TANZANIA'S GOLD RUSH

On November 21 history was made in Nzega District when the first modem gold mine in the country to quarry gold extracted a 6kg piece worth $600,000 after 5 years of exploration and prospecting. This was at the Golden Pride Project at Lusu, 124 miles south of Mwanza, the site of a $50 million joint venture between Australian Resolute Mining and Canadian Samax Resources, the latter recently taken over (for a price of $ 135 million) by Ghana’s Ashanti Goldfields.

The Golden Pride Mine, which might become one of the biggest in Africa, sits on an estimated 2.7 million troy ounce gold deposit. It is an open-pit mine 1.67 miles long, 160 metres deep and 400 metres wide. A kilometre away from this open pit is the mine’s processing plant, which includes seven carbon-in-leach tanks, a five-tonne gold extraction circuit and a crusher. Annual production is expected to rise to as much as 150,000 ounces at a production cost of $210 per ounce -far below the world price of about $290 per ounce.

Things are looking up in the dusty city of Mwanza and its neighbouring districts. From early discovery up to 1965 Tanzania produced about 3 tonnes of gold per annum but virtually all production stopped following the imposition of widespread nationalisation under the Arusha Declaration. It is difficult to exaggerate however the potential for development of the country arising from this new gold rush. If all present investment plans come to fruition, Tanzania could be producing about 26 tons (855,000 ounces) of gold by 2001 representing some 10% of GDP compared with the present production of about 7 tons a year (2% of GDP) by small scale artisanal diggers.

Total reserves are estimated at some 20 million ounces.

Mining has started at several other new big mines:
The Kahama Mining Company at Buzwagi is being developed by Anglogold of South Africa (the world’s largest gold producer -some 200 tons per annum) and Pangea Goldfields of Canada. There are estimated to be about a million ounces of gold to be mined. Anglogold has vast resources of capital (some $20 million was available for investment in the second half of 1998) and is prospecting for gold at other sites in Tanzania. Also in Kahama District, at Bulyanhulu, Sutton Resources of Canada through the Kahama Mining Corporation Ltd., is prospecting deposits which might eventually total 7.2 million ounces. All this activity is bringing about major infrastructural improvements including the upgrading of 80 kms of road from Kahama to the mine site and the laying of a water pipeline from Lake Victoria.

Ashanti Goldfields, the 12th largest gold producer in the world, is investing $130 million in Geita District at Nyamulila Hill where there is estimated to be up to 2 million ounces. Ghana, whose gold production increased from 12 tons in 1988 to 56 tons in 1997 shows how rapidly gold production can be increased. An airport is being built at Geita, schools and dispensaries are being rehabilitated and there are plans to revive Nungwe Bay Port on Lake Victoria. Ashanti Goldfields is hoping to benefit from economies of scale through its newly acquired share of Golden Pride.

Also a new joint project involving the Tanzanian Defence Forces is expected to increase the benefit to the country by curbing smuggling and better organising the marketing.

Tanzania will obtain many benefits from. this new gold rush. The country will get royalties and, after the initial concessions to investors have been allowed for, considerable sums in income and corporation taxes. The recent imposition of VAT at 20% however has proved very unpopular amongst the investment community. There will also be employment opportunities and training in new skills for Tanzanians. Unfortunately, as the latest technology is being used, TA has been told that each mine will employ only about 200 people.

Tanzania is widely regarded as Africa’s best prospective exploration after Ghana for its geological potential and political stability. KPMG Peat Marwick Consultant Salim Bashir said that in the long-term mining would be the mainstay of Tanzania’s economy. Tanzania attracted more exploration expenditure in 1998 than any other African country -$57.70 million.

Anticipating this surge in mining the Eastern and Southern African Mineral Resources Development Centre has installed the first verification facility in Tanzania. It will assist buyers of gold and gemstones to determine the true value of what they wish to purchase. And the 1,500-strong Institute of Engineeers (IET) is intending to launch a division of mining and metallurgy to promote engineering technology for the fast growing mining sector.

Although during the last 18 months the Ministry of Energy and Minerals has issued more than 200 licenses for mineral exploration to local and foreign companies, the smaller gold exploration companies in Mwanza are finding it hard going because of the low gold price. In August last year it touched its lowest for 18 years at $270 an ounce but the price as this issue of TA goes to press is $295 per ounce. South African mines produce 400 tons a year but it is expensive to extract and the industry there is relatively stagnant as far as growth is concerned. Goldfield’s, South Africa’s second biggest gold company, has operating costs of $280 per ounce. It is anticipated that companies like Ashanti and especially Anglogold with their massive capital reserves and the latest cost-cutting technology will, before long, dominate the Tanzanian gold industry.

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