Before we go into the main questions and discuss the Company, what are the five key reasons why investors should take the time to read this Q&A and why should they wish to learn more about ABM?
PJ: I would say at this point the five key reasons are:
- ABM is refreshed and reinvigorated with a £1m financing in February and management restructuring;
- ABM now has a business model offering diversified exposure to the extraordinary prospectivity of Africa and the battery metal complex including copper, nickel and cobalt;
- ABM is seeking to extract operational newsflow and value from its existing Central and West Africa portfolio whilst building the business model with attractively valued acquisitions;
- The Company now has additional exposure to the Haneti Nickel project in Tanzania (up to 35%) and to potentially considerable capital gains from a material equity exposure to Haneti JV partner Katoro Gold plc (LON: KAT);
- Finally, that ABM has now secured up to a 51% economic interest in Kalahari Key Mineral Exploration (Pty) Limited’s search for ‘elephant country’ nickel, copper and PGM deposits in Botswana.
One additional point is that the business model as it stands has been put together in just 3 months from the restructuring and refinancing in February 2019. If we can achieve all this in 3 months, we are confident in the potential value generation in the remainder of 2019 and our work now is to build the business, expand market awareness and stimulate investor engagement during the balance of the year.
ST: Can you provide a short overview of African Battery Metals plc?
PJ: African Battery Metals is listed on the Alternative Investment Market in London (“AIM”) with the stock code ABM. The Company was formerly known as Sula Iron and Gold plc before a name change in December 2017 and a decision by the then board to focus on Africa and battery metal projects.
After experiencing some operational and financial difficulties in 2018 the company was refinanced and restructured in February 2019 and since then we have been rebuilding confidence by recommencing operations on existing projects and searching out new opportunities.
ST: ABM has a poor history and attracts a lot of criticism, why do you think it can get investor confidence and investment?
PJ: That’s a fair comment when you consider the fact that ABM had a share price that nearly touched 70p two years ago and today sits at 0.45p after the restructuring and refinancing at 0.50p in February 2019.
The Company struggled to inspire in 2018 and hit a roadblock with a suspension pending financial clarification in December 2018, failing to raise the money needed at that time for its ongoing operations.
In essence, there are a number of steps to rebuilding the ABM brand in the marketplace:
- The first step to rebuilding confidence was the refinancing in February 2019, which though necessary was undertaken at a pricing level where existing shareholders would have felt considerable pain.
- The next step was the launching of a strategic and operational review including a full examination of existing operations and making sure expenditure was controlled and directed to the areas of the existing business that could potentially deliver a high upside for investors.
- Then alongside consideration of new opportunities, the final step is presenting to market a business model that makes sense and can inspire confidence.
ST: Where are you with the review of existing operations?
PJ: We are quite well advanced, and we are announcing each step carefully as we move through the strategic and operational review.
The Company when the new management came in had three countries of operation, with projects in the DRC, Cameroon and the Ivory Coast. So far in March 2019 we confirmed our continuation with the Kisinka project in the DRC, which targets copper-cobalt mineralisation in the Copperbelt south of Lubumbashi and have announced a termite mound sampling programme across the licence. We have just finished the fieldwork there collecting nearly 700 samples and are now moving into the testing, analysis and review phases to determine the nature and extent of anomalous mineralisation and its relationship to structural and geophysical features.
In addition, in April 2019 we confirmed continuation with our main project in the Cameroon targeting cobalt-nickel and where we have licences adjacent to the substantial Nkamouna nickel-cobalt Resource. We are still to announce the exploration plans there but will be updating the market shortly and still plan to undertake the fieldwork before the rains become too heavy in the third quarter of the year.
We are in the process of reviewing the Ivory Coast opportunity where the Company has an interest in a project prospective for cobalt, nickel and chrome. We will update the market about developments there as soon as possible.
ST: Alongside the existing business interests, why do you think it’s necessary to build a pipeline of new opportunities, after all, if cash is important surely too many interests can consume capital more rapidly?
PJ: We are keen to extract the potential and ultimately the value that resides within our existing portfolio of interests but intend to do this in an extremely cost-effective and controlled manner. That means we will conduct short programmes designed to give us quick answers to the key exploration question – economic mineralisation potential – without draining cash resources. That’s a sensible commercial approach and as a side benefit also means cash is available to look at additional opportunities that complement and diversify the existing business interests.
