Tembo Gold Corp. is a Canadian-based company focusing on development of prime gold exploration targets in Africa.
In February, we visited Tembo’s gold project in Northern Tanzania, near African Barrick’s Bulyanhulu mine.

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Tembo Gold Corp. – Site Visit

Introduction

Tembo Gold Corp. is a Canadian-based company focusing on development of prime gold exploration targets in Africa.
The company holds a portfolio of prospecting licences and licence applications for gold in the Archean greenstone belts of Tanzania. This region of Tanzania is one of Africa’s most prolific gold camps and is host to a number of world class gold mining operations, including Barrick’s Bulyanhulu Mine.
In February, we visited Tembo’s gold project in Northern Tanzania, near African Barrick’s (LON:ABG) Bulyanhulu mine.

Tanzania

According to the World Bank, Tanzania has sustained high economic growth and macro-economic stability over the last decade, driven by structural reforms and steadily increasing levels of exports, becoming one of the best performers in Sub Saharan Africa. Growth in gross domestic product (GDP) has been between 5% and 7% in recent years, with the drivers of growth over the past decade being mining, construction, communications, and the financial sector. Tanzania is considered to be one of Africa’s most mining-friendly investor destinations.

The project

Tembo Gold currently holds a licensed area over 125km², on strike with African Barrick’s Bulyanhulu mine, one of Tanzania’s high-grade vein systems, with a resource base of over 20 million ounces in all categories. The Tembo licenses were owned by Lakota Resources, a resource company which went bankrupt in the aftermath of the 2008 global crisis.
The project might be one of the easiest ‘nearology’-games played ever, as they clearly lie in the extent of the Bulyanhulu-veins, and earlier exploration has confirmed the presence of gold mineralization. The recently released grab samples seem to confirm the continuity of the gold veins.

2012 exploration program

The company tends to complete a 87,000 meter drill program this year, and drilling has started in January. There currently are five drill rigs on site (three diamond and two RC rigs), and three other rigs are on their way to Tanzania, scheduled to arrive by the end of this month.
The company plans to release a first internal conceptual resource estimate by the end of Q3, which should give us a first indication about how big this system could be.

Artisanal operations

There currently are over 2,000 artisanal miners digging ore out of the ground, with not much more than a pickaxe and wheelbarrows. As you can see in the pictures, these people only have limited possibilities to extract ore economically.
This artisanal activity is very helpful to Tembo, as these people are able to expose veins at no cost to Tembo.
The bigger problem will arise when Tembo wants to start developing the project, in a few years from now. Tembo will obviously have to provide them with a backup-plan, should they need to be removed from the site.

As Tembo is the legal owner of the claims, it could ask the Tanzanian authorities to force these artisanal miners out of the property, but it is doubtful the company will take such drastic measures. It therefore is extremely important to continuously be in touch with this local population to listen to their needs, and address their problems.
One of the solutions proposed by CEO David Scott might be to send the local workers one truckload of ore per day. This plan has two advantages for these local miners; First of all they don’t have to go down in their shafts anymore, which are extremely dangerous.

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Secondly, by providing them with assistance to extract the gold on an environmental-friendly base, the artisanal miners would no longer have to use mercury to extract their gold. If this plan goes ahead, it’d be a win-win situation, and we’d definitely chose this option over a forced expropriation.

The game plan

As both CEO David Scott and chairman Dave Anthony have more than enough hands-on experience in mining operations in Africa, it’s safe to assume that developing the Tembo-project themselves would be the preferred option.
We would however not be surprised if a senior miner would be interested in buying Tembo out. If one makes the comparison with African Barrick’s Bulyanhulu mine, Tembo could be quite a profitable operation, if there are similarities to Bulyanhulu.

Barrick Gold put Bulyanhulu into production for less than $300M, and the operation generates in excess of $250M in annual cashflow at a gold price of $1600/oz. Obviously Tembo Gold will have to drill a lot of holes in the dirt before we can assume approximately the same operating details as the Bulyanhulu mine, but it illustrates the possible viability of this project.

The management team

David Scott – President & CEO

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• Former Technical Services Manager for Barrick Gold’s subsidiary Kahama Mining Corporation; responsible for all Technical Services at Bulyanhulu including on-mine
  exploration activities
• Over 32 years of African exploration and mining experience with 13 years in Tanzania
• Extensive knowledge of Tanzanian geology including direct experience at Bulyanhulu
• Substantial government and industry contacts in Tanzania

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Dave Anthony – Chairman

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• Former COO of African Barrick Gold and member of executive team that took ABG public
• 10 years in Tanzania: responsible for design, construction and operation of 3 of 4 worldclass Barrick operations (Bulyanhulu, Buzwagi, Tulawaka)
• Government and industry network in Tanzanian mining industry
• Held multiple senior positions with gold and base metal mining companies (Barrick, Cominco, Hudson Bay M&S, Royal Oak Mines, Cliffs Natural Resources)

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Robert Sedgemore – Director

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• Former Global Mining Specialist with IFC, a division of the World Bank
• Managed and prepared scoping, feasibility studies, engineering services and project delivery support for capital projects up to $2.5B USD
• Significant EPCM projects include Codelco Cu Refinery, Escondida phase 3 & 3.5, BHP Tintaya Cu Oxide, Piedras Verde Cu, CAL Energy Zinc, and the Escondida Oxide project

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Pierre Julien – Director

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• Extensive involvement in Bulyanhulu process plant design and delivery
• Former President and CEO of Norcast Castings, major international supplier of grinding technology and former President of Outotec North America, global leader in the supply of mineral processing plants, technology and services
• Seasoned Executive and Founder of Lincoln Strategic and ORE+PROS Inc, mining industry service providers

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Conclusion

The Tembo Gold story seems to comprise of the right people in the right place at the right time. After several talks with CEO Scott and chairman Anthony, we are very confident they are the right people to lead Tembo’s exploration and possible development program over the next few years.

Based on the successful artisanal mining operations, it’s quite evident there’s gold in the ground there. The only questions now are how much gold there is, and how easy it will be to extract it in a large-scale operation.

We are looking forward with confidence to this year’s drill program, and by the end of this year we’ll probably know whether or not this might be Tanzania’s next multi-million ounce project.
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Disclosure: Over the past 12 months, the author acted as placement agent for Tembo Gold, and received a finders fee in shares for his services. The author visited TemboGold’s project in Tanzania in February 2012, and all of his costs have been reimbursed by the company. Please see our disclaimer for current positions.