Kavango Resources (LSE:KAV) rose to 2.4p on the offer today as the company announced it has identified several high-quality drill targets at its prospective Kalahari Suture Zone (KSZ) project in Botswana. With the news marking yet another step towards the recently-listed business potentially locating what it describes as ‘world-class mineral deposits’, could this weakness provide an exciting buying opportunity?
Kavango, which is currently sitting just below its 2.5p July listing price, holds 15 prospecting licences covering more than 9,000km2 of ground in Botswana. The land includes most of the 450km-long KSZ magnetic anomaly, along which the firm is searching for copper, nickel, and Platinum Group (PGE)-rich sulphide orebodies.
Crucially, the company believes its license areas display a geological setting with distinct similarities to the Norilsk deposits in Siberia, which host the world’s largest copper, nickel, and PGE mines. Mining consultant MSA Group has backed the potential presence of these deposits.
Since listing, Kavango has been taking significant steps towards unlocking the KSZ’s potential, completing the first phase of an airborne electromagnetic (AEM) survey in October. This work, which precedes two larger stages of flying and data collection, identified 26 conductive anomalies over the KSZ, some of which coincided with previously discovered geochemical anomalies.
Since then, the business has begun work on ground-based Audio-frequency Magnetotellurics (AMT) surveys to follow-up on six of these conductors in the northern part of the KSZ. AMT surveys penetrate below the overlying Kalahari sand cover and can conduct massive sulphide deposits as they readily conduct electricity. According to the firm, large conductors extending from near surface to deep levels below surface could contain considerable amounts of mineralisation.
Kavango’s initial targets were selected based on the strength of the conductors and the presence of zinc at surface above the conductor. It took the latter decision because zinc is one of the most mobile base metals, meaning it is relatively soluble in the groundwater. Metal sulphide deposits at depth often produce dissolved metal ions in the groundwater. In arid terrains, the groundwater is drawn up to the surface leaving metal ions deposited in the sandy soil. As Kavango, which has developed a soil sampling technique to detect ultra-fine metal particles, puts it: ‘zinc acts as a pathfinder to mineralisation at depth’.
In today’s update, Kavango said its work has shown that several of its conductors appear to be large, steeply dipping bodies that may represent mineralisation from near surface down to at least 400m from the surface. As a result, they all represent potential targets when the firm begins a follow-up drill programme next year.
Meanwhile, Kavango said it will continue its ground follow-up programme in the northern part of the KSZ project over coming months to investigate more of the phase 1 AEM anomalies.
Alongside its work in the north of the KSZ, the company has been surveying its Ditau Camp prospect since listing. Earlier exploration at Ditau, which also forms part of the KSZ project, identified a 7km long magnetic body with coincident metal in soils anomalies.
In today’s update, the business said AMT surveys have now identified two elongated conductors extending from just below the surface to depths of more than 600m. The two conductors are open at both ends and extend north-south for at least 4km. Kavango described them as ‘very compelling geophysical anomalies’ that ‘represent prime priority drill targets for the first part of next year’.
Kavango believes the success it has had over recent months demonstrates the effectiveness of its soil sampling technique. As a result, it believes that a combination of AEM and AMT surveying and zinc in soils geochemistry will continue to identify multiple high-quality drill targets over coming months.
Chief executive Michael Foster went on to add: ‘We are extremely pleased to be able to report that the initial AEM survey results show that a number of the conductive anomalies identified coincide with significant geochemical (zinc in soil) anomalies. Priority targets have now been followed up on the ground with AMT resistivity surveys and exciting potential drill targets have been identified, including at the Ditau Prospect, which forms part of the KSZ Project.
‘It has been highly encouraging to note the effectiveness of Kavango's exploration strategy and techniques, which are already beginning to deliver positive results. The KSZ Project covers over 9,000km2 of prospective exploration ground including the 450km KSZ magnetic trend which has the potential to host Norilsk type Cu/Ni/PGE massive sulphide ore bodies. This huge area, which is entirely covered by surface (Kalahari) sand cover, has not previously been explored for minerals using modern techniques.
‘The company, which was only listed at the end of July, is already identifying drill ready targets which should only increase with further flying. The company remains fully focused in its pursuit of the discovery of world-class mineral deposits within the KSZ Project area in Botswana by following up on all of the above during 2019.’
Kavango has struggled to attract the market’s attention since listing, with its market cap currently sitting at just £2.7m. However, it is important to note that the company has been quick to launch into its KSZ work programme in precisely the way it described before listing. If the firm is correct in its belief that it will identify more drilling targets that will, ultimately, yield huge Norilsk-like deposits, then its current valuation could multiply if its work successfully progresses.
It is also important to remember that Mike Moles, one of the business’s founders, told MiningMaven in November that the firm only needs to find one sulphide deposit on the KSZ to demonstrate its prospectivity and that the Norilsk model is applicable. This point, combined with the fact that more newsflow is likely to be on the way as surveying and AEM progress continues, means recent weakness in Kavango’s share price could make it worth a look.
Author: Daniel Flynn
The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has not been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Services Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance