Setting the scene
On November 24 we got a news release from Novo Resources which contained the following information:
“Novo wishes to advise that the Company has recently been notified by Artemis that the Western Australian Government’s Department of Mines, Industry Regulation and Safety (“DMIRS”) has granted a 20,000 tonne excess tonnage permit for the extraction of a bulk sample from the Purdy’s Reward tenement.”
Then last week, Dr. Keith Barron put out a meaty article on www.straightalkonmining.com where he shared his pragmatic view on Novo Resources that contained the following snippet:
“Let me make a prediction. The Novo Discovery will be the lowest cost gold mine in the industry, by a massive margin. Maybe sub $100/oz! That’s what should be attracting people’s attention.”
In light of these snippets of information I decided to crate a spread sheet that contained a few potential cash flow scenarios for the 20,000 tonne bulk sample. Given the very nuggety nature of the gold mineralization that we are seeing (so far) coupled with the underwhelming performance of the wide diameter drilling, I thought it would be a good idea to look at sheer earning power potential for these close to surface conglomerate beds. I don’t think the unconventional nature of this deposit will stand in the way of success if we end up with a high margin ultra-district scale gold system.
20,000 bulk sample cash flow scenarios
Let’s assume we only use material from the lower mafic conglomerate sheets and that the target is a 3 m thick sequence. In that case we would have to strip a 51m x 51m (2,601m2) area to get to approximately 20,000 tonne of material. In the following spread sheet you can see a cash flow matrix based on average grade and AISC. If you want to extrapolate the potential earning power on a larger area, you can simply multiply each matrix sell with the relevant “Multiplier” presented to the right of the table:
- To put a 51m x 51m patch of land in perspective:
… Note that the above image doesn’t even capture the full extent of Purdy’s and Comet Well, and those two tenaments are only a tiny fraction of Novo’s Fortescue land holdings.
- A more zoomed out geological view:
… The scale is everything. The theoretical cash flow potential from 8 km strike, “only” 100 m in width, 3 m thick and an average grade of 10 gpt is huge.
- Now, a slide from Kirkland Lake’s latest presentation:
We can speculate how the gold got deposited under the Mount Roe Basalts until the end of time, but the fact is that reality trumps theory. All we know is that the gold is there, and if it proves to have economic grades over an area anywhere near Kirkland Lake’s stated 85 km strike, then this gold system is absolutely huge. What miner would say no to a target of that size if the operational costs end up being the lowest in the business? My guess is not many.
I believe the 20,000 bulk could potentially be a real eye opener, and if we get more (positive) confirmation of how widespread the mineralization is, the blue sky cash flow potential could start to priced in sooner rather than later… Regardless of what “bankable resources” we can officially state.
Keep in mind that we have a lot of work to do before any of this can be validated in terms of grades, strike, thickness, extent and operational costs.
Those who have read my Novo Resources Insider articles know that I believe there is real potential for this “project” to become even larger than what many think.
The Hedgeless Horseman
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[Disclaimer: This should not be considered a buy or sell recommendation. The thoughts and data provided in this article are my own and may prove to be incorrect. This is a highly risky junior stock. I am long Novo Resources and am thus biased and it’s important to DYODD!]