QH expanding on Novo
Quinton Hennigh
Tue, Nov 29, 9:56 PM (9 hours ago)
to me
Marc:
Before COVID, I was traveling to Australia around 180 days per year. I was integral in every facet of the company. I wanted us to demonstrate we could advance and mine the very unusual deposits at Karratha, Beatons and Egina using technologies like ore sorting. I wanted to find the next Fosterville at Malmsbury, and I pushed for the investment into New Found on the hope that we could ultimately take over that company and build the next Kirkland Lake. Heck, I even hoped to be in a position to take over Lion One. We had challenges, but we also had a lot of wind in our sails.
Along comes COVID. I found myself isolated, and after a few months, I recognized that there was no likely way to travel to Australia any time soon, especially with the vaccination restrictions that came about in 2021. Once I realized it would be a long time before I could get back to WA, I pushed for Novo to take on Millennium and get Beatons into production. Why? Because I truly hoped that the resulting mine would be a success and help make the company and team in WA more autonomous. I recognized that they would have to find their way without me or any other significant support from NA.
What has happened? Well, Beatons Creek did not deliver the cash flow we hoped. In my view, we diluted the deposit in order to keep the mill full. Part of the issue was due to a lack of grade control, especially in the early days. This was a real shame. In July, 2021 we hit 8600 oz Au in one month, and I thought the mine would become a success from there. But then we then saw continual turnover of staff and other chronic personnel issues resulting from COVID and a tight labor market resulting from rising commodity prices. Then costs started to skyrocket, and what was a tough situation became impossible. Now, our existing resource has suffered in large due to the obscene costs of operating in WA, and the path to getting a permit for the fresh rock is tortuous in part due to a very constrained permitting regime in WA.
As for Egina, although I still remain hopeful the internal struggles of the Aboriginals will get resolved so that working within the reserve becomes possible, I think it could take a lot longer than we have time/money. There is simply no way to move anything forward inside the reserve until there is unity between the parties. Therefore, we have decided to move to areas outside the reserve and focus on basement targets like Becher. I am hopeful we can find another Hemi like discovery there. That would add decent value as demonstrated by DeGrey.
Karratha needs ore sorting. And ore sorting needs a dedicated team of professionals who are willing to commit to permitting the project and solving all the challenges of operating such new technology. Rob was continually pulled away from the ore sorting endeavor to put out fires at BC. Although he tried to build a team, people kept getting better offers to work elsewhere. The whole exercise was like watching kids build a sand castle on the beach and watching it get washed away by the tide. Can it be salvaged? Yes, but it needs people who are committed, and it also needs a lower cost environment in which to operate. The economics of BC went pear shaped due to recent cost hikes, and using that experience as a proxy for Karratha, I am not confident that it can make money at this time.
Selling the New Found shares was really disappointing and quite frankly, embarrassing. I know what that project has to deliver, and so does Eric. Heck, look at the results this week. I really wanted it to benefit Novo shareholders through acquisition. I could see that sort of deal catalyzing another Kirkland Lake type story. Having to sell shares for a discount in a crappy market and then having to use part of the funds to pay our debt and keep us out of hock was not my intent. Uggghhhh!!!!
This email is long enough. I will end by saying that I am putting a lot of faith in the exploration team to deliver. There is a lot to be found in the Pilbara. Look at all the discoveries made lately. We have more ground than any junior there, so hopefully one or two major discoveries can be made on our ground by the sharp team we have left working for us at Novo.