POW

  • 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

  • Ground geophysics completes at Power Metal Resources and Kalahari Key’s Botswana asset (POW)

    Power Metal Resources (LSE:POW) revealed that ground geophysics has completed at its part-owned Molopo Farms Complex (MFC) project in Botswana on Tuesday. The work was completed by Kalahari Key and will be used to design a drilling programme at the nickel, copper, and platinum group metals (PGM) asset.

    In total 11 loops were conducted on 10 of the best target areas for nickel and PGM mineralisation identified in a recent helicopter-supported, high-resolution electromagnetic survey. The data collected is now being interpreted to identify top priority drill targets by the end of August.

    The MFC project consists of three exploration licences spanning 2,725km2 in southern Botswana. Kalahari Key’s primary target is nickel and platinum mineralisation in the geophysically-delineated, major shear/feeder zone through the centre of the project. The business will also seek to identify massive or disseminated nickel sulphide deposits at the base of, or within the ultramafic zone of the MFC moving forward.

    Power Metal has an 18.26pc shareholding in Kalahari Key. It also has a right by 31 December 2019 to elect to earn into a 40pc direct interest in MFC through an investment of $500,000 in the project by 31 December 2020. If it chooses to do this, the firm will hold an effective economic interest of 50.96pc in the project.

    Alongside its geophysics work, Kalahari Key is preparing relevant environmental submissions for MFC as required in Botswana ahead of drilling. Power Metal noted that the business is also in discussions with drilling companies to ensure that contractors are in place and able to begin drilling when required.

    Paul Johnson, executive director of Power Metal, said: ‘I am pleased to advise that, as previously indicated, the KKME team have now completed the ground geophysics programme. The extensive data collected from the 11 loops, covering the ten best target areas, will now be interpreted with a view to designing a drill programme to test the key targets. I look forward to receiving the results of that interpretation process which are expected to be received by the company later this month.

    To read our recent report on the MFC project and the opportunity it offers to Power Metal Resources and its investors, please click here.

    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

  • Hunting for elephant scale mineral deposits: Paul Johnson on Power Metal’s push into Botswana (POW)

    Since restructuring the board of Power Metal Resources (LSE:POW) in February, Paul Johnson and Andrew Bell have made substantial progress in their strategic and operational review of the business portfolio. Having reviewed and bolstered the business, the directors took another step forward in May by signing an acquisition and earn- in deal with a Botswana-focused Kalahari Key Mineral Exploration.

    In this special MiningMaven report, Power Metal’s Executive Director Paul Johnson talks MiningMaven through the deal and Kalahari Key’s unrivalled local experience before explaining why his firm has committed to pursuing ‘elephant-scale deposits’ at the MFC.

    CLICK TO DOWNLOAD YOUR COPY OF THE REPORT

  • LISTEN: MiningMaven Podcast 120 - with Paul Johnson of Power Metal Resources (POW)

    Today’s guest on the MiningMaven podcast is Paul Johnson, Executive Director of Power Metal Resources (LSE:POW). Power is focussed on the energy metals sector and is developing five projects across Africa. These include the nickel-lithium Haneti project in Tanzania, the Kisinka copper-cobalt project in the DRC, the recently added nickel-copper project in Botswana, and a cobalt-nickel project in Cameroon.

    On Monday, Power announced the completion of a field programme in Cameroon. Paul discusses activities undertaken during the programme and the next stages ahead for the project. The Executive Director also gives a rundown of progress across the rest of Power’s asset portfolio.

    This interview was recorded on 22nd July 2019.

    All opinions expressed are those of MiningMaven and the respective guests, unless otherwise stated and should not be construed as investment advice or a recommendation to buy shares in any featured Company. From time to time MiningMaven principals may take equity positions in companies featured. Listeners are advised to do their own extensive research before buying shares which, as with all small-cap exploration stocks, should be viewed as high risk. Investors should also seek the advice of a qualified investment adviser or stockbroker as they deem appropriate. MiningMaven.com is a trading division of Catalyst Information Services Limited. Registered in England no. 06537074 (Registered Office Address 3rd Floor Ivy Mill, Crown Street, Manchester, M35 9BG) #gold #mining #investing

    Author: Stuart Langelaan

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

    The Author has not been paid to produce this piece by the company or companies mentioned above.

    Catalyst Information Systems Ltd, the owner of MiningMaven.com, has not been paid for the production of this piece by the company or companies mentioned above.

