On Friday, Novo Resources Corp (TSXV: NVO) released a rather disappointing report on recent results from work on their Pilbara conglomerate gold project. The stock closed down 18% on the day and is now about 38% off its high. Read more about the Pilbara gold rush here and here.

In effect the announcement says that large diameter drilling is not working and the company will now rely upon bulk samples from trenches. This means that any results will be from or near the surface. This in turn may not disprove that the gold discovered to date is a near surface phenomenon. If so, the gold is likely to be secondary gold, probably remobilized from primary, shear-hosted gold, rather than from the conglomerate itself. There are numerous shear-hosted gold occurrences in the area, such as those held by DEG.

Parallels have been drawn by NVO and others with the Witwatersrand Basin, which has produced almost half of all gold ever produced. However, NVO says in its release “We were fully aware from day one that the Karratha gold project is a coarse gold system,”. Well Wits gold is fine, generally too fine to see, and it is very evenly distributed. Nothing like the coarse Pilbara gold.

This is a very risky time for those holding Pilbara conglomerate stocks. Two stocks, ARV and DEG, do have reasonable holdings in the area, excluding conglomerate holdings. A number of other “conglomerate” companies have interesting projects away from the Pilbara, although all have run very hard on the conglomerate story.

For this story to be sustainable, the investor needs incontrovertible proof that the conglomerate is the primary host, and that gold occurs within the conglomerate at depth. And that proof may well be forthcoming given the amount of exploration ongoing in the area.

Finally, a list of some Pilbara conglomerate companies:

AND, ARV, CDT, CHN, CZR, DEG, DSO, EYM, HAO, IPT, KAI, KOR, KZR, MZN, PIO, RTR, SEG, SOR, SYA, TYX, VXR

 

NOTE

Any reference to particular companies is in no way a recommendation to buy or sell shares. The reader is advised to do their own research and/or consult with their broker.

27 November 2017 Commodities, Companies