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Bullboard - Stock Discussion Forum Novo Resources Corp NSRPF


Primary Symbol: T.NVO

Novo Resources Corp. is engaged in evaluating, acquiring, exploring, and developing natural resource properties with a focus on gold. The Company explores and develops its prospective land package covering approximately 7,500 square kilometers in the Pilbara region of Western Australia, along with the 22 square kilometer Belltopper project in the Bendigo Tectonic Zone of Victoria, Australia... see more

TSX:NVO - Post Discussion

Novo Resources Corp > What is the “Dummy Definition” of Worthless?
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Post by TXRogers on Oct 01, 2020 2:02am

What is the “Dummy Definition” of Worthless?

In my view, 2019 Q4 was probably the last complete “untainted pre-Covid19 Plandemic” fiscal Quarter for Gold producers.  Based on data from Aurum Analytics, who collects gold mine production and costs data primarily from Australia and New Zealand, we can see that Australia essentially produced 2,540 koz of gold in 2019 Q4
 
https://www.aurumanalytics.com.au/images/Australia-Production_2019_Q4.png
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And the Top 10 producers were as follows:
 
https://www.aurumanalytics.com.au/images/2019_Q4_Mid_Tiers_Top_10.png
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But the Aurum Analytics Australian & New Zealand Gold Operations for December Quarter 2019 – (link) Final Report reveals some other fascinating figures regarding Australian gold production.
 
The average All-in Sustaining Cost (AISC) for Australia and New Zealand was A$1,338/oz, which is up 0.2% (A$3/oz) on the previous quarter average AISC of A$1,335/oz. Evolution Mining’s part of the Ernest Henry operations was the lowest cost producer reporting an AISC of A$-526/oz followed by Newcrest’s Cadia Valley operations with an AISC of A$208/oz, then by Kirkland Lakes' Fosterville mine (A$378/oz). The average gold spot price for the quarter was A$2,168/oz (US$1,482/oz).
 
It should be noted that Ernest Henry and Cadia Valley benefit from significant base metal by-products. Aurum Analytics’ estimate of these operations AISC on a co-product basis (Co- AISC) is as follows; Ernest Henry Co-AISC of A$791/oz and Cadia Valley Co-AISC of A$755/oz. The lowest cost “gold only” operations were Kirkland Lakes' Fosterville mine with an AISC of A$378/oz, then Saracen's Thunderbox mine (A$754/oz) and Evolution's Cowal mine (A$898/oz).
 
Newcrest’s Cadia Valley operation took out top spot as Australia’s largest gold producer with 239,722 oz for the quarter, followed by Newmont's Boddington (196,000 oz) then Kirkland Lake's Fosterville operation (191,894 oz). Of the mines where gold is a by-product, BHP’s Olympic Dam produced the most gold 35,382 oz followed by OZ Minerals' Prominent Hill with 35,102 oz and Evolution's part of Ernest Henry with 23,080 oz.
 
Grade wise for the companies that report AISC, the average reported mill head/feed grade was 3.69 g/t (Open Pit (OP) - 1.26 g/t, Underground (UG) – 5.95 g/t, Open Pit & Underground (OP/UG) - 2.44 g/t) which was up on the previous quarter, 3.59 g/t (2.7%). Kirkland Lake’s Fosterville mine again took out the honour as the operation with the highest average feed grade with 49.30 g/t, followed by St Barbara’s Gwalia mine 7.30 g/t.
 
The lowest grade mine was Evolution’s Ernest Henry processing an average head grade of 0.61 g/t. The high-grade operations that do not report an AISC were Mandalay Resources’ Costerfield mine with 6.80 g/t and LionGold Corp's Ballarat mine with 4.50 g/t.
 
 
Evolution Mining’s (ASX:EVN) share of the Ernest Henry operations was the lowest cost producer, reporting an AISC of NEGATIVE $-526/oz followed by Newcrest Mining’s (ASX:NCM) Cadia Valley operations with an AISC of $208/oz.  Both these operations boast average gold grades of 0.61 g/t and 1.19 g/t respectively.   Note:   Both these operations benefit from significant base metal by-products, which lower their Gold AISCs dramatically.
 
If you remove the base metals credits out of the equation, the lowest cost “gold only” operations were Kirkland Lake Gold’s (ASX:KLA) Fosterville mine with an AISC of $378/oz (49.3g/t), then Alkane Resources’ (ASX:ALK) Tomingley mine at $1441/oz (1.21g/t) and Saracen’s (ASX:SAR) Thunderbox mine at $754/oz (2.1g/t).
 
