Blue Lagoon Resources, Inc. (BLAGF or BLLG.CN) is a high-grade gold resource company in British Columbia that is transitioning into a gold mining company. The unique appeal to this transition story is the potential scale of the Dome Mountain resource it owns in British Columbia. Quinton Hennigh, PhD, and advising geologist for Crescat Capital, which owns 9.9% of Blue Lagoon shares, believes Dome Mountain’s geology resembles that of the Buritica Gold Mine in Columbia, South America and the Porgera Gold Mine in Papua New Guinea, two district scale world class gold resources with 10 million and 30 million ounces of gold respectively. In an interview with Deep Dive in 2022, “Blue Lagoon: The Basis Behind a Potential Massive Deposit” Dr. Hennigh details how Dome Mountain has significant potential beyond the Boulder Vein system which is only 10% of Blue Lagoon’s wholly owned properties that have been explored.
The current valuation re-rating, which led to Blue Lagoon share’s six-fold rise since October of 2024, has been its transition from a gold resource company to a gold producing and cash flowing gold miner. This transition was broadly achieved by securing its British Columbia mining permits and raising start-up capital to commence mining operations. Specifically,
- On November 14th, 2024, Blue Lagoon received its draft mining permit.
- On February 6th, 2025, Blue Lagoon received its final mining permits making it one of only nine mining licenses granted in British Columbia since 2015.
- Blue Lagoon raised development capital through a series of offerings in the first half of 2025; commissioned its Moving Bed Bio Reactor (MBBR) to remove nitrogen from the mine’s waste water; extended its ore-processing agreement to 10 years with Nicola Mining Inc.; and commenced blasting and mine development work on September 25, 2025.
In the coming weeks, Blue Lagoon should send its first truckloads of ore to Nicola Mining, Inc. in Merritt, British Columbia. Once milling commences, revenues/payments from Nicola Mining for Blue Lagoon’s ore should commence two weeks after Nicola Mining receives its first 1000 tons of ore, according to Peter Espig, CEO of Nicola Mining Inc. According to Blue Lagoon CEO, Rana Vig, the company will report on its ore production and Nicola payments so that investors can estimate revenues and cash flows. We estimate about $25 million in cash flow for Blue Lagoon in 2026. The one-year chart below of Blue Lagoon Resources, Inc. shows the six-fold rise from its preliminary mining license approval on November 14th, through its February 6th mining license approval and the mine opening ceremony on July 9th. The pullback from its June high, was a normal consolidation consistent with the company securing the MBBR water treatment commissioning and development work to provide mining flexibility and optionality when Boulder Vein’s commercial production begins.
Blue Lagoon’s current investment appeal is the combination of the resource-to-mining valuation rerating combined with the potential resource opportunity which we believe could be “massive”.
Valuation:
Blue Lagoon’s current market capitalization is US$76.3 million (BLAGF) and CN$106.5 million (BLLG.CN). Its current valuation is based on its transition rerating associated with its BC Mining permitting and mine restart financing.
Once trucking Blue Lagoon’s ore to and milling at Nicola have begun, the market should begin valuing the company’s shares as a producing story for its anticipated 15,000 ounces of gold production during the first year and subsequent ramp to 20,000 ounces.
Revenues with gold at $4000/ounce:
- With company guidance of 15,000 oz. of gold in year one, revenues should be $60,000,000.
- With 20,000 oz. of gold production, revenues should ramp to $80,000,000.
We estimate cash flows, assuming an All In Sustainable Cost (AISC) of $1300/ounce and a 38% Nicola and 62% Blue Lagoon cash flow split.
- At 15,000 oz., CF = 15,000 oz. x ($4000-1300)/oz. x 0.62 = $25,110,000 cash flow.
- At 20,000 oz., CF = 20,000 oz. x ($4000-1300)/oz. x 0.62= $33,480,000 cash flow.
Blue Lagoon is permitted to produce 55,000 TPY and plans to apply for 75,000 TPY.
At 55,000 TPY of ore production, Blue Lagoon should produce 16,623 oz. of gold: = 55,000 TPY x 10 gm/t x .94/31.1gm = 16,623 oz. of gold.
- Revenues = $4000/oz. x 16,623 oz. = $66,492,000.
- Cash flow = 16,623 oz. x $2700/oz. x .62 = $27,826,902.
At 75,000 TPY x 10 gm/t x .94/31.1gm/oz. = 22,668 oz. of gold.
- Revenues = $4000/oz. x 22,668 oz. = $66,492,000.
- Cash flow = 22,668 oz. x $2700/oz. x .62 = $37,946,232.
The table below shows the prospective Blue Lagoon share prices at $4000/oz gold at different ore production rates. CEO Rana Vig has said it expects to produce 100 tons of ore per day initially and then ramp to 150 tons per day. The company could expand production to 200 TPD by the end of 2026. The gold-colored rows at the bottom show how its share price can rise from $0.88/share, to $1.22/share, and then to $1.62/share based on a three times revenue to market capitalization multiple at 100 TPD, 150 TPD and 200 TPD production rates, respectively, on a fully diluted share count of 161,103,088.
