Kalamazoo Resources begins drilling in Pilbara, prepares to spin off non-gold assets

Kalamazoo Resources (ASX: KZR) has commenced a new lithium drilling program in the Pilbara region of Western Australia as it prepares to spin off its non-gold assets.

The company spent the quarter finalising an agreement with TSX-listed Karora Resources to divest its non-gold exploration assets into new lithium exploration subsidiary Kali Metals.

In the lead-up to the commencement of the spin-off initial public offering, Kalamazoo has commenced its ~12,000m aircore drilling program at the DOM’s Hill lithium project.

Drilling is designed to be completed on a 400m by 200m grid pattern across two prospect areas to collect samples from the underlying regolith which is covered by a thin veneer of transported cover.

Samples from the regolith layer will be collected and presented for multi-element assay analysis to test for geochemical anomalism indicative of LCT pegmatite dykes. If those tests prove positive then the company is aiming to undertake follow-up drill testing of the underlying basement.

IPO ready to go

At the same time the company has been finalising an initial public offering which will see Kali listed on the Australian Stock Exchange with its own experienced board and management team.

Subsequent to the end of the quarter, Kalamazoo and Karora continue to make excellent progress with the upcoming IPO.

Kalamazoo reported that the prospectus, independent technical report and supporting documentation are substantially complete and Bell Potter and Canaccord have been appointed as joint lead managers for the $10 million to $12 million capital raise, currently scheduled for October.

Kali’s lithium tenure at IPO stage will include Kalamazoo’s Marble Bar and DOM’s Hill projects in Western Australia’s Pilbara region, where exploration is being conducted in joint venture with Chilean lithium producer Sociedad Química y Minera de Chile S.A.

It will also include the Pear Creek project in the Pilbara; lithium mineral rights across Kalamazoo’s Jingellic and Tallangatta projects in the Lachlan Fold Belt of New South Wales; and lithium mineral rights granted across a significant portion of Karora’s Higginsville gold tenement package WA’s Eastern Yilgarn.

The company plans to trade under ASX ticker code ‘KM1’.

Higginsville studies underway

Kalamazoo has revealed that a program of early-stage field reconnaissance and rock chip sampling has commenced at several high priority targets identified from known pegmatite outcrops and historical reports at the Higginsville Lithium Project.

The exploration team is also interrogating and evaluating the large project-wide drilling database to identify historical downhole pegmatite intersections for follow- up investigation.

Interestingly, the majority of the historical downhole pegmatite intersections have no corresponding lithium or associated pathfinder element assay data.

Kalamazoo said the purpose of the Higginsville exercises is to assess high priority drill-ready targets to be drill tested as soon as possible in the latter half of 2023 upon receipt of requisite permitting.

Share distribution

The demerger and concurrent ASX listing of Kali will see 25% of the Kali shares held by Kalamazoo at IPO being distributed via an initial in-specie distribution to eligible Kalamazoo shareholders in Australia and New Zealand.

These shareholders will be entitled to receive a pro-rata distribution of Kali shares at the record date and will not be required to pay any consideration for their shares.

The entitlements of ineligible foreign shareholders to Kali’s shares as part of the in-specie distribution will be transferred to a sale agent nominated by Kalamazoo.

Kali intends to raise up to $12 million via a pro-rata priority offer to eligible Kalamazoo shareholders.

Company headquarters

Kali has established its headquarters in Perth and an exploration office in Melbourne.

Experienced mining engineer Graeme Sloan has been appointed managing director while Kalamazoo chairman and chief executive officer Luke Reinehr will assume the role of non-executive chairman.

Mr Sloan has over 35 years industry experience and has previously held the role of managing director for Karora.

Kali has appointed independent advisory firm Grant Samuel as corporate advisor and Gilbert + Tobin as legal advisor.

Capital raising

Last week, Kalamazoo revealed it had received firm commitments to raise $1.5 million via a placement of 11.5 million shares at $0.13 each.

The price reflects a 7.7% discount to the 15 day volume weighted average price and a 13.3% discount to the closing price of $0.15 for Kalamazoo shares on 25 July.

Funds raised will be used for further lithium exploration and to advance the Kali demerger and IPO process.

Kali will repay all funds used for its purposes from the proceeds of the IPO.