TXRogers wrote: I read the latest CRUX report on Novo, and I have some comments on the document. This new current document seems to be an extension to the April 2020 report initially released by CRUX investor.
https://cruxinvestor.com/opinions/novo-resources-company-report-red-flags-green-lights/ Specifically, I would like to focus on the method on which this new revised report attempts to drive home certain opinions, supported by selective data arranged in a manner that suggest that these opinions are to be accepted as forgone conclusions.
Just to keep it brief, lets first focus on the stated “red flags”.
Red Flag 1: Opaque property transactions in the Pilbara What exactly does Novo owe to investors with respect to transparency in property acquisitions other than the basic terms and declaration of closure. Legal documents and agreement details are the domain of lawyers and accountants. The fact that CRUX is not privy to the intricate details of asset acquisitions does not warrant a “red flag” claim.
It would be much more responsible to request a follow up discussion to clear up any ambiguity that may exist, instead of suggesting something that investors should be concerned about. I mention this in the Summary below as well
Red Flag 2: An absence of updated technical studies on Beatons Creek As I posted during this past summer:
https://stockhouse.com/companies/bullboard?symbol=v.nvo&postid=31223447 Regarding Beatons Creek: The current stated resource in BC is NOT fully representative of the prospect. An initial 43-101 report was compiled and released to do more than just provide a resource. It was also done to show that Novo can actually succeed in delivering an approved 43-101 report for a coarse gold resource in the Pilbara. A resource defined by an “extreme nugget effect”.
Now, for those of that have been around since the beginning of this story:
This was once deemed a near impossibility. Novo has successfully developed processes and analytics that are now part of an approved 43-101 Report process. This is the most significant achievement.
https://www.novoresources.com/news-media/news/display/index.php?content_id=346 Regarding this stated 43-101 compliant resource estimate for BC: Does anyone actually believe it to be the final figure? It was clearly stated that the pit boundaries used to define this BC prospect was purposely limited. In fact, the following statement included in the Novo NR are quite telling:
“Mineralization remains open to the north-west and south-west with several areas identified for resource development drilling.”
“Underground Mineral Resources contain fresh mineralization outside the optimized shell. Underground resources are constrained to discrete areas of contiguous mineralization. NB: cut-off grade for underground resource has been increased from 2.0 Au g/t to 3.5 Au g/t for the 2019 Resource Estimate”
The Resource estimate for BC is clearly conservative in nature. But a recognized process (once thought impossible) in producing and expanding this resource is now in place.
Investors may ask why wouldn’t Novo expand this resource and continue to revise the 43-101 report? The answer is simple. There is no need to. In fact, it would probably be detrimental to expend further human and financial resources to expand a resource that they already know is much larger. Not until Novo are ready to mine it. And process it through a mill.
And this is where we stand today.
Red Flag 3: Novo Resources publishing the latest resource estimate at Beatons Creek, not an update from Tetra Tech And, so what? Once again, read the official NR:
https://www.novoresources.com/news-media/news/display/index.php?content_id=346 The Mineral Resources in this news release were estimated using current Canadian Institute of Mining, Metallurgy and Petroleum (CIM) standards, definitions and guidelines.
Dr. Simon C. Dominy, FAusIMM (CPGeo) has coordinated the 2019 Resource Estimate for the Beatons Creek conglomerate gold project, and is independent of the Company for purposes of NI 43-101. Dr. Dominy is a Qualified Person as defined by NI 43-101.
What is CRUX suggesting here? Is there a suggestion that an industry recognized professional such as Dr. Simon C. Dominy is playing “favorites” with Novo and has produced a dubious resource estimate?
In fact, many investors are aware that QH was disappointed with the BC Resource declaration because in his professional opinion he felt it was overly conservative. But being a professional himself, he honored the work of Dr. Dominy’s independent assessment.
