When Aviva Corporation gets its teeth into a project, be it gold, base metals or coal, you can bet that its team will get the very best out of every undertaking When we last spoke with Australian-listed aggressive multi-commodity explorer Aviva Corporation (ASX: AVA) (“AVIVA”) in October 2010, chief executive Lindsay Reed delivered the parting words, “Aviva is one of those attractive exploration companies that really does it all and does it all well.”
This has since proved to be quite the understatement. The past 12 months have seen resource upgrades and recently posted gold intercepts outperform expectations for its projects in West Kenya, where the team has earned a 51 per cent interest spurring swift investment in outstanding assets in under 12 months, and the project on track for a maiden gold resource at the Kakamega Gold Camp within the first six months of 2012. Highlights from follow-up drilling at Kakamega, released November 3, are impressive. There’s also the Lake District Gold prospect, where results confirm hopes for potential for large gold systems, and the Bumbo advanced base metals deposit where in early September (within just eight months after starting drilling) the team announced a JORC Resource of 1.68 million tonnes at four per cent copper equivalent; stellar results backing AVIVA’s joint venture options to earn up to 75 per cent in the highly prospective ground (held by AVIVA and Lonmin subsidiary, AfriOre International).
“West Kenya has taken most of the focus in the last 11 months since we spoke,” Reed says.
“It’s been very productive since the agreement was formalised in August last year when the Commissioner gave his approval for the joint venture.”
In Botswana, where AVIVA is also listed, the company has a 90 per cent earning in the Mmamantswe coal project; home to an 895 million tonne JORC open cut coal reserve with a strip ratio of just 1:1. While the multitude of opportunities for future discoveries and mine development in West Kenya are priority number one, at Mmamantswe (domestic/export coal road mapping pending) it looks like the team is set to play a vital part in the nation’s future world scale sector, following the EIA report due for completion in November 2011 and presentation to the authorities early next year.
“I think that Botswana is one of the few destinations where India (the great coal demander of the next decade) can go to procure 50 million tonnes per year for 50 years,” Reed notes.
Marching into 2012, we’re going to see a lot more top results from AVIVA’s portfolio and a pressing need to pay attention to the company. Between that extensive multi-commodity West Kenyan ground holding (two continuous licenses cover 2,800 square kilometres of the highly prospective Ndori Greenstone belt) and the existing resource and desirable development potential offered by Mmamantswe, the attraction, put bluntly, is a no brainer.
Top rocks in West Kenya
Back in November last year, AVIVA commenced resource drilling at Bumbo by targeting 1.2 million tonnes. When the project prospective for base metals, zinc, gold and silver delivered its 1.86 million tonnes initial inferred JORC it was a superb result for AVIVA. The team has targeted gold mineralisation around the resource as well, where drilling is ongoing.
“That was part of the reason why we reached our 51 per cent expenditure milestone so quickly,” Reed says.
“We pledged to spend $3 million over three years [as per the joint venture agreement] and given that Bumbo came up better than expected, we drilled more holes than originally anticipated. The good results at Kakamega meant that we’ve drilled more holes there as well.”
The setting at Kakamega begs belief; a 20 kilometre gold trend with heaps of artisanal workings where, before AVIVA arrived in 2010, just a few holes had been drilled throughout the whole license since the 1950s gold rush subsided. AVIVA has worked systematically through Kakamega’s prospects. The ground team began at Dhahabu where the few previous holes were drilled, then works moved eight kilometres east to Kimingini delivering highlights including 9.00 metres at 12.71 grams per tonne gold from 139 metres (announced November 2011). The team then moved another eight kilometres along trend to Bushiangala (gaining intercepts of 7.00 metres at 8.29 grams per tonne gold from 98 metres) and on to numerous other prospects.
“We were hoping to find large gold systems down in the western end, and the Kakamega area has been a lot more productive than we anticipated. It’s been a great win for us and we’re very happy to keep going there,” Reed says.
