Deep-South Resources (DSM) - License Update from Namibia

Deep-South Resources Inc. is a mineral exploration and development company. The company is actively involved in acquiring, exploring, and developing major mineral properties in Africa. Its growth strategy is focused on the exploration and development of quality assets, in significant mineralized trends, close to infrastructure, in stable countries. The company is guided by integrity and values that keep it focused on its purpose to turn its exploration projects into lasting realities for its empowered local communities. The company is committed to advancing its projects while operating in an environmentally-responsible manner.

Matt Gordon caught up with Pierre Léveillé, President, CEO, and Director, Deep South Resources. Mr. Léveillé has over 28 years of experience in the international financial sector and 20 years of experience in the mining exploration industry. He started his career as an Investment Advisor and an Investment Banker with a large Canadian Securities brokerage firm.

Since the mid-90s, he has been an Executive and Director for several exploration companies active in Africa. He has financed and managed exploration projects in Namibia since 1996, including the acquisition and operation of a diamond mine. He has realised over $75M in transactions and financing for Namibian and African mining exploration projects. 

Company Overview

Deep-South Resources is a mineral exploration company, largely held by Management and Directors with 12% of the company’s share capital, and 16% by Teck Resources Ltd. The company is actively involved in acquiring, exploring, and developing major mineral properties. It is actively seeking other precious and base metal projects in stable countries. The company was founded in 1987 and is headquartered in Vancouver, Canada. It is listed on the Toronto Stock Exchange (TSX-V: DSM). 

Mining Indaba 2022

Deep South Resources’ representatives recently attended Mining Indaba 2022, a week-long networking event in Cape Town, South Africa. This year, the event was focused on the ‘Evolution of African Mining: Investing in the Energy Transition, ESG, and the Economies’. Both Mining Indaba and 121 Mining Investment Cape Town are working together to deliver an unrivalled offering for the entire African mining ecosystem and are driving the sustainable development of African mining economics. 

Interestingly, Mining Indaba has been a significant platform for Africa’s mining industry for over 27 years. This event includes peers, host governments, and investors that are at the heart of the African mining industry. 

Ongoing Legal Proceedings 

Deep-South Resources is involved in court proceedings with regards to the renewal of its Haib Copper licence. This ongoing legal battle included the company and the Ministry of Mines and Energy of Namibia. 

Back in September 2021, there was a court order to the Ministry to deliver all documents pertaining to the way decisions were made without email exchanges, external reports, or any other mode of communication that could support the Ministry’s decision. Notably, the Ministry of Mines and Energy of Namibia continually asked for extensions between February and April 2022, failing to present its defence. 

In a recent development, the judge warned the Ministry that if the delays continue, there could be possible sanctions. Deep South Resources believes that the Ministry is likely to face sanctions as the organisation does not have any proof to defend its side of the argument.  The company is looking to put pressure in order to move the case forward as soon as possible. This could lead to a situation where the company can debate the case in the final hearing, even though the Ministry does not have a defence. The next hearing is scheduled for May 18th, 2022. The company anticipates that the judge would take a decision in its favour. 

As per the company, the rule of the court makes it mandatory for the judge to agree to a certain number of extensions, however, there are limits for the same. However, since the Ministry does not have a defence or any documents that support the actions of its decisions, there is a possibility that the judge can decide on a final hearing and debate, and immediately render a judgement. 

The Haib Project 

The Habit deposit has a distinct surface expression with abundant copper staining on fractures and joint planes, particularly in and around the dry river bed of the Volstruis River. In 2004, Deep South Mining Company Pty Ltd was granted the Exclusive Prospecting licence over a 74,563 hectares area covering the deposit and a very large surrounding area. This licence was renewed in April 2007, 2009, 2011, 2013, and 2015. Notably, the area was reduced to 37,000 hectares after the 2007 renewal. In 2008, Teck Resources Limited under the option agreement with Deep South Resources completed a comprehensive exploration program at the Haib Project and its immediate surroundings. 

The Haib copper deposit is located in the extreme south of Namibia, close to the border with South Africa, which is defined by the course of the Orange River. The deposit is situated 12-15km east of the main interstate highway that connects South Africa and Namibia. The nearest railway station is Grunau, which is located 120km north on the main highway. 

