Douglas Lake Moves To The Assay Stage At The Multi-Million OunceMwembkuru Project, But The Chinese Hold The Whip Hand On Funding
By Alastair Ford
The last time we wrote about Douglas Lakeit generated a fairly spirited response from a certain section of ourreadership. The “spirit” in the response was generated by the size andpotential of the company’s Mbwemkuru gold property down in Tanzania,which really is quite stunning. And also because some shareholdersaren’t, or at least weren’t, too happy with the way bosses Harp Sanghaand Byron Hampton were running and promoting the company.
Theproblem in a nutshell is that Mbwemkuru is an alluvial, or placer, golddeposit, somewhat similar in style to the fabulously wealthyWitwatersrand deposits, one of the two twin pillars on which modernSouth Africa’s immense mining wealth now stands. Mbwemkuru may not beas big as the Wits, but it is big nonetheless. The question is how big?Placer deposits, with their variable grades and huge size, are also anotorious home for scamsters and rampers, and some in the market haveaccused Harp and Byron of being just that. But a quick look at
Douglas Lake’sshare price chart for the last 12 months tells a story familiar toanyone watching markets anywhere in the world – a peak in the summerfollowed by subsequent serious weakness as autumn rolled on.
Douglas Lake’sshares are still up on where they were trading at this time last year,as well they might be, the company having secured a potentialmulti-million ounce gold deposit and partially funded it over thattime. But the share price graph doesn’t look particularly different toany other company trading into the headwinds of this global financialcrisis. And, with the backing of a powerful Chinese minerals instituteit may be that Douglas Lakewill weather the storm not because of the way it sells its equity, butbecause it has influential friends in the land of the panda.
The company has just announced that Dr. WenqinZhang, the second in command at the Tianjin Institute of Geology andMineral Resources (TIGMR), has been appointed to the board. Dr Zhang isno doubt going onto Douglas Lake’sboard with a view to keeping an eye on how TIGMR’s 25 per cent equityinvestment in the company is shaping up. But he’ll also be able to havea look at how TIGMR’s money is actually deployed on the ground atMbwemkuru, once it comes in. So far, according to Douglas LakeUS$1.8 million has already come in from TIGMR. That leaves US$4.2million still due, all of which will be spent on the development of Douglas Lake’s Tanzanian operations. So far so good, and if this Chinese backing lives up to its potential, then Douglas Lakelooks set for life. TIGMR has pledged to fund almost any exploration ordevelopment work the company wants to do in Tanzania, according to HarpSangha, based on its' early good impressions from Mbwemkuru. “What Ithink the Chinese recognised early on is that this is a productionsituation”, says Harp. “They’re not having to spend years going topre-feasibility. For the number of dollars they’re spending, it’s acheap entrance into Tanzania”. The thinking on both sides is that Douglas Lake will act as the Tanzanian arm of TIGMR.
The long-term success of this outsourcingarrangement is necessarily predicated on success at Mbwemkuru. As tothat, despite the doubters, Harp says, “it’s looking fantastic”. Thesimple story for the property as things stand is that the mostpromising section, Mkuvia, looks to be 29 kilometres long by sixkilometres wide, going to a depth of at least a couple of metres. Thatamounts to a serious volume of alluvial sand, and if it’s allmineralised to economic levels, will be hugely rich for Douglas Lakeand its’ Chinese partners. The company’s initial technical report,dated July 2008, starts out with a note of caution, though. It refersto Mbwemkuru as “greenfields”, and goes on to say, that it’s at an“early stage of exploration with no reliable assay data fromgeologically controlled samples as yet”. True enough, and Harp and histeam are working to put that right quick smart. But as far as grade,and the consistency of the grade across the property, is concerned allthat Harp can really say at this point is that “we’re hopeful”. Localoperators Tanzminex are busy working hard collecting the samples, andthe first assay results should be coming out fairly soon.
It will be fascinating to see what those results show, because Douglas Lake’stechnical report goes on to say: “inspection of available artisanalworkings and exploration pits over [a] 20 kilometre strike length,combined with panning of exposed units and analysis of three grabsamples of conglomerate, sand, and panned concentrate, suggests thepotential for a multi-million ounce gold resource with the strongpossibility of Uranium and Thorium credits and possibility ofgem-quality garnets and sapphires locally”. The report also recommendsthat the company install an “insect proof office”, a footnote which maydeter any more over-eager investors from flying down at short notice tosee for themselves.
The plan is for Tanzminex to put a JORC number ontop of the resource by the second quarter of next year, and to be upand mining by year’s end. It’s not too big an ask to get an alluvialproject like this going: a few million dollars at most. The keyquestion to ask will be at what rate Mkuvia gets mined, and that willbe a matter for the Chinese paymasters. Harp says that any operationdown there could easily be processing at a rate of between 100 and 200tonnes per hour. Costs will be low, as there’ll be no crushing. Simply,this will be a big heap leach operation. How big remains to be seen.