NuLegacy explores Iceberg in Nevada

NuLegacy Gold (TSXV: NUG; US-OTC: NULGF) may be onto something at its Iceberg gold deposit on the Red Hill project in Nevada’s famed Cortez gold trend.

Located in Eureka County, the 104 sq. km Red Hill project includes the Barrick property and the Idaho property.

The more exciting of the two is the 66 sq. km Barrick property, where NuLegacy discovered the Iceberg deposit in June 2012, less than two years after securing an option agreement with Barrick Gold (TSX: ABX; NYSE: ABX).

Under that deal, the junior could earn a 70% interest by spending US$5 million on the property by Dec. 31, 2015. 

NuLegacy has US$1.5 million left to spend. Given it secured a $3.5-million financing with Waterton Precious Metals in August, it has more than enough cash to fulfill its obligation by September 2015, says CEO James Anderson. 

The Iceberg project is on the same coveted trend as Barrick’s three multi-million ounce gold assets, including the producing Cortez Hills and Pipeline deposits, and the growing Goldrush deposit.

The junior ended up in this attractive neighbourhood by making the most of a bleak situation. During the economic downturn of 2008 and 2009, when many mining firms were uncertain about their future, NuLegacy’s co-founder Roger Steininger — credited with discovering the Pipeline deposit — thought it was a good time to pick up properties in Nevada that normally weren’t available for options, Anderson says.

To help fund his venture he called on his friend and well-known financier Albert Matter, who is also a founding partner of several other firms, including Alamos Gold (TSX: AGI; NYSE: AGI). From there, the two created NuLegacy in May 2009, with the objective of finding and vending Carlin-type replacement gold deposits. 

Matter is NuLegacy’s chairman, and Steininger its chief operating officer.

They appointed Anderson — a veteran stockbroker who helped finance Alamos’ acquisition of the Mulatos gold mine in Mexico — to  the helm of the company in 2012.

Anderson attributes NuLegacy’s 2010 option deal with Barrick to three factors. 

“People forget, because people’s financial memories are extraordinarily short, but gold had gone from $1,100 to $680 in that 2009 period. So, even the big mining companies were more than a little fearful about what was going on. So that is one of the reasons we were able to get the option from Barrick.”

The second reason, Anderson says, was that Barrick hadn’t yet unlocked the full potential at Goldrush. At that time, the deposit had a global resource of 2.5 million oz. gold, compared to 15.6 million oz. today.

“I guarantee you it will be bigger than that. They have [15] drill rigs turning … if we were trying to do this deal with Barrick today, I don’t think it would get done. They would say ‘thanks anyway — but no.’”

Lastly and most importantly, he says, was Steininger’s key role in closing the deal. “He’s a well-respected exploration geologist in Nevada, and he knows the geologists in Barrick well.”

Anderson reckons that once NuLegacy completes its earn-in, Barrick would likely exercise its right to buy back 70% of the project by investing another US$15 million over five years, leaving the junior with a 30% carried interest.

“That’s the important part for us. Money is extraordinarily difficult to come by, even for really good deposits and really good projects these days. For us to have a 30% carried interest in what could become another one of these giants in the Cortez, where we don’t have to come up with any of the capital necessary to bring the thing into production — we think that’s an advantageous position to be in.”

Barrick has 90 days after NuLegacy completes its earn-in to exercise its one-time callback provision. Anderson believes Barrick has a few reasons to follow through with that provision. 

“Their assets in the Cortez trend are [some of] Barrick’s best gold mining assets,” he says. Barrick reported third-quarter all-in sustaining costs of US$589 per oz. gold for the Cortez mine, which includes the Cortez Hills and Pipeline deposits. 

The Goldrush project — where Barrick intends to complete a prefeasibility study in mid-2015 — shares the same geology as NuLegacy’s adjacent Iceberg deposit. “I don’t think Barrick will allow a junior company to end up with 70% of this deposit. There are plenty of unknowns about it right now, but the $15 million that they have to spend to earn-in the 70% interest … is just not that big of a number in Barrick’s world.”

But if the scenario fails to materialize, the junior has other options: it could attract a buyout for its 70% interest in Iceberg, or take the deposit into production.

“We ultimately think Barrick will be the developer of this deposit,” Anderson says.

NuLegacy describes Iceberg as a Carlin-type oxidized gold deposit with three mineralized zones: North, Central and South. The deposit extends over 3 km and is open in all directions.

Iceberg doesn’t yet have a National Instrumental 43-101-compliant resource, but  it has an “exploration target” of up to 110 million tonnes grading between 0.7 gram and 1 gram gold per tonne, based on 149 shallow historic holes and 16 NuLegacy holes.

The firm is drilling the deposit to better understand the mineralization and is debating whether to complete a resource estimate as part of its US$5-million earn-in. To date, it has completed 39 core and reverse circulation holes.

Highlights from the first three of seven core holes from the late-2014 drill campaign returned 12.1 metres at 3.16 grams gold per tonne and 12.1 metres of 1.57 grams gold in two holes on the Central zone. A third hole drilled on the newly discovered South zone hit 6.1 metres of 1.31 grams gold and 4.5 metres of 0.57 gram gold in two stratigraphic horizons.

NuLegacy expects assays from the remaining four core holes and four reverse-circulation holes over the next two months. It intends to add the assays to the deposit’s exploration model, which, along with the results of a recent gravity survey, should help pinpoint drill targets for the early 2015 program.

NuLegacy shares recently traded at 9¢. The company has a $12-million market capitalization and 141 million shares outstanding.