Kavango Resources (LSE:KAV) dropped to 2.3p yesterday after signing a contract to carry out an airborne geophysical survey over its c.7,000km2 of exploration ground on Botswana’s Kalahari Suture Zone (KSZ). The survey is likely to begin a news-heavy period at Kavango’s flagship asset and shares are now sitting below their 2.5p listing price- could yesterday’s update mark a potential buying opportunity?
At present, Kavango owns 12 prospecting licences along the KSZ, which is a significant underexplored 450km-long structural and magnetic feature in the south-west of the country. Its exploration programme aims to discover ‘world class’ sulphide deposits of nickel, copper, and platinum group metals. A report authored by specialist mining consultants MSA Group has backed the potential for these deposits to be present.
When it listed in July, Kavango raised £1.5m to carry out a helicopter-borne survey over the area and to conduct drilling of identified targets. It has released little news since listing and, as a result, its shares have dropped below their 2.5p listing price after initially hitting highs of 3.3p.
However, in an update yesterday, the firm said it has contracted a subsidiary of Geotech Airborne Geophysical Surveys of Canada to conduct surveys over its KSZ acreage. It also said it has hired experienced geologist Takashaya Murova – who has formerly worked with Cluff Mining and Rio Tinto – as exploration manager for the KSZ project. Finally, the business that it will begin the surveys following the receipt of government approvals, which is expected within the next two weeks.
In yesterday’s update, Michael Foster, chief executive of Kavango, said: ‘We are delighted to be able to announce that Kavango’s contractors have now been appointed to carry out the airborne geophysical survey over the KSZ prospecting licences, which cover almost 7,000 Km2 of south west Botswana.
‘We believe the under-explored licence area has potential for the discovery of world class base and precious metal deposits and we look forward to announcing further information with respect to the granting of all flying permits and our wider exploration programme in due course.’
Speaking to ValueTheMarkets, Mike Moles, one of the founders of Kavango, added that the airborne programme will allow for the quick processing and evaluation of data: ‘The airborne survey will identify conductors beneath the surface and these conductors may represent mineralisation at depth. Once we have identified conductors, we have a field team who will go out and carry out ground-based geophysical surveys to determine the exact location of the conductor and get a better handle on its depth and its magnitude.
‘As the conductors are identified, they will be ranked in order of priority, and those that have the greatest potential will be followed up immediately with ground based surveys, followed by drilling. Initially, we will use RC drilling, since it is faster and cheaper. If sulphide mineralisation is intersected, we will follow up with diamond core drilling for assaying and evaluation. ‘
Moles added that the programme will be divided into three stages: an initial 2,000 line km
s to establish that the system is working properly followed by two larger phases of flying and data collection. Weather permitting, he expects the entire programme to be finished by the end of year, and will provide the market with regular updates throughout the process:
‘We have the option of whether or not to carry on the programme between each stage. However, given that Geotech successfully surveyed an adjacent area with VTEM in May/June of this year, we see no reason why the programme will not be completed. We think it is essential to keep updating the market about the progress of the programme and any significant results we encounter along the way.’
Now that Kavango has announced that its survey is about to start and given the potential for regular positive updates we could see some upward movement in its share price over the next few weeks.