Tanzania stocks get a lift as Magnis wins breakthrough with government deal
Link copied to
Junior Australian explorers with projects in Tanzania were buoyed by good news stemming from negotiations with the government following months of uncertainty and concern.
Tanzania’s energy and minerals ministry halted the export of unprocessed ore a year ago this month, following President John Magufuli’s call for the construction of more processing plants in the African country.
On Friday, Magnis Resources (ASX:MNS) revealed it had secured an agreement with Tanzania that allowed it to retain full ownership of its Nachu graphite project and receive tax breaks.
Magnis jumped nearly 24 per cent to 52c just after market open on Friday before closing up 10.7 per cent at 46.5c.
Cradle Resources (ASX:CXX) climbed as much as 10 per cent to an intra-day high of 11c before edging back to 10.5c.
Cradle has a 50 per cent stake in the Panda Hill niobium project in Tanzania. Niobium is used to strengthen alloys such as stainless steel.
The company had its proposed $55 million takeover bid by private equity-backed Tremont Investments called off when the legislative changes were introduced.
OreCorp (ASX:ORR), which is exploring for gold in Tanzania, gained 4.4 per cent to end Friday at 24c and lithium player Liontown Resources (ASX:LTR) rallied nearly 3 per cent to 4c.
Here is a list of ASX stocks with exposure to Tanzania:
|ASX Code||Name||Price change Mar 9||Price Mar 9, 2018||Price before export ban (Mar 1, 2017)|
|BKT||Black Rock Mining||0||0.05||0.12|
Although the deal Magnis struck covers the processing of graphite, it has positive implications for other Australian resources players.
The government recently made several changes to its Mining Act, including compulsory 16 per cent government ownership of mining companies and the cancellation of retention licences, that rattled ASX-listed resource plays.
“Our companies in negotiation have said that the President [John Magufuli] seems to be in listening mode at the moment,” said Bill Witham, head of the Australia-Africa Minerals & Energy Group.
“Apparently there is another draft of the regulations coming out shortly and certainly providing a lot more clarity about process and timing. I think we’ve seen a substantial turnaround in the government’s engagement probably in the last two or three months.”
AAMEG has been briefing the Australian Department of Foreign Affairs and Trade on the matter.
The legislative changes were aimed at encouraging more in-country processing of minerals rather than exporting raw material straight out of Tanzania.
The Export Processing Zone Authority has been tasked with promoting and facilitating the establishment of Special Economic Zones (SEZ) to host minerals ore beneficiation industries linked to a value chain of associated downstream industries.
Magnis is the first emerging graphite producer to receive a SEZ licence.
To date the majority of existing SEZ licence holders are in the agriculture processing, assembly and engineering, and textile and apparel sectors.
Things are likely to ramp up now that the new mines minister, Angellah Kairuki, has returned from maternity leave and the mining commission is about to be formed.
“You’ll probably see a lot of decisions being made and it sounds positive,” Mr Witham told Stockhead. “It sounds like they’ve realised they need to approve projects to go forward to get investment.”
Still some concern
However, there is still the issue of recently cancelled retention licences – a holding title for a project that gives a company more time to develop the resource and secure financing.
Indiana Resources (ASX:IDA) holds a retention licence for its Ntaka Hill nickel project. The company has put its project on the backburner and picked up some prospective gold ground in Mali.
Liontown, meanwhile, had its application for a retention licence for the Simba resource within its Jubilee Reef project rejected.
It is believed there were only a small number of retention licences previously granted, including for the Kabanga nickel project, which is jointly held by Canadian mining heavyweight Barrick Gold and Switzerland-based Glencore.
The government has been in a drawn-out dispute with Barrick and its 63.9 percent-owned subsidiary Acacia Mining, which has three operating gold mines in Tanzania.
“On the face of it they’ve lost those licences, but we still hope that there will be some sort of opportunity for them to get back onto that ground,” Mr Witham said. “That’s still a big concern.”