Today I have decided to break down everything Chris said in the interview.
The way it works is I listen to and transcribe the core parts of the interview, and then I give my take on what was said, and I try to back up my findings with releases, research, articles and math.
As you may (or may not) appreciate, creating this post takes quite a bit of time and effort.
I have decided to share my analysis today as a thank you for all of the research and information you have all shared that helped me make my investment decision.
I like to do this exercise for a multitude of reasons, the key ones being (but not limited to):
- Accountability is key. There are no free rides, and if a deadline or target gets announced, I want to make sure that management are held to account. In saying this, nothing is set in stone, and every deviation must be understood, and sometimes changes or delays are good.
- I want to make sure that I fully understand what is being said and what is not being said. Often what is said can be different to what is meant, and this level of analysis allows me to reflect on language, tone etc.
- I want to be able to contextualise the comments and numbers to get an appreciation of value being added or lost.
- I want to establish where my next buy is should it come down further, and what my potential upside will be
- I have nothing to do and lockdown is boring (oh, how far from the truth this is with trying to design, build and launch a software platform)
Ok, let’s get started.
PART A - Korbel Main0:52 - “... for 2021 to date we’ve drilled over 30 holes now, coming up over 15,000m on our way to 50,000, got 3 diamond drill rigs going, and another diamond drill rig has been ordered and that’s exciting news that really ramping things up … Also have that RC rig out there which we’re gonna be firing up to scout drill throughout the Korbel Valley.”Not a lot to add here, there is a ton of work going on. There is also a ton of money being spent.
Ultimately it seems like Chris and the team have their house in order and are executing on their plan, and it’s “Inshallah” for the things that are outside of their control.
1:34 - “The results are starting to flow out, this is the second or third set of results that we’ve had so far this year with significant intercepts. If you remember the previous news release to this one, with holes 66 and 68 was another screamer. 60m - 70m, up to 100m of 1g or more of material, and within that 40m - 50m with 1.5 to 2g with these types of intercepts."
Links to documents are from the Nova website -
https://novaminerals.com.au/investors/announcements/Fact check time. The numbers he stated are accurate, and there is 13m at 2x, 6m at 4x and 3m at 6x. He hasn't really overstated the numbers by much (if any) at all.
"Significant Early Results at Korbel Main South East Zone" (08/06/2021) -
https://wcsecure.weblink.com.au/pdf/NVA/02382789.pdf
2:10 - "... and this new flow will continue ... It's very frustrating with these commercial labs to get these results, we know people are frustrated, we are getting to them as soon as we get them, it is 8 or more weeks out.""Where are my news flows? We were promised non stop news flows!!!"
There's your answer. 8 or more weeks bottleneck is from the labs, where there is very little to nothing they can do - and it isn't just Nova, it is industry wide.
2:23 - "As you said, bulk tonnage type deposit, and we've got 500 million tonnes out here (500,000,000,000 kgs - for some perspective, think about how many sausages that is 
), and so when you're dealing with these types of deposit, and you come across intercepts like this, the average grade is 0.3g - 0.4g per tonne."For some context, the Fort Knox Gold Mine -
https://en.wikipedia.org/wiki/Fort_Knox_Gold_Mine has:
"Surpassed 7 million ounces in 2016, Fort Knox is the largest producer of gold in the history of the state of Alaska."
"The Fort Knox gold deposit had pre-production Proven and Probable Reserves in 1996 of 158.3 million tonnes @ 0.83 g/t gold with a 0.39 g/t gold cut-off for 4.2 million ounces.[7] After the production of over 7.5 million ounces, at 31 December 2019 Proven and Probable Reserves were 255.8 million tonnes @ 0.3 g/t gold for 2.80 million ounces."
As an FYI.
- 158m tonnes + 256m tonnes = 414m tonnes. We have more than 500m tonnes, so theoretically we are 25% larger.
- Mining at Fort Knox started in 1996 and has recently been expanded out to 2027 - which is a 31 year life of mine.
2:40 - "... recall our previous drilling was on pads at 500m spacing, now we're infilling at 100m spacing, and when you start to get internal to these deposits, we're seeing these high density vein zones, and that's where we're getting these great results. These most recent results, and the previous ones, are right in the guts of what we've identified as our starter pit area."This is where I believe the company is working to JORC standards which will move resource from inferred to "measured and indicated" and then "probable and proven".
From the JORC code -
http://jorc.org/docs/jorc_code2012.pdf
3:20 - "When you're dealing with this type of bulk tonnage, 500 million tonnes, if you can have a grade increase of even 0.05g or 0.1g per tonne, we can get that average grade up to 0.4, 0.5, 0.6 grams per tonne, we're talking about adding millions of ounces to the resource."Adding. Millions. Of. Ounces. To. The. Resource.
And this is just for Korbel, for which we are already at ~4.7m oz.
So referring back to Fort Knox, they are looking at a total of 10.3m oz "After the production of over 7.5 million ounces, at 31 December 2019 Proven and Probable Reserves were 255.8 million tonnes @ 0.3 g/t gold for 2.80 million ounces."
3:45 - "... well you do the math, add 0.05g - 0.1g per tonne to 500m tonnes and you're talking to about a million to a million and a half ounces there. Raise it to 0.2g per tonne and you're talking about 3 million ounces."
For clarification here, if we refer to the Global Resource at Korbel Main Grows to 4.7Moz Gold (7/4/2021) announcement -
https://wcsecure.weblink.com.au/pdf/NVA/02361133.pdfFrom what I understand, they are measuring the resource at 518 million tonnes of dirt measuring 0.3g per tonne with a cutoff of 0.15g per tonne. for a total for 4.7m oz.
So each 0.1g per tonne upgrade is worth 1.56 million ounces of gold (or 1,560,000 oz gold at $1800USD per ounce = $2.8B USD.
If AISC is $1000, then the profit margin is an EXTRA $1.248 B USD.
And this is JUST at Korbel.
And the Price of Gold is expected to go up.
4:05 - "What's happened with this scoping study we wanted to release this month and we're about 80-90% complete with that, and the engineers have come back to us and said 'We thought the last new release was just an anomaly, and it's just continuing, and with this news release and then what we're observing in the drill holes with these blowout zones', they've said 'we need to re-think this here, because why release a study when it's already obsolete on day one?', so what we really want to incorporate this new information in this Scoping Study, it is in the best interests of the company and the shareholders. Of course we want to release something that reflects the value of the company."A) the experts said they should wait, B) they wanted to release the Scoping Study this month, C) It means the project is more appealing, which means a higher share price, which means less dilution, which means more money in our pockets.
4:50 - "And what this will also do, is because these holes are in the guts of our stage 1 starter pit, it's going to reduce our strip ratio, it's already VERY low, in those first years it is well below 1:1, like 0.3 - 0.5:1, so that will come down lower."In relation to the strip ratio, if we again refer to Fort Knox - "In 2003, the mine was scheduled to excavate up to 130,000 tonnes per day with a 2.3:1 stripping ratio". Granted, that was some time ago, but we are talking about 0.3:1 strip ratio for Korbel.
I will create a new post for RPM shortly.
(20min delay)
