New Tanzanian president’s mining approach could bode well for OreCorp, Peak and Strandline Resources
Tanzania’s new President Samia Hassan appears to have a more welcoming approach to foreign mining investment in the country.
A big win by a private British company in Tanzania has brightened the outlook for a number of ASX-listed explorers getting close to development commitments in the east African county with the potential for significant share-price appreciation.
OreCorp (ASX: ORR), Peak Resources (ASX: PEK) and Strandline Resources (ASX: STA) are in a group of Australian companies attracted to Tanzania by its rich geology only to be caught in a government approvals logjam that came to a head in the infamous US$190 billion Acacia Mining tax demand.
The value gap among Australia’s Tanzanian exposed explorers can be measured by OreCorp’s $0.67 share price and a price target (plus buy tip) from Perth stockbroker Euroz Hartleys of $1.90.
Much of the OreCorp price difference can be traced to the reputational damage done to Tanzania from that massive tax bill levied on London-based gold miner Acacia in 2017 by the Government of Tanzania when led by the populist President John Magufuli.
The claim was based on an allegation that Acacia had been exporting more gold than declared because it was being shipped out as a mineral concentrate rather than smelted locally into bullion.
A settlement was eventually reached, including the payment by Acacia of US$300 million in back taxes, followed by the takeover of the company by Canada’s Barrick Gold, but the dispute had the effect of consigning Tanzania to the investment sin bin as far as foreign investors were concerned.
New Tanzanian president has different approach
The ice started to break earlier this year with the ironic death from COVID-19 of President Megafuli, who had denied the existence of the disease, and the elevation of Samia Hassan who has brought a more rational approach to foreign investment.
Mrs Hassan is believed to have been instrumental in the issuing of a special mining licence to Kabanga Nickel, the current owner of the Kabanga project which has previously attracted the attention of several big miners, including BHP (ASX: BHP), Glencore and Anglo American.
Rich in nickel, copper and cobalt, the Kabanga project was always seen as too remote to justify development, and then too difficult because of the Tanzanian Government’s demands for processing to take place in the country.
Kabanga Nickel has solved the processing problem by opting to use a hydrometallurgical (acid based) refining system previously employed in South Africa’s platinum industry with the result being a high level of metal recovery in Tanzania, which has pleased the government.
The reward is a special mining licence, the key piece of Tanzania’s permitting system for big projects, with the full approval of the country’s president, effectively clearing the way for Kabanga Nickel to develop a project containing metals equating to a grade of 3.21% nickel, or 7.3% copper.
Good news as that is for Kabanga Nickel, which is believed to be heading for a listing on the London Stock Exchange, it also signals that the Tanzanian approvals logjam is breaking, potentially clearing the way for Peak, Strandline, OreCorp, and other miners to proceed after years in limbo.
Peak Resources
Peak, for example, has seen its application for a special mining licence approved by the cabinet of the Tanzanian Government, but is waiting for the final sign off by the country’s president, so it can proceed with its world-class Ngualla rare earth project.
In its latest presentation to investors, Peak noted the pro-business policies of President Hassan as well as singling out the award of a special mining licence to Kabanga Nickel last month as a sign of change in the country.
Once a special mining licence is received, Peak will be able to proceed with development of the Ngualla project which includes final processing of rare earth concentrate in Britain.
On the stock market, Peak has slipped from a high of $0.14 in July to last trades at $0.069, valuing the company at $135 million.
Strandline Resources
Strandline, which is focused on the Coburn mineral sands project in WA, has been working towards final government approval for its relatively small Fungoni sands project in Tanzania while also making progress with the bigger Tajiri sands mine.
On the market, Strandline has been trading around $0.20 for much of the year, valuing the stock at $218 million.
OreCorp
OreCorp, which traded up to $1.05 earlier this year, has also been in decline as the Tanzanian Government approvals process drags on and despite the appeal of a world-class gold deposit at Nyanzaga in the northwest of the country, and an exceptionally high-grade management team.
In almost any other country Nyanzaga would be in production given its resource of 3.07 million ounces of gold, which OreCorp reckons can be produced at a rate of 213,000oz a year over an initial 12-year mine life at an all-in sustaining cost of US$838/oz.
Like Peak, OreCorp has won Cabinet level approval for its mine proposal but is waiting on the special licence which Kabanga has just received.
Euroz Hartleys commentary
Euroz Hartleys said the changes in the Tanzanian Government “bode well for future government relations, as the country starts to open up to more foreign investment”.
For Australian investors who have an aversion to Africa the situation in Tanzania could be a factor in taking a fresh look at the opportunities in the country, and while the continent deserves an overall sovereign risk discount what’s just happened at Kabanga Nickel is encouraging.