KAT

  • Game-changing gold opportunity: Why Katoro’s major bull-run is primed to last (KAT)

    Shares in gold and nickel exploration and development player Katoro Gold (LSE:KAT) are currently experiencing a lot of interest in the market – they are currently sitting at 3.16p after rising 241% so far this year.

    Katoro’s strong momentum began recently with news of a new, near-term gold production opportunity in South Africa. With the deal immediately putting a near-term revenue stream on the horizon, it is not hard to see why Katoro has captured the attention of investors. That being said, even after recent price movements, Katoro is currently only valued at around £6 million. This demonstrates how far many junior exploration and development firms have really fallen in recent years.

    Given the true scale of the JV’s revenue potential amid bullish gold market conditions and the likelihood of positive near-term news flow, we believe Katoro’s current bull-run could well continue for some time.

    Immediate impact

    To recap, on 30 January 2020, Katoro announced its binding, conditional entry into a 50/50 unincorporated joint venture (“JV”) with a company called Blyvoor. The partners plan to reprocess and exploit an existing 1.34 million ounce, JORC-compliant gold resource spanning six tailing dams 75 kilometres south-west of Johannesburg in South Africa.

    As part of the deal, Katoro will provide up to a £790,000 repayable loan to the JV to fund ongoing development work on the project. To support this, Katoro has already raised £397,000 in the form of a convertible loan note with investors through SI Capital and has also agreed further facilities with external finance partners for the balance if this is called down. This means finance for Kataro’s entry into this transaction is already resolved, an important element for investor confidence.

    The first critical point to note about the South Africa JV is that it represents a considerable, near-term revenue-generating production opportunity for Katoro.

    Much of the groundwork has already been covered at the South African tailings project. For example, the mining licence and environmental impact assessment required for the reprocessing of the tailings is already in place. This means that production can begin immediately once a processing plant has been constructed and commissioned.

    Plant progress may not be too far off, either – Katoro has already held discussions with potential funding parties for the project. It believes this will be secured at the project level in the form of debt funding – meaning shareholders would not be diluted at the PLC level.

    The second key point to note is the potential economic impact that the 50/50 JV project could have for Katoro once gold recovery begins.

    The partners are targeting an initial production rate of up to 250,000 tonnes of material a month at an average grade of 0.3 grams per tonne gold from the tailings. This is expected to mark the first stage of a production ramp-up to 500,000 tonnes of material a month within two years. At 500,000 tonnes of material per month, the project is targeted to produce around 35,000 ounces of gold a year and to have a 35-year life of mine.

    So, what does this mean financially?

    Katoro’s board believes that the project enters economic territory at a $1,300 an ounce (“/oz”) gold price. As such, this figure has used this to calculate economic fundamentals.

    Including an all-in-sustaining cost of just $664/oz for the first five years planned production and project capital costs of $30-35 million, the firm puts the project’s net present value (10) at $49 million and its internal rate of return at 31%.

    To put this another way, at an annual production rate of 35,000 ounces of gold, the project would generate around $22.3 million per annum for the JV ( (35,000 X 1,300) – (35,000 X 664) ). Katoro’s 50% share of this comes in at $11.15 million (c.£8.6 million per annum), a figure that compares very favourable to its current, c.£6 million market cap.

    This type of comparison begins to look even more favourable when you consider the fact that, in reality, gold prices currently sit much higher than $1,300/oz. If we use the $1,565/oz quoted by Katoro as the current gold price in its 30 January release, then Katoro’s annual take from the project at a 35,000-ounce per annum production rate comes in at $15.8 million, or c.£12.2 million per annum ( ( (35,000 X 1,565) – (35,000 X 664) ) /2 ).

    With many expecting gold prices to continue rising after climbing 20% in the third quarter of 2019, there is room for these figures to become even more attractive.

    Moreover, the project currently has a projected life of 33 years, demonstrating the long-term production and revenue generating potential.

    Finally, there are several important indications that the JV will be able to quickly and easily build on the strong economic foundations in place at the South African tailings project.

    First, the funds provided by Katoro as part of the JV agreement will be used to, in the company’s own words, “optimise mining strategy”. The firms will complete final detailed mine planning and scheduling to perfect mining strategy and better define the expected plant feed grades and identify possible low-grade zones. They will also look at ways to keep operating costs down as much as possible and maximise processing efficiency. Currently, gold recoveries of 56-60% are thought to be achievable – could this figure rise?

