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Adavale Resources (ASX:ADD): Interview with David Riekie

June 15, 2023

Adavale Resources, ADD


Adavale Resources (ASX:ADD)

We spoke to David Riekie, Executive Director of Adavale Resources (ASX: ADD), about the company’s flagship Kabanga Jirani Nickel Project in northwestern Tanzania.

The first drill holes are beginning to probe the project area, which is exciting because it surrounds the Kaganga Project of Lifezone Metals, the world’s largest undeveloped high-grade nickel sulphide deposit.

We talked about Tanzania’s recent return to respectability in global mining circles and BHP Billiton’s major investment in Lifezone Metals in order to develop the nickel potential of Kabanga.

Full transcription below.


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Stuart: Hello and welcome to “Stocks Down Under.” My name is Stuart Roberts, and I’m one of the co-founders of our service. And joining me on the morning of Wednesday the 14th of June, 2023 from Perth is Mr. David Riekie, who’s one of the executive directors at Adavale Resources ASX:ADD. David, good morning.

David: Good morning, Stuart.

Stuart: David, you’ve been kicking around the small resources corporate game since you finished about a decade at PWC back in the ’90s. So, you’ve gathered up a fair bit of experience. I gather you’re quite excited about the work you’re doing right now with Adavale.

David: That’s right. I think probably I’ve been in the resource space now for the best part of about 30 years, and I’d like to think of myself as a bit of a sponge. I’ve actually sort of been operating in this space, and I think that the selection of projects, and really understanding their underlying value is key to any success in the small-cap space. So, I think the, it’s duty bound, I think, on any director to make sure that they’re looking at the best ground that they’ve got in undertaking the work that they need to do to unlock the value. So, essentially yes. I’ve been in the space for a while, and I’ve been involved in a few commodities, but the one that seems to shine to me, probably like many others, is this whole battery mineral thematic, and that’s actually been probably the driving force as to why we’ve actually chosen nickel, and alongside something as big as what we’re seeing in Western Tanzania in Kabanga.

Stuart: Yeah. Let’s talk about that project. Way up in the northwestern part of Tanzania, Kagera region, one of 31 regions of Tanzania, is a gigantic nickel deposit called Kabanga. That’s not your deposit, belongs to a company called Lifezone, which is now looking to go public in New York [inaudible 00:01:54.346]. But we’re talking one and a half million tons of contained nickel equivalent, at a grade of about… Well, the nickel grade alone is 2.6%. That is a monster of a deposit. Kabanga Jirani is you, and you’ve got everything around it. So, if you don’t find nickel on that ground, I’ll be very surprised.

David: Well, so will we. We’ve done enough, I think, work to sort of demonstrate that this belt, this East African nickel belt, includes Kabanga, and I think it probably will include, you know, similar lookalike opportunities that we are chasing. And that’s right. I mean, the actual area that we cover, and we effectively surround Kabanga is approximately 1300 square kilometers, and we think we’ve chosen wisely with the ground holdings that we’ve now got, and it’s probably been just demonstrated in the work that we’ve done to actually try and hone in and focus in, and get that resolution around those spots that we think could be hiding the next Kabanga or a similar sort of deposit. And you’re quite right, Stuart. The actual grade of this is, it’s very globally significant.

It may not be the biggest, but I think it’s the largest high-grade opportunity existing in the world. And it’s seen the likes of BHP take a very, very significant interest in it, and more particularly strategically to develop what they think, like you said, is going to be many, many tons of nickel at high grade. And I think that’s the important thing, so they’re not doing big processing of large volumes of material, and that’s a feature. So yes, look, we are very blessed with the ground holdings we’ve got where we are, and I think it’s probably more along the lines of the work that we’ve done to get to the point where we can start uncovering what we think might be the next Kabanga.

Stuart: Right. And it’s interesting to me, BHP’s decision to invest in that Kabanga project was hailed globally. You know, suddenly Tanzania’s back in from the cold under President Hassan that, you know, now that the regime is straightforward, someone as big as, and globally significant as BHP choosing to invest says the country’s open for business. So, you’re looking good from a geopolitical risk-type stage as well.

