Dec 17, 2021
 in 
Precious Metals

Inflation Hedge: Nighthawk Gold (TSX: NHK) (OTCQX: MIMZF) Developing Northwest Territories Next High-Grade Gold Resource

Gold prices have been volatile since the start of Q4, trading last at US$1,799 per-ounce. Investors continue to look at the yellow brick as a hedge against inflation, with U.S inflation rising at its fastest pace in decades.

Economists warn US may soon reach a state of stagflation not seen since the 1970s, the annual inflation rate in the US surged to 6.8% in November of 2021, the highest since November of 1990 and above forecasts of 5.8%. Upward pressure was broad-based, with energy costs recording the biggest gain (30% vs24.8% in September), namely gasoline (49.6%). Inflation also increased for shelter (3.5% vs 3.2%); food (5.3% vs 4.6%, the highest since January of 2009),namely food at home (5.4% vs 4.5%); new vehicles (9.8% vs 8.7%); used cars and trucks (26.4% percent vs 24.4%); transportation services (4.5% vs 4.4%);apparel (4.3% vs 3.4%); and medical care services (1.7% vs 0.9%).

Based off Google trends, searches on “inflation” are trending at its highest level in 5 years reaching a score of 100 (A value of100 is the peak popularity for the term. A value of 50 means that the term is half as popular)

As prices rise for everyday items, the dollar will continue to lose value, leading investors to play the precious and base metal markets to protect their wealth.

HOW TO PROTECT YOUR WEALTH?

During previous cycles, investors have capitalized on massive gains speculating on the commodities market. Gold is widely considered the greatest hedge against inflation, as it has preformed extremely well since the 1970s, when Nixon decided to abandon the dollar's link to gold. Gold’s price began around $35 per ounce, and topped out near $850 per ounce, delivering more than 2,300% return by the 1980s.

By 2001, gold prices plummeted to around $260 per ounce from a tighter monetary policy which brought inflation down from double digits to only 2%. Around this time, the Fed realized that it had been too tight for too long and began reducing the Fed funds rate target from 6.5% to 1.75% over the course of that year. The PCE deflator fell at a -0.4% annual pace in the second half of 2001, which was the first time it had ever visited deflationary levels - proof that the Fed had been too tight. As the Fed embraced easy money, gold rose from a low of $256 in early April 2001 to a high of $1900 in September 2011, for a gain of 642%. In real terms, gold reached almost the same levels it had in early 1980.

ONE UNDERVALUED GOLD STOCK?

Nighthawk (TSX: NHK) is a Canadian-based gold exploration company with 100% ownership of a district-scale land position (229,791 acres or 930km2) within the Indin Lake Greenstone Belt, located approximately 200 km north of Yellowknife, Northwest Territories, Canada.

The Company has focused on a small footprint, the Colomac Centre which consists of five separate gold deposits (Colomac Main, Goldcrest Grizzly Bear, and 24/27), but Colomac and Goldcrest received the most drilling and only more recently Grizzly Bear and 24/27 have been drilled by the Company. All deposits remain underexplored and open in all dimensions.  The Colomac Main Deposit was intermittently mined from 1990 to 1997 with reported production of 527,908 ounces of gold with an average head grade of 1.66 grams per tonne gold.   The other deposits remain untouched; thus mining activities have only impacted a small portion of the sill’s 7 km mineralized strike length.  All mining and processing equipment and infrastructure have been removed from the property.

Nighthawk (TSX: NHK) has completed over 185,000 metres of drilling over the past decade and plans to drill upwards of 200,000 metres of drilling by the end of 2022. In 2021, the company completed 72,325metres of drilling, with only ~23,000 metres reported.  

With such an aggressive drill program outlined, Nighthawk (TSX: NHK) will focus on delineating near-surface mineralization, offering investors multi-million-ounce gold upside.

Nighthawk (TSX: NHK) announced an updated mineral resource estimate at the beginning of the year (“2021 MRE”), which resulted insubstantial increases to both Indicated and Inferred ounces.

