordinary results for his firm — Dan Ferris from Stansberry once promoted Sprott, Inc. as his top gold market pick, primarily due to the management fees from their physical gold ETFs acting like a “royalty.” Despite that, shareholder returns haven’t been exceptional. While SII has performed decently since Ferris’s promotion about six years ago — partly boosted by a U.S. listing — its total return has been around 100%, similar to the S&P 500 and physical gold, albeit with higher volatility.
But let’s refocus — today’s topic isn’t Sprott, Inc., but rather a smaller gold company that has caught Eric Sprott’s interest. Here’s what the pitch says from the order form:
Williams notes that more exploration is underway, hinting at the “potential for 15-40 million ounces of high-grade gold,” although such statements are usually reserved until confirmed findings are made.
He believes that a surge in gold prices could trigger “an explosive rally in the stock to almost unimaginable levels.”
So, what is this “#1 Gold Play of the Decade?”
It’s the same stock promoted in 2021 when Luke Burgess pitched a similar report for the same publisher: New Found Gold (NFGC, NFG.V in Canada).
To be clear, the current ad isn’t an exact duplicate, and it’s uncertain whether Williams’ “special report” is a revised version of Burgess’ 2021 report or a new analysis that Williams developed independently. Regardless, the stock being pitched is the same. This means we can acknowledge that while this may represent one of the most significant and exciting gold discoveries in recent memory, it remains a very early-stage project that has yet to truly capture sustained investor interest. Here’s what I shared with the Irregulars back in 2021, when New Found Gold surged to a valuation near $1 billion due to strong drilling results:
So, where do things stand today? New Found Gold continues drilling at the Queensway Project in Newfoundland, touted as the “center of the Newfoundland gold rush” near Gander. The company still produces impressive drilling results from fault zones, showcasing new cores with grades exceeding 100 grams/tonne, similar to the high-grade finds reported in 2021. Eric Sprott remains a significant backer, holding 19% of the company and investing approximately $260 million. However, with the current company valuation around US$540 million, Sprott, like many investors, is seeing a paper loss.
The company maintains an optimistic outlook, signaling belief in the project by buying back minor royalty rights on parts of the property, a sign of fiscal commitment. They have expanded their exploration footprint by drilling new zones and acquiring the adjacent Kingsway Project from Labrador Gold, although that has yet to boost Labrador Gold’s fortunes.
Despite these promising developments, it’s still early days for New Found Gold. No economic assessments or resource estimates have been released, and they have yet to report any reserves. The company is heavily focused on ongoing drilling without concrete evaluations of the resource size or potential mine feasibility. While having Eric Sprott as a shareholder adds credibility, it suggests patience is necessary, and shareholders may need to adopt a similar long-term view. Significant updates could come next year with potential initial resource reports following the current drilling phase. Still, the project could extend beyond that if funding and investor patience persist.
The industry’s typical “discovery to production” timeline averages about 20 years, and it’s been approximately six years since New Found Gold began drilling in Newfoundland. In the coming years, the company will likely reach a stage where it can release a preliminary economic analysis (PEA), offering a basic resource estimate and production cost projection to evaluate feasibility. Should this initial analysis be positive, subsequent drilling would aim to convert resources into reserves, de-risking the project further.
Afterward, a few more years of drilling could set the stage for a feasibility study—a more comprehensive economic evaluation detailing the project’s viability, capital costs, and potential funding routes, whether through loans or partnerships with larger mining companies. This study typically precedes a 4-5 year period of construction planning, infrastructure development, and mine building, after which production could finally commence.
Gold stocks often go through a typical cycle that begins with excitement around new discoveries. This is followed by a long, sometimes frustrating period as the company focuses on the labor-intensive process of proving up reserves through extended drilling and completing necessary work like permitting, which can be costly and provide only incremental news. This phase often results in investor disillusionment as they wait to transition from discovery to a project that could justify the significant investment required to build a mine. Stocks may experience another surge when the company reaches critical milestones, like publishing a preliminary economic analysis (PEA) or a maiden resource estimate, or when a mining project gets built and shows promising financial results.
Due to its unusually high grades and potentially significant size, New Found Gold could deviate somewhat from this cycle. There’s potential for a boost when they announce their maiden resource estimate and PEA within the next year or two. Additionally, if the company secures a deal with a significant partner, that could spike its stock. However, there will likely be “despair” phases as investors tire of waiting for a mine that might only be built in the 2030s.
Risks are inherent, such as setbacks in obtaining permits or substantial fluctuations in gold prices that could disrupt expectations. Despite these uncertainties, New Found Gold still presents an impressive opportunity. Having Eric Sprott as a significant investor and their consistent high-grade drill results are positive indicators. This stock could perform well over a 5-10-year horizon, but that potential was also present when its stock price was $10 three years ago, compared to today’s $2.50.
Recognizing this cycle of excitement and discouragement in mining stocks, I’m generally cautious about investing heavily in explorers or mine developers due to the lengthy timelines and significant uncertainties involved. While such investments can be successful and many investors enjoy following mining projects, they need to align with what I look for in my portfolio. However, the allure of potential success can sometimes be tempting enough to consider, albeit in a limited capacity.
Mining enthusiasts, what’s your perspective on New Found Gold? Are you ready to play the waiting game as the potential for a significant mine materializes? Do you have other gold stocks or speculative picks you’re more confident in? Or are gold investments overhyped and not worth your portfolio’s attention? Share your thoughts in the comments below!
