Novo Resources is continuing to execute on its strategy of picking up nuggety gold projects and has increased its presence in the goldfields of Victoria, famed for its long and rich mining history. Novo has entered into a deal that could see it land up to 75% of GBM Resources’ Malmsbury gold project and just over 4% of the ASX-listed company.
In what looks to be a somewhat complex deal, Novo will get exposure to a project that is at the epicentre of major Victorian gold deposits with an aggregate historical production total of some 61M ounces.
The Malmsbury project already contains a modest resource of 104,000 ounces grading 4 grams per tonne gold.
There has been a plethora of modern discoveries in more recent times in the region such as Kirkland Lake Gold's Fosterville mine hosting a 6.8M ounce resource grading a serious 7.4g/t gold and with Kalamazoo Resources exploring the Castlemaine field next door – the general address looks to be good.
Novo has subscribed to 9,090,909 GBM “units”, which will be paid for by issuing GBM with 197,907 of its own shares. Under this initial exchange, Novo will have a 4.13% stake in GBM and has been granted an option and an additional earn-in right to acquire up to 60% interest in Malmsbury.
Novo said that each GBM unit is made up of one GBM share and a one-half-of-one ordinary share purchase warrant, or a “GBM warrant”.
Novo will be able to exercise one GBM warrant for the purchase of one GBM share at AUD11c for 36 months from the date of issue.
Over a six-month period, Novo will conduct due diligence over the Malmsbury gold project where it will have the right to move to 50% for the issuance to GBM of 1,575,387 Novo shares.
Novo has even committed to credit GBM up to AUD$250K back for its exploration spend on the Malmsbury project during the first six months.
The credit will be applied to Novo’s earn-in commitment spend, if it goes ahead with its 50% option.
If the Canadian gold giant likes what it sees in the first six months, it can earn another 10% and form a JV with GBM by spending AUD$5M over four years with a minimum spend of AUD$1M in the first year and AUD$1.25M for the remainder of the earn-in period.
If Novo doesn’t make the spend, its interest in the Malmsbury project will drop to 49%.
If Novo moves to 60%, GBM will have to then commit to 40% of total spend on the project, after the formation of the JV.
Rather than commit to the 40% spend, GBM also has another option at its disposal that could see it elect to dilute to a 25% interest until Novo tables a preliminary economic assessment that contains a gold resource of at least one million ounces, with 60% worth of the gold at indicated status - all within three years.
If GBM elects to dilute to 25% and a decision to mine occurs, GBM then has to pay Novo back 25% of the development expenditure from a maximum of 80% of Malmsbury Project cash flows.
In any event, GBM will be entitled to receive a maximum 2.5% royalty.
Early this year, Novo took up a strategic 8.17% stake in the Victorian explorer, Kalamazoo, who recently tabled an exceptional result from Castlemaine of 1.42m going a whopping 261.3g/t gold from 100.32 metres downhole.
Importantly, both GBM and Kalamazoo point to patchy historical exploration at their projects.
Dr. Quinton Hennigh, Novo’s President and Chairman said: “The Malmsbury district hosts one of the closest geologic analogues to the high-grade Fosterville … gold deposit approximately 50km to the north.
Like Fosterville, Malmsbury is situated along the eastern margin of the Bendigo belt, displays high-level vuggy quartz vein textures, elevated antimony and high gold grades.
Historic production from the main part of the Malmsbury district totalled about 90,000 ounces of gold at grades of about one ounce per tonne of gold.
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