Novo Resources Corp. [NVO-TSXV; NSRPF-OTCQX] said Friday June 7 that it is set to advance its Egina Gold Project in Western Australia by way of a US$30 million farm-in and joint venture with Sumitomo Corp. of Japan and its wholly-owned Australian subsidiary.
Novo is focused on exploring and developing gold projects in the Pilbara region of Western Australia, where the company has established a land package covering approximately 12,000 km2.
The Egina Project is located approximately 80 km southwest of Port Hedland, the second largest town in the Pilbara region. Port Hedland has an urban population of 14,320 and ranks as the highest tonnage port in Australia.
“Novo’s Egina Project is an early-stage, high potential gold project,” said Novo Chairman and President Quinton Hennigh. “Sumitomo, upon conducting its own technical review and has developed a similar opinion,” he said.
“It is remarkable for an exploration company to team up with a world-class finance partner like Sumitomo,” Hennigh added. “With Sumitomo’s financial backing, we aim to quickly advance Egina through exploration and test-extraction phases with the ultimate goal, should results prove favourable, of setting the project on a path to production.”
Novo shares advanced on the news, rising 7.0% or 14 cents to $2.14 on volume of 300,902. The shares are currently trading in a 52-week range of $1.87 and $4.81.
Under an agreement, Sumitomo can earn, through farm-in arrangements, up to a 40% interest in the project by spending up to US$30 million over three years, with required minimum of US$5 million per phase, defined by a program and budget.
Sumitomo has the right to elect not to continue with the farm-in arrangement and, if this right is not exercised, it is expected that any amounts advanced under the farm-in arrangement will be converted into shares of Novo through a shares for debt settlement at the higher of $2 and the minimum price permitted as at the date the right is exercised.
Any shares issued to Sumitomo under the terms of the debt settlement, will be subject to a 12-month contractual hold period (inclusive of the required four-month statutory hold period) and orderly sale restrictions. The agreement also contains a mechanism by which Sumitomo can participate in an expanded project area.
Egina lies at the heart of the Pilbara conglomerate gold province, approximately 120 km east of Novo’s Karratha gold project. After recognizing its conglomerate gold potential, Novo said it began applying for multiple exploration licenses covering much of the core area starting in 2017. In September 2018, Novo announced two transactions. They included the acquisition of private company Farno-McMahon Pty Ltd. and a joint venture with Australia Stock Exchange listed Pioneer Resources Ltd. [PIO-ASX], a move that increased the size of Novo’s Egina Project to 948 square kilometres.
The Farno-McMahon purchase came with granted mining leases covering 11.8 km2 of key target areas.