    Meanwhile, the JV has already shown its commitment to forming as strong a management team as possible to drive forward. On 10 February 2020, less than two weeks after the deal was announced, the firms had formed a JV management committee and appointed new JV manager  Graham Briggs – former chief executive of Harmony Gold Mining. The group have already started “moving forward multiple workstreams”, according to Katoro.

    The JV’s new management, rapid pace, and work to optimise its project alongside financing discussions show commitment to advancing as quickly and in as economical a way as possible. Not only that, but these points are likely to provide a great deal of short-term news that – if positive – could provide further fuel for Katoro’s share price.

    The sky is the limit

    The bottom line is that Katoro’s entry into the South Africa JV has changed its outlook significantly, putting near-term revenue generation on the horizon. Although the meteoric rise in Katoro’s share price reflects this, the project’s potential in a strong gold market and the pro-active approach to its optimisation may mean the firm has not yet peaked. Now that Katoro has got the ball rolling, the next few months will be about maintaining the pace with frequent project updates and progress towards gold production.

    Author: Daniel Flynn

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

  • Katoro Gold unveils major expansion and value-creation plans for Tanzanian gold projects (KAT, POW)

    Monday morning saw Katoro Gold (LSE:KAT) jump by more than a fifth to 1.14p a share after confirming third-party interest and expanded exploration plans for two of its gold projects in northern Tanzania.

    The £1.92m business said that it had received expressions of interest around a purchase of - or joint venture agreement on - its Imweru and Lubando gold projects in the Lake Victoria Goldfields. Although no suitable agreement has yet been made, Katoro said the interest shows a ‘clear appreciation of the inherent value’ of the projects, which have a combined JORC-compliant gold resource of 754,980oz.

    With gold prices rising and a recent review confirming exploration upside potential at both Imweru and Lubando, Katoro said the best way to create near-term value would be to build up the projects’ resource inventory. Indeed, it is targeting an initial target of 1MMozs of gold across both sites, an increase of nearly a third on existing resources.

    The firm’s focus will initially be on Imweru, as it is the more advanced of the two sites.  Here, it will work to identify the lowest-cost route to adding ounces and quantify gold in extensions to mineralisation along strike and at depth. As it stands, just 30pc of Imweru’s priority one exploration ground has been explored fully. Meanwhile, the site’s previous owner Kibo Energy estimated that its resource expansion potential could sit at between 40pc and 80pc.

    Alongside this work, the business said it would continue to work with Tanzania’s Ministry of Minerals on completing a pre-feasibility study for Imweru and securing all relevant mining approvals. Katoro’s executive chairman Louis Coetzee said that reaching this initial 1MMoz resource target across Imweru and Lubando is not only ‘entirely feasible’, but will demonstrate the ‘substantial nature’ of its gold projects.

    ‘The board believes that Imweru has the potential to deliver 50,000oz per annum gold production should the conditions allow and suitable financing for development and construction be secured,’he added. ‘In this regard, we continue to work with the Tanzanian authorities to chart the correct course for the development of the Projects in a beneficial manner for the region and country, and also in a manner that generates commercial returns for the company supporting the investment decision required for mine development.’

    The news also prompted a response from Power Metal Resources (LSE:POW) which holds a 5.95p stake in Katoro. The organisation, which was sitting at 0.45p in midday trading, said it was ‘pleased to draw investors’ attention’ to Katoro’s update.

    Power Metal also owns a 25pc direct interest in Katoro’s Haneti Nickel project, which can be increased to 35pc through a £25,000 cash payment. Based in Central Tanzania, Haneti is a nickel sulphide project made up of near-contiguous tenements covering around 5,000km 2 of land.  Much of the project lies on top of a highly-prospective belt of rocks called the Haneti-Itsio Ultramafic Complex (HIUC), which is made up of metamorphosed ultrabasic rocks like dunite and peridotite called serpentinites.