    MiningMaven.com and Catalyst Information Systems 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 “perfectly poised” in Botswana as it reveals host of nickel drill targets (POW)

    Power Metal Resources’ (LSE:POW) strong newsflow run continued on Wednesday when it announced that eight “compelling” drill targets had been established at the Botswana-based project into which it is earning.

    The firm said Kalahari Key, the current owner of the Molopo Farms Complex (“MFC”) asset, followed up 11 conductor targets generated from airborne surveys last year with ground-based geophysics and modelling. The work not only recommended detailed drilling parameters and drill testing priorities for eight targets, but indicated that at least six of the highly-conductive bodies have the potential to be massive nickel sulphides.

    The MFC project consists of many licences covering thousands of square kilometres in southern Botswana and is being targeted by Kalahari Key for prospective massive sulphide mineralisation. Power Metal has an 18.6% shareholding in Kahari Key and has elected to earn in to a 40% direct interest in the asset by way of spending $500,000 on exploration and target drilling this year. When this completes, the organisation will have an effective economic interest in the property of 50.96%.

    Paul Johnson, Power Metal’s chief executive officer, said the presence of eight targets far outstrips both his own firm’s and Kalahari Key’s expectations for the MFC project.

    "Back in May 2019 when POW entered the transaction the expectation of the Kalahari Key team was to identify 2 or 3 key targets from the ground geophysics work.  Instead we now have 8 high profile drill targets which is a considerable uplift,” he said. “Kalahari Key have always stated their main strategic objective was to target nickel-PGM-bearing massive sulphide deposits similar to the Voisey's Bay nickel deposit. As POW's key strategic objective is to make a large-scale metal discovery our interests are aligned and now we find ourselves in an interesting position.”

    Elsewhere on Wednesday, Power Metal said that an environmental plan for the proposed drilling programme at MFC has been completed with favourable results and has been submitted to Botswana’s government. Power Metal also said that third-party interest in the asset has continued, with Kalahari Key continuing to “engage with interested parties”. Meanwhile, the firm said Johnson has joined Kalahari Key’s board and an operational committee has been formed between the MFC partners following Power Metal’s decision to exercise its project option in December.

    Johnson added that, following recent progress, he believes that Power Metal and its shareholders are “perfectly poised”in Botswana, adding:

    Subject to local approvals we have the high-profile drill targets, and the cash at bank to instigate a drill programme asap.  Local liaison with drill contractors continues and measures are being implemented that will allow commencement of drilling at the earliest opportunity.”

    Wednesday’s update comes just one day after Power Metal confirmed the presence of gold nuggets at its newly-acquired Alamo asset in Arizona, USA.

    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

  • Power Metal and Red Rock fly as they apply for more gold ground in Victoria (RRR, POW)

    Power Metal Resources (LSE:POW)and Red Rock Resources (LSE:RRR)both enjoyed a strong lift on Tuesday after revealing yet another expansion to their joint venture (“JV”) in Australia’s Victoria Goldfields.

    Through their shared outfit Red Rock Australasia, the firms have lodged applications for two new licence areas covering 215km2in Victoria – one of the world’s most active and prospective high-grade gold mining region.

    This takes the JV’s total licence application area to 919km2 of ground adjacent to the Ballarat gold mine owned and operated by Castlemaine Goldfields – a subsidiary of Liongold Corporate. Ballarat is currently producing 40,000 ounces of gold a year at an average grade of 5.6g/t gold from underground mining and has historically produced more than 13 million ounces of the precious metal.

    Excitingly, all of the joint venture’s application areas have extensive evidence of gold mineralisation. In many cases, they even have recorded production and historical drilling.

    In Tuesday’s announcement, Power Metal’s chief executive Paul Johnson said the expansion has granted Red Rock Australasia “critical mass” in Victoria with a broad spread of targets that could become mines. “I look forward to the coming weeks and months, when we will be providing further information to the market outlining the prospectivity of each project within the JV portfolio,” he added.

    Shares in Power Metal were up 12.6% on the news at 0.39p, their highest level since March, while Red Rock had advanced 27.4% to 0.3p.

    The two firms first announced their entry into the Victoria Goldfields in April, when they applied for 130km2of ground. Several days afterwards, they added a further 581km2to this holding.

    Victoria is currently experiencing something of a modern day goldrush. Historically, work in the region has mostly been mostly alluvial – or at surface.  However, many players are now looking to follow in the footsteps of Kirkland Lake Gold, whose Fosterville gold mine has become one of the world’s highest-grade, and lowest-cost projects through underground drilling. In Q1 2020 alone, the project produced 159,864 ounces at 42.4g/t primarily from underground operations.