Highlights of 2021 Mineral Resource estimate (Colomac centre accounts for 94% of global resource):

Indicated Resources:

  • 2.3Moz (38.7 Mt @ 1.81 g/t, a 35% increase from 2020 MRE)
  • Including 0.9Moz open pit resources (17.9 Mt @ 1.62 g/t, a 71% increase from 2020 MRE)

Inferred Resources:

  • 0.80Moz (11.5 Mt @ 2.13 g/t, a 60% increase from 2020 MRE)

WHY INVEST IN NIGHTHAWK (TSX: NHK)NOW?

Nighthawk Gold (TSX: NHK) has been overlooked for years, but with the recent change in management and plans to delineate ~2.5Mozof open pittable ounces (0.9Moz currently) + with substantial potential to increase the underground resources, and target higher grade mineralization, the company will see a significant re-rate, especially since the current valuation is $24/oz (EV/MI&I) vs explorer average of $109/oz.

With the recent addition of Keyvan Salehi and Richard Roy, Nighthawk Gold(TSX: NHK) has adopted a new strategy:

Keyvan Salehi,President/CEO/Director

Mr. Salehi has over 20 years of industry experience having held various senior roles in operations, projects, and corporate development. Prior to joining Nighthawk, Mr. Salehi served as the Vice President of Corporate Development and Technical Services with Mountain Province Diamonds, where he was responsible for providing operational and technical oversight for the Mountain Province’s jointly owned 12,000 tonnes per day diamond mine in the Northwest Territories (introducing mine optimization initiatives to increase production and reduce costs). Mr. Salehi previously served as VP of Corporate Development and Technical Services for Kirkland Lake Gold (2016-2017), where he led the Company’s due diligence team behind the$2.4B merger with New market Gold.  He held the same position at St. Andrew Goldfields (2013-2016), where he spearheaded the Company’s sale process culminating in the sale to Kirkland Lake Gold in 2016. Prior to those roles, he held various operating positions with Lake Shore Gold, FNX Mining, and Vale(2002 – 2013). Mr. Salehi holds a Bachelor of Applied Sciences, Mineral Engineering from the University of Toronto and an Executive MBA from the Kellogg-Schulich School of Management.

Richard Roy, Vice President of Exploration

Mr. Roy is an experienced geologist with over 30 years in the mineral resource industry working across three continents including extensive experience with underground deposits. Prior to joining Nighthawk, he most recently held the position of Vice President New Ventures with Endeavour Mining Corporation upon the completion of the $1.6 billion acquisition of Semafo Inc. in March 2020. Prior to that, Mr. Roy spent almost 11 years with Semafo Inc. (as the Exploration Manager and subsequently holding the position of Vice President Exploration), where he focused on target selection and prioritization, and was part of the acquisition team looking at opportunities of a variety of grassroots to late-stage level projects. Mr. Royhas designed and implemented successful exploration programs and mine feasibility programs in Mexico and North America, including Nunavut, working for companies such as Aur Resources, Placer Dome and several other junior companies. He has been involved in the discovery of several gold deposits that ultimately reached the mining stage.  Mr. Roy holds a B.Sc. in Geology from Concordia University in Montreal and is a member of the Ordre des Géologues du Québec and is a Qualified Person in accordance with NI 43-101 regulations.

Nighthawk Gold (TSX: NHK) has also attracted some of the biggest players in the mining industry (smart money), as the company completed 3 successful capital raises in 2021 totaling ~$43.6M.

