http://www.copyright link/content/dam/images/g/z/0/9/w/9/image.related.afrArticleLead.620x350.gyzej1.png/1507879363275.jpg <img src="http://www.copyright link/content/d...icleLead.620x350.gyzej1.png/1507879363275.jpg" alt="Canadian explorer Novo Resources has found large gold nuggets in the Pilbara." width="620" height="350" class="lazy620x350">
Canadian explorer Novo Resources has found large gold nuggets in the Pilbara. Supplied
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by Tess Ingram
Just 12 months ago Artemis Resources executive director Edward Mead says he was baffled by the watermelon seed-like gold nuggets found in Western Australia's iron ore rich north west, which have since sent his company's share price soaring.
"I was standing in the Pilbara, swinging a metal detector and scratching my head thinking how on earth do you get these flat nuggets in the rock that I was looking at," Mead says.
"It took me about two weeks and then suddenly one day I had an epiphany."
That epiphany, that the nuggets could be part of a style of gold mineralisation never encountered in the West Pilbara before, has sparked a gold rush that has seen investors clamour in to a host of explorers, pushing their collective market capitalisation up by more than $1 billion in the past three months.
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Canadian explorer Novo Resources has found large gold nuggets in the Pilbara. Supplied
In the red dirt south of Karratha, a town better known for gas production and iron ore mining, a swarm of explorers are now searching for gold nuggets in shallow surface rock.
Shares in Canada's Novo Resources, which inked a joint venture with Artemis in May, have surged about 400 per cent to give the exploration company a market capitalisation of $C1.1 billion ($1.1 billion).
Artemis shares have climbed almost 400 per cent and its market capitalisation has jumped from $19 million to $159 million since July 12, when Novo sparked the hype. Largest reserve
While it was in February that Artemis indicated the nuggets pointed to a new style of mineralisation, broader interest in the find didn't really kick off until July when Novo, armed with metal detectors, pulled nuggets as long as 4 centimetres from an exploration trench which was only about half a metre deep.
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Renowned prospector Mark Creasy has been convinced for decades there is significant gold in the Pilbara. Aaron Bunch
Prospectors have been pulling nuggets from the Pilbara for decades but Mead says no one "quite looked at it in the right way".
Novo and Artemis have said the Purdy's Reward prospect the nuggets were from is part of an 8 kilometre-long trend they view as "highly prospective for conglomerate gold mineralisation considered analogous to the Witwatersrand in South Africa".
The Witwatersrand Basin is the richest and largest known gold reserve in the world and has supplied more than 2 billion ounces, or about a third of all gold ever mined.
There the precious metal is also hosted in conglomerate rock – a rough fusion of pebbles, quartz and sand.
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Newmont Mining CEO Gary Goldberg: "I know it is something our folks are keeping a close eye on."
"Because the gold is so coarse, everybody is finding it with metal detectors as opposed to normal exploration where you have to take samples and then send them off to a laboratory to find out if there is any gold," Mead says.
But because of this, the market continues to approach the trend with caution. Early days
While the hope is the nuggets mean a large basin of gold has gone unnoticed, it remains very early days.
No exploration drilling results, usually relied on by investors to discern the potential of a mineral deposit, have been released yet. Without scale and continuity a commercial project could be difficult and how the nuggets came to be in the conglomerate has not been established.
"There is still a lot of work to be done to figure out exactly what is going on with all of the nuggets," Mead says.
But he is confident the shift under way from surface sampling to drilling will help solve some of those questions and, importantly for the companies, start the process towards firming up a reportable resource.
Mead says suggestions a JORC resource could be challenging given the inconsistent nature of the gold are cynical.
Argonaut analyst Matthew Keane says while "the probability of a contiguous regional scale nugget bed is extremely low" the discovery is "polarising conventional geological thought".
The world's second biggest gold producer, US-based Newmont Mining, is Novo's third-largest shareholder with a 4.1 per cent stake, after reducing its stake from 14.9 per cent in September.
"Understanding where that is going, I know it is something our folks are keeping a close eye on," Newmont chief Gary Goldberg told AFR Weekend this week.
Sitting ahead of Newmont on Novo's register is Canadian miner Kirkland Gold and millionaire Australian prospector Mark Creasy.
Creasy, who is credited with a number of significant Western Australian mineral discoveries, identified the gold prospects of the Pilbara decades ago and pegged much of the ground now being explored by Novo.
"I have been looking for gold in the Pilbara now since 1981," Mr Creasy said in September.
"It is a very intriguing discovery and I wait with interest to see what happens when the outcrops, which have gold in them, are drilled down-dip and along strike."
More than 15 exploration companies plan to explore the Pilbara for conglomerate gold.
Still has way to go
In just three months, shares in DeGrey, which counts Kirkland as an investor, have jumped about 520 per cent while one of the first movers in the space, DGO Gold, is up about 445 per cent.
Market-research guru Gary Morgan's Haoma Mining is up 125 per cent.
Patersons Securities head of research Cathy Moises said she had followed Novo and Artemis's progress and while there were some positive signs, the companies had a way to go.
"There is definitely gold there but there has not, in my view, been enough testing to determine how much and whether it is economic or not," Moises says. "In my view only a lot more work will prove that.
"It is a big learning curve and I would never discount it out of hand because totally new discoveries do come around all the time and if you have got your mind closed you might miss a really good opportunity.
"But at this stage of my analysis I haven't seen enough to want to rush in and buy on the story, particularly because Novo has moved so strongly already."
ARV Price at posting:
29.0¢ Sentiment: Buy Disclosure: Held
(20min delay)