Shares in gold and antimony project developer Nova Minerals Ltd (ASX: NVA) have held up in the face of an attack from a short seller, which claims the company's value could fall to zero.
Over the weekend, Spruce Point Management issued a research report on Nova Minerals, casting doubt on the company's ability to bring its Estelle project in Alaska into development.
Image source: Getty Images
Claim Nova's not up to the task
Spruce Point, which is a short seller and would stand to gain from a fall in Nova's shares, said it had looked at the company's project and management, and concluded that "investor expectations are too high''.
They went on to say:
While the mining exploration and resource production business is notoriously risky with many factors outside of the company's control, we express concerns with management's lack of consistent focus, inability to meet deadlines, and difficulties realising value in previously promoted strategic investments. We estimate that Nova's share price has near-term downside risk of approximately 45% – 60% but under certain scenarios, including a potential loss of a $43.5m Department of War award, up to 100% downside and we believe it is likely to significantly underperform the junior gold mining index.
Spruce said there were significant challenges in bringing the Estelle project to fruition, including the harsh Alaskan environment, and also cast doubt on whether the geologist who signed off on Nova's resource estimations even exists.
Nova: Report is hogwash
Nova's three-page response to the report says that, while it sees a place for short selling in a functioning market, the claims put forward by Spruce were incorrect.
The company said:
The majority of the report consists of statements that are historical, selective, or non-material, and whether accurate or not, are wholly irrelevant to the Company's operations, assets, or prospects. The company will not be responding to these statements and provides the following examples for context only.
One example cited by Nova was regarding Spruce's claim that "Alaska is cold, receives snowfall, has harsh weather conditions, lacks urban infrastructure in its mountainous interior, and that some community members oppose development.''
The company went on to say:
The company can confirm that all of this is true and has been true for quite some time. Alaska's climate and geography have been well documented since at least 1867, when the United States purchased the territory. These are inherent characteristics of resource development in Alaska and have been consistently disclosed by the company. Every major gold mine operating in Alaska today was developed in the same conditions.
Nova also confirmed that other companies had previously held its mining claims, but said that it had invested more than $100 million in exploration and development at the project, and added that the company's US$43.4 million grant from the Department of War followed a rigorous two-year due diligence project.
Nova added:
A refinery site has been secured, procurement of key mining and processing equipment is well underway, with initial deliveries to site imminent, and first production targeted for late 2026/2027. At the same time, the company is also progressing its pre-feasibility study on one of the world's largest undeveloped gold deposits.
The company also confirmed that the consulting geologist who had signed off on the company's reports was registered with the Australian Institute of Geologists.
Nova shares were 2.7% higher in early trade at 77 cents. Nova was valued at $342.1 million at the close of trade on Friday.
