Kainantu Resources Announces Acquisition of Kili Teke Copper-Gold Project from Harmony Gold (PNG) Exploration Limited
Kainantu Resources Announces Acquisition of
Kili Teke Copper-Gold Project from Harmony
Gold (PNG) Exploration Limited
VANCOUVER, BC
,
April 6, 2022
/CNW/ - Kainantu Resources Ltd. ("KRL" or the "Company")
(TSXV: KRL) (FSE: 6J0) is pleased to announce that it has entered into a definitive agreement with
Harmony Gold
(PNG) Exploration Limited ("HGEL"), a wholly-owned subsidiary of Harmony Gold
Mining Company Limited ("Harmony") to acquire 100% ownership of the Kili Teke Gold-Copper
Project ("Kili Teke" or the "Project") in
Papua New Guinea
("PNG") (the "Acquisition" or
"Transaction") .
Kili Teke is a significant advanced exploration porphyry gold-copper project with an existing mineral
resource, and potential for further re-optimization and discoveries to increase overall value.
Highlights:
Matthew Salthouse
, CEO of KRL, commented:
KRL to acquire 100% of the Kili Teke project from HGEL:
advanced exploration Au-Cu project in premier region of PNG;
has an existing defined Inferred Mineral Resource of
237Mt
@ 0.34% Cu (=0.8Mt Cu),
0.24g/t Au (=1.8Moz Au) and 168ppm Mo (=0.04Mt Mo), with an effective date of
30 June
2021
;
over
36,000m
of drilling completed to date;
significant exploration resource upside, with near surface, high-grade Au skarn
mineralisation not yet included in the defined Mineral Resource;
potential for re-optimisation, bringing Kili Teke significantly closer to production as an open-
pit mine to increase economic returns;
Terms of Agreement:
initial cash consideration of
US$1 million
, payable in two instalments:
US$500,000
on
closing (targeted for
May 31, 2022
); and
US$500,000
on receipt of post-closing regulatory
approvals (expected in late 2022 or early 2023);
KRL intends to work towards a Preliminary Economic Assessment ("PEA"), then a
Feasibility Study. If KRL views the Project positively at each step, KRL to make further
payments to HGEL of
US$3 million
and
US$4 million
respectively;
KRL to pay HGEL a 1.5% net smelter royalty from future mine revenue;
potential for Harmony to become a strategic investor in KRL under the Transaction, with
HGEL to be issued warrants equal to 9.9% of the issued share capital of KRL on closing
(with each warrant exercisable at
C$0.28
per share or a 25% premium to the KRL 30-day
VWAP to
April 5, 2022
).
"We are delighted to announce the acquisition of Kili Teke which aligns with our strategy of
building shareholder returns by executing value accretive acquisitions. In this regard, our extensive
due diligence indicates Kili Teke will be a transformative and accretive acquisition for KRL and will
elevate our asset portfolio, adding an established gold copper resource which has potential for
significant growth."
"The Project lies on the highly prospective Papuan Fold Belt which hosts world class projects, such
as Ok Tedi,
Frieda River
and Porgera. We look forward to exploring and developing another
potential world class project for the region."
"This transaction moves KRL from a greenfield high potential explorer into being a resource
development company with upside. For a junior to achieve this after a year of listing is a testament
to the team's vision on growing KRL via accretive transactions in combination with on-going field
work.
HGEL has already made excellent progress to date in developing the Project, delineating an
impressive copper gold resource of 800Kt copper and 1.8Moz gold; with the deposit remaining
open to the southeast and down depth. Through the grant of warrants to acquire equity in KRL of
up to 9.9%, HGEL has an option to engage further."
"KRL will continue to deliver on our strategic objectives with Kili Teke a key catalyst in driving
shareholder value as we develop as an
Asia Pacific
gold-copper mining company.
"
Johannes van Heerden
, CEO for
Harmony South East Asia
and senior executive for New
Business at Harmony Gold Mining Company Limited commented:
"Harmony remains focused on permitting and delivering the much anticipated Wafi-Golpu project
alongside its existing
Hidden Valley
mine life extension project. In addition to these on-going
projects, Harmony has identified additional potential growth opportunities in and around the
Hidden
Valley
mine. These multiple workstreams demonstrate our long-term commitment to
Papua New
Guinea
, and will require significant investment and management resources over the next 5 years.
