A gold rush is underway in the Pilbara region of Western Australia. Prospectors and companies have been finding gold nuggets within conglomerates at the base of the Fortescue Basin.  The basin is 2629M to 2775M years old and the basal part, at least, is thought by some to be analogous to the Witwatersrand Basin (“Wits”) in South Africa. The Wits has produced ~1.8 billion ounces of gold, approaching half of all gold ever produced worldwide.

There is no consensus on the genesis of Wits gold. Two basic theories are; it is a paleo placer deposit or a hydrothermal, replacement deposit. Both theories are supported by compelling evidence. In any event, the gold (and uranium) are associated with hydrocarbons (now pyrobitumen), which are assumed to be the reductant that caused precipitation of the gold and uranium. Other minerals, such as anatase (TiO2) are also commonly associated with gold and uranium.

It is too early to draw the conclusion that the occurrences of gold nuggets in the Pilbara are comparable to Wits gold, based upon public evidence to date. Risk is high, but the potential reward is huge.

The leading player is Novo Resources Corp (TSXV: NVO), which has a market cap of CAD1.2B, largely on the basis of its conglomerate gold story in the Pilbara. It has a huge landholding in the Pilbara along with a +500k oz gold resource in the Nullagine (East Plibara) region. Of most interest is its impressive list of shareholders.

Kirkland Lake Gold Ltd (TSX: KL, market cap CAD3.6B) holds 17.9%, Mark Creasy’s group holds 7.6%, institutions 10.1%, and, recently, fabled resource investor Eric Sprott has acquired an on-market interest of 9.1%. These are serious investors. While, as a geologist, I am skeptical of the Wits comparison, I have to assume that others know much more than me.

This story needs to be followed. There are several small ASX listed companies in this space that are worth a look. None have remotely the level of NVO’s exposure to conglomerate gold, but then the market caps are much lower. More on these companies soon.

10 October 2017 Commodities