Tanzania has been long seen as one of Africa’s brightest mining prospects. BHP, one of the world’s biggest mining companies, recently took a decision to invest $100 million in a nickel project in the East African country. On the other hand, TRX Gold Corporation (TSX:TNX, NYSE-A:TRX) already has a presence in Tanzania.
TRX Gold is currently working on its third processing mill expansion at its flagship Buckreef gold mine, which is about 45 kilometers (km) to the west of Barrick Gold’s Bulyanhulu gold mine and 35 km south from AngloGold Ashanti's (ASX:AGG) flagship Geita mine in Tanzania.
The Toronto-based low-cost gold producer has de-risked the project through a fully permitted special mining license to 2032. Buckreef has an oxide ore processing plant and mine that has consistently beaten production records.
“All the large miners like Barrick and AngloGold Ashanti (ASX:AGG) are in Tanzania so the country is rich in human resources,” TRX Gold CEO Stephen Mullowney told Proactive.
The Canadian company’s mine site is run by an entirely Tanzanian workforce.
A careful strategist and risk taker, Mullowney was a former managing director at PricewaterhouseCoopers LLP (PwC), who led PwC Canada’s high-profile Deals Mining Group for over a decade.
Record gold production
For its preliminary fiscal second quarter that ended February 28, 2023, TRX Gold produced 5,636 ounces of gold, a new record for the gold miner and in line with its previous production guidance of 1,600 to 2,000 ounces of gold per month.
The preliminary figure was higher than in the previous quarter, reflecting the first full quarter of the over 1,000-ton per day (tpd) processing plant operating at full design capacity since commercial production took off in November last year..
“Buckreef Gold’s production profile has been solid in the second quarter and continues to prove that this is a project that can be grown incrementally with the advantages of lowered risk, minimal capital costs and little to no shareholder dilution,” said Mullowney.
Near doubling of mill capacity
TRX Gold has announced that a 1,000 tpd capacity ball mill has been ordered for Buckreef. The company is committed to increasing Buckreef current average annual throughput of oxide ore by 75%-to-100%, through the addition of the new mill.
The company said its engineering consultants and operations teams who built the current 1,000-plus tpd mill, using larger tanks and agitators, had the “foresight” to create an opportunity for the short-term expansion.
"Once this project is delivered, it will be our third mill expansion at Buckreef Gold; phenomenal growth for a junior gold mining company within a 24-month period,” said Mullowney.
The near doubling of milling capacity is expected to boost Buckreef's gold production beyond current annual guidance of 20,000-to-25,000 ounces of gold. The company expects the commissioning of the project to transpire in early fiscal year 2024, benefiting gold production in the near-term.
Apparently, the ‘R’ in TRX stands for “rapid” production growth and investors have now come to expect nothing less from the gold miner. Analysts are also upbeat on TRX Gold after the firm’s recent solid set of full year results and its growth prospects for 2023.
Analysts at Alliance Global Partners (AGP) have a 'Buy' rating on TRX Gold and a $1.50 price target on its shares.
"Given our belief that much of the heavy lifting was completed at Buckreef during 2022, we expect 2023 to feature continued positive cash flow generation and gold production growth,” said AGP’s analyst.
"As such, we continue to view TRX as an undervalued low-cost gold producer with additional production growth and exploration upside on the horizon."
Exploration upside
The firm’s current exploration program is focused on the northeast extension, while expanded exploration programs will focus on resource conversion in Buckreef Main, Buckreef West and the discovery of a highly prospective new gold bearing tract in the Anfield zones.
The company’s business strategy consists of reinvesting positive cash flow from operations into exploratory drilling with the goal of increasing the current gold mineral resource and advancing the larger project well beyond two million ounces of gold.
“We're not developing this in the same way that others do by going out and raising millions to get 200,000 ounces on day one. We are developing this over time to get the ounce count out and the cash flow up in stages,” explained Mullowney.
“We're utilizing our cash flow to continue to grow the resource. In other words, we are growing production to grow the resource.”
Anchored by a mineral resource published in May 2020, the Buckreef gold project currently hosts an NI 43-101 measured and indicated mineral resource of 35.88 million tons (MT) at 1.77 grams per ton (g/t) gold containing 2,036,280 ounces of gold and an inferred mineral resource of 17.8 MT at 1.11 g/t gold for 635,540 ounces of gold.
Significantly, the company’s Buckreef gold project lies in the heart of the greenstone belt around Lake Victoria, where several large deposits have been discovered.
"Through drilling, it is becoming more evident with each batch of results that the Buckreef gold deposit has the potential for a much larger footprint and therefore project,” said Mullowney.
“We are currently awaiting assay results from drilling at the Anfield and Eastern Porphyry zones as well as from infill drilling all while we continue to increase gold production.”
TRX Gold’s exploration program will look for new trends, gold deposits and mineral resources at Buckreef. The company has drilled 24 drill holes representing 4,255 meters (m) in the southwest area and has a property-wide program of 9,000m of diamond drilling, 13,000m of grade control drilling and 10,000m of RC ‘sterilization’ drilling planned for fiscal year 2023.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive
