Understanding the Novo/Newmont Deal
Novo has been especially quiet lately due to market constraints. With about $3.5 million in the bank, Quinton Hennigh didn’t want to make waves until investors realize gold isn’t going to zero. So he started a small 2,500-meter drill program. The results will be out shortly.
But that doesn’t mean Quinton hasn’t been working behind the scenes. There is a lot going on. The biggest event in company history took place last week and the market barely noticed. Newmont Mining bought 35.7% of Novo in an unusual deal.
Basically Newmont is buying from two existing shareholders almost 18 million shares at about $.91 a share, some 12% over the market. Normally a big company buying shares in the open market from an existing shareholder wouldn’t make all that much difference to a company, after all, all you are doing is changing seats. But part of the deal is that Newmont is buying the shares after one of the existing shareholders has exercised 10 million shares at $.60 a share.
So what it really means is Novo is getting $6 million in the bank and now is fully cashed up. Expect to hear more things faster over the coming months. Quinton didn’t want to have to do a financing at these prices and now he doesn’t have to.
In addition, there are about 5 million warrants at $.60 that expire at the end of November. That means the shares are pretty much on sale for the next three months as shareholders sell shares to exercise warrants. Without a major change in the share structure, Novo is bringing in almost $9 million into the treasury and they have a boatload of happy investors.
The only thing that has held back Novo was cash in the bank. That isn’t a problem any longer.
Novo is an advertiser and they are my biggest share investment. I am as biased as I can be. Prior to this deal, Mark Creasy bought into Quinton’s theory of gold precipitation, I bought into the theory of gold precipitation and now Newmont has bought into the theory in a big way. None of you are smarter than all of us so you may want to pick up some shares on sale before the rest of the world understands the theory. Do your own due diligence.