Dr. Quinton Hennigh, President – CEO & Director, is an economic geologist with more than 20 years of exploration experience with major gold mining firms including Homestake Mining, Newcrest Mining and Newmont Mining. Dr. Hennigh was the former director and Chief Geologist of Evolving Gold Corp. where he helped assemble a world class portfolio of gold projects and led successful explorations resulting in three significant discoveries including the Rattlesnake Hills deposit, Wyoming. Currently, Dr. Hennigh is a director and Technical Advisor to Gold Canyon Resources., where he helped refocus exploration at the company’s Springpole Gold Project in Red Lake, Ontario. Dr. Hennigh is also currently the Chief Geologist of EurOmax Resources, the Technical Advisor and a director to Prosperity Goldfields Corp. and a director to NV Gold Corp. Dr. Hennigh obtained a Ph.D. in Geology/Geochemistry from the Colorado School of Mines.
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Dr. Quinton Hennigh the President, Director, and CEO of Novo Resources sits down with Maurice Jackson of Proven and Probable to discuss the truly unique value proposition on their flagship project Beaton’s Creek and adjacent project Blue Spec. Dr. Hennigh, shares with speculators the merits of being a shareholder as he conveys the virtues of Beaton’s Creek 2.7 grams per ton near surface Gold conglomerate. Not to be outdone, Dr. Hennigh demonstrates his business acumen with procurement of the Blue Spec Project, which was purchased at CAD $3.00 per oz. of Gold! ! ! Speculators will find out the cost, timeline, and results in determining the next unanswered question for both projects respectively. And finally, we share what actions you the investor need to take!
Maurice: Welcome to Proven & Probable where we focus on metals, mining and more. I’m your host, Maurice Jackson. Today’s show is dedicated to speculators seeking to identify a new paradigm in gold exploration and investing. I’m speaking of Novo Resources trading on the TSX-V, symbol NVO, and on the OTC, symbol NSRPF. Our guest is one of the most recognized and respected names in the natural resource space, known for his success as an astute geologist and his keen business acumen. Joining us today is Dr. Quinton Hennigh, the president, director and CEO of Novo Resources. Thank you for joining us, sir.
Quinton: Thank you, Maurice.
Maurice: Before we begin today’s discussion, I want to give credit where credit is due. We want to thank Bob Moriarty, the founder of 321gold and 321energy, and Jayant Bhandari, the host of the highly acclaimed Capitalism & Morality and one of the highly sought advisors to institutional investors for making us aware of the value proposition of Novo Resources. In full disclosure, we are proud shareholders of Novo Resources for the virtues we will convey today. Dr. Hennigh, for the first-time listener, please share who is Novo Resources.
Quinton: Yes. Certainly. Let’s start with where Novo is headquartered. It’s in Canada. It’s a Canadian-listed company as you indicated at the beginning of the show. I’m American and our project is here in Australia. So, we’re basically scattered all over the world. We are focused on gold exploration and now in development in northwestern Australia in a region called the Pilbara, P-I-L-B-A-R-A. People can look it up on Google. They can see it’s tucked way up in the northwest corner of Australia in what’s known as iron ore country. So we’re kind of a little gold company exploring for large gold deposits right in the midst of a bunch of iron ore mines.
Maurice: Now, Quinton, speaking of Australia, let’s begin today’s discussion with your flagship project which is Beatons Creek, which is truly unique. Tell us about this project.
Quinton: Yeah, Beatons Creek has very unique geology. It is hosted by sedimentary rocks called conglomerates. These are rocks that are comprised of beds of cobbles and boulders that were laid down along an ancient shoreline many, many eons ago, about 2.74 billion years ago. These conglomerates are very sheet-like. They’re very continuous deposits and they contain good concentrations of gold, somewhere around 2.7 grams per ton is our average resource grade. These deposits are very shallow where we’re exploring them right now. They do continue into the basin. There’s a probability that this might underlie a much vaster area. What we are focused on right now though is taking what we found near surface and advancing these sheet-like deposits to becoming an active mine.
Maurice: Now, in reference to that, so we’re referring to a commercial-scale mine. Is that correct?
Maurice: All right. Now realizing that this is a forward-looking statement, do you have a range of the all-in sustaining cost on Beatons Creek?
