TANZANIA – Tanzanian Gold Corporation has secured U$14 million (TSh32.5bn) flexible financing agreement from RiverFort Global Capital Limited and Yorkville Advisors in a major boost to increase gold production at Geita based Buckreef Mine.
In a statement, TGC’s Executive Chairman, James Sinclair said the financing will be structured in two tranches of which U$7 million will be advanced between close and the filing of a registration statement with the US Securities Exchange Commission while the remaining U$7 million will be advanced over time upon reaching certain milestones.
“The past 18 months of work from a talented team at Buckreef and our entire organization represent an incredible period of progress and value creation for our company,” Sinclair said in the statement.
“We have dramatically grown our resource base at very low cost, increased the scale and scope of what we now feel will be the next world-class mine in Tanzania and have begun to unlock the tremendous blue-sky potential that exists with our continuing exploration and development programs.”
The proceeds of the financing will be utilized for a significant expansion of the Buckreef Project oxide mining and processing operation, general corporate purposes, the advancement of a feasibility study for the larger sulphide mining complex, and the continuation of multiple drilling programs, the statement noted.
“Critically, we have now become a gold producer. The financing announced today will ensure rapid expansion of oxide gold production, and by the end of the term of this agreement, we should reach our goal of becoming cash-flow positive,” he added.
Tanzanian Gold has developed a scope of the project to expand the oxide processing plant to the range of 40 tons per hour as the basis for discussion with State Mining Company and regulatory approval. Details of the plant expansion will be announced in the immediate future, the company stated.
The first tranche is essentially a low-cost equity financing as the investors will seek to convert the debenture into common shares. In order to help maintain an orderly market for the company’s shares, there are limitations on the number of shares the investors can trade at any given moment.
The second tranche is essentially a low-cost unsecured debt financing as dilutive conversions of the debentures into common shares are at the discretion of the company. Investors can convert at any time at the fixed conversion price, the company’s statement noted.
The company expects that the size of the first tranche will fund orders of long lead items for the oxide plant expansion while the additional tranche will provide the company with additional financial support and flexibility to complete the plant expansion and other related expenditures.
Furthermore, the company believes that this approach to funding an expansion helps de-risk the project for the company’s shareholders without diluting a significant upside, the TGC statement stated.
This comes at a time when the government has expressed optimism after gold prices hit a new high in the world market.
Gold struck a record high of US$1,944.71 in Asian trading recently as traders piled into the “safe haven” investment, a status that is a product of the characteristics that have long made the metal useful in finance.
The new price is well above its previous record of US$1,921.18 per ounce in 2011. It later pulled back somewhat.
The rise of gold prices is even good news for Tanzania where the precious metal is now the leading foreign exchange earner. Gold exports overtaken that of tourism which has been hit by Covid-19.
The increase in gold exports was attributed to increase in both production volume and price.
Commenting the development, the commissioner for minerals Mr Zephania Maduhu said sine Tanzania is also part and parcel of the trend in the global prices, the price increase will boost the country’s revenues.
“We will benefit as a country in the value of gold charges that include royalties, service levies as well as the taxable income will also increase,” he said.
In May, gold was sold at US$1,531.37 per troy ounce, up from US$1,257.35 recorded in similar month last year, the central bank report stated. Prospects are better following the increase of prices in the world market.
Liked this article? Subscribe to DealStreet Africa News, our regular email newsletter with the latest news, deals and insights from Africa’s business, economy and more. SUBSCRIBE HERE