David: Very much so. I think the endorsement of BHP coming back in is that they’ve done their due diligence. We’d like to think we’ve done ours, but their investment is going to be over many decades, you know, when they start to get things up and going. And they take these sorts of decisions very carefully, and for us to be, I suppose, a net beneficiary of actually being in that location means that it demonstrates the geopolitical stability of the country. There’s also demonstrating that, you know, eyes back on Tanzania, you know, half a dozen years ago, it had its issues. Now, it’s actually seen a resurgence and a reemergence out of what has been a darker, darker space in its time and its history. But we’ve seen the welcoming of negotiation teams moving projects forward, those that have been more abundant, those that hadn’t actually had the endorsement of the government.

There’s clear pathways now as to what you need to do with the government. They need to have a 16% interest. They are taking things very seriously, and I think the advent of Kamala Harris coming into Tanzania also is an endorsement that the U.S. is saying, you know, they’re cheering from the stand saying, you know, “Go ahead Tanzania and find these battery minerals.” And nickel seems to be at the very much the forefront there. And that really comes back full circle to what you mentioned before about Life Zone actually seeking listing on the New York Stock Exchange. So, there will be a lot more eyes on this particular region, and I think it’s really a perfect opportunity, a perfect storm for us to try and take advantage of, in a nice way, of the situation that’s emerged in Tanzania, but also getting some eyes on our drilling program. It is starting to turn up these massive sulfides, which is exactly what we want.

Stuart: Yeah, no. [inaudible 00:05:44.516]. I sat down a couple of years ago with your colleague, Allan Richie, and we talked about this project. Meantime, a heck of a lot of gravity and EM data to pick the best targets, and the first of the diamond drills holes are going down now. Tell me about the choice of Luhama Central as the first prospect to drill test.

David: Yeah. Look, I normally have the benefit of a prop where I can actually point to the particular trends that are seeming to emerge, but this, what we’ve seen is that Luhama Central itself and above and below it, sit within a trend. So, in its own right, it’s actually a feature of the trend rather than the trend itself. So, what we’re seeing is that with the AMT and the gravity and the soils that we’ve been able to do in and around that area shows that this trend’s probably about 8 to 10 kilometers long, and the beauty of that is that we know that we’re in the right rock types. We’ve actually been able to demonstrate that with our soils. So, the region itself, we’ve focused on Luhama Central and HEM-2, which is a region, like I said, over about 10ks, because it demonstrates the prospectivity of massive sulfides, disseminated sulfides, and the right ultramafic rocks, which will host those types of bodies.

Importantly, we’re using that as a template, and it’s been probably to the frustration of everyone including the board that we’ve moved ahead very, very carefully and diligently, you know, making sure that we’ve got a number of these different techniques correlating and pointing to those parts of this opportunity set, this ground hoarding, that we think is gonna demonstrate the greatest opportunity of success. Now, we’ve done that with the first hole that we put in at the Luhama Central. We think we’re gonna be able to replicate that across East, West, and North, South. How far that goes, I don’t know, but we’ve done AMT slices up to about a kilometer and expanding. We’ve got a similar sort of philosophy that we’ve adopted, another 4ks down along that strike to HEM-2 Northeast. We’ve done AMT there, we’ve got similar sort of correlations.

We’ve done the same sort of set of background information down at HTM-2. HTM-2 is a bit of a monster. It looks as though it’s got a massive gravity anomaly, and we’re in the process of drilling that. So, this often term used, you know, when we’re in an exciting phase. We really are. Genuinely, we are looking to see us uncovering more massive sulfides, and demonstrating that sulfides through this trend. And we’ve gone back, and we’ve done a lot of research as well, Stuart. I mean, behind the scenes, there’s certain information that you can rely upon heavily and you can validate, and there’s good indicators. So, the historical holes and the research that we’ve done suggests that this particular trend is a fertile opportunity for us to drill.

Stuart: Right. And obviously, the choice to go straight to diamonds was to be able to scope out exactly how far these massive sulfides go, so that we can then go back and be a bit more careful later on about where we pick amongst the massive sulfide endowment if I could put it like that.

