Several of African Barrick Gold's (ABGLY.PK) high grade mines in Tanzania are hosted in greenstones within the Lake Victoria Greenstone Belt. Bulyanhulu has an 11 million oz reserve (after having been mined since 2001) and produced 260,000 oz in 2010 with an average head grade of 9.2 g/t. This highly profitable mine cost only $280 million to build and is producing gold at $539 an oz cash costs. The Bulyanhulu deposits are described as steeply dipping reefs with widths typically in the 2 - 5 meter range. Their high grade makes them very profitable.
The Bulyanhulu mine is similar in style, grade and width to some of the other mines in the Lake Victoria region of Tanzania and some of the other Archean greenstone belts in Sub-Saharan Africa including DR Congo and Zimbabwe. ABGLY greenstones are well developed with stable production and the $1.8 to $2 billion market cap reflects this stability. Emerging explorers still provide significant upside potential with lower market caps such as Loncor Resources (LON) in the $100 million range and Whetstone Minerals (WMITF) and Tembo Gold (TEM) and in the $15 to $20 million range.
Bulyanhulu Represents the Bulk of African Barrick Value
Compared to African Barrick's other mines, North Mara (also greenstone), Tulawaka (greenstone) and Buzwagi (porphyry), Bulyanhulu is larger and of higher grade as seen in Chart 1.1. Beyond what has been discovered, African Barrick is also focused on the untapped exploration potential available in the region. In fact, according to African Barrick's website: "The ABG Group holds one of the largest land packages in Tanzania over highly prospective greenstones … in the Lake Victoria Greenstone Belt."
African Barrick Gold
Proven & Probable
Proven & Probable
Proven & Probable
Proven & Probable
Current Exploration Potential in Africa's Greenstone Belts
The greenstone belt that lies southeast of Lake Victoria, and potentially extends north west into the DR Congo, has provided discoveries of over 57 million oz of gold to date. In production are AngloGold Ashanti's (AU) 20 million oz Geita deposit (discovered by Peter Cowley - President LON, when Mr. Cowley headed up Ashanti Exploration), grading around 5.3 g/t and African Barrick's 11 million oz Bulyanhulu deposit, with an average grade of 11.3 g/t among others. New companies are also joining the effort to discover and extract more gold from this prolific region.
Tembo Gold (TEM), which listed on the Toronto Venture exchange on February 22, 2012, has a 125km2 contiguous area consisting of 80km2 of active licenses and 45km2 of pending applications located adjacent to African Barrick's 20 Moz (mined and current resource) Bulyanhulu Mine in the prolific Lake Victoria Greenstone belt.
Currently there are over 2,000 artisanal miners on Tembo's property operating over 100 shafts with limited capital and technology, and are mining grades of 9 to 20 g/t according to Tembo Gold. In the past 12 months, Tembo has successfully raised over $15M privately and through their listing financing in order to recapitalize the company and fund their 2012 exploration program.
Historic drilling on the property has demonstrated encouraging results including 9.8 g/t over 3.4 m, 10.25 g/t over 3.5 m, and 36.0 g/t over 1.0 m according to the company website. These historic drill results, combined with the extensive underground artisanal workings and airborne geophysics have identified several high priority targets to be tested with their planned 87,000m drill program.
Tembo's founding management team which owns 30% of the issued and outstanding common shares, is composed of successful professionals with extensive local experience. CEO David Scott has 32 years experience including 13 in Tanzania part of which was as the technical services manager at the neighbouring Bulyhahulu mine. Tembo's Chairman, Dave Anthony was the former COO of African Barrick and has 30 years experience with 10 in Tanzania. A strong, well financed management team working a prime gold region should bear strong shareholder gains in today's gold environment.
Tanzania contains additional exploration potential as indicated by Clarity Capital, through its wholly owned new Tanzanian exploration company Mwamba Minerals which holds approximately 61,000 sq KM of prospecting licences over the central Tanzanian craton. Recently, using country wide geophysical data, a number of different workers have identified the potential within this totally un-explored area for a series of previously unknown greenstone belts.
