PGMs

  • Kavango Resources – On the road to another Norilsk in Botswana? (KAV)

    The Norilsk nickel mine sits high in the Russian Arctic plains, 1,700 miles northeast of Moscow in the permafrost of the Taimyr Peninsular.

    Here, in the Arctic Circle’s second-largest city, virtually all of Russia’s copper and Platinum Group Metals (“PGMs”) are produced. Not only that, but this polar mine accounts for 50% of the world’s palladium, some 20% of its nickel, 20% of all platinum, over 10% of the world’s cobalt, and 3% of all copper mined globally.

    This staggering production rate won’t slow down any time soon. Recent reserve estimates suggest Norilsk’s current output rates can be maintained for upwards of another 50 years. This is thanks to 500 million tonnes of probable PGM ore reserves, including 6 million tonnes of nickel, 9 million tonnes of copper, 62 million ounces of palladium, and 16 million ounces of platinum. 

    For an idea of just how valuable this mine is, consider that Norilsk’s largest shareholder is one of the richest men in Russia.

    Oligarch Vladimir Potanin swooped in for a 34.5% stake in MMC Norilsk Nickel Ltd (Nornickel) when it was privatised by the Russian government in 1995. His net worth is now reported to be close to $24 billion.

    That’s a lot of money, but it’s not just Potanin basking in Norilsk’s riches. According to the Financial Times, Norilsk has generated the highest shareholder return of any large diversified miner over the last five years. As of 2020, the company has a market value of over $40 billion - nearly twice that of Anglo American (LSE:AAL), and $10 billion more than Glencore (LSE:GLEN).

    How exciting, then, that Kavango Resources plc (LSE:KAV) is exploring a project that could rival the best of what Norilsk has to offer.

    Kavango chief executive Michael Foster has repeatedly described the company’s targets here as “highly attractive”. However, those in the know would say that this is quite the understatement.

    Kavango holds 12 prospecting licences across the KSZ and the adjacent Ditau Project in a huge, near-7,000km2 area.  Prof. David Holwell of the University of Leicester, a world authority on magmatic sulphide deposits, describes the KSZ as “a prime setting for a magmatic Ni-Cu-PGE deposit.”

    Kavango is hard at work targeting nickel-copper-platinum-group-element deposits across the 450km length of the KSZ.

    Fig. 1. Kavango’s 3 areas of exploration

    Foster is keen to draw the Norilsk comparison for one precise reason: it’s backed by geoscience.

    The same black, granular intrusive rock that hosts Siberia’s vast metal deposits – known as gabbro - is found under the Botswana sands, exactly where Kavango is drilling.

    “We believe the results from our 2019 drilling in the KSZ have brought us closer to confirming a Norilsk-style ‘plumbing system’ through which significant quantities of metal sulphides were transported,” Foster explains.

    Copper-Nickel-PGM deposits can accumulate in vast underground ‘traps’ — as molten metal-sulphides filter down through the cooling silicate magma. As at Norilsk, these accumulations can form huge ore bodies over a prolonged period of magma flow, which appears to be the case on the KSZ.

    One of the most important results from the drilling and rock sampling by Kavango to date has been the confirmation that most of the gabbroic magma intruded into sulphur-rich coal shales.

    Why is this key?

    It tells Kavango’s geologists that the sulphur content of the magma would have increased due to the incorporation of sulphur rich coal shales into the melt. Therefore, more of the valuable metals (Nickel & Copper) would have combined with the sulphur to form sulphide accumulations.

    Magmatic sulphide specialist Dr Martin Prendergast examined the geochemistry of the gabbro samples and concluded that the silicates seem to have “lost” metals during the crystallisation of the magma whilst the ratios of Cu/Zn and Cu/Pd strongly suggest that “sulphide saturation” would have occurred leading to the formation of metal sulphides. The location of these sulphide deposits are relatively simple to confirm in geophysical surveys because they conduct electricity so easily.

    In Kavango’s recent Mineral Systems Review by Prof. Holwell it is suggested that large volumes of metal sulphides including copper, nickel and platinum could be found in trap zones associated with gabbro dykes (vertical) and sills (horizontal).

    If this is correct and the accumulations are close enough to surface to mine economically, it will then be a case of identifying the location of these deposits with ground based geophysical surveys and obtaining samples of the mineralisation.

    With so much ground to cover this is obviously a big job for Kavango, but the potential rewards are huge.

    If the company is successful and identifies commercial metal deposits then this will be transformational for the company’s stock price. This will be the main focus of Kavango’s exploration efforts well into 2021.

    Fig.2. Diagram showing how metal sulphides can accumulate within sills and dykes as the gabbroic magma ascends towards the surface. (After Barnes et al 2015)

    Wider Exploration Potential in Botswana

    It’s no surprise that fellow junior mining exploration companies are now following Kavango into Botswana.

    Notably, shares in Power Metal Resources (LSE:POW) rocketed 50% in a day in April when the London explorer announced the acquisition of a 51% stake in Kavango’s Ditau Project located 70km east of the KSZ.

    At Ditau, Kavango has been focussing on 10 or so “ring structures” identified from airborne magnetic surveys, which the company believes should contain “carbonatite” lying beneath about 70m of Kalahari Sands

    Carbonatites, are intrusive/extrusive volcanic bodies whose geochemistry is dominated by calcium or magnesium carbonate. Significantly, carbonatites represent the leading source (almost the only source) of rare earth elements (REEs). REEs are becoming increasingly important in high tech applications, particularly in the manufacture of batteries and lightweight magnets used in the motors of Electric Vehicles.

