Nova Minerals rises despite short seller attack

[Ben Graham]

Nova Minerals (ASX, NASDAQ: NVA) surged to a one-week high in the US market even after investment research firm Spruce Point Capital Management disclosed a short position on the Australian miner.

In its report published on Friday, the firm founded by activist investor Ben Axler cast doubts over the company’s ability to bring its proposed gold-antimony mine in Alaska online in a timely manner. Specifically, it named several challenges that Nova still has to overcome, such as a lack of infrastructure, community pushback and harsh weather conditions.

Moreover, Spruce Point raised concerns over management’s credentials and background, and more crucially, the qualifications of its consulting geologist. The biggest problem is the company’s ‘competent’ and ‘qualified’ person and the attestations made with the SEC, it wrote, alleging that they did not match the information provided by a private investigative group.

The company did not respond to MINING.COM’s request for commentary.

The Melbourne-based miner is developing the Estelle project located in Alaska’s Tintina mineral belt, which is known to hold over 220 million oz. of bulk-tonnage gold deposits. To date, the company has identified four large, near-surface gold deposits along a 35-km corridor.

The 500 km² property also holds traces of antimony, a critical mineral widely used in defence applications. The company currently has plans to build a mining and processing hub in Alaska to produce military-grade antimony, backed by $43.4 million in funding provided by the Department of War. First output is targeted within two years.

Downside risk

In the short report, Spruce Point said it believes Nova’s current valuation is overstated, and the stock price has a “near-term downside risk” of approximately 45% to 60% ($2.50-$3.50 per ADR share). Under certain scenarios, such as a potential loss of the DoW award, it could further downside upwards of 100%.

However, Nova Minerals’ US-listed shares gained more than 6% to trade at $6.78 each, with a market capitalization of $255.3 million. In Australia, its stock closed 3.2% lower at A$0.75 apiece.

Earlier this month, the company announced plans to redomicile to the US, as it is set to lose its foreign private issuer (FPI) status after American equity ownership has now exceeded 50%. In addition, it intends to acquire the remaining 15% stake in the Estelle project currently held by related parties.