Operational Update and Acquisition
Kavango Resources (KAV.L) announced to the market two key RNSs this morning, one providing a detailed operational update on its Kanye Resources’ projects at Ditau and Kalahari Copper Belt (KCB) and the other announcing the acquisition of the remaining 50% of Kayne Resources.
The operational update reported that the 4-hole drill programme at Ditau had been completed, with three of the twelve targets tested in the search for carbonatites and mineralised intrusives. Samples from hole-4 are already at the laboratory, with samples from the other three holes likely to follow soon. A final drill report is being prepared, which will include recommendations for the next exploration stage.
On the KCB we learnt from today’s update that over 40% of the soil samples from the 8,000-soil sample campaign have been collected, and that an important geological feature known as the Ngwako Pan-D’kar has been identified and located over several KCB licences.
The RNS also said that initial talks had started with drilling contractors regarding a planned drilling programme later this year, which will look to target some of the Ngwako Pan-D’kar formational contacts.
In the second RNS this morning, it was revealed that the other 50% of Kanye Resources had been acquired from AIM listed Power Metals Resources plc (POW.L) to give Kavango a 100% working interest. Kanye was previously the subject of a JV between KAV and POW. Kanye Resources encompasses the 10 prospecting licences in the KCB (4,257 sq. km) and 2 prospecting licences in Ditau Camp (1,368 sq. km). The consideration to POW being 60m KAV shares at 3p (with a 12-month lock in), 30m KAV warrants (exercisable at 4.25p for 30 months), 30m KAV warrants (ex 5.5p for 30 months) and a 1% net smelter royalty.
FEQ Comment
It is welcome to see an exploration company provide such a detailed operational update on its projects and at the same time double its commitment to the KCB and Ditau by acquiring the other 50% of Kanye Resources, in an all-share consideration. The operational advancement and greater geological understanding being made is encouraging in what is one of the most prospective parts of the world for copper, along with other commodities. Such factors have yet to be fully absorbed and understood by investors, which thereby provides an opportunity for investors to buy into the shares today, before further RNS’s provide proof-of-concept news-flow and possible discoveries.
The shares are surprisingly sitting at only 1.75p, around 40% lower than the last Placing earlier this year in April at 3.0p. We believe the shares should start to bounce back from the current 2-year lows as more investors start to appreciate the progress being made, and as the many near term drilling related news event catalysts are announced in the coming months that could trigger a sudden rebound in the share price. We therefore continue to recommend Kavango Resources (KAV.L) as a ‘Buy’.
Although it is really beyond the scope of this particular morning comment, we also need to alert our readers to the undervalued nature of Power Metal Resources plc (POW.L)**, which is currently trading at below 1.00p, at 0.88p and offers a similar bounce back potential opportunity to KAV on the back of several compelling factors, including the value added nature of its many spin-out and disposal IPO’s, one of which we understand is expected to be listed on the market later this month.
Jason Robertson
D: +44 (0)20 7330 1883
E: jasonrobertson@firstequitylimited.com
*First Equity Limited act as Joint Broker to Kavango Resources plc and ** Power Metal Resources plc.
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