Paulson and Soros, two huge and public hedge fund managers, recently took up stake in NovaGold, an exploration based firm that scouts land for mining and then partners with huge firms like Barrick to actually mine the ground.
When two huge money managers like Paulson and Soros pile into something, investors take notice.
Sure enough, Rick van Nieuwenhuyse, the company’s CEO, said NovaGold has been getting a lot of calls and emails after the news this week.
He remembers one call in particular. A group called him and asked to finance NovaGold, following the move both Paulson and Soros took.
That’s funny, said van Nieuwenhuyse, because he understood the group had been shorting his stock.
He told the group they were welcome to buy in on the exchange, but NovaGold was closed to new financers.
The group’s short position was probably trying to bet that NovaGold would continue to falter as they try to break ground on new projects.
NovaGold’s latest project, Galore, will mine mostly copper and some gold and silver. It had certainly taken a lot longer to break ground on Galore than van Nieuwenhuyse thought it would (mainly because of increasing costs and the financial crisis that hit in 2008).
It could be purely coincidental, but the newly interested group might also have gained confidence in NovaGold after hearing Paulson and Soros were going long. (This is exactly the sort of reaction that feeds claims that when hedge funds very publicly enter a position, it’s really just a “pump and dump” scheme.)
After all, other than Paulson’s and Soros’ investments, not much has changed. Nathan Vardi from Forbes points out that NovaGold is no further along than it was four years ago.
“We’re actually 48 km closer than we were four years ago,” Van Nieuwenhuyse joked to Business Insider, referring to a halfway finished road that leads to Galore. He admits that most of what Vardi says is true.
“2008 was a bad year for everyone,” he says. “Mining costs have doubled in the past five years.”
However, gold prices are 50% higher than they were three years ago and long-term copper prices have more than doubled. He is still very optimistic about the projects.
“The ounces of gold in the ground haven’t disappeared,” he said.