James Bay Minerals has secured what we believe to be one of the best gold deals on the ASX, acquiring the Independence Gold Project in Nevada for a total purchase price of ~$4/oz, in a region where peers trade for many multiples of that. The project’s previous owner, an undercapitalized private company and motivated seller presented a rare opportunity to acquire a high-quality asset at a deep discount—a feat that’s increasingly difficult to achieve in gold M&A as prices rise.
JBY’s Independence gold project sits directly adjacent to the Phoenix/Fortitude Mine, owned by Nevada Gold Mines (NGM)—a joint venture between A$47 billion Barrick Gold (NYSE: GOLD) and A$83 billion Newmont (ASX: NEM). NGM is one of the world’s largest gold producers, accounting for over 3 million ounces annually.
As we pointed out in relation to another stock – Sun Silver (ASX: SS1) – here on Livewire, Nevada, USA, is a state that is not only a tier 1 jurisdiction but consistently ranks in the top 3 jurisdictions to operate globally, per the Fraser Institute.
JBY’s project has a resource of 1.18Moz gold and 7.6Moz silver (NI-43 foreign resource estimate), including a high-grade component of 796,200oz at 6.53g/t Au, open in all directions. However, we believe the low-grade, near-surface component of the resource is fundamentally misunderstood across the market, and should it prove amenable to low-cost heap leaching, a process that other nearby miners commonly practice. If this forecast proves accurate, there is substantial shareholder value on offer from the current market capitalisation of only 60 million.
Australian investors traditionally snub sub-1g/t gold grades, but in Nevada, heap leaching enables highly profitable production at much lower grades. For example, the neighbouring Phoenix Mine operates exceptionally profitably at just 0.32g/t gold, with an AISC of US$1,050/oz. SSR Mining (ASX: SSR)’s Marigold Mine remains profitable at an eye-wateringly low grade of just 0.17g/t gold. These examples highlight the untapped potential of JBY’s 0.37g/t oxide resource, which remains overlooked by the market despite its strong economics.
Too good to be true?
Soft oxide ores are ideal for heap leaching – a process where ore is dug up, lightly crushed, stacked into piles (or heaps), and irrigated with a cyanide solution using basic PVC piping.
Challenges with heap leaching can include volatile weather conditions, environmental regulations, a lack of available land or steep terrain – none of which are an issue in Nevada.
From our analysis of Nevada heap leach gold production, recoveries of 60-80% with minimal processing costs are the norm, with strip ratios as low as 0.5:1. While difficult for the average Australian gold-focused investor to comprehend, mining in Nevada is more akin to large-scale earth-moving operations with operating costs at the Phoenix mine next door to JBY’s as low as A$10 per tonne—a stark contrast to Australia’s >A$100 per tonne underground operations.
If you wanted to draw an Australian comparison, we think the Pilbara iron ore market is the most analogous. In the Pilbara lower-grade hematite DSO remains superior to higher-grade magnetite due to its simplicity, scalability, and cost efficiency.
Australian investors have been conditioned to evaluate gold deposits based almost exclusively on high-grade intercepts. With discoveries like Bellevue Gold (BGL)’s namesake Bellevue gold project hosting a resource of 3.2Moz @ 9g/t Au, attracting a market capitalization in excess of $1.5 billion despite the hard economic reality that mining costs came in at A$259 per tonne in the December quarter, eroding margins despite the higher grades. (For completeness, Bellevue is in its ramp-up mining phase but hasn’t enjoyed the re-rate that gold peers have had over the last 12 months and has only just disclosed the crucial all-in-sustaining-costs metric to investors for the first time in January).
James Bay Minerals (ASX: JBY) listed on the strength of its prospective lithium assets in Quebec, along trend from Patriot Battery Metals’ (ASX: PMT) world-class Corvette discovery. We covered it here. However, the downturn in lithium prices has forced JBY to diversify its focus to maintain investor interest, as exploration is capital-intensive, particularly in James Bay.
Despite retaining its lithium assets, the company has scaled back drilling due to the high operating costs in the remote region, where drilling expenses can reach $1,000 per meter. Even strong lithium drill results are struggling to gain market traction, as evidenced by QTWO Metals’ latest hits (which were nothing short of exceptional – highlights included 347m @ 1.35% Li2O. The share price doubled to $1.48 per share on the news, before falling back to $0.78 by the end of Jan). With ~$2 million already spent to secure tenure until 2026, JBY has shifted its priorities toward acquiring a lower-cost, near-term development asset to drive shareholder value.
Sidebar: Many might be sceptical of this sort of ‘pivot.’ In our opinion, we view junior mining entrepreneurs who are realistic and willing to adapt (and do so while protecting shareholder capital) positively. This aligns with the culture Luke Laretive has been fostering at Seneca for years —encouraging people to be brave enough to change their mind. The only thing worse than making a mistake is compounding the error in a bid to protect your ego.
Beyond its near-term gold production potential, JBY has multiple levers of ‘low-hanging fruit’ to expand the resource at the Independence project. The high-grade skarn zone remains open in all directions, while infill drilling and underexplored areas—previously neglected by owners unwilling to spend ~$150k on a short access road to reach uphill sections of the property or assay entire drill core sections—offer straightforward growth opportunities. With US$25M already spent on exploration, JBY is positioned for a major resource upgrade at minimal cost.
Located immediately west of NGM’s Phoenix/Fortitude Mine, Independence presents a compelling bolt-on acquisition opportunity. It offers near-surface, high-margin ounces, along with permitting advantages and proximity to major infrastructure. On an EV/Resource valuation, JBY trades at just $41/oz, a steep discount to M&A transactions that have historically occurred at an average of $137/oz. A conservative takeover scenario values JBY at $1.60+ (234% upside), with blue-sky potential of $2.50+ (5-6x upside) upon resource expansion.
At just a $60 million market cap, we view JBY as one of the most mispriced, asymmetric opportunities on the ASX today. In our view, the Nevada majors won’t ignore this forever.
