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The El Dorado Of Greenland – AEX Gold (TSXV: $AEX)

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AEX Gold has over 3,000 square kilometers available for exploration, and one location with gold estimates of 250,000 ounces at 18.5 g/t AU in Nalunaq, Greenland.

AEX Gold (LON: AEXG) (TSVX: $AEX) is an explorer that is focused on building a full cycle gold company in South Greenland. Founded in 2017, and with a current market cap of 90 million AEX provides investors a unique listing with a high-grade asset, based in an OCED jurisdiction with favorable mining laws.

Pandemic or no pandemic, AEX Gold continues to expand its asset portfolio and exploration activities. The company has no threat of insolvency and expects to begin commercial production from its Nalunaq mine by early 2022.

In November 2020 the company released a corporate presentation where they showed “a clear path to cash flow” for their exciting Nalunaq Investment.

Uncertainty is investors’ worst enemy, and so far AEX Gold has been very transparent with their ongoing processes and expectations from the Nalunaq project.

The company also informed that exploration drilling will continue for Vagar, another prospective location with characteristics similar to those of Nalunaq. On top of that, AEX Gold will also look into mapping and surveying Kangerluluk, an area that has shown samples up to 110.8 g/t Au.

Preliminary studies from the Vagar location have shown high-grade gold in quartz veins – which is quite a big deal for junior miners (to say the least).

In August 2020 gold prices reached a historic high of $2067 per ounce. With economic recovery and low-interest rates setting the tone for 2021, commodities such as gold are expected to have continued demand as investors try to limit their losses by moving into more physical investments.

 

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AEX’s Three Key Competitive Advantages


Promising location

AEX Gold has through its largest gold license portfolio in Greenland obtained a significant first-mover advantage. The Nanortalik gold belt where AEX’s main asset is located is similar in characteristics to that of Canada’s Abitibi gold belt, which has produced over 170 million ounces of gold since 1901.

Possessing claims for an area of more than 3,000 square kilometers, seven licenses in “one of the world’s most exciting new mining regions”, and knowing that Nalunaq has produced 350,000 ounces of gold in the past – AEX Gold appears to be very well-positioned for success in the coming years, if not months.

 

Pre-established infrastructure

Another fact to consider is that the Nalunaq project calls for minimal re-development investments since a large portion of the infrastructure is already in place – allowing the firm to focus on their self-funded exploration. Additionally, Southern Greenland is easily accessible by air and water and is ice-free most of the year, compared to some of the northern locations, providing great a logistical location.

 

Supported by the local government

AEX Gold’s presence is warmly welcomed by Greenland’s government and widely supported by the country’s major institutions – such as SISA, a Greenlandic pension fund, which has taken up a minority stake of 6.4% in the company.

AEX has also committed to employing at least 50% local workers, bringing not only investments to the country but also job opportunities.

Having interests aligned and being on favorable terms with the regulating government in the country where one’s excavation activities will be taking place are key success factors for any player in the mining industry.

 

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AEX’s Financial Situation and Lurking Risks 


With a reported cash balance of $68 million in Q3 2020, the company is nowhere near insolvency and has enough free cash to continue operations for a minimum of 3 years. While the company is not profitable yet, its financial position appears to be very strong for the time being.

Now trading at $0.50, with a price to book ratio of 1.3 – well below the industry average of 2.7 – AEX Gold is currently looking undervalued based on its assets.

The stock faced a sharp sell-off in early February on the back of their decision to defer Nalunaq mine development because of tighter Covid-19 restrictions. The world still isn’t completely clear from Covid-19, so investors could easily expect additional delays.

However, based on AEX’s fundamentals the sell-offs seems to be an unmerited overreaction – it’s only a matter of time before their operations can resume, plus the company has got enough gold in their war chest to whether out any additional delays.

AEX Gold has got enough gold in their war chest to whether out any additional delays.

A common risk associated with mining is energy consumption for operations and its carbon footprint. AEX Gold has taken steps to incorporate local wind and hydro plants to support mining and reduce the project’s environmental footprint. The effectiveness of these changes remains uncertain, however.

The market is whispering “inflation” – which we are still to see how will manifest – but if it picks up it could impose a risk on material costs. These costs could be offset with an equivalent rise in gold prices – the question will be whether it’ll be enough to cover the difference, as it is far from cheap to run a mining operation in Greenland.

 

The Overall Picture


AEX Gold Inc (LON: AEXG) (TSVX: $AEX) appears to be a promising mining company with a unique opportunity to capitalize on the vast lands and high-grade gold deposits it has claims on. Complemented by strong competitive advantages, government support, and extensive management expertise, the business is set to deliver great value for its shareholders.

The organization’s strong financial position and asset development projections portray an optimistic trajectory for the coming months. Currently undervalued and unchallenged in its domain, AEX Gold shapes up to be a good long-term value investment, backed by market momentum and its demand for commodities such as gold.

If you haven’t already, then take a good and long look at AEX Gold now and strike while the gold is still hot. 

 

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Luka Marjanovic

Partner

Luka holds a Bachelor’s in International Business and a Master’s in International Management. During his undergraduate studies he worked as a research assistant in the field of Big Data; founded his own consulting firm providing services to local SME's in various sectors and invested in the capital markets; as well as working pro-bono providing education and career counselling. Prior to his business education, he studied Biology-and-Biotechnology, and served in the Danish Royal Army as Second Sergeant, leading and managing a group under extreme conditions and pressure. Luka has spent significant time abroad, living and working in seven different countries. When he's not in the office, he's chasing the next gusts windsurfing, carving the mountain snowboarding or out in the forest for a jog.

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