Botswana Strategic Joint Venture with Power Metals

RNS Number : 5040Z

Kavango Resources PLC

21 September 2020

 

PRESS RELEASE

21 September 2020

KAVANGO RESOURCES PLC

("Kavango" or "the Company")

Botswana Strategic Joint Venture with Power Metals

Kavango Resources plc (LSE:KAV), the exploration company targeting the discovery of world-class mineral deposits in Botswana, is pleased to announce the formation of a Strategic Joint Venture with Power Metal Resources Plc (LSE:POW) ("Power Metals").

The Strategic Joint Venture will see the formation of a new, jointly owned, privately held company that is focussed on large-scale mineral exploration projects in Botswana (the "Strategic Joint Venture").

The Strategic Joint Venture will enable Kavango to inject new liquidity into its wider project portfolio, accelerate its plans for more extensive field exploration of the Kalahari Copper Belt Project (KCB) and focus its resources on target evaluation, followed by drilling, in the northern (Hukuntsi) section of the Kalahari Suture Zone (KSZ). 

Highlights

v Formation of new Botswana focussed exploration company

-  Jointly-owned and operated by Kavango and Power Metals

-  Privately held initially, with prospecting licenses covering 2,680km² of highly prospective land

v Kavango to transfer to the Strategic Joint Venture:

-  Its two rare earths & copper prospecting licenses that cover the Ditau Project

-  Two wholly owned copper prospecting licenses PL036/2020 and PL037/2020 on the KCB

v Power Metals to pay:

-  £75,000 cash to Kavango

-  The first $75,000 of exploration expenditure in the Strategic Joint Venture over two consecutive years (totalling $150,000, with additional exploration costs to be pro-rated thereafter)

-  Up to £10,000 to cover costs of incorporating the Strategic Joint Venture

v Power Metals to issue:

-  6,000,000 shares in Power Metals to Kavango at 1.25p per share

-  5,000,000 warrants in Power Metals to Kavango, exercisable at 2p per share with a two-year life & 1 for 1 replacement warrants, exercisable at 5p per share over two years

v Kavango to initiate immediately the next phases of field exploration on the two KCB licences and at Ditau

v The Strategic Joint Venture will be incorporated to enable a future separate listing, expected to be on a Canadian or British stock exchange.

Michael Foster, Chief Executive Officer of Kavango Resources, commented:

"We are delighted to confirm our Strategic Joint Venture with Power Metals.

Over the course of completing the due diligence for the sale of the interest in our Ditau Project it became clear there was a much greater opportunity for both parties.

Thanks to our extensive experience of working in Botswana, Kavango has been able to secure large-scale exploration projects. Each of these holds a great deal of potential, but our primary focus has always been on the KSZ.

Now that we have confirmed the Strategic Joint Venture with Power Metals, we can leverage the expertise and energy of the two companies to drive forward our current interests on the KCB.

We expect this will lead to a significant acceleration of our exploration efforts across both areas and we look forward to reporting our progress."

Background & rationale to the Strategic Joint Venture

Further to the announcement on 15 April, when Kavango announced it had entered into a provisional agreement to sell a 51% interest in the Ditau Project to Power Metals, the Company has now entered into a much more comprehensive agreement.

Power Metals' due diligence into Ditau was interrupted by the COVID-19 pandemic. However, over recent months it became increasingly clear to the directors of Kavango and Power Metals that there was a more advantageous opportunity for both companies than originally anticipated.   

Both sets of directors have extensive experience of operating mineral exploration projects in Botswana and the two companies felt they could leverage one another's expertise and energy to great effect.

In parallel to this, Kavango has made significant progress over the summer developing its project on the KSZ. The Company is in the final stages of analysis work on the northern (Hukuntsi) section of the KSZ.

Given the likely number and scale of these "Norilsk style" targets, Kavango is readying itself to prepare for a drill campaign to test the large regional structures it has identified on the KSZ.

With such a large planned operational commitment, the board of Kavango felt the Company would benefit from introducing a new development partner to two licences on the KCB, and at Ditau.

Each of these projects holds significant potential for discovery of substantial mineral deposits.

Power Metals is an ambitious exploration company that has assembled a portfolio of global exploration interests. It is the ideal partner to work with Kavango's technical team.

Kavango welcomes the opportunity to work closely with Power Metals to accelerate exploration across two KCB prospecting licenses and at Ditau.

Terms of the Strategic Joint Venture

Kavango and Power Metals will own the Strategic Joint Venture equally and will be joint operators.

Kavango will transfer into the Strategic Joint Venture:

-  Its two prospecting licenses that make up the Ditau Project. These licenses cover 1,386km² of prospective land for rare earths and copper. The Company has identified 10 carbonatite-like 'ring structures' here that represent sizeable exploration targets.

-  Its two wholly owned prospecting licenses PL036/2020 and PL037/2020 on the KCB. These licenses cover 1,294km² and are highly prospective for copper/silver mineralisation.

Power Metals will invest into the Strategic Joint Venture:

-  The first $75,000 of exploration expenditure over two consecutive years, totalling $150,000.

-  Up to £10,000 in set up costs, to cover the incorporation of the vehicle in line with local regulations and an appropriate holding company structure.

Additional exploration expenditure incurred by the Strategic Joint Venture, beyond the initial investment from Power Metals, will be on a pro-rated, "fund or dilute" basis. 

