698.3 Square Miles of the Wits
I have waited impatiently for almost four years to write this piece. Quinton Hennigh and I visited a gold project back in 2008 that we both are convinced is part of the Witwatersrand gold deposit, where almost half the gold ever produced came from.
The one thing this gold cycle has lacked is a really monster gold find. I think this is it and I’ve been waiting and waiting to write about it.
I’m going to tell you everything you need to know about mineral deposits and then everything you need to know about the Wits. Not that I would touch a mine in South Africa with a 10-foot pole.
All minerals are found everywhere. Albeit in tiny quantities. To make a mine you need a concentration of minerals that will justify the investment to define an economic resource and the capital expense of building a mine and mill.
Most minerals are concentrated through hydrothermal action. You have fresh water or often even salt water deep in the earth under tremendous pressure and temperature that can dissolve anything. You need four different elements to create a deposit through hydrothermal action.
That covers the vast majority of deposits in the world. There is another type of mineralizing event rarely discussed or thought of. Banded Iron Formations (BIF) come under this category. Banded iron is formed when iron precipitates out of salt water. Most were formed some 3.7 billion years ago to 2.4 billion years ago.
The earth is around 4.5 billion years old. Back around 3.5 to 3.9 billion years ago, life began. The conventional theory of how BIF formed says that cyanobacteria (single cell algae) produced oxygen after consuming sulfides, often associated with black smokers. Water, both sea and fresh, was highly acidic. The world had no free oxygen until the single cell algae produced it. As the chemistry of salt water changed oxygen combined with iron in salt water literally to produce rust. Banded Iron Formations came about as the rusted iron precipitated out of solution to produce sedimentary beds of iron rich rock.
One of the richest iron regions in the world is in the Pilbara region of Western Australia. The iron is found in Banded Iron Formations and was precipitated out of salt water. The Pilbara Craton shares a genesis with the Kaapvaal Craton in South Africa, home of the world famous gold region called the Witwatersrand. The Pilbara region and the Wits were once part of the same Supercontinent called Vaalbara dating back some 3.6 to 2.5 billion years.
There are two well-known theories about the origin of the gold in the Witwatersrand. One holds that it is placer gold that was deposited in a giant flood plain and the source is long gone. The other holds that it is a traditional epithermal deposit that just happens to be in reefs along a band of carbon.
Quinton Hennigh worked for Newmont Mining and came up with a third theory. He could blow holes in both the placer theory and the epithermal gold theory. He did some studies and realized that due to the acidity, water had the ability to hold in solution some 1,000 to 10,000 times more gold under the conditions of 2.7 billion years ago than today. If that’s true, where did the gold go?
Due to the acidity, 2.7 billion years ago, water had the ability to contain between 4 ppb and 40 ppb. Salt water today contains 4 ppt of gold. At 4 ppb, one cubic km of water could contain 130,000 ounces of gold. At 40 ppb, one cubic km of water could contain 1.3 million ounces of gold. Where did the gold go? It had to go somewhere.
Quinton postulated that like iron before it, the gold precipitated out of solution with the chemical changes of the GOE. The GOE or Great Oxidation was when the algae produced more oxygen than iron could combine with. The excess oxygen went into the atmosphere. The chemical changes in the acidity of water caused the dissolved gold to fall out of solution. Often in the presence of carbon from the dead algae since gold loves carbon.
Quinton Hennigh realized that the Pilbara region of Western Australia and the Witwatersrand are identical in age and rock type. He believed that if you want another Wits, all Newmont had to do was drill the Pilbara basin.
The bigger the organization, the dumber people get as they are removed further and further from the consequences of their decisions. Newmont passed on his theory and eventually Quinton left the security blanket of working for a big corporation and went out into the junior field. He never forgot his dream.
In the summer of 2008 Quinton called me and asked me if I wanted to go on a trip to Western Australia with him to look at the Hamersley Basin in the Pilbara with the idea of doing a deal with Mark Creasy who holds most of the good ground in the basin.
Mark Creasy is one of the great legends in Australian mining. A self-educated prospector, he emigrated from England in the 1960s and got into mining. Mark discovered many of the existing gold mines in Australia and has made hundreds of millions off his investments. He is the largest claim holder in the country.
Quinton knew Mark from Quinton’s days at Newmont. We borrowed several of Mark’s top-notch geos and headed out into the field. Let me be clear, the Hamersley basin in the Pilbara is identical to the Wits. The age is identical, the rocks are identical and the gold is identical. We went to an area near the misnamed Marble Bar where the gold reef outcrops at surface and gold was first discovered in 1890. Quinton dug around and found me a piece of carbon some 2.8 billion years old and I became a believer.
Finding a gold deposit with a zillion ounce potential is probably a lot easier than doing a deal with Mark Creasy. When a guy has as much money as he has, money loses its appeal as a motivator. Quinton set up a company named Galliard Resources (Sort of rolls off your tongue, doesn’t it?) in 2009 to hold the project. Someone with more sense renamed it Novo Resources later. That still sucks, Barbara and I always thought it should be called Roo Gold. (As in kangaroo, like the one Quinton drove over and fails to mention to anyone.)
