The recently completed property acquisition includes 6km of strike length of the favourably hard
rock conglomerate horizon. This horizon is exposed (or is near-surface) before dipping (at approximately 10 degrees) underneath the nearby basalts
for 500 to 1000m over this 6km strike length. Based on initial investigations by the company, it appears to be between 10m and 20m thick. With respect
to grade, despite the pervasiveness of nuggets, we have tempered our assumptions to assume that there is only disseminated gold, to account for the
expected statistical challenge of incorporating the nuggets into an initial NI 43-101 compliant resource. Consequently, we have assumed grades similar
to Beatons Creek. Figure 1 shows a previous prospectors hole, the favourable conglomerate horizon with the basalts in the background. Figure 2 provides
a typical sample of the conglomerate. Figure 3 shows the land holdings and approximate location of where the conglomerate goes underneath the basalt.
Is there upside from the current share price?
The company’s fully diluted market capitalization of ~C$447 million assumes a lot of
exploration success in Karratha, but does not appear to fully reflect our view of the project's potential. Peers typically trade between C$50-70/oz,
which based on our opinion of the potential for +10 million ounces this implies an EV of between C$400-C$560 million (80% ownership). However,
this provides no credit for Beatons Creek, which despite having smaller ounce potential, is likely to be low cost, low capex producer. Our preliminary
estimates suggest Beatons Creek could be worth C$150-200 million. This suggests to us that while Novo’s share price has significantly outperformed
over the last few months, the potential exists for further appreciation. We note that our view depends on Novo delivering exploration success in
Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate
Red Cloud Klondike Strike Inc.
105 King Street East, 2nd Floor
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Priced as of prior trading day's market close, EDT (unless otherwise noted).
All values in USD unless otherwise noted
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Company Specific Disclosure Details
Novo Resources Corp. - TSXV:NVO - 1,2,3,4
Artemis Resources Ltd. - ASX:ARV - None
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