To complete the transaction, Power Metals will:

-  Pay £75,000 to Kavango

-  Issue 6,000,000 shares in Power Metals to Kavango, at an issue price of 1.25p per share (the "Acquisition Warrants")

-  Issue 5,000,000 warrants in Power Metals to Kavango, exercisable over 2 years at an exercise price of 2p per share

Should the Power Metals Volume Weighted Average Share Price ("VWAP") meet or exceed a price of 7.5p for five consecutive trading days, Kavango will then have 14 calendar days to exercise the Acquisition Warrants and make payment to Power Metal or the Acquisition Warrants will be cancelled.

Should Kavango exercise the Acquisition Warrants within 12 months of issue, they will receive 1 for 1 replacement warrants to subscribe for Power Metal shares, exercisable over an additional two years at an exercise price of 5p per share (the "Super Warrants").

Should the Power Metal Volume Weighted Average Share Price ("VWAP") meet or exceed a price of 10.0p for five consecutive trading days Kavango will then have 14 calendar days to exercise the Super Warrants and make payment to Power Metal or the Super Warrants will be cancelled.

Plan for the Strategic Joint Venture

The vision for the Strategic Joint Venture is to create a Botswana-focussed minerals exploration company, which will ultimately seek a separate listing on either a Canadian or British stock exchange.

The immediate aim for this new company will be to make rapid progress in the field, across its portfolio of large-scale exploration projects. The new company may also seek to acquire additional prospecting licenses, building on the good standing its directors have in Botswana

Kavango will immediately initiate the next phases of field exploration at its KCB prospecting licenses and at Ditau.

Further information in respect of the Company and its business interests is provided on the Company's website at www.kavangoresources.com and on Twitter at #KAV.

For further information please contact:

Kavango Resources plc   

Michael Foster

[e-mail]

SI Capital Limited (Broker) 

[phone]

Nick Emerson

Note to Editors:

Kavango's 100% subsidiary in Botswana, Kavango Minerals (Pty) Ltd, is the holder of 12 prospecting licences covering 8,324.7km² of ground, including 10 licences over a significant portion of the 450km long KSZ magnetic anomaly in the southwest of the country along which Kavango is exploring for Copper-Nickel-PGM rich sulphide ore bodies. This large area, which is entirely covered by Cretaceous and post-Cretaceous Kalahari Sediments, has not previously been explored using modern techniques.

The area covered by Kavango's KSZ licences displays a geological setting with distinct similarities to that hosting World Class magmatic sulphide deposits such as those at Norilsk (Siberia) and Voisey's Bay (Canada). 

The Norilsk mining centre is about 2,800km northeast of Moscow and accounts for 90% of Russia's nickel reserves, 55% of its copper and virtually all of its PGMs. Kavango's licenses in the KSZ display a geological setting with distinct geological similarities to the magmatic sulphide deposits at Norilsk. Magma plumbing systems are a key feature of these deposits.

Kalahari Copper Belt (KCB)

The KCB Project is located within an area of newly discovered sediment-hosted copper deposits, such as Cupric Canyon's Zone 5 deposit and MOD's T3 deposit, both of which are now being developed as mining operations. The KCB extends 1,000kms by 250kms from NE Botswana to central Namibia.

Kavango has working interest in two separate Joint Ventures in the KCB. The first Joint Venture is with LVR GeoExplorers (Pty) Ltd ("LVR") and covers two PLs, PL082/2018 & PL 082/2018, which cover 1,091km² and are not part of  the Strategic Joint Venture with Power Metals The LVR PLs are strategically located in this belt and therefore represent an attractive exploration target. PL 082/2018 lies 30km north of MOD Resources' T3 mine development and is completely surrounded by MOD/Metal Tiger/Sandfire PLs including their T5, T6, T9, T10, T14 and T15 targets. The PL lies astride the main Ghanzi - Maun tarred highway. PL 083/2018 is close to the Namibian border south of the Trans-Kalahari Highway and adjacent to a block of PL's held by Kopore Metals Limited.

The second Joint Venture is with Power Metals and covers two PLs PL036/2020 and PL037/2020, which cover 1,294km² and lie in a prospective area immediately south of the District capital of Ghanzi:

No modern exploration has been carried out on the area covered by these prospecting licenses.

Ditau

Ditau comprises of two prospecting licences (PLs), which cover an area of 1,386km². Kavango originally identified a magnetic anomaly at the first of these two licenses, which the directors believed presented an attractive exploration target.

In February 2019 the Company drilled two holes into the "original" Ditau magnetic anomaly (the "Ditau Camp Prospect"). Assay and whole rock geochemistry results from these two holes, released in early August, demonstrated the presence of an extensive zone of highly altered Karoo sediments sitting above a mafic intrusive body. The alteration extended to over 300m in depth in both holes, which were 1.8km apart.

The geochemistry obtained from the drill core suggested that the alteration was due to "fenitization", a type of extensive alteration associated with alkali magmatism and carbonatites. Carbonatites are the major global source of Rare Earth Elements (REEs).

Economic Potential of Carbonatites

Until recently carbonatites were regarded as unusual and academically interesting geological bodies but significant interest was only generated once the demand for REEs was established (in the last few years). Hitherto many carbonatites were mined for their phosphate content (fertilizer), or for economic deposits of Niobium, Strontium, Uranium, Thorium, Magnetite, Barium and Vermiculite. One of the world's most productive carbonatites, Palabora, has been in production continuously since 1953 and is South Africa's principal source of copper. About one out of nine carbonatites world-wide have been mined commercially (Simandi & Paradis 2018).

Both the market and production of REE's is dominated by China who are also leading the research into the technological application of these metals. Western countries have recently become alarmed about the strategic advantage that China now exerts over REE technology such that new deposits of these elements are in high demand.

 

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