Tembo Roars Out of the Jungle
Just FYI Tembo means elephant in Swahili.
Tembo Gold is a new company/old company. It used to be called Lakota Resources in the bad old days. The company had one of the most interesting gold projects in Africa, the extension of the system at Bulyanhulu in northern Tanzania.
I was familiar with the company and the “management” 11 years ago. It was run out of the United States by what I would call a hobby miner. If you really liked the guy and felt sorry for him, you would call him an idiot. He squandered years of opportunity and tens of millions of dollars of investor’s money feeding his ego.
Adult management took over and the company rolled back and relisted as Tembo Gold. It came public on February 22 with a management team to die for and probably the best single gold project in Tanzania and maybe Africa. The company announced closing a private placement at $1 on February 21st. The shares had a low of $1.20 on opening day, have gone up seven out of eight days since then and closed at $2.08 on Friday after hitting a new high of $2.10.
You could call the new management of Tembo, the “Dream Team.” Led by David Scott as President and CEO, this is the strongest team of a “New” company I have ever seen. David Scott has 13 years experience in Tanzania and was Technical Services Manager for Barrick and responsible for the Bulyanhulu exploration work. Chairman David Anthony was the COO for African Barrick and part of the team that took ABG public. David Anthony has 10 years experience in Africa.
Top management at Tembo literally looked across the western fence between Bulyanhulu and the Tembo project and thought about what they could do with it when they were working for Barrick. The primary structure controlling mineralization at Bulyanhulu runs right onto Tembo. Bulyanhulu is ABG’s most valuable asset producing some 260,000 ounces of gold a year.
You could safely describe Tembo’s exploration program for 2012 as extremely aggressive. They know exactly what they have. There are 11 linear km of artisanal workings. Technical studies that were completed under Lakota but never followed up on are being interpreted. Tembo management intends to drill an incredible 90,000 meters of both core and RC drilling this year. Two core rigs and one RC have been mobilized and are turning as we speak.
On February 28, David Scott announces the completion of an airborne Laser Imaging, Detection and Ranging (LIDAR) survey. LIDAR bounces radar beams on the ground and can detect a tiny depression. So when you have a deposit such as Tembo where thousands of pits have been dug by hand, you can spot them all. The artisan miners go where the gold is. All Tembo has to do is drill under them.
It’s way too early to come up with any idea of the size of Tembo but Bulyanhulu measures some 20 million ounces. I have little doubt that Chairman David Anthony and President David Scott are thinking “nice potential.” They already know the potential better than anyone but the artisanal miners.
On March 1, the company announced grab samples testing between below .5 g/t to as high as 58.47 g/t. In the press release they said, “providing confidence in the information that artisanal miners are extracting ore at grades between 5 g/t gold and 25 g/t gold.”
Management and insiders control some 45% of the shares. With $13 million in the bank and another $11.3 million potential from warrants now in the money, Tembo is both well cashed up and positioned for a serious exploration program. With about 40 million shares outstanding, in-the-money warrants add another 6.5 million shares to the fully diluted number.
One issue is the float. 32 million shares of the 40 million are still under the 4-month restriction or in the case of management and insiders, escrowed. The twin David’s have done an excellent job of communicating the story to investment funds and there is a shortage of shares available to be purchased.
With a $2.08 share price, the company is coming out of the chute with a market cap of over $83 million dollars. That seems high for a junior just starting to drill but with the strength of the management team, the price is the price. I’d like to see a bit of a pullback to allow new investors into the stock but it may or may not happen.
I love the management team. David and David run the tightest ship in Africa. They know the project, they have cash in the bank and they are using a 1st class exploration group. $83 million may seem like a lot of money now but a year from now it will look dead cheap.
Tanzanian Royalty (TNX-T) sports a market cap of over $430 million. I attribute that to the “Sinclair” effect because the company isn’t a royalty company and I can’t see how they have accomplished much in the last ten years. Canaco (CAN-V) is worth $300 million with $120 million in the bank. At one point last year, Canaco was worth almost $800 million. Tembo is both better managed and has a better project than either Can or Tnx in my view.
Tembo is an advertiser and we are biased. I used to own a lot of Lakota but sold the last of it years ago. I was in on the early fund raising and I own shares. As always I encourage potential investors to do their own due diligence and take responsibility for their own investments.
Tembo is hot and it’s going to get hotter. I just hope the price stabilizes long enough that serious investors can get a position. I love this stock.