MDN’s focus on Tanzania is paying off with solid gold production

After South Africa and Ghana, Tanzania is Africa’s third-largest gold producer and MDN‘s (MDN-T) Tulawaka gold mine can claim some of the credit.

The mine, which poured its first gold in March 2005, churned out 54,251 oz. of gold in the fourth quarter ended Dec. 31 a new record for the company.

Montreal-based MDN reported gold production at the mine last year jumped 28% year-on-year, rising to 178,618 oz., up from 139,655 oz. in 2006.

Last year Tulawaka’s mill processed 433,921 tonnes of ore at an average grade of 13.66 grams gold per tonne, with a gold recovery rate of 93.6%.

As of Dec. 31, the mine’s total cash balances were US$28.7 million. Net cash flow from operating activities for the fiscal year was US$65.2 million and the mine’s operating profits jumped a year-on-year 75% to US$60.5 million.

“It’s a highly profitable mine with a high-grade open pit,” says Richard Corbo, an advisor to MDN’s chairman and chief executive officer, Paul Girard.

Total cash costs in 2007 averaged US$271 to produce an ounce of gold, compared with US$268 in 2006.

In total, MDN sold 176,508 oz. gold all of it on the spot market at an average price of US$709 per oz. last year. That price was up significantly over the average price in 2006 of US$606 per oz.

Higher gold prices translated into higher annual revenues of US$125.1 million, up 41% year-on-year from the 2006 tally of US$88.7 million.

MDN owns 30% of the Tulawaka project and the mine’s operator, Pangea Goldfields, a subsidiary of Barrick Gold (ABX-T, ABX-N), holds the remaining 70%.

MDN used its share of revenues (US$17.1 million) to whittle down debt.

The Tulawaka property lies 160 km southwest of the city of Mwanza in the western Lake Victoria goldfields district and about 1,000 km northwest of Dar-es-Salaam, Tanzania’s largest commercial city on the edge of the Indian Ocean

A paved highway from the railhead at Isaka to Burundi passes about 20 km south of the property, while the old road linking Dar-es-Salaam on the Indian Ocean to Burundi crossed the property 3 km south of the Tulawaka camp.

Gold was first discovered on the property in Sept. 1998 by drilling soil geochemical anomalies. The main gold deposit at Tulawaka is called the Eastern zone, which is currently being mined.

According to a bankable feasibility study completed in 2003, the East zone has an indicated gold resource of 1.9 million tonnes grading 11.30 grams gold per tonne or 691,600 oz. gold. The zone also has an inferred resource of 89,000 tonnes grading 7.02 grams gold per tonne or 20,100 oz. gold.

But those are old numbers, Corbo of MDN explains, and he hopes MDN and its joint-venture partner Barrick will work towards updating and confirming a new resource calculation as soon as possible. Under the initial bankable feasibility study, for example, the life of the open pit was estimated to be five years, but Corbo says that it will most probably be extended beyond that number when a new resource calculation is completed.

The East zone ore is free milling with coarse gold and recoveries of up to 98%. The processing system includes run-of-mine stockpiling, primary crushing, single stage semi-autogenous-grinding, gravity recovery followed by intensive leaching and carbon-in-leach gold extraction. A cyanide detoxification process is being used to recycle water to the processing plant prior to discharging tailings slurry to the tailings storage facility.

Mineralization is found in meta-sedimentary rocks, which consist of fine-grained laminated to coarse-grained bedded units and include silicate iron-formations. Several generations of mafic to felsic dykes cut the metamorphosed host rocks.

Apart from the Tulawaka mine, MDN holds 20 prospecting licences stretching across 700 sq. km, all of them within 50 km or trucking distance — of the Tulawaka mill. Those distances make developing the properties economic.

Of those licenses, MDN’s primary gold targets are Isambra and Viyonz, where the company spent US$4 million on exploration last year.

Isambara, a 40-sq. km property about 28 km north of the Tulawaka mine, has shown some encouraging drill results. They included 10.42 grams gold per tonne over 11 metres; 11.98 grams gold per tonne over 6 metres; 14.93 grams gold per tonne over 5 metres and 15.53 grams gold per tonne over 8 metres.

Viyonza, meanwhile, a 103-sq.-km property just 15 km north of the Tulawaka mine, posted drill results including 35.95 grams gold per tonne over 2 metres; 17.15 grams gold per tonne over 3 metres; 7.27 grams gold per tonne over 9 metres; and 13.34 grams gold per tonne over 4 metres.

MDN’s primary goal this year is to finalize resource calculations on the two licenced properties.

“It is viable with the price of gold being what it is now that you don’t need too much gold per tonne to be profitable, especially when you are talking about an open-pit resource and Isambara is looking quite promising,” says Corbo. “We’re looking at exploration drilling programs of US$5 million mainly on Isambara and Vivonza this year.”

News of Tulawaka’s gold production sent MDN’s shares on the Toronto Stock Exchange up 1 to 98 apiece on a trading volume of 269,051.