OreCorp is developing its Nyanzaga project in Tanzania, which has all the makings of a gold success story. We take a closer look at the project’s future.
In March 2021, Tanzania swore in Her Excellency Samia Suluhu Hassan as its new president following the death of previous leader John Magufuli.
This signalled the revival of the African nation’s mining sector as Her Excellency looked to reconcile relations with miners and drive new investment into the industry.
President Hassan announced her desire to improve the economic contribution of the mining sector to at least 10 per cent of Tanzania’s gross domestic product (GDP) by 2025. In 2019, the industry represented 5.2 per cent of the country’s GDP.
President Hassan’s appointment also coincided with the approval of OreCorp’s special mining license (SML) to develop the Nyanzaga gold project in the Lake Victoria Goldfields of north-west Tanzania, for which the company had applied in 2017.
The SML was granted to new joint venture company, Sotta Mining Corporation, for an initial term of 15 years. OreCorp holds an 84 per cent interest in Sotta through its subsidiary, Nyanzaga Mining Company. The Government of Tanzania holds the remaining 16 per cent stake as free carried interest.
OreCorp executive chair Matthew Yates said the SML has opened the floodgates for the company.
“We always knew that Nyanzaga was a world-class deposit, and we just needed the permit and the opportunity to build it,” he told Australian Resources & Investment.
“Then we finished the definitive feasibility study (DFS). Henk (Diederichs) led the DFS team as chief operating officer and did a brilliant job to deliver what is a very high margin gold project with an excellent production profile.”
OreCorp announced Nyanzaga’s DFS in August, demonstrating a project capable of producing an average of 234,000oz per annum across 10.7 years. Peak gold production is expected to be 295,000oz per annum, with Nyanzaga to average 250,000oz per annum across the first eight years.
The pre-production capital cost is $US474 million, which includes underground development, open-pit pre-strip, plant and associated infrastructure, and $US36 million of contingency.
A high-margin project with an all-in sustaining cost of $US954/oz, the pre-tax net present value of Nyanzaga is $US926 million, with an internal rate of return (IRR) of 31 per cent based on a $US1750/oz gold price. The payback period is 3.7 years.
OreCorp is targeting first gold from Nyanzaga in the first half of 2025.
The next priority for OreCorp is financing Nyanzaga, with an initial focus on shoring up the project’s debt profile.
“We’ve started a debt funding process for the project,” Yates said. “So we’ve appointed Auramet International, a debt advisor which has offices all over the world.
“Auramet will basically scour the globe talking to banks and other financial institutions looking for potential lenders who will put money into these projects.”
Yates said OreCorp was looking for “competitive debt” in the mining industry. To support this search, the company has established a data room with all the relevant documentation for the Nyanzaga project.
“Debt discussions are going very well on two fronts,” Yates said.
“Firstly, we’ve had a lot of interest from financial institutions and we’ve got several CAs (confidentiality agreements) signed and people active in the data room.
“Secondly, we believe that in the not-too-distant future we’ll start receiving confirmations of interest – whether that’s binary or not – and an idea of the extent of this.
“We consider the carrying capacity of Nyanzaga, because of its robust margins, to be extremely high and we feel you could debt finance maybe 60 or 70 per cent of the project, which goes a long way to mitigating the equity issue.”
In late November, OreCorp announced it had more than $US400 million of debt funding in the pipeline, with non-binding expressions of interest signed by European, African and Tanzanian banks.
The $US400 million total well in excess of the $US300 million debt target, and there could be more to come, with OreCorp and Auramet in discussions with several other financial institutions regarding further funding support for Nyanzaga.
Yates said that to achieve the greatest financing success, it’s critical to have the right asset at your disposal.
“Ultimately, you need to have the right ingredient to start with, which is a solid project with a high production profile, high margin, and longevity. Nyanzaga delivers on all three,” Yates said.
Diederichs, who was recently promoted to managing director and chief executive officer (CEO) of OreCorp, with Yates shifting to executive chair, said OreCorp was also advancing other priorities at Nyanzaga, such as early contractor engagement.
“We are preparing for early contractor engagement or the FEED (front end engineering design) phase of the project, which will put us in a position – when we get to an FID (final investment decision) – to then place the long-lead items and commence early construction work shortly thereafter, by mid-2023,” he told Australian Resources & Investment.
“Then we’re focused on the rest of the construction activities for the next 18 months to two years until we start the commissioning activities for first gold production by mid-2025.”
Yates said his appointment as executive chair means he can focus his efforts on Nyanzaga’s financing, while Diederichs takes charge of project development.
“Once we got to the DFS phase, my role started to move more into financing and progressing that side of the business, whereas the incoming CEO needs to be a lot more focused on the project and how that’s all going to come together – the systems, processes and timelines,” he said.
Yates and Diederichs commenced their new roles from OreCorp’s annual general meeting (AGM) on November 16. Craig Williams retired as OreCorp chair at the conclusion of the AGM.
Accompanying Nyanzaga’s economic potential, the project also has strong green credentials. Yates said once the Julius Nyerere hydropower station is up and running, 71 per cent of Nyanzaga’s power would come from hydropower (currently 36 per cent from hydropower), with the remaining 29 per cent from natural gas.
There is also the potential to further uplift Nyanzaga’s renewable capacity.
“There is scope as the project moves forward to contemplate electric underground fleets, as well as the potential use of hydrogen in the open-pit fleet,” Yates said.
“The hydrogen-versus-battery race is running now, as we know, and once you’ve got the first hydrogen truck up and running, as an industry we could potentially look to start generating hydrogen.
“You can only do that if you’ve got plentiful amounts of competitively priced electricity and water, which is exactly what we have today (at Nyanzaga).”
With the DFS complete and the SML granted, OreCorp has a clear runway to elevate its Nyanzaga gold project into production.
In doing so, Tanzania’s renewed economic aspirations are set to get a major boost.
This feature appeared in the December issue of Australian Resources & Investment.