Merger Between Gold Cos. to Offer 'Significant Growth Potential'

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NexGold Mining Corp. (NEXG.V:TSXV; NXGCF:OTCQX; TRC1.F:FRA) and Signal Gold Inc. (SGNL:TSX; SGNLF:OTCQB) have entered into an agreement to combine the two companies in a bid to produce 200,000 ounces of gold per year from their projects in Ontario and Nova Scotia.

The new company would advance both NexGold's Goliath Gold Complex Project in northern Ontario and Signal's Goldboro Gold Project in the historic Goldboro Gold District of Nova Scotia for a combine 4.7 million ounces gold (Moz Au) in measured and indicated resources and 1.3 Moz Au of inferred mineral resources between both companies.

NexGold noted in a release that there is "significant growth potential" at both projects, which cover more than 60,000 hectares with potential along strike at depth, and through new discoveries.

"This will be the most near-term mid-tier gold company in Canada," Lekstrom told Streetwise Reports on Thursday. "We are in a very high gold-price environment, and we offer not only leverage to that, but a clear path with permitting that can take years. This is the bottom of the value curve and has major upside potential especially in this market."

Analyst Clive Maund, in a news flash after the news broke, wrote that the merger would create "one of Canada's most advanced near-term gold developers."

"This development is seen as a major positive development for both companies, especially as the concurrent financing looks set to be well taken up, with the stocks of both companies at good entry points," he wrote. "Note that Signal Gold is rated AN IMMEDIATE STRONG BUY as it is at a very good entry point following a severe bear market from its 2021 high at C$1.05 that has taken it down to the current 9 cents."

Details of Transaction

A concurrent non-brokered private placement financing for up CA$11.5 million with the NexGold board and management subscribing for up to CA$1 million. Current greater than 10% NexGold shareholder Frank Guistra will also be participating "in a meaningful way," the company said.

NexGold noted that both projects are in the advanced stages of permitting, with completion of project permits expected in 2025. Goliath has Federal Environmental Assessment Approval and the Goldboro Project has Provincial Environmental Assessment Approval.

"I believe 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," Signal President and Chief Executive Officer Kevin Bullock said. "The combined company will be led by an experienced and skilled leadership team and will benefit from a strong balance sheet."

In the release, NexGold said the combined team from both companies will "complementary skills and experience required for successful development, including geology, engineering, finance and capital markets, governance and sustainability."

With the concurrent financing, proposed debt reconstruction, and available cash resources, the new company will provide significant funding to advance both projects toward a construction decision.

"The combined company will focus on showing growth in the Goldboro and Goliath Districts through drilling while assessing further opportunities for corporate growth," the release said.

Earlier Merger Created NexGold

NexGold itself resulted from the business combination of Blackwolf Copper & Gold Ltd. and Treasury Metals Inc.

"The main driver for the business combination was the economies of scale and efficiencies that would result in the combined company being more than the sum of its parts," Maund noted the day before the news came out.*

"The downward drift of (NexGold's stock in) recent months has, therefore, presented a great buying opportunity for investors showing up now, as once it does break out, it could advance smartly, especially once it gets above the resistance level shown near the top of the pattern," Maund continued.

Last month, NexGold gained additional research coverage from Red Cloud Securities, which issued a Speculative Buy rating and a CA$1.80 target price, reported Ron Stewart, managing director and mining analyst, in a Sept. 6 research note.

"The merger (between Blackwolf and Treasury) strengthened the leadership, balance sheet, and capital markets capabilities, allowing it to execute a strategy to drill, develop and deal its way to becoming a mid-tier gold producer," Stewart wrote.

Stewart pointed out that the experienced management and technical team of NexGold gives it a competitive edge. These "seasoned mine builders and operators," with extensive careers in the industry. Further, the company has two strategic advisers with proven track records of creating shareholder value like Giustra, a principal investor, and Shawn Khunkhun.

The Catalyst: Gold Bulls Still on the Run

Gold has lost some traction this week after hitting a record high of US$2,685.42 in September, but most experts agree its bull market has not ended. The price was US$2,621.82 per ounce Thursday morning.

Goldman Sachs has raised its forecast for gold in early 2025 to US$2,900 from the previous US$2,700, Investing.com reported.

"Firstly, they anticipate faster declines in short-term interest rates in Western countries and China, adding that the gold market 'doesn't fully price in the rates boost to Western ETF holdings backed by physical gold yet, which tends to be gradual,'" Goldman Sachs noted, according to Investing.com's Vahid Karaahmetovic. "Secondly, ongoing robust purchases by emerging market (EM) central banks in the London over-the-counter (OTC) market are expected to continue fueling the gold rally that began in 2022. Strategists believe 'that these purchases will remain structurally elevated.'"

According to Reuters, gold is on-track for its best quarter in four years. The recent rise was "fueled by the U.S. Federal Reserve's half-percentage-point cut and flare-ups in the Middle East," author Sherin Elizabeth Varghese wrote.

Ownership and Share Structure

The company notes management and insiders own 3.4% of NexGold.

Institutions own 17%.

Strategic investors own 37.4%. Frank Guistra owns 10.1%. Extract owns 9.3%. Sprott owns 9.9%. First Mining owns 4.3%. Matrix owns 1.9%, and Teck own 1.9%.

NexGold has 76 million free float shares and a market cap of CA$57.16 million.