In our last conversation with 321gold founder Bob Moriarty, Bob told us that Novo was about to pour its first gold at Beatons Creek, and that his new book on the Novo Resources story would be published on the day of the first gold pour at BC. The first gold pour happened, Novo’s share price shot skyward, and the book was published. I finally received my hard cover copy in the mail last weekend and immediately began reading the story. It’s a tough book to put down and can easily be read cover to cover in a single day. Without further ado, Energy & Gold’s March 2021 conversation with Bob Moriarty…
Goldfinger: I have read about half of your book “What Became of the Crow?“. The hard copy is fantastic, it’s very well done. I like how it feels like a real book that’s not going to get torn or bent. I’m glad I got the hard copy and I’m a little more than halfway through it. There’s a lot more to the Novo story than I ever knew. In addition, I learned a lot about many of the characters involved in the Novo Resources (TSX:NVO) story like Mark Creasy and Eric Sprott. I must say I really enjoyed the backstory on Kirkland Lake and Newmarket Gold, as well as the 2017 staking rush in the Pilbara. It’s a fantastic read, it really gives the reader an insight into putting together a junior mining company. What’s involved and some things that can go wrong, and some of the things that can go right. It’s quite a journey, a long journey.
Bob Moriarty: Well, the interesting thing is that over the last 20 years, I’ve worked with over 500 companies, but I was closer to Novo literally from the theoretical stage all the way to first production. And I’ve gotten to be part of that through the entire journey. And strangely enough, I don’t think there is any book written by anybody talking about the same kind of adventure. I’m really pleased with the book. And I think you’re dead right. Here’s what’s daft, Amazon doesn’t put out hard backs. I wanted to do the Amazon book in color, but it could only be paperback. The Amazon paperback colored version is $2 more than the Lulu hardback version in color. And the Lulu book, it’s light years ahead of any paperback.
So, I was really pleased with that, but I’ll go you one better. And that’s about those shitbirds at Amazon. If you go to Amazon and you click on the hard back and go to order it, it says it’s out of stock. But the Amazon doesn’t make the book, Lulu does.. So, if you order the book, you get the book in a week, but Amazon is trying to force you into buying the Amazon book and not the Lulu book.
They are absolute scumbags. There is a Lulu paperback in black and white, and it’s $24. And if you tried to order that on Amazon, it says delivery in one to two months. I’m sitting here saying “They’re trying every dirty trick in the world to force you into dealing with Amazon.”
Goldfinger: Amazon has come to basically take over the world. It’s pretty amazing. Especially in the last year.
Bob Moriarty: Yep.
Goldfinger: Let’s talk about the Novo story and how we got here today. So, they’re pouring gold right now at Beatons Creek. The company started in 2009 with this idea that Quinton Hennigh had about there being a Witswatersrand 2.0. So, could you tell us a little bit about the early days for Novo and how this got started?
Bob Moriarty: Well, that’s a really interesting point. There were actually two main players and that was Mark Creasy and Quinton Hennigh. In 2003 Quinton was with Newmont and did a study. There are 98 basins around the world that have conglomerate gold of the same age as the Wits. The biggest and the best is the Pilbara. So, he went to Mark Creasy and talked to him. And was going to try to get a deal done, but there were some games being played with Newmont in Perth. Because Mark didn’t like them, but they didn’t particularly like Mark. So, literally Quinton is back in the US and doesn’t understand why months and months and months have gone by with no action. But actually Newmont, in Perth had done some double dealing and going behind Mark Creasy’s back and he didn’t like it. But the overall story is all about the dreadful things that happen to every single junior mining company. It’s truly a minefield at every step of the trip.
So, eventually in 2009 Quinton and Mark got together, Quinton starts the company, Mark does the deal with them on land and they move forward. And the really interesting thing is, this could be a surprise to a lot of people in the book, obviously 10 days ago, when Novo did the first pour, that was a major step forward. They’ve got their own mill and they’re processing and they are pouring gold. And in a month or two or three, we’re going to have some idea of what the run rate is and what the production is and roughly what the cost is going to be per year. But nobody but Quinton and I knew that actually Millennium was in deep serious trouble as far back as 2013. It was a failed company, right from the get-go. They built a mill for oxide ore, but they didn’t have enough oxide ore, they had sulphide ore and they didn’t ever do anything except process a rock at a loss.
