Tanzania: Canada’s TRX Gold may raise debt in 2023 to help fund Buckreef expansion

By David Whitehouse
Posted on Wednesday, 21 December 2022 10:04

The Buckreef project in Tanzania lies just south of Lake Victoria. Photo supplied.

Canada’s TRX Gold may seek to raise debt as part of its plan to expand production at the Buckreef project in Tanzania, CEO Stephen Mullowney tells The Africa Report.

The company, which trades on the New York and Toronto stock exchanges and is currently debt-free, may seek to raise bank debt or project financing during 2023, Mullowney says, without giving an amount.

TRX began production at Buckreef in North-Central Tanzania in the second quarter of 2022 and was profitable in the year to 31 August. The plan is to use the cash flow from operations for more exploratory drilling. “The snowball has been pushed down the hill and will get larger,” Mullowney says, adding that the current licence offers a “plethora” of potential targets.

Buckreef is within 45km of mines owned by Barrick Gold and AngloGold Ashanti. The target is for production of 20,000 ounces to 25,000 ounces of gold in 2023. The potential exists to increase that to 150,000 ounces to 200,000 ounces, Mullowney says. “This plant should be a lot larger.”

  • The company is evaluating a project aimed at increasing average annual throughput by 75%-100% through the addition of a new ball mill. A final decision on whether to build the mill will be taken in 2023.
  • The cashflow will also be used to evaluate the company’s sulphide development project. About 90% of Buckreef’s gold resources exist in sulphide material.

Rebuilding reputation

Tanzania is Africa’s third-largest gold producer. Former President John Magufuli alarmed investors in 2017 when he awarded the government a 16% stake in all mining projects, and increased gold and diamond royalties. President Samia Suluhu Hassan, who came to power in March 2021 after Magufuli’s death, is “repairing” the country’s reputation, Mullowney says.

The Policy Perception Index – published by the Fraser Institute – shows that Tanzania improved its score in 2021, climbing to 67th out of 84 jurisdictions surveyed, versus 75 out of 77 in 2020. This meant that Tanzania bucked the African trend, as all other African jurisdictions, except Namibia and Mauritania, which had declines in their policy scores. Miners in the survey cited reduced concerns on regulatory duplication and inconsistencies, and less uncertainty on enforcement of regulations and disputed land claims.

Mining already accounts for over 50% of the country’s exports by value, and Tanzania aims to raise the share of its GDP from mining to 10% by 2025. The country, which has minerals, such as nickel, graphite, tanzanite, sapphire, cobalt, diamond and gold, will have a “much better jurisdictional rating over time”, Mullowney says.

Some gold explorers, such as Centamin in Egypt, prefer to specialise in exploration and let others develop the mines. Mullowney is confident that TRX can continue to perform both roles. “Why raise equity for exploration and then sell the asset?” he says.

Tanzania’s mining skill base underpins his confidence.

  • Universities in the country have succeeded in creating a deep skill pool, which can support the company’s current and future projects, Mullowney says. The workforce at the Buckreef site is 100% Tanzanian.
  • Mullowney says the company is willing to consider having multiple assets in the future “if it makes sense for shareholders”.
  • The company is willing to consider other countries, but the project would have to be at least as good as Buckreef, he concludes.

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