It’ll be an interesting test of how much strength in depth there is in the current market for grassroots exploration when Kavango Resources PLC lists in a few weeks.
Earlier in the year, Cora Gold Limited (LON:CORA) and Group Eleven Resources Ltd (CVE:ZNG) got listings away fairly well with their own exploration portfolios, respectfully in West Africa and Ireland.
And in February, Kavango itself built a book to the tune of around £1.6mln. The plan now is to revisit that book and boost it to around £2mln by selling shares at 6p each. Post financing, that would give Kavango a ballpark market capitalisation of around £6mln when it debuts with a standard listing in June.
And it may well be that Kavango turns out to be the biggest grassroots opportunity of the year so far, if chief executive Mike Foster’s assessment of the company’s prospects is anything to go by.
Seasoned investors will know that Foster’s opinion is one to be reckoned with in the mining industry. He has a long track record of success dating back at least to his time as one of the prime movers at Reunion Mining, which sold out to Anglo American for a substantial profit in the late 1990s.
He was subsequently with ZincOx, but cashed out 10 years ago before all the trouble there started, and has since done a couple of private deals, including the sale of Copperbelt Minerals for US$197mln and vending the two million ounce Misisi gold project in the Congo into Arc Minerals (LON:ARCM).
So, when he compares Kavanga’s Kalahari Suture Zone with Norilsk, one of the greatest paladium and base metals complexes in the world, it’s worth taking notice.
The caveat is that it’s very early days, but the signs are there.
The Kalahari Suture Zone covers around 7,000 square kilometres of ground in the south west of Botswana and was first looked over in the 1970s, when the government sponsored an aerial survey. A Canadian aid agency financed some drilling work in the 1980s, and it’s this core which has set Kavango off on its big game hunt.
This core isn’t mineralised in itself, but it is of the same age and composition as the rocks in and around Norilsk, and that’s an intriguing enough proposition in itself to set the exploration process going.
To identify mineralised massive sulphide target
Kavango has always taken the view that the biggest outcropping and near-surface deposits in Botswana have now gone. But Kalahari Suture sits beneath between 20 metres and 80 metres of overburden, which is one reason why no-one’s looked seriously over the ground until now.
The other reason is that the ground in question is actually extremely extensive. The Canadian aid agency drilled seven holes, but across a tract of land that Foster equates as being the distance between London and Edinburgh.
It’s quite a lot to digest.
But with £2mln in the bank, Kavango reckons it will be able to have a good stab at getting to grips with the full potential. The money will be spent on more aerial surveys, follow-up work, and then drilling on the most attractive areas.
“The intention,” says Foster, “is to identify a mineralised massive sulphide target.”
As an indication of what’s at stake here, it’s worth noting that Kavango has already received preliminary interest in the Kalahari Suture Zone project from some big name potential partners.
The company is already partnered with Rio Tinto on another project in northern Botswana, so there is clearly an appetite to do deals.
But as far as Kalahari Suture Zone is concerned, Foster reckons it’s too early.
“We’ll try and add value first,” he says.
Helping him do that is a team of excellent geologists, including former Reunion men Mike Moles and Hillary Gumbo, the founders of Kavango Minerals in Botswana some five years ago, spending their own funds on exploration and licence acquisitions since then, and experienced city men like Douglas Wright and Chuck Forrest.
These directors and managers are also key investors, and will continue to be a significant presence on the register once the company is listed. Their motivation will thus be in equity rather than salary, which makes a lot of sense if the company does indeed uncover the next Norilsk project.