    In Tuesday’s update, Andrew Bell, the chairman of Red Rock Resources, elaborated on his new JV’s potential to this end:

    “Each license contains evidence of gold mineralisation and historic gold workings, with in many cases recorded production from previous alluvial mining or underground drives.

    At a time when the Goldfields are attracting considerable new interest after a series of discoveries and the opening up of the high grade zones at the Fosterville mine, RRAL has made a strategic decision to become a regional specialist in the Victoria Goldfields with a twin focus on bringing brownfield projects back into production and discovering new mines. Often it is by producing that one makes discoveries."   

    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

     

  • Power Metal and Red Rock JV to double Australian gold footprint (POW, RRR)

    AIM-listed metals explorer Power Metal Resources (LSE:POW) will double the size of its joint venture Australian gold project in central Victoria.

    The application for four new gold license areas totalling 916km2 in the historic Goldfields region will make it one of the largest tenement holders in the area. 

    Gold production has doubled in the Goldfields region in the last five years, attracting serious corporate attention. Recent studies suggest that more than 2.2 million ounces remains to be found. 

    Power Metal has a 49.9% stake in Red Rock Australasia Pty Ltd (RRAL), a JV it formed with Red Rock Resources (LSE:RRR).

    Power Metal CEO Paul Johnson said the move to increase RRAL’s landholding to 1,835km2 gives it “one of the largest strategic footprints in one of the most sought-after gold explorations territories.”

    Johnson added: “This has been achieved partly through longstanding preparations in the background that yielded the early license applications and then by proactive search and expedient action when new opportunities were identified.” 

    The application for the licenses:  EL007327, EL007328, EL007329, and EL007330 marks another step in POW’s rapid Australian expansion.

    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, 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

     

  • Power Metal moves to exploit “very extensive” Kisinka copper anomaly (POW)

    The discovery of a vast seam of copper at the Kinsinka mine in the Democratic Republic of Congo has produced a welcome bump for Power Metal Resources(LSE:POW).

    The AIM-listed explorer has been concentrating recent efforts on expanding its gold prospects at Alamo in Arizona, so developments at its 70%-owned copper and cobalt mine have flown under the radar somewhat. 

    But chief executive Paul Johnson told the market on Wednesday morning that his company was now commissioning Congolese experts Minex Consulting to carry out detailed mapping of 24 pits across nine cross sections of the 6.8 kilometre target area where a large copper anomaly was discovered. Kisinka is located in the southern part of the Katangan copper belt, home to some of the world’s largest and highest-grade copper and cobalt deposits. 

    Shares in the £2.3 million market cap firm were 6% higher at 0.4p in early Wednesday trading. Meanwhile, technical analysis of the share price shows it as a buy on the daily and weekly charts, as it sits above both the short-term 5-day EMA of 0.373p and medium-term 50-day EMA of 0.362p.

    The news backs up statements chief executive Paul Johnson made in June 2019 that “the potential significance of this large anomalous zone makes this a high-priority prospect for the company”. Initial exploration started in 2018 had failed to pick up any significant signs of mineralisation. 

    When Johnson took over as executive chairman in August 2019, the Kisinka project was the first work the company looked at in an effort to rationalise its portfolio.Our expectations were not high, and we were surprised and encouraged by the discovery,”he noted. 

    He was also brought in, along with executive chairman Andrew Bell, to boost POW’s technical capability at board level. 

    Johnson added that the next planned work at Kinsinka would be to use the rest of the rainy season to carry out less weather-dependent work in sampling and mapping, while preparing for potential future drilling.

    While the spot price of copper dipped in the second half of January, the metal is still trading near five-year highs at $2.59 per lb.

    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

     

  • Power Metal picks four key drill targets at Botswana nickel opportunity (POW)

    Power Metal Resources (LSE:POW) is pushing ahead with a massive nickel sulphide project in Botswana and now says it has identified four key targets for drilling.

    The AIM-listed explorer has an interest in a major project at Molopo Farms Complex (MFC), three licenses covering 2,725km2 prospective for Nickel-Copper-PGM which straddles the country’s southern border with South Africa. 

    Geoscientists carried out an electromagnetic study of the area by helicopter and a followup by ground survey identified a “larger than expected number” of high-profile targets, Power Metal said. 