We believe it makes strategic sense for the Kili Teke exploration project to continue with dedicated
focus, allowing further value to be unlocked for all stakeholders in
Papua New Guinea
."
Definitive Agreement
KRL and HGEL have executed a definitive agreement for KRL to purchase Kili Teke by way of an
asset acquisition. The acquisition is inclusive of the transfer of the Exploration Licence 2310
("EL 2310") and all associated assets and know-how, such as drill core, logs and data used to
support the Mineral Resource.
The initial acquisition price payable by KRL is
US$1 million
, payable by two instalments of (i)
US$500,000
on closing of the transaction and (ii)
$500,000
on receipt of post-closing regulatory
approvals (expected in late 2022 or early 2023).
Closing of the transaction is subject to customary closing conditions, including the approval of the
TSX Venture Exchange (the "TSX-V"), PNG regulatory approval and registration of the sale
agreement and all schedules to it, and KRL (at its discretion) raising financing of up to
US$1 million
.
The parties are targeting closing of the transaction by
May 31, 2022
, at which point KRL will assume
100% ownership of the Project.
In future years, as the Project is advanced, KRL will move to complete a PEA. If KRL publishes a
PEA (at KRL's discretion), then the Company will pay
US$3 million
to HGEL within six months of
publication and move to complete a Preliminary Feasibility Study or Feasibility Study.
If KRL completes and publishes such Preliminary Feasibility Study or Feasibility Study (at KRL's
discretion), then a further and final payment of
US$4 million
will be made to HGEL within six months
of publication.
In addition to the cash payments, KRL will grant HGEL a 1.5% net smelter royalty upon the
commencement of commercial production in the future.
KRL will also grant HGEL common share purchase warrants on closing of the Transaction
exercisable for up to 9.9% of the Company's issued share capital as of closing the Transaction, with
each warrant being exercisable at an exercise price of
C$0.28
per share, representing a 25%
premium to KRL's 30-day VWAP to
April 5, 2022
. HGEL has also been granted anti-dilutions rights
with respect to future financings of KRL to maintain its equity ownership in KRL.
The definitive agreement also contains other terms and conditions as are customary for a
transaction of this nature.
Strategic Rationale
The acquisition of Kili Teke will provide KRL with immediate ownership of a quality exploration
project in a region well known to KRL management and stakeholders. The Company views the
acquisition as transformational for KRL, given the clear development nature of Kili-Teke (beyond
early-stage greenfield exploration).
Amongst other objectives, the Transaction:
Project Overview
allows KRL to incorporate a sizeable Au-Cu resource into the Company's asset base, potentially
enabling a re-rating of KRL in due course;
increases exposure to Cu as well as Au (in addition to KRL's other exciting projects in Kainantu
and May River);
moves KRL's overall portfolio further along the development curve, given Kili Teke's advanced
stage; and
provides upside potential to KRL, with identified exploration targets and options to re-optimise
the preliminary mining approach.
The Project comprises of EL 2310 and is located approximately 40km west-northwest of the
Porgera Gold Mine, in the Koroba-Kopiago District of Hela Province, PNG. EL 2310 was granted to
HGEL in
May 2014
and has been renewed three times. The EL remains in good standing and is
currently subject to a further renewal application at the end of the current term in
May 2022
. Pending
renewal, the EL remains on foot with KRL entitled to continue to explore the project as is customary
under PNG mining law.
An Inferred Mineral Resource of
237Mt
@ 0.34% Cu (=0.8Mt Cu), 0.24g/t Au (=1.8Moz Au) and
168ppm Mo (=0.04Mt Mo), with an effective date of
30 June 2021
has been established by
Harmony for the Project in accordance with the South African Code for the Reporting of Exploration
Results, Mineral Resources and Mineral Reserves (SAMREC, 2016 Edition) (
www.samcode.co.za
),
which is recognised and accepted for the purposes of National Instrument 43-101,
Standards of
Disclosure
for Mineral projects
("NI 43-101"). As part of the Transaction, KRL intends to file with
applicable Canadian securities regulators and the TSX-V, within 45 days of this news release, an NI
43-101 compliant technical report in respect of the project.
