Australian-based emerging gold producer focused on its Big Springs Gold Project in northern Nevada, USA. Anova is progressing steadily towards production, with open-pit mining set to commence during mid-2015.
| Corporate Details |  |
| Status: Emerging Producer | |
| Size: Small Cap | |
| Commodity Exposure: Gold | |
| Share Price: $0.06 | |
| 12-month Range: $0.02 – $0.06 | |
| Shares: 300m, Options: 33m | |
| Top 20: 56% | |
| Net Cash: $2.9m | |
| Market Value: $18m |
| Key Parameters | Rating (✓out of 5) | Quarterly Statistics |
| Management Quality | ✓✓✓✓✓ | Q4 2014 Exploration Spend: $0.435m |
| Financial Security | ✓✓✓✓✓ | Q4 2014 Administration Spend: $0.384m |
| Project Quality | ✓✓✓✓✓ | Exploration Spend 53%, Admin. Spend 47% |
| Exploration / Resource Potential | ✓✓✓✓✓ | Q1 2015 Forecast Exploration Spend: $0.8m |
| Project Risk | ✓✓✓✓✓ | Q1 2015 Forecast Administration Spend: $0.2m |
We introduced Anova Metals to readers during December 2014 as we wanted to enhance our gold sector exposure at a time when gold prices had stabilised and bargains were presenting themselves. Anova’s attraction is that it is a relatively low-risk exposure because it plans to mine already-identified gold resources and utilize existing neighbouring production infrastructure, therefore minimizing start-up costs and investment risk. The stock has doubled from our initial recommended price of $0.032 in December.
In Big Springs, Anova has a high-quality gold asset with a clear and rapid path to production. A key element is the low start-up capital of around US$2 million for the initial open-pit phase, with ore being processed via a toll-treatment agreement with the neighbouring Jerritt Canyon Mine. This eliminates the need to build a treatment plant, which in addition to minimizing costs, simplifies permitting and significantly reduces development timelines and start-up risk.
Big Springs is situated within the Carlin district, a world-class gold producing area that provides access to all essential mining services. The proposed initial three-year, 41,000oz p.a. operation has the potential to generate significant cash, with which the company plans to pay dividends. There is also excellent exploration and resource expansion potential – both in extensions to the current mineralisation and also within the high-quality exploration ground surrounding the Big Springs mining area.
Big Springs Project
Anova recently released further high-grade assay results from the recent infill-drilling program at its 100%-owned Big Springs project in North Eastern Nevada, USA. The infill program has been focused on the 601 deposit at South Sammy, with the results providing great confidence in its capacity to host robust grade, near-surface mineralization.
We’ve previously provided updates in our December coverage of Anova, which encompassed results from 43 drill-holes that included high-grade intercepts such as 20.5 metres @ 7.6g/t Au. Assays from the final three holes have now been received, with the best intersections including 3.0 metres at 12.3 g/t Au from 18.2 metres depth and 4.5 metres at 6.7 g/t Au from 174.1 metres depth.
Technical Significance
These three holes were planned to provide geotechnical data for the planned 601 open-pit and potential underground mining at the adjacent 701 zone. The intercepts in Table 1 reflect where the holes happen to pass through mineralised zones. Importantly, the infill drilling program has been very successful in confirming the grade and shallow nature of the resource at 601, whilst also highlighting the potential for additional gold resources to be defined below the base of the open-pit. The results reinforce Anova’s production plans at Big Springs.
Project Background
Big Springs was acquired by Anova (then known as Kimberley Rare Earths Limited) from Victoria Gold Corporation, with completion during February 2013. Cash consideration was in the order of A$4.65 million, plus 20 million consideration shares and 30 million performance shares (in three tranches) being issued or vested. There are currently another 15 million performance shares that are yet to vest – these will vest should a Probable Ore Reserve of at least 75,000oz be delineated by February 2015.
