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Kavango dives as assay results disappoint – but could this represent a buying opportunity? (KAV)

Kavango Resources (LSE:KAV) was down by nearly 40pc at 2.1p on Friday morning as disappointing early-stage drilling results from its Ditau Camp target in Botswana caught the attention of disappointed investors. But with the firm also suggesting that the holes present similarities to ‘some of the world’s biggest copper and rare earth deposits’ and alluding to farm-in talks, could such a large sell-off present a buying opportunity?

Ditau Camp forms part of Kavango’s KSZ project in Botswana, where it is targeting the discovery of world-class mineral deposits at depth using industry-leading drilling and sampling techniques.  The prospect is underlain by magnetic and gravity anomalies that suggest a 7km x 5km intrusive body at depth. The alteration zone was discovered using ground-based geophysical techniques.

In Friday’s update, Kavango said that assay results from two holes recently drilled at the target showed lower-than-expected values that are not considered to be economic. Although this point appears to be what the market focused on, the business went on to add that the ‘gabbroic rocks’ in both holes appear to be more mineralised.

Indeed, anomalous values of gold and base metal were found to occur towards the bottom of hole DitDDH2. For reference, Gabbro is a coarse grained, dark coloured, mafic intrusive rock formed by the partial melting of peridotite deep within the earth’s crust. Kavango went on to say that analysis of the geochemistry generated by the laboratory supports the existence an alkaline igneous complex featuring a number of ring structures.

‘This would explain the large volume of alteration encountered in both holes (1.8km apart) which is possibly due to fenitization associated with the emplacement of carbonatites into the Karoo sediments,’ added the firm’s chief executive Michael Foster. ‘This is an exciting development in the continuing exploration of the Ditau Prospect.’

What on earth does that mean? I hear you ask. Well, according to Foster, some of the world’s largest copper and rare earth deposits are associated with these conditions.

When this is combined with Kavango’s recent addition of a new Ditau licence and its claims that it is ‘holding discussions with industry partners with a view to sharing the costs of further exploration’, one gets the impression that both the company and potential partners remain highly interested in the prospect’s potential.

It is important to remember both that assay results are just one part of a large puzzle and that the Ditau magnetic anomaly itself represent just one of at least ten similar magnetic ‘ring structures’ on Kavango’s licence area. From this perspective, Friday’s sell-off could seem over-done, giving those who continue to believe in the Kalahari Suture Zone’s potential an opportunity to top up.

Valuethemarkets.com and Dynamic Investor Relations Ltd are not responsible for the content or accuracy of this article.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

  • Daniel Flynn does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
  • Daniel Flynn has not been paid to produce this piece by the company or companies mentioned above.
  • Dynamic Investor Relations Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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