Novo Resources discovers the untapped potential of the Pilbara Region
The Pilbara region in Western Australia may not be a familiar name to many, but it is a gold mining jurisdiction that has been capturing a considerable amount of attention from prospectors, investors and mining companies in recent years. This interest follows an extended period where the district was better known for its iron ore production.
Western Australia is, in fact, the biggest producer of iron ore for China. Over the past couple years, that industry has pulled back as iron ore prices have fallen. More recently, gold mining has taken centre stage.
According to industry observers, the Pilbara region in particular has a wealth of potential in terms of both short- and long-term prospects for gold exploration and mining.
One aspect that makes Pilbara such an interesting gold prospect is its unique geological history. The region hosts gold deposits similar to those of the world famous Witwatersrand basin of South Africa — a jurisdiction that accounts for 40 per cent of all gold ever mined. Recent research has shown that the Pilbara region and the Witwatersrand were once part of the same supercontinent dating back 2.7 billion years ago.
Dr. Quinton Hennigh’s interest in the region can be traced back to his years with Newmont Mining, when his research into the Witwatersrand connection brought Pilbara to his attention. Now the president, chief executive officer and director of Novo Resources Corp. (TSX.V: NVO), has two high-quality assets in Western Australia, one nearing development and one being explored.
“Dr. Hennigh wanted to prove the theory that Witwatersrand was the same as Pilbara,” says Robert Moriarty, president of 321 Gold, a financial website for the resource sector. “He has proven that the gold in both regions is the same, which means the potential is there.”
After forming Novo Resources, Hennigh has worked to acquire two large land blocks in Western Australia’s Hamersley Basin, called Beatons Creek — which is set to enter into production shortly — and Marble Bar.
Indirect subsidiaries of Novo hold a 100 per cent interest in the Beatons Creek gold project, and a 70 per cent interest in properties surrounding Beatons Creek and Marble Bar. The company also has a 100 per cent interest in the Blue Spec gold-antimony project, and options covering approximately 400 square kilometres over the Mosquito Creek Basin — all of which are located within the Pilbara region.
The region has already shown itself to be a centre for some high-quality assets, ones that can be mined and processed relatively cheaply, he explains. The attraction of Beatons Creek, for example, is that it hosts flat-lying deposits that can be mined by very simple, low-cost means. Treating ores is also simple and cheap. “We can process rock through gravity recovery, which means that the capital needed to develop and operate is quite low.”
He adds that Novo completed trial mining of 30,000 tonnes at the site earlier this year. Plans are to use data gathered during trial mining to complete the economic study and put the site into production in 2017.
The main thrust of the Beatons Creek project is to generate near-term cash flow in order to finance further exploration at Beatons Creek and at Blue Spec, which has recently been delivering high-grade drill results.
“What we have at Blue Spec is a very high-grade vein-type gold system that has very good potential to expand quickly,” Hennigh says. “Right now, we are step-out drilling around known mineralization and targeting new high-grade zones recently discovered through surface sampling.
High-grade gold mineralization at Blue Spec can potentially be processed through cost-effective means, including gravity separation and flotation, to produce a high-quality concentrate.
Early exploration at Blue Spec has shown that the structural zone that hosts gold extends for a long distance.
“There is potential there for a considerably larger deposit that can be unlocked over time,” Hennigh says. “Right now, we are well positioned. If all goes according to plan, we will have very high-quality exploration and production assets in a strong gold market.”
Moriarty confirms that the Blue Spec project has good high-grade potential. “That’s a 20,000-plus-metre exploration program. This new area will be a lot richer. While Beatons Creek is excellent, Blue Spec to the east also lights up like a Christmas tree. Barn-burning results are already coming out. The potential could be five or 10 million ounces.”
An added advantage is that Western Australia is a mining-friendly district, he adds. “Australians appreciate the mining industry and understand its importance to their economy. There are lots of operating mines, such as our neighbour, Millennium Minerals. Between Novo and Millennium, this camp can support 100,000-plus ounces of production a year.”
As a mining-friendly jurisdiction, permitting is reasonably straightforward; so are the environmental aspects because of the simplicity of the processing and the remoteness of the region, Hennigh says. All of which he believes bodes well for Novo’s long-term prospects for Beatons Creek and Blue Spec.
This is good news in an industry that has become increasingly difficult in recent years, Hennigh says. “When I started in exploration in this industry 25 years ago, discoveries were made routinely. We saw a constant pipeline of new projects discovered and brought online. It took a very short time to move from discovery to production — typically two to three years.”
New discoveries, however, have fallen off sharply. “Much of the low-hanging fruit has been discovered and near surface deposits are scarcer. Typically, you have to go after deeper deposits that are harder to identify. With the added social, environmental and permitting issues, it can take 10 to 15 years to develop a mine. That can be very problematic for a junior mine to have the cash to sustain itself. If you don’t have production, you have to go to market over and over. That’s a huge challenge.”
Novo is overcoming that hurdle thanks to the rapid progress at Beatons Creek, he says.
“We chose this particular area because we saw the unrecognized potential in a region that has been overlooked until recently. What I like from the short-term perspective is the potential to run a very low-cost mining operation which supports our long-term plans for exploring a very large gold system that could have long mine life. Compared to other mining jurisdictions, our project is moving very fast.”
Market timing is promising in terms of Novo’s current projects. While gold prices have fallen off sharply in recent months, Hennigh anticipates there will be strong support for gold by 2017.
“This dip is a short-term phenomenon. There has already been a sharp uptick in gold investment interest and we expect it will resume in earnest in 2017 as reality sets back in. With the Beatons Creek project underway, we could soon be in production, providing us funds to further advance our very high-quality exploration assets.”