NewLox Gold Ventures (LUX:CSE)
Producing gold in Costa Rica
Of course, the first company I want to look at is not on the Venture, Newlox is on the CSE. No matter, the basic work is the same.
Newlox is an on and off client of montherlodetv.net and that is how I first became aware of its young CEO, Ryan Jackson, and his idea of processing the “waste rock” of the artisanal gold mining community in Costa Rica. He’d begun work on the first plant back before COVID in 2019.
He had worked with people at UBC’s Norman B. Keevil Institute of Mining Engineering, Newlox built a processing plant which took the “waste rock”, processed it for gold and remediated the various nasty chemicals which had been used by the artisanal miners to, inefficiently, extract gold. The key here being “inefficiently”. The very primitive techniques used by the artisanal miners left 30-60% of the gold unrecovered.
In its initial Costa Rica operation, Newlox buys the waste rock from the artisanal miners based upon on-site assays. They are looked for rock grading 9 grams per ton or better. Newlox’s first plant was designed to process 80 tons a day. (Just for fun, say it is 10 gpt x 80 tons = 800 grams of gold per day, 4000 grams per 5 day week, 16,000 grams per month: 16 kilograms of gold at US $60,000 per kilo…nice work if you can get it.)
Just as Newlox was ramping up operations in Costa Rica COVID hit which set the company back considerably. However, the share price did not really reflect the COVID hit.
Anyone was to guess where I bought my position in Newlox…Yup, $0.50 exactly.
I got the entry point precisely wrong. However, I was not buying Newlox to trade. I was buying it because the story is compelling. It was compelling at $0.50 and it is more compelling at $0.18.
What Jackson is proving up is gold production without gold mining. The initial facility in Costa Rica is still “ramping up” to full production. Looking at its financials and doing some back of the envelope math in Q3 2021 Newlox produced roughly 108 grams per day, in Q4 that production had risen to 150 grams per day. Still some distance from my projected 800 grams per day or the company’s own projection of 648 grams per day. But very much going in the right direction. Q1 of 2022 should be very interesting. (It would be great if Newlox published quarterly gold production figures.)
Newlox estimates that the all-in cash costs at this facility will be on the order of $600 per ounce. Even with the current, slightly depressed, gold price, Plant #1 will be very profitable as it achieves full production.
While operations at its first facility in Costa Rica were disrupted by having to deal with COVID, Jackson kept pushing forward with what Newlox calls the Boston project.
Here the goal is to provide processing facilities to artisanal miners for their raw, un-processed feed stock. The Boston project is located in an area where permitted artisanal miners have been operating for years. By getting the raw feedstock, Newlox will be able to acquire more material of a higher grade. Projected throughput for Boston is 150 tons per day with a grade of 15 gpt.
Work is underway on the construction of the Boston facility. Test milling is expected soon with full production scheduled for early 2023. That production is anticipated to run 20,000 ounces of gold per year.
The overall Newlox plan is to keep building artisanal driven production facilities where ever suitable feed stock can be found. (They are looking at expanding into Brazil.) Each plant has an anticipated payback time of around 12 months of full commercial production.
Newlox is not a “get rich quick” sort of company. Jackson is taking a long view with each production facility first financing itself and then, other facilities. There will be bumps along the way. COVID was, obviously, a huge bump. But the actual details of construction are rarely smooth. However, not so very far down the road, 26,000 ounces of profitable gold should be coming out of the first two production facilities.
Frankly, I feel like a dummy getting in at the All Time High; but I may well average down a bit. The point here is that Ryan Jackson and the people at Newlox have a plan and are executing on that plan.
The market does not like anyone right now. Which is, of course, the best time to buy solid, long term, stories. Newlox is very much worth a look.
[Disclaimer: This is not investment advice. I am not an investment professional. I am down about 30% at the moment. I will write about companies that I hold. I will disclose any holdings. Do your own due diligence. Do it hard. Call the CEO.
I currently own shares in $LUX.CSE which I intend to hold but which I may sell at any time.]