Katoro Gold (LSE:KAT) and African Battery (LSE:ABM) both enjoyed a strong start this week after a soil sampling programme confirmed the exploration prospectivity of their Haneti nickel project in Tanzania. Shares in Katoro shot up by more than a quarter to 0.98p on Tuesday when it revealed that 1,500 samples had reconfirmed and extended the strike length of numerous high-priority ultramafic exploration targets at the site.

What’s more, the work, which forms part of an ongoing exploration programme at the project, identified an additional ultramafic target that had previously been unknown to the business. Katoro said the results confirm Haneti’s exploration potential and will be used to inform its further work this year.

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, which owns a 75pc stake in Haneti, believes that the work could host a chonolith type nickel sulphide deposit and is principally targeting a prospect called Mihanza Hill.

The news comes just one week after African Battery exercised an option to take a 25pc stake in Haneti. As part of this option, the business invested a further £75,000 to acquire 7.5m new shares in Katoro at 1p each with 1.25p, three-year warrants attached.

African Battery – which rose 5.6pc on Monday following the Haneti update - purchased the option in March when it invested £25,000 in Katoro in exchange for 2.5m of its shares with warrants attached. Under the terms of its option with Katoro, African Battery has the right to buy a further 10pc interest in Haneti for another £25,000 payment to Katoro within 12 months. The two businesses are now working together to establish a written JV agreement and associated shareholder agreement.

The deal also gives African Battery exposure to Katoro other assets, which include the Imweru and Lubando gold projects in Tanzania. Together, these host a JORC-compliant gold resource 754,980oz gold.

Going forward, African Battery will be required to fund its 25pc share of Haneti’s project costs, or its interest will be diluted under standard industry fund or dilute provisions. On this front, Katoro - which is required to allocate all the money it receives from African Battery to Haneti - added on Monday that it is now fully funded to undertake all initial exploration activities at the asset.

Louis Coetzee, executive chairman at Katoro, said Monday’s results had increased the organisation’s confidence in Haneti.

‘Particularly positive, is the identification of a new, previously unknown, target as well as the increase in strike length of known priority targets,’ he added. ‘We believe that Haneti has the potential to provide significant value to Katoro and its shareholders, and I look forward to providing updates as we continue to deliver our planned exploration programme.’

Meanwhile, African Battery’s executive director Paul Johnson was similarly bullish:

‘I am delighted to be working with the team at Katoro and congratulate them on an exceptionally good start to the 2019 exploration programme at Haneti. In particular it is notable that the work undertaken has reconfirmed and extended high-profile target areas and also identified a further previously unknown ultramafic target. This triple positive outcome is exciting for ABM as Joint Venture partners with Katoro at Haneti and also for ABM as significant shareholders in Katoro Gold plc itself.’

Author: Daniel Flynn

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