Ray Attard has lived in the Pilbara for the best part of 40 years but has never seen anything quite like this.
Mr Attard runs Pilbara Prospecting Supplies in Karratha and for the past few months has been doing a roaring trade in metal detectors as would-be gold hunters try to make the most of the astounding gold nugget frenzy now gripping the region.
There have been far bigger resources booms in the Pilbara than the current gold rush but none has inspired the sort of prospecting fever spreading through the residents of Karratha and Port Hedland.
Mr Attard has been selling at least a couple of his top-of-the-range $10,000 metal detectors each week since Canadian company Novo Resources captured the market’s attention with its claim that it has discovered a nuggetygetty gold system analogous to South Africa’s world-beating Witwatersrand gold basin sitting at the surface and right on the doorstep of the Pilbara’s two biggest towns.
Despite deep and widespread scepticism about the technical merits of Novo’s find, enchanted investors have pushed Novo’s shares from 80c in July to as high as $8.55 and its market cap has gone past $2.4bn.
Over a dozen Australian-listed juniors have capitalised on the rush, staking ground, dusting off old projects and using the excitement to raise precious new capital. They’ve also attracted some prominent backers, with none other than Sheikh Maktoum Hasher al Maktoum — a member of Dubai’s super-rich ruling family — this week joining the board of Artemis Resources, Novo’s joint venture partner. It’s not just listed companies making the most of the excitement.
Mr Attard’s shop is enjoying its best trading conditions since the height of the boom. The hardest part has been keeping up with demand — he ran out of stock last week.
“Everyone thinks there’re nuggets out there like jelly beans, that you just go out there with a metal detector, start swinging and pick them up,” Mr Attard told The Weekend Australian.
“It’s not that simple and we tell people that, but everyone makes up their own mind, gets the cash and come and buy detectors anyway.”
Among the Pilbara locals flocking to Mr Attard’s store in Karratha’s dusty industrial precinct have been some notable shoppers. Among the clientele to come through Mr Attard’s store recently was Canadian billionaire Eric Sprott, the founder of giant Canadian resources fund of the same name and a big investor in Novo. (Sprott, Mr Attard says, bought a few thousand dollars’ worth of gold nuggets from the shop.) Since his visit, Sprott and his companies have taken positions or struck agreements with other Pilbara gold plays including Kairos Minerals and De Grey Mining.
And that’s not all: Mr Attard, a veteran prospector himself, has already been approached with an offer of more than $1 million for some of the ground he pegged in the area a while back.
That potential windfall will be a strong temptation, particularly given the tough recent few years in the Pilbara following the end of the mining construction boom, but Mr Attard says he won’t be hurried into a decision on the offer.
Atlas Iron, which actually started its listed life as a Pilbara gold explorer before pivoting into iron ore, recently revealed it would turn its attention to the gold potential of its ground after fielding plenty of inquiries from other parties interested in just that.
Atlas managing director Cliff Lawrenson told The Weekend Australian he was still waiting to see whether Novo’s theory was geologically sound, but noted Atlas’s established infrastructure in the Pilbara meant it could test the gold potential cheaply and easily.
“We’re certainly getting a lot of interest from third parties who are talking to us and that are interested in getting involved, but we want to try to get a better view of what it’s really worth before we start getting into deals,” he said.
Unlike most modern-day gold discoveries, which involve large-scale, deep mineralised systems in which the gold is disseminated through broad sections of rock invisible to the untried eye, the Novo-inspired Pilbara gold rush involves nuggets sitting just below the surface.
Typical disseminated gold deposits can be found only through costly multi-million-dollar drilling programs and can only be processed through large-scale and expensive processing plants, but the companies and prospectors rushing around the Pilbara gold rush are picking gold out of the ground armed with little more than metal detectors, jackhammers and shovels.
It makes this perhaps the most egalitarian and imagination-grabbing gold rush since those in the Victorian and Kalgoorlie gold fields back in the 19th century.
While the Pilbara rush kicked off in earnest back in July, prospectors such as Mr Attard have been digging up the region’s watermelon seed-shaped nuggets out of conglomerate rock for decades.
What has changed is Novo’s interpretation and promotion of those nuggets.
Novo has noted the similarity in size and shape of the Pilbara nuggets and those of South Africa’s Witwatersrand Basin, which has produced more than a third of the entire world’s gold. The hypothesis is that the conglomerates of the Pilbara could host a gold system that is either similar to or was once connected with the Witswatersrand and which could be similarly rich.
The theory has been amplified by photographs and videos of Novo pulling nuggets out of its ground, most famously during a live 2am broadcast from the Pilbara to the influential Denver Gold Forum.
Novo’s Witwatersrand theory has attracted plenty of cynicism.
Could such a massive, rich system really have been sitting in the middle of what is one of the world’s most valuable (and heavily scrutinised) mineral regions all this time all but unnoticed? How could Novo and its Canadian chief executive have found something that generations of Australian geologists must have missed?
There are also questions about just how Novo and the other Pilbara conglomerate plays will go about proving up the resource and reserve bases needed to justify their valuations and secure finance for future development.
The fact the gold occurs as nuggets means the typical method of drilling simply cannot be relied upon. The nuggety nature makes it essentially impossible for drilling to determine an indicative grade and scale of the mineralisation.
There are many in Perth who believe Novo and the others will have to start mining to find out just what they have — and without a reliable resource and reserve, that would involve sinking a lot of capital with no real idea whether the investment is warranted.
Then there is the valuation currently being attributed to Novo.
Lion Selection Group fund manager Hedley Widdup noted recently that Novo’s current market capitalisation was greater than the that of established 300,000oz a year gold producer Saracen Mineral Holdings, and was more than the combined market cap of promising production and development groups Dacian Gold, Beadell Resources, West African Resources and Ramelius Resources.
He noted that based on current market valuations of Australian-listed gold plays, the market is pricing in Novo having an astronomical 16 million ounces sitting in its ground. All on the back of a company that is yet to deliver any real drilling results of note.
While Mr Widdup and the likes of Far East Capital founder Warwick Grigor have stopped short of declaring the whole rush to be bunkum, there is broad agreement that Novo’s valuation might have got ahead of itself.
“The fact that the promotion seems to have now overtaken what is happening in the field is good for shareholders in Novo — if they are smart enough to sell,” Mr Grigor said.
Atlas’s Mr Lawrenson said: “Last year everyone in Port Hedland went fishing on weekends. Now most of them are going prospecting on weekends. So when people are giving up fishing in Port Hedland, you know there’s something going on.”
CDT Price at posting:
4.6¢ Sentiment: Buy Disclosure: Held
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