Novo Area Plays

Oct 1, 2017

We just learned that Kirkland Lake, a Canadian mid-tier gold miner with a market cap of US $2.7 bn, is making a strategic $5 MM investment in De Grey Mining, an Australian mining company with properties hosting the same type of geology as Novo resources. That is now the second company that has independently claimed the discovery of a large nuggety gold area. De Gray is now up almost 400% over the past 5 trading days, but this junior's market cap of ~$40 MM is tiny compared to Novo's ~$750 MM market cap. Unfortunately De Gray doesn't trade on the Canadian exchanges, making it slightly harder for me to trade...which brings me to my next investment:

Last week I took a position in two area plays which trade on Canadian exchanges. The first one was Macarthur Minerals (MMS.V), and the second one is Chalice Gold Mines (CXN.T). Both have surged in price by 60% and 70% respectively, but they still have relatively small market caps of ~$15 MM and ~$80 MM respectively. Of the two, CXN is a more mature play, with experience, already trading on TSX, and with $53 MM in cash. My industry contacts tell me that both companies have properties that could host a part of the discovery.

I recognize that nothing has been economically proven, making this is a risky investment, but I view this as a generational investment opportunity. The kind of opportunity that investors had in the stock of Diamond Fields in November of 1994, at the price of $4.65. A month later that stock tripled in price, as the assay results from the very first hole confirmed the discovery of a massive nickel sulphide. Stock price tripled to $13.50, and kept trending up, culminating in a ~$174 buyout of the legendary Voisey's Bay discovery, in April of 1996. Novo's current stock price of $6.30 could therefore one day seem low. My game plan will then be to continue to add Novo on pullbacks, hopefully at $5.50. I'll add proportionally more of MMS.V, and CXN.T, as I see more upside with these two for now, compared to Novo. I will accumulate these stocks on pullbacks as I never like buying a stock at a 52 week high.

TB
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