North of Lake Victoria in what appears to be an extension of the greenstone region crossing over the border into the DR Congo where Loncor Resources is exploring the Ngayu Greenstone Belt. Loncor controls over 2,000 sq KM of Archean greenstone and has initiated a technical services agreement with Newmont Mining (NEM). Loncor has advanced its exploration program through its technical services agreement and initiated drilling. With strong intercepts in the first 51 holes of their Makapela prospect, including 64 g/t over 4.3 meters, and averaging in the 10 g/t range, Loncor has stepped up its current drill program and now has 5 drill rigs working to delineate its first deposit and explore additional highly prospective regions of the property. Newmont, with its 17.8% position in Loncor could be a logical candidate to take over the company if and when additional large deposits are delineated. The style of mineralization is similar to Bulyanhulu in terms of grade and width. These are early days for Tembo and Loncor but investors should expect strong news flow throughout 2012.
Another frontier of untapped greenstone exploration is in Zimbabwe. The Zimbabwe Craton hosts numerous greenstone belts with Whetstone Minerals (WMITF.PK) controlling a central position in one of the largest belts. Whetstone was recently launched by Allan Dolan - founder and a significant shareholder of African Minerals (AMLZF.PK), the U.S. $2.5 billion iron ore producer in Sierra Leone.
WMITF has assembled a strong management team, board, and advanced gold exploration portfolio. WMITF's exploration team is headed by Steve Smith, who has over 20 years experience with significant Sub-Saharan Africa exposure including being part of the Anglo American team that made initial discoveries of two multi-million ounce gold deposits.
Notwithstanding Zimbabwe's economic challenges and investor perceptions, Zimbabwe offers gold explorers and miners some very attractive features. The country, having been well developed pre and post independence boasts extensive hydro and road infrastructure within gold exploration regions. There exists extensive penetration of paved roads which reduces development costs for miners and speeds development. Hydro, although suffering from periodic brownouts throughout the cities, can be purchased by miners under premium service contracts which favour uninterrupted electricity to mining projects. One of the main attractions of Zimbabwe is the vast tracks of explored but largely untapped gold resources throughout the country's Archean greenstone belts.
These greenstone belts were explored by settlers and locals from the early 1900's to the 1970's. Development however, suffered from two main issues. Land holdings were generally small and miners were poorly equipped to fully exploit their gold discoveries. These conditions led to subsistence mining with minimal planning and development. Undercapitalized miners, tended to mine high grade quartz vein hosted and or oxide deposits to a shallow depth only. They ignored substantial lower grade halo zones surrounding the high grade quartz as they had many choices of high grade deposits well within their local vicinity.
As a result, thousands of small artisanal pits of varying widths from several meters to up to an estimated 10 meter widths currently exist throughout the greenstone belts to indicate where additional gold deposits may be developed. Previous mining activity saw widths up to 50 meters. The depths of these pits extend down to only 20 or 30 meter depths typically. These early miners had cut off grades of sometimes 10 and 14 grams per tonne gold.
WMITF has been left with potential halo zones at surface, in easy to mine relatively low grade oxide zones. In addition, Archean greenstone belts, as evidenced by Bulyanhulu, and Loncor, extend into the earth's crust for many hundreds of meters and in some cases, thousands of meters. However, at around the 30 meter depth, the rock changes from an oxide deposit to a sulphide deposit. Sulphide deposits require more metallurgical processing which increases the capital costs and the technological requirements to release the gold from the surrounding host rock.
Technology for dealing with sulphide deposits has been developed within the last 50 years. Although not as simple or cheap as pouring cyanide and water over rocks (heap leaching) to release the gold, these issues have been addressed by many companies for many years. One of the keys to dealing with metallurgical issues is to have the critical mass of gold deposits to justify working out the specific processes and building the plants. This is a key strength of WMITF's large land position.
With over 6,000 documented historical mines throughout Zimbabwe greenstone belts, and only a small number of well equipped miners exploiting these deposits, the ability to amass the necessary land packages and mining rights has been proved out by Whetstone Minerals and its sister company (and shareholder) Clarity Capital. Clarity and Whetstone have a historical and internal resource (non 43-101 compliant) estimate of more than 4 million oz of gold.
Whetstone gold mining claims include more than a dozen past producing, but underexploited mines which significantly reduces exploration risks. With these large positions Whetstone management has the ability to demonstrate the continuity of these mines and prove out the world class size potential of these deposits. Although historical mining focused on small claim areas for exploitation, a consolidated approach will likely result in world class deposits in the multimillion oz size range. Patient investors should be rewarded by positioning in these vast untapped greenstone belts throughout Sub Saharan Africa.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.