The government of Tanzania has made no secret of its desire to attract more investment in its burgeoning mining sector. Recently, it achieved its wish when the world’s biggest mining company, BHP (NYSE: BHP), confirmed it was planning to invest tens of millions of dollars in the country.
Identified as a home of “elephant” sized mineral deposits, the potential riches associated with the Tanzanian mining sector were highlighted when it was confirmed that BHP has agreed to invest US$90M to support the development of the giant Kabanga Nickel Project.
The initial stage of the transaction will see BHP invest US$40M in UK-registered private company, Kabanga Nickel Limited, to accelerate the development of the Kabanga Nickel Project.
In parallel, BHP has invested US$10M into Lifezone Limited to advance the roll-out of a patented hydrometallurgical technology to be utilized at Kabanga. Future investment tranches in Kabanga Nickel have also been agreed, including a second tranche of US$50M and the right for BHP to make a further investment in the project subject to achieving certain agreed milestones.
Kabanga is rated as the largest development-ready nickel sulphide deposit in the world with at least 30 years’ life of mine and further exploration upside.
Kabanga Nickel CEO, Chris Showalter, said an extensive amount of exploration and resource definition has been completed to date, setting the Kabanga nickel project on a well-defined path to production.
Based on approximately 600km of drilling, Kabanga’s previous owners, Barrick Gold Corporation (TSX: ABX) and Glencore (LSE: GLEN), published a resource estimate (measured, indicated and inferred) in 2014 of 58Mt of ore at an average in-situ nickel grade of 2.62%. Mineralization of the resource is greater than 95% massive sulphide.
Mr Showalter said the partnership with BHP highlighted the world-class nature of the Kabanga deposit and its importance in helping meet the crucial decarbonization challenge facing the world today.
“BHP is the ideal partner for Kabanga Nickel, bringing significant advantages and expertise that will enable us to move ahead with the project.
“BHP’s investment reflects the project’s strong ESG (environmental, social, and governance) credentials and its role in improving environmental performance throughout the nickel value chain.
“In addition, BHP’s funding support of Lifezone’s hydromet technology – the future of sustainable metals processing – will drive progress towards a greener world.
“Through development of Kabanga and Lifezone hydromet, Tanzania will have a growing role in the supply of the battery metals needed to move to a global low-carbon economy,” he said.
Transaction details
BHP will invest US$90M in unsecured convertible securities in Kabanga Nickel in two tranches:
An initial US$40M, followed by a further US$50M on successful agreement of definitive documentation and satisfaction of certain other conditions. The first tranche of US$40M will convert into an 8.9% equity stake in Kabanga Nickel. Once invested and on conversion, the second tranche of US$50M will increase BHP’s equity stake in Kabanga Nickel to 17.8%.
On satisfaction of additional conditions, BHP will secure the right to make a further investment in Kabanga Nickel subject to achieving certain agreed milestones.
Development acceleration
Mr Showalter said the investment into Kabanga Nickel from BHP will support an acceleration in the mine’s development, including an enhanced metallurgical drilling programme to enable update of the definitive feasibility study and support the construction plans for the hydromet refinery.
These studies are expected to be completed by the end of 2022. Site and infrastructure development is already underway. The investment will also support hiring and training of local Tanzanian talent. In welcoming BHP’s decision to invest in Kabanga, Tanzania’s Minister, for minerals, Doto Biteko, said the country has a vision to become an important hub for critical decarbonization minerals.
The current project development timeline anticipates first production in 2025. Output will ramp up to target a minimum annual production of 40Kt of nickel, 6Kt of copper, and 3Kt of cobalt.
Meanwhile, the investment into Lifezone allows for new patent applications as well as research and development work that will further commercialise the Lifezone hydrometallurgical technology.
Tanzania mining boom
Commodities mined in Tanzania incudes metals (gold, iron ore, nickel, copper, cobalt, and silver), industrial minerals (diamonds, tanzanite, ruby, garnet, limestone, soda ash, gypsum, salt, phosphate, gravel, sand, dimension stones, and graphite), and fuel minerals (coal and uranium). Tanzania is also home to many rare earth and critical minerals that are currently in the exploration stage.
Already home for several major international mining companies, including Barrick and AngloGold Ashanti (JSE: ANG), mining is a leading industrial sector in Tanzania with the value of mineral exports constantly increasing for the past several years.
Government data show that mining and quarrying activities made a very large contribution to Tanzania’s Gross Domestic Product (GDP) growth in the first quarter of 2021, with the sector recording 10.2% of the GDP.
Tanzania is now attracting growing mineral exploration interest in several parts of the country, with the sector attracting substantial new foreign investment, while local investment has surpassed US$1B
Junior interests
With a supportive government promoting Tanzania’s minerals riches, several junior miners are also making strong moves in the country. This includes Tanzanian Gold Corporation (TSX: TNX) which recently announced procurement and construction plans for an excess of 1,000 tonnes per day processing plant at the Buckreef Gold Project.
After analysing various options, the company confirmed that the most cost effective and timely approach to building a 1,000 tonnes per day processing plant was to self-construct this operation as an expansion to the 360 processing plant.
The company, through the Buckreef Gold joint venture with state-owned STAMICO, will operate the 360-tonnes-per-day operation while simultaneously advancing construction on the 1,000+ tonnes-per-day processing plant expansion.
The 1,000+ tonnes-per-day operation is expected to be capable of production 15-20Koz of gold per year based on the initial mine plan and grade profile.
Tanzanian Gold said the anticipated increase in cash flow from the processing plant will fund value enhancing activities at Buckreef Gold, including a robust exploration programme in the Buckreef Main Zone, Buckreef West, and the newly discovered Anfield Zone.
Evolution
Meanwhile, Evolution Energy Minerals (ASX: EV1) has received confirmation from the government of Tanzania that its prospecting licence PL 11034/2017 is in good standing after lodgement of a renewal application during 2021.
Pursuant to the terms of the share exchange agreement between Evolution Mining (ASX: EVN) and Marvel Gold Limited (ASX: MVL), Evolution has now paid Marvel a further A$1M, bringing the cash consideration for the acquisition of the Chilalo Graphite Project to A$2M. Evolution says it is committed to supplying sustainable graphite solutions for the global green economy and in doing so, create the first net-zero-carbon graphite mine.
A definitive feasibility study confirmed the opportunity to produce high-quality flake graphite at Chilalo and the company intends to apply Chilalo flake graphite to downstream processing to produce battery anode material, expandable graphite, micronized graphite, and graphite foil. The Chilalo Project hosts a high-grade mineral resource of 20.1Mt at 9.9% total graphitic carbon for 1,991Kt of contained graphite.
This article was amended on 26 January 2022 to clarify that Buckreef Gold is a joint venture between Tanzanian Gold and STAMICO.
