Novo Scores +1 Gram Per Meter at Egina
It’s been eight months since I have delivered an update on Novo. While Novo has put out a fair number of press releases since then I have been waiting for some solid red meat. They have just put out red meat that should satisfy the Novo faithful and really irritate all the naysayers who live to pee on Novo’s parade.
In the piece I wrote in December of 2018 I covered the important numbers about alluvial production so any nitpickers should reread the piece. Basically it’s really cheap to process alluvial gravel and is always done with heavy equipment so is measured in cubic meters or cubic yards because that’s how heavy equipment is used. A dump truck or front-end loader will hold X meters or yards. All you are doing is moving dirt.
I was at Egina last year. I made it clear that what I saw was exceptional. Novo owns two mining licenses that cover 5 square km apiece.
Due to very sensitive issues about native title and control, you simply cannot just wander about the desert taking samples. Illegal prospectors will often sneak onto the reserve at night with metal detectors to snipe. If the locals catch them in the act they will give them a thumping, destroy their equipment and throw them off the property. So Novo has been highly limited in what they can and can’t do before coming to an arrangement with the natives.
I think I did a good job of explaining the theory last year but now that Novo has delivered solid numbers I can talk about the practice.
Novo used GPR (Ground Penetrating Radar) to identify a swale or depression in the subsurface terrain on one of their two concessions. In theory that is where you should find the richest gold.
As I write the bid on gold is $1498.70 making a gram of pure gold worth $48.19 USD. In their initial tests, Novo found 292.38 grams of 89% to 95% purity gold nuggets out of 281.9 cubic meters of gravel from surface. Please note that these were gold nuggets of 1 mm or larger. There will be some small gold but Novo has not determined the quantity yet.
If you use a nice conservative 90% purity for the gold and an even 1 g/m at $48 a gram, I come up with a total value of $43.20 per cubic meter. You can add the small gold later but I would be astonished if it were over 5% of the total weight so I will ignore. I love being conservative so I will say in that swale the processed gravel was $40 a cubic meter in gold values.
I could process that for $8 a cubic meter, Keith Barron could process it for $10.70 a cubic meter in Montana but let’s be really conservative and say you aren’t very good at this and it costs you $20 a cubic meter because you are so ham fisted.
A 50% margin on an alluvial project would be a home run out of the park in any alluvial project on earth and half of Mars.
Those who want to whine about everything Novo does, and Ken don’t think for even a moment I am talking about you, will sputter and explain that just because this swale is wildly profitable, not all of the 1,000 square km that Novo owns around Egina would be as profitable. But like all con men, and again Ken I am not talking about you, they couldn’t get permits to strip mine 1,000 square km in a lifetime of lifetimes.
Just because something is true doesn’t mean it is meaningful. I’m wearing blue socks and there is no elephant in the room. Both statements happen to be perfectly true but are perfectly meaningless.
But by using the GPR to narrow down the most attractive and prospective 5% Novo or whoever buys Novo will be producing gold at a good margin for twenty years past when I am pushing daisies just with their current land position. And who knows, there might be another 25% of that land position that is still economic below $40 a meter.
I’ve been a Novo shareholder since before they were Novo. I’ve participated in almost every private placement and clearly I am biased. Novo is an advertiser so do your own due diligence.