    Before Katoro or Power Metal’s involvement at Haneti, previous owners such as Kibo Mining (LSE:KIBO) had completed around $1.5m worth of exploration work.  These efforts identified strong prospectivity for nickel in the block across four key drill-ready targets along with additional gold, cobalt, platinum credits, and some significant lithium anomalies.  The most prospective of these sites is Mihanza Hill, which covers an 80km-long ultramafic zone known as ‘the central zone’ and has returned grades of 13pc nickel and 2.33 grams per tonne of palladium and gold.

    Beyond these efforts, additional, independent work by Western Geophysics proposed that Haneti could host a significant nickel sulphide deposit.  Likewise, the Geological Survey of Tanzania completed a high resolution airborne geophysical survey covering c.12,000km between 2012 and 2013 that extended the footprint of the project’s known nickel sulphide-prospective belt.

    After acquiring Haneti in November last year, Katoro immediately began a review of all the historic work completed on the block. This led it to the exciting conclusion that the asset may host a chonolith-type nickel sulphide deposit.

    Katoro and Power Metal, which entered Haneti earlier this year, are now working to establish whether disseminated or massive sulphide mineralisation exists across the project’s key targets ahead of drilling.

    Towards the end of May, the pair revealed that 1,500 soil samples from the project had extended the strike length of its existing exploration targets and well as identifying an entirely new target.  Following this, in June, the partners revealed that they had decided to carry out a drill programme on two of Haneti’s key targets – Mihanza Hill and Mwaka Hill.  This decision came after 3D modelling on a magnetic anomaly at Mihanza Hill.

    Finally, in July, Katoro and Power Metal announced that they had identified several pegmatite outcrops within two abandoned artisanal pits at Haneti during exploration work.  These were found to contain coarse quartz, red and black tourmaline and- most critically- lepidolite - which contains significant amounts of lithium. These results indicate that lithium minerals such as spodumene and petalite – as well as rare earth elements like tantalite-columbite – may be present at Haneti. As such, the pair have applied for five new exploration licences covering zones of interest and are developing a work programme to identify any lithium-bearing minerals and assess the extent of any lithium mineralisation.

    Author: Daniel Flynn

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    Catalyst Information Services Ltd, the owner of MiningMaven.com, owns a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    Catalyst Information Services Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

     

  • Power Metal Resources confirms major drill targets at Haneti Nickel Project (POW, KAT)

    On Wednesday, Power Metal Resources (LSE:POW) - formerly known as African Battery Metals (LSE:ABM) – announced plans to drill the Haneti Nickel Project. A fully funded initial drill programme will focus on two key targets - Mihanza Hill and Mwaka Hill - to ascertain the existence of disseminated or massive sulphide mineralisation.

    The decision to drill follows an in-depth review and analysis of historical work at the project which indicates Haneti may host a chonolith type nickel sulphide deposit. In the event of success, a larger drilling programme will likely follow on the 5,000 sq. km site.

    Power Metal currently holds a 25pc interest in the Haneti project via a joint venture agreement with Katoro Gold (LSE:KAT). The firm can elect to increase its interest to 35pc on payment of £25k. Power also gains additional exposure to the project via a 5.95pc shareholding in Katoro.

    Paul Johnson, Executive Director of Power Metal Resources plc commented: "The decision to drill the Haneti Nickel project, targeting nickel, copper and PGM mineralisation is an acutely significant event for both JV partners.

    The two initial targets are substantial and have been selected following an extensive exploration programme involving a combination of airborne and ground exploration techniques to identify, consolidate and pinpoint the drill programme.

    The upcoming drill programme is an efficient start to our JV work at Haneti and fits with the Company's strategic objective to discover large scale mineral deposits."

    Former project owner, Kibo Energy (LSE:KIBO) spent $1.5m on exploration across the Haneti-Itiso Ultramafic Complex (HIUC) at Haneti prior to 2012. The work included rock and soil sampling, geological mapping, trenching, geophysical surveys and petrographic analyses, with grades of up to 13.59pc nickel identified in rock samples.

    A  high resolution airborne geophysical survey followed in 2012/13 outlined mafic-ultramafic zones with strike lengths of 10-20km, 30km and 80km, across the northwest, southwest and central zones of the HIUC. Haneti lies within the HIUC, and a subsequent independent geochemical interpretation highlighted the Mihanza Hill area as a prime drill target.

