Tanzania/Barrick Gold Settlement Opens Up BIG Opportunities

The past six months have seen some momentous events in the gold mining industry. Much of this activity has been taking place on the M&A front: Barrick Gold has acquired Randgold for $6.5 billion (September 2018). Newmont and Goldcorp have merged via acquisition (January 2019). Then Barrick, in turn, launched a hostile offer for that combined entity – from which it only recently backed away. A frenzy of activity from some of the industry’s heavy hitters.

Then there have been encouraging signs in the gold market itself. The price of bullion has once again been trending higher in recent weeks. Even in advance of this, a recent Stockhouse article noted that some gold mining companies have already been recording impressive gains.

However, that’s not the only big news in the world of gold mining: there is a political settlement between Barrick Gold and the Tanzanian government.

Starting in 2016, a major dispute erupted between the government of Tanzania and Acacia Mining, a majority-owned spin-off of Barrick that operates several gold mines in Tanzania, including its enormous, high grade Bulyanhulu Mine. Historically, this is a 20+ million ounce gold deposit (8.7 million ounces of gold Proven & Probable/Measured & Indicated + 7.6 million ounces Inferred).

Serious accusations were leveled at Acacia, including tax evasion and corruption. An enormous “unpaid taxes” bill was sent to Acacia. The government also banned all gold bearing concentrate exports. This caused huge problems for this large-scale miner including a dramatic drop-off in its share price.

Caught in the crossfire of this dispute were junior gold mining companies who were also active in Tanzania. This legal/political conflict provisionally curtailed gold mining operations, and caused gold exploration in Tanzania to effectively grind to a halt.

Flash forward to February 2019 and news has emerged of a comprehensive agreement to resolve this dispute. Accompanying this, the Tanzania government has also introduced a more mining-friendly regulatory structure (more on this later). A glance at the Acacia Mining stock chart shows the market reacting to this news, despite the large fines/taxes that it will still be required to pay.


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A Reuters article called this “a victory for Barrick’s new Chief Executive Mark Bristow”. For investors new to the gold mining industry, Bristow is simply one of the leading figures in African gold mining. The former CEO of Randgold, Bristow’s new position is a result of the Barrick-Randgold acquisition. And the new leader of the world’s largest gold company has a strong focus on Africa in general, and Tanzania in particular.

In a Bloomberg article from October 2018 (a month after Bristow took the reins at Barrick), Barrick expressed its enthusiasm for becoming more deeply involved in Tanzania gold mining.

Barrick Gold Corp. favors taking back control of its separately listed Tanzanian assets after completing its takeover of Africa-focused rival Randgold Resources Ltd., according to people familiar with the situation.

One gold mining industry veteran with an especially informed perspective on these developments is David Scott. Today, David Scott is President and CEO of Tembo Gold Corp. (TSX: V.TEM, OTCQB: TBGPF, Forum). Included in Scott’s 37 years of gold mining experience is 20 years spent in Tanzania itself.



Part of those 20 years was spent as Barrick’s Technical Services Manager at the previously mentioned 16+ million ounce Bulyanhulu Mine. For the Tembo CEO, it’s hardly coincidence that Barrick’s settlement with the Tanzania government quickly followed Bristow’s appointment at Barrick.

“The merger of Barrick Gold and Randgold, and the appointment of Mark Bristow as CEO of the group is very significant for the future of the gold mining industry in Tanzania. Resolution of the disputes between Acacia (the Barrick owned LSE listed operating entity in Tanzania) and the government will almost certainly reinvigorate gold exploration and mining in the country and re-establish trust and strong working relationships between companies and the government.

Bristow has a strong track record of building and maintaining robust corporate-government relationships based on trust and transparency through dialogue and his personal involvement and commitment. He has recognised and pursued relentlessly the benefit of mining activities to the governments, the people, corporate shareholders and other stakeholders in the jurisdictions of operations. It is time for our industry as a whole to re-establish sound relationships in this country, healing the differences of the past, and progressing to a new trusting and mutually beneficial future, and this resolution is an essential first step.”

Tembo Gold is certainly not a disinterested observer here. Based in Tanzania, its flagship Tembo Gold Project is located directly adjacent to Acacia Mining’s Bulyanhulu property. Tembo was one of the innocent bystanders in the Tanzania mining industry who became a casualty of this dispute.


(Visible gold from Tembo exploration)

With investment and operating conditions so poisoned in Tanzania, management reached the strategic decision to put operations on hold. The Company has been largely dormant over the past two years. But what is a mere “deal” for a mining behemoth like Barrick is nothing less than a rebirth for a junior mining company like Tembo.

Experienced mining investors who looked at this Company prior to the Acacia/Tanzania dispute would have seen a lot to like, starting at the top. Complementing the leadership of CEO Scott is Tembo’s Chairman, David Anthony. Anthony is another former Barrick executive also with deep experience in African gold mining, Tanzania, and Bulyanhulu itself.

