Novo: Some Thoughts on The Crux Investor Piece

I just thought it would be fun to point out a few things that I do not agree with in this piece on Novo by Crux Investor. But first off I would like to point out that Novo is a banner sponsor of The Hedgeless Horseman and I own a lot of shares of Novo Resources. I will say that again. Novo is a banner sponsor, Novo is a banner sponsor, Novo is a banner sponsor. Got it? Good. Thus consider me biased. I hope that the logic in this article will do the talking. Anyway, below are some quotes from the piece and my thoughts on said quotes:

” Furthermore, when commercially mining the narrow gold-bearing conglomerates alternating with barren sections that are visually indistinguishable, much dilution can be expected compared to the carefully controlled bulk sampling exercise.”

… I recommend watching this.

“Novo Resources is currently in the process of acquiring Millenium shares to take control of its existing process plant at 10km from Beatons Creek. Whether this 1.5Mtpa plant is optimally set up to treat the Beatons Creek mineralisation is not yet clear from the documentation.”

… Already done.

“There has been no technical study at Beatons Creek for years and Crux Investors’ new evaluation of the project also arrives at the conclusion that the Beatons Creek resource is unlikely to ever come out of the ground.”

… Hold your breath.

“When interest started waning at Purdy’s Reward, announcements of nuggets at an adjacent property, Comet Well, temporarily re-inflated the balloon. Over time things have gone quiet with regard to these prospects, which is completely understandable when the technical information is thoroughly reviewed.”

… And yet they not only kept the ground but expanded the area of control. Gee, almost like some strategy is involved…

“At its most basic, the Company is built on sand with most of the Pilbara portfolio acreage being worthless”

… Strong opinions from someone who has no experience with any conglomerate or alluvial deposits. I would also add that 5% of 14,000 km2 is still 700 km2 (70,000 ha) and that these are indeed lateral deposits.

” The surface area explored to date is not more than 800m x 200m and bulk sampling has yielded an average grade of 0.35g/t Au and a gravity recovered yield of 0.28g/t Au. And once again, the fresh Crux Investor report reached a confident but critical conclusion on the value of Egina. Worthless.”

… Anyone heard Sumitomo pulling out? No? Well then, they must have not gotten the memo. But what do they know, they have only been insiders for the last 2 years and have a senior manager on the Novo board.

“Therefore, the loss of revenue may well be greater than the operating cost saving. Pre-concentration in itself is not a game-changer.”

… Any calcs on this? Definately NOT a game changer huh? Go find me a trial tests with ore sorters that comes even close to Novo’s numbers out of Comet Well. One can truck a lot of gold over a long distance if the mass pull comes close to 1% and 90%+ recoveries. Lastly, using absolutes in this context is a red flag in my book.

“When the Board of Directors agrees that Novo Resources money should be invested into companies OTHER than Novo Resources, and when the Chairman and President takes any position offered to him OTHER than Novo Resources, the message to shareholders should be received loud and clear, “abandon ship, abandon ship”. It is every man for himself at this point.”

… Pure conjecture and an outright lie. Quinton involves himself in companies HE wants to get involved with. Furthermore, how on earth does one explain the fact that Quinton never sold shares (even at the top two years ago?). Again, actions speaks louder than words. QH has not sold a single share of Novo and I am pretty sure it is his largest or second largest personal investment… Quite weird for someone who is “abandoning ship”.

“Hennigh, Chairman of Novo Resource has always had too many other corporate positions for comfort but in recent months he has taken on more and more positions, reducing the time he spends on Novo Resources, and reducing his reliance on the Novo shilling/pfennig/dime. He has at least seventeen paid positions as Director or Advisor to companies other than Novo Resources and incredibly, he has taken on 10 new roles in 2020 alone.”

… And yet Novo Resources gets more done than multiple juniors combined and have a more impressive collection of backers than any junior around… Again, reality speaks louder than theory.

… Elementum 3D investment = full blown success. Like unicorn type success. Just think about it for a minute… QH (Novo) did a seed investment in Elementum 3D and now the company has some of the worlds largest companies as customers and Sumitomo Corporation even invested in the company. Give me 50 shots of trying to find a an early stage TECH play and I might score one hit. QH shot once and hit a bulls eye even though it’s not even in his sector of expertise. The Kalamazoo investment is well in the money and so is the investment in New Found Gold.

When reality says one thing and the conclusions are completely opposite, one is either seriously biased or worse… “Oh no, Novo is making great returns on their investments… Sell immediately!!”

“Events of the past 2-years show that Directors of Novo Resources have lost faith in the projects as the Company and its Chairman have steadily been diversifying away from the Pilbara gold conglomerates.”

… Again with the absolutes and confusing creating value with something else. If management sees an opportunity I hope they jump on it. So far it has been working out great but that is considered to be a red flag? What kind of logic is that? Novo/QH has literally created MORE value to shareholders!!

Trivia:

In the “in depth” Crux piece on Novo the conclusion was that nothing except Beaton’s Creek should be counted as having any value at all (and BC was deemed uneconomic). Well Novo just announced a deal to sell Blue Spec to Calidus Resources for $20 M and the New Found Gold Stake is currently worth $29.4 M to name just a few examples of OBVIOUS value… And there is a lot more than that “hidden” within Novo but you actually got to have open eyes and an open mind to grasp such an “outrageous” proposition.

… If you are one of the many who actually believes that Beaton’s Creek is the only potential value factor in Novo then I suspect you will get a lot of additional surprises in the future…

Bad input —> Bad output

Red Flags:

• Absolutes and strong opinions with little to no backing nor experience
• Apparently not up to date with current events
• Conclusion based on theory that does not jive with reality
• No calculations at all despite the use of strong wording (including absolutes)
• No effort to present arguments that could be used for a risk/reward calculation

Closing Thoughts

Opinions are pretty much worthless unless there is some estimation on impact and probability. As an investor I want to know what is priced in, what is not priced in, what the chances are for scenario A-Z to happen and what it would mean for me as an investor. When I see “analysis” that throws out a lot of absolutes and doesn’t even touch on what it would mean if certain eventualities materialize (like being wrong) then it is impossible to form a proper investment case.

Comments from fingerprint42:

“The Crux hit piece is wonderful in one way, it proves just how clueless the “Experts” can be on a constant basis. Gordon runs a shop telling people what to do but he lacks even the most basic understanding of what he is talking about. For example, Egina is an alluvial project. You do not measure alluvial projects in g/t for the simple reason that all processing is via yellow gear and they work in cubic meters or cubic yards. If you went to a bulldozer operator and asked him how many tons per hour he could push, he would know at once you don’t understand what you are talking about. They move cubic meters, not tons and using tons as a measure means you don’t understand the subject. BC is entirely conventional and can be measured and valued via conventional thinking. But QH and everyone else who has ever been there knows there is a lot more ore there than the 43-101 shows. If you don’t have a mill and you have a 43-101 resource of a million ounces, why would anyone but an idiot spend money to drill off resources that you can’t process? He just put out this report but doesn’t seem to understand that Novo owns the mill now and has firm plans for getting it back into production. “

TXRogers had some great comments on the piece as well which can be read HERE.

Make up your own minds. If you can’t spot the fish then YOU are the fish.

(Note: This is not a buy or sell recommendation. This is not investment advice and I am not a geologist. This article is highly speculative, forward looking and I can’t guarantee accuracy. Always do your own due diligence. I own a lot of shares of Novo Resources which I have bought in the open market and am thus biased.  Novo is a passive banner sponsor on my site. )

Best regards,

The Hedgeless Horseman

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