New Found Gold Drills at 5-Meter Spacing at Keats Zone: What Tighter Drill Patterns Mean for Mining Confidence

• New Found Gold completed tight-spaced drilling at the Keats Zone during 2025, with results reported through February 2, 2026 (additional results pending), indicating continuous at-surface high-grade gold and addressing one of the most common investor risks in high-grade gold systems: grade variability at mine scale.
• Near-surface grade continuity has potential implications for mine planning, strip ratios, unit costs, and early cash flow, particularly in a higher-cost inflationary environment.
• Transition from exploration drilling to grade-control density at 5 meter by 5 meter spacing signals a shift from geological discovery toward execution and extraction readiness.
• Queensway's structural setting and discoveries outside the preliminary economic assessment area suggests district-scale optionality, but recent drilling prioritizes economic confidence over exploration upside, aligning with institutional capital preferences.
• Indication of shallow and continuous mineralization may reduce downside risk and strengthen the credibility of preliminary economic assessment-level economics ahead of updated resource and technical reporting expected mid-2026.

Why Near-Surface Grade Continuity Matters More Than Headline Grades

High-grade gold intercepts generate investor attention, but continuity at mine scale determines whether a discovery becomes economically viable. Many high-grade gold stories underperform after preliminary economic assessments when drilling density exposes grade variability that undermines production assumptions.

The Market Problem: High-Grade Discoveries That Fail at Mine Scale

Common failure points include nugget effect (where gold occurs in sporadic clusters rather than continuous zones), grade smearing (where widely spaced drill holes create an illusion of continuity), and reconciliation risk (where actual mined grades deviate from resource models). Institutional investors systematically discount headline intercepts without density because exploration drilling typically targets high-grade zones with wide spacing, creating uncertainty about what lies between drill holes.

At-Surface Continuity as a Cost & Risk Lever

Strip ratio sensitivity governs open-pit economics. When high-grade mineralization occurs at or near surface with minimal waste rock removal, mining costs decline substantially. Near-surface continuity may reduce these risks by indicating that ore extends from surface downward without extensive waste removal, allowing simpler mining sequences and lower capital intensity.

Projects with shallow, continuous ounces may generate revenue faster because ore extraction begins sooner and waste handling costs remain contained. This matters for debt financing and streaming arrangements, where lenders model cash flow stability and early payback.

From Exploration Success to Engineering Confidence: What Changed at Queensway

New Found Gold's drilling program at Keats shifted from exploration to development drilling, including grade-control density during 2025. The Keats excavation grade control drill program comprised 84 drill holes, with 62 percent of results reported as of February 2, 2026. This change reflects management's primary focus on de-risking near-term production economics and secondary focus on expanding resource footprints, as evidenced by a 75:25 split in drilling meterage in 2025 between development and exploration.

Shift in Drilling Intent: Exploration Versus Grade Control

Exploration drilling typically uses 50 to 100-meter step-outs to define mineralized trends. Grade-control drilling tightens, in this case to 5 meter by 5 meter spacing to validate grade distribution within near-surface blocks, supporting engineering designs and production schedules. The 5-meter spacing signals a different project phase because mining equipment requires grade confidence at meter-scale resolution.

Recent results from February 2, 2026, included intercepts of 508 grams per tonne gold over 2.20 meters from 16.80 meters, 113 grams per tonne gold over 3.75 meters from 11.90 meters, and 27.0 grams per tonne gold over 10.00 meters from surface.

Chief Executive Officer Keith Boyle framed the company's progress in a late 2025 investor presentation:

"Last year was a pivotal year for us. We went from exploration at the start of the year to being an emerging producer at the end of the year."

What Continuity Actually Means for Investors

When dense drilling reveals consistent grades across tested volumes, resource estimation becomes less sensitive to capping parameters and dilution estimates. This may reduce the gap between geological resources and mineable reserves, a critical distinction because only reserves support production schedules and economic models.

