Novo: Ten Times Good
Novo Resources released an important press release Tuesday morning March 4th. I got a lot of questions as a result. Someone read the press release, was confused by what it meant and wrote me to ask the significance. My response was that it was ten times good.
I first wrote about Novo about 18 months ago and detailed the story. Basically Australian mining typhoon Mark Creasy tied up a giant portion of the 60,000 square km Hamersley Basin in Western Australia. While working for Newmont Mining Quinton Hennigh tried to do a deal on the project. For a lot of reasons, the deal didn’t happen. But Quinton didn’t forget the Pilbara or Mark Creasy.
Fast forward to 2008/2009: I first met Quinton in October of 2008 when we drove up to the Rattlesnake project owned by Evolving Gold. Quinton was the president of the company. I spent three hours beating him up about why Evolving had been pitched as an extension of the Carlin Trend but he and I were on the way up to Wyoming. After telling me how he realized the Carlin project was probably oversold and he snapped up Rattlesnake in an effort to show the market some real progress somewhere.
As long drives are wont to do, we ended up talking about a whole bunch of other things. He pitched me on his Wits lookalike theory where he thought that the source of the 1.5 billion ounces of gold produced from the Witwatersrand Basin was precipitated out of solution rather than alluvial or epithermal as was so popularly believed.
He determined that some 2.8 billion years ago, the chemical composition of water allowed both fresh and salt water to absorb 4-40 PPB of gold per ton and today only contains 4-40 PPT or a thousand times less gold. It stands to reason that if water had the ability to contain that much gold back then, it had to go somewhere as the chemistry of the water changed. Quinton theorized that the gold precipitated out of solution into the conglomerate rocks the same way a salt or sugar solution would if it was supersaturated and it cooled.
We went on a ten-day trip to see Mark and the project in June of 2009. Quinton made a believer out of me when he showed me a piece of 2.8 billion year old carbon. Carbon likes gold and as single cell bacteria grew and died, their remains formed a carbon leader identical to that of the Wits. The richest gold in the Wits is in the carbon leader. It was the action of the bacteria consuming sulfide materials that produced oxygen that changed the chemistry of the water and left the carbon.
It took until July of 2012 for Quinton to finish the deal with Mark Creasy. My piece was titled 698.3 Square Miles of the Wits because the deal with Mark was on 1800 square kilometers. Maybe I should have titled this piece 6949.8 Square Miles of the Wits because that’s how much Wits lookalike ground Quinton just added to the deal.
But that wouldn’t really be right because that project already had 698 square miles of ground and he added another 6949 square miles. So the current size of the project just on Mark’s ground is 7647 square miles or if you are more comfortable with square kilometers, 19,800 square kilometers.
That would have to make this project one of biggest land positions of potential ground of any junior in the world. So do you see why I answered the fellow today, Ten Times Good?
I have been wondering what Quinton was up to; there has been a dearth of information from him lately. But I talked to him today and this has consumed his time for months. I’d say it was time well spent.
But Quinton still had time for some other adventures. He’s been releasing drill results from the summer of 2012 until now. The drill results support the Wits lookalike theory. In August of 2012 Novo released results showing 2.08 grams of gold over 35 meters, 18 meters at 5.18 g/t and 11 meters of 4.15 g/t. In May of 2013, Novo released their first 43-101 resource of 428,000 ounces at a .5 g/t cutoff at Beaton’s Creek.
He surprised everyone; probably including himself when the company announced in December of 2013 the government of Australia approved a $400,000 grant for drilling two deep holes into the project. I’ve been bugging Quinton since 2012 to drill as far away from the current drill program as possible to prove the theory. Now he has convinced the government to help pay for a couple of holes.
And the big news of 2013 was in September of 2013 when Newmont bought 37% of the company. In addition, some 6.6 million warrants were exercised bringing in $4.8 million in cash.
The stock has had several runs from $.40 in 2012 to $1.18, from $.40 in early 2013 to $1.03 in mid 2013 and from $.60 in November to $1.20 in January. In each case, investors have had the information provided to them in order to make a buying decision and a later opportunity to take profits. While I do believe we started a major bull market in 2013 and certainly Novo has benefited to the tune of a 100% gain in 7 weeks, I think the best is yet to come.
The deal announced on March 4 with Mark Creasy is a little confusing, even to me. But basically it provides for Novo to acquire a 70% interest in 103 separate tenements in the Pilbara Basin covering about 18,000 square kilometers. That’s a giant land position. No single company ever controlled anywhere near this size land position in the Witwatersrand. This deal controls ground about half as big as the total of the Wits Basin. In exchange, Novo will issue about 22 million shares plus some reimbursement of up to $12 million in expenses to Mark Creasy. I’ll have to come back with a more clear explanation after Quinton comes back from PDAC.
I’ve loved this project since I first saw it five and a half years ago. I believe in Quinton’s theory. It’s more important that Mark Creasy and Newmont believe in it and as owners of about 60% of the stock, I think they do. This project has the potential for being a game changer in the gold market. I think it will be the next big thing.
The company is well cashed up with over $10 million in the till. Please note that the deal with Mark Creasy does not call for cash but rather shares. There isn’t a world of difference between Novo printing up shares and the Fed printing up money. Novo has changed just who owns what in the company but has expanded the land position ten fold. That’s giant. This is a sedimentary deposit and it may all be mineralized; only time will tell.
I expect Quinton to be announcing a big drill program soon. Last year was quiet due to the lack of funds and interest in gold juniors. All that has changed and the company is well cashed up and ready for a big year. It was nice of the government to contribute to the drill program, I didn’t know that sort of thing went on in Australia.
The company is as cheap as it has ever been. It’s going to be pretty easy to prove the theory. Quinton needs just to drill as far away on his ground as he can from where he is drilling now. That would be 100% proof even though every drill hole, every assay done in the last four years has tended to prove the theory. This is another Wits.
I own a lot of shares. I believe the story. I’m as biased as I could ever be. I’ve been there twice, I’ve beaten on rocks and listened to the theory. I buy it and you should too. Novo is an advertiser.
Please take some responsibility for your own financial decisions.