The project is situated within the Carlin region of northern Nevada, a truly world-class mining district that produces approximately 75% of the USA’s annual gold output. The state has produced more than 150Moz of gold, largely over the last 30 years, and is an extremely mining-friendly jurisdiction. Big Springs produced around 386koz (from 510koz mined) in six open-pits from 1987 until production ceased in 1993 (due to low gold prices). It is situated 20km north of Veris Gold Corp’s operating Jerritt Canyon Mine.
Big Springs incorporates a current well-defined resource of 16Mt @ 2.0g/t for 1.03Moz, with a higher-grade component of 3.1Mt @ 4.2g/t for 415koz. The initial mining inventory includes 804,700 tonnes @ 5.5g/t for 142koz of contained gold, with the 272koz balance of the high-grade component to be further evaluated.
The key to the project is the low start-up capital cost of around US$2 million for the initial open-pit, which will mainly be for the re-grading of internal roads, preparation of a ROM pad and the payment of rehabilitation bonds. Initial access to the underground operations will be paid out of cashflow.
The mineralisation, including metallurgy, is well understood, and hence will help mitigate start-up risk. Ore from Big Springs was previously processed through a 1,000 tpd trial roaster located at Big Springs, which was the pre-cursor to the much larger 6,000 tpd Jerritt Canyon facility. Recoveries averaged 86% through the trial roaster. Jerritt Canyon has been treating similar ores for over 30 years, with good metallurgical recoveries of 85-90% expected. Geologically the mineralisation is well-understood and defined.
Anova has in place reached a toll-treatment agreement with Veris Gold Corp., with ore from Big Springs to be treated at their Jerritt Canyon mill, some 42km by road from Big Springs. The plant, including a roaster, has recently undergone a US$250m upgrade and refurbishment, and being only one of three roasters in the state, is considered a strategic asset, and currently toll treats in addition to processing Jerritt Canyon ore.
Under the terms of the deal, Anova can deliver up to 1,000 short tons (907 tonnes) of ore per day to Jerritt Canyon, with the ore being milled in 25,000 short ton (22,700 tonne) lots. Anova retains ownership of the ore and gold through the process. The toll treatment charge is US$62/short ton (US$68.40/tonne), which is only payable after Anova have received payment for their gold.
The use of toll treatment has two key advantages, firstly it significantly cuts down the capital cost, and secondly it greatly simplifies the mine permitting process.
Another issue is the complex metallurgy – given the refractory nature of the gold, roasting is required, and hence Anova will be taking advantage of Veris’ experience in treating this type of ore. In addition there is a significant arsenic content in the ore, but all potential environmental liabilities stay with Veris.
Anova is currently working towards bringing Big Springs into production via a 24,500oz open-pit (already pre-stripped by the previous owner), followed by three underground operations with plans to mine 138,600oz of gold. Anova is looking at commencing production during mid-2015 for a period of three years based on current resources. The mineable resources comprise 780,620 @ 5.52g/t Au (including 10% mining dilution).
The four-stage initial project comprises:
1. South Sammy 601 Open Pit – 185,800t @ 4.1g/t – 24,500oz
2. South Sammy 601 and 701 Underground – 70,170t @ 5.72g/t – 12,900oz
3. North Sammy Underground – 357,500t @ 6.42g/t – 73,800oz
4. Beadles Creek Underground – 167,510t @ 5.10g/t – 27,400oz
Summary
Anova will evaluate the potential to extract further high-grade remnant ore during its mining phase, as well as conduct regional exploration so that mine life can be potentially extended. There is considerable scope to expand the current resource base via extensions to the known mineralisation (a number of the ore shoots are still open down-plunge), along with identifying new discoveries.
We were impressed by the initial presentation by Anova management here in Sydney during late 2014 and we took advantage of weak gold prices and volatile markets to recommend the stock as a Speculative Buy around $0.03 during December 2014. The opportunity however still remains for investors without exposure to buy into a relatively low-risk, low-capex gold play in one of the world’s most prolific gold-producing provinces.
