NexGold, Signal Gold merger aims to create 200,000 oz per year producer

NexGold Mining (TSXV: NEXG; US-OTC: NXGCF) and Signal Gold (TSX: SGNL; US-OTC: SGNLF) have agreed to merge and create a new Canadian gold developer with a combined resource base of 6 million ounces.

The all-stock transaction would bring two near-term development projects together and eliminate the single-asset risks incurred by each, they said in a release. Both of NexGold, which was known as Treasury Metals until July, holds the Goliath project in Ontario. Like Signal’s Goldboro project in Nova Scotia, both have environmental approvals in place, and the companies are anticipating final permits in 2025.

Combined, the Goliath and Goldboro projects cover a property package of more than 600 sq. km, with an established gold resource of 4.7 million oz. in the measured and indicated category and 1.3 million oz. in the inferred category.

The Goliath project consists of an open-pit and underground gold mine, along with associated milling infrastructure including a tailings storage facility, located 20 km east of Dryden, Ont. A February 2023 prefeasibility study outlined a 9-year mine life producing on average 109,000 oz. a year. The project’s after-tax net present value is estimated at $625 million (discounted at 5%), with a 41.1% internal rate of return.

The Goldboro project is a proposed open pit mine that has an approximate 11-year life with projected annual production of 100,000 oz., according to a feasibility study. The project has an after-tax NPV (at 5% discount) of $328 million and IRR of 25.5%, for a payback period of 2.9 years.

NexGold president Morgan Lekstrom said this deal “will be a transformative transaction” that combines two near-term buildable projects in Canada on a potential path to a production profile of over 200,000 oz. per year.

“This reflects the execution of NexGold’s strategy of targeting high-value gold projects with potential production of over 100,000 ounces and a capital expenditure of under $400 million,” he said in release Thursday.

Kevin Bullock, CEO of Signal, added that “the transaction brings together two cornerstone Canadian gold projects and presents an exciting opportunity to create a leading gold development company in Canada during a time of increasing gold prices.”

Bullock will assume the role of CEO of the combined company, building on his previous experience leading Volta Resources, which was sold to B2Gold (TSX: BTO; NYSE-AM: BTG) in 2013, as well as Kirkland Lake Gold and Iamgold (TSX: IMG; NYSE: IAG).

The deal will see NexGold issue 0.1244 of a common share to acquire each of Signal’s shares. Upon completion, existing NexGold and Signal shareholders will own roughly 71% and 29% of the combined company, respectively.

To complete the transaction, NexGold and Signal have each arranged for financings totalling $5 million and $6.5 million respectively. It is anticipated that both NexGold’s management team and Frank Giustra, a significant shareholder, will participate in its financing.

Shares of Signal Gold rose 5.9% to 9¢ following the merger announcement, giving the company a market capitalization of $21.7 million. NexGold traded flat at 75¢ with a market capitalization of $57.4 million.