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Sprott’s Exploration Investment Hints At Possible Resurgence In Mining Exploration

Sprott, the founder of asset manager Sprott Inc., announced that he had purchased $125.9 million of shares in New Found Gold Corp., an early stage exploration with exclusive rights to a Newfoundland and Labrador gold project.

“I do believe it is special,” Sprott said in an interview. “It’s going to prove to be maybe the greatest gold discovery in the history of Canada, if not in the world … so that’s what makes it so easy for me to put that additional money in it.”

Sprott is retired, and so invests his own money today. He remains bullish on Canada’s precious-metal mining industry. He has purchased stakes in dozens of tiny penny-stock companies. He was an early backer of Kirkland Lake Gold, which grew into one of the largest gold miners in the world with a value of $13.5 billion after a merger with Agnico Eagle Mines Ltd. 

It appears Sprott believes exploration is a key part of the present metals scene. Chris Verrico, CEO of Rio Silver, agrees. “The world won’t find more gold unless we start exploring,” he says. “For the juniors at these price levels, the risk reward is not great to explore. So, until the juniors market starts capitalizing, and people start feeling good about investing in these deals, because they can make money, the supply crunch on gold could be exacerbated.”

Sprott’s focus on an early stage mining company is in line with Verrico’s view of the market. “The majors are no good at exploring,” the Rio Silver CEO said. “They burn outrageous amounts of capital yet have a poor track record when it comes to exploration. “They’ll be better suited finding a junior with a half decent outline of a deposit in a good location, and grab that.” Such deposits, nonetheless, are getting harder and harder to find. 

“Something’s going to break here in the junior cycle,” predicted Verrico, who notes it could be during the junior cycle when these things turn around. “We’re starting to get excitement in the junior market, in part because the industry is really starting to get going post-COVID. As market caps grow, more interest will be on the space, and then the exploration cycle really begins.”

He adds: “There’s still plenty of opportunity.”