A major hedge fund based in New York, Spruce Point Capital, has raised significant concerns regarding Nova Minerals and its ability to meet a critical deadline for its flagship Estelle gold-antimony project in remote Alaska. The allegations come following the release of a detailed 61-page report over the weekend, which highlighted several challenges that the company faces, including inadequate infrastructure, community opposition, and severe weather conditions.
In response to the report, Nova temporarily halted the trading of its shares on Monday morning. The company has targeted late 2026 or early 2027 for production at its standalone Stibium antimony-gold deposit. The firm has recently benefited from the U.S. government’s efforts to boost domestic production of critical minerals, receiving a substantial award of $US43.4 million from the Trump administration in October 2020. The stock surged after Nova was invited to brief the Australian government ahead of Prime Minister Anthony Albanese‘s visit to the White House, underlining the project’s strategic importance.
Spruce Point Capital estimates that Nova’s share price could face a decline of approximately 45 percent to 60 percent in the near term. The report further posits that under certain circumstances, including the potential loss of the crucial $US43.5 million award from the Department of Defense, the shares could experience a total decline of up to 100 percent.
Activist short sellers like Spruce Point Capital profit by betting against stocks, often releasing research designed to drive share prices lower. Following the resumption of trading on Monday, Nova’s shares rose by 2 percent to 76.5 cents, maintaining a remarkable 125 percent increase over the past year.
The report also raised concerns about the qualifications of one of Nova’s consulting geologists, Vannu Khounphakdy. In a statement to the Australian Securities Exchange (ASX), Nova defended Khounphakdy’s credentials, affirming that they possess documentation of his degree from Krivoy Rog National University. The company criticized Spruce Point’s approach, noting that the hedge fund did not reach out for verification of claims prior to publication.
“The report itself acknowledges that Spruce Point stands to realize significant gains in the event the Nova share price declines. That is their prerogative,” the company stated. Nova advised shareholders and potential investors to exercise caution and to rely on its official disclosures to the ASX and U.S. Securities and Exchange Commission (SEC).
The scrutiny of Nova Minerals reflects a broader trend among short sellers targeting Australian Securities Exchange (ASX)-listed companies, particularly in the mining and defense sectors. According to Ben Axler, chief investment officer at Spruce Point, the current market valuations create numerous attractive short opportunities.
Earlier this month, the uranium exploration company NexGen Energy was similarly targeted by Culper Research, which raised doubts about the feasibility of the miner’s production forecasts. Additionally, Grizzly Research compelled weapons manufacturer Electro Optic Systems into a trading halt after questioning the identity of a significant customer.
Spruce Point has a track record of targeting ASX-listed critical minerals stocks. In November, the activist investor alleged inaccuracies in IperionX‘s accounts and questioned the company’s ability to commercialize its titanium extraction technology. The percentage of IperionX shares held by short sellers has risen from 5.9 percent in November to nearly 8 percent recently.
As Nova Minerals navigates these challenges, the company’s response and performance in the coming months will be closely monitored by investors and analysts alike.
