Easily ranking among the most exciting but also highly risky junior gold exploration firms, New Found Gold (NYSEAMERICAN:NFGC) is quietly attracting interest from risk-tolerant gamblers. Over the years, New Found has made waves in the precious metals scene with astounding gold concentration claims — with some high-profile critics claiming that the news is too good to be true. Still, if the former is more aligned with reality, NFGC stock could potentially skyrocket.
Put another way, New Found is exactly what it sounds like — a high-risk, high-reward penny stock. Corporate insiders and proponents may object to that characterization, but it is what it is. With a time-of-writing price tag of less than two bucks and a market capitalization of only 527.2 million CAD, there’s no better descriptor. With NFGC stock, you’re swinging for the fences.
As such, New Found isn’t for everyone. However, open-minded investors should consider the main angles — both the positives and negatives — before making a decision.
As a junior miner, New Found falls under the exploration category — it’s searching for gold and because of this, it hasn’t yet generated any sales, nor do analysts expect sales in the immediate future. However, it has made claims about a potentially robust volume of gold in its mining projects, with the latest such information arriving via channel samples from its Queensway Project, located in Newfoundland, Canada.
At a specific area called Keats Trench, New Found took rock samples from the surface (in a process called channel sampling) and found exceptionally high gold concentrations. Notable samples included the following:
To provide context, S&P Global reported that the average gold grade was only 1.31 g/t in 2022. Therefore, the channel samples that New Found discovered are nothing short of astounding. What’s more, samples provide evidence of robust gold mineralization in two key veins. Additionally, the junior miner’s Iceberg Trench offers promise as a potential gold-bearing site.
Since the above press release, NFGC stock has moved up — but only by about 6%. Further, over the past one-year period, NFGC has given up 43% of equity value. It raises the obvious question: why?
Stay around in the market long enough and you’ll eventually come across a short seller firsthand. Although the practice of short selling might seem unsavory, it technically serves a purpose, much like great white sharks in the open water — they get rid of diseased entities which would otherwise consume valuable limited resources that viable entities could benefit from.
Of course, it’s difficult to view the matter that objectively when you’re the one suffering the losses. And while New Found and its proponents categorically rejected Iceberg Research’s September 2024 attack on the gold miner, it’s clear based on the market performance that many of the criticisms stuck.
Essentially, Iceberg accused New Found of lies, misrepresentations and a cynical deployment of the wiles of a professional stock promoter — a reference to New Found CEO and Chairman Collin Kettell. In the glaring spotlight is the gold concentration claims. Iceberg is adamant that concentration is only one part of the narrative. The other critical C-word is continuity.
Bottom line, the short seller cast doubts that the high-grade gold deposits found in certain drill holes or trench samples extend consistently over a larger area. If the gold veins are isolated in small pockets, then there may not be enough extractable gold to make the project economically viable.
Where then does this leave the speculator? What’s critical to note is that New Found stated that it would release a mineral resource estimate (MRE) sometime in the second quarter this year. This is significant news because Iceberg has been skeptical about the continuity issue. To make a long story short, the MRE will likely represent a put-up-or-shut-up moment for New Found.
If the high concentrations of gold extend over a consistent length, then NFGC stock could skyrocket. If not, Iceberg would be proven right, and the equity would likely tank.
It’s about as binary of an affair as one can get. What’s more, investors shouldn’t expect to get any market clues from opposing-side wagers. As of this writing, the short interest of NFGC stock is only 4.73% of its float. Yes, the short interest ratio comes in at 6.22 days to cover. Nevertheless, these aren’t outrageous stats so bullish investors shouldn’t expect a short squeeze.
Instead, the narrative is going to come down to the MRE. The gold is either there or it’s not.