In developing the Project, HGEL drilled 54 holes (for
36,325m
), at an estimated cost of
US$20
million
. With multiple work streams ongoing in PNG, Harmony has taken a strategic decision to sell
the Project to KRL as a credible junior explorer to allow exploration on the project to continue with a
dedicated focus.
Regional and Local Geology
The Project lies within the Papuan Fold Belt, a mixed terrane of limestone and clastic sediments
which have been strongly folded and thrusted during the evolution of the
New Guinea
magmatic
island arc, on the northern margin of the Australian tectonic plate.
Numerous felsic and intermediate plutons, generated from the subducting Australian plate, are
intruded into these sediments, and several are host to, or are associated with, large porphyry Au-Cu
and epithermal Au deposits, respectively, including Ok Tedi (3.4Mt Cu, 12.5Moz Au*),
Frieda River
(12.9Mt Cu, 21.1Moz Au), Porgera (10.4Moz Au), and Mt Kare (2.1Moz Au).
*Pre-production
figures.
These world-class ore deposits are all located close to major deep-seated transfer faults which
accommodate lateral slip between adjacent segments of the Australian plate, as it moves
northwards. Kili Teke is located on the strike extension of a transfer fault and is highly prospective,
as shown in Figure 1.
Figure 1: Kili Teke Regional Project Location (CNW Group/Kainantu Resources Ltd.)
Kili Teke is hosted by a late Miocene (3.59±0.5Ma to 3.50±0.04Ma) multi-phase, intermediate-
composition, intrusive complex (including diorite, microdiorite and hornblende porphyry lithologies),
and associated breccias and skarns, as indicated in Figure 2. The latter occur both within (along
structures), and on the margins of the intrusive complex, in limestone host rock.
Figure 2: Kili Teke Geology (CNW Group/Kainantu Resources Ltd.)
Mineralisation is exposed at surface. This is of particular interest to KRL, as it indicates the upper
part of the deposit could be mined via an open pit, even though part of the deposit is covered by a
limestone cap.
Studies indicate the strongest mineralisation is developed as disseminated and vein infill
chalcopyrite, with lesser bornite, pyrite, gold and molybdenum, in two classic, porphyry-style
stockworks: the Northern and Southern Stockwork Zones (NSZ and SSZ). Both of these high-grade
zones are offset at depth by post-mineralisation faulting. A single drill intercept, from KTDD013,
reported
Cu & 0.57g/t Au, which demonstrates that this is a significant deposit, with
high-grade potential.
Several zones of high-grade skarn mineralisation are also recognised, but the drill density is
insufficient to confirm continuity at this stage and they have been excluded from the current Mineral
Resource estimate. In due course, a priority for KRL will be further investigation of this skarn
mineralisation.
The dominant alteration is an early potassic assemblage, composed of pervasive fine-grained
biotite±K-feldspar±magnetite±sulphide (py+cp+mo). This is overprinted in turn by a secondary
potassic event, restricted to breccia zones, pervasive phyllic alteration (sericite±quartz±sulphide),
and late-stage argillic to intermediate argillic alteration (kaolinite±smectite clays), also restricted to
major fault zones.
Importantly, the controls on high-grade mineralisation have not been defined. There remains residual
upside potential to expand high-grade zones.
Potential Upside to the Mineral Resource Estimate
Since acquiring the Project in
June 2014
, HGEL has drilled 54 holes (for
36,325m
), including 7 (for
3,683m
) to test exploration targets. Using all currently available data, an Inferred Mineral Resource
of
237Mt
@ 0.34% Cu (=0.8Mt Cu), 0.24g/t Au (=1.8Moz Au) and 168ppm Mo (=0.04Mt Mo) has
been defined for the Project.
