Newlox Gold Ventures Corp.
Meta description: Newlox Gold Ventures Corp., is an environmental remediation company working within the mining industry. Here is everything you need to know about its stock.
INTRODUCTION
Introduction and Overview
Gold production and mining, in general, used to be a business or industry that was meant for big corporations with access to deep funding as well as technical, commercial and operational know-how. In essence, the barriers to entry into the mining industry are some of the highest you can find in business.
However, the status quo is changing. Thanks to technology, small but innovative and highly-driven firms are aiming to break into the industry with the goal of reinventing mining as we used to know it. One such company is Newlox Gold Ventures Corp., an environmental remediation company whose business is to recover residual precious metals and contaminants from historical wastes generated by over a century of inefficient mining carried out by small-scale, artisanal miners.
Mining is one of the dirtiest industries, and while the big players do more damage, artisanal mining still contributes a good fraction of the wastes as well. Even more appalling is the impact brought about by illegal small-scale miners. Most of these wastes are not properly disposed, and the risks they pose to the environment are quite substantial. However, hidden in some of these wastes are precious metals and minerals, potential ample revenue generators, if reclaimed and put to proper use. This is where Newlox Gold comes in.
Based in Vancouver, Canada, the company has focused its operations on Latin (Southern and Central) America, looking to clean up decades of artisanal mining wastes and in the process, generate cleaner, more viable minerals. It is out to develop new gold projects by cleaning the wastes from old production processes. Newlox will not describe itself as a mining company. Instead, it claims to be more into clean tech than explorations.
Currently, the company has undertaken a little over 30 projects spread across key states in Latin America, including Nicaragua, Ecuador, but most especially, Costa Rica. Newlox Gold is a publicly traded company with primary listing in 2012 on the Canadian Securities Exchange (CSE), with the ticker symbol, LUX. It is also secondarily listed in Europe on the Frankfurt Stock Exchange (FSE) under the ticker NGO.
Company Strengths and Opportunities
Newlox Gold appears to possess some great deal of potentials. Looking into the specifics of its business model highlights some core strengths, which if well utilised, will set the company on the path of growth.
- Extremely Low Costs
Compared to the general mining industry, Newlox Gold does business on extremely low costs. The natural resources and mining industries are known for high costs – especially for capital projects. As such, mining projects have mostly been the exclusive preserve of large-cap companies.
However, Newlox has been able to develop innovative technology to greatly reduce the quantum of costs involved in capital expenditure. Capex for a single project is put at just about $1.5 million.
- Innovative Processes and Technology
By developing an innovative business model, Newlox can largely eliminate the time and capital-intensive processes that we have come to identify traditional mining with. For traditional mining firms – both large and small-scale – to embark on proper mining expeditions, they must first prospect for the mineral (in this case, gold).
Then, they have to undertake commercial, environmental and financial assessments of the mining assets. There are also legal processes to be carried out, before finally commencing the mining proper. But new business practices undercut this.
For instance, there is far less legal and regulatory approval needed for an environmental remediation and clean-up project (which is what Newlox does) as against for a full-scale mining project. Also, there is no need to embark upon prospecting and exploring for minerals as they are readily found in the wastes.
More importantly, all of the technology is custom-built and proprietary, giving Newlox an advantage over the competition.
- Management and Partnerships
Newlox Gold appears to be run by a team of astute industry professionals with commendable levels of expertise and experience. However, more noteworthy is the amount of partnerships with institutions and resource persons that Newlox seems to have developed.
Entities with whom Newlox has developed partnerships include academia and other core relevant institutions as well as an array of technical advisors and qualified persons. These will surely prove useful in R&D.
- Latin America
The Latin American continent is a fast-emerging economic power, as countries in the region prominently feature on the annual lists of fast-growing economies. The mid-term growth forecasts for the region are quite modest and there are projections for rapid modernization in business and governance in the region.
Despite being an emerging market, some countries in the region have started to emerge as global players in an array of sectors – from technology to manufacturing and finance. However, one industry where Latin America plays a particularly big role on the global stage is natural resources – and in particular, the mining sub-industry. From oil and gas to agro produce and precious metals, Latin America features prominently with regional raw material superpowers. Notably, countries in the region are heavy producers of gold. Hence, the region appears to be a perfect place to carry out gold business.
Just like in most emerging economies, the Latin America region can prove socially and politically unstable, as events in Venezuela have shown. However, Newlox states that it operates in “politically and socially stable” states in Latin America. It has set up a major base in Costa Rica, where it operates under a local subsidiary, Oro Roca, S.A.
- Unique Position: Environmental Change and Mining
From all indicators, Newlox occupies quite a unique place in the mining industry. The mining and extractive industries have historically been touted as unethical and noted for being against social good. Particularly, they are well known for their environmentally-damaging activities. It is, therefore, rare to see a firm that is engaged in mining, yet registered as a “clean-tech” company.
Newlox has noted that its aim is to bring about environmental and social change by making use of custom-built technology to clean up the environment and yet generate revenue from mining. Another way by which the company reports it brings about social development is in economic empowerment of the artisanal mining cooperatives. Newlox enables them monetize wastes, while also helping in the removal of those wastes from their mining sites.
- Research and Development
Being an innovative company, R&D has to be an important aspect of business for Newlox. The company has gone further to incorporate Newlox Research and Development Corp as a separate, though subsidiary entity, for which it has reportedly secured research grants. Apart from serving as in-house research partner to Newlox, the newly-formed Newlox Research also aims to enter into ventures with third parties.
Company Weaknesses and Risks
Despite appearing to be a promising firm, some points about Newlox still call for concern.
