RCKS Talk

26-Oct-2018

Novo Resources Corp.

Time to get Mining

Impact: Mildly Negative

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Bulk sample results provide enough information to move the project to the next stage, despite coming in below expectations. The lower grades materially reduce our expected deposit size; however, the results are expected to provide enough information for a mineral inventory. We believe this updated data should allow the company to convert Comet Well into a Mining Lease and result in large scale bulk sampling in H2/19. While these results suggest the likely mineral endowment at Comet Well & Purdy’s Reward is smaller than previously thought, we continue to believe that Pilbara is likely to yield multiple significant conglomerate gold deposits.

Highlights: 
    • Enough information to move to go mining. A mineral inventory is one of the items required to convert Comet Well into a mining lease. We believe these results, along with the diamond drilling for structure should be sufficient. We expect it will take 6-12 months to convert it to a mining lease, likely resulting in bulk sampling starting in H2/19.
    • Our resource guess is now, 3-5Moz, smaller but still represents a major discovery. Using similar parameters to our previous estimates (Figure 2), but assuming narrow widths and lower grades we get to our new estimate. We are planning to visit the project before the end of the year and are likely to evaluate project economics with that visit.
Valuation:
Preliminary valuation reduced to C$2.40-4.80/sh (was C$4.80-18/sh); number to be refined following upcoming site visit. We now believe Karratha is worth between C$0.90-3.00/sh (was C$3.25-16.25/sh) based on our lower potential resource estimate. In our view the next major catalyst for Novo and the Pilbara is larger scale bulk sampling, which is expected to start in H2/19. Upcoming catalysts include, 1) Larger scale bulk sampling (H2/19) and 2) Ramp-up of exploration work at Egina.


 

Derek Macpherson | VP Mining Analysis 
Edmond Thorose | VP Corporate Development
Alex Pitcher | Associate, Mining Analysis
Beatrice Cigagna | Associate, Mining Analysis 

 
Red Cloud Klondike Strike Inc.
105 King Street East, 2nd Floor
Toronto ON, M5C 1G6
RCKSTalk@RedCloudKS.com

Priced as of prior trading day's market close, EDT (unless otherwise noted).
All values in USD unless otherwise noted.

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Red Cloud Klondike Strike Inc. is registered as an Exempt Market Dealer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, and the Yukon. Part of Red Cloud Klondike Strike Inc.'s business is to connect mining companies with suitable investors that qualify under available regulatory exemptions (the "Red Cloud KS Business"). Red Cloud Klondike Strike Inc., its affiliates and associates, and their respective officers, directors, representatives, researchers and members of their families (collectively, "Red Cloud KS") may hold positions in the companies mentioned in this publication and may buy or sell, or buy and sell their securities or securities of the same class on the market or otherwise. Additionally, Red Cloud KS may have provided in the past, and may provide in the future, certain advisory or corporate finance services and receive financial and other incentives from issuers as consideration for the provision of such services.
Red Cloud KS has prepared this publication for general information purposes only, NOT as part of the Red Cloud KS Business. This publication should not be considered a solicitation to purchase or sell securities or a recommendation to buy or sell securities. The information provided by Red Cloud KS for the purposes of this publication has been derived from sources believed to be accurate, but cannot be guaranteed. Opinions or analysis contained in this publication may be subject to change and Red Cloud KS does not undertake to advise the reader of such changes. This publication does NOT take into account the particular investment objectives, financial situations, or needs of individual recipients and other issues (e.g. prohibitions to investments due to law, jurisdiction issues, etc.) which may exist for certain persons. Recipients should rely on their own investigations and take their own professional advice before investment. Red Cloud KS will not treat recipients of this publication as customers or clients by virtue of having viewed this report.

Company Specific Disclosure Details

Novo Resources - TSXV:NVO - 1,2,3,4


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