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Tango Mining’s Terry Tucker hits the funding trail after study gives thumbs up to BK11

Tango Mining has delivered an economic assessment for the BK11 kimberlite pipe that highlights the potential for robust returns
Tango Mining’s Terry Tucker hits the funding trail after study gives thumbs up to BK11
Tango's diamonds are high quality stones

“The mine is 12 months to production upon completion of financing,” says Terry Tucker of Tango Mining Limited (CVE:TGV).

The mine he’s talking about is the BK11 kimberlite diamond mine in Botswana, currently the subject of an ongoing US$8.8mln deal between former owner Firestone Diamonds (LON:FDI) and Tango.

With Firestone pushing ahead with construction at its US$185mln Liqhobong diamond project in Lesotho, BK11 has become less of a priority.

But for a company like Tango Mining it has the potential to be a company maker, as a recently released preliminary economic assessment shows.

For an up-front development cost of just US$15mln, Tango’s study shows that BK11 is capable of delivering gross mine revenues over the seven year mine life of US$188mln.

The post-tax discounted net present value of the project is US$40mln, excluding acquisition costs, while the internal rate of return rings in at a highly attractive 43%.

Small? Yes, but it has the potential to be beautiful too.

“The results were better than I’d hoped for,” says Tucker. 

But the reasons aren’t hard to find.

In large part it’s because of the input of newly appointed chief operating officer, Devin McKay.

He went back and reviewed the original processing plan and came up with some significant improvements, as Tucker explains.

“I didn’t really contemplate autogenous milling,” he says. Autogenous milling allows rocks in a rotating drum to crash down upon other rocks also inside the drum, thus allowing the ore effectively to grind itself.

“I was going to use the old mill,” says Tucker. “But Devin said this isn’t going to work, but if we buy a US$4mln mill I can solve all these problems.”

That raised some interesting challenges, and possibilities.

“We had to go back and rethink the entire project,” says Tucker. “The project was completely re-engineered and revisited.”

The result was the latest economic study, done to a “pre-feasibility level of accuracy” according to Tucker, restricted only because it is based only on an inferred resource.

With that one proviso: the market now has a very clear idea of just what exactly BK11 could do for Tango.

There’s that 43% IRR for starters, and the projected US$188mln revenue number.

Those are based on overall production of nearly 570,000 carats of diamonds, producing an average of 90,000 carats for the first six years, with the projected selling price per carat set at between US$260 and US$285.

At US$10.20 per tonne, operating costs compare well to projected revenues of US$20.80 per tonne.

There’s margin on offer here, that’s for sure, and just to add a little icing onto the cake, US$45mln of tax losses too, related to the old operation.

Two things now remain for Tango to do before this project can really get underway in earnest, and both involve money.

The balance of the purchase cost has yet to be paid to Firestone as seller, and one deadline has already passed.

But this hasn’t led to friction.

On the contrary, says Tucker, Firestone’s Stuart Brown has been “very supportive”.

Firestone has understood all along that Tango needs to be able publicly to demonstrate the economic potential of BK11, given its need to raise both the purchase and the construction cost of the project in the international capital markets.

A down payment has been made, but still needs to come up with US$7.65mln to complete, as well as an additional sum to cover the costs of ongoing care and maintenance.

Then there’s the capital requirement of US$15mln. The total is likely to be US$23mln or more, which isn’t completely out of reach in this market, but it is going to take a lot of hard work.

Tucker’s a financier based in Switzerland and he knows his way around the capital markets.

In his favour is the evident goodwill of Firestone, the Botswana government and other interested parties.

Separately he’s also got, inside Tango, a small South African operating contracting business that is now also running Firestone’s old alluvial mine at Oena and four metallurgical coal processing contracts with Exarro and Glencore.

The resulting cash flow means that although the pressure’s on to finance BK11, it isn’t completely make or break for the company, and that’s a crucial dynamic for Tucker to deploy when he sits across the table from other financiers.

It also means he has in-house expertise when it comes to getting the work done on BK11 itself.

It’s an intriguing setup and within the next few months we’ll know whether the pieces are likely to fall into place.

Watch this space.

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