Importantly, and as noted above, this defined Mineral Resource excludes all high-grade skarn
intercepts because the drill density was considered insufficient to prove the continuity of these
mineralised zones: see Figure 3, indicating the high-grade skarn area. These remain a viable
exploration target, and an opportunity to increase the metal inventory significantly. (The inclusion of
skarn mineralisation in a previously reported Mineral Resource potentially added 11% and 10% more
Cu and Au metal, respectively, to that estimate.)
Figure 3: Kili Teke Project: High Grade Skarn Area (CNW Group/Kainantu Resources Ltd.)
In addition to the deposit drill-out, in 2016 HGEL drill-tested 3 exploration targets close to Kili Teke.
Of interest is the Ridge Gold Anomaly (RGA) target, located within 1km of the main resource, which
has not been adequately explored as yet. This target was defined by surface geochemistry in
stream sediments, and has subsequently been confirmed in soils and bedrock, via trench sampling (
/t Au & 0.77% Cu) and anomalous rock chips (up to 3.5g/t Au). The bedrock anomaly
potentially extends beneath a limestone cap cover sequence, which means that RGA may be a much
larger target than has been considered before. This will be another area of focus for KRL with the
likelihood of further drilling at this target.
Concept Mining Study
A conceptual mining study has been completed for the Project (completed by Advisian, a consulting
business of the WorleyParsons Group) to investigate the economic potential of an open pit and
underground block cave development. This study was independently reviewed by AMC in 2017.
KRL is keen to test the viability of an open pit operation. Compared to Harmony as a smaller
operator, KRL will consider ways to re-optimise the Project with a focus on higher grades and lower
through-puts, with an open-pit approach as one way to potentially optimise economic value.
To date, desk top studies by KRL suggest that an open pit operation is potentially viable (with a
robust economic return) on the definition of more high-grade ore. In due course, this would require
further infill drilling, focused initially on the two high-grade stockwork zones (NSZ and SSZ) and the
marginal skarns; and any other features that can be targeted if the controls of mineralisation can be
determined. KRL expects further investigation on the viability of these options are part of the
intended work towards a PEA and Feasibility Study.
Infrastructure, Logistics and Community Relations
Local infrastructure to support a new mine at Kili Teke is favourable. The Hides gas power station,
which supplies power to the Porgera Gold Mine, is 50km south of Kili Teke; and the largest sealed
airstrip in PNG, at Komo, is 80km to the south (and there are dirt strips much closer, at Auwi and
Tari). The government has announced funding to build sealed roads between the local towns of
Komo, Tari, Korobo and Mendi, all of which would serve a future mine at Kili Teke.
KRL stakeholders have significant experience operating in the Hela District where the Project is
located. Based on initial discussions with relevant community groups, KRL is confident it can develop
a viable community programme at Kili Teke.
Next Steps
KRL will continue to work co-operatively with the management of HGEL to obtain all necessary
regulatory approvals to close the acquisition and consolidate the Project into KRL.
Although KRL remains fully funded in order to complete the Transaction in the short term, closing of
the Transaction is subject to KRL raising financing of up to
US$1 million
(or waiving this condition).
Qualified Person
The scientific and technical information disclosed in this release has been reviewed and approved by
Graeme Fleming
, B. App. Sc., MAIG, an independent "qualified person" as defined under National
Instrument 43-101,
Standards of Disclosure for Mineral Projects
.
About KRL
Kainantu Resources 'KRL' is an
Asia-Pacific
focused gold mining company with three highly
prospective gold-copper projects, KRL South, KRL North and the May River Project. All projects are
located in premier mining regions in PNG.
Both KRL North and KRL South show potential to host high-grade epithermal and porphyry
mineralisation, as seen elsewhere in the high-grade Kainantu Gold District. The May River project is
in close proximity to the world-renowned Frieda River Copper-Gold Project, with historical drilling
indicating the potential for significant copper-gold projects. KRL has a highly experienced board and
management team with a proven track record of working together in the region; and an established
in-country partner.
For further information please visit
https://kainanturesources.com/
Neither the TSX-V nor its Regulation Services Provider (as that term is defined in the policies of
the TSX-V) accepts responsibility for the adequacy or accuracy of this release.
Disclaimer and Forward-Looking Information
Mineralization hosted on adjacent and/or nearby
properties is not necessarily indicative of mineralization hosted on the Company's property. The
data disclosed in this release relating to drilling results is historical in nature. Neither the Company
nor a qualified person has yet verified this data and therefore investors should not place undue
reliance on such data, and no representation or warranty, express or implied, is made by the
Company, its affiliated companies, or any other person as to its fairness, accuracy, completeness,
or correctness. This release contains forward-looking statements, which relate to future events or
future performance and reflect management's current expectations and assumptions. Such
forward-looking statements reflect management's current beliefs and are based on assumptions
made by and information currently available to the Company. All statements, other than statements
of historical fact, are forward-looking statements or information. Forward-looking statements or
information in this news release relate to, among other things: expectations regarding completion
of the Acquisition and the terms thereof, including timing, the results of Preliminary Economic
Assessments and Feasibility Studies, further exploration activities or development programs on the
Project, receipt of necessary regulatory approvals and the formulation of plans for drill testing; the
effect of the Acquisition on KRL and its portfolio; further growth of the Project; timing of the renewal
of EL 2310; the ability of the Company to raise financing; the description and viability of the
Project; the preparation and filing of a NI 43-101 Technical Report; and the ability of the Company
to deliver on its strategic objectives and create shareholder value. These forward-looking
statements and information reflect the Company's current views with respect to future events and
are necessarily based upon a number of assumptions that, while considered reasonable by the
Company, are inherently subject to significant operational, business, economic and regulatory
uncertainties and contingencies. These assumptions include; success of the Company's projects;
prices for gold remaining as estimated; currency exchange rates remaining as estimated;
availability of funds for the Company's projects; capital, decommissioning and reclamation
estimates; prices for energy inputs, labour, materials, supplies and services (including
transportation); no labour-related disruptions; no unplanned delays or interruptions in scheduled
construction and production; all necessary permits, licenses and regulatory approvals are received
in a timely manner; and the ability to comply with environmental, health and safety laws. The
foregoing list of assumptions is not exhaustive. The Company cautions the reader that forward-
looking statements and information involve known and unknown risks, uncertainties and other
factors that may cause actual results and developments to differ materially from those expressed
or implied by such forward-looking statements or information contained in this news release and
the Company has made assumptions and estimates based on or related to many of these factors.
Such factors include, without limitation: fluctuations in gold prices; fluctuations in prices for energy
inputs, labour, materials, supplies and services (including transportation); fluctuations in currency
markets (such as the Canadian dollar versus the U.S. dollar); operational risks and hazards
inherent with the business of mineral exploration; inadequate insurance, or inability to obtain
insurance, to cover these risks and hazards; our ability to obtain all necessary permits, licenses
and regulatory approvals in a timely manner; changes in laws, regulations and government
practices, including environmental, export and import laws and regulations; legal restrictions
relating to mineral exploration; increased competition in the mining industry for equipment and
qualified personnel; the availability of additional capital; title matters and the additional risks
identified in our filings with Canadian securities regulators on SEDAR in
Canada
(available at
www.sedar.com
). Although the Company has attempted to identify important factors that could
cause actual results to differ materially, there may be other factors that cause results not to be as
anticipated, estimated, described, or intended. Investors are cautioned against undue reliance on
forward-looking statements or information. These forward-looking statements are made as of the
date hereof and, except as required under applicable securities legislation, the Company does not
assume any obligation to update or revise them to reflect new events or circumstances.
SOURCE
Kainantu Resources Ltd.
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For further information:
Kainantu Resources: Matthew Salthouse, Chief Executive Officer (Tel: +
65 8318 8125); Callum Jones, Corporate Development Co-ordinator (Tel: + 61 450 969 697); Email:
[email protected]; IR / Financial PR: Camarco, Gordon Poole / Charlotte Hollinshead / Tessa Gough-
Allen, Tel: +44(0) 20 3757 4980; Financial PR North America: Jemini Capital, Kevin Shum / Jerry
Huang
[email protected]: +1 (212) 219-4680 | +1 (647) 725-3888 ext 702
CO: Kainantu Resources Ltd.
CNW 05:31e 06-APR-22