Katoro Gold

Justin Reynolds

Can the polymetallic Haneti prospect power up Katoro Gold?

“…The polymetallic Haneti prospect, covering an area of approximately 5,000 km2 in central Tanzania, is a joint venture with Power Metal Resources, in which Katoro holds a 65pc interest…”

Katoro Gold (AIM:KAT), an AIM-listed gold and mineral exploration and development company headquartered in London, has undertaken significant internal re-engineering over the past year to refocus on two projects in Africa.

Katoro is exploring Blyvoor, a near term gold production opportunity in South Africa, and Haneti, a polymetallic prospect in Tanzania, with potential for nickel, PGMS minerals (platinum, palladium, rhodium and others), copper, gold, lithium and rare earth elements.

Over the past few months the company has worked on securing funding and designing exploratory drilling programmes for both prospects. A placing completed this June raised £1.1m, and the sale of an interest in another Tanzanian gold project secured another US$1.0m.

Blyvoor

Blyvoor is a gold mine located some 75km south west of Johannesburg, which during its peak years in the mid-20th century was one of the country’s most prolific producers of the yellow metal, with recovered grades averaging over 14 g/t from 1937 to 2013.

Katoro shares a 50/50 interest in the licence with its joint venture partner Blyvoor Gold Operations Pty Ltd. The partners plan to exploit potentially viable deposits of gold and any other minerals from six gold tailings dams, which contain an aggregate JORC Code compliant resource of 1.34Moz of Au at an average grade of 0.30g/t Au. Subject to funding, they are targeting initial production of up to 250,000 tonnes per month (tpm) of material from the tailings, with the possibility of ramping-up production to 500,000 tpm within two years.

In July the partners agreed a strategy for securing financing for an exploratory drilling programme and metallurgical test work designed to specify a probable reserve for a Definitive Feasibility Study. Katoro has said that 14 parties have expressed interest in providing project level financing to support the construction and development of the project. The partners hope to complete their financing round by October, though their market announcements have acknowledged these target dates may be compromised by pandemic restrictions.

Forecasts suggest Blyvoor may sustain a mine life of 25 years, building to a production capacity of 500,000 tons per month and 35,000 ounces of gold production per annum. Total production of 661,171 ounces of gold over 25 years would generate revenue of US$992m. The partners forecast total project capital costs of US$110m across the life of the project, with a peak funding requirement of US$36.4m. The requisite mining licence and environmental impact assessment have already been secured, opening the way for production to begin immediately upon commissioning of a processing plant.

Haneti

The polymetallic Haneti prospect, covering an area of approximately 5,000 km2 in central Tanzania, is a joint venture with Power Metal Resources (LON:POW), in which Katoro holds a 65pc interest.

In July the partners announced details of a planned initial drill programme to enhance their understanding of the project’s geological characteristics, and – possibly – identify the existence of nickel sulphides. An airborne geophysics survey over the wider project area is intended to delineate additional deep-seated targets.

Haneti is key to Katoro’s stated intention to move into the battery metals space. Global demand for nickel, which is also used in stainless steel, is expected to increase six-fold by 2030, as electric vehicle makers shift to nickel-rich technologies that improve battery energy density, enabling vehicles to drive further on a single charge. Katoro hopes to feed into a market currently highly dependent on Indonesian mines, which are expected to account for almost all growth in nickel supplies over the coming decade.

Tanzanian troubles

Like other mining projects in Tanzania, the Haneti project is somewhat in the shadow of uncertainties regarding the legal and regulatory framework governing resource extraction in the country.

Three years ago the controversial government of President John Magufuli introduced tough new operating regulations for mining companies, including higher royalty rates, obligations to allow increased state participation in projects, powers of review enabling the state to instruct renegotiation of previous agreements, and the denial of recourse to international arbitration in the event of legal disputes.

Investment in the Tanzania’s mining sector has all but halted in the wake of the new regulations and an ongoing tax dispute with Barrick Gold’s Acacia Mining. The uncertainty may persist beyond the general election scheduled later this year.

In a February interview with Mining News, Katoro Exec Chairman Louis Coetzee acknowledged the company had concerns about the new measures. But he insisted that Katoro’s directors have established a long relationship with Tanzanian regulators that would allow the company to navigate the current environment, telling the magazine: ‘We have been operating in Tanzania for the last 20 years. When the new Tanzanian mining act was passed, many people were up in arms about the new regulations and we were also concerned. But … we have as a matter of principle, always been well above the new minimum social and labour statutory compliance requirements. So, we are confident that we will continue to steadily progress Haneti.’

Looking ahead

The situation in Tanzania, and the impact of the pandemic there and in South Africa, add extra unknowns to the uncertainties inherent to any exploratory mining project.

But Katoro is a company with a sharp focus on two prospects with potential, serving lucrative markets: the price of gold, which surged this year, is expected to hold up as investors continue to seek shelter from the uncertain market conditions brought by Covid-19. With a share price that has hovered around 2.5p for most of the year, Katoro is worth a look for investors seeking to increase their exposure to a mining sector that will be fundamental to a future green economy dependent on rare metals.

To hear the latest podcast interview with Exec Chairman Louis Coetzee click here

Below, Katoro Gold Exec Chairman Louis Coetzee and Blyvoor joint venture Manager Graham Briggs recently spoke to @StockBoxMedia about progress made at both the Haneti and Blyvoor projects…

 

The author was paid for this article but does not hold shares in the company.



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