- Finances
The finances of the firm highlight potential red flags. Even though listed as far back as 2012, the company is still largely in its initial stages of business development and as a result, been performing below par on key financial metrics. For instance, it is still a long way from profitability, as latest financials show that it loses $1.7 per every $1 of revenue made. The company also runs extremely low on cash.
However, we have to commend the healthy debt profile due to its preference for equity or hybrid funding.
- Valuations
With market cap at just around $20 million, the company is grossly overvalued. A valuation of 50X revenue is not healthy, and might not be sustainable. Even at that, for majority of stock investors, the overall market capitalization is extremely small. That, unfortunately, sets the stock up for easy manipulation.
- Ambiguous Targets
It is a point to note that there are no specific dates or timelines for most of the milestones the company had outlined. With this, investors do not have any standards or benchmarks to which to hold the management.
SHARE STRUCTURE
From latest information at the Canadian Securities Exchange (CSE), Newlox Gold share structure goes thus:
Total Outstanding shares: 96,443,740
Reserved for issuance: 35,518,502
The Company is, however, authorized to issue an unlimited number of common shares without par value.
CURRENT PROJECTS
The projects the company is currently undertaking are numbered.
Project 1
The Costa Rican Gold Belt, designated as Project 1, is centered around tailings and metal recovery from ancient Costa Rican mining sites. The business development process for Project 1 involved negotiating with artisanal cooperatives covering over 30 mining sites to secure historical stockpiles of gold tailings which serve as the feed stock for the project.
Upon acquiring the potential feed stock, the Newlox in-house atomic absorption & fire assay analytical lab then tests the samples, to identify if they meet certain cutoffs, before they can be admitted as proper feed stock. So far, Project 1 is still the only project that has reached commercial development.
Project 1 has a rated capacity of 80 tonnes per day of material grading +9 grams per tonne of gold. It is projected that gold recovery from the project will hit as high as approximately 90%. It is expected that there will be at least 2 plants as part of Project 1; and the other plant is expected to come on board in 2021.
This business model of sourcing the feed stock from organized groups and cooperatives rather than the company prospecting in search of potential feed stock, both benefit the company and the cooperatives. For one, the cooperatives and individual artisans get to earn returns from the wastes they generate in the course of carrying out their operations.
The company itself benefits in that it does not have to go about prospecting for potential feed stock. And finally, there is the overall benefit to the society as a result of the environmental remediation efforts.
Project 2
Tagged ‘The Boston Project’, Project 2 is a fully-permitted mining concession also located in Costa Rica in the ancient Juntas Gold Camp which has seen mining activity since very early 20th century. With a larger scale and better grade than was seen in Project 1, The Boston Project comes with a mill with output at 150 tpd of material grading 15 grams per gold. Precious metals recovery is expected at over 90%. At full capacity, the facility will be churning out over 1,000 ounces of gold monthly.
The timeline for completing the project and reaching initial production capacity is the second half of 2021. Beyond the above, the company plans to increase Project 1 to reach full commercial capacity and to embark on expansion projects all across Latin America.
CURRENT FINANCIALS
Based on information contained in its financial statements for the year ended March 2020, revenue came in at $486,603, representing a multiple-thousand-increase over the previous year, bearing the fact that no revenue was recorded for that preceding financial year. Losses were, however, 170% greater than revenue at $790,830, a 0.001% reduction from the previous period. This highlights the fact that the company may still be a long way from profitability.
Net cash-flow for the period was $5,879, a sharp 67% drop from the preceding year. The company, however, has a healthier, longer-term debt profile, but is heavy with short-term liabilities. One important fact that stood out from the financial statements is that the company generates far below the quantum of cash needed for operations and may need to revamp this almost immediately to ensure longer-term sustainability.
Unfortunately, one cannot be really bullish about the forthcoming year ended March 2021, especially considering the impact of the COVID-19 pandemic on the global economy, and Newlox’s business operations in particular. The company had to halt operations for a while and only did return to work just recently. Although not yet reflecting in its books, the company recently secured $2.7 million in convertible debt financing. Thus, there might be some fast expansion activity in the near to medium term.
MANAGEMENT
Newlox is led by an array of industry veterans, who appear to have the commensurate experience needed to run a firm like this.
Ryan Jackson, CEO & President
A mining expert with experience both afield and off-field, especially in Latin America, but also in other key gold markets. Having covered the industry as a top journalist, Jackson had developed an important depth of understanding and made crucial contacts that will prove useful to work at Newlox.
Jeffrey Benavides, CFO
Based in Costa Rica, the country of core operations, Benavides is an experienced accountant, and has spent some of his professional years in the mining industry. With several years worth of experience in mining in Latin America, Benavides is charged with overseeing personnel and processes.
Marcello Veiga, Chief Technical Adviser
With a PhD in mining, Veiga is a professor of same field at the University of British Columbia. With over 40 years in the field, Veiga has served in advisory roles to global bodies including the United Nations Development Project on things mining. He is a well-sought scholar on artisanal mining, having deployed his experience of several field projects in this specialization.
Furthermore, Newlox has a commendable array of directors, technical advisors and qualified persons, all of whom are authorities in the field.
Research
Canadian Stock Exchange (CSE): Newlox Gold Ventures Corp.
NEWLOX GOLD VENTURES CORP Announces: Closing of Acquisition of Oro Roca SA – Company Update.
NEWLOX GOLD VENTURES Official Website.
NEWLOX GOLD VENTURES CORP. Years Ended March 31, 2020 and 2019, Consolidated Financial Statements.
PRESS RELEASE: Newlox Gold Raises $2.779 Million
PRESS RELEASE: Newlox Gold Joins CSE Composite Index
PRESS RELEASE: Newlox Gold Resumes Gold Production
