Q: Assuming there are further delays in securing the Millennium mill and since the ore at Egina has been demonstrated to be so amenable to sorting, wouldn’t the transportation costs to take it to a mill with a toll arrangement be negligible even if that mill was hundreds of kilometers further away?
A: See notes from previous questions about this – Egina may not require any further processing through another mill and may be able to be direct smelted at site into bars and larger individual nuggets sold at a nugget premium. All to be determined and a lot of water to go under the bridge yet but sorters are likely to generate a very high grade concentrate that could likely be processed on the moon.
Q: What are the production targets for the company in the next 24 months?
A: From the time we have a Novo owned processing facility, I’d like to build towards 100k oz per annum as quickly as possible and then leverage the shallowness, the flatness of the other prospects to continue to build gold production year on year from then on. I believe our prospects are unsurpassed in terms of potential future scalability, with gold production growing in line with projects approvals.
Q: What do you personally hope that Novo might look like in 5 years?
A: A profitable gold miner, with a growing production profile and resource base and with a second processing facility either in planning or under construction. If mechanical sorting formed a part of the successful development of other prospects outside Beatons creek I’d be tickled pink. Then I see some loyal shareholders that have stayed the course cashing in some of their dividend cheques to fund a trip down under for a personalised Pilbara tour of operations with the opportunity to try their hand at a little metal detecting too. Then maybe drinks back at my place to wash the dust down.
Q: What are the biggest challenges for Novo to make that into reality?
A: Gaining approvals from government regulators and native title parties. Defining gold grades and generating resources will continue to be challenging but there may come a time in future where we can rely on less than traditional information and bootstrap ourselves into production.
Q: Novo has released lots of positive news recently—so why isn’t there buying of the stock in the marketplace by officers and BOD?
A: Another very good question. Correct, there has been a lot of positive news lately. Whilst I can’t speak for others, these are my thoughts on the matter of officers and BOD buying stock.
Firstly, not buying stock in the market has no bearing on my enthusiasm for the story. I vote with my feet every day to stay at Novo and invest 100% of my time and attention, as do all the other very committed employees we have. The calibre of our people means that they are constantly being targeted by competitors through headhunters to gain employment elsewhere and yet despite offers of substantially more $ they stay put because we have a fascinating story and we have a lot of fun together as a group. We typically use stock options to incentivize people which can be somewhat fickle as there is much outside our control that drives the share price and efforts can often be misaligned with rewards. So not perfect but no major complaints internally and people seem to appreciate that we go to the trouble to provide stock options to all employees.
Secondly, officers and BOD are in a position of superior knowledge to the market and I have an ethical issue with buying stock in this environment. I must admit greed nearly got the better of me and I seriously contemplated buying stock soon after commencing at Novo after a site visit to Purdys and witnessing first hand the abundance of gold under the metal detectors. So yes I could have purchased stock at about 85c and sold within two months at nearly $9, but in each instance I’d have been in possession of information not available to the general public, which is a problem for someone with a conscience. The other significant problem is that if an officer or BoD member ever sells it creates questions as to the reasons why regardless of the legitimacy of the reason, so the stocks effectively become somewhat illiquid in the hands of such persons and the only clean way to crystallise value is to vend them into a corporate takeover. Novo has no current plans for this to occur, indeed it is our preference to maintain Novo as a separate entity and build our production profile over time.
Thirdly, a quick anecdote : my stockbroker once lectured me on the importance of diversification, so I went out and hired a second stockbroker. The significance of this is that if I’m already committing 100% of my time and energy to a company and deriving 100% of my income from it, it seems to make more sense to invest discretionary funds elsewhere simply from a risk management point of view. You just never know when a black swan event can rip the rug out from under you and leave you unemployed and with stock worth zero. Maybe ask an airline exec who’s recently purchased stock in their company before Covid 19 hit ……
And finally, I’ve personally done reasonably OK from the resources industry over the years but I’ve got two teenaged kids and whilst I’m reasonably certain it’s not their prime motivation to keep me financially grounded the end result is not up for debate ……. so notwithstanding all I’ve said above I have limited capacity to rush out and personally buy a meaningful chunk of the company any day soon.
… That concludes Part 2 of the Q&A with Rob Hymphryson of Novo Resources. A big thank you to Rob for taking the time and energy to answer these questions in a very detailed manner!
Rob in Action
Note: This is not investment advice. Always do your own due diligence. I am a shareholder of Novo and the company is a banner sponsor.
The Hedgeless Horseman
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