Novo fast-tracks Pilbara gold feasibility study

Canadian listed Novo Resources Corporation is forging ahead with a feasibility study on the more-lucrative fresh rock gold resource at its Beatons Creek project in the Pilbara after spending the past year or so mining the shallower oxide resource that with mixed results. The company says it has come to the end of the mineable oxide resource and the mine will move to care and maintenance whilst it awaits government approvals to mine the fresh rock – expected in 12 to 18 months.

The feasibility study is slated for completion in the final quarter of this year and will involve a more-detailed study on the previous “preliminary economic assessment”. The work will encompass an updated mineral resource, along with detailed metallurgical and geotechnical test work and the company will use the time to drill out the resource even further whilst it awaits approvals.

Novo is Australia’s first modern producer of conglomerate gold, a style of gold that was transported historically by water and was made famous by the incredibly large resources discovered in South Africa’s famous Witwatersrand region. The company’s Beatons Creek mine is west of the established Nullagine gold mining centre in WA’s Pilbara region, about 250km south-east of Port Hedland.

In the lead-up to the completion of the feasibility study, Novo has accelerated a resource drill out of its Grant’s Hill deposit that holds the lion’s share of the known gold mineralisation in the fresh rock at Beatons Creek, that the company says is still open along strike.

Three rigs have been working tirelessly to plunge nearly 32,000m into the Grant’s Hill deposit, testing the extents of the mineralisation where sub-horizontal lodes over widths of 400m and strike lengths of 600m have been defined.

Encouragingly, drilling so far has confirmed the high-grade nature and continuity of multiple priority lodes in the fresh rock with one result returning 3.5m going 43.62 grams per tonne gold from 47m and another thicker 5.5m intersection chiming in at 16.02g/t gold from just 30m.

Among an Aladdin’s Cave of significant hits in the fresh rock, other notable intercepts include 1.5m grading 48.84g/t gold from 42.5m and 4.5m at 15.23g/t gold from 47.5m.

Novo’s preliminary economic assessment, or “PEA” of the Beatons Creek gold project that covered both the oxide and the fresh rock released in March 2021, forecast an operation set to produce more than 100,000 ounces of gold per annum at a cash cost of about US$700 an ounce, delivering a healthy profit over its initial six-year mine life.

At the time, Novo projected a Net Present Value of US$318 million and an EBITDA tracking at US$88 million a year using a gold price of US$1700 per ounce and a currency exchange rate of US$0.75.

With the benefit of the Golden Eagle mill that Novo bought from Millennium Minerals’ mothballed operation in 2020, the company was able to develop the Beatons Creek gold project at a breakneck pace and poured first gold in February last year after trucking the ore the short 14km distance to the Golden Eagle mill.

Whilst Novo hit its 1.8 million tonne per annum, or 150,000 tonne per month name plate capacity through the refurbished mill, gold production fell below expectation, resulting from lower grades in the less-certain oxide ore and delivering only marginal cashflow.

Despite the company’s PEA predicting grades of 1.9g/t gold in the oxide mineral resource, head grades in the oxide ore processed through the mill only ever reached 1.34g/t gold.

The company says mining and processing of the oxide resource at its Pilbara-based operation will be strategically wound down by the third quarter of this year, allowing it ample opportunity to fast-track the feasibility study.

In anticipation of the projected wind-down, Novo implemented a three-phase mine plan late last year that would see it transition from mining the oxide resource to mining the higher-grade free-milling fresh rock mineral resource with additional throughput courtesy of the nearby Golden Eagle deposit.

Phase three however that involves the mining of the fresh rock has been temporarily thwarted at the eleventh hour courtesy of a long approvals process.

Novo must now endure an agonising wait for Mines Department and environmental approval to monetise the resource.

Despite the production hiatus, Novo says it is in a strong financial position with nearly C$78 million in the bank. This is set to get a shot in the arm courtesy of the planned sale of Novo’s stake in New Found Gold Corp –tipping an additional C$125.9million into the kitty slated for August this year.

According to the company, Novo’s chief lender, Sprott Lending, has offered support to the company and waived any event of default that may have been triggered by the temporary mothballing of the mine. In return, Novo has agreed to the full repayment of its outstanding US$40m senior secured credit facility after the sale of the company’s shares in New Found that will leave Novo debt-free.

With the drill rods expected to be spinning well into next year, Novo is aiming to infill the known resource to boost confidence in the geological model ahead of mining that is scheduled to recommence in the next 12 to 18 months, subject to approvals.

The oxide was only ever a nice to have and was never expected to be the major money spinner for Novo – the real prize was always the fresh rock resource below it with much higher grades and much more stable geology.

Management says about 65 per cent of the total resource base at Beatons Creek falls into the fresh rock category, clocking in at about 2.65Mt tonnes going 2.9g/t gold for 250,000 ounces of the precious yellow metal in the inferred category. The deposit takes in another 2.14Mt at 2.7g/t for 185,000 ounces of gold in the higher-confidence indicated category.

Importantly the resource is still open and showing good grades at depth that may lead to underground mining activity in time with a current underground inferred mineral resource of 885,000 tonnes coming in at a healthy 5.3g/t gold for 152,000 ounces of gold.

Even though the fresh rock is essentially sulphide mineralisation, it is not difficult refractory ore and has previously demonstrated solid recoveries in a bulk sample of more than 94 per cent.

The oxide ore did not prove to be overly profitable and whilst Novo managed to wash its face with it financially, it has served to test-fire the Golden Eagle mill and its surrounding operations and iron out the operational bugs in readiness for what is expected by Novo to be a considerably more profitable operation in the fresh rock. If it can scrub up the fresh rock resource further whilst approvals are pending, then it will kick off mining again on the front foot.

Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au