Raises questions about New Found Gold deposit near Gander
Vancouver-based New Found Gold Corp. has been the toast of Canada’s exploration sector for reportedly striking bonanza-grade intercepts, but a short-seller report is trying to poke holes in the company’s story.
“The deposit, explored since the 1980s, has historically been plagued by a lack of continuity: the presence of gold and grades vary widely across the deposit,” the report said. “Many comparable gold projects have failed due to this problem.”
So far, the report appears to have had little impact on investors. New Found Gold’s shares are trading for $3.72, which is around where it traded before the report was released.
Out of hundreds of junior exploration companies listed in Canada — few of which, if any, have any revenue — New Found Gold caught the attention of investors around 2020 by reporting that it had discovered gold on a patch of land in Gander, N.L., miles away from the airport featured in the hit musical Come From Away.
Chief executive Collin Kettel said the company, on its very first drill hole, hit a high-grade intercept containing 92.86 grams of gold per tonne spread over 19 metres in what he described as “just incredible luck.”
But the Iceberg report said the initial high-grade intercept wasn’t by luck at all.
“This was really a case of drilling below a historic hole along the quartz vein and simply following the previous operator’s recommendations,” its report said.
It also said Sprott was chair of the previous operator, Paragon Minerals Corp., which drilled right above the “historic hole” and whose geologists in 2011 recommended deeper drilling below it.
A screenshot of a 2021 tweet by a co-founding investor suggests that Sprott funded the drill hole, according to the report.
But the report’s main thrust is that New Found Gold has conducted extensive drilling campaigns and reported high-grade results, but is resisting recommendations to put together an official mineral resource estimate — the first big step in determining whether a mine is feasible.
“We believe that management is delaying the release of a resource estimate because continuity remains problematic,” the report said.
It said shareholders “can expect significant dilution” because New Found Gold will continue to issue new shares to raise money.
Neither Sprott nor Kettle responded to requests for comment by the time of publication.
The report also levels other accusations about the pre-existing relationship between Kettel and Sprott, who have multiple investments together, and their history of failed exploration ventures.
The report has been widely discussed on social media and chatboards, and some critics have pointed out that most exploration ventures do not succeed.