African Battery Metals (LSE:ABM) sat at 0.4p on Friday after securing an option to acquire a stake in a Tanzania-based nickel project. The firm has entered an option agreement with AIM-listed exploration and development company Katoro Gold (LSE:KAT). This gives it the right to purchase a 25pc position in Katoro’s Haneti project as well as a stake in Katoro itself.

Haneti comprises tenements that cover around 5,000km2 and are prospective for nickel, platinum group elements, cobalt, copper, gold, and lithium. Around $1.5m worth of work has been carried out at the project to date, identifying grades of up to 13.6pc nickel.

Katoro believes that Haneti could host a chonolith type nickel sulphide deposit and is principally targeting a prospect called Mihanza Hill. It is currently carrying out a 2019 work programme to determine whether disseminated or massive sulphide mineralisation is present.

Under the terms of its agreement, African Battery has acquired an initial £25,000 worth of Katoro shares at 1p each.  Each of these shares comes with a three-year warrant that is exercisable at 1.25p. This also gives the business exposure to Katoro’s other asset, which includes the Imweru and Lubando gold projects in Tanzania. Together, these host a JORC compliant gold resource 754,980oz gold.

Following this initial purchase, African Battery has been granted a 60-day option, giving it time to carry out due diligence on Katoro’s projects, with a particular focus on Haneti. If the business decides to exercise this option, it will acquire around £75,000 worth of shares with warrants attached.

It will also acquire a 25pc stake in Haneti, through Katoro’s subsidiary Kibo Nickel.  In this scenario, it will be required to fund a 25pc share of Haneti’s costs. Finally, African Battery will have the option to acquire a further 10pc position in Haneti for £25,000 a year on from the day it exercises its option.

African Battery’s exec director Paul Johnson said Friday’s deal complements the firm’s existing interests and provides it with some diversification without diverting its focus away from Africa and battery metal projects.

‘Alongside our existing copper and cobalt interests, the addition of nickel into our portfolio exposes our shareholders to another strategically significant metal where we believe the forward supply/demand dynamics are looking highly attractive,’ he said.

‘We are looking to work with Katoro on an accelerated exploration programme at Haneti to build on the knowledge that Katoro, and previous owner Kibo Mining plc, gathered.  This includes data demonstrating 13.59% nickel in sampling of outcrops. We look forward to reporting back on developments in respect of this strategic transaction in the near future.’

Friday’s update comes after African Battery announced that it had returned from the first stage of its strategic and operational review with a ‘robust financial position’.

The exploration player was suspended from trading in December as demands from short-term creditors exceeded available working capital. However, it was re-admitted to the market last month days after shareholders voted in favour of a host of proposals aimed and restructuring the business. This included a conditional placing and subscription to raise £1m at 0.5p a share and help pay off creditors.

In an update, African Battery said it has now paid all material creditor balances through either cash or share settlements. It now has no material debt and free working capital of around £860,000. It believes this figure will cover corporate plc costs, anticipated project exploration, and expenditure on existing interests for 12 months.

Author: Daniel Flynn

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