Kavango Resources (LON: KAV) on Monday announced not only an expansion of its Kalahari Suture Zone drill programme but also an almost £2 million placing.

To start with, there’s the expansion of the Kalahari Suture Zone (“KSZ”) drilling programme in Botswana. This now involves drilling an impressive 550m borehole through Target B1, once operations at Target A2 & Target C1 are complete.

Mindea Exploration and Drilling Services (“Mindea”), the drill operator, began drilling at the KSZ in June with two ‘proof of concept’ geological holes. Mindea started with A2, and will proceed to C1 before moving on to B1.

Target B1 itself measures 475m by 550m and has a conductance of approximately 8,200 Siemens as well as an estimated decay constant of more than 350ms. While A2 and C1 share the same geological corridor, B1’s geological setting is separate and distinct.

The company said Spectral Geophysics will be performing “immediate down hole electromagnetic (“EM”) surveys” on all boreholes upon completion.

So far, Spectral has conducted Time Domain Electromagnetic (“TDEM”) surveys on six target areas. These identified drill targets in A2, C1, and B1 but not A1 or D.

Analysis of Target Area B2 data is still ongoing, with two more TDEM surveys planned for Target Area B, including on for Target B1.

Chief executive Ben Turney said the negative A1 and D1 results bring “a high degree of comfort”, since they means that the TDEM surveys are selectively identifying EM conductors. This is proof that the firm is “using the right remote sensing technology to define specific drill targets”.

As previously announced, 49% Mindea shareholder Equity Drilling and Kavango are in talks to form a strategic drilling partnership. Equity Drilling is currently “owned and run by highly experienced African drill operators”.

Options on the table include Kavango’s potential acquisition of two drill rigs as well as support vehicles which would form a “dedicated team” across the firm’s project portfolio.

The company said that any such partnership would be “subject to due diligence” and is expected to involve both cash and share payments. More announcements will follow.

Turning to the placing, then, First Equity placed 35.3 million new shares on Kavango’s behalf with institutional and other investors at a 5.5p per share price. This was only a 5% discount to the share price at the time.

The firm’s shares were trading higher, in fact, on Monday—up 3.5% at 6p each.

The placing involves a one-for-one warrant for all placing participants, with an 8.5p per shar exercise price for a two-year period.Warrants are subject to an acceleration clause, meaning that if Kavango’s shares close at more than 17p for five trading days then the company can give notice of an accelerated exercise with a ten-day deadline for payment.

Gross funds raised amount to £1.94 million.

Certain directors are in talks to potentially take part in a subscription on the same terms as the fundraise, with an announcement to follow later this week if they reach an agreement.

Turney said that while “Kavango is already well financed”, its budget was designed for “a specific work programme” with “a certain amount of drilling in 2021” while the company pursued if ‘proof of concept’ objective in the KSZ.

However, he explained, the board has now realised that its projects need “much more extensive campaigns”.

In response, the firm has advanced its Equity Drilling talks “about instigating much larger drill programmes” whish respond to Kavango’s “rapid progress” so far in the fiel 

The chief executive highlighted the “minimal discount and an excellent price” for the financing, reflecting the strength of the company’s position. 

“With our general overheads already budgeted for, Kavango will now deploy the new funds into pursuing our ambition of making one or more major mineral discoveries,” Turney concluded.

 

Author: Anna Farley

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