By LM Louw
As Tanzania enters the final straight before general elections, my pick of the week is Twiga Minerals, a joint venture between Barrick Gold and the government of Tanzania.
While business prepares for another five years of John Magufuli, I am still scratching my head trying to decipher the man. The one thing that I know, however, is that a Magufuli defeat at the ballot box is highly unlikely. In fact, all indications point to a landslide victory for the President’s Chama Cha Mapinduzi or Party of the Revolution.
When an exploration company asked me about three years ago whether I regard Magufuli as a risk factor, I affirmed without giving the question a second thought. Although the President blows hot and cold, he blows hot more often than cold, and in that year, his temperature was way up in the red zone. Most of his rage was aimed at mining companies. Magufuli was a risk in 2018. He slapped Acacia Mining, then Tanzania’s largest gold miner, with a USD190-billion tax bill for failing to pay royalties on alleged undeclared exports. Acacia was close to dead in the water, but Magufuli continued stoking the fires, until they left and in 2019 Barrick Gold, under newly appointed ex-Randgold boss Mark Bristow gained full control of Acacia. Barrick settled the dispute by paying USD300-million and giving the government of Tanzania a 16% share in Bulyanhulu, North Mara and Buzwagi, the gold mining giant’s three operations in Tanzania. The joint venture, a unique partnership called Twiga Minerals Corporation, has African governments, mining companies, investors and the markets talking.
When trying to make sense of Tanzania, one needs to understand that John Pombe Magufuli is a socialist and revolutionary at heart. He grew up in a region where mining failed to uplift the local community. This makes it extremely difficult for him to trust foreign owned companies, especially when they play in the mining and exploration space. However, it does not mean that Magufuli is completely business averse. The current president understands the importance of foreign investment and private interests, but he is schooled in a dogma that the state should be the main vehicle for development, and nobody will ever change his views. Nevertheless, Magufuli is more amiable towards Barrick and Bristow now that the state has at least some say in the management of Bulyanhulu, North Mara and Buzwagi. With Magufuli seemingly satisfied for now, Twiga’s mines are sitting pretty in a region punted to grow significantly in a post-Covid-19 world.
“Barely a year after it was established, Twiga Minerals Corporation has demonstrated the value-creating capacity of a true partnership between a mining company and its host nation,” says Bristow.
Barely a year after establishing the JV, Barrick’s assets in Tanzania have paid more than USD200-million to the government in taxes and royalties, and Twiga recently declared a maiden interim dividend of USD250-million.
“The fact that so much value has been delivered in such a short time is a tribute to the power of what I believe is the first partnership of its kind in Africa. With the framework agreement now fully implemented, we have settled most of the landowner disputes and are well on our way to ensure that we are fully compliant with our environmental permits as well as with the government’s local content legislation,” says Bristow.
“A rehabilitated and re-energised North Mara mine is ahead of plan in the year to date. Bulyanhulu has resumed underground mining operations and is scheduled to restart processing of underground ore by the end of 2020 as a long-life underground mine.
“We are gearing up to potentially make North Mara and Bulyanhulu into a combined Tier One complex, capable of producing at least 500 000 ounces of gold annually for more than 10 years in the lower half of the industry’s cost profile one. We shall also be looking to expand the life of operations as well as other new Tanzanian opportunities within the Twiga framework,” says Bristow.
More exciting though, is that Barrick has been awarded 10 new exploration licenses in Tanzania and plans to spend a lot of money on exploration there this year. Tanzania has long been a favourite destination for geologists and exploration companies, and with Barrick also now calling in the rigs, I will be watching Tanzania with a hawk’s eye.