Kavango Resources PLC (LSE:KAV, OTC:KVGOF)'s Great Red Spot project in Botswana has been boosted significantly by a new independent report.
The company announced in a statement that an independent conceptual economic viability report authored by Executive Mining Group Ltd has stated that the project’s Iron Oxide Copper-Gold (IOCG) target - located in Target Area B in the northern (Hukuntsi) section of the Kalahari Suture Zone (KSZ) – could conceptionally be economically viable as a mine.
It concluded that the IOCG target would be economically viable at depths up to 2km below the surface, if “sufficient bulk of mineralisation be discovered that is of sufficient grade”.
"The IOCG target at the Great Red Spot is highly attractive because it is so large, and the geophysical indicators so compelling,” said Kavango chief executive Ben Turney.
The Kavango boss described it as “a project of significant potential”.
“We are very pleased with the results of the report and Kavango will continue further exploration of the IOCG target, with a view to vectoring in on specific drill targets," Turney said.
In the report, the Great Red Spot target was viewed "based on an Olympic Dam model" – comparing the project to BHP Billiton’s giant underground mine in South Australia as Kavango believes that its IOCG target has similar geophysical signatures to that ore body.
In its economic viability report, Executive Mining noted that the target probably lies deeper than the Olympic Dam orebody (which is beneath 300 metres of rock and then extends down 900 metres of mining), and, it is "certainly below 1,000 metres of depth".
Among Kavango’s queries for the consultant was whether an Olympic Dam type and scale of orebody could be economically viable if it was 1,000 metres, 1,500 metres, 2,000 metres.
The consultant's model pitched possible net present value estimates ranging between US$3bn and US$8bn, with internal rates of return estimated in a range of 17% to 31% - with estimates based on US$1,600 per ounce gold, US$18 per ounce silver, US$3.50 per pound copper, and US$28 per pound uranium.
It estimated that underground mine development could cost some US$3.5bn of capex, whilst an on-site processing plant to recover all four commodities could add another US$1bn to the capex bill.
Kavango, meanwhile, reminded investors of the early stage of the project and the conceptual nature of its ‘Olympic-Dam-alike’ project. It noted that so far the consultant’s assessment remains at a conceptual level.
“As this stage it is important to understand that the numbers presented are idealised,” Turney added.
“Until Kavango is able to drill test the IOCG target we cannot know what the geological formations are nor whether any mineralisation is present.
“The purpose of this report is to give Kavango confidence that the IOCG target is worth pursuing.
“We've tried to be conservative with the input numbers, especially the estimated forward metal prices.”