Financial Times
Gold open for business in Tanzania
Optimism is growing that the country offers fantastic prizes and the government will involve foreign investors, writes Mark Turner
Next year could be great for mining and exploration in Tanzania. Despite some discouraging news that South African JCI was pulling out, the launch of Golden Pride, Tanzania's first large-scale gold mine, confirmed what the optimists had been saying for years. After decades of false starts, obstructive governments and price uncertainty, Tanzania's vast gold potential stands its best-ever chance of being realised.
In a continent where South Africa and Ghana have dominated exploration, optimism has been growing for the past three years that east Africa's sleeping giant offers some fantastic prizes, and that - more importantly - the government will involve foreign investors.
Metals Economics Group, a Canadian consultancy, says Tanzania has attracted more exploration expenditure this year than any other African country, including South Africa, with spending in non-ferrous minerals reaching $57.7m, some 13.3 per cent of the African total. That compares with $59.3m last year - only 9.8 per cent of the total $606.6m - behind South Africa and Ghana.
Over the next five years, gold production is expected to triple from five to 15 tonnes a year, and maybe more, recently inspiring the resource information unit in Perth, Australia, to describe Tanzania as having more gold potential than any other country north of the Limpopo river.
This interest is not a new phenomenon. Since the 1900s geologists have highlighted Tanzania's attractive geology, with the rich greenstone belts around Lake Victoria bearing a remarkable resemblance to the eastern goldfields of Western Australia and Canada.
What has changed is a recent turnround by a government previously characterised by socialist self-reliance and a distrust of foreign interference. A new investment code exempts foreigners from import duty on equipment and sales tax, and crucially allows the repatriation of profits.
Continual battles over VAT, which increases drilling and analysis costs by 20 per cent, have led to a strong war of words between government and the industry, but few doubt that - in principle at least - Tanzania is now open for business.
Golden Pride, a joint venture between Resolute Resources and Samax Gold, produced its first gold ingot at the end of November, and is expected to produce 150,000 ounces a year at $210 an ounce: far enough below world prices of $300 to be very viable. Optimism over the project and other Samax holdings recently prompted Ghana's Ashanti Goldfields to buy the Canadian company outright.
Sam Jonah, Ashanti chief executive, said this year that subsequent consolidation would open the way to one of the biggest gold mines on the continent, with an output of about 400,000 troy ounces a year at a cost of $180 an ounce.
Other companies, still concerned about gold prices, are playing a game of wait-and-see, and it will not be clear until 1999 whether this year's activity will be replicated. Nevertheless, few doubt the potential is there - it appears more a matter of when, rather than whether, Tanzania's minerals will be exploited.
Sutton Resources' Bulyanhulu project is well advanced and contains an estimated 7.2m ounces of gold, while Tanganyika Gold boasts a prospect with resources of more than 750,000 ounces. Anglo American's Buzwagi is estimated to contain 1m ounces. Its Nyamulilima Hill reserves could exceed 2m ounces.
"This prospect looks destined to come on stream in the next five years," said Julian Ogilvie Thompson, chairman, in June. Recent speculation that Anglo-American was losing interest has been quashed, while word has spread that Australian miner Delta is looking for new investments.
Samuel Lwakatare, chairman of the Tanzania Chamber of Mines, is optimistic. "We are headed for a turning point where previously the mining sector was dominated by exploration," he said, adding that the country could produce 26 tonnes a year by 2001 - 10 per cent of gross domestic product.
That would be a profound turnround from the current situation, where Tanzanian gold mining is dominated by thousands of artisanal diggers, who produce only seven tonnes a year and account for just 2 per cent of the country's GDP.
Dar es Salaam also hopes to boost this sector with Meremeta, a recent joint venture involving the Tanzania military, which will organise artisanal marketing and curb smuggling.
Gold is not the only encouraging prospect. The Kabanga nickel project, a joint venture between Anglo American and Sutton Resources, has the potential to produce 100,000 tonnes a year of concentrated ore containing 15 per cent nickel, 1.2 per cent cobalt and 2.5 per cent copper, with a minimum life of 14 years.
Tanzania is already a significant diamond producer with exports worth about $15m for the past two years, mostly under the control of Williamson Diamonds, a De Beers subsidiary. The government has also highlighted commercial opportunities in phosphates, salt, kaolin, coal and tin.
Nevertheless, companies still complain that high levels of bureaucracy, complicated taxation and inadequate electric power are hampering progress.
Perhaps most irritating is the state of Tanzania's crumbling roads. "A well-maintained infrastructure is critical to the development of the mining industry in Tanzania," says Matthew Yates, from Tanganyika Gold
|