Quinton: Yes. Because of the amenability to mining, these things where they’re near surface and oxidized are all shown to be free-digging. We demonstrated this during our bulk sampling efforts last year. The mining costs are actually quite low. We anticipate costs of mining that are probably in the lower quartile of all gold deposits around the world and processing is also quite friendly. We’re targeting gravity, carbon in leach technology which is kind of boiler tried and true in Australia. And we get excellent recoveries. We’ve got some metallurgical data here exist. We get very, very good recovery.
So all of these components, all these variables combined mean that we should be absolutely in the lower quartile in terms of All In Costs to produce an ounce of gold. Our best guess right now, our target I guess I would say is that we should be producing somewhere between $600 and $700 dollars an ounce Australian.
Maurice: That is quite impressive. I had to share that with you.
Quinton: It is.
Maurice: Now, just sticking with this for one moment though, your capital expenditures, let’s compare that and contrast that with a traditional mining company that is looking to have a commercial scale mine.
Quinton: Sure. Let’s talk about scale first. So we are looking at—we’re targeting a commercial operation that’s around 2,000 tons per day. It’s quite manageable. The capital for this is quite modest. We are targeting capital in the neighborhood of 30 million dollars Australian. So once again, this is quite low compared to many projects where you might see a price tag of, you know, 100 million or more.
Maurice: And how about the infrastructure? What can you tell us about that?
Quinton: You know, we’re in a very good location. As I mentioned earlier, we’re in the midst of a large number of iron ore mines. In fact, one of the newest and biggest iron ore mines in Australia just came online 60 km to the south of us. So, we’re blessed with pretty good infrastructure. We’ve got a highway right next to us that goes from a city called Newman all the way up to the coast of Port Hedland where they offload the iron ore onto ships and ship it up to China. So we’ve got access to two major communities in the region. We’ve got power on site. The little town we’re next to—we’re literally right next door to a town called Nullagine which is about 150 people. It’s great—We have camps. Everything is right there. We’ve got everything we need basically to set this up and that’s what’s really helping keep the overall capital of this project quite reasonable.
Maurice: I see. Now are there any reversionary interests on Beatons Creek?
Quinton: Are there any—say that again?
Maurice: Reversionary interests? Is it 100% owned?
Quinton: Yes. I see. So our core block which is where we’re developing this commercial mine is 100% Novo-controlled. We actually—we’re in a joint venture on this but we bought out the residual interest from our joint venture partner a couple of years ago. The ground surrounding it as many people will be aware is a joint venture with Mark Creasy. Mark is a very well-known prospector in Australia and he’s really the one that helped us put the land package together in Australia. He’s got a 30% interest. We’ve got a 70% interest in those surrounding grounds. We’re not planning on developing those just yet, but there’s a likelihood that the deposits will continue out there, so someday in the future we’ll look at moving in that direction.
Maurice: Now, Quinton, what is the next unknown for Beatons Creek that needs to be answered?
Quinton: Yeah. So, right now, we’ve got two things going on. We’ve started some more resource work. Early this year, we examined the scope and kind of the metrics, what was—you know, we debated what was optimal. We really picked things apart. What really opened our eyes was some cyanidation test. So, we decided to shift towards CIL as part of our processing efforts. So what we have going right now is we are revising our economic study and incorporating CIL into that. And the second thing is resource. Because of the addition of CIL processing, we think we can move straight into the sulfide. We can also expand some of the present outside resources that we have. So we’re trying to build up a resource base that can be incorporated into, say, a more robust commercial scale economic study for later this year.
Maurice: Now what is time and the cost allowance for answering this question? You mentioned—you just briefly mentioned later this year.
Quinton: Yes. So the cost of this program including the resource work is on the order of a few million dollars. We’re looking at a breadth of about 2-1/2 for the resource component and then another 1-1.5 million for the economic studies, the permitting work and so forth and also corporate overhead. So, you know, it’s a modest sum but we think we can easily handle this between now and the end of the year.
Maurice: Now, once we have the answers to the question, what is the measurement for success?
