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Also to clarify when I say the warrants are staggered I don't mean by expiration date as they are 30 months.
I mean by the variable strike prices. Obviously POW could decide to exercise them all at once but given their cash constraints they'd only spend £3.375 million if they are in the money. Plus they'd only sell them if they stay in the money.
This is an important point as they would have to sell them orderly to avoid crashing the share price for their own good. Even then, the price they execute at would need to be 200-300% higher than today's for any of it to be relevant
Atb
Hi JP
Thanks for reply. To cover your points I'd say as follows...
1. The 1% NSR is fairly standard in deal acquisition. My understanding is the norm in the region is double that for a NSR but in any event if it gets to be applicable we won't give two hoots as to the NSR as well have done very well!
Sale premium - seems fair doesn't it? Especially given POW accepted the deal between 50% to 175% premium to the prevailing KAV share price and KAV bought 50% for effectively £1.8 m. If we sell for over £7.5 million then between 5-20% sell on clause seems to also favour KAV. Is it even likely..
2. Impact of warrants being sold - They aren't all available at same time. They are staggered is one point. Secondly, it goes back to my point about if KAV had to raise the cash in the market then it would be much higher dilution and selling. Your point IMO is a general point about placements of shares, rather than this specific deal. This deal has lowered the dilution and impact of warrants being sold as they'll be less of them. (As explained in first 2 posts).
3. POW still get access to 14% of the KSZ. Kind of but you could buy more shares at a huge discount to those available to POW right....we can all get greater exposure. You could add 14% extra shares to your total position right now to offset that at minimal cost if imagine. To me again it's not an argument against the deal but an argument against placements generally.
Atb
You've not mentioned:
1) "Royalty:
Power Metal will receive a 1% Net Smelter Return ("NSR") ("Royalty") across all Kanye licence areas save in respect of any such licences which, at its sole discretion, Kanye Botswana allows to lapse. Costs for the preparation of a suitable separate Royalty Agreement shall be shared by the parties. In the event that Kavango is able to secure, within 2 years of execution of the agreement, a greater than 2% NSR or other royalty on any of the Kanye properties the total royalty above 2% would be split equally Power Metal/Kavango (e.g. a 3% NSR would see KAV/POW each receive a total 1.5% royalty), with Kavango retaining the balance.
Sale Premium:
In the event that Kavango sells all or part of Kanye for in excess of £7.5 million, Power Metal will be paid a proportion of the gross excess received by Kavango above £7.5 million (the "Sell-On Premium"). (e.g. if Kanye is sold for £50 million in month 15, POW would receive £4.25million). The Sell-On Premium is 20% for 6 months from execution of the Agreement, 15% for 7-12 months from execution of the agreement, 10% for 13-18 months from execution of the agreement and 5% for 19-24 months from execution of the Agreement, after which the Sell-On Premium will lapse."
2) The impact on the share price of 75m warrants being converted and sold (there's zero chance of POW converting and holding onto the stake because they haven't got the cash).
3) POW still get their hands on 14% of KSZ and that's before any JV's signed.
Part 1 of 2
James, quite right.
It's important to look at the deal objectively. While everyone can see things differently I'm struggling to observe why some feel this is such a bad deal for KAV and such a great one for POW.
Breaking it down, my view is that I've shared before is ...(sorry for the post length but I feel it was needed)..
As you say the 60million shares POW got are only 14% of KAVs shares in circulation, for KAV to gain POWs 50% of what is a very highly prospective bunch of assets and as you say many consider the highest potential/lowest risk.
Even if all warrants are exercised that's a total 135m shares.
So, worse case, under 31% dilution for full control. (But this also gives KAV £3.375m cash as part of the deal that they otherwise would have needed to raise - see below).
Another way of looking at this is focusing on the strike price of the deal terms.
The strike price used to determine those 60 million shares was 3p.
The day before the deal was announced KAV shares closed at 2p, and had been below 3p for a couple of months prior to the deal announcement. It was a very good strike price deal for KAV. With a 12 month lock in.
Beyond the 60 million it was all warrants..
Total warrants 75 million @
- 30 million at 4.25p (raises £1.275 million for KAV at a premium of 112% of the SP at time of deal)
- 30 million at 5.5p (raises £1.65 million for KAV at 175% premium to kav SP at time of deal)
- 15 million at min 3p or at a 15% discount to vwap. (raises min £450k for KAV at min of 50% premium to kav SP at time of deal).
