Zambezi Resources Limited (ASX:ZRL) is seeing its risk-profile increase.

The Australian miner continues to plough ahead with the Kangaluwi mine project, but the company along with research houses and fund managers continues to fail to impress on investors that the proposed mine will be built in a national park.

As knowledge of the project spreads, so grows the opposition amongst conservationists, civil society and a diverse section of the public of Southern Africa who will ultimately be the project's greatest stumbling block. Forget copper prices.
The Kangaluwi mine is located in The Lower Zambezi National Park - an area being considered as part of a greater World Heritage Area which includes the famous Mana Pools National Park located across the Zambezi river in Zimbabwe.

On the 19th of April 2011 the miner announced a successful application for a 25 year Large Scale Mining Licence for the site and in March this year Zambezi Resources Ltd's latest assay results, "continue to support both the continuity and tenor of the mineralisation observed at the KCP."

As mentioned, and understandably, there is a growing movement against the project which could ultimately scupper the plans of Zambezi Resources and leave a number of investors with empty pockets.

"The Lower Zambezi National Park is due to be declared a World Heritage Site by UNESCO as a result of the Zambian Government's agreement not to allow mining there," says IPA Manning, who heads the official petition against the Zambezi Resources project.

Paul Steyn in Africa Geographic Magazine notes:

"On the Zambezi Resourses website I found an investor news feed about progress on the Kangaluwi mine, but in seven posts it failed to mention once that the planned site is right in the middle of a National Park. I wonder if the investors know this is the case? And if they did, would they think twice about the financial and – if they have a conscience – environmental risks?"

What is more there are concerns over the independence of the Environmental Impact Assessment conducted by GeoQuest.

GeoQuest's core focus is consulting and contracting for the mining sector.

And, as Steyn points out, due to high demand they have now developed a 'department' that can handle environmental impact assessments.

"Isn’t that a conflict of interest? Someone might say," says Steyn.

zambezi resources

(Image: The Lower Zambezi valley, courtesy of Africa Geographic Magazine).

The biggest backer of the Kangaluwi project appears to be Australian fund manager LinQ Group via their LinQ Resources Fund.

As of 30 June 2012 the Zambian project constituted the LinQ Resources Fund's 5th largest investment.

The majority of this investment was made on the 28th October 2011 when Zambezi Resources secured a AUD $10 million Convertible Note Facility with LinQ Capital Limited in two tranches of A$5 million.

The latest quarterly review from the LinQ Resources Fund mentions nothing about the inherent environment-based risks concerning the project.

In addition, retail investors are also being offered limited insights into the project.

Research houses and brokerages, who advise investors on whether to back a company or not, are failing to emphasise the significance of the location of the proposed copper project.

A note from research house Phatprophets says:

"Zambezi is still a very speculative copper play but the early signs are encouraging that the company may emerge as a junior copper play with the development of Kangaluwi. On a risk to reward basis we are recommending the stock as a BUY for Members without exposure.

Nowhere in the investor note released back in February 2011 was the location of Kangaluwi mentioned, let alone emphasised. And yet, investors were advised to buy stock and fund this project that is becoming increasingly controversial, and therefore risky.

DJ Carmichael, in the same month also failed to impress on investors the sensitivities surrounding the project.

It is only responsible that Zambezi Resources, LinQ and others with an interest in the Kangaluwi project inform investors explicitly about the location of the project.

Full disclosure must be made.

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