Pilbara gold stocks take a twenty per cent haircut after Novo disappoints

The Pilbara gold rush suffered its first major setback today after a less than glowing report from Canada’s Novo Resources at its Purdy’s Reward deposit, sending share prices in a host of junior stocks plummeting.

Shares in many of the Pilbara hopefuls fell by around 20 per cent or more, including Novo’s partner Artemis Resources (ASX: ARV), De Grey Mining (ASX: DEG), Impact Minerals (ASX: IPT), Southern Hemisphere Mining (ASX: SUH), Marindi Metals (ASX: MZN), Kairos Minerals (ASX: KAI), DGO Gold (ASX: DGO) and Coziron Resources (ASX: CZR).

Twenty per cent drop

The fairly widespread 20 per cent haircut for the Pilbara hopefuls followed on from an 18 per cent fall in Novo’s share price in Canada following the announcement that the watermelon pip style of nuggety gold mineralisation appearing in conglomerate beds will be more difficult to analyse than hoped.

At the very least the announcement suggests that proving the gold nuggets are an economic deposit capable of becoming a mine will require more expensive bulk sampling from trenches after unsatisfactory results from scout diamond drilling and a variety of large diameter drilling methods.

Novo Resources sparks rush and disappointment

Novo sparked the Pilbara gold rush when it compared the Pilbara gold-in-conglomerate finds at Purdy’s Reward as being similar to South Africa’s fabled Witwatersrand deposit – the world’s largest gold find.

However these latest test results suggest the nuggets may not be as consistent within the Fortescue Group conglomerate beds as had been hoped.

Novo said it was not happy with the integrity of the sample results produced from both wet and dry large diameter drilling for estimating gold grades.

Artemis announces bulk extraction and processing

The damage may have been even worse but for Artemis releasing two statements to the ASX today – one saying that a permit for a 20,000 tonne bulk extraction from Purdy’s Reward had just been granted and the other that the Radio Hill processing plant was on track to begin processing Purdy’s Reward sample from the middle of 2018.

Sector suffers reality check

Nevertheless, the entire sector has suffered a reality check that making economic gold discoveries in the Pilbara was not going to be as easy as simply identifying conglomerate beds and beginning to mine them – particularly with the delay until January of any assays from Novo’s exploration so far.

While the beds are fairly widespread in the area, the distribution of the watermelon- pip style gold nuggets and associated fine gold still remains an open question.

Some of the other Pilbara gold players that on the whole have other interests but were still caught up in the Pilbara gold rush hype were not as badly hit in the share price rout including Venturex Resources (ASX: VXR), Rumble Resources (ASX: RTR), Haoma Mining (ASX: HAO) and Kalamazoo Resources (ASX: KZR).

Novo shares a ten-bagger – but not any more

Novo shares have taken investors on a roller-coaster ride, rising from just C$0.80 in July to a peak of C$8.40 in early October after it had assembled a 12,000 sq km tenement in the Pilbara on the back of its fresh conglomerate-hosted gold theory.

That rise sparked a frenzy of exploration and “nearology’’ as other junior players assembled tenements containing Fortescue group conglomerate beds and existing players such as Haoma outlined the existence of the beds on their tenements.

However, the frenzied price rises have begun to fall off in recent weeks, leaving the sector vulnerable to the sort of plunge today that would inevitably accompany any disappointing news.