As part of my Due Diligence on CLA, I researched on the relevant facts of Kunene Resources and the logical reasons behind the eventual transfer of its mining leases to CLA. Tried to figure out exactly why Kunene pain became CLA's gain
3) June 2014: First Quantum provided the following update highlights: >Several field visits undertaken by renowned experts in sediment hosted copper and structural geology . >Confirmed similarities between our Dolomite Ore Formation and Congo Mine Series in DRC >Structural control of Okanihova mineralization confirmed https://hotcopper.com.au/threads/an...o-project-nami.2257909/#.Wm0GGUxuJ9A[/BCOLOR]
7) Sept 2015 : First Quantum Minerals withdraws from Kaoko Project joint venture . The reason was that Under the terms of the JV Agreement, First Quantum had a minimum size threshold for any discovery at the Kaoko Project of two million tonnes of contained copper (or equivalent of other metals). Whilst the exploration program funded by First Quantum yielded encouraging results, including a new copper-cobalt discovery at the Dolomite Ore Formation, First Quantum did not see sufficient potential for a deposit that met that minimum size threshold. https://hotcopper.com.au/threads/an...-joint-venture.2595605/#.Wm0L_ExuJ9A[/BCOLOR]
8) Consider the situation of Cobalt prices in 2015 which affected the calculation of "contained copper equivalent" of other metals in para7 above :
"With growing demand from the battery industry and uncertainty over access to cobalt ores from Africa, many expected the cobalt market to be in tight supply in 2015. Instead, slowing consumption and increased output resulted in slumping cobalt prices. The first half of the year saw prices for cobalt contracts on the London Metal Exchange (LME) remain fairly steady at between US$ 31,000 and US$ 27,000 per metric tonne. However, financial pressures on Chinese refiners - who account for nearly half of all refined cobalt production - resulted in prices plummeting by 15 percent in the fourth quarter of 2015 to end the year under US$ 24,000 per tonne." 9) Oct 2015: As a result of falling commodity prices, and a negative investor sentiment (and Kunene's own funding limitations), Kunene decides to move out of mining. It neither had the funds to continue exploring on its own and could not attract any investment given the negative sentiment towards commodities market in 2015.. Kunene moved into Drone business..and changed company name to D13.... Chairman issues the following letter to shareholders :
LETTER FROM THE BOARD OF DIRECTORS TO SHAREHOLDERS
"Dear Shareholders
Kunene Resources Ltd (Kunene or the Company) has had a challenging year, in common with most junior exploration companies, as a result of falling commodities prices and deteriorating investor sentiment for resources companies. The market has remained very challenging for small exploration companies with restrictions on raising capital and volatile commodity prices making aggressive green field exploration increasingly difficult. During the year, Kunene optimised its resources by successfully utilising joint venture partners for both the Kaoko Project and the Alcoutim Project.
Despite these challenges, the Company had a busy year, completing the acquisition of the Alcoutim Project in Portugal whilst securing a funding partner for this project, as well as significantly increasing the Company’s land holding at its flagship Kaoko Project in Namibia. Exploration activities conducted at the Dolomite Ore Formation produced significant results and indicated the discovery of the first copper-cobalt mineralisation of Central African Copperbelt type in Namibia. At the Kaoko Project, Kunene, in conjunction with its joint venture partner First Quantum Minerals, completed a very large scale soil sampling campaign which, combined with geophysical work, culminated in RC and diamond drill testing of several targets. Despite the majority of boreholes intersecting mineralisation, with the exception of the Dolomite Ore Formation, none of these targets produced economically interesting results.
In spite of the prospectivity of the Company’s assets and the caliber of the Company’s team, the difficult market conditions and scope of exploration activity required to define a significant resource led the Company to investigate alternative industries to pursue.
On 3 September 2015, Kunene was pleased to announce the signing of a conditional heads of agreement to acquire 100 per cent of Department 13 LLC (D13). D13 is a drone defense, cyber security and RF software communications and networking company based in Virginia, USA which has research and development contracts with multiple US Government agencies.
Kunene believes this is an exciting change in direction for the Company and both parties are working to satisfy the conditions to that transaction. "
10) Cobalt prices since 2015 took a massive upturn changing completely the economics associated with the project: from $27,000/t in 2015 to $80,000/t now and expected to go beyond $1,00,000/t
Conclusion : Kunene were exploring at the time with Copper as the prime focus. Since exploration did not yield enough copper, (and Cobalt prices were low, First Quantum pulled out of the JV...which was end of funding for exploration activities. Kunene in 2015 them had no option but to stop exploration even though the discovery of DOF was significant. Kunene them moved on to the business of drones. CLA moved in at the right time (thanks to BB) taking on this project with Cobalt as the primary focus and based to price trends of Cobalt should be a winner.
All IMO..GLTA
CLA Price at posting:
13.0¢ Sentiment: Buy Disclosure: Held
(20min delay)