Valuation Growth with Execution:
We believe that the next six months will show Blue Lagoon Resources as a producing story. That is Blue Lagoon Resources will operate as a proficient high-grade junior miner on a promising property.
As the company begins growing cash flow from $1.5 million to $3 million per month, Blue Lagoon will begin building its balance sheet and then direct its cash flows to prove out the resource opportunity in the Boulder Vein area. The development of the Boulder Vein is Blue Lagoon’s low hanging fruit and could hold one million ounces.
Blue Lagoon shares should rise as it grows Boulder Vein production over the next year; however, Blue Lagoon’s valuation will also be driven as an exploration story as the company begins infill drilling and proving out the estimated one million ounces of gold in the Boulder Vein System. In March, Blue Lagoon should begin its diamond tip drilling into the resource and quantifying the resource in a 43-101 compliant manner. This new infill drilling, in the Boulder Vein area, should lead to Blue Lagoon’s valuation rising as its 218,000 ounces of “Measured” gold grows toward one million ounces.
The Mining Industry is Noticing:
The 2025 Precious Metals Summit at Beaver Creek held on September 9-12, found Blue Lagoon Mining one-on-one meeting schedule packed with 33 meetings including majors. Rana Vig was interviewed at the Beaver Creek Summit by Crescat Capital. One major mining firm met with them saying that Blue Lagoon has an 18-kilometer strike on its property that had not been explored. This could be the source of material upside to the Blue Lagoon story which some geologists believe could hold up to 2-3 million ounces. The potential that is unknown is what that 18 kilometers strike could hold as it is the unexplored 90% of Blue Lagoon’s land package. Our sense is that there could be material upside above off-the-record estimates of 2-3 million ounces. If the massive potential of Dome Mountain proves to resemble the Buritica Gold Mine or Porgera Gold Mine, then Blue Lagoon could potentially have a 5–10-million-ounce gold resource.
Blue Lagoon’s Exploration Blue Sky or Potential:
In lieu of diamond tip and 43-101 compliant drilling, Blue Lagoon has maps and magnetic images which show its land package to be quite promising. Last week, I spoke with Yanis Tsitos, Head of Blue Lagoon’s Mining Committee, to better understand what Blue Lagoon’s geological surveys and magnetic images suggest.
The 18-kilometer strike shown below is the reason that one major gold mining company cited as a reason for their meeting with Blue Lagoon at the Beaver Creek Mining Conference.
The crossed pickaxes mark the Boulder Vein Mine entrance of the Dome Mountain Mine. The picture below is of the mine opening ceremony on July 9th which we attended and led to our meeting CEO Rana Vig, Quinton Hennigh, PhD., Crescat Geological consultant, Yanis Tsitos (Chair of the Mining Committee), Peter Batjos P.Geo (Strategic Advisor), Peter Espig, President and CEO Nicola Mining and (Strategic Advisor), Steve Cutler, President of Rough Stock Mining Services and (Principal Mining Consultant), and Bill Cronk, P.Geo Blue Lagoon’s Chief Geologist.
The chart below shows Blue Lagoon’s whole land package. The long oblong shape at the top labeled Chance Structure Zone is the 18-kilometer unexplored property which could be the source of a significant blue sky resource. The gold-colored oval at the bottom chart labeled Boulder Vein System is where 95% of historical exploration has occurred and where the company believes up to one million ounces could reside.
Resource Exploration Opportunities:
A formal mining strategy will be developed in January which will define how they plan to mine and drill/explore the Dome Mountain resource in 2026 and beyond. We would not be surprised if a second mine portal could result in late 2026 or 2027 from successful drilling in the Boulder Vein System. There are 15 veins already known in the Boulder Vein System.
The chart below shows two nodes above the Dome Mountain Mine portal. The smaller geological map to the right highlights two formations that have generated keen interest from the mining team. The node on the right is quartz monzonite and includes Free Gold and Chance. This node could be a “mother lode” from which numerous veins emanate. The node to the left also appears to have potential. These nodes won’t be thoroughly explored until the low hanging fruit or easily developable exploration in the Boulder Vein System have been explored.
Resource Potential:
The potential scale and scope of the Blue Lagoon opportunity cannot be made in a NI 43-101 compliant manner until significant expensive exploration is done. We know that Blue Lagoon has 218,000 ounces of measured and indicated gold based on their January 2022 NI 43-101.
Blue Lagoon Resources owns Dome Mountain’s 22,000 hectares, 55,000 acres, or a nine-mile by nine-mile land package. 90% of this resource has not been explored yet by drilling, but maps and magnetic imaging of the resource using drones have left the mining team and Hennigh hopeful of a proverbial gold mine in Blue Lagoon’s Smithers British Columbia land package.
Shifting from a production valuation to a resource valuation could provide a significant boost to Blue Lagoon, as the company will be able to use its significant cash flow to invest in infill drilling and exploration drilling. That cash flow could lead to a second mine portal in the Boulder Vein System in late 2026 or 2027. That cash flow could also be used to purchase an adjacent property which could improve Blue Lagoon’s land package and potentially diversify its mining revenues.
