James Sinclair, the Executive Chairman of the Toronto-based Tanzanian Royalty Exploration Corporation, said President John Magufuli's government is on the right track with its far-reaching mining sector reforms.
Sinclair's company owns a 55 per cent stake in a long-delayed project aimed at developing the Buckreef Gold mine in Tanzania in joint venture with the State Mining Corporation (STAMICO), which holds the remaining 45 per cent of the shares in the proposed mine.
"Buckreef Gold Company and the Tanzanian Royalty Exploration have and continue to support the policies and positions of the President of Tanzania, John Magufuli, and believe his efforts over time will distinguish the country of Tanzania on the African continent," Sinclair said in a statement yesterday.
"We have been welcomed in Tanzania for 30 years and have conducted meaningful mining business in the country. We are now working to bring a tier-one mine to prominence in Tanzania, one which could continue to produce gold well into the future."
Sinclair said the Buckreef Gold Company plans to invest $56 million over the next 12 months for an "extensive drilling programme" as part of its plans to develop the gold mine in the country.
The Canadian gold expert said his company has already invested $96 million in its gold exploration activity in Tanzania.
"Our joint venture agreement with STAMICO is the best in the industry. It is a unique and unprecedented arrangement allowing both entities opportunity to benefit from the development of Buckreef," he insisted.
"Both parties share in the profits and ownership of the asset itself. Our partnership with Tanzania will prove to be a model for mining companies and host nations to follow."
Sinclair said a recently-concluded pre-feasibility study on the proposed Buckreef Gold Mine shows that the asset has proven and probable reserves of 951,000 troy ounces of gold, with a gross value of $1.2 billion.
The reserves at the Buckreef deposits in Tanzania would support a 16-year open pit gold mine, he said.
"Additionally, using today's gold price, the approximate asset value on the country's 45 per cent holding (in the gold project through STAMICO) is $516.968 million," Sinclair noted.
Some analysts claim that mining regulatory reforms coupled with an aggressive tax crackdown by President Magufuli's government over the past three years have caused uncertainty in the sector and undermined investments.
"It looks to us as though high-profile changes to investment security in the DR Congo and Tanzania have cast a shadow over a region that has, as a collective, made a modest but significant improvement in its risk profile," Mining Journal Intelligence head Chris Cann said in a new report last week.
Taking Tanzania as a case study, the key change in risk profile was the fresh requirements for mineral processing written into its mining code.
The result of this change was a 25.6 per cent fall in its ‘hard risk' score for the Legal category, which is based on legal analysis of the mining code by research firm, MineHutte. The mining industry's reaction to the change as measured by the survey showed a disproportionately severe 35.7% drop in Tanzania's ‘perceived' legal score.
"While the (mining) industry should respect the right of host governments to regulate their extractive industries as they see fit, governments in turn should be aware of how the industry is likely to react to dramatic change that eats into the profitability of miners," Cann said.
"The numbers out of Tanzania suggest the mining industry is savage on governments that move the goalposts, particularly if change is poorly communicated and consultation with miners is limited."