Botswana-focused Metal Tiger (LSE:MTR) rose 2.6pc to 2.9p today after selling off its 30pc interest in the T3 Copper Project to joint venture (JV) partner MOD Resources as it looks to shift its focus onto exploration.
In return for selling its stake in T3, Metal Tiger will receive MOD shares and three-year options worth a total value of A$27.7m, based on MOD’s closing price yesterday. This figure converts to c.£15.6m, meaning the transaction is equivalent to around half of Metal Tiger’s current £32m market cap.
T3, which contains an indicated copper resource of 417Kt, was 30pc-owned by Metal Tiger and 70pc-owned by MOD in a broader JV over Botswana’s Kalahari Copper Belt comprising 18 exploration licences. Following the sale, MOD will hold 100pc of T3, which is expected to make the asset more attractive when it comes to future development financing options. Metal Tiger said it will benefit from this through its substantial consideration securities and equity position if MOD, which currently stands at 6pc.
With Metal Tiger investing around £3.8m to date in the JV, it calculates that today’s deal has so far provided shareholders with c.4.5X return over direct investment costs. As a result of the transaction, the firm’s funding commitment of the T3 Project has ceased.
Crucially, as part of the deal, Metal Tiger and MOD will also transfer control of all the 18 remaining exploration licences held under the existing JV arrangement to a new exploration JV. The new JV will also be 70pc-owned by MOD and 30pc-owned by Metal Tiger and will continue the two firms ongoing exploration programme over 7,978km2 of prospective land in the Kalahari Copper Belt. This new arrangement – which will be called Tshukudu Exploration, will provide Metal Tiger’s shareholders with a 30pc interest in any future discoveries on these areas.
Michael McNeilly, chief executive of Metal Tiger, said: ‘We are delighted to sign this deal with our long-standing partner MOD, which is the culmination of five months of hard work on both sides. We believe this deal represents an exceptional outcome for both Metal Tiger and MOD shareholders and the optimal path forward for the advancement of the T3 Project. The creation of the new exploration JV preserves and formalises Metal Tiger and MOD’s highly successful exploration partnership in the Kalahari Copper Belt where we continue to see scope for substantial value creation in the short term and will continue to draw upon the joint financing capabilities of both the London and Australian markets.
‘Through the transaction, Metal Tiger will become the largest shareholder in MOD and is pleased to give its full support to the MOD Board to continue their excellent work in the management of exploration activities and the expeditious development of T3. We have full confidence that Metal Tiger’s investment in MOD will deliver exceptional returns for Metal Tiger shareholders.’
Today’s deal falls in line with McNeilly’s comments when he spoke to ValueTheMarkets.com in May. At the time, he said T3 was planned as a ‘starter mine’ on the road to establishing Metal Tiger and MOD in Botswana, with both businesses keen on the country as an operating jurisdiction. Botswana has a long-established mining industry, plenty of infrastructure, a supportive and stable government, and a favourable tax regime- copper royalties are c.3pc.
As illustrated in the map below, T3 represented just 0.1pc of the total land held by the two companies in the Kalahari Copper belt, which will now transfer to the new JV. The two firms are already making steady exploration progress beyond T3. They have located widespread copper and zinc soil anomalies at JV licence T4 and the T20 dome. A sizeable airborne electromagnetic survey has been carried out over these areas and last month saw the JV lodge an environmental application with Botswana’s government to drill the T20 dome. If granted, the permit will allow for the drilling of new and existing targets and open up an additional 697km2 of underexplored and prospective Kalahari copper belt for drilling.
As McNeilly put it to us in May: ‘If you believe in the district-scale potential of the Kalahari and that there are other deposits out there then we have barely scratched the surface. Minimal exploration has been carried out, but there is nothing to indicate that there will not be more copper deposits out there and we have numerous drilling sites.’