Bil­lion­aire a be­liever in Pil­bara gold hype

The Weekend Australian - - THE MARKETS - MATT CHAM­BERS RE­SOURCES

Bil­lion­aire in­vestor and Kirk­land Lake Gold chair­man Eric Sprott says the ex­cite­ment gen­er­at­ing the cur­rent nugget gold rush in West­ern Aus­tralia and driv­ing share prices to as­tro­nom­i­cal lev­els is like noth­ing he has seen in 40 years of in­vest­ing.

But the renowned gold bug, who is heav­ily in­vested in the the­ory that the Pil­bara could host a sim­i­lar gi­ant gold de­posit to that in South Africa’s Wit­wa­ter­srand Basin, says the ex­cite­ment is jus­ti­fied and that the prize here could be even big­ger.

The Witswa­ter­srand has pro­duced more than two bil­lion ounces of gold, or more than a third of all the gold ever mined. Mr Sprott says the Pil­bara could hold as much or more gold.

“There are lots of rea­sons to be­lieve the the­ory,” the 73-yearold Mr Sprott told The Week­end Aus­tralian from the side­lines of the Pre­cious Met­als In­vest­ment Sym­po­sium in Mel­bourne this week. “We think it could be big­ger, be­cause the thick­ness looks big­ger (than the Wit­wa­ter­srand’s one me­tre).”

The Pil­bara rush has seen prospec­tors and gold ju­niors swarm­ing over the re­gion pick­ing up nuggets.

While this in it­self is not new, the re­cent ex­cite­ment has been gen­er­ated by Quin­ton Hen­nigh’s Toronto-listed Novo Re­sources, which farmed into ASX-listed Artemis Re­sources Purdy’s Re­ward prospect, 35km south­east of Kar­ratha, in July.

Dr Hen­nigh says Artemis’s un­cov­er­ing of nuggets in con­glom­er­ates backs up his the­ory that the Pil­bara, joined to Africa bil­lions of years ago, hosts a Wit­wa­ter­srand-style de­posit.

Mr Sprott owns 9.2 per cent of Novo Re­sources, whose shares have surged ten­fold since July to give it a mar­ket value of $1.2 bil­lion. He also has a 10.6 per cent stake in Kirk­land Lake, which it­self owns 17 per cent of Novo and has taken small stakes in ASX-listed De Grey Min­ing and Kairos Min­er­als, which are both up 500 per cent in the past three weeks.

Artemis has risen five­fold since July and now has a mar­ket value of $273 mil­lion.

Perth ju­nior Marindi Met­als ex­pe­ri­enced the rush yes­ter­day, up 55 per cent af­ter it said it had se­cured an op­tion to ac­quire a Pil­bara site from ge­ol­o­gist Joshua Pitt.

Mr Sprott is a for­mer Mer­rill Lynch banker who set up his own in­vest­ment com­pa­nies and who Forbes now val­ues $1.4bn.

He has a rep­u­ta­tion as a fierce gold bull and an in­vestor who wholeheartedly backs ge­o­log­i­cal con­cepts he is ex­cited by through in­vest­ment and talk­ing them up.

He says he has never seen any­thing like the Pil­bara rush.

“I’ve never seen some­thing with as much po­ten­tial as there is on the ta­ble and the kinds of moods we are hav­ing,” Mr Sprott said. “When you’re run­ning 10 and 15 per cent a day on top of an al­ready el­e­vated price, it’s pretty stag­ger­ing. But I think it’s jus­ti­fied be­cause of the size of the po­ten­tial prize.”

All of the nuggets un­cov­ered have so far been un­cov­ered on the sur­face, mean­ing there is a lot of scep­ti­cism among an­a­lysts about what lies deeper. It will take drilling to prove whether there is a big de­posit be­low the Pil­bara sur­face and whether it links up with a 1980s drill hole by Rio Tinto fore­bear CRA 60km south­west of Purdy’s Re­ward that hit gold at 1753km deep.

Novo now has drill rigs at the prospect, mean­ing the re­sults that will fil­ter through in com­ing months will be the most closely watched min­eral as­says in years.

Hed­ley Wid­dup, a ge­ol­o­gist and fund man­ager at ASX-listed min­ing in­vestor Lion Se­lec­tion, says a lot of suc­cess has al­ready been priced in to the ex­plor­ers in­volved. This means there is big risk to new money that is punted on the the­ory.

“The pos­si­bil­ity of a mas­sive gold dis­cov­ery in the Pil­bara is ex­cit­ing and the ge­o­log­i­cal model pro­vides for a big tar­get,” Mr Wid­dup said. “But we just don’t know yet what is be­neath the sur­face to sub­stan­ti­ate it.”

Mr Sprott dis­tils his be­lief in the the­ory that a huge de­posit lies be­neath the nuggets down to a few fac­tors.

These are that mi­cro or non-nugget gold is be­ing found, as an­nounced by Novo this month, and that the same nuggets are be­ing found along a 100km strike area. Those nuggets are pure.

“The fact the nuggets are 96 per cent pure and nuggets have never been found to be that pure that were al­lu­vial or from lode,” he said.

“So there is some­thing un­usual with the nuggets, and the fact their shapes are the same hun­dreds of kilo­me­tres away is prob­a­bly a tes­ta­ment to the the­ory.”

Even if Mr Sprott’s punt on the north­west isn’t the bo­nanza he is hop­ing, he is al­ready tapped into a gold re­nais­sance on the other side of Aus­tralia.

Kirk­land Lake has been re­port­ing phe­nom­e­nal grades at the Foster­ville un­der­ground mine near Bendigo that is now seen by many as one of the world’s best un­der­ground gold­mines.

The yet-to-be-mined Swan Zone has grades of 58.8 grams of gold per tonne of ore, com­pared to an av­er­age 23g per tonne mined last month, mean­ing gold pro­duc­tion is set grow when min­ing starts there.

Mr Sprott says he hopes the re­sults, which come from un­der­neath an open pit, will be re­peated on Kirk­land Lake’s ground.

BLOOMBERG

Eric Sprott says he be­lieves the Pil­bara could hold more gold than South Africa’s Wit­wa­ter­srand Basin

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