Tanzanian Royalty Strikes Deal With Kazakh Africa

Tanzanian Royalty Exploration Corp.’s (TNX-T, TRE-X) shares climbed 5% to $4.39 per share following news it had signed an agreement with Kazakh Africa Mining involving its diamond licences in the Mwadui area of Tanzania’s Lake Victoria Greenstone Belt.

Under the deal, Kazakh Africa can acquire a 100% interest in Tanzanian Royalty’s diamond licences in the Mwadui project area by fulfilling various option payments. Tanzanian Royalty will then receive a gross overriding royalty (GORR) of 1.5% on all diamonds sold.

The agreement is a good fit with Tanzanian Royalty’s strategy of building business relationships with “entrepreneurial-minded, independent- thinking, technically competent industry partners who share our vision of the mineral potential in Tanzania,” the company’s chairman and chief executive, James Sinclair, said in a statement.

Two directors on Kazakh Africa’s board hold “prominent positions” with the Almatyenergoservice, an energy company with substantial hydrocarbon reserves in Kazakhstan, the largest of the former Soviet satellite republics.

“While the business climate has certainly slowed, we see no concerns expressed by partners about the long-term prospects for mineral commodities,” Sinclair noted. “The willingness to consummate deals is there, it’s just a question of immediate corporate responsibilities and, of course, timing.”

Tanzanian Royalty is particularly interested in working with emerging economies, he added, “whose leaders think longer term” and where “industrialization programs have been put into place that are unencumbered by high-risk, short-term, politically expedient policies that are so pervasive in the West.”

Kazakh Africa plans to evaluate the Mwadui licences, which are known to host alluvial gravels.

The Mwadui licences encompass 886 sq. km. The project area is within the northern part of the Shinyanga- Mwadui greenstone belt, where explorers have been looking for diamonds for many decades.

Also in the area is the Williamson diamond mine, which hosts the huge Mwadui kimberlite, about 160 km south of the town of Mwanza on the shores of Lake Victoria. The kimberlite pipe was discovered in 1940 by J. T. Williamson, a Canadian geologist, and has produced over 17 million carats of high-quality diamonds.

In addition to diamonds, Tanzanian Royalty is exploring for gold and base metals.

“Jim (Sinclair) has been in Africa for quite some number of years — probably for almost twenty years or more — so strategically he sees Africa and Tanzania in particular as a source of mineral commodities for places like China and India,” David Duval, Sinclair’s special adviser, told The Northern Miner.

Duval says Tanzania has had very good relationships with China and other important developing countries for decades.

He notes that Sinclair likes working with companies from emerging economies (like Kazakh Africa) and is looking to do other deals on his nickel and gold properties.

“He looks at the health of these companies in terms of their exposure to derivatives and things like that,” Duval explains, noting that many big companies have taken on tremendous amounts of debt and that one of the first things that start to go in an economic downturn are their foreign exploration projects and their agreements with other companies.

Sinclair believes companies from emerging economies are better bets, Duval says.

“He sees the Chinese and a lot of these emerging economies as better partners for these types of situations than probably some of the larger mining companies who have historically, in his view, not been all that nice to junior companies in terms of their dealings with them and the types of deals they are prepared to negotiate with them.”

Tanzanian Royalty’s flagship project is the Kigosi gold deposit in Tanzania, which Sinclair is financing himself by buying shares in the company.

On Jan. 30, the company released assay results from a multi-phase drill program completed late last year.

Diamond drilling within Kigosi’s Luhwaika main zone and the newly discovered Igunda zone, 2.5 km southeast, confirmed that each of the zones extend to depth and enhance the property’s resource potential. The program confirmed depth extensions to drill-targeted veins (reefs), along with open-pit potential in near-surface gravels and hard rock vein material.

Among the higher-grade gold intercepts reported within the Luhwaika prospect area were 2 metres grading 9.4 grams gold per tonne; 2 metres averaging 7.06 grams gold; 3 metres at 6.38 grams gold, including 1 metre of 15.96 grams gold; 5 metres grading 2.93 grams gold; and 1 metre at 10.1 grams.

One 2-metre interval in gravel returned 6.64 grams gold, including 1 metre averaging 12.95 grams gold. Reverse-circulation drilling of the Igunda discovery returned values including: 1 metre of 35 grams gold; 2 metres grading 4.58 grams gold; and 2 metres of 3.27 grams gold.

In announcing the results, Sinclair pointed out that the depth extensions “are consistent with deposits found in some of the world’s largest gold-mining camps.”

At presstime, Tanzanian Royalty was trading at $4.76 per share. The company has a 52-week trading range of $1.99-6.37 per share and 88.86 million shares outstanding.