It’s heart-in-mouth time for Pilbara gold explorers as Novo plunges
Link copied to
Pilbara gold stocks will be tested this week following a fall in Canada’s Novo Resources after a lacklustre report from Purdy’s Reward, reports Barry FitzGerald.
The Pilbara gold nuggets rush has become a wealth hazard for investors who arrived late to the frenzy.
And the pain is set to step up a notch this week after shares in the lead company in the rush, Canada’s Novo Resources, plunged in their home market over the weekend.
The bunch of ASX juniors that have pinned their fortunes to the nuggets thematic can be expected to come under pressure after Novo shares dived 18 per cent to $C5.45 ($A5.63) a share in response to a lacklustre update on the Purdy’s Reward project near Karratha in Western Australia.
Novo’s joint venture partner, ASX-listed Artemis Resources, will be chief among the ASX stocks to come under scrutiny after the savage sell-off in Novo.
The Canadian’s losses in the last two weeks now stand at 31 per cent.
The share price dive has wiped $C430m from Novo’s market value, reducing it to a still hefty $C795m.
Both the Canadian and Australian markets have been looking to Novo to produce results that justify its share price rise from C80c in July to a peak of $C8.40 in early October.
But there was little of that in its latest update on Purdy’s. It only served to confirm that the unique Pilbara gold-in-conglomerates play – one Novo has compared to South Africa’s fabled Witwatersrand – is a long way from being confirmed as an economic proposition.
Purdy’s gold is nuggetty, making it a challenge to confirm the conglomerate beds are an economic proposition — and that the “watermelon seed” sized nuggets are as a regionally extensive as the conglomerate beds.
Novo devised a three-pronged exploration program to deal with the issues — scout diamond drilling for geological data; large diameter drilling to retrieve bulk samples; and trenching for geological information/bulk sampling.
But in its latest update Novo said it was not happy with the integrity of the sample results produced from the large diameter drilling for the critical purpose of gold grade estimation.
It is reviewing other potential options for collecting bulk samples from large diameter drilling but has decided it needs to put more emphasis on the collection of bulk samples from trenches – a more costly and time consuming method.
“Novo envisions collection of bulk material from multiple sites and positions within the conglomerate package at Purdy’s Reward to provide the greatest understanding of this unusual gold system,’’ Novo told the Canadian market.
Bulk samples from the accelerated trenching program have been sent to Perth for assaying (testing) at a laboratory that has brought in new equipment to deal with the challenges of processing the conglomerate material to come up with a final gold analysis.
No test results til January
It is a lengthier process than simple assaying and Novo’s best estimate is that it will not get to see the first gold assays until January.
The slow turnaround in assay results — and the growing realisation that there is a long way to go before anything definitive can be said about the economic potential of the Pilbara conglomerates — will test the willingness of investors in the Pilbara nuggets rush to hold tight.
Artemis and other ASX Pilbara nugget stocks have already showed signs of fatigue in recent weeks although most are still up massively on their levels before the fever for the conglomerate nuggets swept the junior gold market.
Two weeks ago, Artemis was a 55c stock. It has since fallen to 38c. Another ASX stock in the thick of the Pilbara rush, De Grey Mining, has seen its share price wilt from 36c to 23c in the same period.
Novo president Quinton Hennigh said that the company was fully aware from day one that the Karratha gold project was a coarse gold system.
“The fact that numerous prospectors have been detecting gold here since its discovery is compelling evidence.
“While the ability to recover consistent, quality sample material using large diameter drilling has not yet been accomplished, trenching appears to yield acceptable bulk samples for test work.’’
“Bulk sampling at surface will be the most critical means of determining the grade, processing characteristics and viability of this deposit,’’ Dr Hennigh said.