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Novo Resources Presents a Golden Opportunity

Commentaries & Views

Novo Resources (NVO.V) has been on my radar for about 4 years now. Back in October of 2012, I read a story in the Northern Miner about former Newcrest & Newmont geologist Quinton Hennigh’s theory of an area in Western Australia possibly having a similar geological occurrence to South Africa’s Witwatersrand basin, which has produced approximately 1.6 billion oz. gold since being discovered in 1852.

It was very early days at the time, but the story resonated with me so I continued to follow the company’s progress. Since that time, Novo has been very aggressive in securing land covering approximately 400 square km over the Mosquito Creek Basin, all in the Pilbara region of Western Australia. This includes the Beaton’s Creek area near the town of Nullagine and the Marble Bar sub-basin near the town Marble Bar. The gold region Hennigh is focused on has a mining history dating back over 100 years.

Just this week, Novo announced another large land package acquisition in the Karratha region of Western Australia, which is also in the Pilbara. Mr. Hennigh told me after the acquisition was announced: “I have been searching for conglomerate hosted gold in the Pilbara for 12 years. This occurrence popped up unexpectedly via local prospectors who have found an extensive area where gold nuggets can be detected. (Before the purchase) I was able to identify the bedrock source on my recent site visit. It looks very promising and we have been very aggressive at securing land.”

Beaton’s Creek is the company’s open-pit deposit which is mostly 30m from surface and open at depth. Novo holds a 70% interest in Beaton’s Creek under separate joint-venture agreements with Millennium Minerals (MOY-A) and the Creasy Group. Mark Creasy, the best-known prospector in Australia, also owns 12% of Novo. Millennium owns an 85,000 oz per year gold mine with a 5,400 TPD mill just 9km away from the Beaton’s Creek deposit.

Novo has targeted shallow, oxidized gold in an area covering about four sq km at Beaton’s Creek. A 30,000 tonne bulk sample has demonstrated no drilling and blasting is required, so all the near surface material can easily be excavated cheaply with heavy equipment.

Hennigh’s plan has been to produce gold at Beaton’s Creek by assessing a 2,000 tonne per day open-pit operation utilizing a gravity + carbon-in-leach mill that could be developed into a low-cost mining operation. The average grade on the project is 2.78 g/t.

The company is currently undertaking drilling and trenching to grow and upgrade the resources at Beaton’s Creek which will take 3-4 months to complete. The Pre-feasibility Study (PFS) is scheduled to be completed and released later this year. Permitting should be completed by early next year, with construction starting by the first half of 2018.

On March 30th, the company announced an C$8m Private Placement @C$.66c. Less than one week later, the financing was bumped up to C$12m due to overwhelming demand from investors.

When the financing is completed, Novo will have the funds necessary to complete the Beaton’s Creek open-pit operation. In a follow-up, Northern Miner piece on Novo a few years ago Hennigh stated: “What we envision is a 30,000 oz. per year operation for over eight years.” The mine should be in production by late 2018, then after commercial production is up and running, the cash flow will be used to drill out the high-grade underground Blue Spec Project.

The Blue Spec Project is a high-grade vein system with strong exploration potential which is contained in a huge 65km long shear zone crossing the Mosquito Creek Basin. Novo controls 65% of this project. Bonanza gold grades are at multiple locations with high grade antimony present in some zones. Blue Spec has a resource from 2012 of 106koz @ 24.85 g/t Indicated; 113koz @ 13.95 g/t Inferred.

When the open-pit Beaton’s Creek project reaches the production stage in late 2018, the opportunity for the company to begin drilling out this huge shear zone at Blue Spec will be at hand. The company will then be one giant step closer for Hennigh to begin proving his theory of the Pilbara containing multi-million oz. gold deposits similar to South Africa’s Witwatersrand basin.

If all the above goes according to plan, the Novo CEO may finally have the chance to realize his vision into 2019-2020, which would be nearly 15 years from his theory’s conception.

Global miner Newmont owns 19% of the company with management and insiders owning 12%. The aforementioned Mark Creasy owns 12% and the retail float is 57%. When the finance is completed later this month the company should have roughly 148 million fully diluted shares outstanding.

Full Disclosure: I have participated in the recent Novo Resources Private Placement. Please do your own due diligence before purchasing shares in any of the companies mentioned in this article.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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