It’s taken four years, and several false starts, but the road blocks which have hindered the development of a world-class gold deposit by low-key OreCorp (ASX:ORR) appear to have been cleared with a share-price re-rating underway.

Over the past two weeks without many investors noticing, OreCorp’s share price has risen by 20 per cent — though if you look back a little further you can see a 100 per cent increase in the four months since mid-June with the stock rattling along from 20c to 41c.

What some investors have spotted is that OreCorp’s slow-motion Nyanzaga project in the east African country of Tanzania has moved to within sight of a development commitment.

Officially, the green light has not been given but a series of announcements, and an upbeat presentation by management at two US gold conferences last month, are part of a trail leading to a go-ahead, perhaps around the time of OreCorp’s annual meeting next month.

It was at the Beaver Creek Precious Metals Summit and Denver Gold Forum in Colorado that OreCorp’s chairman, Craig Williams, and chief executive, Matthew Yates, rekindled interest among professional and institutional gold investors.

OreCorp needed to re-boot Nyanzaga because after a promising start as far back as 2015 the project faded under the weight of corporate and government issues.

The location in Tanzania, where the government has tightened mining laws, was one concern of investors.

Read: Tough times for Tanzania explorers targeting ‘God-given minerals’

A second was that OreCorp acquired Nyanzaga from Acacia Mining a company particularly disliked by the Tanzanian Government.

Multiple uncertainties drained OreCorp’s support, and the share price which peaked at 68c in mid-2016 slid to 17c just 12-months later.

The recovery has been slow but there is a constant in the OreCorp situation which has not changed – the highly attractive geology of Nyanzaga and the appeal of developing a mine capable of producing 213,000 ounces of gold a year for at least 12 years at a very profitable all-in sustaining cost of $US838/oz ($1,221/oz).

Hints that OreCorp is back on track with Nyanzaga can be traced through the company’s steady stream of recent stock-market filings, starting with the takeover of Acacia by Barrick Gold, a move which was key to resolving a stand-off with the Tanzanian government.

Read: Kibaran says end to Barrick Gold-Tanzania dispute will bring back the money for mining projects

Then came settlement of outstanding government tax demands, followed by completion of the Nyanzaga acquisition which gives OreCorp 100 per cent ownership of the project.

While all that has been happening, OreCorp has hosted a site visit by Tanzanian government authorities which is being followed by the government formally acquiring a minority (16 per cent) interest in the project.


First big gold mine in awhile

With the paperwork largely complete, and the government keen to see the development of Tanzania’s first large-scale gold mine in more than a decade, it is becoming easier to see the business case behind the proposed mine.

Discovered the best part of a decade ago by Acacia, Nyanzaga failed to meet that company’s requirements despite the outline of an orebody containing at least 100 million tonnes of material assaying 1.3 grams a tonne for 4.19 million ounces of gold.

The low grade of the ore, and a gold price at the end of 2015 of little more than $US1000/oz, saw Acacia invite OreCorp to have a look at the numbers to see if there was an alternative development route.

Discovering that route is how OreCorp has brought value to the deal, because rather than thinking about a bulk mining development, a focused mining process which would concentrate on high-grade sections of the orebody has been designed.

At an estimated 213,000oz the OreCorp plan for Nyanzaga is less than half the size of what Acacia had been working on, with an estimated capital cost of $US287m a fraction of what Acacia had been considering.

Mining is expected to be a two-stage process with an open-pit down to 445m using conventional truck and shovel extraction, while work on an underground phase will start in the first year of the project, eventually replacing the pit as the primary ore source.

Because of Nyanzaga’s Tanzanian location and the entanglement with Acacia, very few investment analysts have kept abreast of the OreCorp story.

That will change because with gold now selling for around $US1500/oz that all-in sustaining cost estimate for Nyanzaga of $US838/oz means OreCorp is looking at a gross margin of $US662/oz.

The targeted annual output of 213,000oz points to annual cash flow approaching $US141m, or $210m on conversion to Australian dollars, which is close to double the company’s current stock-market value of $110m.

It’s been a slow, grinding, process for OreCorp as it has untangled Nyanzaga from the Acacia v Tanzania dispute.

But with a management team that has scored multiple wins in African mining, and an attractive orebody, OreCorp is getting ready to go mining.

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