And that went on for nine years. Eventually they went bankrupt. Quinton and I knew they would as far back as 2013. So they collapsed and Novo picked up the mill. The problem was, let’s say Millennium was actually making money, if you got a million ounces of oxide gold and you’re 10 kilometers away from a mill, it demands you do something. You don’t spend a $100 million, $150 million building a new mill and take five years to permit it. You have to do some kind of deal with the people that own the mill. And Millennium wouldn’t do a deal. They wouldn’t buy Beatons Creek. They wouldn’t joint venture the project. And they wouldn’t toll mill, which is totally insane. Millennium management knew they had a gun to their head and they thought they were playing Russian roulette, but the gun was an automatic.
Goldfinger: I think that’s an interesting point. It seems to me that that was a classic example of conflict of interests between management and shareholders, where you have a situation where management wants to drag it out, doesn’t matter how bad the business is and how much shareholders are losing. They want to cash their paychecks for five more years, and shareholders are sort of trapped. Is that a fair assessment?
Bob Moriarty: They’re not sort of trapped, they are trapped. Millennium was a lifestyle company, and it was operated solely for the benefit of management. But if you’ve gone far enough in the book, that isn’t the worst story. The worst story is Artemis, where a guy comes in and becomes chairman of the board and they give him 25 million shares for free. And he’s been associated with 160 companies in the past, all of which had failed.
No, it’s true. The junior resource field. The resource field, in general, and the small balances, in general, it’s remarkable how many idiots there are who are doing little more than stealing from their own shareholders. But, the guy who was a chairman of Artemis, absolutely stiffed his shareholders, and they never realized it.
Goldfinger: That brings up another thing. For some reason, in Australia, they have this thing where they think it’s totally fine, just peachy, to have a billion or two billion shares out and have a three cent share price. I don’t get it because as an investor or trader, trading a three cent stock, is terrible because the bid is two and a half, the ask is three cents and that’s a 20% gap. I mean, it’s just terrible. And 2 billion shares out makes absolutely no sense to me. Do you have any idea why they do this?
Bob Moriarty: Australia and, especially Perth, is the last of the wild, wild west. Now, Australia, in general, is an interesting country. It’s one of the leading mining countries in the world. They have some of the best run, most aggressive mining companies in the world. And they’ve got so many crooks out there that it’s just remarkable. There’s nobody in the middle there. You’re either a crook or you’re running a good operation.
It’s amazing to me, but Perth is what Vancouver was like 20 or 30 years ago, it’s like what the Spokane and Seattle and San Francisco exchanges were like 20 or 30 years ago. It’s the wild, wild west.
Goldfinger: What ended up happening with Artemis and that guy (Lenigas) that you mentioned who has a track record of failed companies?
Bob Moriarty: What he did, he ran the price of stock up. Novo had a binding letter of commitment from Artemis with Novo. Novo needed Purdy’s reward because Purdy’s reward had a drill permit and it was going to take a year or so to get this drill permit for Comet Well.
It was important for Novo to do a deal, well he started realizing that Novo had hit on something. When Artemis did the deal with Novo in the first place, they thought Quinton Hennigh was totally insane. They thought there was no value whatsoever to the conglomerate gold and they literally gave the candy store away. Then he started realizing, “Hey, wait a minute. I need something to boost the price of my shares. I’ll just hold Novo up for ransom.” It came, literally, to the point where Novo was going to have to release results.
The chairman of the company is going out on an Australian chat board and he’s posting himself talking about how Artemis has Novo by the short and curlies. The guy was such a crook. I just couldn’t believe it. Quinton sits down to talk turkey with him and he says, “You know, we don’t think a binding letter of agreement is really a binding letter of agreement. We think you need to give us $20 million in stock.”
And unfortunately, at that point in time, Quinton was stuck and he did it. But, what the shareholders of Artemis, who were cheering him on HotCopper, what they didn’t realize was Lenigas just guaranteed Novo was never going to work with Artemis again because Novo had some 100% owned ground, they had the 80% owned ground, and they end up 50/50 JV on a Purdy’s reward.
Now, if you’re dealing with somebody who stiffs you at the very first opportunity, why would you put more money in his pocket? The answer is you couldn’t. But, the main thing is about the Artemis shareholders was, they thought the idea of screwing Novo was the most wonderful idea in the world. And they didn’t realize that Lenigas wasn’t stiffing Novo, he was stiffing them.
Goldfinger: That’s a great story. It’s karma too, right? If you screw someone else or you screw other people for your own personal gain, usually it comes back around in a bad way for you.