    Now the exploration company has divided potential sites into four target groups where it will drill eight large holes to test for the valuable element. 

    The target groups comprise Chipo in the north, Galaletsang to the south, Tshenolo to the west and Tsepho in the central region. Initial drilling will focus on the Chipo target group where surveys show the highest possibility of results consistent with other massive sulphide discoveries in the region.

    Two project licences originally granted in 2016 have been successfully renewed, Power Metal CEO Paul Johnson said, with authorisation received from the Botswanan Department of Mines. 

    "The scale of potential prospectivity at the MFC project was demonstrated by the large number of Nickel-PGM targets identified during ground geophysics and this has now led to a clustering of targets into four groups. The MFC project is increasingly attractive and we look forward to the pursuit of ground exploration, notably high-profile target drilling.” 

    Last year, Power Metal took an 18.26% shareholding in Kalahari Key, a local exploration company that has 100% ownership of the Botswana project. In December 2019, it elected to earn-in a 40% interest in the project by spending $500,000 on exploration and target drilling, with CEO Paul Johnson joining the Kalahari Key board. 

    After completing the earn-in POW will have a 50.96% economic interest in MFC. 

    Power Metal is looking for metal deposits buried in the igneous rock. Magmatic sulphide deposits, like those in Botswana, produce between 40% and 95% of the world’s total resources of nickel and platinum group elements.  These metals are key components in electric vehicle battery manufacturing, a sector that before coronavirus restrictions were imposed was soaring globally. 

    Botswana has been relatively little affected by the pandemic thus far but authorities are not taking any chances. The country’s first case was recorded on 31 March, and days later President Mokgweetsi Massi declared a 28-day state of emergency involving lockdown, where only those providing essential services would be allowed to leave their homes. To date the country has recorded 20 cases and one death from Covid-19. The lockdown is expected to end on 28 April 2020. 

    In the meantime the Kalahari Key team are using the lockdown period to review all available geological and geophysical data to refine their drilling plans, Power Metal said, and to liaise with third parties who have expressed an interest in the nickel project.

    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, 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

  • Power Metal Resources advances following strong exploration progress at Botswana investment (POW)

    Power Metal Resources (LSE:POW) inched up to 0.54p on Tuesday after updating investors on the strong ground operation progress being made at the Molopo Farms Complex (MFC) project in Botswana.

    The business said that Kalahari Key, owner of the nickel, copper, and platinum group metals project, has largely completed ground geophysics work to identify priority drill targets for the next stage of exploration. The work follows a high-resolution EM and magnetic survey completed in May last year that identified 17 conductor targets within the project’s feeder/shear zone.

    Kalahari Key expects to complete its ground geophysics work by early August, with results interpretation expected to commence shortly thereafter. A full update will be provided to the market detailing the outcome of the ground geophysics and the priority drill targets upon completion.

    Power Metal’s exposure and interest in MFC comes through its 18.26pc position in Kalahari Key. The business also has the right by 31 December this year to earn-in to a 40pc direct interest in the project by committing to spending $500,000 on its development by 31 December 2020. If it chooses to exercise this option, then it will hold a 50.96pc effective economic interest in MFC.

    Paul Johnson, executive director of Power Metal, said he was ‘impressed’ by the pace at which Kalahari Key is advancing exploration at MFC, adding:

    ‘This important groundwork is designed to initially follow up 11 areas within the 17 conductor targets identified from the helicopter Electromagnetic ("EM") Survey and narrow down to a number of high-profile drill targets. In this region mineral deposits are under sand cover with no surface expression so the application of high-resolution geophysics is vital in identifying the most attractive drill locations.

    ‘I am hugely excited by the opportunity the MFC project presents for our shareholders, both through the POW 18.26% shareholding in Kalahari Key and the potential for the Company to earn in to a 40% direct project interest. Consequently, we await with some excitement the outcome of the ground geophysics programme and the important results interpretation.’

    MFC consists of three exploration licences spanning 2,725km2 in southern Botswana. Kalahari Key’s primary target is nickel and platinum mineralisation in the geophysically-delineated, major shear/feeder zone through the centre of the MFC. The business will also seek to identify massive or disseminated nickel sulphide deposits at the base of, or within the ultramafic zone of the MFC moving forward. To read our recent report on Power Metals’ deal with Kalahari Key and the opportunities offered by the MFC project, please click here.

    Tuesday’s news comes just a day after Katoro Gold (LSE:KAT) confirmed 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 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.

