It's been eight months since I have delivered an update on Novo Resources
Corp. (NVO:TSX.V; NSRPF:OTCQX). While Novo has put out a fair number of
press releases since then I have been waiting for some solid red meat. They
have just put out red meat that should satisfy the Novo faithful and really
irritate all the naysayers who live to rain on Novo's parade.
In the piece I wrote in December of 2018 I covered the important numbers
about alluvial production so any nitpickers should reread the piece.
Basically it's really cheap to process alluvial gravel and is always done
with heavy equipment so is measured in cubic meters or cubic yards because
that's how heavy equipment is used. A dump truck or front-end loader will
hold X meters or yards. All you are doing is moving dirt.
I was at Egina last year. I made it clear that what I saw was exceptional.
Novo owns two mining licenses that cover 5 square km apiece.
Due to very sensitive issues about native title and control, you simply
cannot just wander about the desert taking samples. Illegal prospectors will
often sneak onto the reserve at night with metal detectors to snipe. If the
locals catch them in the act they will give them a thumping, destroy their equipment
and throw them off the property. So Novo has been highly limited in what they
can and can't do before coming to an arrangement with the native people.
I think I did a good job of explaining the theory last year but now that Novo has delivered solid numbers I can talk about the
practice.
Novo used GPR (Ground Penetrating Radar) to identify a swale or depression
in the subsurface terrain on one of their two concessions. In theory that is
where you should find the richest gold.
As I write the bid on gold is $1498.70 making a gram of pure gold worth
$48.19 USD. In their initial tests, Novo found 292.38 grams of 89% to 95%
purity gold nuggets out of 281.9 cubic meters of gravel from surface. Please
note that these were gold nuggets of 1 mm or larger. There will be some small
gold but Novo has not determined the quantity yet.
If you use a nice conservative 90% purity for the gold and an even 1 g/m at
$48 a gram, I come up with a total value of $43.20 per cubic meter. You can
add the small gold later but I would be astonished if it were over 5% of the
total weight so I will ignore. I love being conservative so I will say in
that swale the processed gravel was $40 a cubic meter in gold values.
I could process that for $8 a cubic meter, Keith Barron could process it
for $10.70 a cubic meter in Montana but let's be really conservative and say
you aren't very good at this and it costs you $20 a cubic meter because you
are so ham fisted.
A 50% margin on an alluvial project would be a home run out of the park in
any alluvial project on earth and half of Mars.
Those who want to whine about everything Novo does will sputter and
explain that just because this swale is wildly profitable, not all of the
1,000 square km that Novo owns around Egina would be as profitable. But those
people couldn't get permits to strip mine 1,000 square km in a lifetime of
lifetimes.
Just because something is true doesn't mean it is meaningful. I'm wearing
blue socks and there is no elephant in the room. Both statements happen to be
perfectly true but are perfectly meaningless.
But by using the GPR to narrow down the most attractive and prospective 5%
Novo or whoever buys Novo will be producing gold at a good margin for twenty
years past when I am pushing daisies just with their current land position.
And who knows, there might be another 25% of that land position that is still
economic below $40 a meter.
I've been a Novo shareholder since before they were Novo. I've
participated in almost every private placement and clearly I am biased. Novo
is an advertiser so do your own due diligence.
Novo Resources
NVO-V $2.52 (Aug 22, 2019)
NSRPF $1.90 OTCQX 178.8 million shares
Novo Resources website.
Bob and Barb Moriarty brought 321gold.com
to the Internet almost 16 years ago. They later added 321energy.com to
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current events affecting both sectors. Previously, Moriarty was a Marine F-4B
and O-1 pilot with more than 832 missions in Vietnam. He holds 14
international aviation records.
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