    Last month, Katoro Gold revealed results from a comprehensive soil sampling programme had further increased its confidence in the project. 1,500 samples were analysed at an independent laboratory, confirming high priority targets and extending the strike length of a number of targets.

    Speaking to MiningMaven, Paul Johnson added: ‘Haneti is the fourth POW project that is now operationally active and exploring for a major metal discovery. It also is unique with strike lengths in the HIUC of up to 80km and in respect of Mihanzi Hill, an identified target that extends to 800m below surface, so is extremely large.’ 

    Author: Stuart Langelaan

    The Author does not hold a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    The Author has been paid to produce this piece by the company or companies mentioned above.

    Catalyst Information Services Ltd, the owner of MiningMaven.com, owns a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    Catalyst Information Services Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

     

     

  • Record gold prices beckon huge profits for Katoro at Blyvoor (KAT)

    With gold prices soaring, junior miners with strong projects are in ultra-high demand.

    The yellow metal pushed past eight-year highs against the US dollar on Monday 18 May to reach $1,762 per ounce (“/oz”). The same trading session saw the precious commodity smash all-time records against most of the world’s other major currencies. Strength has continued throughout the week.

    In a market like this, one company, in particular, has a prime opportunity to make its investors a lot of money. 

    We sat down with Louis Coetzee, chief executive of Katoro Gold (LSE:KAT), to get the inside track on what’s next for Blyvoor – the firm’s exciting precious metals project in South Africa.

    Aerial view of the Blyvoor project (Source: Katoro Gold)

    Carltonville is a busy mining town west of South Africa’s capital Johannesburg. When gold was first discovered there in 1886, it transformed the country from a farming-led economy into the most industrialised nation on the continent. It also helped to create some of the world’s most profitable mining companies, like Anglo American (LSE:AAL). 

    The area is now home to Katoro’s Blyvoor project, a 50-50 joint venture with Blyvoor Gold Operations. At Blyvoor, Katoro and its partner will focus on processing “tailings” from previous gold mining schemes in the local area.

    This is a lucrative niche.

    Tailings are mineral loads that were once considered to be waste products. However, thanks to novel extraction techniques developed only in the last ten years, previously-overlooked gold in this discarded rock can now be extracted economically.

    This approach has worked wonders for De Beers in South Africa. Thanks to advances in separating, sorting and crushing equipment, the world’s largest diamond miner famously managed to extract 815,036 carats of diamonds from several million tons of tailings in 2013 and operations will continue beyond 2030. 

    Outstanding scoping study

    Earlier this month, Katoro took a huge step forward at Blyvoor when it released the results of its scoping study for the project.

    The work assumes the asset will operate for 25 years, during which production capacity will build up to 500,000 tons of tailings ore per month and 35,000 ounces of gold production per year.

    These rates translate into a net present value of US$131 million, a 25% internal rate of return, and a return on investment (“ROI”) of 260%. Meanwhile, revenues over the life of mine are expected to reach US$992 million against total capital costs of US$110 million. All-in sustaining costs are forecast to sit at just US$727 per ounce of gold.

    These are already very impressive figures. However, they become even more impressive when you consider the extremely conservative measurements Katoro used to reach them.

    One such example is the company’s assessment of Blyvoor’s recovery rate. Although test work showed this to be as high as 62%, Katoro used an average recovery of 52% - 10% lower.

    Likewise, the ROI was calculated using a very conservative gold price of just $1500/oz. With gold now breaking record prices, this figure is free to rise exponentially. 

    The context of the numbers is critical to consider,”explains Coetzee. “Our approach was not to see what is the best-case scenario, it was to say “If we pick this apart, and if we strip it down to the bare bones, does it still present us with a decent opportunity?" The answer is a clear yes, and this scoping study has demonstrated Blyvoor’s true integrity as a project."

    Alongside the attractive economics of its contained resource, there are several other areas of potential financial upside to consider at Blyvoor.

    For example, although novice investors often overlook the impact of currency on overseas operations, the exchange rate is essential for Katoro. See, the firm is paid in US dollars but incurs costs in South African rand. In the last 12 months, the rand exchange rate has surged against the US dollar- there is now 18.46 rand to the dollar, compared to just 14 a year ago. This means there’s no better time to undertake work in the country.