    Power Metal owns a 5.95pc stake in Katoro as well as a 25pc direct interest in the firm’s Haneti Nickel project. 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.

    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.

     

     

  • Power Metal Resources finalises earn-in to major Botswana nickel-copper-PGM asset (POW)

    Power Metal Resources (LSE:POW) has exercised its option to earn-in to a 40% direct stake in the highly prospective Molopo Farms Complex (MFC) nickel-copper-PGM project in Botswana.

    On Tuesday, the business said it had written to the 2,7525km2asset’s owner Kalahari Key Mineral Exploration to confirm that it will take the position in exchange for $500,000 worth of funding in 2020. This money, which Power Metal said is fully covered by its existing cash resources, will be used to support the drilling of critical targets for mineralisation.

    Alongside its 40% direct interest, the firm owns an 18.26% position in Kalahari Key’s equity, giving it an effective 50.96% position in the MFC property.

    In the second quarter of 2019, a helicopter-borne electromagnetic (EM) survey was completed over the MFC project feeder zone, identifying 17 sub-surface conductor targets.  Subsequent follow-up ground EM surveys over 14 of these targets – the results of which were released in October 2019 – produced five high priority targets across the asset. These are all thought to be of ‘considerable size and scale’, and potentially even home to massive nickel sulphides due to their location, geological setting, and associated magnetic response.

    Eight drill holes have now been designed to penetrate all targets, and Kalahari Key has engaged a local consulting firm to complete a pre-drilling environmental management plan for the project. Meanwhile, Power Metal and Kalahari Key are awaiting the final results of a gravity survey over the priority target to reduce the chance that they are graphite rather than sulphide bodies as much as possible. Finally, the two businesses are in discussions with drilling conductors, with several expressing interest in completing initial work on the MFC in exchange for a combination of equity and cash.

    Power Metal’s chief executive Paul Johnson said the business chose to earn-in to a significant position in the asset following the ‘very encouraging’ results yielded from work to date.

    ‘In recent weeks we have held a number of meetings and discussions with the KKME team and there is clear and growing confidence in the potential of the MFC project for a nickel discovery,’he said on Tuesday. ‘We are now working with the KKME team on preparations and options for an upcoming drill programme and will provide further updates to the market as material developments occur.’

    He added that, if initial exploration work at proves to be successful, the project’s potential valuation could rise ‘dramatically’ and attract interest from larger mining companies.

    ‘I would like to be clear that exploration drilling of the nature we plan to support is high risk, albeit the in-depth preparatory work undertaken by KKME helps to mitigate that risk and increase the chance of success,’said Johnson. ‘That said, I also want to be clear why we are enthusiastic and have decided to proceed with the earn in opportunity. It is rare for investors in the junior resource space to have exposure to near term drill campaigns that could have the potential to yield a large-scale nickel sulphide discovery and we believe that the MFC project is one such opportunity.’

    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

  • Power Metal Resources pushes forward at Kisinka copper-cobalt project (POW)

    Friday morning saw Power Metal Resources (LSE:POW)reveal enlarged areas of prospectivity at its 70%-owned Kisinka copper-cobalt project in the DRC.

    The firm launched into a pitting and mapping exploration programme at the site in February, having discovered a large 6.8km copper anomaly during field work last year.

    Results have not only confirmed the two copper anomalous zones previously identified, but also demonstrated that they contain higher values than expected, span a greater width, and are open to the north-west and south-east.

    Meanwhile, the work also found that these zones are “quite well correlated” with major structures the operators had already inferred from mapping Kisinka.

    Finally, cobalt anomalism was indicated in both zones.

    Power Metal said that once sampling is fully completed, the next recommended steps are expected to be a ground magnetic survey and a ground electromagnetic survey.

    These will aim to detect both low magnetic and chargeable lithologies and indicate structures and faulting and areas of carbonate rocks and further pitting.

    Paul Johnson, Power Metal’s chief executive, said the latest results allow the firm to “go forward with confidence” at Kisinka:

    “The laterization and leaching that we encountered support the theory that there may be supergene enriched mineralisation at a lower level, so we particularly want to investigate this.

    The presence of cobalt partly correlated with the copper is another positive indication. After confirmation from the ICP analysis, which we may extend to include samples from the earlier termite mound sampling, we will release the data on cobalt and copper levels in the anomalies.

    We were able to relate some mineralisation areas to structures and faulting, and to build on that work and generate the best drill targets we will need to carry out some geophysics.”

