Investment Case Opened today an account to discuss the business case in a serios - whithout polemic - manner.
I bought a few days ago a core position at an average of 3 cad. Main Reason for timing was the approval of Nullagine Mine. This was the smartest thing Novo could do. BC ressources and mill should be compatible. The main problem of big dilution in the last years should be under control now. They will start mining with heap leach (down til 70m) and processing Beatons Creek at Nullagine. According Jorc Standard 1m ressouces at an average of about 2.4 g/t. Probable production of about 120.000 oz/pa the next few years. With the cash flow they can prove the business plan at eniga and other tenements of about 14.000 sqm.
Strategy of the last years:
They waited long time to go the way of a producer. countless mak/bulk samples and processing tests at IGR300. countless mechanical rock sorter tests and improvements with tomra (processing fines smaller than 0.8mm). Consolidation of a huge potential 'nuggets' piece of land. At Karratha +2mm almost fine gold nuggets. All in sediment. Looks like an automated sorting and processing without mill just with a small circulation circuit could be possible. Dr Quinton Hennigh buying stakes of the best gold explorer. Intensivation of strategic cooperation with sumitomo (renewed MOU, JV of Eniga). Sumitono belongs to the biggest coorporation worldwide with specialist in all areas.
Triggers:
PFS probable til end of March
cash cost of first quarter
commercial production
PFS:
deposit: beatons creek
Base: indicated ressources (it's a PFS)
Mining: open pit til 70 meters downside
grades: 2.1 g/t
recovery: 90-95% (data of jorc study)
lenght: about 2 km
rock: sediment
All parameters let me expect of a really good PFS with cash costs of about 650 USD. Good grade very close to surface, open pit, probable low mining costs due softrock and low stripp off, low transporting costs due to near distance to mine, low processing costs due to good grade and recovery. In any case the conditions shoud be met to get the second tranche of credit facility.
Volume on 19.03.2021
Really looks like GDXJ rebalancing. At 18.03. GDXJ ETF was owner of about 7.5m shares. Somebody sold, but more interesting is who bought.
conclusion:
Novo can not be valued with a general approach. The gold is lying probable on 14.000 qm. Decisive for the business case is the assumption of non expensive decentralised processing and the capability for scaling up economically. Conventionally on ressource base Novo is valued expensive. JORC standard will not work. Cash costs could be less than 300 usd. Now it's time to prove the business plan.
If you believe Buy otherwise Sell.
Peter