Midnight Sun shares plunge on Zambian exploration licence setback
Midnight Sun Mining (TSXV: MMA) shares plunged on Thursday after it reported the Zambian government rejected a request to renew the company’s exploration licence for the Kazhiba target at its flagship Solwezi copper project.
The government, which on Thursday said it was forming a new company to control 30% of all the country’s mining projects, didn’t give a reason for the Kazhiba licence refusal, Midnight Sun said. The rights were instead given to another company, the Canadian junior added. It has suspended work on Kazhiba, but said it may appeal the government’s decision.
“While we are disappointed in the current situation, we do believe it will be rectified,” CEO Al Fabbro said in a release. “We are taking all possible steps to expedite a swift resolution so that we can resume our exploration at Kazhiba.”
Shares in Midnight Sun Mining fell 11% on Thursday in Toronto to close at C$0.355 apiece, valuing the company at C$58.7 million ($43.5 million).
Kazhiba is one of three licensed target areas on the company’s 506-sq.-km property that have had significant copper discoveries to date. It is underlain by a previously undiscovered basement dome similar to those at the Kansanshi mine held by First Quantum Minerals (TSX: FM) and Barrick Gold‘s (TSX: ABX; NYSE: GOLD) Lumwana mine, Midnight Sun said.
High-grade target
The Kazhiba project features the high-grade 22 zone, located 10 km from the western mine gate of First Quantum’s Kansanshi mine complex. This zone was discovered by follow-up shallow drilling in 2012 over a subtle copper anomaly with thick overburden, Midnight Sun said. One discovery hole intersected 11.3 metres of 5.71% copper near surface.
Midnight Sun had planned to further explore the target this year to define its copper oxide resources, as well as potential feed sources for the nearby Kansanshi mine under a cooperative exploration plan with First Quantum.
For this program, the company said it had submitted an application to renew the Kazhiba licence. It was due this year for a final three-year extension allowed under Zambian mining law.
No formal notice
However, when Zambia’s mining licencing committee rejected the application in June, it didn’t deliver a formal notice to the company, and instead only published the decision on its website, Midnight Sun said, adding that it was unclear what company was instead awarded the exploration rights.
Meanwhile, Midnight Sun said its other two licences are unaffected by the government’s move. One covers the Dumbwa target, which is under an earn-in agreement with KoBold Metals, the high-profile startup backed by billionaires Bill Gates and Jeff Bezos. The other is the Kansanshi-style Mitu target, part of the cooperative exploration plan with First Quantum.
Exploration is to move forward as planned at Mitu, which represents a bigger target than Kazhiba and also hosts near-surface oxide copper. Previously, drilling at Mitu returned 11.6 metres at 3.44% copper.