Results provide indication of thickness and continuity of conglomerates.
Novo Resources Corp. (TSXV:NVO) has completed drilling of 12 diamond core holes in a 400x200m area (Figure 1), at its earn-in and JV, Purdy’s Reward
in Western Australia. In the area drilled the conglomerate had a true width of between 4 and 15m, hole 17PDD007 (pictured in the press release) had
an interval of 9.5m of conglomerate. This confirms our view and is important step in de-risking the project. The two main risks to our +10M ounce potential estimate, are conglomerate thickness and grade. This diamond drill program has started reducing the risk
around thickness, the ongoing bulk samples and planned large diameter drill program should have the same impact on grade. At its current share price,
the market is pricing in a sizeable resource at Novo’s Karratha project, which based on the data to date, we view as very possible. However, additional
data, including additional diamond drilling to determine conglomerate thickness (ongoing) and assay results from the ongoing bulk samples and planned
large diameter drilling (early 2018), is needed to fully understand this projects potential.
Diamond core drilling has been successful in intercepting conglomerate
strata in all holes which continue to remain open to the southeast. Results provide an indication of thickness and continuity of the conglomerates (Figure
2). Drilling was conducted over a 400x200m area, the conglomerate sequence is between 4-15m in true thickness, with an average thickness from the holes
released of 8.8m. We note this is slightly below the 10-20m range that we had previously suggested but it remains early days and generally speaking these
results confirm our view. As a part of the two-phased program, the company is adding a second drill to ramp-up diamond core drilling, to be completed shortly,
which will be then followed by 17.5” diameter percussion holes, which is expected to begin within a week.
Valuation pricing in a significant discovery; initial results support that view.
findings confirm our view, that the potential for a significant deposit exists. Based on our preliminary value for Beatons Creek (C$150-200 million), the
market is ascribing a value of ~C$950M-1B for Karratha. Using a C$50/oz multiple this implies ~20M attributable ounces, using C$100/oz (to account, for
the premium jurisdiction, likely low-cost mining and potential for high-grades) this implies ~10M attributable ounces. While there are a number of variables
and risks to any size estimate given the early stage of exploration, in particular grade and thickness, we view this size of resource at Purdy’s Reward
(earning 50% interest) and Comet Well (80% interest) as possible. The company has a lot of work (which is ongoing) to demonstrate this potential and we
will continue to evaluate as more data becomes available. We note that our previous +10-million-ounce estimate excluded Purdy’s Reward, and made conservative
grade and grade continuity assumptions.
Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate
Alex Pitcher | Associate
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Novo Resources Corp. - TSXV:NVO - 1,2,3,4
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