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How Nordic Gold turned a shell company into a 60-thousand ounce per year producer

A unique opportunity in the world’s number one mining jurisdiction
By: Galit Solomon

Company:  Nordic Gold, NOR:TSXV
Market Cap: $12.6 mil, $0.065/share
President & CEO:  Michael Hepworth
Headquarters: Vancouver, Canada
Number of locations: 3
In current role: 5
Place of birth: United Kingdom

In the span of seven months, one of Europe’s newest gold producers, Nordic Gold, went from relative obscurity to producing 4,100 ounces worth $5.1 million. “We plan to produce 60,000 ounces, worth $78 million in 2019, and 70,000 ounces per year, worth $91 million per year over the six years that will follow,” says president and CEO, Michael Hepworth. “Nordic Gold has a 250 ton per hour plant, fed by two open pits. Most of the area is mineralized but unexplored, providing significant blue-sky exploration potential.” Since gold companies tend to be valued at 1-5 time revenue, Nordic Gold’s current $12.6 million valuation seems unreasonably low.

While Nordic Gold is headquartered in Vancouver, Canada, the two pits are in the world’s number one mining jurisdiction – Raahe, Finland. “NOR was a shell that had been around since the early 2,000s. But it only began trading as Nordic Gold in August 2018. The previous owners went bankrupt, largely due to a lack of technical mining skills.”

Now the million-dollar question is, what will new management do differently? Hepworth says the key is to learn from the past. “We are approaching this project from a science and engineering perspective. We have made changes to almost every step of mining and processing. We have chosen to selectively mine, instead of the bulk mining approach taken by the previous owners. Bulk mining results in significant dilution, which proved to be the undoing of the previous operators.”

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https://podcast.rss.com/richmondclub/download.php?filename=2019-02-17_richmondclubmichaelhepworth.mp3

Hepworth studied marketing and business and ran his own management consulting company with a strong focus on strategy. He sold his business In 2005 to a US firm. “I continued to consult while I looked for my next opportunity. I was interested in the mining business.” Hepworth had discussions with the current Chairman of Nordic Gold, Basil Botha, who was responsible for a mining operation in Guatemala at the time. The pair has known each other for four decades. “I did some consulting work with Mr. Botha and eventually decided to take on the role of VP, Corporate Development in Guatemala. It was my introduction to the business, and I discovered it offered everything I was looking for in a career.” Hepworth has been working in mining ever since.

When Hepworth and Botha began looking at the Finland asset that eventually became Nordic Gold, they recognized their biggest challenge would be raising the capital needed to run a past producing mine. “We were a $3 million market cap exploration company that was trying to acquire a fully built and past producing mine. We needed $20 million US in order to acquire the mine. Financing this required all the skills and contacts the team had. It was a stressful and challenging period, but perseverance and focus paid off.”

Hepworth also admits that current market conditions are not ideal, but he says there is a silver lining. “We have two research groups that believe we are significantly undervalued.” He adds, the next six to twelve months will be critical. “We have three main goals – optimizing production and economics, adding ounces so we can upgrade our resource and extend the mine life, and refinancing the gold forward sale.”

Hepworth cites three reasons why this is the time for investors to consider investing in Nordic Gold.

  1. “We have an extremely talented operational team in Finland made up of three professionals with a combined 75-years of gold mining experience. They are all engineers and have worked with big name companies like Goldcorp, BHP Billiton, and Rio Tinto, to name a few.
  2. Regardless of the metric you use to measure our worth, we are currently under-valued.
  3. And finally, there is a huge exploration upside. We have a five-kilometer-long area where the mineralization is pretty much the same, and only about 1.2 kilometers of that has been drilled.”
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