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Savannah 's value climbs as lithium peps up portfolio

Savannah shares have more than doubled this year as momentum has built

picture of copper wire
Savannah aims to be producing copper next year

In a recent interview with Proactive, David Archer, Savannah Resources’ (LON:SAV) chief executive said there were three reasons to invest in the company.

“Our assets in Mozambique, our assets in Oman and our shareholder base.”

In June, it potentially added a fourth when it was awarded two lithium exploration permits in Finland.

Lithium dimension adds spice

The permits are for two new projects at Somero and Erajarvi.

Work previously completed by the Finnish geological survey showed the presence across this ground of key lithium minerals in 117 individual occurrences, according to Archer.

The projects are at a much earlier stage than Savannah’s other two assets, the Jangamo mineral sands project in Mozambique and a copper project in Oman.

Nevertheless, the addition of lithium to the portfolio adds a new dimension to the company’s future.

Excitement, hype even, over the potential of lithium for battery power and energy storage has made it one of the few metals where prices have been rising strongly.

“Lithium makes enormous sense from a pollution point of view,” he says.

“People do want to get away from internal combustion energies.”

The lithium price has moved from US$8.00 per kg over the past 12 months to a current price of around US$25 per kg, so he’s not alone in spotting the potential.

But for European car makers, battery-powered cars feature heavily in their forward planning manual and having a source nearby will be essential.

That said, Savannah has barely started to scratch the surface of its new licences.

In August, it began an initial exploration programme that is expected to take 8-10 weeks and comprise mapping, surface rock chip and channel sampling that will target pegmatites with known lithium minerals.

Copper production next year is aim

The copper programme in Oman is much further down the development road.

Indeed, Savannah hopes to be in production by the end of 2017.

The focus is on two blocks, 4 and 5, and priorities now are a mineral resource estimate for the previously producing Aarja, Bayda and Lasail mines in Block 4 and a feasibility study of an amalgamated mine development of the deposits within both.

The firm will also apply for mining leases over the deposits.

Drill results encouraging   

Results from the latest drilling in Oman showed more encouraging copper grades with a notable gold credit.

Six diamond drill holes have been completed so far this season: Three at Maqail South (in Block 5) and on Block 4 one at the Dog's Bone and two at Bayda.

A first hole at Maqail South intercepted 2m at 6.84% copper and 0.3g/t gold from a depth 47.5m.

At Dogs Bone, on the Aarja target, the intercept was 5.75m at 1.84% copper and 0.8g/t gold from 109.3m.

Savannah has scheduled an updated resource statement for both Maqail South and Mahab 4, where drilling starts shortly, by the end of the year. 

Mahab 4 currently has a resource of 1.5Mt at 2.1% copper for 31,500t of contained copper."

Archer said: “Aarja is shaping up as a moderate-grade, underground deposit that can be readily accessed via the existing portal and decline while Maqail South is being validated as a very attractive, high-grade copper deposit readily mineable via open-cut methods. “ 

Elsewhere on Block 4, the old Lasail Mine is the largest VMS deposit within the Oman ophiolite belt and saw 13mln tonnes at 2% copper mined between 1986 and 1994.

Around this, Savannah has also identified several potential areas, which could present future mining opportunities.

Mineral sands merger

The mineral sands asset is the huge Jangamo prospect in Mozambique.

The plan here is to merge it with the neighbouring deposit owned by Rio Tinto (LON:RIO).

Progress has been slow since the deal was announced in 2015 but the long stop date is now September 30.

The deal would bring together Rio’s Mutamba, Dongane with Jangamo.

Savannah’s asset carries an inferred mineral resource of 65mln tonnes at 4.2% heavy mineral sands – the source of  ilmenite, rutile and zircon.

The AIM-listed explorer can earn up to 51% of the new joint-venture company, while Rio has agreed that it or one of its subsidiaries will buy the output from any mine.

The Rio areas have a declared exploration target of 9-12bn tonnes grading 3-4.5%.

Savannah will be the operator of the JV and will earn its majority stake by carrying out scoping, pre-feasibility and feasibility studies. Rio will provide access to its existing camp, facilities and equipment.

Solid shareholder base

Aside from its mining assets, Archer reckons Savannah’s solid shareholder base is another major plus.

Middle Eastern private investment group Al Marjan is the company’s major backer with a 29.99% stake and supported the group in £1.75mln placing in February.

Value doubles this year

Savannah’s share price has more than doubled since the start of the year, with the company worth around £15.7mln at 3.96p.

House broker Northland said the run-up to the end of this year is a key time for the company especially the resources update in Oman.

Quick facts: Savannah Resources PLC

Price: 2.18 GBX

Market: AIM
Market Cap: £28.32 m

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