Dense drilling at Keats may support indicated resource classification, which matters for financing because lenders typically require indicated or measured categories for reserve conversion and production planning. The company plans to file an updated mineral resource estimate and technical report in mid-2026.

Keith Boyle described the project's production profile in the July 2025 preliminary economic assessment:

"It's phased. Starting small, small capex C$155 million, growing that to use the cash flow to grow it to 7,000 tons per day or 172,000 ounces a year at an all-in sustaining cost of less than $1,100 an ounce… Targeting 100,000 ounces in the first four years and then over 170,000 ounces thereafter."

The preliminary economic assessment, released July 21, 2025, outlined average annual production of 172,000 ounces in Years 5 through 9, with Phase 2 all-in sustaining costs of $1,090 per ounce at a base case gold price assumption of $2,500 per ounce.

Queensway in Context: Structural Scale Without Over-Promising

The Queensway project occupies a structural corridor with demonstrated strike length and vertical extent, but management has prioritized near-term mining potential over district-scale exploration narratives. The company plans to expand grade control drilling to the Iceberg and Lotto excavations in the second quarter of 2026, indicating continued focus on near-surface continuity validation.

Institutional capital values optionality differently before and after economic proof. Once a company demonstrates profitable extraction at scale, additional resources gain credibility because infrastructure, permitting, and operational capability already exist. Before that proof point, optionality trades at steep discounts because it compounds rather than mitigates execution risk.

Cost Curves & Capital Intensity

Gold development economics have tightened as inflation elevated sustaining costs across the sector. All-in sustaining costs have increased industry-wide due to higher labor costs, energy prices, and consumables inflation. Producers with high all-in sustaining costs face margin compression, while developers must model higher cost structures than historical precedents.

When ore sits at or near surface, mining companies can potentially adjust production rates, defer waste stripping, or selectively mine higher-grade zones to manage cash flow during price volatility. Deposits requiring extensive pre-stripping carry fixed cost commitments that reduce operational flexibility.

Economic Relevance at the Preliminary Economic Assessment Level

Preliminary economic assessments typically discount future cash flows at 5 percent, meaning revenues generated in years one through five contribute disproportionately to net present value. Projects that can access high-grade near-surface ounces early may generate stronger net present values and internal rates of return.

New Found Gold's phased approach starts with C$155 million capital expenditure supporting initial production, then expands to 172,000 ounces annually using internal cash flow. This strategy requires initial production to deliver predicted grades and costs, making near-surface continuity validation essential for credibility.

New Found Gold acquired Maritime Resources Corp on November 13, 2025, adding the Hammerdown Gold Mine along with the Pine Cove Mill and Nugget Pond hydrometallurgical gold plant. Hammerdown is currently ramping up toward steady-state production in 2026, providing operational experience that may transfer to Queensway development.

Keith Boyle emphasized the team's development experience:

"I'm a 40-year mining engineer, have eight development projects under my belt. This is just the same movie but a different theater... We've got the right team to now move the project forward."

Jurisdiction & Infrastructure: Quiet Advantages That Compound

Newfoundland and Labrador ranked as a top 10 mining jurisdiction in the Fraser Institute's 2025 Annual Survey of Mining Companies and has consistently maintained top-tier status. The jurisdiction provides permitting visibility and infrastructure access that may reduce development risk compared to higher-risk geographies.

Infrastructure access includes the Trans-Canada Highway running through the project area, Gander International Airport, deep-water shipping ports, and transmission lines traversing the property boundaries. The company also owns fully permitted processing infrastructure through the Pine Cove Mill and Nugget Pond plant acquired with Hammerdown.

The company is conducting environmental baseline work at Queensway and anticipates submitting the environmental assessment application in late first quarter 2026, with feasibility work beginning in late 2026 or early 2027.

Risks & What Could Change the Thesis

Investment decisions require balanced assessment of supporting factors and potential challenges. While near-surface grade continuity indicators reduce certain risks, other factors remain subject to uncertainty.

