Independent Valuation of Kanye Resources

RNS Number : 4210S

Kavango Resources PLC

14 July 2022

 

14 July 2022

KAVANGO RESOURCES PLC

("Kavango" or "the Company")

Independent Valuation of Kanye Resources

Botswana focussed metals exploration company Kavango Resources plc (LSE:KAV) ("Kavango") is pleased to publish the Independent Valuation (the "Valuation Report") conducted by Afrasia Mining and Energy Investment Holdings Ltd ("Afrasia") of the mineral exploration assets of Kanye Resources Proprietary Ltd ("Kanye").

Following the announcement on 08 July 2022, Kavango will become the sole owner of Kanye on completion of the acquisition, which is conditional on publication of a prospectus relating to the new shares and warrants to be issued as consideration for the acquisition.

Kanye owns 100% working interests in:

-  10 prospecting licenses in the Kalahari Copper Belt ("KCB"), which cover 4,257km²

-  2 prospecting licences in the Ditau Camp Project that cover an area of 1,386km²

Highlights

-  The Valuation Report covers solely the Kanye assets, comprising 10 Prospecting Licences in the KCB, and two PLs at Ditau.

-  Kavango's KSZ PLs and the LVR earn-in PLs have not been reviewed in the Valuation Report

-  US$8.0m preferred value assigned to Kanye

-  Combination of market & cost approaches used

-  Valuation date 01 May 2022,

-  Subsequent work undertaken at Kanye's KCB and Ditau projects not reflected

-  Valuation Report prepared in accordance with the SAMVAL code, by a designated Competent Valuator

-  Kavango will publish the Valuation Report on its website via the following link

https://www.kavangoresources.com/investor-relations/research-notes

Ben Turney, Chief Executive Officer of Kavango Resources, commented:

"Today's independent valuation report underlines the commercial rationale for the deal we recently struck to acquire the 100% working interest in Kanye Resources. The sound fundamentals of the transaction were nicely balanced for both parties.

Afrasia has undertaken a detailed piece of work which shows an established Preferred Valuation for Kanye of US$8.0m.

The valuation is based squarely on the current stage of our Kalahari Copper Belt and Ditau interests. This not only underlines the inherent value in our portfolio of our asset base versus the current market capitalisation of the company, but also highlights yet again the huge prospectivity of our licence area. If we can build on the momentum we have gathered across both projects and deliver success in the field, Kavango's 100% ownership could prove to be a game-changer for the company.

Exploration work across the portfolio continues at pace, and I look forward to giving shareholders continued updates on our progress as the opportunities arise."

Kanye Resources Independent Valuation Report Executive Summary

The Kanye Resources assets comprise the KCB project and the Ditau project, and are focussed on the exploration for and confirmation of Copper/Silver and Rare Earth Elements ("REEs") respectively, with substantial exploration work already completed and new phases of work in progress. 

The report released today has a base date of 1^st May 2022 and been prepared by Afrasia and its Principal Competent Valuator (CV) and presents an independent financial valuation of the prospective Mineral assets of Kanye, generally consisting of 10 prospecting licences ("PLs") clustered in two contiguous and adjacent groups within the south-central Kalahari Copper Belt ("KCB") and a further two prospecting licences situated in the east-central section of the Kalahari Suture Zone ("KSZ") at the Ditau camp ("Ditau") also laying contiguous and adjacent to each other.

The geological setting is generally south along strike with Cupric Canyon's Tier-1 Khoemacau Copper Mine that began producing in July 2021 from a measured and indicated resource base of c.90Mt @ 2.2% Cu and an overall defined compliant resource of c.500Mt @ 1.4% Cu. 

In between Kanye and Khoemacau lies Sandfire Resources' (ASX-SFR) Motheo Copper Project currently under construction with a compliant resource base of 53Mt @ 1.2% Cu, and Sandfire has numerous satellite projects in close proximity with defined compliant resources.

Kavango Resources Plc, parent company of Kanye has commissioned a Competent Persons Report (CPR) on the Kanye assets valued, while other assets in close proximity to the Kanye asset package have confirmed the high degree of prospectivity for the discovery and definition of mineral resources. 

While no code compliant mineral resources and/or mineral reserves have yet been declared the draft CPR specific to the Kanye assets valued herein and currently being generated has been reviewed by the CV and is expected to be available for inspection by prospective investors in the near future.

It is important to note that there are a number of recent significant transactions in the public domain related with the greater KCB geographical area including both Botswana and Namibia as well as a number of active development projects with public valuations that can be related to specific prospective areas and/or licence packages of defined hectarage.

These public companies used as reference within the Market approach to the valuation detailed within the valuation report encompass projects under development that represent the key way-points along the value chain that can provide realistic and reasonable valuation estimates based on both a willing seller/willing buyer transactional basis and market capitalisation as defined by public investment markets.  Information and data on these public companies was recovered from the specific stock exchange reporting issuer data bases.

The Market Approach

This approach uses price and resource information from historical transactions for comparable mineral assets to determine a range of values per Hectare of prospective ground under Licence.  This method is widely used for valuation of exploration assets.

-  10 comparable Botswana transactions were used as benchmarks for the KCB asset.

-  The Kanye KCB land package of 287 100 Ha was valued at US$6.02m using this method.