Quinton: Yes. The measurement here, I mean it’s easy to just say, “Oh, we could just jump in and start mining.” But we really want to have a good plan sorted out to demonstrate that this thing, you know, can indeed meet the expectations. I told you earlier what we think the cost might come in. This is—you know, it almost sounds ridiculous how low those numbers are. But we need to make sure that we, you know, clearly demonstrate the potential to mine at those kind of costs, you know, so the market is aware that we—you know, we’re not just full of balogna here, that we really have something special.
Maurice: Now moving forward from Beatons Creek is equally my favorite which is Blue Spec. Now, Quinton, I have to say this is one of—if not the most impressive demonstration of optionality I’ve ever witnessed. Tell us how Novo acquired Blue Spec and at what price.
Quinton: Yeah. So, Blue Spec was acquired in August of 2015. It’s literally right next door to us at Beatons Creek. It’s very different geologically. It’s a high-grade vein system. The veins are near vertical and they contrast with the conglomerates of Beatons Creek which are largely flat line, all right. So it’s a much, much different gold system. I want to emphasize that. But we purchased Blue Spec, the whole property from Northwest Resources. You know, the gold market really struggled—well, everybody knows that gold market was down on its back for about 5 years now. But there was a period there in Australia where it was particularly troubling for many gold producers because Australian dollar was quite strong all the way up through 2014. Northwest Resources did a good job at exploring, but they simply got caught out and, you know, we were fortunate in that we’ve purchased the property for $650,000 in cash and shares, which translates to about $3 Australian per ounce of resources, got a 220,000 ounce resource.
Maurice: Let’s let that settle in for just a moment here. AUD $3 per ounce and gold is currently trading roughly above US $1250 per ounce. Most impressive, sir. Now, listeners need to keep in mind, this is on top of what we’ve already learned regarding Beatons Creek. Please share with listeners the enormous potential within Blue Spec.
Quinton: OK, yeah. Blue Spec is a very—it’s along a very long shear zone. The sheer zone is roughly 65 km long. Through purchase of Blue Spec property and some other options we’ve taken, we control roughly 65% or two-thirds of the overall strike length for that shear zone. We did a little bit of drilling last year. We’ve demonstrated conclusively that there’s upside around the existing deposits, but more importantly, we also tagged a few new discoveries. These were outlined in some news releases late last year and early this year. These are what I would consider new shoots that have never been, you know, drilled or explored before. So these are bonafide new discoveries that will, you know, clearly add potential to the Blue Spec property. We’ve done lots of rock chip sampling up and down the belt on our ground and it’s clearly right. There’s lots and lots of potential for more of these high-grade shoots.
Maurice: Now Novo took additional measures in procuring the land surrounding Blue Spec. Is that correct?
Quinton: Yes. We’ve been pretty aggressive with our land position in Australia. You know, anytime we see some openings, we grab it.
Maurice: Now, are the plans to go into a commercial scale production or sell the project?
Quinton: For Blue Spec in particular, we are looking to develop it on the back of cash flow out of Beatons Creek. It’s an exercise that—it’s certainly a high quality project but it’s earlier stage. So we’ve got to get Beatons Creek going. That’s our main focus here this year and then we will focus on advancing Blue Spec out of the cash that comes from Beatons Creek.
Maurice: All right. Switching gears, let’s talk about the most important asset—the people. What can you tell us about the board of directors?
Quinton: Sure. Like they’ve got a very supportive board. Akiko Levinson, I’ve worked with for about 7 or 8 years now. I helped Akiko with Gold Canyon. She was the CEO there. We drilled up a 5 million ounce deposit called Sprinkle. Gold Canyon was sold to First Mining Finance about a year and a half ago. And now, you know, First Mining is advancing the project done quite well that was what I would call a good success. Let’s see. We’ve got Luca Bechis. Luca is a fellow who put up the initial capital for me to get Novo started. I really started Novo from the ground up and Luca has been a long-term friend. And then Herrick Lau. Herrick is our CFO. Herrick is—I’ve been working with him for nearly 10 years now. Pleasure to work with. Very solid guy. Makes sure everything is, you know, signed off and all the boxes are ticked so I don’t get in trouble, so—good supportive board. The kind you want.
Maurice: All right. Now tell us about Dr. Quinton Hennigh, the CEO. What makes him qualified for the task at hand?