Key Risks to Monitor

Grade variability outside tested panels represents a primary geological risk. Dense drilling at Keats validates continuity within specific volumes, but areas beyond current drilling coverage could exhibit different grade characteristics. The company notes that infill veining could result in additional uncertainty in true width, and that conversion of inferred and indicated resources to higher categories remains uncertain.

Metallurgical performance at scale may differ from bench-scale testing. Recovery rates and reagent consumption established in laboratory programs sometimes require adjustment during pilot testing or early operations.

Permitting or development timeline extensions can delay first production and increase pre-production carrying costs. Cost inflation exceeding preliminary economic assessment assumptions presents ongoing risk as supply chains, labor markets, and commodity inputs experience price volatility.

What Would Strengthen or Weaken Investor Confidence

The updated mineral resource estimate and technical report expected in mid-2026 would strengthen confidence by demonstrating conversion from inferred to indicated categories and validating continuity assumptions. Early mining reconciliation data from Hammerdown as it reaches steady-state production provides a testing ground for management's ability to deliver predicted grades and costs.

Capital cost revisions in future studies could either strengthen or weaken the thesis. If detailed engineering reduces capital requirements below preliminary estimates, project economics improve. Conversely, capital cost inflation or scope expansions that increase funding requirements would pressure returns.

As of September 30, 2025, New Found Gold held approximately $87 million in cash and marketable securities following an $83 million financing completed in 2025. Major shareholders include Eric Sprott at 19 percent ownership and institutional investors holding over 20 percent collectively.

The Investment Thesis for New Found Gold

• Reduced geological risk through dense drilling may confirm grade continuity at mine scale, potentially lowering reconciliation risk between resource models and actual mining outcomes.
• Improved capital efficiency may result from shallow, continuous mineralization supporting lower strip ratios and simpler mining sequences that reduce construction timelines and commissioning costs.
• Stronger financing profile may emerge from predictable early cash flow improving debt and streaming optionality, with lenders favoring projects that generate revenue quickly to support debt service.
• Valuation support may come from assets with demonstrated continuity tending to sustain higher enterprise value per ounce multiples because markets may assign lower risk premiums to projects with validated grade distributions.
• Phased development optionality allows management to prove production capability at smaller scale before committing full capital, potentially reducing execution risk and preserving flexibility to adjust strategies.
• Optional upside preserved through district-scale geology remaining intact without being required to justify base-case economics, allowing companies to pursue exploration targets after establishing production credibility.
• Management depth and operational experience may reduce execution risk when teams demonstrate prior development success in navigating construction challenges and early production optimization.

New Found Gold's transition from exploration to grade-control drilling at Queensway illustrates a broader investor lesson: spectacular intercepts generate initial interest, but systematic de-risking through dense drilling and technical studies converts that interest into sustained capital support. 

Indicated near-surface continuity through dense drilling may reduce execution risk and strengthen development credibility in ways that matter for capital allocation decisions. This matters in a selective capital environment where financing flows preferentially toward projects demonstrating clear paths to production at sustainable costs.

TL;DR

New Found Gold completed dense grade-control drilling at the Keats Zone using 5-meter spacing, confirming continuous near-surface high-grade gold mineralization. The shift from exploration to mine-scale validation, addresses grade variability risk that commonly undermines high-grade gold projects. Near-surface continuity supports lower strip ratios, reduced capital intensity, and earlier cash flow generation. The company's phased development strategy targets initial production of 100,000 ounces annually with C$155 million capex, expanding to 172,000 ounces at sub-$1,100 all-in sustaining costs. Updated resource estimates expected mid-2026 should demonstrate conversion from inferred to indicated categories, strengthening financing credibility. Combined with Newfoundland's top-tier jurisdiction ranking and existing processing infrastructure from the Hammerdown acquisition, systematic de-risking through dense drilling may reduce execution risk and support institutional capital allocation.

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