Tembo looks for fresh start in Tanzania

Restructured and re-listed, Tanzania-focused Tembo Gold (TEM-V) is looking to finally take a thorough look at its prospective land package sitting adjacent to African Barrick Gold’s (ABGLF-Q, ABG-L) Bulyanhulu gold mine in the Lake Victoria gold fields.

The company has held parts of its 123-sq.-km land package for a decade, but questionable management and the financial crisis led to what was then called Lakota Resources going bankrupt and delisting in 2009, with not a whole lot to show for its efforts.

The old management team were ushered out with the help of major shareholders Tom and William MacNeill in 2009, but it wasn’t until 2011 that the company got its affairs back in order. Settling debts and filing overdue audited statements for past years, the company was cleared to trade again in mid-2011. Shortly after being cleared to trade the company brought on another new management team, raised funds, changed its name and got to work on the property.

Trading publicly again as of Feb. 22, the company has planned an ambitious 87,000-metre drilling program for 2012 to see just how similar the Tembo property is to its neighbour Bulyanhulu, which hosts 10.6 million reserve oz. gold.

The first few drill results are already out, with a range of values in the seven drill holes. Diamond drill hole 4 cut 26 metres grading 3.13 grams gold per tonne from 41 metres downhole, including two half-metre intercepts grading 36.3 grams gold and 20.1 grams gold. Diamond drill hole 5 returned 4 metres carrying 10.76 grams gold from 154 metres downhole; hole 10 cut 2 metres of 4.48 grams gold from 190 metres depth; and hole 11 hit a half-metre of 1.84 grams gold. 

In reverse-circulation (RC) drilling, hole 13 cut 3 metres of 16.1 grams gold from 19 metres depth, while hole 4 hit nothing and hole 5 cut 3 metres of 1.8 grams gold from 156 metres depth.

Tembo director and vice-president of corporate development Marc Cernovitch says in a phone interview that the results are encouraging, especially for the first results from the new drill program. Cernovitch notes that the neighbouring Bulyanhulu orebody is 2 metres wide, 4 km long and 2 km deep, so anything that fits that model is encouraging.

“Anything above a couple metres at plus-ten grams is what we’re looking for, and we saw some of that, so we’re pleased,” Cernovitch says.

The company is targeting the drill program on the property’s southeast region, the nearest to Barrick’s property, and is focusing on areas of concentrated artisanal work. Thanks to a light detection and ranging survey the company conducted on the property, which helps pinpoint artisanal adits, Tembo has identified more than 2,800 shafts on structures that run northwest parallel to Bulyanhulu, northeast, and east–west covering over 10 km on the property. Ore from the workings consist mainly of quartz vein and sheared metavolcanic host, with abundant evidence of sulphide.

Once in full swing, Tembo will be using four diamond drills to conduct 27,000 metres of drilling on the well-established targets, and three RC drilling to complete 60,000 metres on less-defined targets. The whole drill budget is $14 million for the year.

The ambition of the program contrasts what had been accomplished by the previous management team, with Cernovtich noting that “the company was mismanaged, to be polite.”

The new management team looks especially suited to the task. David Scott, president and CEO, was formerly technical services manager for Barrick in Tanzania and has 13 years of experience in the country; David Anthony, chairman, is the former chief operating officer of African Barrick Gold and brought three out of four of its Tanzanian mines to production; and several directors are well connected to the financial industry.

Tembo has $13 million on hand, and will almost certainly be financing sometime this year to finish its program. The company has raised close to $20 million in the past few months, all of it while private.

Owing to sizeable insider financing and legacy ownership from its Lakota days, founders and management control about 30% of outstanding shares. A September private financing included 78.3 million units at 3¢, though shortly after the financing the company completed an 18-for-1 share rollback, bringing total outstanding shares from 478 million to 26.6 million. A combined brokered and non-brokered financing of $14 million a month later was priced at $1.

Since listing, Tembo’s share price has gone from $1.25 to a high of $2.15 before retreating to $1.50. While still climbing however, two officers of the company reaped some profit, with chairman David Anthony selling 34,000 shares at between $1.70 and $2.10, plus a further 40,000 shares at a little over $1.70 through a trust, and director Robert Sedgemore selling 70,000 shares at between $1.30 and $1.96. The two have hardly liquidated their stocks though, with Anthony holding 140,000 shares directly and 145,000 in a trust, and Sedgemore holding 280,000.