    Meanwhile, another pivotal point is the fact that previous work completed at Blyvoor has been significant enough to allow Katoro to proceed straight to the definitive feasibility study (“DFS”) stage from its scoping study. In doing so, it skips the time burden and costs associated with the pre-feasibility stage.

    Is this particularly common in mining?

    No,” says Coetzee. “It’s not common for projects like this at all, especially in the mining side. The historic work that was done on Blyvoor was more than enough in terms of quality and quantity that we can progress and proceed immediately with a DFS. This saves us both time and money.”

    Finally, one of the most exciting things about Blyvoor is Katoro's belief that the project will reach first production within just 18-24 months. For shareholders, this is a very short timeline to revenue – especially when Katoro’s market cap currently sits at just £5.2 million.

    So, where will news come from next? More importantly, will it be able to extend the strong run Katoro’s share price has enjoyed since March?

    Coetzee believes so, pointing to the numerous potential funding partners now circling Blyvoor:

    From the time we first announced this transaction we started engaging with potential funders. There's quite a number of them. There's quite a few that have shown quite a keen interest, and this has only increased since we made the scoping study results available,” he says. 

    All in all, Katoro looks to have a brilliant opportunity ahead of it at Blyvoor. New investors should watch closely – the firm’s current 2.3p share price could soon look very cheap.

    Author: Daniel Flynn

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, does not own a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and MiningMaven Ltd are not responsible for the article's content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance

  • Soaring gold price sees Katoro Gold push forward transformational plans in South Africa (KAT)

    AIM-listed gold and nickel player Katoro Gold(LSE:KAT) says the climbing price of gold has had a positive impact on its well-received plans to exploit a South African gold resource.

    The spot price of gold hit a seven-year peak of $1686.74/oz on 24 February, reaching record levels against the Euro and Canadian and Australian dollars.  

    Global fears about the spread of coronavirus and its effect on global supply chains caused a growing flight to safety on Monday as Italian authorities enforced a quarantine around a worsening outbreak of Covid-19. The Dow saw a 1,000 point drop that day, while the FTSE 100 cratered nearly 4%.

    Nicky Shiels, commodities analysts at Scotiabank, noted that Covid-19 represented a “black swan” or unforeseen event that could roil global markets for months to come, with gold prices “doing what they should given renewed global growth risks”. Prices have already “taken out our average forecast for 2020 ($1,600) and it’s likely the floors are shifting up,” Shiels added. 

    The gold price has since edged backwards a little from its multi-year high to settle around the $1,650 mark. But with fears about the spread of coronavirus in Europe, we would suggest that jittery markets will support this price point in the near term. 

    All of this means good news for gold producers, especially those who can point to near-term revenue. 

    Katoro intend to reprocess an existing gold tailings resource rated at approximately 1.34Moz at a South African mine owned by Blyvoor. It and entered into a joint venture with the company on 30 January 2020.

    Reprocessing of gold from tailings is a relatively new technological approach which examines and exploits mining materials previously thought of as waste. This process gained popularity in South Africa in the 1970s, using a technique known as flotation to recover pyrite uranium and gold. Given the vast amount of tailings (in the region of hundreds of millions of tonnes) produced from gold mining, more efficient scientific methods developed in recent years have been able to extract and recover metals that were not discovered in the original mining process. 

    Katoro agreed to provide a loan worth £790,000 to the JV. £263,000 of this amount has already been advanced with the remaining £527,000 expected to be released in the near future. 

    To fund the loan Katoro issued a convertible loan note to SI Capital for £397,000 and secured £400,000 from Sanderson Capital Partners. 

    Katoro said in a 25 February market update that it had issued notice to Sanderson that it intended to draw down the additional £400,000 in full to fund ongoing work. 

    Executive chairman Louis Coetzee noted that his team was “very pleased” with progress so far, saying that feasibility studies and plant design were progressing ahead of expectations. 

    “The Board notes the strengthening gold price which further bolsters what we consider to be very robust project economics,”Katoro said.

    Shares in the London-headquartered explorer have gained 325% in the last 12 months. On this latest news, the KAT share price has gained 3% to 2.7p. 

    Author: Tom Rodgers

    The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, does not a position in the stock(s) and/or financial instrument(s) mentioned in the piece.

    MiningMaven Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and MiningMaven Ltd are not responsible for the article’s content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.