On Tuesday (September 5), mid-tier gold producer Kirkland Lake entered into a term sheet agreement with Novo to buy 14 million units priced at C$4 each. Each unit consists of one common share and one common share purchase warrant.
“Investing in Novo will provide our company with exposure to highly prospective exploration targets in the Pilbara Region of Western Australia,” Tony Makuch, CEO of Kirkland Lake, said in a statement.
Vancouver-based Novo is developing several projects in the Pilbara area, including the Karratha gold project, which it discovered in late 2016. The company expects to release a prefeasibility study for the project by the end of the year.
“[Karratha’s recent] exploration results have been very encouraging and suggest that the property may be host to a large gold system with significant potential for profitable, long-life production,” Makuch also said.
Kirkland Lake’s investment will support an acceleration of exploration programs at Karratha and at other key projects in Novo’s portfolio.
“Kirkland Lake Gold is quickly rising as a preeminent high-margin gold producer, the sort of company we see as a good fit for Novo’s shareholder registry,” Dr. Quinton Hennigh, chairman and president of Novo, commented in a press release.
For more than a decade, Hennigh has been advancing the theory that Karratha and the surrounding Pilbara area could host deposits similar to those in the South Africa-based Witwatersrand Basin, which has supplied one-third of the world’s gold to date.
In July, a discovery made at the company’s Purdy’s Reward prospect, located south of Karratha, hinted at very high ore grades.
“It’s not the kind of thing that many people think would host gold, and that might go a long way toward explaining why this thing wasn’t discovered,” Hennigh told Bloomberg in a recent interview. “We jumped all over it and started staking land as quick as we could,” expanding Novo’s holdings to about 12,000 square kilometers, close to the size of Connecticut.
In addition to this significant land package, Novo also holds an interest in the Tuscarora gold-silver district in Nevada.
Aside from Kirkland Lake, which will hold 18.2 percent of Novo’s issued and outstanding shares after Tuesday’s deal closes, Novo’s largest shareholders include Newmont Mining (NYSE:NEM), the world’s second-largest gold producer, and billionaire precious metals investor Eric Sprott. The financing deal with Kirkland Lake is expected to close on September 15, following regulatory approval.
As of 2:00 p.m. EST on Tuesday, Novo’s share price was up 15.09 percent, trading at C$4.48. It has surged 462.5 percent since January.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.