New Market Research Report: Tanzania Mining Report Q1 2011

Recently published research from Business Monitor International, "Tanzania Mining Report Q1 2011", is now available at Fast Market Research
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* Uranium
* Tanzanian
* Gold
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* Diamonds

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Jan. 4, 2011 - PRLog -- Atomic unveils BFS for Mbalawala

In September 2010, Atomic Resources announced the results of its bankable feasibility study (BFS) for the Mbalawala coal project, located within the Ngaka coal field. This study assumed capital expenditure on the project of AUD205mn to develop a conventional open-cast pit. Atomic is developing the project in a joint venture (JV) with the National Development Corporation of Tanzania, known as Tancoal Energy.

The BFS states that Mbalawala has a JORC-compliant mineable resource of 40mn tons of coal and that the project could support a production rate of around 1.5mn tonnes per annum (tpa) for a mine life of 25 years. The BFC also upgraded the combined coal resource of the Mbalawala block by 18%, from 212mn tonnes to 251mn tonnes. At the same time, Atomic has identified an exploration target range of between 160-320mn tonnes for its Mbuyura and Mkapa blocks, which remain relatively underexplored.

We have long held the view that coal should become one of the fastest-growing mining sub-sectors in Tanzania over the coming years, as the country looks to coal-fired power stations to offset an energy shortage that is holding back its development. The country could also be in a position to export coal in the future.

New Mining Act Passed

In April 2010 Tanzania passed long-awaited changes to its 1998 Mining Act. The main changes are: an increase in the royalty rate levied on precious and base metals from 3%, to 4%; an increase in the royalty rate levied on diamonds from 5% to 6%, with a flat rate of 7% for uranium and a standard 3% for any other minerals; the requirement that the government hold a stake in all future mining projects (the amount to be determined on a case-by-case basis); and the view that all mining companies operating in Tanzania should be required to list on the local stock exchange (although it is unclear whether this last point is legally enforceable by the Act). The revised Mining Act 2010 also bans the issuing of any new gemstone mining licences to foreign companies and calls for the government to set aside specific areas for artisanal miners to operate in.

Initial reaction to the new Mining Act has been negative, with several mining companies reportedly issuing a statement through the Tanzania Chamber of Minerals and Energy, describing the legislation as 'distorted' and warning that it could erode investor confidence. There has also been concern expressed that the new Mining Act does not go far enough in setting a clear long-term policy framework for the sector.

In our view, we believe that the clear long-term potential of the Tanzanian mining sector should outweigh any short-term blow to confidence as a result of these legislative changes. Indeed, it can be argued that Tanzania is only following a similar course of action to that seen in other African countries of late (such as Ghana) in seeking to raise royalty rates in order to increase their share of their nations' mineral wealth. As such, BMI maintains a positive outlook on Tanzania's mining sector in Q111.

Country Overview

The Tanzanian mining industry is relatively small in terms of value, but its importance is highlighted by the fact that mining earns a significant share of the country's export revenues. The mining sector contributes approximately 2.3% to annual GDP, but the government wishes to expand this to 10% by 2025. Major foreign investors in Tanzanian mining include African Barrick Gold (ABG) and AngloGold Ashanti.

Tanzania is home to deposits of many metals and minerals, including: coal, cobalt, diamonds, gold, nickel and uranium. The country has long been a significant producer of gold (currently Africa's fourth largest producer) and diamonds. However, in the coming years, we also expect coal, nickel and uranium production to become key sub-sectors of Tanzanian mining output.

Industry Forecast

We are optimistic on the outlook for Tanzania's mining industry, forecasting average annual growth of 7.7% over our forecast period to 2015. Gold production should increase as new projects are developed, with large-scale commercial coal and uranium mining also likely to commence over the coming years. Nickel mining should also commence, with two major mining companies developing projects in country.

Company coverage shift from Barrick to African Barrick Gold

In February 2010, Barrick Gold spun off its African operations into a separate subsidiary company, African Barrick Gold (ABG). ABG has four producing gold mines in north west Tanzania - North Mara, Bulyanhulu, Tulawaka and Buzwagi - which together produced some 716,000oz of gold. A 25% stake in ABG was floated on the London stock exchange in March 2010 in an IPO which raised some GBP58mn. For BMI's Q111 Tanzania Mining Report, we have decided to switch our company coverage from the parent company Barrick, to the Africa-focused ABG. For the first nine months of 2010, ABG has reported net income of US$139mn and revenues of US$633mn.

Over the same period, attributable production was up by 4%, to 521,204oz. However, the company now expects a drop-off in production over the final quarter of the year, in light of the suspension of some 40% of its workforce who are suspected of being involved in onsite fuel theft at its Buzwagi mine.

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Tags:Mining, Tanzania, ACT, Uranium, Uranex, Tanzanian, Gold, Projects, Coal, Diamonds
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