“I going to share something with my readers that no one has ever mentioned that you really want to think about. Pretend for a moment that the lava never covered the sand and gravel and turned it into hard rock. Instead of this being a 5-20 meter thick hard rock conglomerate, it’s a simple 5-20 meter thick sand and gravel bed with gold nuggets in it.
It’s a placer deposit. We don’t know how the gold get there or where it came from: it’s a standard but very rich placer deposit.
Where is the richest gold?
Right! It’s at the very bottom of the gravel right on and in the bedrock.
The richest gold is not at the top of the sand and gravel unless you can think of some way of making gold nuggets float. Nobody’s mentioned that yet. The deep large diameter RC bulk samples taken from the lower parts of the conglomerate are going to be very very interesting.”
Novo is trading above $8.00 a share and that takes its market cap well over a billion. Part of that trading is a bet that the Moriarty version of the geology will be proven out when the drill results come in. For my pals at Novo I hope that is exactly what happens.
But if this deposit behaves like a placer deposit per Moriarty it will take a lot of drilling, trenching and big diameter drilling to get a serious handle on the dimensions of the discovery. How thick is the conglomerate in which the nuggets are being found? How far does that structure extend? Is it relatively homogeneous, in other words will Novo find nuggets dispersed continuously or will there be clumping with some areas much richer than others?
The people bidding the shares up over $8.00 are betting that the drilling and trenching will establish continuity, extension and depth. People on the short side, and they are out there, are making two kinds of bets: the first is that the geology is not going to match Quinton Hennigh’s theory in some significant way. That is, in my opinion, a very unwise bet. Quinton, as well as being a first-rate explorationist, is also a scientist. He knows just how easy it is to “fool yourself” in Feynman’s phrase. The drilling and trenching are testing Hennigh’s hypothesis and are unlikely to refute it completely.
The second sort of short bet on Novo is about the details and the delivery. In any exploration project, there will be setbacks and surprises. There will also be delays of one sort or another. And there will be unexpected results: running a large diameter drill will pull up a lot of rock. Some of that rock may very well be “dead”. (Of course, some of it may be a pirates’ chest of watermelon nuggets so rich they break the core.) This kind of short bet is really a trading call. Essentially the bet is that Novo’s share price will, from time to time, get ahead of itself. People on these trades may be agnostic on Hennigh’s theory or they may be as committed as Moriarty; but they can “reality check” the share price against the progress and trade when it outruns that reality.