Top shareholders include:

  • Northfield Capital Corporation 15%
  • Kinross Gold Corporation 7%
  • Osisko Development Corp 6% (includes portion held directly by Sean Roosen)
  • Institutional ownership grew from 5% to 21% with names like Franklin Templeton, Merk Investments and Van Eck supporting the new team and new strategy

LATEST EXPLORATION SUCCESS

Nighthawk Gold’s (TSX: NHK) latest batch of drill results (29 drillholes 5,269m) demonstrates that at Cass the trend extends into the Albatross zone.  Intercepting higher grades, these new lenses added a combined 250 metres of mineralization and maybe indicative of other lenses further west and to the north. Highlights include:

  • Hole CM21-36 (set up immediately below hole CM21-22) returned 3.21 grams     per tonne gold ("g/t", "Au") over 20.50 m;
  • Hole CM21-37 returned a high-grade interval of 5.08 g/t     Au over 9.00 m;
  • Hole CM21-22 returned 1.49 g/t Au over 32.00 m including a higher-grade portion of 3.37 g/t Au over 10.50 m (Figure 3); and
  • Hole CM21-19 returned 1.47 g/t Au over 23.75 m and hole CM21-34 returned 1.09 g/t Au over 30.00 m, including 2.89 g/t Au over 7.00 m, within the westernmost lens.
  • Follow-up drilling next year will test the potential for additional lenses to the north and further to the west.

A new intersection from greenfield exploration at Albatross uncovers new mineralization and clearly demonstrates that the Cass trend extends well into Albatross.

  • Hole A21-02 returned 1.37 g/t Au over 14.00 m, including a higher-grade portion returning 5.37 g/t Au over 2.00 m.

Additional results are pending from a series of deeper holes drilled below the central Cass zone. Nighthawk Gold’s (TSX: NHK) is also awaiting results from the Colomac area, Kim South, and Grizzly zones (assay labs are backed up with wait times of up to 12 weeks).

CURRENT VALUATION

As of today, Nighthawk Gold’s (TSX: NHK) has 86,166,250 shares outstanding and is trading at $0.83, giving it a market cap of $71.38M.

Based on a Price/NAV comparable, Nighthawk (TSX: NHK) trades at a 0.21x (P/NAV), while Moneta Gold (TSX: ME) trades at 2.52x (P/NAV) (MORE THAN 10X).

Moneta Gold (TSX: ME) currently has 93,491,612 shares outstanding and is trading at $1.76, giving it a market cap of $164M. The company is currently exploring in Timmins, Ontario and has low grade (0.89 g/t @ a cut - off grade of 0.30 g/t Au) open pit resource with a high-grade underground resource (indicated 4.05g/t and inferred 4.21g/t @ a 2.60 g/t au cut-off) (all information based off Moneta Gold’s website.

JUNIOR MINING OUTLOOK FOR 2022

The junior mining sector has had a turbulent year, with gold prices being extremely volatile. In the beginning of the year, we saw gold prices reach US$1,950, and bottomed out to US$1,680 in April 2021. Major mining companies have also seen a decline in share price, even after month-over-month of substantial free cashflow.

A Notable deal that has recently gone down was the takeover of Great Bear Resources (TSX:GBR) which has been acquired by Kinross (TSX: K) for $1.8B or $29 per share. The Dixie project has excellent potential to become a top-tier deposit that could support a large, long-life mine complex and boost Kinross’ long-term production outlook. It also has significant exploration upside potential.

Kinross, on its last earnings call, stated that it expects to produce 2.1 million (+/- 5%) gold equivalent ounces for 2021. It expects to meet its revised production cost of sales guidance to$830 per gold equivalent ounce.

All-in sustaining cost per ounce for 2021 is projected at$1,110. Capital expenditures are predicted at around $900 million (+/- 5%) for this year.
In 2022 and 2023, Kinross expects the annual production to increase to 2.7 and2.9 million gold equivalent ounces, respectively.

WHERE DOES NIGHTHAWK GOLD (TSX: NHK) FIT IN ALL THIS?

At current levels, Nighthawk (TSX: NHK) is extremely attractive to majors, especially since the company is just scratching the surface on the open pit potential. And to top it off having Kinross Gold (TSX: K) owning 7%, Nighthawk(TSX: NHK) will be set up perfectly if the stars align.

Disclaimer: Nighthawk Gold Corp. (TSX: NHK) is a paid marketing client

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