Gold and Gold Mining Stock Prospects:
The sharp pullback in the price of gold this week does not appear to be a bubble because the macro factors which have driven the gold price up this year remain intact. The two primary drivers we see lifting gold prices are foreign Central Bank purchases of gold and dollar weakness.
The chart below from Crescat Capital’s Tavi Costa highlights how foreign central bank purchases of gold now exceed foreign central bank buying of US Treasuries. Foreign central banks are experiencing better returns on their gold purchases than they are on US Treasury security purchases. Furthermore, gold insulates foreign banks from currency risks which have been costly especially with the dollar’s sharp weakness this year. Additionally, monetary and fiscal mismanagement have led to all three rating agencies downgrading US Treasury credit ratings.
We believe this disintermediation of US Treasuries for gold is likely to be a persistent trend until the US deficit, debt, and dollar improve – a prospect we don’t see changing any time soon.
US Dollar Weakness:
The US dollar has been very weak this year, and we believe, along with DoubleLine CEO Jeffrey Gundlach (10 minutes) that this trend will persist. Over 20 trillion dollars of inflow into US markets over the last 18 years has started to reverse. With overvalued US equity markets and weakening Treasuries, we remain cautious on the dollar and optimistic on both gold and gold miners, as does Gundlach.
Technical Analysis of Gold:
The 50-year chart of gold below suggests that gold prices could rise to the $6519/ounce range based on the two five-fold rallies experienced during the last fifty years. Shown below are the August 1976 to January 1980 525% gold bull run and the July 1999 to August 2011 506%, an average gold bull run of 515%. Applying the average of those two bull cycles, implies a potential upside target of $6519/oz for gold based off of the December 2015 low gold price of $1060/oz.
Where gold prices go ultimately depends on supply and demand for the metal. Given the 10 to 14-years it takes to develop a new gold mine, new supply, driven by higher gold prices, may take years to materialize. Novagold Resources Inc. and Paulson Partner’s Donlin Gold Project hopes to produce 1.5 million ounces of gold commencing around 2029 and suggests a timeframe when significant new supply could enter the market.
While we believe that gold has not reached its cyclical peak, we believe that gold mining stocks are far from reaching their peak. The chart below of the VanEck Junior Miners ETF suggests that junior gold miners are below prices where they traded in 2011, despite a 169% rise in the price of gold.
We believe there are lead lag factors which drive these gold cycles where gold prices rise, followed by gold miners eg. The VanEck Gold Miners ETF (GDX) and then followed by Junior miners eg. The VanEck Junior Gold Miners ETF (GDXJ). The Chart below shows gold (GLD – SPDR Gold ETF), gold miners (GDX- VanEck Gold Miners ETF), and gold junior miners (GDXJ-VanEck Junior Gold Miners) still lag the price of the yellow metal and suggests upside for the miners even if gold pauses.
The valuation case for gold miners is dramatically shown below by this table from Crescat Capital which compares PE ratios and growth rates for 9 of the Magnificent stocks versus nine large capitalization gold miners. As of October 3rd, the average PE for gold miners was 16.2 versus 38.2 for the MAG 9. Earnings growth rates for the large miners was 129% compared to 23.9 for the MAG 9. The PE to growth rate differential is 0.13 for gold miners versus 1.6 for the MAG 9.
Conclusion:
The case for owning gold and gold miners is growing. In the last six months, pronouncement and research from John Paulson, Jeffrey Gundlach, Ray Dalio, JP Morgan, and Citibank, make the case for higher allocation of gold and gold miners to portfolios and asset allocation models. Despite recent weakness in gold, following its sharp and parabolic rise this year, we believe that there remain solid drivers including a weaker dollar, international trade uncertainty, and the historic scale of past gold bull markets supporting gold prices.
There is a compelling valuation case to be made for gold miners versus technology stocks. We believe that a rotation from technology stocks to gold miners is likely in the years ahead as this tech boom fades and monetary metals miners become new market leadership.
Blue Lagoon Resources, Inc. appears to be highly compelling as it should soon begin shipping ore to Nicola Mining and generating its first revenues. We believe the company has assembled a very talented and experienced mining team and will prove to be a proficient gold miner over the next six months and should generate about $25 million in cash flow in 2026 leading to a $1.50/share price level by year end 2026. More importantly, free cash flow will be directed to exploration in the Boulder Vein System that should lead to additional mines. There is potentially massive upside in the Chance Structural Zone and in the unexplored 17-kilometer strike which Blue Lagoon owns.
Following the investment lead of Crescat Capital which owns 9.9% of Blue Lagoon and Nicola Mining which owns 7% of Blue Lagoon, Income Growth Advisors, LLC has accumulated nearly 5 million shares of Blue Lagoon and sees Blue Lagoon as an attractive junior miner with significant upside potential. Our large holding may make our opinion biased, as does our good relationship with the mining team at Blue Lagoon, but we believe there is compelling operating, valuation, and blue sky resource potential in its shares.