Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Tango’s economic studies for BK11 show potential for robust diamond mine

A new economic study for Tango Mining's diamond project predicts robust returns
Tango’s economic studies for BK11 show potential for robust diamond mine
Workers at BK11

It’s been swift work, but Tango Mining (CVE:TGV) has managed to turn around a preliminary economic study for the BK11 kimberlite pipe in Botswana just a few short months after agreeing terms for its acquisition from former owner Firestone Diamonds (LON:FDI).

Those terms have now been amended somewhat, and the date for full settlement put back till next year, but while that’s been going on the meantime the economics of the project have been confirmed.

Tango’s PEA shows the BK11 pipe to have a net present value of US$40mln at an 8% discount rate and excluding the overall US$8.8mln acquisition costs.

The cost to build the project is likely to be a modest US$15mln.

With production likely to run at an average of 90,000 carats of diamonds per year in the early years of a planned seven year life, the internal rate of return works out at a highly attractive 43%, including acquisition costs.

With those numbers in the bag, Tango can now turn towards the serious business of raising the capital necessary to complete the deal, specifically US$7.65mln still outstanding, plus the maintenance charges for the property, estimated at around US$40,000 per month.

The company also needs the relevant approvals from the government of Botswana and the Toronto stock exchange, although at this stage these should be relatively straightforward.

It all adds up to a project that presents a compelling case for development.

Diamond valuation experts have placed a conservative value on the stones likely to come from BK11 at around US$260 per carat, with an upside case that reaches up to US$285.

The diamonds are good quality white stones that should be fairly easy to sell.

In all, Tango expects at this stage that BK11 will generate revenues of around US$188mln, with each tonne of rock costing US$10.80 to mine and generating revenue of over US$20.00.

So the margins are clearly there, helped along by the high quality of the local infrastructure and the general, and widely accepted attractiveness of Botswana as a mining jurisdiction.

What’s more, the operations at BK11 come with US$45mln in tax losses, so in the early years the company will be able to retain a greater share of profits.

Tango also has the requisite expertise in place to bring BK11 into production, and given that the project is what is known in the jargon as a “brownfields” site, environmental and other permitting shouldn’t be too onerous a process.

After all, this is a country that was built on diamond production, that knows diamonds, and is highly influential in the diamond industry.

They do things properly in Botswana, but they will certainly not want to discourage a new mine from getting into production.

View full TGV profile View Profile

Tango Mining Timeline

Related Articles

project works
September 11 2018
The project is close to underutilised rail, road and gas infrastructure with access to key Asian markets through the Port of Darwin.
map showing Cobalt belt in East Ontario with projects marked
August 14 2018
A historical 8-tonne bulk sample from the Mulligan project averaged 10% cobalt grade.
November 01 2017
Pan Asia Metals is building strength in depth in South East Asia

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use