I met David Erfle on the media tour of the Yukon I was on a few weeks back. Quiet, intense and very, very focused. He has to be because he is trading the junior mining market and runs a subscription newsletter from his site juniorminerjunky.com out of Southern California.
At the banquet for the Yukon Mining Alliance Mining Conference, I was lucky enough to sit with David and Mickey “The Mercenary Geologist” Fulp. Along with learning a lot about geology and the history of discovery in the Yukon we had a heck of a lot of fun. About halfway through dinner, there was a bit of a buzz and all of a sudden David and Mickey were talking about the “nuggets” NOVO Resources had found in Western Australia. (I tried to text Leo Karabelas, NOVO’s IR guy) to get a picture of these nuggets. No luck.)
I had been following the Novo story for years partially because I know Leo but mainly because, in an earlier lifetime, I had spent a fair bit of telephone time with Novo’s CEO Dr Quinton Hennigh through a mutual association at Evolving Gold (V.EVG). While I suspect Hennigh would deny this, my sense was that he was a theoretician first and an explorationist second. Hennigh certainly wanted to find gold in economic quantities, but he also wanted to know why the gold he found was there.
Hennigh was also somewhat singular in that he was really only interested in elephant sized deposits. 5 million ounces and up. Way up.
Over dinner, David and I discussed NOVO and its rather startling nugget results. That was July 12. Here’s the chart.
David was kind enough to share his answers to a few questions I sent to him by email.
What attracted you to NOVO in the first place?
I first heard about Novo in an article I read in The Northern Miner back in October, 2012 (Please see my article about Novo which I submitted in my weekly column back in April here). Junior Miner Junky friend and subscriber Bob Moriarty also mentioned it to me around the same time. Since that time, I have always made sure I spoke with Quinton Hennigh about his progress every time I ran into him at a conference. I had been reluctant to purchase shares until I believed he was in the right position financially to test his theory of the Hamersley Basin in the Pilbara region of Western Australia having the same geological footprint as the Witwatersrand region of South Africa. Quinton came up with this theory nearly 25 years ago and has been quietly staking over 7,000sq km of ground in the Pilbara over the past 12 years. When the recent private placement was announced, I participated as I believed the funds would be substantial enough to bring his Beaton’s Creek project into production. And also believing the steady Beaton’s Creek high-grade open-pit production would then provide him the necessary capital to explore Nov’s Blue Spec property. However, just as I had written a story on NOVO before the placement closed, it was upsized from C$8M to C$15M. I quoted Quinton in my article about the claim staking the company had just announced, which is where the recent discovery has been made:
“Just this week, Novo announced another large land package acquisition in the Karratha region of Western Australia, which is also in the Pilbara. Mr. Hennigh told me after the acquisition was announced: “I have been searching for conglomerate hosted gold in the Pilbara for 12 years. This occurrence popped up unexpectedly via local prospectors who have found an extensive area where gold nuggets can be detected. (Before the purchase) I was able to identify the bedrock source on my recent site visit. It looks very promising and we have been very aggressive at securing land.”
What do you see as the significance of the results from a single 2 meter by 2 meter pit?
The 25km Purdy’s Reward area (where the recent discovery has been made) is less than 1% of NOVO’s total land package. The 2×2.5M pit for the bulk sample was at surface and they still will not know the significance until they drill test it. They do not know how thick it is, if it’s all mineralized, or even how far it extends under the basalt. It is too soon to be sure this discovery has Wits sized potential until some of these questions are answered.
At its current price ($5.45) what would you see as a strategy for investors lucky (and smart) enough to have NOVO in their portfolio?
The market is pricing NOVO as if these questions have already been answered and the stock is trading as a “must have in my portfolio at any price” valuation here. In other words, the market is telling us the risk is not being into possibly the greatest gold discovery of the past 100 years, as opposed to worrying about paying too much for it here. If I did not have a position, I would buy 1/2 now, then wait for the recent private placement shares to become free trading after Labor Day to buy the other 1/2.
Of course, if you had subscribed to David’s newsletter you’d already know this and, had you followed him into NOVO when he bought into the May 2017 private placement at $0.66 per unit with a full warrant at $0.90, you would be very pleased with the advice you received. Very.