We can grades vary wildly for these producers.  The reason is that there are clearly other factors involved besides grade.   Here is the 2019 Q4 listing for Australian producers with profitable mining operations below 2.5 g/t gold grade grades:

Mine Type: 
UG = Underground
OP = Open Pit
 
Operation Company Mine Type AISC (A$/oz) Grade (g/t) Au Produced (oz)  
Ernest Henry Evolution Mining Limited UG -526 0.61 23,080  
Cadia Valley Newcrest Mining Limited UG 208 1.19 239,722  
Thunderbox Saracen Mineral Holdings Ltd OP/UG 754 2.1 46,594  
Cowal Evolution Mining Limited OP 898 1.11 65,080  
Tropicana JV AngloGold/IGO OP 1,030 2.12 133,932  
Gruyere JV Gold Fields/Gold Road OP 1,043 1.1 70,023  
Mt Magnet Ops Ramelius Resources Limited OP/UG 1,182 2.33 37,956  
Duketon South Regis Resources Limited OP 1,219 1.55 65,971  
Duketon North Regis Resources Limited OP 1,219 1.11 24,877  
Mungari Evolution Mining Limited OP/UG 1,344 2.29 32,751  
Boddington Newmont Corporation OP 1,351 0.69 196,000  
Tomingley Alkane Resources Limited OP 1,441 1.21 6,929  
Dalgaranga Gascoyne Resources Limited OP 1,488 0.73 16,781  
Edna May Ramelius Resources Limited OP/UG 1,512 0.85 9,946  
Macraes Ops OceanaGold Corporation OP/UG 1,521 1.18 45,505  
Matilda-Wiluna Blackham Resources Limited OP/UG 1,527 2.2 20,003  
Ravenswood Resolute Mining Limited UG 1,589 0.69 15,351  
Cue Westgold Resources Limited OP/UG 1,627 1.89 17,757  
Kalgoorlie JV Newmont/Barrick/Saracen OP/UG 1,688 1.5 115,000  
Mt Morgans Dacian Gold Limited OP/UG 1,737 1.5 33,235  
Telfer Newcrest Mining Limited OP/UG 1,755 0.87 103,155  
Mt Rawdon Evolution Mining Limited OP 1,815 0.86 20,338  
Sunrise Dam AngloGold Ashanti Limited UG 2,069 1.75 58,000  
Plutonic Superior Gold Inc UG 2,084 1.77 20,084  
Mt Carlton Evolution Mining Limited OP 2,182 2.09 9,787  
Peak Aurelia Metals Limited UG 3,079 1.12 4,206  
        Total 1,432,063 oz
        Total 1,432 koz
 

This data also reveals another interesting fact:  If we go up to the first image of this post and the list above, we can see that approximately 56 % of Australian Gold 2019 Q4 production came from low grade operations (below 2.5 g/t).  What is also notable is that a significant portion came from higher cost Underground (UG) operations.
 
Out of the Top 5 Pure Gold Producers (No Base Metal By or Co-Products), two on the above “low grade” list ranked in the #3 and #4 spot.
 
Rank     Operation          AU oz Produced
  3            Tropicana           133,932
  4            Kalgoorlie           115,000
 
Out of the Top 5 Pure Gold Operations (No Base Metal By or Co-Products), two on the above “low grade” list ranked in the #2 and #3 spot for the lowest AISCs.
 
Rank     Operation          A$/oz AISCs
  2            Thunderbox        754
  3            Cowal                 898
 
While retail investors are often impressed by high-grade mines that crank out the ounces, they should realize that gold-mining is like any other business: revenues must exceed costs.  The point is, costs matter.  These 6 main costs can be generalized as follows: depth of deposit; strip ratio; open pit vs underground; labor; infrastructure; and recovery method.
 
Open pit / Surface vs underground
Of utmost importance to the cost of extracting gold is where the gold lies within a deposit. A deposit of disseminated gold (small particles of gold distributed throughout the rock) close to surface will be open-pit mined, while gold found in often-thin veins hundreds of meters below surface is mined using underground methods. There are many more low-grade gold deposits than high-grade. For every 2.5 grams per tonne (g/t) gold deposit, Mother Nature forms another 10 deposits around 1 g/t. Generally speaking, one gram per tonne works for open-pit mines, but underground gold mines require at least 2.5 g/t to be economic.
 
Depth of deposit
The most famous of the world’s shallow deposits is the Carlin Trend in Nevada. Here microscopic gold is found in almost every rock. The gold is low-grade (under one gram per tonne) but plentiful. Between 1835 and 2008 a whopping 152 million ounces was pulled from the Carlin Trend and other gold trends in Nevada, including Cortez and Walker Lane, mostly through open-pit mining. Some Nevada pits are now depleted and have moved underground.
 
Strip ratio
The strip ratio is the amount of waste rock, or overburden, that must be removed in order to get to the mineralized rock (ore). The strip ratio is calculated by dividing the thickness of the overburden by ore thickness. Eg. if the overburden is 100m thick and the ore is 50m, the strip ratio is 2:1. The lower a strip ratio, the more profitable the mine will be, since less material needs to be moved.
 
