WisGuy1 wrote: From QH: Marc:
I do not follow chat boards. If I did, I'd have no time for anything else.
In response to your previous email, here is my view on things.
Novo has about 13,000 sq km of prospective land in the Pilbara. Over time, we may pare back some of our current land holdings, but I imagine we will take on more prospective land in new places, too, as we learn more about the distribution of gold in the region. As a function of our large land holdings, minimum work expenditures will be a substantial part of our budget for the foreseeable future. We need to keep exploring. This year alone, we have two teams dedicated to generative work.
Egina is approximately 950 sq km, so about 7% of our total land holdings. It has very good potential, but it also has risks and challenges. Is the grade present across the greater terrace? Are grades consistent enough to mine? Where can we source sufficient water for processing? If we have to process material dry, how do we do this cost effectively with acceptable recovery? How will aboriginal negotiations proceed and how long will they take? How do we permit a large scale mine like this? Will it be viewed by the government as a conventional gold mine requiring considerable levels of permitting, or will they allow us to operate this at more of a quarry-type level? How do we implement sustainable mining and rehabilitation? Etc, etc, etc. I think you get the picture. Each one of these questions requires a dedicated team of people and money to answer. What is reality? I suspect it will take 18-24 months to get to a large scale trial mining phase. It could take another year after that to get a full blown permit to operate a respectable sized commercial level mine. Egina is a great project, but we have some serious work to do and money to spend. The money Sumitomo has allocated for this JV totals US$30M, or about A$42M. Injection of money is staged based on outcomes as we advance things. This is the way money should be spent on mining...in a measured approach based on success. Sumitomo's money allows Novo to advance Egina without betting our entire treasury on one project. In exchange, they are a minority, but dedicated, fully aligned, financial partner. I consider this a huge win. If Novo tried to advance Egina as a "cowboy" mine, it could end badly. And the cash flow would be minor compared to the vision we have discussed with Sumitomo. Also, if Novo used its treasury to go it alone, we would have to sacrifice other parts of the Pilbara, not ideal. We would also have to ultimately seek "conventional" mine financing which is cut-throat at best, especially for a nuggety alluvial project.
So what about Beatons Creek? We are currently undertaking the option study discussed in the news as well as in my interviews. The outcome of this study will determine which way we take the project. As you are probably aware, there are a number of ways this might go. Sumitomo has 5 billion yen set aside for us to advance Beatons Creek. We will get it into production. What will a deal look like for this money? Probably a similar Sumitomo minority stake in the project. Yet another win for Novo. And with luck, this all might transpire sooner than later.
And CW/PR? I think the track Karratha will take is similar to that we went through at Beatons Creek. We will have a trial bulk sampling and processing phase followed by iterative exploration work that builds on those results. This is how we got Beatons to 900 Koz, and fully permitted. We also have to work through native title negotiations, something we are rekindling now that Ngarluma has finally appointed a new CEO. We will get there, and guess what, we will have a financial partner to ensure it. Sumitomo are lifers. They do not look for short term gains like most in the mine finance industry.
Lastly, the rest of the Pilbara...I think we will make several new discoveries this year and next. We have large expanses of terrace outside of Egina that are equally prospective. By sharing risk with Sumitomo at Egina, Novo can piggyback on this success. We know there are gold-bearing conglomerates in new poorly explored areas. What will Novo look like if we find 2-3 more high quality projects over the next couple years? We have nothing but opportunity!
I did not start Novo as a short term pump. I wanted to build a gold company centered around what I think is one of if not the largest remaining gold systems left on the planet. If our work proves fruitful, I hope to see gold bars coming out of our ground for decades. Sumitomo is the type of finance partner to help us reach this vision.
I hope this gives you the clarity you need.
Sincerely,
Quinton Hennigh
Chairman and President
Novo Resources Corp