Mr. Michael Spreadborough reports
NULLAGINE GOLD PROJECT OPERATIONS UPDATE
Novo Resources Corp. has provided an operations update for Beatons Creek.
In December, 2021 (1), Novo released a three-phase mine plan for Beatons Creek which was composed of:
Mining of the Beatons Creek oxide mineral resource through second quarter 2022, with the expectation that low-grade stockpiles would be processed through third quarter 2022;
Thereafter, transition to mining of the higher-grade free-milling Beatons Creek fresh mineral resource, subject to approvals, expected to provide production through 2026;
Mining of the Golden Eagle deposit commencing and continuing through the transition from Beatons Creek oxide to fresh material, depending on timing of Beatons Creek fresh mining approvals.
Despite optimization activities for the oxide mineral resource, mined grade continues to deliver marginal cash flow, and grade control drilling has defined the extent of economic oxide material, which could be mined. Novo believes that economic mining and processing of the oxide mineral resource can be extended for an additional quarter from the three-phase mine plan outlined in December, 2021 (1), and will now continue to the end of third quarter 2022. However, the transition to Golden Eagle and the fresh mineral resource cannot occur immediately as previously anticipated. As such, following completion of oxide mining, the company will pause production operations at Beatons Creek and the Golden Eagle plant, with a controlled and phased wind-down of operational activities.
The company expects production to recommence in approximately 12 to 18 months, following receipt of required approvals for the fresh mineral resource and completion of an FID (final investment decision) postreceipt of the results from the feasibility study. Importantly, Novo has developed a detailed development and exploration plan during this period, which includes further definition and extension drilling of the fresh mineral resource and resource definition drilling of near-mine targets, with a primary focus on the Mosquito Creek oxide and sulphide targets to extend the greater Nullagine gold project beyond Beatons Creek.
Commenting on the production update and path ahead at Nullagine, executive co-chairman, acting chief executive officer and director Mike Spreadborough said: "Confirmation of grade of the oxide mineral resource has been a challenge. The team at Beatons Creek has done an excellent job in optimizing the mine plan, and I, along with the Novo board of directors, commend them on their attention and focus. We now turn our attention to phase 2 mining of the fresh mineral resource, where we expect operations to be supported by higher grades and lower mining costs. We will complete the feasibility study to validate the mining approach and economics prior to commencement of mining, and in parallel, we are seeking requisite environmental approvals.
"Unfortunately, we expect a 12- to 18-month gap in production as we seek formal approval to mine the fresh mineral resource. While this pause is far from ideal, we will continue to focus on Novo's core strategic exploration programs across the company's 11,000 square kilometres of premium Pilbara tenure.
"We will also focus on the efficient execution of the extensive work program we have developed over this period, with key activities planned across the fresh mineral resource that will both optimize the economics and reduce future development and operational risks. This includes a 12-month drillout of the known fresh mineral resource, exploration for extension opportunities and completion of the feasibility study, which we expect to complete mid-fourth quarter 2022. Further resource definition drilling of the Mosquito Creek oxide and sulphide targets, which comprises several exciting targets and provides excellent upside to extending production from Nullagine beyond Beatons Creek, is also planned.
"I would like to take this time to thank all the staff and contractors at Beatons Creek for their hard work and determination. We will honour our commitments to staff and contractors during the pause in operations and continue to support the local community and our traditional owner partners.
"Importantly, Novo remains in a strong financial position, and we believe the plan in place provides the best platform for the Nullagine operations to become a consistent 100,000-ounce-per-year gold operation and for Novo to deliver on its longer-term strategy of becoming a 250,000-ounce-per-year gold producer through existing operations, exploration and other opportunities."
Phase 2 -- fresh operations at Beatons Creek
The fresh mineral resource accounts for 65 per cent of the total Beatons Creek mineral resource estimate (1). Phase 2 of operations, which is forecast to start in the next 12 to 18 months and is subject to approvals, is expected to be supported by higher grades and lower unit costs.
Delivery of phase 2 production will be underpinned by completion of key workstreams over the next 12 months, which include the following:
Feasibility study, which is under way and scheduled for completion in mid-fourth quarter 2022:
Expectation to report mineral reserve based on updated mineral resource;
Study focused on optimizing life-of-mine costs for haulage, power, water and tailings storage;
Metallurgical and geotechnical diamond drilling programs have recently been completed;
Other key studies under way and progressing as planned:
Completion of phase 1 of a reverse circulation (RC) drilling program to deliver an upgraded mineral resource:
Results to be used in a mineral resource update, which will form the basis of the feasibility study;
Resource definition and extension drilling programs for the fresh mineral resource; programs have commenced and will continue for the rest of calendar year 2022 and into first half 2023:
Program to be completed in stages, targeting higher-priority areas in the first instance and progressing to lower-priority targets;
Significant assay results to date provide Novo with an excellent platform to plan future stages of drilling;
- Focused on expanding inferred mineral resource, informing further studies and life-of-mine planning.