    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

     

  • 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

  • Power Metal reveals lithium prospectivity at key project in Tanzania (POW)

    Power Metal Resources (LSE:POW) rose 1.8p on Tuesday after announcing signs of lithium prospectivity at its part-owned Haneti project in Tanzania. The firm, which owns a 25pc position in Haneti alongside Katoro Gold (LSE:KAT), said regional exploration reconnaissance at the identified several pegmatite outcrops included within two abandoned artisanal pits.

    The pegmatites, appear to intrude along the sheared contact between granite gneisses and serpentinised ultramafic rocks, consist of corase quartz, lepidolite, and red and black tourmaline. Critically, Lepidolite contains significant amounts of lithium and may indicate the presence of useful lithium minerals like spodumene and petalite. Meanwhile, Power Metal said the pegmatites can also prove prospective for rare earth elements and other saleable minerals like tantalite-columbite.

    Further work will be completed in the area following these early signs of prospectivity, with Katoro already applying for five additional licences in the areas coverin the zones of interest. Meanwhile, Power Metal and Katoro are constructing a work programme that may include a regional desktop study, detailed field mapping and geochemical analysis. The aim of this work will be to identify any lithium-bearing minerals and the extent of any mineralisation identified.

    Paul Johnson, executive director at Power Metal, said he was excited by the news as the firm’s original interest in Haneti had stemmed from its large-scale nickel sulphide targets. An upcoming drill programme will be undertaken to test those targets.

    ‘Having lithium, and potentially rare earth element, prospectivity at Haneti is also very interesting and adds to the excitement and potential of the Haneti Project for the project partners; and shareholders of both POW and Katoro alike,’ he added. ‘I look forward to reporting further in respect of these additional exploration activities being undertaken at Haneti.’

    Power Metal established a joint venture with Katoro over Haneti earlier this year, and the former has the option to increase its position in the project to 35pc by paying the latter £25,000 in cash by 15 May 2020. The asset sits alongside Power Metal’s broader portfolio of projects centred around the key metals used in power generation, transmission, storage, and utilisation. This includes assets in the DRC, Cameroon, Cote d’Ivoire, and Botswana.

    To read our recent report on Power Metal’s interests in Botswana, including exclusive quotes from Johnson, please click here.

    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 reveals option to acquire early-stage DRC copper-cobalt project(POW)

    Power Metal Resources’ (LSE:POW) busy week continued on Thursday with the news that it had purchased an option to acquire a majority stake in a DRC-based copper-cobalt project.

    The business has paid $5,000 for a 60-day exclusivity period over licence PR 13479, during which it will carry out legal and technical due diligence and prepare JV documentation. It will also complete a termite mound sampling programme to test cobalt mineralisation at a greater depth than the 27-30cm soil sampling depth.

    If Power Metal decides to exercise its option, it will pay $50,000 to the licence’s current owner SCOMIS – a local Congolese firm – in exchange for a 70pc stake. The organisation would then pay a further $250,000 to SCOMIS once drilling begins.

    PR 13470 covers around 3.5km2in the Lualaba district of the DRC and is based some 5km north of the producing Tondo cobalt and copper mine owned by a Lerexcom. According to Power Metal, PR 13470 sits in the same geology as Tondo in a known cobalt-prospective area that is attracting increased exploration attention.

    What’s more, early-stage soil sampling has already shown the presence of anomalous cobalt at 500-750 parts per million on the licence. One early sample was even found to contain more than 4pc of the metal by an x-ray fluorescence spectrometer. The area has also been found to contain dispersed sections or fragments of R2 mineralisation, a part of the Roan sequence that hosts much of Congo’s cobalt. Some of these sections are visible locally as elevated ridges.

    Power Metal’s executive director Paul Johnson described the option as ‘very exciting’, adding that the company’s goal at the licence is to prove up a shallow, open-pittable, and high-grade resource.

    ‘This license is in a highly prospective area for copper-cobalt, near an existing mine, and is primarily a cobalt target. We are fortunate to have secured this option at an early stage when the presence of anomalous cobalt has already been proven. However, the shallow depth at which soil sampling has been carried out means the results derive from material where the mineralisation may have been reduced by weathering,’added Johnson.

    ‘If we test deeper in the regolith, we may get results of higher tenor that show more of the potential of the License. Initially we propose to do this by termite mound sampling across the license. That may be followed by a small number of pit excavations to take us down to the bedrock, which we expect to encounter at about a depth of 10m.’