At the time of interview, AVIVA had released assay results from 21 of the 88 holes drilled and counting. The weeks leading into the coming year promise to deliver more encouraging assays for both Bumbo and Kakamega, and based on the information provided to date, incoming releases look promising. There’s also Lake District Gold; home to large gold in soil anomalies within which drilling at AVIVA’s Masumbi prospect have all delivered intercepted broad gold mineralisation.
“Like our other projects down there, it’s a work in progress and we still think it has potential for big systems similar to those in Tanzania, but it isn’t as obvious in terms of where to go as Kakamega is. We’re doing a lot of work with ground geophysics, auger rigs, soil sampling to build up targets,” Reed explains.
“We still think that it looks pretty attractive down there. We’ll be sitting down early next year to reappraise all of the results we’ve got from Kakamega and the Lake Zone to decide where to focus our attention and money over the coming 18 months.”
It is clear why AVIVA has earned into 51 per cent of its West Kenyan joint venture so quickly. In ascending to 75 per cent interest, the miner explorer needs to complete a pre-feasibility study (PFS) demonstrating a pre-tax NPV of US$50M, and after reappraising the many results (and abundance of project options) to move forward with, Reed says, the joint venture partners will begin formulating plans about how this will take shape.
Building Botswana’s coal sector
Home to world-scale coal resources, Botswana’s coal road map currently under creation is a matter of interest to many. That includes AVIVA, as it sits on Mmamantswe’s 200 million tonnes export coal and 150 million tonnes domestic coal, where the team plans a 10 million tonne per annum project.
“The coal map review underway is what’s really important in Botswana at the moment. About four weeks ago the government announced that they will be extending the time to complete the review, and have a moratorium on issuing new coal licenses during that time,” Reed explains.
“It was originally meant to be lifted in October, but while the review is underway it’s not likely to be lifted until early next year. We’re very supportive of that position.”
Reed stresses that Botswana’s coal sector needs to be developed in a way that underpins a long-term sustainable industry both domestically and in exportation. Like any other advanced explorer/developer in the country, AVIVA’s project outcomes depend on future investments in export rail and domestic power infrastructure.
“A railway line would require 50 million tonnes a year to get up and running, and as such you need to make sure that there’s a suitably credit worthy sector, funded and with robust develop plans,” Reed says.
“Simultaneously you want to make sure not to flood the domestic market just to make the export market, because the domestic market is limited. While we continue with our EIA—which is largely designed around meeting those market ratios—we hope that in the months to come we can play a small but integral part in the nation’s coal sector.”
In earning 90 per cent in Mmamantswe, where there’s still scope to add incrementally to the resource, AVIVA will complete a feasibility study. To date the company and its project partners are awaiting news on infrastructural funding to come before committing to carrying this out, and in the interim remain wholly supportive of Botswana’s efforts to forge a diverse and sustainable sector.
Multiple mine options in 2012
As the West Kenya projects continue to deliver, Reed and the AVIVA team are spoilt for choice.
“The focus for the first half of next year is to get a gold resource out,” he says.
“It might be at Kakamega, the Lake Zone, or both.”
At Bumbo the team will carry out a scoping study, post metallurgical results to market, and seek out opportunities for resource extension via Bumbo itself and the surrounding area.
“The two important aspects of the scoping study will be what the economics are for this project and whether it needs to be bigger,” Reed says.
“And if it does need to be bigger, can we extend it or do we need another deposit. That will give us the metrics for targeting the regional exploration for everything else going on there in base metals.”
AVIVA has two stories under one roof, each exciting in its own right. The West Kenyan developments look likely to propel the team towards resource upgrades, increased ownership and mine development, and Mmamantswe is really just a question of timing. Reed’s statement about doing it all and doing it all well rings true across the team’s gold, base metals and coal activity—and it looks like this highly capable team are in for another year of solid growth and strong performance in 2012.
AVA Price at posting:
40.5¢ Sentiment: Buy Disclosure: Held