Bob Moriarty: It always does. The absolutely daft thing is, and I cover it in the book, there’s three different ways to do deals. You can do a zero sum game. And that’s the game in which I win, and you lose. People do that on a consistent basis, and I talk about it in the book. You can have a negative sum game. That’s the game which you lose and I lose. That’s what happens with divorces in the United States. The ex-wife says, “Hmm, I’m going to really stiff my husband. I’m going to make sure he doesn’t get to be part of the kid’s life.” It screws the children, it screws the husband, and ultimately screws the wife.
Or you can have a positive sum game. That’s the game in which everybody benefits. Now, it was simply beyond me why anybody would do any kind of a deal other than a positive sum game, Because you want to do business with this person in the future. The way Artemis stiffed Novo was like taking a hooker with you on your honeymoon. It sets the stage for the rest of the relationship.
Goldfinger: That’s spot on. I think there’s a lot of lessons to be learned from that, especially in the junior mining sector. How a CEO operates, how a CEO speaks to his or her shareholders is extremely important. Does the CEO operate with integrity and a win-win vision where it is a positive sum game, as you said. While you definitely talk about the downsides of mining in the book, and how so many companies don’t actually mine for profit and don’t run the company for profit. Mining, at its very best, is a beautiful thing, mining can be a positive sum game.
You’re finding value in the earth where nobody saw value previously. And then you’re creating jobs and tax revenue and greater wealth for shareholders, which generates more wealth for the entire economy. At its core, mining is a great win-win for the world, for everyone. I read that for every mining job there are five additional jobs created in the economy, to support that one mining job.
But, at its worst, it is a negative sum game where everybody loses. The environment loses, shareholders lose, and the economy loses when people do things the wrong way and they break the law.
Bob Moriarty: I totally agree.
Goldfinger: Let’s add one more topic about Novo and then we’ll move on from there. Novo now is about $3 per share in Canada. It’s about a C$700 million market cap. And you and I have talked, many times, and you said the market price is the right price. Right now, the market price is C$700 million for Novo. I guess that’s the right price right now. Despite all of this potential, the greatest gold discovery in history, the problem with Novo is that much of the potential is kind of far into the future.
Bob Moriarty: Well, strange enough, you have hit on something that is ultra important. Now, here’s why I called this the inside story of the greatest gold discovery in history. In 1976, I took an airplane from California with the son-in-law of Lang Hancock. He was the guy who claimed to have discovered iron in Western Australia in 1951 and the 2nd richest person in Australia. The flight took 75 hours from California to Australia. All he talked about was how rich the Pilbara was in iron. And in fact, the Pilbara is home to 29% of the world’s reserve iron. It is the largest iron formation in the world. But what most people don’t realize, and actually nobody realizes, is that the iron was precipitated out of salt water when single cell creatures produced oxygen and changed the chemistry. Now Quinton Hennigh’s theory was that gold did the same thing. And in fact, anytime you find a conglomerate gold package, you find iron around there somewhere. So after you got the world’s largest iron formation, you’ve also got the world’s largest gold formation. And of course, it’s going to be 50 years before anybody is going to agree with me, which I don’t particularly care about. It doesn’t make any difference. I’m not planning on being around 50 years from now, but the real key to it is, Novo is going to be valued based on their dividend yield.
Now let’s pretend, and I am not saying this is true. Let’s pretend there’s two billion ounces of gold in the Pilbara. It would cost you billions of dollars just to prove it up, okay? And it’s not something you could mine inside the next 50 years. It’s been 140 years since the Wits was discovered and they are still mining there. So you can’t use the typical… We’ve got four million ounces of gold that’s worth 100 bucks an ounce, therefore the value of the company is X. You cannot use that measurement. And what Novo is going to have to do, is pay dividends out of cash flow, and they will be based on dividends, not potential.
Goldfinger: So Novo is going to pay dividends, and when do you think that is that going to start?
Bob Moriarty: Pretty soon. A year or so.
Goldfinger: How large could the dividend be initially?
Bob Moriarty: The market’s really going to be surprised by how low the price of production is, and how much cash flow they throw off. I got my own estimate of what they’re going to do. I know Quinton. Quinton’s my best friend. And he always, always, always understates things. He underquotes and he overdelivers. He is never going to tell you exactly what he thinks he is going to do, because he wants you to be surprised on a pleasant basis. And I agree with that. Guys who overpromise and underdeliver, I hate.
Goldfinger: Yeah, there’s a lot of those out there. So let’s talk about another company that we’re both involved with, Eloro Resources (TSX-V:ELO). Now they have had a tremendous start to 2021. New polymetallic discovery in Bolivia, these breccia pipes that have just massive amounts of metals, silver, copper, tin, lead etc.
