kalahari holding , page-24

October 12, 2009

Kalahari Minerals Hives Off Its Namibian Gold And Base Metals Assets Into North River Resources

By Charles Wyatt / www.minesite.com

Australian accountant David Steinepreis, who is probably best known for bringing Norseman Gold to Aim via a reverse, intends to do something similar with North River Resources. This company has been listed on Aim for some time, as David and his brother Gary set it up as a shell back in 2006, just after they did the same for Davos Resources, the company which eventually morphed into Norseman Gold early in 2007. Norseman, it hardly needs pointing out, has been one of the best performing junior gold stocks of 2009. North River acquired a number of gold and uranium projects in Mozambique from OMS a few months ago. These included the historically-worked Mavuzi mine, the Castro uranium prospect, and the Boa Vissau and Murrupula gold prospects.

The deal that North River has just announced with Kalahari Minerals and North River is, however, the big one, as it brings in some advanced copper and base metal assets in Namibia, results in an ongoing close association between the two companies, and has resulted in suspension of North River listing as it is a reverse deal under the Aim rules.

Like all the best deals, this one has advantages for both sides. Most shareholders in Kalahari Minerals are in it for its 40 per cent holding in Extract Resources, the company which holds the huge Rossing South and Ida Dome uranium deposits within the Husab uranium project, just south of Rio Tinto’s Rossing uranium mine. Even so the price of Kalahari’s shares sits at a discount to the value of its shareholding in Extract alone, so no value whatsoever is accorded to its gold and base metals assets in Namibia.

North River, for its part, wants assets that it can really get its teeth into, and an association with Kalahari Minerals will certainly help to raise its profile. David Steinepreis points out that he was a director of Extract Resources in its early days and has known Mark Hohnen, the executive chairman of Kalahari for a number of years.

This personal friendship is the main reason why it took such a short time to put the deal together. The association will remain strong, as Mark Hohnen and Professor Glyn Tonge will join the board of the new company. The chief executive is Luke Bryan, a mining engineer with massive experience in construction, software, manufacturing and mining, gained through working with a number of companies in Australia, Africa, and Russia, where he held senior operational and mining positions. Luke will get the benefit of the Kalahari exploration team already operating in Namibia, a team which has taken the Dordabis and Witvlei copper projects to their advanced states.

Also coming into the company is the past-producing Namib lead-zinc project, and the Ubib gold project, which is only 15 kilometres from the four million ounce Navachab mine. Kalahari has already spent around £8 million on exploration of these assets. No coincidence, then, that it is being paid with 266.66 million shares in North River at a price of 3p per share, which amounts to the same magic total of £8 million.

To put this in context, Kalahari will start off with a 45 per cent holding in North River, allowing for the £7 million placing proposed by North River at 3p per share. These funds will be used to appraise and develop the copper assets as well as the Namib lead-zinc project. They will also enable North River, in tandem with Kalahari, to evaluate new assets for acquisition and one gold deposit in particular has already received a bid from the two ambitious partners. There is a bit of competition for this one so David Steinepreis is paying his cards fairly close to his chest, but the strong technical team already established in country could bring it into production quite quickly and this may tip the balance in the eyes of the vendor.

The copper assets are clearly a priority. These are all situated in the heart of the Kalahari copper belt. The principal targets are the Koperbeg and RK prospects at Dordabis, and Malachite Pan and Okasewa at Witvlei. So far around 144,000 metres of RC drilling and 2,745 metres of diamond drilling has been completed, and the current in-house non JORC resource estimates for the combined projects totals 201,000 tonnes of copper, including a historic JORC resource of 17,000 tonnes of copper at Koperberg.

At this stage it looks as if heap leaching will be a possibility, but there is more work to be done before this can be confirmed. An exploration programme is taking place and the aim is to boost resources to a JORC compliant 250,000 tonnes with more to come. Work carried out at Dordabis indicates that Koperberg and RK host small oxide resources which could be amenable to open pit mining. Meanwhile a scoping study is in progress at Witvlei.

The Namib lead-zinc mine was operational up to 1992 and the infrastructure is good, as it is only 25 kilometres north of Swakopmund. Previous non-JORC mine studies indicate surface tailings and underground reserves amounting to 1.65 million tonnes grading 5.7% zinc, 1.6% lead and 40.2 grammes per tone silver, but there is thought to be at least another one million tonnes below the previously mined areas. RC drilling results have confirmed historic data and the metallurgical results have been encouraging, so this is another project that could be in production quite quickly. Interestingly the Ubib gold project is also very close to the Rossing mine, so application has been made for a nuclear fuels licence in addition to gold.

The end result of this deal is that Kalahari Minerals will have roughly equal shareholdings in Extract and North River, and in both it will be an active and supportive shareholder. The current portfolio of North River covers gold, copper, lead, and zinc in Namibia and Mozambique, but David and Mark see its territory as covering the whole of Southern Africa, and uranium projects would certainly not be turned away.

It is interesting to speculate on what might happen if Rio Tinto gets its act together and bids for Extract in order to consolidate Husab into its Rossing mine. The current value of Kalahari’s holding in Extract is A$945 million, so it would be bound to come away with well over A$1 billion, and this would, presumably, all be available to be pumped into North River’s assets and thus accelerate them into production. Looks as if life could be quite exciting for this new company and it is nice to see that it has stuck with Ocean Equities as broker, just as Ocean stuck with Norseman in the early days when things were not going so well.