So KAV have negotiated potential future funding of over £3.375 million at up to 175% premium to the prevailing share price at the point of the deal. That's a great deal for KAV share holders. It basically gives KAV access to exploration capex that they otherwise would have likely needed to raise in the market at up to 20% discount or with 1:1 warrrants, but at prices up to 175% premium to the share price when deal announced.
So...
If the KAV share price doesn't improve and the POW warrants stay out the money the total dilution is less than 14% KAV for POWs 50% of the asset and full control.
If the KAV share price does improve to a point where POW exercise the warrants as they are in the money, then KAV raise over £3.375m as part of the deal, the rise in price will be applicable to all shareholders positions and they avoid having to raise this money through a placing. Win win IMO.
Part 2 of 2..
If you look at the alternative to making a deal it would have been KAV paying for the asset in cash instead of the 60million shares at 3p, so £1.8 million. They would have needed to raise the capital in the market. Either at a discount or at market price with 1:1 warrants attached as they normally do.
So at best £1.8 million at market price (2p) would have been 90million shares plus 1:1 warrants would have been 180m shares. Without even giving any consideration the need to raise the potential £3.375m exploration cash KAV can get from POW from the deal terms.
So in short if getting 100% and full control of the asset(s) for 60m KAV shares, or max of 135m shares plus £3.375m cash to KAV at up to 175% premium to the pre deal share price is considered bad I need to have someone explain why. To me it feels as though some have lost faith and objectivity here.
My view is it was a well structured and favourable deal for KAV shareholders.
Atb
Correction. It's more likely that you looking to buy back in, at the lowest possible price.
Good luck to you!
So Coxonopolos, the Trader, is back. No doubt you've bought back in after dumping your shares, presumably at a healthy profit, and are planning on another rinse/repeat? Who knows, maybe this time, you might get left holding the baby?
ATB, FG
How exactly did last month's deal favour POW?
POW gave up a 50% stake in Ditau and KCB for an approximately 14% overall stake in KAV.
Further dilution of this 14% is guaranteed.
BT and many others on this board have repeatedly said that the KCB is the project with the lowest exploration risk and lowest exploration costs. A major discovery there will have a much greater effect on KAV's share price than it will on POW's.
Sell the 11 million POW shares? that's £100k ....spend it wisely KAV.
Goes further than being best pals as for loyalty
PJ hired BT as investment writer for miningmaven (owned by PJ) if I recall correctly and sort of saved his career by doing so. I think BT speaks about their history in one of his interviews
Explains some of the recent actions that clearly favored POW at KAV expense (last months' deal with POW, exercising the POW 2p warrants when out of the money).
I can see why they are best pals. They are very similar. Both love being in the spotlight, both love to hype things up, both love to talk and put on a show. I am sure quite sure how competent they both are however.
Many many people have lost faith in BT and I too have my serious times. I expressed them a while back but was shot down by BCB and a few others.
Let's hope so
Will need more cash though for a decent program
Let's start by selling the 11 million power shares
But I am afraid BT's loyalty to PJ prevents from doing that
Personally I think Kav have noted that this is a good time of year to be quietly working on drill plans for both of the KSZ and the KCB, with a view to having a busy autumn when markets are busier again. Very sensible and likely only a few weeks to wait until things kick up a gear. We also know from interviews that there have been conversations going on with potential partners, including reviews of the Kav data room. So that’s another possible explanation for the current relative quiet. I’m not counting on that one though. The one I’m confident about is that we’re doing the groundwork for a busy autumn
Everyone welcome to make their own assessment.
IMO they have been drilling and been progressing assets; exploration/interpretation/acquisition etc and currently feeding this into subsequent drill plans.
Clearly KAV won't be able to progress these assets alone mid to long term, and I don't think they plan to. That said I believe they've established a decent runway of potential funding via warrants and cash to hit a 'game changing' intercept that will make shareholders do well. Then they can look for formalise an arrangement to fully prove the a resource.
The markets generally aren't great ATM as we're all aware.
I'm holding through this period tbh. That's my personal view. I believe this stock will make me very strong returns (as things stand).
Atb everyone.
Thanks Catbert, I agree with the above - it was an interesting post. As a holder I hope you're wrong too because I'm in BCBs boat - underwater. All this talk of Olympic Dam makes me queasy, because it sounds like the patter of a used car salesman. I bought into the Norilsk hype, and this year's activities are making me question how we'll attract a serious business partner. A man is judged by the company he keeps, qui se ressemble s'assemble. BT has talked a lot about shareholder activism. Maybe Kavango needs some too.