Eloro put out results for a few holes last week and the market was a little disappointed, I think, because they had drilled two other holes, holes two and three into the Santa Barbara pipe. And in the news release in January, they mentioned massive sulphides, especially in hole three. So we didn’t get assays for holes two or three. And the company talked about how it needed to change its assay protocols because of the high concentration of tin. Hole DSB-02 evidently has revealed evidence of a tin-silver-gold porphyry system as Eloro tests the deeper parts of the Central Breccia Pipe (CBP). So what did you think about the results last week?
Bob Moriarty: The results were actually brilliant, and I’ve talked to Quinton at length. They’ve got an interesting situation. This is a case where I disagree with management. It appears they’ve got four or five pipes that lead down to some kind of massive porphyry. And they’re drilling the pipes at roughly a 45 degree angle. They’re drilling from one side of the pipe to the other side of the pipe, and quite bluntly, I think they should be drilling down. Now there’s no question about it whatsoever. This is a massive, massive, massive discovery. Quinton originally was believing that it was going to be something in the 500 million to a billion tons, and now he realizes it could be a billion, or two billion, or three billion up. It easily could be the largest silver deposit in history. It’s a Potosi type system. But when he started looking at the assays, he realized they were using a wet acid way of treating the material.
But in fact, the specific mineral, the tin mineral, does not dissolve in that wet acid. You’ve got to use XRF. Quinton is actually an expert on tin, and he worked with it for seven or eight years. He’s one of the top guys in the world on tin. And he went, “Hey, wait a minute guys, we’ve misread this thing. We thought it was a zinc silver deposit, and it’s really a massive tin porphyry, and we need to go deep.” There are some great maps on their website, and you could look at this Caldara, and you could look at these pipes. Well damn, the pipe’s got to go somewhere. So I think they should be drilling vertical holes, and they’re drilling more horizontal holes, which is the professional way to do it.
But when you’ve got two or three or four billion tonnes of ore, it’s kind of a waste of time defining every pipe. You need to go in there and see what’s the mass of the material. Now, everything that they’ve come up with has averaged between US$100-150 a tonne, and that is just wildly economic in Bolivia. It will be open pit, and you could open pit mine in Bolivia for probably $20/tonne, all in cost. Eloro was one of my top three picks for the year, and it’s going to be a home run, out of the park. I think they’ve done an absolutely marvelous job, great management, great geological people, and a great project.
Goldfinger: So does the polymetallic aspect concern you at all in terms of the metallurgy? They’ve been reporting grades in silver-equivalent, and the grades have been generally about 100 grams per tonne silver-equivalent, maybe a little more, silver equivalent grades. But the silver grade might be 30 grams, and then there’s copper, and there’s tin, and there’s all these other metals, lead, zinc, and things can get a little complicated when you’re talking about five or six metals. Normally, we’re just talking gold or silver, and the metallurgy is pretty simple, but this could be a little more complex. Does that worry you at all?
Bob Moriarty: Not at all. Osvaldo, who is the country manager for Bolivia, is the leading expert in the world on Potosi systems. And they’ve looked at the metals, and they realized there are no metals in there that are dilatory. They’re all metals that you could float off. So I don’t see it as a problem. They’ve looked at it. It’s certainly something they’re aware of.
Goldfinger: Yeah, they’ve done this during the time of COVID, absolutely extraordinary. Eloro has a very tight share structure with strong insider ownership, and a really talented team with Bill Pearson, Osvaldo, and Hennigh, absolutely a top-notch team. The fact that the share structure has been managed so well, really speaks to the quality of the management team and to Tom Larsen, the CEO. I’m excited to see the assays for holes DSB-02 and 03, especially the grades for the 50 meters of massive sulphides in hole DSB-03.
So, let’s move on from there. I want to ask you what you think about the recent action in gold and more specifically, I know you look at the Daily Sentiment Index, and maybe you can tell me the latest numbers there, because I didn’t get to check this morning. But silver was 75 while gold was like 21 recently, which I’d never seen where silver is bullish sentiment and gold is bearish. I’ve never seen that before. We’re seeing a very weird time with this silver squeeze stuff, which in my mind doesn’t make any sense. I don’t think buying a 10 ounce bar from your local coin dealer is going to squeeze anything except maybe your bank account. Tell me what you think about this market right now.