Anthony is the former Process Manager for Barrick at Bulyanhulu, the Project Director for Tulawaka, Buzwagi mines and the COO for African Barrick Gold when the IPO was completed in 2009 – 2010. Anthony has acquired extensive experience in mine planning, design, and construction as well as mining operations. Together, some industry insiders have dubbed them the “Tanzanian Dream Team” for gold mining in that nation.


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Scott and Anthony have a strong asset to develop. To date, three mineralized zones have already been identified on the Tembo Property: Ngula 1, Nyakagwe East and Nyakagwe Village. However, the Tembo property is a huge, 135 square kilometer contiguous land package. This provides abundant potential for additional discoveries.

To date, close to USD$30 million has been invested in Project development, this includes approximately 42,000 meters of drilling spread among the three Zones at Tembo. Grades at Acacia’s 4 kilometer (long) by 2 kilometer (deep) by 2 meter wide Bulyanhulu deposit are exceptional: > 11 g/t Au.

Grades assayed in previous drilling at Tembo are certainly comparable. Highlights of previous intercepts include:

• 22.81 g/t Au over 15.00 meters, including 34.78 g/t Au over 9.70 meters
• 16.58 g/t Au over 3.55 meters and 27.88 g/t Au over 3.00 meters
• 35.14 g/t Au over 2.45 meters, including 167 g/t Au over 0.50 meters
• 10.17 g/t Au over 6 meters, including 19.1 g/t Au over 3 meters
• 3.13 g/t Au over 35.89 meters, including 4.46 g/t Au over 2.60 meters and 9.38 g/t Au over 6.30 meters

The Company has tested three targets with, in total, 2 kilometers of strike length of this high-grade mineralization. As noted above, these grades have been similar to (or better) than Bulyanhulu at numerous locations along this trend.

Tanzania is also an active jurisdiction with respect to artisanal mining. This small-scale mining is generally symbiotic with the activities of mining companies. Such crude, low-tech operations extract relatively small quantities of gold, but all these “boots on the ground” function as unofficial field exploration for companies like Tembo, often identifying new mineralized zones before mining companies can make such discoveries via traditional mining exploration techniques.

On the massive Tembo land package, roughly 1,000 of these artisanal miners are on the ground. Tens of shafts are active, with such mining delving to depths of as much as 30 meters. Where artisanal miners are abundant, so is gold mineralization.

With the Barrick/Acacia settlement, not only Acacia Mining has seen a positive reaction from the market. Ironically, the junior gold mining companies who were never directly involved in the dispute suffered even more than Acacia. Consequently, their rebounds have generally been even stronger. An Appendix below shows the charts for some of these companies.

Tembo itself has not yet benefitted from the settlement, despite its prime position, high grades, and advanced level of development. Why not? Capital.

Management wanted to wait until there was political/legal clarity before seeking to recapitalize. On February 12, 2019; Tembo announced a CAD$1,500,000 private placement.

Accompanying this financing is a 2:1 rollback. It’s a blow to existing shareholders. However, in the generally tough conditions for junior mining companies over the past few years, investors have seen many mining companies engage in much more extreme share consolidations.

Demonstrating their faith in the Company, several of Tembo’s major shareholders have already stepped forward to participate in the offering. Also included in this recapitalization will be a debt-to-equity exchange (at a steep discount), allowing Tembo to clear away debts incurred during the Barrick/Tanzania dispute.

More importantly, the Company will be able to immediately move forward on important operational milestones, including a resource estimate and scoping study or PFS. CEO Scott framed the opportunity here for investors.

“Tanzania is endowed with a highly prospective gold geology and remains underexplored. Tembo Gold is located on one of the most exciting pieces of geology in the country, hosting Tanzania’s largest high grade deposits, and with respect to the Bulyanhulu Mine of Acacia is almost “in the shadow of the headframe”.

The government recently redefined the rules of engagement between Tanzania and the international mining investment community and is now focussed on re-establishing the country as a favoured destination for such investment. The circumstances are now right for a renewed growth in exploration and mining activity in the country with the benefit being fairly shared between the parties. The government recognises the key role that positive resource exploitation plays in the development of the economy of the country and is pursuing ways and executing further changes to attract investors into mining once again.” [emphasis mine]


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Once recapitalized and given the strength of the Tembo asset, it’s reasonable to expect Tembo Gold to follow other Tanzania gold mining companies that have already seen strong rebounds due to the improved climate for mining. New investors who see the opportunity here and are interested in building a larger position may still be able to participate in Tembo’s financing.

Tembo Gold, its management, and its shareholders have endured a very dark night as result of circumstances in which it was completely uninvolved. However, as the gold sector itself shows increasing signs of life, there is a New Dawn for Tembo and gold mining in Tanzania, in general.


Appendix: charts for Tanzanian gold mining companies



www.temgogold.com



FULL DISCLOSURE: This is a paid article of Stockhouse Publishing.