    Thursday’s release came just a day after Power Metal revealed substantial ground operation progress at the Molopo Farms Complex (MFC) project in Botswana.

    The business said that Kalahari Key, owner of the nickel, copper, and platinum group metals project, has largely completed ground geophysics work to identify priority drill targets for the next stage of exploration. The work follows a high-resolution EM and magnetic survey completed in May last year that identified 17 conductor targets within the project’s feeder/shear zone.

    Kalahari Key expects to complete its ground geophysics work by early August, with results interpretation expected to commence shortly after that. A full update will be provided to the market detailing the outcome of the ground geophysics and the priority drill targets upon completion.

    Power Metal’s exposure and interest in MFC comes through its 18.26pc position in Kalahari Key. The firm also has the right by 31 December this year to earn-in to a 40pc direct investment in the project by committing to spending $500,000 on its development by 31 December 2020. If it chooses to exercise this option, then it will hold a 50.96pc effective economic interest in MFC.

    Meanwhile, on Monday, the business welcomed the news that Katoro Gold (LSE:KAT), in which it owns a 5.95pc stake, had received third-party interest in two of its gold projects in northern Tanzania.

    Katoro said 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.

    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.

    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

  • REPORT: Power Metal Resources- Unlocking Haneti’s transformational potential

    Earlier this year, Power Metal Resources added Tanzania to the growing list of African countries where it is exploring for the key battery metals powering the electrification of the world. The company entered an option to buy up to a 35pc position in a project owned by AIM-listed Katoro Gold (LSE:KAT) called Haneti that is thought to be prospective for both nickel and lithium.

    Together, the two businesses have pooled their collective experience to launch immediately into an accelerated programme of work designed to inform a drilling campaign at Haneti. In this report, Power Metal’s executive chairman Paul Johnson, who joined alongside chairman Andrew Bell as part of a restructuring earlier this year, explains why he thinks this work could be ‘transformational’ for the firm.

    CLICK HERE TO DOWNLOAD YOUR COPY OF THE REPORT

  • Who will be the big winners from a nickel price boom? (HZM, POW, RGM)

    2019 was an exciting period for the nickel market, with increasing demand and supply disruption helping to drive the metal’s price higher at a time when other commodities trod water. Having started the year at $10,600/t (“per tonne”) on the London Metals Exchange (“LME”), the metal hit a high of $18,000/t in September and became one of the year’s strongest performing metals.

    The price of nickel subsequently dropped, hitting a low of $13,000/t in December. However, this pullback could have created an opportunity, and investors are now eagerly anticipating what might come in 2020 for the base metal.

    With many of the forces that propelled last year’s nickel rally still in place, we have taken a look at several of the London-listed firms that will benefit if the metal soars.

    Strong supply/demand dynamics

    On the demand side, stainless steel – which accounts for most of nickel’s global usage – experienced a surge during 2019.

    Meanwhile, the level of nickel required for electric vehicles (“EVs”) continued to grow, with more units being sold at the same time as critical developments in battery technology increased dependency on the base metal. According to the Nickel Institute, two of the most commonly used types of EV batteries, Nickel Cobalt Aluminium and Nickel Manganese Cobalt (“NMC”), are now made up of 80% and 33% nickel respectively. Meanwhile, newer formulations of NMC batteries are also approaching 80% nickel content, the body says.

    Elsewhere, nickel prices were bolstered by fears on the supply side. Indonesia, the world’s largest nickel producer, confirmed plans to bring forward a ban on the export of raw nickel ores from 2022 to January 2020. With Chinese producers stocking up on nickel inventories in anticipation of the ban, LME nickel warehouse stock levels have reportedly dropped by almost 50%. In October, Reuters reported that stocks had even fallen to 79,800 tonnes, their lowest value since January 2009.

    A secure setting for 2020

    Nickel currently sits at around $13,800/t, approximately 30% higher than it was a year ago in spite of the recent decline. This suggests that the bull market is still intact, with fundamental growth expected across core markets as supply concerns continue.

    From a demand perspective, the use of nickel in the stainless-steel sector is expected to continue to rise at a steady rate.

    But the real game-changer for the metal this year could be in EV space. According to Kitco, batteries (including those used to power laptops, phones, etc.) currently account for 5% of the global nickel market. However, with a record four million EV units slated for global sale over the next 12 months, this share could rise to 8% in 2020.

