Tembo Gold Comes Back to Life
Someone called me a month or so back and pitched me on a company I had visited and followed a dozen years ago. I had lost track of the company because I never seemed to hear anything from or about them. Part of the reason was because they weren’t doing anything at all.
Here is the story.
Sutton Resources controlled by Jim Sinclair explored for gold and found the deposit now known as Bulyanhulu. In 1999 Barrick purchased Sutton for $343 million and began construction of a mine. It cost $280 million and went into production in 2001. Today the mine still produces over 100,000 ounces of gold a year and has 2.5 million ounces in reserves. As far back as 2010 Barrick was producing 250,000 ounces of gold a year. Clearly they would like to find new and easy to mine resources.
One of the principals of Sutton staked ground to the west and northwest of the Bulyanhulu deposit and formed a company named Lakota Resources. Lakota was an early advertiser with 321gold but the guy running the company was more interested in drinking than mining. I can understand that, at times I feel exactly the same way.
I visited the property about fifteen years ago. When you look at maps of the structure and the Bulyanhulu mine off to the distance to the southeast it becomes obvious that the gold bearing structure runs from the mine right onto the Lakota property. To confirm, there were hundreds of garimpeiro miners working near surface showings. I was always disappointed that Lakota didn’t actually advance the project.
Eventually, by 2011, Lakota adopted new management, raised money and changed the name to Tembo Gold. Their timing might have been the worst ever. Gold peaked in December of 2011 and began a steady decline into late 2015. Tembo drilled with some success but raising more money to advance the project was simply out of the question. It would have been a far better time to drink than to explore for gold. I visited the project in early 2012 when no one quite understood just how bad things were going to get in the gold exploration business.
After beating their heads against the wall for a couple of years, Tembo management reconsidered their approach and put the project on a back burner until conditions improved. Meanwhile Bulyanhulu’s 25 million ounces of gold declined after years of producing 250,000 ounces a year and the company started looking over their western fence at the Tembo ground.
As poor as the timing was in 2011-2012, Tembo’s fortunes changed in late 2021 with the announcement of a binding agreement with Barrick where Tembo has sold 100% ownership in six non-core tenements adjacent to the Bulyanhulu mine to Barrick.
Terms included a $6 million US payment to Tembo, a $1.5 million CAD placement in Tembo at $.27 a share, a $9 million USD work commitment over four years and a sliding scale payment schedule where Barrick will pay Tembo an additional $20 per ounce for the first million ounces of a resource, $10 an ounce for the second million ounces and $5 an ounce for the next five million ounces up to a cap of $45 million US. Frankly Barrick understands the ground far better than Lakota/Tembo could have because they have been mining it for twenty years.
And of course Tembo kept their core property and have been busy drilling it as gold has started the next bull run higher. Naturally Tembo is taking their cash haul and putting it into the ground with a 7,000-meter drill program on their core property. The company has completed about 3,350 meters of the program and released excellent results on November 3rd including 12.96 g/t Au over 5.54 meters.
It’s hard to imagine a company more perfectly positioned for a bull market in gold than Tembo. With $4 million in the bank and a market cap of only $19 million the company is drilling some of the most prospective ground in Africa with a ready potential partner right next door. The $9 million in drilling by Barrick is going to find some gold, the question is just how much. So Tembo has a potential payoff of up to $45 million more and a ready and willing buyer for any more ounces Tembo can prove up.
Tembo is an advertiser. I did own shares in the company back in 2012 but sold those and haven’t bought more since. Do your own due diligence.
Tembo Gold Corp