AIM-listed Kavango Resources (LSE: KAV) has the potential to produce a near-term 76% share price gain, according to a new note by First Equity.
The copper and nickel explorer could hit 5.2p in short order, the broker said, from its current 2.8p.
Analyst Jason Robertson said the copper and nickel explorer also has “a medium to high probability of making a major exploration discovery within the next 18 months.”
Kavango is seeking world-class Norilsk-style nickel sulphide deposits from its 100%-owned flagship project at the Kalahari Suture Zone (KSZ) in Botswana.
“Investors may be wise to position themselves in the stock ahead of any potential landmark discoveries being made in the coming year as the Group ramps up its exploration activities,” the analyst added.
Norilsk in northern Russia hosts the planet’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.
Success on this level for Kavango in Botswana would attract not only new investors but also possible big player industrial participants, Robertson said.
Derisking the play is a recent JV with fellow AIM-listed Power Metal Resources (LSE: POW). And Kavango is also now fully-funded for a 2021 drill campaign after it successfully raised £2m from a heavily oversubscribed 10 November placing.
At the time, CEO Michael Foster noted the company was now “well-funded to pursue ambitious exploration plans and unlock what we believe is the KSZ’s considerable potential.”
KSZ potential booms
Kavango has a drill programme of 5,000 metres planned for 2021. In December 2020, it revealed it had identified four Norilsk-style ‘mega targets’ in the northern Hukuntsi section of the KSZ.
To confirm these targets, Kavango used proprietary techniques to produce the first ever 3D geological models of the region, followed by intensive ‘large loop’ surveys which are much more precise than standard airborne electromagnetic analysis. These give the £8.9m market cap company “a crucial competitive advantage” to determine high-priority drill targets, Robertson noted.
Previous work has confirmed important similarities between the KSZ and other major global metal sulphide deposits, including Norilsk and Voisey’s Bay in Canada.
The broker note also focuses on Kavango’s management team, which it says has a successful track record in minerals discovery and realising value from exploration projects.
Director Mike Moles “added significant value to several early-stage assets, including a Mozambique coal project that was sold to Riversdale, and then subsequently acquired by Rio Tinto for a sizeable US$4bn,” the note mentions.
In 2020, Kavango signed terms with Power Metal Resources for a JV covering two of its Kalahari Copper Belt (KCB) licences and two licences at the Ditau Project for a 50% interest. Field explorations are currently underway.
The partners could seek to list a separate investment vehicle on UK or North American markets, enhancing additional value for shareholders, Robertson notes.
The focus is an exploration-rich target area of west-central Botswana, which is near many world-class copper and silver discoveries made in the last 15 years such as Cupric Canyon’s Zone 5 and Sandfire Resource’s T3, T4 and A4 deposits.
POW CEO Paul Johnson “previously added considerable value to a Botswana project via a similar style JV” in his previous position at Metal Tiger (LSE:MTR), the note adds.
Exploration drilling could follow in 2021 if results prove positive.
“Given the management’s experience in adding considerable value to resource projects in previous ventures, and high likelihood of finding similar world class deposits to those nearby and currently controlled by Cupric Canyon and Sandfire in the Kalahari Copper Belt,“ investors should watch Kavango Resources for an entry point in early 2021, Robertson concluded.
Author: Mark Sheridan
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