Tanzanian Gold’s Buckreef on course to be a significant gold producer, says CEO Stephen Mullowney

Tanzanian Gold’s (TSX: TNX; NYSE: TRX) Buckreef gold project, south of Lake Victoria and 110 km southwest of the city of Mwanza in north-central Tanzania, is on track to become the region’s newest gold mine, according to the company’s CEO Stephen Mullowney.

The project involves the re-development of the past-producing Buckreef underground gold mine operated by a state-owned mining company during the late 1980s. The mine closed in 1990 due to low gold prices and lack of working capital.

The Buckreef project area hosts over 1.2 km of continuous mineralization, with two key deposits: Buckreef Main, which is open in all directions, and Buckreef West. The company is also advancing work on four prospects:  Buziba, 20 km east of Buckreef Main; Tembo, three kilometres southwest; Bingwa, four kilometres east; and Eastern Porphyry, one kilometre east.

Tanzanian Gold is in the process of de-risking and advancing the project through the ramp-up of an open-pit oxide pilot treatment plant currently running at 4.5 tonnes per hour to a much larger plant of 36 tonnes per hour for an expected annual production of 15,000 to 20,000 oz. of gold.

The company has commenced the tender process with prospective engineering, procurement, and construction service providers for the plant, with production targeted for the first half of next year from an open-pit mining operation.

At the same time, the company has commenced a feasibility study for a sulphide plant. The study envisages a plant capable of processing up to 2.7 million tonnes of mineralised material annually and is expected to produce 150,000-175,000 oz. of gold per year. The study is due to be completed over the next 12-18 months.

In 2018, a prefeasibility study for an underground mine for the sulphide component of Buckreef envisioned a 16-year underground operation producing 51,000 oz. gold a year for total life-of-mine production of 822,000 ounces.

Initial capital costs were pegged at US$76.50 million, with US$22.95 million budgeted for sustaining capital over the life of the mine. The study estimated an after-tax net present value of US$130.96 million, based on a gold price of US$1,300 per oz. and using a 5% discount rate, with an after-tax internal rate of return of 74% and a four-year payback.

Last year the company updated Buckreef’s mineral resource estimate and outlined 35.89 million measured and indicated tonnes grading 1.77 grams gold per tonne for 2.04 million contained oz. of gold and 17.82 million inferred tonnes of 1.11 grams gold for 635,541 oz. of gold. The resource estimate used a cutoff grade of 0.4 gram gold.

Tanzanian Gold acquired a 55% stake in Buckreef from state-owned miner STAMICO in 2011. Under the joint-venture agreement, Tanzanian Gold is the project manager and STAMICO holds the remaining 45%.

The project lies within the Lake Victoria greenstone belt, Africa’s third-largest gold-producing region, which also hosts AngloGold Ashanti’s (NYSE: AU) Geita mine, about 13 km north of Buckreef, and Barrick’s (TSX: ABX; NYSE: GOLD) Tulawaka mine, 30 km to the west, and Bulyanhulu mine, 36 km to the east.

“We often find that projects located in greenstone belts can have quite straightforward metallurgy, which should allow us to advance Buckreef to production quickly,” Mullowney said in an interview.

In February, initial metallurgical testing of diamond core samples grading between 0.54 gram and 19.4 grams gold for the sulphide component of the project showed gold recoveries of between 85.3% and 95.4%. The company has already begun the process of pit modelling, one of the critical components of the feasibility study for the sulphide plant.

Buckreef’s proximity to world-class mining operations, noted Mullowney, means it benefits from good regional infrastructure and a local workforce with considerable mining experience. 

The project can be accessed all-year-round via a fully paved road from Mwanza to within 15 km of the project and then by unpaved tracks suitable for two-wheel-drive vehicles in the dry season and four-wheel-drive vehicles in the wet season.

It also benefits from being connected to the national power grid and existing infrastructure, which includes a defunct vertical shaft, open-pit and waste rock dump, a borehole for domestic water sources, heap leach pads, as well as office and accommodation buildings. 

“Buckreef is under a special mining licence permitted for oxide and sulphide operations, which allows it to advance from small production to large production without the need for re-permitting,” explained Mullowney, who joined Tanzanian Gold in December. Immediately prior to joining the company, he was a partner and managing director at PricewaterhouseCoopers (PwC) from 2007-2020, where he led PwC Canada’s Deals Mining Group, advising mining companies on mergers and acquisitions, capital raising, and strategic evaluation.

Since joining Tanzanian Gold, Mullowney has re-capitalised the company and shored up its balance sheet with two capital raises. The company now has about US$20 million in the treasury, which is “enough to fund our short to medium term business needs.”

He also set about changing the company culture, bringing on a new management team. In February, Andrew Cheatle, a renowned geoscientist and industry thought leader on environmental, social, and governance (ESG) matters, was appointed chief operating officer, and in March, Michael Leonard, who spent 17 years at Barrick Gold and has extensive investor relations, financial planning, and business development experience, as chief financial officer.

“Bringing Andrew and Michael on board was a major accomplishment as they both bring significant experience and new thinking and insights to the company,” Mullowney says. “We’re moving to a more entrepreneurial-type organisation, where the management team acts more like owners and can generate ideas to move the project forward.”

In particular, the appointment of Cheatle reflects the company’s increasing focus on ESG issues and recent changes to Tanzanian mining legislation, which places an increased emphasis on meeting the needs of local communities.

“Beyond the mineral potential of Buckreef, what also attracted me to this project is that the timing is right is to implement our ESG and CSR [Corporate Social Responsibility] programs by considering the impact of the project on the United Nations sustainability goals,” Cheatle said in the same interview.

Since acquiring its 55% stake in the project, Tanzanian Gold has completed preliminary due diligence of previous exploration work, including approximately 30,000 soil samples, 202,000 metres of RC drilling, 124,000 metres of air-core drilling, and 28,000 metres of diamond core drilling conducted by Iamgold (TSX: IMG; NYSE: IAG) between 2006-2010. It has also started its own exploration work.

Earlier this year, a four-hole (374-metre) drill program completed at Buckreef West identified over 400 metres of shallow mineralisation, which remains open along strike to the north and south and at depth. 

Highlights included drillhole BWDD0018, which intersected 7 metres grading 2.03 grams gold per tonne from 44 metres, and hole BWDD031, which returned 2.5 metres of 7.29 grams gold from 46.1 metres, including 0.5 metres of 4.46 grams gold.

Tanzanian Gold plans to conduct a 1,000-metre drilling program to provide samples for metallurgical variability testing and to upgrade mineral resources currently in the inferred category, with drilling slated to start by the end of next month. 

The company also plans step-out drilling on the northeast and south extensions of the Buckreef Main deposit.

“There is a great opportunity to accelerate this project extremely quickly and to generate value as we transition from exploration to production,” said Mullowney. “There is also significant exploration upside at the project too. So, it’s very exciting times for us.”