Kavango Resources commences the most important drilling in its history (LSE:KAV)

Kavango Resources (LSE: KAV) has officially begun drilling at its “extremely high priority target” in the Kalahari Suture Zone (“KSZ). Known as the B1 Conductor, this target is Kavango’s biggest yet. Results from this one exploration hole could be transformational for the company, as it aims to prove its model is correct and that world-class deposits of nickel, copper and PGMs exist in this prospective region.

By Anna Farley

No wonder, then, that CEO Ben Turney believes this is the KSZ’s most important exploration hole drilled so far – bar none.

With so much upside on offer, it might seem like everything is at stake in this drilling.

However, that is not the case at all. Unlike, many other small-cap exploration companies, Kavango has plenty of working capital and lots of progress across its exciting portfolio of projects.

The latest drill target is far from ‘make or break’ for Kavango

The hole Kavango is about to drill is named Hole KSZDD002 and is targeting the centre of the promising B1 Conductor. The shape, size, position, and orientation of this underground body – as well as surveys of how well it conducts electricity (important when looking for conductive metals like copper and nickel) – suggest something very exciting lurks at depth.

Kavango clearly hopes the B1 Conductor turns out to be a large-scale nickel-copper-platinum group element ore body. This is certainly what the company is aiming for, and is now about to test with the drill bit.

Nonetheless, one hole on a single project does not decide if the firm sinks or swims.

CEO Ben Turney summarises Kavango’s attitude to the B1 Conductor target best when he says:

“We believe in the major potential on offer in the B1 Conductor, and that Hole KSZDD002 could be a breakthrough in unlocking the KSZ. However, the future of Kavango doesn’t rest on any one target, or even on a single project.”

So much has changed since the company first began theorising about the KSZ, leaving plenty on offer no matter the outcome of this drilling.

Most obviously, Kavango has snapped up other interests in Botswana. There are its interests in the Kalahari Copper Belt (“KCB”), a lucrative region for mining where the company is involved in two joint ventures seeking copper and silver, as well as the Ditau Camp rare earth elements project in the southwest of the country.

There’s also the fact that Kavango has the majority of licences within the KSZ. Even if the current target does not prove fruitful, there are multiple other targets on offer at this project that could provide the world-class potential the company is looking for.

“Given our wealth of projects and licences, our aim is to make significant metal discoveries. We have done everything we can to maximise our chances of success while managing the company in a prudent, yet ambitious manner. Multiple discoveries are a definite possibility for us,” says Turney.

Crucially, the firm already paid the cash portion for drilling Hole KSZDD002 upfront and still has £2.1 million in working capital.

The £2.1 million is enough, Turney says, to see Kavango through the next phases of its exploration, not just in the KSZ but in its other projects as well.

This keeps the company nimble – able to quickly pivot and change focus should the need arise.

Hints of another opportunity deeper underground…

Kavango based its first forays into Botswana on the potential that could be unlocked within a particular type of rock found at the KSZ known as Karoo-age gabbro. A “gabbro” is the technical word to describe ancient molten magma that has long since solidified.

The Karoo is a rock system located in southern Africa that formed between 180 million and 310 million years ago.

Based on results from the last drill hole Kavango recently announced, it now appears there might be an older, Proterozoic-age system lying right underneath this Karoo gabbro. An intriguing new mineralisation model is still in development and it appears Kavango will update more on this before the end of the year.

While the value of such a development is hard to quantify without more information, it remains an intriguing possibility for much greater upside in the future.

In the meantime, all attention will focus on the current drill. If Kavango is able to prove that the B1 Conductor is indeed a nickel/copper/PGM ore body then expect to see the company’s share price rocket.

Some weakness in the stock over the last week could have opened up a significant opportunity ahead of Christmas.

Anna Farley

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