-  9 market reference points were established for the Ditau asset. These are based on global comparable carbonatite projects, as there is insufficient data in Botswana.

-  the Kanye Ditau land package of 138 500 Ha is valued at US$2.58m

Considered on a consolidated Kanye basis, then the company asset value for Kanye can stated as the sum of the two, i.e., US$6.02m + US$2.58m = US$8.60m

The Cost Approach

This provides an indication of value by using actual expenditure on the asset to date, assuming this represents the value to a buyer who would pay no more for an asset than the cost to obtain an asset of equal utility. This is conservative in nature, in particular when used in an area such as the KCB, where ground is in limited supply and there is a competitive market with premiums being paid for acquisition. For this reason the Market approach is considered by Kavango as the most appropriate means of appraisal, although the Cost approach is stated here to provide a comparison.

-  Based on the actual expenditure costs incurred to the Valuation date Total US$2.27m

-  Additionally, assessment of budgeted and committed expenditures to each of the Kanye projects at KCB and Ditau, and that are already funded for the balance of 2022 amounts to a further US$1.59m.

-  In total therefore using the Cost Approach for Kanye the consolidated value assessed by the CV is US$3.86m

Valuation Report Conclusions

The following assessed values have been assessed:

-  Market Approach - US$8.60m

-  Cost Approach - US$3.86m

On this basis a Median value computes to US$6.23m.  However, given the following observations and market conditions;

-  The relative significance of the companies' valuations assessed within the market approach utilised for this assessment,

-  The significant valuation increases and multiples observed as they progress along the value chain of development, and

-  Taking into account the projections of the mainstream base metals and REE analysts along with main resources investment banking community;

The CV assesses that the valuation will in reality reside at the upper end of the range between the Median value of the two approaches, i.e., US$6.23m and the Market Approach value of US$8.60m and therefore assigns a Preferred Value of US$8.0m .

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   

Ben Turney

[e-mail]

[phone]

  First Equity (Joint Broker)

[phone]

Jason Robertson 

SI Capital Limited (Joint Broker) 

[phone]

Nick Emerson

NOTES TO EDITORS

THE KALAHARI COPPER BELT PROJECT GEOLOGICAL SETTING

The Kanye Resources prospecting licences in the Kalahari Copper Belts include lengthy redox boundaries, close to surface, that represent excellent exploration targets.

The redox boundaries were formed several hundred million years ago in active sedimentary basins flooded by shallow seas. Organic matter accumulating on the sea floor created anoxic conditions, which formed a chemical barrier to metal ions rising upwards through the sediments as the basin subsided. The change in chemistry caused the precipitation of metal species (carbonates, sulphides etc.) including copper and silver on or just below the redox boundary.

Subsequent tectonic activity folded the sedimentary layers, which was often accompanied by the concentration of metals into the fold hinges and shear zones. Fold hinges pointing upwards are known as anticlines, while the downward pointing hinges are called synclines.

Several large copper/silver ore deposits have been discovered on the KCB in association with anticlines in areas now held under licence by Sandfire Resources (ASX:SFR) and Cupric Canyon (a privately owned mining development company). These deposits are relatively close to surface and many are amenable to open pit mining operations.

Accumulations of metals can be traced along the strike of geochemical reduction-oxidation ("redox") boundaries (sometimes for many kilometres) because they often contain iron and have a higher magnetic signature than the surrounding rock.

KALAHARI COPPER BELT EXPLORATION STRATEGY

The South Ghanzi PLs lie within the Central Structural Corridor of the KCB immediately south of the town of Ghanzi.

Sedimentary horizons hosting copper/silver mineralisation in the KCB are known to be conductive. AEM surveys are a recognised and tested exploration method for identifying high priority drill targets.

Kavango's strategy in the KCB is to identify conductive targets and then to complete follow up investigation, using other proven exploration methods including geological mapping and testing of soil geochemistry through extensive sampling. The correlation of positive zinc and copper soil geochemistry readings to positive AEM results is a highly encouraging exploration vector.

Given Kavango's understanding of the regional lithology and stratigraphy of the KCB, the Company is optimistic about the progress it has made in South Ghanzi over recent months.

Specifically, the identification of a number of smaller anticlines associated with conductors suggests there are seven large, promising drill targets at South Ghanzi.

THE DITAU CAMP PROJECT

The Ditau Camp Project comprises two Prospecting Licences ("PLs") (PL169/2012 & PL010/2019) that cover an area of 1,386km². Geophysical analyses by Kavango in the two PLs have identified 12 "geophysical structures" of which 9 have clear indications of being "ring structures".

The "ring structures" have the potential to host carbonatite and other intrusive rocks.

Carbonatites are the principal source of rare earth elements ("REEs") including the much sought-after elements Neodymium (Nd) and Praseodymium (Pr), which are used in the manufacture of the new generation of electric vehicles (EVs), magnets and other high-tech applications. Other elements/minerals associated with carbonatites include Niobium, Phosphates, Monazite, Strontium, Magnetite and Copper.

Mafic intrusives have potential to host base and precious metals, as seen in the Molopo Farms Project, Selebi Phikwe and Tati Nickel deposits in Botswana.

 

END

 

 

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