Deep South Resources currently has a sub $10M market cap. Based on the company’s PEA (Preliminary Economic Assessment) and the current market pricing, the IRR (Internal Rate of Return) is estimated at around 40%. The Haib Project is a low-grade, large-scale project. 

Following a relatively quiet 2021, Deep South Resources anticipates that it can raise capital in order to put the project back on track. The company has various institutions and large shareholders that continue to provide support. The company has an assurance that once it gets back, it will have the support of investors to move forward. Since there are fairly limited investment-ready advanced copper projects, the company anticipates that the project will continue to maintain its appeal, despite the market conditions. The company is confident that it will be able to raise capital in order to continue advancing the project and finalise the Feasibility Study.

3 New Licences in Zambia 

Deep-South Resources is prioritising its rights on the Haib Project in Namibia. At the same time, it understands that a single project in a portfolio can be tricky. It is an exploration and development company that is looking to add value for its shareholders. In order to achieve this, the company is looking to develop projects. Interestingly, the company has looked at projects across Canada, the United States, and South America. It ended up choosing a project in Zambia, as it's located near Namibia, which is a highly familiar operating environment for the company. 

As the company understands the geology, and the people within the region, Zambia was a preferred choice for a new project. Notably, Zambia has had a serious turnaround since the country’s last elections in September 2021. It is once again considered a mining-friendly jurisdiction. 

Hakainde Hichilema, Zambia’s current President recently made an announcement that Zambia is planning to grow its production capacity from 800Mt to 3Bnt. This would directly translate to added support for companies that are looking to develop projects. 

Deep South Resources chose a fairly low-cost, and less advanced project, enabling it to put together a robust exploration program. 

In April 2022, Deep South Resources announced that it has plans to acquire up to 80% of three copper exploration licences in the heart of the Zambia Copper Belt. This deal was executed through the signing of a definitive earn-in agreement with World Class Minerals Venture Ltd. of Zambia. As per the company, the three licences are extremely well-situated in the centre of the Zambia Copper Belt. The licences are based 7km away from Lubambe and Konkola, the regions that have the country’s largest copper mines. One of the licences is located 20km from Luanshya. This project features highly-interesting anomalies. The company anticipates that this region has the potential for big deposits along with very high grades. 

Cash Position 

Deep South Resources has CAD$1.5M in current cash flow. The company is looking to spend around CAD$500,000 for conducting soil sampling on its Zambian assets. The company has identified several anomalies, and in order to better define them, extensive soil sampling is needed. Although there has been soil sampling done in the past, the results have been unsatisfactory. It plans to redo the sampling in order to establish drill targets. 

The company is open to spending an additional CAD$250,000 to drill a couple of holes and test out a few areas. It has the financial capacity to carry out operations up to the end of 2022. Following this, the company has plans to develop targets for the projects. 

Notably, the company is working on updating its presentation for the recent acquisition. It is currently waiting for the conditional letter of approval to come through, following which it will move towards an eventual closing. It is also awaiting the stock exchange approval for the acquisition. Once the deal is closed in the next 2-3 weeks, the company will start promoting its new assets. 

Deep South Resources has a very strong network in Namibia. The company’s Chairman and one of the Directors are Namibian. It is looking to resolve the ongoing legal situation, preferably by way of an out-of-court settlement. 

Once the Zambia deal is closed, the company plans to explore financing opportunities. It has had proposals for financing, however, since it has a low market cap, the company does not need to raise capital on an immediate basis. 

Following the closure of the deal, the company will decide whether a capital raise is needed. The recent acquisition makes it easier for the company to licence additional ground nearby. It has had discussions with majors regarding the possibility of increasing the size of its Zambian assets. Although there aren’t any proposals yet, the company has realised that there’s an investment appetite in the copper market. 

The African Mining Landscape 

According to Deep South Resources, there’s a lot of ongoing development in Namibia, Botswana, and Zambia. Zimbabwe also seems to be slowly getting back on track. It is well-documented that starting a mine in countries such as Canada can be difficult, and the problems around mining in Africa are similar to Peru, Chile, and Ecuador, which are considered good mining jurisdictions.

Africa is potentially the ideal place for under-explored resources that covers all commodities. Zambia-based copper projects are exceptionally huge mines. For instance, the Kamoa Project in Zambia is a massive project with over 3% copper grades. The company forecasts that Africa has a bright future from a mining perspective.

To find out more, go to the Deep South Resources website