Lucky old Wadharma investors. This failed mobile phone dealer stopped trading in June 2006, collapsing from 40p to 2p in the process. Over the statutory six months grace period while shares still traded on AIM, the rumour mill went to work and by the time suspension finally arrived in January 2007, the share price had stabilised at a slightly less beggarly 8p. Just seven months later, Colin Bird has just handed them a wonderful get-out-of-jail-free card; to say they owe him a beer is an understatement.
Wadharma re-listed at 10p in July after announcing the reverse takeover of a privately held entity called Kiwara Resources, at that point entirely owned by Colin Bird and his fellow board members. As promised, the company changed its name to Kiwara. Bird's considerable personal reputation through the success of Jubilee Platinum ensured that the price would gallop away and as I write this, the share price stands at 17.5p, valuing the company at £24.8m.
What investors get for their money is a Zambian nickel, cobalt and copper play with bonus uranium interest within a huge 11,000 km2 license area. Situated not far from the DRC border in Kalumbia, north western Zambia, the license was previously held by Anglo American, who relinquished it partly because metal prices were suppressed and partly because Zambia had embarked upon nationalisation of its resources. Bearing in mind that both Colin Bird and fellow board member Peter Vivian-Neal are veterans of the African mining scene (Bird actually worked for Anglo as a mining engineer in a past incarnation), they were well-positioned to pounce when this promising license came up for grabs.
Zambia's mining industry is enjoying a resurgence. According to a recent article in the national newspaper 'Times of Zambia', the mining industry employs 50,000 people and is responsible for 11.8% of national GDP, up from 6.2% in 2000. It sits on huge mineral wealth that may rival neighbouring DRC with whom it shares geology, but 45 per cent of Zambia is yet to be geologically surveyed and covered by geological maps.
Kalumbila
There are two known areas of interest within this license area. The first is known as Kalumbila, which lies in the periphery of a large scale geological feature known as the Kabompo Dome. Mineralisation at Kalumbila is known to extend over a strike length of 11km and it is reckoned to house stratiform copper mineralisation, in addition to zones of nickel and cobalt.
It is worth pausing to put this techno-speak into macro-geological perspective. Zooming the camera out, the Kabompo Dome is itself situated on-trend with the vast copperbelt which straddles north-central Zambia and the southern portion of Katanga Province in the Democratic Republic of Congo (DRC). The copper belt has spawned many mines, amongst them well-known names such as Anvil's Dikulushi and First Quantum's Kansanshi mines.
Zambia itself is reckoned to host over five billion tonnes of high-grade copper ore ? 4% or better is not unusual ? although the stratiform style mineralisation is generally of much lower grade. According to the US Geological Survey the region also contains 40% of the world's cobalt reserves, again in spectacular concentrations. Lead-zinc, uranium, and iron-copper-gold deposits also feature.
Focusing down on Kalumbila again, Anglo American estimated an ore reserve of 'up to' six million tonnes at 0.6% nickel and a cobalt grade of 0.2%. It should be noted here that the resource is not compliant to international standards, although the deposit won't have evaporated. These grades may not sound impressive, especially at this modest size, unless you know that cobalt is over six times as expensive as nickel, making the combined metal content equivalent to 1.9% nickel. Further pods like this are likely, and if the company is lucky, it might even identify the source of the cobalt and nickel intrusion. That really would be jackpot.
Ground geophysics and drilling are proceeding simultaneously with a view to establishing a SAMREC (South African equivalent of JORC) compliant mineral resource, with pre-feasibility studies targeted for 2009.
Kawanga
A few miles down the road, Kawanga houses uranium deposits originally identified and drilled by AGIP over a strike length of some 1,000m in 1970s. It is said to have an unconfirmed uranium content of 2,000 tonnes with apparently one drill hole intersecting nearly 1% over 25 metres but the prospect is pretty much at grassroots exploration stage.
Company Structure and Valuation.
Kiwara doesn't own the license outright and the company structure is a little complicated. As in South Africa, Zambia requires the economic participation of local groups. Kiwara owns 75% of its Zambian subsidiary, with the New African Mining fund having purchased a 25% interest for an investment of R10m, or £1.4m at today's currency exchange rates ? a tidy investment for NAMF considering the current market cap. In turn, the Zambian subsidiary owns 55%of Kalumbila Minerals, with the other 45% owned by a Zambian company, LM Engineering Limited.
Investors will be heartened to know that Directors still personally hold 73% of Kiwara, even post-dilution, and there is a 1 year lock-in.
Attempting valuation at this early stage is a reckless game indeed, but one can't help observing that at almost £25m, the market cap looks to have run ahead of itself. Old mobile phone investors will doubtless take the opportunity to move out at manageable loss, as will early bird investors who have managed a quick-fire double. These comings and goings are likely to constrain the price until proper resource figures are published.
Risks.
Kiwara is more than adequately funded. With the benefit of Wadharma's original cash of £772,000 and the £1.4m raised from the NAMF investment, Kiwara will set about proving up and extending the known resource at Kalumbila. Grass doesn't seem to grow long under Bird's feet, and as mentioned drilling has already commenced. A separate exploration programme should be starting at Kawanga shortly.
One of the chief risks should hopefully be settled by September, which is when the Kalumbila license comes up for renewal. The company highlights that the license is in fact held by LM Engineering Limited and the intention is that it should be transferred to Kiwara. Zambian counsel is not expecting problems but this plainly an important event.
Country risk is reasonable. In recent years the government has attempted to stamp out the corruption that sullied Zambia's reputation. It certainly isn't putting off interested western companies these days, not to mention the Chinese. Zambia is a busy place.
Overall, Kiwara Resources looks like one for the 'watch' list.
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