“Can you please answer this question.
Why is Quinton trading Novo shares for any other companies shares? If he belives Novo is another witswatersrand then your trading a much more valuable company for ownership in an inferior company. This is analogous to Warren Buffet trading Birkshire stock for another comanies stock he has done it Once, and it was a major mistake… ”
As you know the valuations of mining companies are absurdly low. As you also might know, there are almost no big discoveries happening in the gold space and the large miners need to find large deposits just to tread water. Kirkland Lake is for example expected to run out of the bonanza gold at Fosterville in just a few years…
With Quinton being one of the foremost experts on Epizonial Gold Systems (Fosterville is such a system) it makes sense to me that he would want to be able to pick up 75% of potentially another Fosterville type of mine for a few million bucks. I mean Fosterville is only one deposit and it’s still worth billions. That whole area in Bendigo is red hot right now simply because of the success of Fosterville, and it was none other than Quinton who recognized what Fosterville would become early on.
Furthermore, it is much easier (and faster) to drill and confirm lode gold as compared to our nuggety “beds” in Pilbara. With Novo having three different stakes in companies who have Epizonial Gold systems, they all could revalue quickly just by hitting on a few holes. Imagine if KZR, New Found Gold and GBM would confirm three Fosterville type deposits with a couple of good hits. That would revalue each venture a lot in, quickly. Then Novo could decide if they want to sell it to the likes of Kirkland Lake (who will need more ore sooner rather than later) or potentially build it themselves from Cash Flow that will hopefully come out of Pilbara.
The thing with Pilbara is that the near surface systems might require very little in terms of CAPEX or OPEX. That especially goes for Egina I would say. I mean a continuous miner and a few ore sorters is peanuts and if it works well, each “unit” could pay itself off and cover the expenses for a few additional units within 12 months. The same goes for the outcropping conglomerate beds… So then the question would be what to do with the rest of the cash flow? Banks pay close to nothing so in order to compound the returns, after the necessary investment costs are covered, Novo would need to invest it somewhere. Any project with an expected positive Return On Investment (ROI) would be worth investing in.
If you have one of the best exploration geologists in the world then the best value creation you can get out of that is for said person to look for projects around the world that looks incredibly prospective. IF, and that’s still a big if, GBM’s ground ends up hosting a world class Epizonial Gold System under all those historic workings and placer deposits then said system could be worth billions. In turn, 75% of that would belong to Novo. There is literally a chance that within 12-24 months, any of the three projects might be intrinsically worth more than the current market cap of Novo.
If you got a guy that is one of the best exploration geologists in the world, the most rational thing to do is to give that guy infinite tools to seek out the most prospective projects in the world. You mentioned Warren Buffet which is a perfect example. What does Warren Buffet do best? He is one of the best value investors in the world. He buys something that he thinks is currently cheap relative to what it will be worth in the long run. Thus, letting Warren Buffet invest your money by buying shares of Berkshire Hathaway makes perfect sense if you are looking for good returns on your investment. Compare that to Quinton who is one of the best in the world in terms of figuring out if an early stage exploration asset has the potential to become something that is worth a lot. Naturally you would want to give him your money if you are interested in having the best returns when it comes to gold exploration. And that is basically what he is doing. He is spending small fraction of shareholders money, including his own, to invest in early stage exploration projects which have a real shot of becoming something significantly more valuable over time. Personally I am all for it since I think that any project worth his time has a better than average shot of becoming a world class deposit and it currently costs us very little to partake since the sector is in the crapper.
Eric Sprott made a fortune thanks to Quinton’s brilliant insights. Thankfully for us he is now using those brilliant insights for the sake of Novo shareholders at the moment. There is a reason why so many exploration companies wants him on board. I have personally seen first hand how Quinton can come up with insights that no one had thought about after just spending a day or two at a project. Underestimating the value creation potential of his knowledge is a big mistake in my opinion. The best thing for Novo shareholders is to see Quinton do what few if any in the world can do better… To recognize something that could be worth a lot in the future, early.
… In contrast, if you give me $5 M dollars to pick projects you can be assured that the Expected Value is ZERO on your investment.
- Novo becomes more diversified
- News flow will be be jacked up
The Hedgeless Horseman