Delivery of phase 2 will play a critical role in executing the long-term vision at Nullagine, which should see production of the fresh mineral resource between 2023 and 2026, with extensional drilling focused on extending production post-2026, along with exploration and development work at Mosquito Creek. Mining of the fresh mineral resource is subject to receipt of approvals and an FID postreceipt of the results from the feasibility study.
Novo has completed confirmatory resource drilling and metallurgical testing to evaluate the potential to expand the historical Golden Eagle pit. Unfortunately, this work confirmed the geological complexity of Golden Eagle mineralization and also confirmed historic studies that Golden Eagle material requires the Golden Eagle plant to be expanded to include a flotation circuit and associated components. The company's review has also confirmed that a mining restart of the Golden Eagle pit requires approval from relevant Western Australian government agencies. A decision has yet to be made whether the company will progress further resource drilling and technical studies.
Long-term production potential at Mosquito Creek
Novo has developed and is implementing a refractory (sulphide) strategy at Mosquito Creek to target production at Nullagine postphase 2 mining of the fresh mineral resource.
Historical work completed by Millennium Minerals Ltd. (prior to being acquired by Novo (2)) identified extensive sulphide mineralization at Mosquito Creek at several targets, and importantly, the majority of sulphide mineralization is reachable by expansion of existing Mosquito Creek oxide pits, including Golden Eagle and Golden Gate. Historical work also indicated good gold recovery using fine grinding and flotation, which would require expansion of the existing Golden Eagle plant.
Exploration programs have been developed to identify potential oxide mill feed to the Golden Eagle plant from the Mosquito Creek basin, with follow-up RC drilling programs to commence in first half 2023 at Genie, Parnell-Vulture and Daisy Central, where current drilling has intersected significant, high-grade results (3).
Novo financial position and guidance
Novo's current cash balance is approximately $77.5-million.
In addition to its existing cash reserves, the company expects to complete the sale of its investment in New Found in August, 2022 (4). The funds from this sale are expected to be used to repay the credit facility, leaving Novo debt free. Although the operational pause constitutes an event of default under the credit facility, Sprott has waived any consequence in anticipation of the credit facility repayment.
Novo expects to produce 9,000 to 11,000 ounces gold in third quarter 2022 prior to the operational pause at Beatons Creek and the Golden Eagle mill, with an additional 1,000 oz Au expected to be produced in fourth quarter 2022 as part of inventory drawdown.
Qualified person statement
Dr. Quinton Hennigh (PGeo) is the qualified person, as defined under National Instrument 43-101 (Standards of Disclosure for Mineral Projects), responsible for, and having reviewed and approved, the technical information contained in this news release. Dr. Hennigh is the non-executive co-chairman and a director of Novo.
The decision by the company to produce at the Beatons Creek project was not based on a feasibility study of mineral reserves demonstrating economic and technical viability, and, as a result, there is an increased uncertainty of achieving any particular level of recovery of minerals or the cost of such recovery, including increased risks associated with developing a commercially minable deposit. Production has not achieved forecast to date. Historically, such projects have a much higher risk of economic and technical failure. There is no guarantee that anticipated production costs will be achieved. Failure to achieve the anticipated production costs would have a material adverse impact on the company's cash flow and future profitability.
The company cautions that its declaration of commercial production, effective Oct. 1, 2021 (5), only indicates that Beatons Creek was operating at anticipated and sustainable levels, and it does not indicate that economic results will be realized.
About Novo Resources Corp.
Novo operates its flagship Beatons Creek gold project while exploring and developing its prospective land package covering approximately 11,000 square kilometres in the Pilbara region of Western Australia. In addition to the company's primary focus, Novo seeks to leverage its internal geological expertise to deliver value-accretive opportunities to its shareholders.
(1) Refer to the company's news release dated
Dec. 13, 2021.
(2) Refer to the company's news releases dated
Aug. 4, 2020,
Sept. 8, 2020.
(3) Refer to the company's news release dated
Jan. 28, 2022.
(4) Refer to the company's news releases dated April 12, 2022, and April 27, 2022.
(5) Refer to the company's news release dated
Oct. 12, 2021.
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