And now is the time to look for opportunities, with a hugely depressed resource sector and difficulties for operators to secure finance. This means that for a period well-financed companies can secure great opportunities on reasonable terms.
ST: What’s the rationale for the deal with Kalahari Key Mineral Exploration in Botswana?
PJ: It’s a rarity to be able to access opportunities with as much potential as that offered by Kalahari Key, who have over 5 years built a 2,725 sq km land package and undertaken Airborne Electromagnetic (“AEM”) work which has identified so far 17 zones where the conductivity of the rocks is of interest.
I signed a deal before in respect of Botswana in 2015 securing a 30% interest for Metal Tiger plc in the Joint Venture with MOD Resources over an exploration package. That turned out rather well with the rapid discovery of the T3 deposit and a commensurate dramatic rise in the market capitalisation of both companies.
There is a real interest in Botswana as a destination for investment, and with good reason, as the country offers dramatic elephant opportunities for explorers whilst being a stable operating environment for exploration, development and mining.
ABM has now secured an initial 18% interest in Kalahari key through a purchase of shares in Kalahari Key and all the money that we injected into new share acquisition will go into the next stage of exploration, following up the AEM work with the ground geophysics that will give the more precise information we need to fill out the geological picture and generate good drill targets.
We have the right by 31.12.19 to elect to earn into a 40% direct project interest in the Molopo Farms Complex, which is the sole project focus of Kalahari Key. Overall, we would then have an economic interest in 51% of the project and representation at the operational committee and board level at Kalahari Key.
We believe there is an opportunity for a major discovery by Kalahari Key. The technical team there have vast experience and have made it clear that they are targeting a Voisey Bay type discovery. We hope they are right of course and we think it will be a very exciting journey.
ST: Likewise what’s your rationale for the Katoro Gold plc/Haneti Nickel transaction?
PJ: We have now secured a 25% interest in the Haneti Nickel Project and have a right to acquire a further 10% within the next 12 months. We have been following the Haneti story for some time and the opportunity to secure a strategic Joint Venture Agreement with Katoro Gold, our 75% Joint Venture partner, was compelling. High profile nickel sulphide opportunities are not readily available and certainly not with the grades of up to 13% that have been identified in sampling at this project.
The way we have accomplished this acquisition is a little unique, as Katoro Gold has a par value of 1.0p (ie new shares cannot be issued below 1.0p) yet when we undertook the original option transaction the shares in Katoro were trading around 0.50p, so in essence we paid £100,000 for 10m shares when the market value was £50,000, so the extra £50,000 represented our payment for 25% of the Haneti project.
Now the shares trade at 0.75p so that extra cost for the Haneti Project has diminished to just £25,000 in paper terms.
Going back in time again, at Metal Tiger plc one of the most successful investments we made (in late 2014) was the purchase of 10m shares in Kibo Mining plc run by Louis Coetzee at 1.5p (with 10m three year warrants at 3.0p). Within a week or so of paying the cash over the share price of Kibo Mining rose to 12p intraday, and all told I think we made a +£1m profit from a £150k investment.
In that sense it’s good to have the equity exposure in Katoro Gold which is also run by Louis Coetzee and like Kibo Mining in 2014 has experienced a shocking slide in valuation to what we believe is an unsustainable level. So, alongside the obvious benefit of ABM holding a strategic Joint Venture position in Haneti, the potential upside opportunity in holding the shares of Katoro is highly attractive.
Should the share price of Katoro Gold rise materially, ABM stands to make a considerable profit which could significantly increase our working capital on the ABM balance sheet.
ST: Is there more to come, new opportunity wise?
PJ: Never say never in this business when you think you are at the bottom of the market and opportunities abound. That said we are entirely happy to sit with our project portfolio as it stands because across the business we have interests that could, at any time and in any project, deliver major valuation uplifts for investors.
ST: How would you summarise the value proposition for African Battery Metals plc now in 100 words?
PJ: ABM is a company refreshed, with refinancing and restructuring. We are active operationally across multiple projects and jurisdictions with a commodity and country diversified model. That said we have a focus in Africa and strategic battery metal projects, reflecting the dramatic prospectivity of the continent and the forward supply-demand dynamic of the battery metal complex. From a low market capitalisation, we have a real opportunity to deliver value to shareholders and the business model to leverage that value growth into a recovering natural resource sector.
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