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Hope for Pilbara conglomerate gold stocks as Canadian investors take notice

The eerie stillness at the Pilbara Conglomerate Gold Conference on March 22 spoke volumes of the early stage and therefore perceived uncertainty around the investment story since "watermelon seed" gold nuggets were found in August 2017, but juniors struggling to gain traction locally can take heart in renewed investment interest from Canada.

Novo Resources Corp. discovered 457 grams of said gold nuggets — worth more than A$25,000 — indicative of Witwatersrand-style conglomerate gold, over four days in August 2017 at Purdy's Reward.

After a largely geological and geophysical focus on the Pilbara conglomerate conference in Perth on day one on March 21, day two presented the opportunity for investors to hear from analysts and corporate advisers from Perth and Toronto.

Yet when panel chair Martin Place Securities Executive Chairman Barry Dawes opened up the floor to questions during the last session of the conference, not a peep was heard, leading one panelist, Azure Capital co-founder Simon Price, to quip: "That's what happens when you get the graveyard shift."

There's no doubt that risk capital is returning to the Australian mining space, and gold is no exception, but given the Pilbara conglomerate story is largely based around "one significant hole," as a Toronto-based analyst said, the investment story was understandably "exceptionally" early stage — hence the quiet room.

"You have to remember that this was discovered six months ago as a hard rock target, so we're six months into a brand new gold camp, so it's complicated to measure," Red Cloud Klondike Strike Inc. Vice President Mining Analysis Derek Macpherson said on the conference sidelines. The Toronto-based company is focused on providing financing solutions to the mining sector.

Citi Research Metals and Mining Vice President Trent Allen also warned that Pilbara conglomerate-focused juniors were better off spreading the risk into other commodities and even other jurisdictions — even overseas — to focus on until they get back on track if their gold bulk sample does not work out.

Price said on the panel that the key was convincing the skeptics, since "there's a lot of gold there quite clearly [and] a lot of people are interested in it."

Macpherson told S&P Global Market Intelligence that the average gold deposit takes 10 years to become a mine, so experimentation was bound to happen; and while Novo is leading the charge on that front, "there's a reason not to put all your eggs in that basket. You need to have other options."

Distractions and enticements

Whatever the case, he said investors back home, where there are more resource-specific funds, were waking up to Australian mining having not historically shown much interest, even while being distracted by small medical marijuana and blockchain stocks.

"The plus side is that it's made up of a bunch of new millionaires who have invested, so there will be money for junior mining again. The downside is that it's not [so available to miners] right now," Macpherson said on the panel.

"Large-scale gold producers in Australia have done a lot better at running their business, whereas that hasn't necessarily been the case in Canada where we still have companies that, while they're still getting their costs under control, they're not nearly as sustainable as some of the operations in Australia."

He later said in the interview that the success Kirkland Lake Gold Ltd. has been having at Fosterville and Novo in the west Pilbara has "changed the perception" in Canada and "there's more interest in Australian mining now than there has been in the past."

"Novo in particular is a Canadian listed company, its management and [chairman and president] Quentin Hennigh are well known, but now [investors want to know] what else is out there," he added.

The comments on Canadian gold stocks came just as S&P Global Ratings raised its long-term corporate credit and issue-level ratings on Kinross Gold Corp. from BB+ to BBB- and Barrick Gold Corp. to BBB from BBB-.

S&P Global Ratings also upped its outlook on Goldcorp Inc. from negative to stable.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings.