Kaoko carry-on shouldn’t cloud an exciting copper discovery

There are plenty of examples in the exploration game where the reporting of visible mineralisation during a drilling campaign has fired up investor interest ahead of assay results being returned from the lab.

And it is not all that unusual for assay results to disappoint to the point where both company and investor interest in a project is killed off for good.

But that is not always the case.

Quality discoveries shake off the initial disappointment with the grade of the assay results compared with what visible mineralisation might have suggested in the first instance to go on to create serious value through the systematic exploration of the discovery.

All that is by way of background to the wild ride of late for Kaoko Metals (ASX: KAO) which only listed back in May as a copper explorer in Namibia.

The 20c shares from the IPO were travelling along nicely at 74c on the last trading day before the company announced on September 2 that first drilling at its Otniel prospect within the broader Chalkos copper-silver project had returned thick intersections of visual copper mineralisation.

The announcement included the standard advice that visual estimation of mineral abundance in the drill holes was no substitute for lab assays i.e. treat with caution. The stock took off anyway, climbing to $1.85 on the day and moving higher in following days to a peak of $2.68.

The share price run on the visuals coincided with the copper mania that has gripped the market on the red metal’s move to record levels and the wall of commentary suggesting that looming supply deficits could push prices higher still.

For a junior company with a promising copper exploration project in a copper exploration hotspot like Namibia, there was money for the taking from investors chasing the copper thematic while at the same time betting that when the assays results were released, they would impress.

So Kaoko did want any right-minded junior would do and pulled in $20 million on September 7 from what was said to be an institutional-led share placement at $2.20 a share, increasing its cash balance to $24m for the copper hunt in Namibia.

Come October 12, the assays results were released – 37.1m grading 1.23% copper and 15.2g/t silver from 54m down-hole (including 6.62m at 3.05% copper and 40g/t silver from 58.38m) in one hole, and 48m at 1.02% copper and 12.9g/t silver from 46m down-hole (including 7.15m at 2.76% copper and 34.6g/t silver from 67.9m) in the second hole.

The stock got smashed, plunging from $1.93 the previous trading day to 84c. Those that took visual mineralisation to mean the assay results to would come back with 5% copper readings were clearly disappointed.

Those prepared to pay $2.20 a share in the placement had gambled and lost.

But significantly, Kaoko has continued to trade above its price level before the announcement of visible mineralisation on September 2. In Thursday’s market it was trading at 86c a share for a market cap $62 million.

It is significant because while there was clearly some disappointment with the assay results for those that paid $2.20 for their stock in the placement, Otniel stands as one of the more exciting copper discoveries by a junior explorer on the copper-obsessed ASX.

And rightly so too.

It has to be remembered the drill results – assays and all – were from the first holes drilled into the 400sqkm project area that’s never seen a drill hole previously.

So the results were a great start, forming the basis for something to build on.

It is a statement backed by Kaoko’s on-going activity at Chalkos. It’s made a discovery and it is stepping up to capitalise on it now.

There is a drill rig going 24/7 at Otniel where six holes have been completed, and there is a rig going 24/7 at Donkey Hill. It is a program all that much easier to fund thanks to the $2.20 a placement which had the added benefit of causing less dilution than otherwise would have been the case.

Donkey Hill deserves a special mention as it was Kaoko’s primary target on listing but got shunted behind Otniel for being drilled first because road access and water had to be sorted.

While Otniel has delivered in its own right as a standalone prospect that will be drilled out, Donkey Hill was always the main game because of the intensity of mineralisation at surface and its strike length of at least 1.5km.

There should be assay results from the drilling at the two prospects this side of Christmas. More from Otniel will be interesting, but the real kicker could come from Donkey Hill.

SUNSTONE: (ASX:STM):

Sunstone Metals has done what it said it would do by growing the resource at its Bramaderos gold-copper project in southern Ecuador into a scale too big to ignore.

Earlier in the week the resource was upgraded following the completion of the 2026 drilling program to 6.2Moz gold equivalent, with the higher confidence indicated component coming in at 3.3Moz AuEq.

Bramaderos also has an exploration target for an additional 4.4-11.2Moz AuEq. So it’s big and getting bigger to give real potential to the prospect that it will eventually support a 250,000-300,000 AuEq mining operation.

The question remains whether it will be Sunstone with its modest and likely mispriced market cap of $56.8 million at 20c a share that gets to develop the project or whether the company and the project get snapped up by an international major looking for a multi-decade project.

As that scenario pans out one way or another, the real near-term interest in Sunstone is the potential high-impact drilling program after a two-year hiatus at the El Palmar gold-copper project in the north of the country.

Sunstone announced the start of drilling last week, and a second rig began operating this week. The deep-drilling program targets large porphyry-related gold-copper systems on the same Toachi fault that hosts the giant Cascabel copper-gold deposit and others to the north-east.

Cascabel was recently acquired by China’s Jiangxi Copper for $1.7 billion through a takeover of the Nick Mather’s London-listed and Australian managed SolGold. Another Mather company which was a SolGold shareholder, DGR Global, took up shares in Sunstone’s $10m June placement, giving it a 10% stake in the company.

Mather reported this week a relevant in additional Sunstone for an all up interest of 10.9% of the company.

Interesting times all round for the company.