Thinking Big is not Cheap: Money is always an Issue
Let’s put aside the current Global Financial and Health crisis for a moment. Maybe, more like a complete mess than a crisis. Although it has significant impact on all of us as well NVO’s share price, I don’t believe any of us voluntarily invested in it intentionally. And none of us can control the eventual outcome. Let’s hope it’s sooner than later.
I have an opinion on the required upfront capital needs for Novo, and accept the reasons on why they have managed to burn the amount of capital to date on the Pilbara project. And more importantly, why the Major shareholders have been relatively patient with the whole exercise. I also believe that no investor should assume that “Money is not a problem”, although I understand when it is stated as such by company management in the context of adhering to a their plan and budget. With any company that has expenditures and does not generate income, the preservation of working capital is ALWAYS a serious issue.
This last KE report 03/13 podcast was informative in one key aspect in my opinion: The recurring theme of how the Pilbara project is being addressed by Novo as an integrated series of activities. The interview once again revealed the Novo strategy towards the greater Pilbara. This in my opinion, is where we get to understand the rationale behind the progression of prospect puzzle pieces (or as some incorrectly claim, the lack of progression).
Every prospect being pursued by Novo in the 13,000 + sq-kms of stake is becoming a combination of the following activities and process developments:
Refinement of exploration techniques such GPR, statistical analysis, etc.
Development of Mineralization Reports towards Mining Licenses.
Aboriginal Clearances for both Exploration and Mining.
Expansion of the coarse gold resource and 43-101 compliancy.
Refinement of gold processing techniques such as ore sorting and concentration.
And finally, the milling solution
Each one of the above activities are stories in themselves and have tested many investor’s patience. But Novo has been candid about the rationale behind each endeavor and the pace of overall progress. It’s quite simple as far as I am concerned: They each mean very little in isolation.
All these activities apply towards ALL the Novo prospects in varying degrees – from Karratha to Egina to Beaton’s Creek and so on. These are all critical foundational components that build up an operation “tool kit” that will be applied towards each project in the mineralized Pilbara basin as a whole. A solutions kit customized for the unique Coarse Gold nature of that District.
I think one can see the vastness and scale of the overall endeavor if all these variables are applied on such a scale. And hopefully one can appreciate the time it takes to ensure each of the above processes becomes functional. So that each specific Pilbara coarse gold prospect can become economically successful by applying the correct mix.
But what becomes extremely difficult for an investor to gauge is NVO's confidence that these things are all coming together in a manner in which the company is satisfied. Although it is often stated that "all is well" in each QH interview we hear, I agree that words are simply not enough.
Actions are much more reassuring to investors than words. And that’s exactly what we received in the recent 03/12 NR.
Novo has further refined its Karratha strategy with the long-awaited acquisition of the 100% exploration licenses E47/1745 (“Purdy’s Reward”) and E47/3443 (“Patch 47K”) from Artemis Resources. Accompanied by the termination and jettisoning of the remaining JV with the ARV shipwreck, along with the non-compatible Radio Hill mill that offers no value within NVO’s overall business plan. As we recall, the previous Pipeline tenement deal was also deemed as non-compitable and was not pursued. This has been a calculated execution all along, and refined along the way as required.
A Patch 47 / Purdy's deal is very revealing on the part of Novo – both in what they acquired and where they showed no interest. There is absolutely no way this acquisition would have taken place if any of the 6 key elements stated above were faltering, or considered to be unacheivable. Actions speak louder than words. If an investor is not a good listener, then observation is the better substitute.
A 450x150 sq-km integrated plan of geological reports, license applications, native approvals, resource estimates, scooping, crushing, sorting, transporting, and finally milling. Call them puzzle pieces, but they are not randomly arranged. And neither are they devoid of revealing the complete picture.
It will all become more obvious when 20 – 25 kg Dore gold bars hit the skids. Hopefully, when the price of gold is doing the exact opposite and before Novo burns through its remaining millions of working capital.
Tx