Nova Minerals Ltd (ASX: NVA)
Geological Model: Estelle is a near-surface Intrusion Related Gold System (IRGS) deposit. The Tintina Gold Belt contains a number of IRGS deposits with low grade multi-million ounces gold mineral resources:
- Fort Knox (5.6 Moz @ 0.3 g/t Au resource) operated by Kinross (K.TSX, market capitalisation $13bn) 8.0 Moz produced 1997-2019
- Golden Summit (2.9 Moz @ 0.7 g/t Au) explored and developed by Freegold Ventures (FVL.TSX, $289m)
- Eagle (5.3 Moz @ 0.6 g/t Au) operated by Victoria Gold Corporation (VGCX.TSX, $770m)
Other types of deposits include very large porphyry copper – gold – silver deposits such as Casino (17.8 Moz @ 0.2 g/t Au, Pebble (106 Moz @ 0.3 g/t Au) and Whistler (6.4 Moz @ 0.5 g/t Au).
Mineral Resource Growth: The maiden mineral resource (2.5 Moz Au – Sep 2019) at Korbel was only a start. The interim mineral resource (3.3 Moz Au – Oct 2020) is just a stepping stone. The Korbel mineral resource can easily double by drilling adjacent blocks with identical geophysical signature, likely offset by faulting. The growth of the mineral resource at Korbel is seen as a function of drilling metres. Korbel Main is identified over an area spanning 2,000m North-South and 600m East-West with depths in excess of 500m. Then Korbel is only one of 15 identified prospects in the Estelle property. Mining Scenario: With a current average drilling depth of less than 100m, the deposit is shallow and amenable to open pit with a low strip ratio. Preliminary leach recoveries averaging 76% are in line with peer heap leach projects. Potential Economics: In December 2019, VGCX.TSX released the results of its feasibility study for the Eagle deposit: 2P reserves 3.15 Moz @ 0.66 g/t Au, strip ratio 0.9:1, recovery 76.9%, production 210,000oz p.a. at AISC US$774/oz, capex US$365m, NPV5% US$756m using US$1,300/oz gold price. Eagle started production in Sep 2019 (first gold pour). In time, NVA could produce similar results for Korbel or some other newly discovered deposits on the Estelle property.
Exploration Momentum: With $16m cash, NVA has the opportunity to continue building momentum in its exploration programs. NVA has now setup an all-year round camp removing any seasonality in its exploration efforts and news flow.
News flow: We anticipate several share price catalysts including results from drilling programs at Korbel and two other prospects, geophysical and geochemical surveys, mineral resource estimates and an overall acceleration of exploration results (80,000m drilling in 2021 vs. 40,000m in 2020) with the potential for new discoveries. In the short term (next three months), we can expect the release of an updated mineral resource which is likely to be around the 5 million ounces level.
Valuation: While it is still early days for NVA, we can see a relatively low risk high growth potential for the value of the company. Thanks to the rapid conversion of drilling results into mineral resource, this low risk high growth potential is recognised by the market with the NVA share price overtaking our initial >$0.20 price target set in June 2020. Considering further highly likely exploration and resource drilling success, we are updating our NVA price target to $0.40. This price target is supported by the current market value of peers.