If you’ve looked at a resource chart over the past two years, you’ll know that it’s been a profitable time to be invested in gold. While it may be a barbaric relic that sits around and pays no dividends, it has represented one of the hot tickets on Wall Street. Naturally, then, people are eagerly turning to the gold-mining sector. Within this realm is the exciting but highly risky junior exploration category.

One name that has aroused both intrigue and controversy is New Found Gold (NFGC). A mineral exploration firm, New Found is focused on its Queensway Project, located in Newfoundland, Canada. On paper, the project offers strategic advantages, being located near infrastructure such as highways, power lines and an experienced labor force. Broadly, the company is conducting an extensive 650,000-meter drill program.

In recent years, the mining exploration specialist has made extraordinary claims about high-grade gold samples, with the company’s latest press release whetting the appetite of speculation. In the report, New Found has announced exceptionally high-grade gold samples from its Keats Trench exploration site. Below are the core takeaways:

• Channel sampling revealed 455 grams per tonne (g/t) of gold over 4.1 meters, 148 g/t over 7 meters and 58.6 g/t over 11.6 meters.
• Further, the samples confirm strong gold mineralization in two key veins, which are the East-West Vein (with 77 meters of strike length confirmed) and the Keats Main Vein (60 meters of strike length confirmed).
• New Found’s Iceberg Trench also demonstrates strong gold potential, with an excavation exposing a 220-meter-long fault zone with gold-bearing quartz veins.

With these discoveries, management intends to continue drilling and sampling to further define the extent of the gold deposits. As well, the company aims to publish an initial mineral resource estimate (MRE) in mid-2025.

What’s significant here is the absolutely bonkers gold concentration. According to S&P Global, the average gold grade was 1.31 g/t in 2022. So, based on the figures from the New Found sampling report, its reserves could potentially have concentration levels nearly 45 to over 347 times what is average for the industry.

If true, that’s beyond a high-grade discovery — the gold industry would practically have to invent a new categorization.

Asking the Obvious Question About NFGC Stock

It’s usually difficult to pull a fast one on Wall Street. Yes, it’s possible that because NFGC stock is a lowly security — what most folks would consider a penny stock — its underlying announcements may not merit much consideration. However, plenty of analysts are assessing less-heralded names, including New Found. Therefore, it begs the obvious question.

Why, if NFGC stock is such a grand investment, is it down almost 47% in the past 52 weeks?

As you might suspect, at least some of the skepticism may be tied to a short-seller report. Back in September 2024, Iceberg Research published a takedown of NFGC stock, accusing the issuing company of lies, misrepresentations and enjoying the hype train generated by a professional stock promoter, a reference to company CEO and Chairman Collin Kettell. As well, Iceberg pours cold water on resource investor Eric Sprott’s involvement in NFGC.

Before anyone plunks down their hard-earned cash for NFGC stock, it’s well worth considering both the bull and bear case. From Iceberg’s perspective, it’s not just about the questionable promotional tactics that New Found deploys. Rather, it’s the claims of extraordinary gold concentrations.

Essentially, the short-seller has raised concerns about continuity. While New Found may have discovered high-grad gold deposits in certain drill holes or trench samples, it’s not clear whether these discoveries extend consistently over a larger area. This attribute is key for gold miners. If the gold veins are too narrow or isolated, such concentrations may not be economically viable for mining.

In turn, the criticisms lend weight to the financial viability angle. New Found isn’t in the best shape when it comes to the books. To Iceberg’s point, there is an incentive to misrepresent mining data to the general public, which is typically not astutely educated in all the nuances. And the implication is that NFGC stock is yet another pump and dump executed by professionals who know a thing or two about pumping and dumping.

Possibly Turning a Corner?

At this point, it’s possible that NFGC stock has absorbed the good, bad and ugly. Ultimately, then, the fate of NFGC stock would seem to rest on the underlying company’s MRE report. The resource estimate will probably confirm or deny the scale of the deposit discoveries.

Now, for Barchart Premier members, one big clue really got me thinking. Using Barchart’s Options Overview History, I discovered that between the third and fourth quarters of last year, the average implied volatility (IV) percentile — or the percentage of days with IV closing below the current at-the-money IV over the prior one year — was 63%. However, in the year to date, this metric increased to 73%.

What this statistic may be revealing is the market’s expectation of some big movement ahead. Could it be that bullish investors are anticipating a big jump in NFGC stock due to the upcoming MRE? Obviously, I can’t say for sure but that’s one reasonable item of speculation.

What’s really interesting is that during Q2 2024, the IV percentile shot up to 91%. During the three months, NFGC stock reached a closing high for 2024 at a price tag of $4.03.

Yes, shares succumbed shortly after — that has to be acknowledged. Still, with IV rumbling upward again for NFGC stock ahead of a critical fundamental development, it raises intrigue. One thing is for sure: New Found Gold should be on speculators’ radar.