    With EV use set to grow by 30-40% annually for some years, the nickel market is likely to witness enduring change. Global demand is expected to rise from two million tonnes per annum, where it currently sits, to six million tonnes per annum by 2035. Batteries are expected to account for almost half of this demand growth.

    Meanwhile, nickel’s bleak supply outlook is also set to linger. Wood Mackenzie has estimated that Indonesia’s export ban will directly result in the loss of 190,000 metric tons of nickel globally by next year. Meanwhile, very few large-scale nickel projects have been developed in recent years. With the process of moving greenfield nickel assets from exploration through to production taking many years, many analysts believe that LME stocks will continue to fall as demand grows. This is expected to result in an annual average deficit of 60 kilotonnes of the metal through to 2027.

    Add the Federal Reserve’s dovish rate stance into the mix, and the combination of dwindling supply and rising demand could create an ideal setting for nickel explorers and producers globally.

    For example, Fastmarkets analysts forecast an average LME nickel cash price of $16,375/t in 2020- a considerable leap on the metal’s current position. Meanwhile, Wood Mackenzie expects nickel prices to continue breaking out beyond the current 12-month period, reaching $25,000/t by 2025 and $28,000/t by 2027.

    Who will be the big nickel winners?

    Several firms listed on London’s junior market are well primed to benefit from an increase in nickel prices throughout 2020.

    Horizonte Minerals (LSE:HZM) is one of the most likely candidates. The company wholly-owns the advanced Araguaia ferronickel project and the earlier-stage Vermelho nickel-cobalt asset to the south of the major Carajás mining district in Brazil.

    Horizonte has grown the resources of its assets by more than 800% in just seven years. It now plans to turn Araguaia into Brazil’s next major tier-one producing ferronickel mine by 2022.

    The firm recently entered a $25 million royalty agreement with Orion Mine Finance, providing the initial capital required to begin an early works programme at Araguaia and advance the project towards construction. At a nickel price of $14,000/t, the project has an estimated net present value (“NPV) of $741 million and an internal rate of return (“IRR”) of 23.8% (provided stage two expansion is completed).

    Applying recent nickel price highs of $16,000/t only serves to improve Araguaia’s economics. Under these conditions, the asset’s NPV rises to $1 billion while its IRR hits 30%. This would see the project generate free cash flow of $3.5bn. For perspective, Horizonte’s market cap currently sits at £51.8 million.

    Another London-based stock that could benefit from surging nickel prices is Power Metal Resources (LSE:POW). This company recently confirmed that it would earn-in to a 40% interest in the Molopo Farms Complex (“MFC”) nickel-copper-PGM (“platinum group metals”) project in Botswana, giving it an effective project interest of 50.96%.

    Following an airborne survey and follow-up groundwork in 2019, five targets have been selected at the MFC project as a focus for an initial drilling programme. Power Metal describes these targets as highly conductive bodies that “could potentially be host to massive nickel sulphides” due to their location, geology, and associated magnetic responses.

    Finally, a third London-listed firm operating in the nickel space is Regency Mines (LSE:RGM). Following a significant management shakeup last year in the wake of a challenging period, the organisation plans to push forward at its flagship, 50%-owned Mambare nickel-cobalt project in Papua New Guinea. Mambare covers 256 square kilometres and contains a compliant resource of 162.5 million tonnes at 0.94% nickel and 0.09% cobalt.

    A valuable investment opportunity

    The macro trade winds for the price of nickel look highly favourable. Given that Indonesia’s export ban will come into force imminently, supply is inevitably going to tighten this year. Meanwhile, the Federal Reserve’s hesitancy around raising interest rates any further this year is likely to cause further dollar weakness- a generally bullish force for commodities.

    In parallel, 2020 is also expected to welcome in a great deal of EV market growth, putting further upward pressure on nickel prices. Following the nickel sell-off in the last quarter of last year, this could open up a valuable investment opportunity – especially given that stocks operating in the nickel market generally fell alongside the base metal. If the bullish outlook for nickel materialises into another price rally, it stands to reason stocks with nickel exposure will follow suit.

    Given the stage of Araguaia’s development and the potential for news flow from Vermelho, Horizonte Minerals offers low risk and potentially sizeable returns at 3.1p (as at 21 January 2020). Power Metal, on the other hand, is a racier option. However, after raising £700,000 in December, the organisation has the funding in place to deliver exploration progress.

    If looking to take a punt on nickel having another bumper year, these two stocks could present significant upside to your portfolio.

    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