Billionaire a believer in Pilbara gold hype
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.
Eric Sprott says he believes the Pilbara could hold more gold than South Africa’s Witwatersrand Basin