Jervois Mining in bid to win nickel-cobalt project in Tanzania

Australian junior developer Jervois Mining (ASX: JRV) may be successful in its bid to win control of the undeveloped Kabanga nickel-cobalt project in Tanzania under sweeping changes made to the east-African nation’s mining regime which have seen the project’s fate hang in the balance for eight months.

In January, the Tanzanian government cancelled 11 retention licences which were approved under the Mining (Mineral Rights) Regulations of 2018, as part of a broader strategy to claw back a bigger share of its domestic mineral wealth.

Retention licences are granted to mining companies when they identify a mineral deposit of potential commercial significance but cannot immediately develop it due to technical constraints, adverse market conditions or other economic factors.

The licence for Kabanga – situated in north-western Tanzania and believed to be one of the most attractive undeveloped nickel sulphide deposits in the world – was among those cancelled, despite being due to expire in less than 12 months.

Ten other licences targeting gold, silver, copper and rare earth discoveries have also been cancelled.

Kabanga is operated by the Glencore-Barrick Gold joint venture, which had spent more than US$250 million on exploration and pre-development activities since the late 1990s before mothballing the project in the mid-2000s in light of falling nickel prices.

Kabanga is currently the subject of a prospecting licence application by Glencore-Barrick, to replace the cancelled retention licence.

Jervois is believed to have also submitted an exploration permit application for the project.

New laws to distribute wealth

Once considered an investment-friendly country, the Tanzanian Government gave the region’s prospective mineral explorers serious food for thought in July 2017 when it brought in major changes aimed at increasing the domestic benefits of large-scale mining projects by foreign investors.

The changes were in the form of three bills which were fast-tracked through the Tanzanian parliament and signed into law by President John Magufuli.

The laws included potential re-negotiation of existing mining agreements, a compulsory 16% government ownership of mining projects and the government’s right to acquire up to 50% of foreign mining companies under certain conditions.

They also sought to raise royalties taxes for gold, copper, silver and platinum exports from 4% to 6%, in an effort to “distribute wealth to the Tanzanian people”.

“We must benefit from our God-given minerals and that is why we must safeguard our natural resource wealth to ensure we do not end up with empty mining pits,” President Magufuli said at the time.

Kabanga experience

Jervois may succeed in its efforts to snare Kabanga from the Glencore stable on the strength of its current leadership team.

Chief executive officer Bryce Crocker used to be on the Kabanga shareholder advisory committee in his days with Xstrata.

Chairman Peter Johnston had executive oversight of the project in his days as Glencore’s global nickel boss and executive management committee member from 2013 to 2015.

During this period, Mr Johnston was responsible for all of Glencore’s nickel-cobalt mine and processing facilities operations across Australia, Canada, the Dominican Republic, New Caledonia, Norway as well as the sole Tanzanian asset.

Both men have intimate knowledge of Kabanga and are believed to be well-positioned to help reclaim the project for Jervois to advance.

Jervois is forecasting to end 2018 with in excess of A$22 million in cash and publicly traded securities.