    At the time of the acquisition by Power Metals, chief executive Paul Johnson said the purchase offered “a great deal of promise for highly prospective” targets of carbonatite magmatism.

    Across these targets, the Kavango/Power Metal Joint Venture hopes to discover economic deposits of REEs as well as niobium – a ductile metal used to create heat-resistant superalloys for jet engines. 

    Just 25km to the north of the project area, three carbonatites were discovered by Falconbridge Exploration in the 1970s.

    One of these was reported to contain high grades of Niobium.

    Once the Covid-19 lockdown is over, the JV partners plan to carry out orientation surveys on the Falconbridge carbonatites before undertaking an exploration exercise to identify carbonatite within the ring structures. Once carbonatites have been confirmed, shallow drilling will be employed to test for REEs and other economically viable minerals.

     

    Rising demand paints a positive picture for Copper, Nickel, REE and PGM producers

    As Kavangopushes forwards, demand for rare earths and PGMs is also soaring. More and more of the world’s technologies are coming to rely on these highly sought-after minerals

    Increasing quantities of palladium are being sought by world’s carmakers, who use the rare metal to manufacture green catalytic converters. Meanwhile, rare earths are critical in everything from medical equipment and electric car motors to lithium-ion batteries, computer hard drives, solar panels, and wind turbines.

    The net result has been a surge in prices over recent months. Palladium soared to record highs above $2,795 an ounce in January 2020.  Spot prices have remained at 25-year highs in spite of the Covid-19 pandemic.

    The reason?

    Auto manufacturers are struggling to find new suppliers and tough new emissions standards have come into force around the globe.

    Nickel, meanwhile, has jumped 18% since March.  A large driver here has been an export ban on the commodity in Indonesia – one of the world’s leading suppliers.

    So, while prices of key metals take off across the globe, and Kavango finds precisely the same underground structures that made billionaires of Norilsk investors, the company now has a huge opportunity to match this exploration potential and enrich its early investors.

    Author: Mark Sheridan

    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, owns 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

     

  • Power Metal Resources to push on “innovatively and aggressively” following recent placing (POW)

    Earlier this week, Power Metal Resources (LSE:POW)outlined in detail its plans to "push on with existing interests more innovatively and aggressively" following a recent £1 million fundraise.

    The company's chief executive Paul Johnson said he and his team are pursuing two key objectives. The first of these is to make one or more major metal discoveries within the firm's gold, base, and strategic metal projects. It will then look to crystallise the value of any such discovery for the benefit of shareholders.

    Although Johnson said each of Power Metal's five projects has the potential to deliver such a discovery, he highlighted three standout opportunities for the remainder of 2020.

    The first is the firm's 51%-held Molopo Farms Complex project in Botswana, where drilling over coming months will target major nickel, copper, and platinum group metal ("PGM") targets. The second is its Haneti polymetallic project in Tanzania, where exploration drilling plans are being developed to target major nickel, copper, and PGM targets.

    The third, and arguably most exciting, opportunity is its Australia gold joint venture with AIM peer Red Rock Resources. The two firms have been building up their position in the highly-prospective region of Victoria over the past few months, and proactive exploration may be completed in 2020 subject to permitting developments.

    "So now we find ourselves with a diverse and exciting portfolio of project interests, and with the support of shareholders and investors in the recent financing, a considerable working capital position with which to drive forward those interests," added Johnson. "If we are fortunate in making a major discovery in just one of our projects, we could create significant value for our shareholders."

    Power Metal'ssecond key objective is to build up its working capital and balance sheet towards what it describes as "financial self-sufficiency". Moving forward, the company means that it aims to reduce its reliance on funding from the market to achieve its business objectives. This is something the firm does not feel like many of its junior resource peers are pursuing, highlighting their reliance on a "more traditional model of cash burn for exploration" in Monday's release.

    Johnson said that his firm would achieve financial independence in three different ways.

    The first is by taking positions in project holdings companies alongside direct project participation. This is something it has already done at Molopo Farms with Kalahari Key and Haneti with Katoro Gold, and in Botswana with Kavango Resources.

    "The aim is that successful project development will drive the value of the ultimate holding company in which Power Metal has a stake, driving the value of our investment in that company higher," the company added.

    Alongside this, the firm said it is working to monetise its existing project interests, as already described. Finally, it will invest in other junior resource sector opportunities, having recently established a "Junior Resource Fund" that allows it to invest up to £75,000 in value cases it finds across the market.

    "In the current climate there are opportunities for significant capital returns to be generated from investment in junior resource equity or related financial instruments," it added.

    Rounding up, Johnson added: "I am keen for us to be bold and adventurous with reward weighted risk-taking, but with solid underlying principles of risk management covering geopolitical, commodity, operational and financial considerations. In other words, combining boldness with risk management means diversification, which is what we have achieved.

    Many companies put their business case forward-focused around a single major project and concentrate their energies around that.  I understand this, but it's not the Power Metal approach, where instead, in our view, we have numerous major projects, each of which is capable of delivering a transformational discovery and by virtue of this shareholder wealth."

    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, owns 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