Catbert - interesting post and agree. Thank you as I found it objective and reflective. I was a fan of BT until his true colours came out during the news blackout. He proved to me he is just a PR stuntman who likes to spin hype and is focused on trying to get people excited.
J02000 - two points. First I don’t think Mike actually invested the money through his own money as such but instead turned his shares into it. Secondly even if he did out his own money everyone can make mistakes and get too emotional in shares so may not indicate much.
We need more objectivity on this board instead of a number of people looking at tiny bits of potential positive news and focusing on it instead of looking at the bigger picture. It will cost a lot for sure and big players will only invest if it accessible.l and cost effective. How long have we been waiting for some of these assays????
Rumour was the shares MM bought were from Chuck Forrest. He is a director of Kavango Minerals.
JP2000 - did Mike Moles actually pay £400k cash @4p? Do we know this for a fact? It would be very reassuring if we knew that was definitely the case.
Mike Moles invested £400k @4p and he's an insider.
B1 fiasco had a massive impact, the target didn't go away and the intention is a B1/GRS drill later in the year.
KCB is arguably KAV's most bankable project, reverse circulation drilling is quick and cheap, the targets are c2-3% Copper 200m subsurface. Establishing a resource will be a game changer.
There is no doubt the targets and ground are interesting but Kavango will take a million years to prove up a resource.
The reason is that they'd much rather talk about drilling than actually do any. Heck they'd put out an RNS is Ben had decided to switch from 2 sugars in his coffee to one.
Let's face it the share price and news ticker moves along nicely on the hype and they don't have the money to do what is needed which is at least 50-100,000 of drill meters just to start. Even 20-30,000 would be a start. Yet we'd be luck to see a tenth of that in an average year.
Instead they are going to eke out a few drill meters, spin, raise, dilute until this goes to zero or they find someone with enough capital to take it off them and actually do something with it.
The flaw here is they do not have the capital to do justice to the potential of any of these projects .
As for anything being the next Norilsk or Olympic Dam? I'm not sure any serious geologist would make a claim like that with nothing drilled. It's a claim that is difficult to disprove of course but they don't have the drill budget to prove it either. So this may be the investment of a lifetime. Maybe it isn't.
Sorry to tiddle on your strawberries and if you are a holder here I hope I'm wrong.
I'm going to watch from a distance now rather than hold this stock. These are a set of interesting projects in a good jurisdiction I'm just not convinced that Kavango have the resources to do them justice.
I think it’s just the case that patience is required, as they say put it in the bottom drawer and for get about it. Having said that I am a bit disappointed with the power deal, although I think it may end up being better than a spin out…Time will tell
Still here Pauly ..still holding 6.2m shares with my wife... average of 3p...so underwater somewhat.
But nothing has changed for me... Its Botswana..and a discovery of some sort waiting in the weeds...
Great value ..will be adding at these prices as an when able....
Got a bit of a none related deal going on so hopefully be liquid in the coming weeks...
When sentiment returns the sector will be cooking on gas from these low levels..
Nice to see the Climate bill passed in the USA..
Botswana..... is why I am here and the works to date.... in a lot of respects a lot further forward and a third of the SP
ATB
Can't see the share price going anywhere until the company announce the next drilling campaign or a JV deal of some sort. Until then, the share price will follow the wider market.
Seriously how low can this go? I bought in on all the hype by BT. Christmas present, 20p prediction and paid 6p plus and this is just falling. What on earth is going on here. Where is bitcoin and all his big predictions and forecasts?
the second drill was TA2DD002
Of the 4 holes KAV drilled in KSZ:
TA2DD001 targeted Karoo, core sent for "Full sweep analysis", no hype so no real expectations from this drill.
KSZDD002 350m of Proterozoic with visual mineralisation even though the main conductors were several hundred meters away so there might be some expectations.
KSZDD001 "fine-grained, interstitial disseminated chalcopyrite (copper sulphide) and abundant magnetite through sections of the 49m of recovered Proterozoic core. This includes occasional 1cm elongated blebs of chalcopyrite (copper sulphide) with minor nickel". I'm not expecting this to be commercial grades especially given the depth but it is indicative of mineralisation in GRS.
KSZDD002 no mention of assays which is slightly odd as they drilled through a feeder and there might be some evidence.