Bob Moriarty: You are absolutely correct. There is a big dichotomy. The current Daily Sentiment Index for gold is at 14 and at 66 for silver. Silver is being manipulated by the Gamestop people. I mean, I heard about naked short selling and comex defaults, and silver being the most manipulated metal since the coming of Christ. It’s all bullshit. Okay, it’s a market, and it operates just like every other market. You cannot pretend that silver went from $5 an ounce to $50 an ounce, and maintain it was suppressed. If you believe that it was suppressed by $5 dollars an ounce to $50 an ounce, you need to change the batteries in your fucking calculator. But silver is probably overpriced, and I think gold may have made a bottom on Friday.
Goldfinger: I feel like we’re very close. We’re definitely very close. I made a blog post Friday morning talking about how I think Barrick and Newmont have probably just about priced in the worst case at this point. Barrick in particular has given back the entire covid 2020 rally, and it’s actually back to late-2019 share price levels.
I made a tweet in early January, and I don’t think many people paid attention to it, but I said the best thing Donald Trump could do when he leaves office is to not say anything or appear in public for 30 days. Just go quiet. That’d be the best thing that he could do. Well, that’s pretty much what he’s done. We haven’t really heard anything from the guy. I know he doesn’t have his Twitter account, but I’m sure if he really wanted to get out a message, he could find a way, right? But we haven’t heard from the guy, and it’s been over a month. What would you say about the current backdrop in the US? Biden, from my vantage point, hasn’t really done much so far. I think that’s normal for the first few weeks of a new presidency. He did bomb Iranian backed militias in eastern Syria a couple of days ago, supposedly in a warning for Iran to ‘be careful’.
Bob Moriarty: Well, for the first time in American history, we’ve elected someone who has Alzheimer’s, and everybody who has their eyes open knows it. I am astonished. I’m going to agree with you. The smartest thing Trump could do is just fade away, as Trump would like to believe that he’s coming back in 2024, that’s bullshit. He’s not going to. He had his day. But Biden was signing 40 executive orders, muttering under his voice. “Of course, I don’t have any idea what this executive order is.” We’ve got the most powerful, dangerous nation in the world run by a bunch of fruitcakes. I think we’re going to pay a big price for it. Now, some of the stuff, as far as Syria goes, we’re in Syria illegally. We don’t even pretend to have any kind of a legal basis for being in Syria. It’s illegal. We have no business there.
Israel pulls the strings of the powers that be in Washington, and they go bomb the shit out of an outhouse and say they are going after Iranians. They don’t know if they’re going after Iranians or not. So it’s kind of a knee jerk reaction on his part. I liked the idea of Trump coming into office and saying, “We’re going to eliminate these stupid wars.” To the extent that Biden was kind of saying the same thing, we’re right back to the same old bullshit. We’re going to bomb everybody in the world. It’s illegal as hell. We’re never going to consider talking to anybody. We’re just going to bomb people, and we’re going to be better off as a result. They have destroyed the US financially and are still acting like a bunch of six year old kids playing war.
Goldfinger: It’s interesting that you mentioned Trump because Trump said no more wars. Now, he didn’t create any new wars, but he did bomb Syria. I think he bombed Syria a couple of times actually.
Bob Moriarty: Yeah, he did a lot of it. Sure. He said no more new wars, but we kept the same old wars. The biggest thing is, I mean, let me point something out. You’re talking to a guy who spent almost two years at war. I got some idea of what war is all about. When you attack somebody, you walk into a bar and start a fight, and you’re still fighting 20 years later, you lost. Get over it, go home, sober up. We refused to do that. Trump was just going to pull us out of Afghanistan, and they got some asshole idiot general from the United States who just came out with a paper and said, “We’re bombing these people in order to have peace.” you don’t get peace by bombing people.
Goldfinger: That’s true. Absolutely true. I guess, final topic. So you mentioned Gamestop (NYSE:GME) earlier, and obviously we’ve heard a lot about that in the last month. We’ve seen record inflows into the stock market in the last couple of months and all of these new accounts opening up, people speculating with Robin Hood or what have you. Is this the most dangerous market environment you’ve ever seen or can this keep going?
Bob Moriarty: It’s the most dangerous market in world history. It cannot possibly get any sillier. Dogecoins increased in value 15% in one day last week to a US$7.5 billion dollar market cap, and Dogecoin was created as a joke. When you have seven and a half billion dollar jokes, it’s over.
Goldfinger: I think that’s a good spot to wrap it up Bob, I need to get back to reading your book to find out what became of the crow…..
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