Is NuLegacy’s Nevada Discovery Just the Tip of the Iceberg?

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How and why a junior explorer such as NuLegacy came to get its hands on a promising patch of the Cortez Trend could become a momentous story if and when the company’s speculative gamble pays off.

Jamie Sokalsky, Chief Executive Officer at Barrick Gold, describes the Goldrush discovery as “one of the most exciting exploration finds in recent memory.” (1)

In three short years, the gold resources of the Goldrush project, located along Nevada’s famous Cortez Trend, has increased from 2.5 million oz. in 2011, to 7.l million oz. in 2012, and 14.1 million oz. as of January 2013.

“Goldrush has become Barrick’s most important development project anywhere in the world,” says Anderson, CEO of Vancouver-based NuLegacy Gold Corp. “I’m confident they will not stop at 14 million oz. I’d predict they’ll reach at least 20 million. They’re calling it the fifth largest gold endowment in Nevada.”

To understand Anderson’s awed respect for Goldrush, keep in mind that the state of Nevada — if it were a country — would be the sixth largest gold-producing nation in the world.

And the aptly named Goldrush is just one mine among many along the gold-rich Cortez Trend, where NuLegacy is hunting for its own “Nevada elephant.”

How and why a junior explorer such as NuLegacy came to get its hands on a promising patch of the Cortez Trend could become a momentous story if and when the company’s speculative gamble pays off.

Even today, Anderson sees it as one sweet deal.

The story begins in 2008, the year of the global financial collapse, when Barrick’s Goldrush riches remained undiscovered, and junior exploration companies were toppling into bankruptcy.

Geologist Roger Steininger — who had made an earlier successful discovery in the Cortez Trend, at the 21-plus million ounce Pipeline deposit — called a colleague, Albert Matter, with news of some promising claims becoming available. “Is it even possible to put some money together?” he asked.

Matter, who along with Anderson had steered the launch of the ultimately hugely successful Alamos Gold Corp’s Mulatos property in Mexico, got back to Steininger within a week with a commitment for $500,000.

And so, in the throes of a financial meltdown, NuLegacy was born, with co-founders Steininger as COO and Matter as Executive Chairman.

Steininger worked his contacts at Barrick, and the eventual upshot was that NuLegacy secured an option on a 60 sq. km Barrick property known as Red Hills/Iceberg Project.

By agreeing to invest $5 million over five years in developing the property, NuLegacy won the right to earn a 70 per cent interest in the Iceberg Project.

Barrick — even then aware of the huge potential in the area — insisted that, if NuLegacy made a significant discovery, they would retain the right to claw back the 70 per cent. In order to do so, however, Barrick would have to commit to spending $15 million over five years and to convert NuLegacy’s stake to a 30 per cent “carried to production” interest.(2)

Covering all bases, Barrick could also choose to remain a 30 per cent JV partner, or to purchase NuLegacy’s 70 per cent interest outright to consolidate its hold on the Cortez Trend.(2)

Whatever it decides, Barrick will have to make its choice within 90 days of NuLegacy completing its earn-in — expected by Sept. 2015.

From NuLegacy’s point of view, it was a win-win situation.

“A 30-per-cent ‘carried to production’ interest means we don’t have to raise any more money for exploration, for development, or for production,” says Anderson. “That’s an extremely important element. It becomes like a royalty.”

Even if Barrick elected to stick with its 30 per cent JV stake, says Anderson, “there are lots of people who would be interested in our 70 per cent.”

And there’s another scenario.

“Let’s say we came up with a million and a half ounces and, for whatever reason, Barrick says, ‘You guys go ahead and put it into production — it’s too much aggravation for us.’ We could actually put it into production ourselves. We could put together a very profitable mining operation.”

Whatever the outcome, Anderson is counting his blessings: “If we asked for this deal today — not a chance,” he says. “No way in the world would Barrick give us this piece of ground, given what’s happened since at Goldrush. They would just say, ‘no thank you.’”

NuLegacy’s first breakthrough came in 2012 after Steininger assembled sufficiently convincing geochemical data to identify a near-surface oxide gold discovery now known as the ‘Iceberg’ deposit.

A subsequent $500,000 drilling program in early 2013 expanded the Iceberg deposit to a strike length of 1,200 metres, with the best hole reporting 41 meters of 1.1 g/t. Another ten holes will be drilled in November 2013.

To maintain its interest, NuLegacy must spend a further $2.9 million in 2014-15 of which $2.15 million will be used to drill 35 to 40 delineation holes to build ounces in the Iceberg.

Another $750,000 will be spent on drilling up to 10 deeper ‘exploration’ holes into three other “favourable” targets where geological anomalies hint at the presence of higher-grade deposits.

Anderson says two-thirds of the $2.9 million has been secured and he expects no difficulty raising the rest. “We have to spend $2.9 million, but we have over two years to do that. Nobody’s putting a gun to our heads.”

He adds: “We’ve been able to raise money in a very difficult environment,” citing as reasons the huge Goldrush deposit, Steininger’s solid reputation as a geologist and Matter’s ability to find finance under most any circumstances — plus NuLegacy’s determination to “be one of the survivors.”

“I like the odds,” says Anderson. “NuLegacy is the type of company I have helped to finance and invest in for more than 20 years in the brokerage business. And I especially like the ones I think have a chance of hitting a home run.

“I believe there is a very good chance of a high-grade deposit around here, somewhere in the valley between our ridge and the Goldrush ridge just seven kms away.”

(1) - Barrick Gold Bets Once More on Nevada After Zambian Flop

(2) - NuLegacy Gold Options a Major Land Position in Nevada

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