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Africa Geographic Travel

Independent financial research organisation Viceroy Research has released a damning report on Reconnaissance Energy Africa Ltd (ReconAfrica) – the Canadian oil and gas company that has set its sights on the Kavango Basin in Namibia and Botswana. The Viceroy report labels ReconAfrica a “stock-promoted junior explorer, drilling imaginary oil basins in a fragile ecosystem”. It concludes by saying that the detailed findings have been shared with Canadian regulators.

ReconAfrica has rejected suggestions that it is a “pump and dump” stock. In this illegal practice, stock prices are inflated through misleading assertions, allowing insiders to sell off their shares for profit after a surge in interest before the price crashes. ReconAfrica’s share price has risen from around USD 0.5 to USD 13 in the past 18 months, despite serious concerns about the environmental implications of the proposed mining operations.

However, Viceroy’s report states that “once (ReconAfrica’s) promotional veil has been pulled back, we believe the company will revert to trading as a speculative, but highly unimpressive, penny stock”.


In summary, the report highlights the following geological and practical concerns:

  1. Drilling blind
    • ReconAfrica has been marketing its exploration allotment as a potential shale (unconventional) play – a type of exploration banned by the Namibian Government. The Botswana Government has denied that ReconAfrica has permission to conduct this type of exploration and has stated that the company is only in the initial stages of assessing geological data.
    • The company has used surface geology analysis, geochemical sniffing and aeromagnetic data to indicate the possibility of a basin that might justify real oil and gas exploration – “this severe overreaction is the equivalent of justifying a gold mine at a beach because a metal detector pinged”.
    • The company is years and tens of millions of dollars away from drilling an exploratory well with any chance of discovering commercial oil or gas. The three stratigraphic wells were drilled to “justify overly optimistic press releases, swindle investors and fulfil their immediate commitments to the government to retain their leases”.
    • No well data has been released because the two wells drilled so far failed to encounter oil or gas.
    • “This approach of drilling blind was common in the 1940s to the 1960s among the oil and gas giants who had billions to burn; for a smaller company with limited case and time, this is a last-ditch effort.”
  2. Their licence to drill
    • ReconAfrica’s license requires them to forfeit 75% of the lease area by January 2022, and it is unlikely they will have sufficient data to determine which sites to relinquish – “they are rapidly running out of time to do anything that would yield a commercial discovery.”
  3. The Sproule Report
    • The report produced by Sproule, an external reserves auditor, was purely conceptual, based on potential analogues in other countries – it is a work of “geo-fantasy”.
    • Regardless, Sproule estimates just a 3.3% chance of commercial success.
  4. The “Kavango” Basin
    • The Viceroy analysts believe that ReconAfrica’s lease is likely on the Owambo basin rather than the previously unexplored Kavango basin. The Owambo basin has been extensively prospected but with limited success
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Along with the environmental concerns, the Viceroy report also indicates that various members of ReconAfrica’s management come with chequered histories, ranging from bribery to incompetence and a trail of ecological damage and unrehabilitated wells. The retail interest they have acquired, according to the report, is due to a strategy of duping unsophisticated investors through crooked analysts, stock promoters, YouTubers and “ClickBait masters”. ReconAfrica’s association with Namibian businessman Knowledge Katti created the impression of insider political connections to “do the magic” with government officials.

The critical report concludes by stating that ReconAfrica is a “tale as old as time”, manipulating investors that will ultimately be burned when the fiction is revealed as such.  Viceroy’s report prompted a brief dip in share price and an immediate backlash from ReconAfrica in a press release refuting the “false, short report”, to which Viceroy responded as follows.

[Editorial note: Viceroy is headed by short-sellers whose research has, in recent years, triggered stock collapses in German company Wirecard and South Africa company Steinhoff.]

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Africa Geographic Travel
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