Musings on Investing

India-China Moving Towards a War

Novo Resources (NVO.V), Amarillo Gold (AGC.V), and Anfield Gold (ANF.V)

The situation in India continues to worsen. India and China are rapidly moving towards a war. In the following article, I talk about the kind of people who run India: “India: The Lunatics have taken over the Asylum.”

India’s information technology industry is considered much bigger and powerful than it really is. I explore this issue in “The Myth of India’s Information Technology Industry.”

India is a country of 1.35 billion people. Despite the lip-service people give to India, not many really care to visit or invest in it. This is a rational decision. But India is still very important, for the wrong reasons. India is a major humanitarian crisis in the making. It is already a supplier of among the largest illegal migrants to the USA. As troubles increase, so will migration.

On investments:

Four months back, I wrote about Novo Resources (NVO). Those who at that time participated in an ongoing financing have made more than 1,200% of their money. The early signs from Karratha Gold Project have been very good. Instead of finding gold miles below the ground (as is the case at Witwatersrand in South Africa), they are finding high-grade rock at shallow depths. People have speculated on how big this can become and then they have multiplied their back-of-the-envelope ounces by $50 or so to put a value on the project.

Not all ounces-in-the-ground are the same. Let us consider two hypothetical projects that are exactly alike and have a million ounces-in-the-ground each, but one with a grade of 1g/t and another of 10g/t. Assume that it costs $1,200 to extract an ounce of gold from the lower-grade deposit, leaving you with $100 per ounce profit (using $1,300 per ounce as gold price). The higher-grade project using similar costs of mining and processing the rock would make you a profit of $1,180 per ounce. In this simplified case, the higher-grade project is worth about 11 times more.

Now, consider this: NVO’s bulk sample gave them a grade of about 2 ounces per tonne.

I have been to NVO’s Beaton Creek project, but I haven’t to Karratha. I am unable to have an opinion on the size potential that Novo offers. But whatever the size potential, the rock on per ounce basis is much more valuable than what the simplistic $50 per ounce-in-the-ground suggests.

To form your own opinion, I suggest reading articles on NVO on the website of 321Gold.

I hope to visit Karratha in October, soon after a visit to Japan with Irving Resources (IRV), another company that has done very well.

Finally, I find Amarillo Gold (AGC; C$0.32) quite attractive. They have two issues: the project is in Brazil, a jurisdiction I am not too fond of, and that the balance sheet of AGC needs to be cleaned up. In my view, AGC share price has more than discounted the risks related with these two issues. Anfield Gold (ANF; C$0.36) is another company in which the risks in my view have been more than discounted in the share price. I am a buyer of both.

Warm regards,

Jayant Bhandari

Associate: Rajni Bala


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