Kavango Resources (LSE:KAV) has the potential to be one of next year’s most exciting plays in the junior metal exploration space. Having recently raised £2 million, the company is fully funded to pursue its ambition of making a major metal discovery in the Kalahari Suture Zone (KSZ) in southwest Botswana.

On Tuesday Kavango announced the next phase of exploration at the KSZ, with the exciting revelation the company has identified 4 ‘Norilsk style’ targets in the Hukuntsi project area. This could be a huge development for the firm.

Kavango believes these ‘Norilsk style’ targets could host world-class deposits of copper, nickel and PGMs. Now that is has four of these to test, the upside potential is enormous.

Each target was selected using the latest geophysical data from 3D magnetic models developed by a joint team of Kavango and Mira Geoscience experts. Kavango is the first company ever to produce such a 3D geological model of the KSZ.

The four targets are all located in the northern Hukuntsi section of the KSZ. And the next step is to carry out vital field exploration to determine more precise drill targets. 

Looping up

To confirm the best drill targets at Hukuntsi, Kavango will carry out ‘large loop’ surveys using more intensive analysis than is possible from airborne electromagnetic (AEM) surveys. 

AEMs are a standard tool in identifying potential mineral targets, but are limited by being unable to distinguish between electrically conductive groundwater and underground metal deposits.  

By contrast, large loop surveys use ground-based equipment to transmit a powerful electrical current into the earth through extremely long copper wires. Low-frequency electrical signals are bounced from the wire underground, in much the same way as sonar, to identify metallically conductive targets. 

Direct ground surveys of this type can not only penetrate through groundwater supply — that AEMs cannot — they can also distinguish the difference between metal deposits and water tables. The main focus here is to find high-speed electromagnetic conductors that are associated with magmatic sulphide mineralisation: the exact type of rocks that contain the world’s largest copper-nickel-PGM deposits. 

These loop surveys remain a relatively low cost way to more precisely identify specific drill targets, in precisely defined areas. 

“We are in advanced discussions with a local specialist contractor who will undertake the large loop surveys,” said CEO Michael Foster, “and we look forward to providing further updates in the coming weeks.”

Fully-funded for a shot at the big time

All the news is pointing in the right direction for Kavango at present. 

The company’s extensive geological analysis of the KSZ has added significant weight to its theory the region plays host to one or more very large copper-nickel-PGM deposits.

Laboratory analysis of rock chip sampling, completed in late October this year by Dr David Howell (a leading authority on the subject of copper-nickel-PGM sulphides), suggests compelling evidence of the precise type of underground metal transport systems required to form mineable mineral deposits. 

These include primary magmatic sulphides in 50-metre thick “gabbroic sills”, along with strong evidence of sulphur saturation and cumulate rocks. Structures of this type suggest that metal sulphides may have accumulated in vast underground trap zones, making the metals easier to access than would be possible otherwise.

Earlier, in August 2020, independent consultants identified the presence of the same key cumulate rocks and crucially, sulphide liquid fractionation. 

The latest thinking is that the KSZ experienced the same geological conditions that created massive sulphide deposits at Norilsk in Siberia, Jinchuan in China and the Thomson Nickel Belt in Canada. 

The Norilsk mining centre is one of the world’s richest supply of copper-nickel-PGM metals. The huge Siberian mine accounts for 50% of the world’s palladium production, along with 20% of global nickel and platinum. 

Finding even a small proportion of ‘Norilsk-style’ deposits would clearly transform the fortunes of the £5.7m market cap explorer.

In fact, if even one of its four targets bears fruit, Kavango Resources could become a nine-figure market cap company overnight. The upside potential here is immense. 

Trading up

Investor interest is intensifying as Kavango makes these preparations. 

At 3p, the share price has rebounded to a level not seen since July 2019.

On the trading side, multiple bullish signals abound. The Kavango share price has seen a pattern of increasing higher lows since early April 2020, while KAV remains above its 50 day moving average and 200 day moving average with strong support in these areas. 

Volatility is low intraday, with Bollinger Bands squeezing tighter and volume building on rising share price days. In our opinion a breakout to the upside is the most likely scenario from here. 

And it’s not only investors whose interest has been piqued. Scientists too are turning their attention to the conditions in the KSZ. 

Kavango’s exploration is now also the subject of a Masters research project with the University of Leicester, beginning in January 2021 and completing at the end of Q2 next year. Kavango will supply core samples and exploration data for the thesis entitled: “Mineralogy, Petrology and Geochemistry of the Karoo Gabbros of the KSZ and the similarities with world-class magmatic sulphide deposits of the world.”

Hot copper

All of this is playing out against a macroeconomic backdrop of soaring copper prices. 

In September 2020 global intelligence agency Fitch raised its price forecast for the metal to $6,000/tonne backed by buoyant demand from China and the short-term recovery of global economic activity. 

This bullish forecast surpassed the average $5,790/tonne price in the first nine months of the year, while China’s copper consumption rose nearly 25% from January to July 2020. 

Then copper hit a seven-year high of $7,250/tonne on 29 November. 

Bloomberg reported that inflation fears were driving investors into the bellwether metal at new record rates, with the market “experiencing a wave of investor interest the likes of which it hasn’t seen for a decade.” 

This certainly isn’t the end for rising copper prices. 

Traders are preparing themselves for a major bull market and believe copper could challenge the $10,000/tonne price last seen in 2011. 

Certainly, global economic recovery could spur further inflation worries as governments devote vast amounts of capital to metals-intensive stimulus packages, Bloomberg say.

And any explorer in the right place at the right time with a potential world-class deposit on its hands could see major riches flow. 

Author: Mark Sheridan

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