Novo attracts De Grey as partner and shareholder

In return for spending at least $25 million on exploration over the next four years, De Grey will earn a 50% interest in Novo's 1034sq.km Egina project that sits along trend from De Grey's 11.7 million ounce Mallina project and its play-opening Hemi discoveries. De Grey will also spend $10 million to take an 11.6% stake in Novo, becoming its largest single shareholder. De Grey will then manage exploration over a 70% larger chunk of the Pilbara, covering an area of more than 2500sq.km, spending at least $7 million over the next 18 months looking for large-scale, intrusion-related gold deposits similar to Hemi and shear-hosted orogenic deposits, building on the work completed by Novo so far. De Grey managing director Glenn Jardine said recent work by Novo at Becher, in the northern part of the Egina camp, just 28km from Hemi and 10km from the Withnell deposit, suggested extensions to the prospective geology and fertile structures. Much of Novo's areas have received minimal modern systematic exploration providing scope for discoveries.Encouraging signsSpeaking to MNN, Novo executive co-chair and acting CEO Mike Spreadborough said a significant aircore program over the past nine months suggested the Becher area appeared to have all the building blocks for a similar resource. "We've had the tenement for a while, but past drilling was inconclusive," Spreadborough said, noting there was 10-20m of cover in the area. "Over time, we've built up a viewpoint that we had the same structural settings and rock types for a Hemi-style intrusive-related gold system. "The geochemical results from the bottom-of-hole surveys confirmed intrusive rocks similar to (De Grey's) Withnell in the early days. It's a broad brush, but we have confirmed disseminated zones of mineralisation at shallow depths." This year's follow-up program has closed down the spacing to 320m, helping Novo narrow down priority areas for deeper drilling at three of the five prospects at Becher: Heckmair, Irvine and Whillans within the northern region of the Egina gold camp. The recent 50,000m-plus aircore drilling at Becher delivered numerous anomalous results, such as 3m at 5.23 grams per tonne from 9m; and 18m at 0.38gpt from 21m, including 9m at 0.56gpt, over 12m at 0.43gpt from 57m, and 39m at 0.25 grams per tonne from 81m, confirming a large 5sq.km anomaly.Mallina DFSDe Grey continues to finalise its definitive feasibility study for Mallina, which is expected to support the development of a major gold processing facility at Hemi, providing a regionally strategic asset in the west Pilbara. For its part, Novo is mulling listing on the Australian Securities Exchange later this year, believing in the benefits of getting closer to local investors given its assets are dotted across Western Australia and Victoria. De Grey has indicated it could consider backing the IPO. Spreadborough said Novo would continue to focus on exploration with drilling programs planned for Nunyerry North and Balla Balla in the Pilbara, and Belltopper in Victoria later this year, funded by a cash position that is expected to be $33 million. Novo built up its Pilbara position during the conglomerate gold rush late last decade, which remains an exploration option, but Spreadborough said Novo was keen to focus its exploration spend on the highest return opportunities, which is why it has downgraded the once highly touted Bellary Dome area with only sporadic gold reported in drilling. "We are disciplined. We drilled just enough holes to get the information, and we will review the results," Spreadborough said.Priority targetsIts next priority target is the Nunyerry North project, located in the southern section of the Egina gold camp, 1.5km south of Becher where there is a 1.5km-long high-grade surface anomaly. Creasy Group owns 30% of the untested area. Novo will also begin a strategic review of the Nullagine gold project in the eastern Pilbara, where it has the suspended 1.5 million tonne per annum Golden Eagle mill. The project has resources of around 276,000oz. As with its other assets, Novo will consider development, joint ventures or divestment options.Victorian actionThe explorer recently increased its holdings by moving to 100% in the Belltopper project within the prolific Bendigo Tectonic Zone. While the Pilbara is advancing quickly, Spreadborough said Victoria was a more complex environment in terms of land access and geology, but it has completed a lot of work in developing its structural modelling for the Malmsbury gold field, about 55km south of Agnico Eagle Mines' high-grade Fosterville operation. The Malmsbury area has seen only limited shallow drilling, and historically produced just 90,000 ounces at about 1oz per tonne. "It takes time, but the rewards can be very, very high," Spreadborough said. Spreadborough said Novo sees its core competence is in gold, and that is what its shareholders on the TSX want to see. That is why it has farmed out its Pilbara lithium rights, initially at Quartz Hill south of Nullagine, to Bald Hill mine owner Liatam Mining. It is also in the process of packaging up the nickel and battery metal potential around Karratha. Novo shares have traded at C22-60c over the past year. De Grey shares were steady at A$1.35 today, valuing the company at $2.1 billion.

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