Newmarket Gold's Shares Up 75% In 2016 And That Is Just The Beginning

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Newmarket Gold's shares have appreciated 75% since the beginning of 2016, but CEO Douglas Forster believes that is just the beginning. The company's storied founders have set their sights on making Newmarket the next high-quality mid-tier gold producer. In this interview with The Gold Report, Forster puts forth his vision of how, starting with the acquisition of Crocodile Gold, he will make that happen.

NMI 3-Month Chart

Newmarket Gold Three-Month Chart

Management Q&A: View From the Top

The Gold Report: Newmarket Gold Inc. (NMI:TSX) (NMKTF) has a significant, well-known team with a strong track record. What brought all of you together?

Doug Forster: The founders of Newmarket Gold are friends. We decided it would be great to work together on a mining opportunity. After gold dropped about $100/ounce ($100/oz) one day in April 2013, we agreed that we had not seen valuations for gold assets at this level for many years. So we decided Newmarket would acquire gold-producing opportunities, and our strategy would be to roll up quality gold production assets. Great gold assets don't walk through the door. You have to literally dig them up. So having Lukas Lundin, Randall Oliphant, Ray Threlkeld and Blayne Johnson as founders of Newmarket brings an incredible contact base and scope of relationships to our business, which we will leverage to find and acquire those undervalued, potentially unrecognized quality gold assets.

Newmarket wants to be the next quality mid-tier gold producer.

Our first acquisition, Crocodile Gold Corp., was an unrecognized, undervalued gold production opportunity that our team identified, negotiated terms and closed. It has worked out very well for our shareholders. Bringing this team together was the seed of the success that we're now reaping for our shareholders.

TGR: Nothing shows more belief in a company than investing one's own money. Can you share management's ownership percentages and how much they've invested to date?

DF: The founders and management of Newmarket own about 8% of the company, and we have collectively invested CA$12 million (CA$12M) of our money. It's tremendously important that management and founders of public mining companies invest their own capital alongside shareholders. When we closed our first acquisition in July 2015, we completed a CA$25M concurrent financing at CA$1.25/share. The founders of Newmarket invested CA$9M, or 36%, of that financing, and this attracted other investors to join us in making Newmarket an outstanding success.

TGR: You have a unique performance share unit (PSU) investing plan and lower-than-average general and administrative expenses (G&A) that are aligned with your shareholders. Can you explain?

DF: Our PSU plan is unique in that the PSUs are not time-based vesting. Rather, they vest according to certain share price hurdles. We have aligned our incentive programs with what is most important to shareholders: share appreciation. There are approximately 4.0M PSUs granted to the management, board members and founders. The first one-third tranche vests when our share price hits $2.25 on a 20-day, volume-weighted average basis. The second tranche vests when the shares hit $3, and the third tranche is vested at $3.75. In this way management and founders' incentive are directly aligned with shareholders.

Our G&A is about $27 per annual ounce of production, and that's about half of our junior producer peer group, which averages approximately $56/oz of annual ounce of production.

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Disclosure: 

1) Paul Guedes conducted this interview for Streetwise Reports LLC. He owns, or his family owns, shares of the ...

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