David: That’s correct. I mean, the beauty of this particular opportunity is that we know historically that there were massive sulfides intercepted. What we’ve actually been able to do, and I think maybe it’s lost in the wash sometimes, is we’re able to correlate that with the EM and the AMT techniques that we’re applying. So, where we see it in the core is where we expected to see it from the visuals. Now, you lose that level of resolution if you get past about 500 meters, but certainly, for the top 500 meters, you are going to snag things that you think you’re gonna snag, and we have an expectation and that will happen. What we’ll just also need to do with that, is do some downhole EM, so we can get, you know, an understanding as to what might exist at depth.

An important facet to understand is that Kabanga extends down to about 1.2ks. We’re drilling about 300 meters, we’re drilling about 500 meters. So, what I’m trying to say is that I don’t think that we’re gonna tap out there. I think there’s opportunities that would extend this. Now what we’re trying to do is to actually get our refinement around these drilling techniques and other tools that we’re using to make sure that when we start drilling the deeper holes, we’ve got a greater chance, put down the probes, understand where the plates are, and start drilling towards them, get the right orientation. Sounds frustrating, but you know what? You’re taking out all of the unknowns in an equation. You know, drilling’s quite expensive, so you wanna make sure that every meter you’re drilling is in the right direction, gives you the best chance of hitting stuff.

Stuart: Particularly in this part of Tanzania when it’s not exactly the middle of nowhere, but we’re talking remote from all the population centers. I think we’re talking before the nearest big town is Mwanza over on Lake Victoria, which is the other side of the region.

David: That’s correct. That’s become, that’s a bit of a hub, a hub for many things. You know, preparation of samples, support service vehicles for drill rigs, jewelry companies, technical guys, and it is. It’s a bit of a recognized hub in that particular region. It’s still about three hours away from where we are, but it well services where we are. And I think that the infrastructure generally will start to increase and improve in and around where we are, as we see the movement forward of Kabanga moving into production. I think it’s reasonable [SP] serviced.

Stuart: Okay. You’re talking to me from Perth. I’m hoping you’ve got a reasonably solid in-country team in Tanzania, which you must have.

David: Oh, look, again, these sorts of features sometimes get glossed over, but the answer is absolutely yes. Our chairman has been an identity in Tanzania in a good way. He’s actually got good relationships, which we continue to refresh. We do have a beachhead there and a general manager, and a local geologist that are doing a sterling job. We’re very confident they’ve got the right sort of engagements with people happening, and an understanding with the drilling companies at this point in time, which is critically important. We meet the mining commissioners, we understand what they want, they wanna see from us, they wanna see work being done, and importantly also, it’s the inclusion of local peoples in the soil campaigns to pad preparation and opportunities for them to participate. You know, that’s basically controlled by our team in Tanzania. So, I’m happy to say that now that level of, you know, social content consideration and local content engagement in any contracts, we recognize, and we try to do our best to accommodate.

Stuart: Obviously, yeah. That’s a big deal for the Tanzanian government. They wanna see a lot of local participation in these kind of projects.

David: Well, and as do we. As do we. At the end of the day, you wanna make sure that, you know, people are coming along for the ride with us. And I think it’s very important also that governments, and it does, supports these sorts of initiatives because, at the end of the day, they’re going to be the net beneficiaries, which they should be. You know, there’s 16% interest in these mining projects, is what’s gonna be putting ’em back into the country, and start to unlock the endowment of mineral wealth that they’ve got.

Stuart: Right. Well, David Riekie, well done on what your team have achieved. It’s been a slow and steady wins the race progress towards the point we’ve reached now, but we’re getting towards the exciting part where Dr. Drill is telling us some interesting things. So, we look forward to what happens next with Adavale Resources.

David: Well, thank you, Stuart, and I think investors alike should be watching us very, very closely over the next four to six weeks. We’ve said this before but, you know, before the end of this financial year, we should have some more results out.

Stuart: All right. David Riekie, thanks for joining “Stocks Down Under.”

David: Pleasure. Thank you, Stuart.