Nova Minerals rises despite short seller attack

Nova Minerals (ASX, NASDAQ: NVA) rose in U.S. trading even after investment research firm Spruce Point Capital Management disclosed a short position in the Australian miner.

In its report published on Friday, the investment 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. It highlighted several challenges that Nova still has to overcome, such as a lack of infrastructure, community pushback and harsh weather conditions.

Spruce Point also 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 didn’t match the information provided by a private investigative group.

The company didn’t respond to Mining.com’s request for commentary.

Nova shares rose 2.5% to $6.45 in Nasdaq trading Friday, taking the company’s market capitalization to about $266 million (C$364 million). The stock has traded between $1.68 and $16.28 in the past year. In Australian trading, Nova dropped 3.2% to 75¢ apiece.

Downside risk

Melbourne-based Nova 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-sq.-km property also holds traces of antimony, a critical mineral widely used in defence applications. The company 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.

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 45% to 60% ($2.50-$3.50 per ADR share). Under certain scenarios, such as a potential loss of the Department of War award, Nova could lose up to 100% of its value, Spruce Point added.

Earlier this month, the company announced plans to redomicile to the U.S., as it is set to lose its foreign private issuer (FPI) status now that U.S.-based equity ownership exceeds 50%. Nova also intends to acquire the remaining 15% stake in Estelle that’s held by related parties.