Infrastructure:
There are hundreds of gold deposits around the world that will never be developed because they lack access to infrastructure – power, water and roads – making them too expensive. Both exploration companies and investors should recognize this at an early stage as a possible fatal flaw. Mines located close to population centers do not need to fly workers in and out, their supply lines are short, and they can tap into an existing electricity grid rather than paying for a new power line and servicing it.
 
Labor:
Labor represents the largest component of a mining operation, approximately 50% in developed countries. Of course, Labor costs are cheaper in some countries, and when combined with a weak currency, this can significantly widen a company’s margins. In contrast, rising currency values versus the US dollar squeeze margins.
 
Gold recovery costs:
Extracting gold from ore can be complicated and countless mines have failed because they did not recover enough gold to balance input costs. Refractory ore is more difficult and expensive to process due to the presence of sulfide minerals, which block the cyanide solution.  Even with a large mineral deposit, the metallurgy can be challenging if the ore is refractory.
 
The lesson for investors is clear: don’t make the mistake of judging a mine or pricing a junior developer purely by its production numbers and/or grades. Of greater importance are a healthy cash flow and low-cost structure, which allows a company with capital discipline to reap the rewards of a high gold price when times are good, but protect its margins when the price takes a hit.
 
Which brings us all around about back to where a “Dummy” cries out WORTHLESS.  Or even when another “Dummy” cries out JACKPOT.  Unless one is intimate with all the factors (and data examples) stated above, they will continue to remain a "Dummy", regardless of what they think they know.
 
Being dummy is OK for an investor under one specific condition: The company in question possesses superior management that has executed on the stated tasks, and it has your back.  That's what you're really betting upon.
 
Tx
Comment by TXRogers on Oct 01, 2020 2:31am
Oops - sorry typo (but no significant change to the message): .....  we can see that Australia essentially produced 2,794 koz of gold in 2019 Q4, with 51%  from low grade operations (below 2.5 g/t).   Tx
Comment by GoNovo2014 on Oct 01, 2020 3:41am
Thank you, Tx. Happy Mid-Autumn Moon Festival. Full moon tonight. GoNovo2014
Comment by TXRogers on Oct 01, 2020 4:47am
  Thank you GN2014.   But keep in mind that we don't all share the same spatial or chronological reference point. https://www.timeanddate.com/moon/phases/@1861060 Another time around.   Moon Over a Ruined Castle Tx  
Comment by likeike on Oct 01, 2020 11:32am
Geez TX just to your point if I got QH right on the tailend of the webnair he was pushed to say BC grade was 2.45 g/ton but they have to get in to see what it really is. I am grotesquely paraphrasing but believe it the jest.  interesting you mentioned 51% below 2.5g/t IKE
Comment by ReefinKeiph on Oct 01, 2020 2:57am
Chimpoxzee.  Keiph
Comment by TXRogers on Oct 01, 2020 8:57pm
Look - we can all be Dummies concerning what we believe will be, and what we think is unlikely.  Thant goodness, most our our opinions don't matter as riding investors. The reason I wrote the post below on low grade gold operations (less than 2.5 g/t) is because there are some "extremely tricky" factors driving the positive economics (or failure) of these mining operations ...more  
Comment by THound on Oct 01, 2020 9:10pm
The boys want to weigh in on the economics Tx.  https://youtu.be/mHSjGFuKob0 Hound:)
Comment by TXRogers on Oct 01, 2020 9:16pm
Believe it or not, I actually owned a Black and Tan coonhound when I was younger.  Stupidest dog I ever owned:  a quasi retarded beast connected to a nose which never left the ground. Fortunately, one day it managed to sniff down a Go Train east of Toronto, and disappeared into a hundred pieces.  Saved me the cost of burying the thing. Tx
Comment by THound on Oct 01, 2020 9:18pm
Hes prbly still chasing that train:)  H
Comment by waitingstill on Oct 01, 2020 10:17pm
You would think this is the first open pit mine ever tried?! I would like to think management has some experience in this area of mining and milling that they would be able to calculate the cost of removing the over burden and whether that over burden has any value contained in it or not. It boggles my mind how with all the technology and experience there is out there that this is such a black box ...more  
Comment by TXRogers on Oct 01, 2020 10:27pm
As I mentioned.  It's not a technological challenge.  It's a cost management exercise. Well said, WS:  You "have to trust QH and the team that has actually seen the land, all the assays, the mill and so on. Clearly I am putting my lot with QH"  AND the Novo team. And I do. Tx
Comment by THound on Oct 02, 2020 2:40am
I apologize WS. Im not myself lately. Summer is over and Mule is coming out of the water this weekend, the leaves are falling along with the temperature, TA threw my spinach bottle into the pool, and even refused little Hounds advances last nite. She had a headache. So all in all Im in a foul mood lately. Disregard any negative comments. Go nvo go. I will be in the band section, trying to play ...more  
Comment by TXRogers on Oct 02, 2020 4:39am
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