It is always interesting to speak with Ryan Jackson, CEO of Newlox Gold (LUX.C). Jackson has the great gift of being able to make a plan and stick to that plan – with a few shifts for COVID.
We hear a lot about Environmental, Social and Corporate Governance these days. For many junior resource companies, ESG is something of a “bolt-on”, for Newlox it is the foundation of the company. When he was in college, Jackson worked as an intern for a mining concern operating in Costa Rica. As he worked at the company’s site he also became aware of the artisanal mining activity in the area. In particular, he realized there were artisanal tailings piles which were both an environmental hazard because of the mercury used to extract the gold and a significant gold resource because the miner’s methods only recovered 40% of the gold present.
Putting these two insights together Jackson founded Newlox and got to work on potential solutions. Working with the University of British Columbia, Newlox developed a scalable technology which is designed to allow old artisanal tailings to be processed for their gold and environmentally remediated.
While the Newlox technology is an important part of the story, the real challenge was in deploying the technology in areas with significant artisanal activity. Artisanal miners tend to look at processors sceptically simply because they have not been treated fairly in the past.
Newlox set up its first plant in Costa Rica’s central gold belt. It paid artisanal miners to bring truckloads of tailings for processing. The tailings had an average grade of 9 grams of gold per ton and the first processing plant – which had a CAPEX of around 2 million dollars – could process 80 tons a day. At full capacity that would be around 700 grams of gold a day. Which does not sound like much but in a month that is 21 kilos of gold.
“We’re ramping up our test production to full commercial production at our first plant,” said Jackson in a phone interview. Newlox was knocked off schedule by COVID but took advantage of the lull to “Increase material handling capacity and upgrade our flotation. We want to be efficient.”
“We’ll have productivity numbers at the end of August,” said Jackson. “We’re past cash cost breakeven. We’re doing decently in terms of our expectations.”
A second Costa Rica plant, the Boston project, should be in place by the end of the summer. As well as tailings, this plant is designed to process the rock mined by the artisanal miners. This would mean that there would be no mercury driven extraction and the gold could be extracted in an environmentally safe way.
With two plants to service the 1000 artisanal miners in Costa Rica, Newlox looked further afield for its next project.
“We wanted to work with artisanal miners,” said Jackson. “We needed a technically good project but human resources and team development in a new jurisdiction are equally important. Because of widespread artisanal mining and the historical lack of interest in the sector from mining companies, attractive projects are plentiful, so the main factor for us is expanding to areas where we can efficiently deploy the right team.”
It turns out that the best fit was in the thriving artisanal sector in Brazil. “There is a huge difference in scale,” said Jackson. “In Costa Rica there are about 1000 artisanal miners, in Brazil, we are looking at working with one co-op with nearly 6000 miners, 133 mining claims and 300 active faces.”
The key to this relationship is Newlox’s partnership with NAP.Mineração/USP, the centre for small-scale responsible mining at the University of São Paulo, Brazil. This organization has been working in the “informal” mining sector in Brazil for many years.
“For the Brazil projects we have economies of scale,” said Jackson. “We can build two mills into one big one. Everything will be bigger than in Costa Rica. And there are large tailings piles.”
Overall, Jackson’s step by step, pay as you go, approach is producing results. Newlox is already pouring gold at its first plant. The market, however, has been a bit slow to catch on. As Jackson put it, “We’re being treated as an explorer, not a producer.”
There was a gratifying run up from a mid-June share price of $0.23 to an all-time high of $0.60 in early July, but the stock has since fallen back to $0.46 for a market cap of only 50 million dollars. In many ways, this is because the market has not figured out how to value a gold producer which does not actually own a gold mine. At full capacity, Newlox’s first plant will produce about $1.2 million dollars a month worth of gold. Against which it has to pay for the tailings and the processing costs. In August Newlox will the productivity numbers and, likely, some indication of costs. Jackson cannot disclose those numbers until they have been publicly released.
As those production details emerge and Newlox’s other projects advance it is reasonable to expect its market cap to increase substantially. All the more so if the price of gold advances as many expect it will.
[I hold a position in Newlox and will be expanding that position over the next year.]