Quinton has spent four years trying to do the deal. We were discussing the rough terms with Mark and his lawyer back in the summer of 2008. It took Quinton and Mark until July of this year to actually put the final signature to the final agreement.
The terms were more or less what we had been talking about in 2008. Quinton finally got Mark to the table by pointing out that a sizeable investment had to be made on the ground shortly or Mark would forfeit the ground. Given the unpalatable choice of paying for it himself or letting Novo Resources pay for it, Mark took the path of least resistance.
This project and this company have taken a new paradigm. The precipitation theory of gold deposits is going to be debated for years before the industry accepts what should be as obvious as a pimple on your nose. If iron can precipitate out of acidic water, why can’t gold? If there was a lot of gold in water back then, where did it go?
For tactical reasons, Quinton has restricted information about what the company is all about and plans for the future until he could secure the deal with Mark Creasy. Quinton did pick up a couple of small pieces of the basin in the past and actually began a 5000-meter drill program in early 2012. Some results were released in February of 2012 and we already know the grade and thickness of the gold reefs is similar to that of the gold reefs in the Wits.
I’ve been dying to post this piece for years but have been unable to because the website wasn’t finished. Now that it’s finished and investors can verify what I have said, I can write about it.
Novo has drilled 43 RC holes. Results have been released from only 16 holes. We know what we can expect from other holes in what is a basin similar to drilling coal. Highlights included 4 meters of 24.67 g/t gold and 4 meters of 10.29 g/t au in another hole. Results from the next 27 holes to be released shortly should verify the potential of the deposit. The gold is found in narrow but rich reefs just as with the Witwatersrand gold. It’s a sedimentary basin but unlike the Wits, it’s pretty much flat lying and will be dead easy to mine.
The Hamersley basin is about 60,000 square km. The deal with Mark Creasy is for a 70% interest in 1800 square km of the basin or 698 square miles for the Americans reading. That’s a giant project and should it all be mineralized I believe this is going to be the biggest gold deposit in the world. Only time will tell but I’m a believer and have been since I wiped that piece of 2.8 billion year old carbon across my palm.
The company has 31.2 million shares outstanding. It is one of the most tightly held companies I have ever seen mostly because it’s on the Canadian C Exchange, has had no website until now and no one except the few investors part of the original deal know anything about what they are doing.
The company is well cashed up with about $2.9 million in the till. In addition, the company owns 7 million shares of Euromax (EOX-V) and 7 million warrants at $.30 for two years. The shares were purchased when EOX was $.22 so are solidly in the money. Novo also purchased 1,987,527 shares of Prosperity Goldfields (PPG-V) with 833,333 warrants at $.25 good until November of 2012.
Novo just participated in a private placement for 2 million shares of Evolving Gold (EVG-T) in August at $.30 with a full warrant good for three years at $.40.
Novo has about 18.15 million warrants outstanding. The average exercise price is about $.58 and they are open until Jun and Nov of 2013. Exercise of all warrants will bring in an additional $10.5 million. The company is in especially good shape regarding finances.
The warrant exercise would add another 18 million shares but with $14 million to spend on exploration, I suggest the next placement will be at a lot higher price. 50 million shares on a fully funded basis is quite manageable. Quinton also has worked on both Euromax and Prosperity Goldfields so he has a real good idea of their true value. I expect the investments made by Novo to be quite profitable.
In eleven years of running 321gold, I have never come across a company that had the potential of Novo Resources. If you subtract the cash and value today of the shares and warrants the company owns, you are getting 700 square miles of a Wits model deposit for about $5 million. It doesn’t get any better than that. It is easily a ten-bagger. It could be a 100-bagger. It’s going to be big. What’s the value of 700 square miles of the Wits?
I’d like to see the company get off the C exchange as soon as possible. It’s going to be very difficult for American investors to buy the stock until then unless you have an account with Pennaluna. There is a US OTCQX symbol and there is a market maker for the shares. Canadians can buy it through the C Exchange. It’s not going to be easy but it’s going to be worth it down the road.
I rarely give a pure buy signal. This is a buy signal, the most important I have ever made. This stock at $.44 is like stealing. A $14 million market cap is absurd. They are cashed up, drill results will come out shortly and a new drill program will be announced any day now. We already know from the results released in February what kind of grades and thickness we can expect from the gold reefs.
I suspect Mark Creasy and Quinton Hennigh will soon share “Prospector of the Year.” This is truly a joint venture. It took Quinton’s unceasing desire to question everything geological and Creasy’s scent for massive gold deposits to put this deal together. All this was going to take to succeed was for someone to be around to tell the story as it should be told.
Novo Resources is my biggest holding by far. I’ve been snapping up shares for many months. Novo will probably advertise. I have been on the project at my own expense and I’m biased.
Do your own due diligence.