Newcore Gold’s best Nyam hit points to larger Enchi mine in Ghana

Newcore Gold's recent drilling at its Enchi gold project in Ghana has revealed a record-breaking assay, indicating the potential for a larger mine than previously estimated. The company's hole NBDD088, which drilled just beneath the current reserve pit, returned an impressive grade of 3.67 grams of gold per tonne over 25.3 metres.

Complementing this was hole NBDD091, which yielded 1.26 grams of gold per tonne from 300 metres, including a notable 2.31 grams from the same depth. Enchi, located in southwestern Ghana, is situated approximately 290 kilometres west of Accra. Analysts from Haywood Securities, Marcus Giannini, maintain the company's view that Enchi's metal reserves have the capacity to support a larger-scale mining operation than initially outlined in the project's prefeasibility study.

This assessment is bolstered by the emerging depth-growth trend across multiple Enchi deposits. The company's latest drilling results have not been included in the resource and mine study, allowing for the potential expansion of the pit limits and the addition of higher-grade feed material. At the current market price of 29¢ per share, Newcore's Toronto-listed shares have remained relatively stable, trading in a narrow range between 28¢ and 92¢ over the past year.

The company's market capitalization stands at $82.5 million, with a current share price of $29. Depth growth is a key focus for Newcore, with the five diamond holes drilled accounting for a total of 1,489 metres across four sections, spanning 410 metres. CEO Luke Alexander commented on the significance of the findings, highlighting the discovery of wide zones of mineralization above the existing resource grade, which bolsters the opportunity for higher-grade gold discoveries in future economic studies.

The deepest drilling reached a depth of 275 metres, while the average depth of the Nyam's holes was 100 metres. Haywood Securities notes that the shallow test depth leaves room for the reshaping of proposed pits, incorporating more higher-grade material into the mine plan. A potential comparable for Enchi is Asante Gold's Chirano mine, situated 50 kilometres northeast of Enchi, with mining operations extending over 800 metres below surface.

Newcore has reported assays from 46,140 metres of its 80,000-metre program. Currently, four rigs are focused on testing shallow areas for resource conversion and deeper zones for higher-grade extensions. The June study proposed an open pit and mill capable of producing 5.5 million tonnes per year, generating an estimated 953,000 ounces of gold over a 9.3-year period.

The study further forecasts an average annual output of 104,000 ounces, increasing to about 129,000 ounces during the first three years due to higher-graded processed material. Assuming a gold price of $3,800 per ounce, the study estimated an after-tax net present value of $496 million, an internal rate of return of 37%, and a payback period of 1.6 years.

Initial construction costs were estimated at $351 million. The June study encompassed 13.5 million indicated tonnes grading 0.66 grams of gold per tonne, producing 287,000 ounces, and 5.5 million inferred tonnes grading 0.68 grams, resulting in 120,000 ounces. Enchi's probable reserves total 51.3 million tonnes grading 0.64 grams, equating to 1.06 million ounces.

So far, only the first 28,000 metres of the current drilling program have contributed to the March resource estimate underpinning the study. Newcore plans to assess the later drilling results in subsequent resource estimates and economic analyses. In terms of market valuation, Newcore currently trades at 0.14 times Haywood's estimated net asset value, compared to 0.44 times for selected peers.

Its enterprise value of $28 per resource ounce is notably lower than the peer average of $213, a gap Haywood attributes to higher costs in the June study and a weakness in gold equities. The company holds $18.8 million in cash and has no debt, according to Haywood. Haywood Securities expects Newcore to seek a Ghanaian mining lease by the end of the year, given the completion of the study and the declaration of a reserve.

The broker participates in a recent share offering by Newcore, holding at least 1% of the company's shares.