Red Flag 4: Low grade, high nugget effect at Comet Well / Purdy’s Rewards rendering the project worthless Red Flag 5: Low grade, high stripping at Egina rendering the project worthless These “Red Flags” are remarkable statements in themselves. Since Novo has not established and declared a value on these prospects, we now have an investment house like CRUX making a value assessment as “worthless”. What credential do CRUX actually hold as gold explorers? The fact that CRUX have no ability to assess value by no means suggests worthlessness. The statements actually reveal that CRUX has no clue.
Low grade is not worthless. The issue is always AISCs. If CRUX require help making the distinction, they can examine the Barrick and Newmont operations in state of Nevada. And all those big open pit holes pockmarking the surface of the state.
In the case of Egina:
Under Sumitomo’s farm-in contract with Novo, Sumitomo will spend US$30 million on exploring Egina, which includes Novo’s wholly-owned tenements, as well as Pioneer’s Kangan licenses and a separate farm-in arrangement with De Grey Mining (ASX: DEG).
After spending US$30 million on exploration over three years, Sumitomo will own 40% of the project. The farm-in terms for Pioneer’s Kangan asset comprise Sumitomo and Novo spending $460,000 on exploration over the next 18-months to secure a combined 70% stake in the project.
QH has previous referred to Egina as an early stage project with high gold potential. “Sumitomo, upon conducting their own technical review, has developed a similar opinion,” he stated. “It is remarkable for an exploration company like Novo to team up with a world class finance partner like Sumitomo.”
Are investors to believe an unsubstantiated opinion by CRUX, or technical reviews conducted by Sumitomo of Japan and Novo resources?
Red Flag 6: Board of Directors abandoning the Pilbara investment thesis as demonstrated by ‘strategic’ investments in early 2020 CRUX makes the following statements:
“In 2019 and 2020 the company (Novo) has changed its stated objective of developing gold in the Pilbara, adding the phrase that it “seeks to leverage its internal geological expertise to deliver value-accretive opportunities for its shareholders.” This is code for, “the Pilbara assets are worthless, we need to diversify.”
However, we see the following Pilbara centric NRs made by Novo in 2020 alone: Note that hese are only the major activities and don’t include the exploration updates.
Sept 15:
Novo Reaches First Completion Milestone With Creasy Group Sept 08:
Novo Closes Initial Tranche of Sprott Facility Concurrently With US$3.6 Million Non-Brokered Financing and Completes Acquisition of Millennium Minerals Limited August 04:
Novo Undertakes Transformative Acquisition to Fast-Track Planned Pilbara Conglomerate Gold Production July 31:
Novo Files Egina Technical Report and Satisfies Bellary Dome Conditions July 10:
Novo Completes Acquisition of Mt. Elsie Project June 18:
Novo Announces Plans to Acquire and Field Test a Steinert Mechanical Sorter at Purdy's Reward / Comet Well June 12:
Novo Enters Into Agreement to Acquire Option Over Bellary Dome Tenement in Southern Pilbara March 25:
Novo Signs Tenement-wide Heritage Agreement With Yindjibarndi Aboriginal Corporation March 23:
Novo Completes Acquisition of 100% Interest in Purdy's Reward and 47k Patch and Dissolves Artemis Resources Limited Joint Venture February 27:
Outstanding Results Achieved From Mechanical Sorting Tests Completed at TOMRA's Testing Facility And for 2019, Novo announced the following major Pilbara milestones:
12.17.2019 Novo Discovers New Terrace Gold at Egina; Receives Positive Initial Sorting Test Results
12.03.2019 Novo Reports Significant Sub 1mm Gold From Egina
11.26.2019 Novo Plans Bulk Mechanical Sorter Trials for Egina and Beatons Creek
11.12.2019 Novo Reports Significant Advancements in Mechanical Sorting Technology
10.09.2019 Positive Coarse Gold Recoveries From Recent Bulk Samples at Novo's Egina Project
09.16.2019 Novo Completes Encouraging Gold Processing Trials With Steinert
09.09.2019 Novo Completes Initial Heritage Survey at Egina Gold Project
08.22.2019 Novo Recovers Significant Coarse Gold From Bulk Samples at Egina
08.13.2019 Novo's First Egina Trench Supports Exploration Model
08.01.2019 Novo Provides Egina Update
07.11.2019 Novo Files Updated Karratha Technical Report
06.28.2019 Novo to Broaden Exposure to Pilbara Gold-Bearing Lag Gravels Via Letter of Intent With De Grey
06.07.2019 Novo to Advance Egina Gold Project by Way of US $30 Million Farmin & JV With Sumitomo Corp.
05.28.2019 Karratha Gold Project Update Completion of Mineralization Report and Outline of Future Work
05.14.2019 Novo Announces the Grant of Mining Approvals at Its Beatons Creek Conglomerate Gold Project
05.13.2019 Novo Files Updated Beatons Creek Technical Report
04.29.2019 Novo Commences Pilbara Exploration Program
04.17.2019 Novo Announces Path Forward in the East Pilbara 04.01.2019 Novo Announces Resource Increase at Its Beatons Creek Conglomerate Gold Project
02.20.2019 Novo Advances Beatons Creek Resource Work
01.31.2019 Mechanical Sorting Generates Encouraging Results at Karratha
01.22.2019 Novo Provides Update on Near-Term Exploration Progress
01.07.2019 Novo and Sumitomo Corporation Extend MoU to Advance Novo's Australian Projects Are the above Pilbara activities in 2019 / 2020 to be interpreted as abandonment? I have no idea what CRUX is alluding to with such "red flags".
Red Flag 7: Chairman and President of Novo Resources abandoning the Novo Resources cause by taking nine new senior positions with other companies during 2020 Again, another reckless claim of “abandonment”. Novo resources is not a one man show. It is a growing company employing a team of industry professionals.
Every prospect being pursued by Novo in the 14,000 + sq-kms of stake is a combination of the following activities and process developments:
· Refinement of exploration techniques such GPR, statistical analysis, etc.
· Development of Mineralization Reports towards Mining Licenses.
· Aboriginal Clearances for both Exploration and Mining.
· Expansion of the coarse gold resource and 43-101 compliancy.
· Refinement of gold processing techniques such as ore sorting and concentration.
· And finally, the milling solution
All these activities contribute towards a larger Novo portrait – from Karratha to Egina to Beaton’s Creek and so on. These are all critical foundational components that build up an operation towards the mineralized Pilbara basin as a whole. Investors in Novo see the vastness and scale of the overall Pilbara project with all these variables integrated together. It has taken time. And the Pilbara project is still in the early stages despite the clear progress of its components.
With respect to QH taking on new advisory positions with other companies or Novo Resources expanding beyond the Pilbara: Again, expanding the scale of a company’s activities (or that of its senior executive) should not be automatically correlated to abandonment.
The yearly volume of Novo NRs and the company’s path from a local explorer in the far Eastern Pilbara to a near term gold producer with the largest Pilbara land holdings in a few short years is remarkable. This is not the result of abandonment or a lack of focus in my opinion.
Red Flag 8: Enterprise Value 1.9 times greater than Net Asset Value indicating that the next most likely significant share price move will be lower (barring a huge rise in the gold price) At this point, CRUX has completely lost credibility. Let’s just say that CRUX wouldn’t have a clue what constitutes a Net Asset Value of Novo. It goes back to the frustratingly asinine line of questioning that CRUX pursued in their QH interview last Spring on the seemingly high market cap of Novo Resources. Neither Novo Resources or QH define the market cap of Novo. The market itself defines this value.
Summary I am curious on another matter though? Why have CRUX decided to release a “deeper” rehash of their previous Novo April 2020 report? A responsible investor service would have requested a follow up interview with Novo Resources (QH) to discuss and refute the misplaced “red flags” before CRUX released such unsupported opinions.
I am open to critical and fair analysis. And I am intimate with the trials and tribulations of Novo Resources over the last few years. There are many issues that have come up and are being resolved, along with greater exploration plans. I would claim to know where Novo will be in 5 yrs. As an investor, I am betting that it will be much further ahead and with a much larger market cap.
One thing that I have discovered today: CRUX does not appear willing or qualified to make a responsible assessment.
Tx