Quinton: Look, I’ve been in gold exploration for about 27 years now. I started working for major mining companies back in the early 1990s. Worked almost 20 years for major mining companies including Homestake, Newcrest and Newmont. You know, it’s a great pleasure to work with those companies, gained a lot of experience all the way from exploration level projects to advanced, you know, development stage projects. Since leaving Newmont in 2007, I’ve gone out and worked in the junior sector, which has been a pleasure. You know, I’ve been blessed and had the ability to raise money and do some work and projects that I’ve really, really felt passionate about. But I think—you know, if I had to sum it up, I’ve got a long and very solid background in all levels of exploration through development and that’s what we need to move Beatons Creek towards production.
Maurice: What can you share with us about the technical team?
Quinton: Sure. We’ve got Simon Pooley. He’s our COO or, you know, in charge of operations and development down in Australia. He’s got lots of experience in this particular region in building this scale of mine. We’ve got Luke Meter who’s our lead of exploration down in Australia. He’s in charge of this resource work that we’re undertaking right now. I’ve got a gentleman named Kevin Box here in the US who’s been working with me for nearly 12 years now even going back to Newmont days, and he’s just basically my right hand and shows—he’s somebody that I worked with closely to kind of lay out game plans and strategies. So we’ve got a very, very good technical team.
Maurice: Which is always, always good to have. Let’s discuss some numbers please. How much cash and cash equivalents do you have?
Quinton: Yeah, we’ve got about 2 million in the bank right now.
Maurice: And what is your burn rate?
Quinton: The burn rate—the basic burn rate is around 160,000 Canadian for a month. And, by the way, all the dollar sums I’m giving here are Canadian and/or Australian dollars. They’re almost parody right now, so either one.
Maurice: All right. And how much debt do you have?
Quinton: No debt. We have no debt on the books. We pay our invoices within 2 weeks, so we keep the books clean.
Maurice: Most impressive. Who are the major shareholders?
Quinton: Yeah. Look, our biggest shareholder is Newmont Mining. They came in in 2013. They realized the large scale of this project and they have been very supportive on the technical side. They’ve been—let’s see. Their position I believe is around a little over 19% at present. Mark Creasy, the gentleman I mentioned—the prospector in Australia who helped me put the land together, he holds roughly 12% and then myself and other directors, we have another 12%. So combine all of those, we’re somewhere up in the low 40th percentile.
Maurice: All right. And Mr. Hennigh, last question, what did I forget to ask?
Quinton: Look, I think it’s real important for people to understand the context of where we’re working. We’re in a first-world country and we’re in a jurisdiction within that first-world country that’s second to none. This is a great place to build mines. You can get things permanent. You can move things forward in quite a reasonable time. I would say it’s one of the last places left in the first world that I see where you can make a discovery and then advance it quite quickly to into production. So that’s certainly a very, very strong, you know, like word for Western Australia. But I think the other thing you got to keep in mind is that in Australia right now, mining gold is very, very favorable in terms of economics. If you look at Australian gold price, we’re in $1650 right now, which is just a dream. So we’re in a very, very good position.
Maurice: And for listeners, I recently had the opportunity to interview legendary investors, Rick Rule and Doug Casey. And their number one criteria for deploying capital, it wasn’t the latent material on the ground. It’s the people. Novo Resources under the leadership of Dr. Quinton Hennigh has the perfect blend of the tangibles and the intangibles. Quinton, if investors want to get more information about Novo Resources, please share the contact information.
Quinton: Sure. They should come to www.novoresources.com, all one word. Please look for the contact information for our IR whose name is Leo Karabelas. Leo will take calls from anybody that answers questions. If he can’t answer the question, he points them to me. We jump right on it. We always answer everyone’s questions.
Maurice: And last but not least, please visit our website, www.provenandprobable.com. Through Miles Franklin Precious Metals Investments, we offer gold, silver, platinum and palladium offshore storage, precious metals IRAs and safe deposit boxes which are fully insured and secured by Brinks. The website again is www.provenandprobable.com and you may reach us at email@example.com. Dr. Quinton Hennigh of Novo Resources, thank you for joining us today on Proven & Probable.
Quinton: Thank you, Maurice.
Maurice: All the best, sir.
Quinton: You too.
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