Katoro Gold

Katoro announced a shake-up on 12 February, and after the customary spike has now fallen by 40% year-to-date. Opportunity?

If there’s one thing I love, it’s mining shares down in the dumps in terms of investor sentiment — but with cash in the bank and a turnaround plan. I want to be clear at the outset that Katoro is not a stock you’re going to use to build your entire portfolio around, but as risky non-core investments go, something is definitely cooking.

I don’t really know what, I just know I want some.

For context, Katoro shares have fallen by lots over the past few years — and by 40% in 2024 alone. It now sports a £1.3 million market capitalisation, low liquidity, and the usual PR problem endemic in small caps.

Katoro Gold Plc

Let’s dive in.

Katoro assets

There are four ‘assets’ in the portfolio:

Haneti — a nickel project in Tanzania that has seen a little historical diamond drilling over the past few years. KAT owns 65% of Haneti with 35% held by Power Metal Resources (this is relevant later on). The company is now undertaking a review to figure out a ‘cost-effective’ exploration programme — but with nickel where it is in the wake of Chinese-backed expansion in Indonesia, the reality is that anything not exceptional is unlikely to turn the ship around any time soon.

Blyvoor — Katoro has given up on this asset, except for potentially planning to attempt to recover cash from some third parties. This probably won’t happen.

Imweru — Katoro contends private company Lake Victoria Gold owes it €792,000, due to be settled at the end of last year. LVG disputes this (quelle surprise) and now legal proceedings look likely. If the legal case is solid, I would not be surprised to see a settlement for a lower amount in the near future.

Namibian Iron Ore — JV partner Trans Namibian Mining and Minerals probably never held the ownership of the project (at least they can’t prove it). Again Katoro has given up on this one, except for again potentially planning to attempt to recover cash from some third parties. Again, this probably won’t happen.

But to sum up — Haneti is the only real going concern, and this is for a nickel project which has effectively stalled for some time. All four projects are ignored for balance sheet purposes, which means literally any positive movement would be unexpected, good news. I would however argue that any cash from LVG would be seriously material to a £1.3 million company.

The business is now ‘highly engaged’ with Haneti and plans to identify some new opportunities. I can guess which ones.

We’re getting the band back together!

getting the band back together

Let’s consider that 12 February RNS. Katoro Gold is changing its name to Katoro Global Resources (fair enough, it has no gold), and has brought Paul Johnson (previously of POW) on as a consultant.

The company also planned to raise £750,000 by issuing 750 million new shares and shake up the board.

It’s worth noting that these shares will come with an attaching warrant, with a three-year expiry and an exercise price of 0.2p per share — more than double the current share price. For clarity, KAT retains the right to force warrant holders to exercise if the share price hits 0.5p+ for five trading days — and the total possible sum that could be generated from these warrants would be £1.5 million.

There was also some legacy tidying up of outstanding issues, paid for in shares (some subject to a lock-up).

Happily, KAT’s broker SI Capital also managed to lock down an additional £75,000 in cash from a ‘single institution,’ leaving the company with £825,000 (minus expenses) and a correspondingly higher number of warrants. I would hazard a guess that this institution was Purebond — which has also lent a hand at Power (a guess), Power majority-owned Golden Metal (definitely), and Power warrant-held Kavango (definitely).

Louis Coetzee agreed to step down as Executive Chair — and his replacement as Non-Executive Chair was announced as Power Metal CEO Sean Wade on 15 February — confirmed on 29 February. Wade enthuses that he looks ‘look forward to Katoro announcing further developments as soon as possible.’

The strategy update

Katoro Gold

We already know that Haneti is the only currently held asset Katoro is planning to pursue. I’m not sure how the conflicts of interest work given the interplaying Paul Johnson/Sean Wade roles — but realistically, if Haneti delivers, it will deliver for both POW and KAT.

But there are two key phrases to pick out of its ‘new opportunities’ plan.

  • First: ‘going forward the Company will seek additional opportunities to broaden its portfolio of interests in Africa, North America and Australia.’
  • Second: ‘target projects are available and may be secured in a wide range of commodities, however a particular focus will be on critical metal opportunities, including uranium.’

Power Metal has assets in all three continents, but it’s the specific mention of uranium that whets my personal appetite. We know that Power is on the verge of launching the Uranium Energy Exploration IPO — where several uranium assets in the Athabasca Basin portfolio will be vended into UEE.

But this still leaves more than a dozen uranium targets in the Athabasca that Power holds the rights to, and which need some drilling. There is very much a path forward (again, conflicts of interest aside), where POW vends some of these assets into KAT in some kind of funky deal. This is the world’s No1 uranium address — and would be a win-win because POW gets to avoid the expensive listing fees of a second IPO so soon after UEE.

Power also has a 100% owned, really interesting uranium property called Selta, within the Arunta region of Australia’s Northern Territory, an area known for its historical uranium mining and high-grade uranium and rare earth element deposits.

This asset is located very close to the Nolans rare earth deposit — which is inarguably world class. I’m generally not a fan of nearology, but Selta has already had some initial desktop assessment of historical datasets where elevated uranium was found to be in soil and rick samples. There’s also some limited evidence of potential lithium and/or rare earths mineralisation.

While Selta is currently part of POW’s proposed First Development Resources IPO, it really doesn’t fit well with the other three assets — Wallal, Braeside West and Ripon Hills — and there may now be a better home for it.

I hesitate to mention this one as I think it’s unlikely, but Golden Metal’s Garfield property recently threw up a uranium target — and the £750,000 raised from Purebond is going to be used at Pilot Mountain. Cash has not been set aside for Garfield, and the conspiracy theorist in me cannot help but throw out the possibility that something is brewing here.

We do know from the recent fundraising — and Power Arabia news — that POW is moving its focus to Saudi Arabia. We know that Katoro now has the POW duo holding the reins. We know that POW has more assets that it can drill alone with its current funding. And we know that KAT has £825,000 lying around, doing nothing.

I’m pretty confident it didn’t raise this cash to do nothing.

I’m also pretty confident that POW has several high quality uranium targets ready to be drilled.

Is this all speculation? Absolutely.

Am I wrong? Who knows…

Yes, there are tons of warrants thrown about like confetti. But unless the share price more than doubles, they’re useless to the holders.

Again, this is not on any level a core portfolio stock. But tuck a few shares away for a rainy day?

There are worse ideas.

This article has been prepared for information purposes only by Charles Archer. It does not constitute advice, and no party accepts any liability for either accuracy or for investing decisions made using the information provided.

Further, it is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

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