HomeEast AfricaEast Africa Metals’ Tanzanian gold stream to produce gold in Q1, 2021

East Africa Metals’ Tanzanian gold stream to produce gold in Q1, 2021

TSXV-listed African minerals explorer East Africa Metals and its Tanzania partner PMM Mining Company has announced the commissioning of a gold tailings reprocessing operation at the Magambazi mine in Tanzania.

Read more: East Africa Metals unearths Ethiopia’s gold potential

East Africa Metals concluded a gold stream transaction with PPM in December 2020 in which PMM paid East Africa Metals US$2 million in cash for a 100% interest in Canaco Tanzania Limited (CTL), East Africa’s wholly owned subsidiary. Also as part of the transaction, PMM provided East Africa Metals with the right to purchase 30% of gold produced from operations on the asset for production cost plus 15%.

PMM Mining plans to reprocess existing tailings from artisanal mining activities that took place between 2007 and 2016 at the Magambazi site, during which time large, active artisanal mining operations extracted gold from high-grade quartz veins within the Magambazi main zone.

To date, PMM has completed the construction of the tailings re-processing plant and initiated start-up of the re-processing operation. The tailing re-processing operation is expected to be in full production prior to the end of the first quarter of 2021.

During 2018, CTL surveyed the volume of the tailings, which were mined from its licenses by a group of illegal miners, who were exploiting the high-grade gold veins intercepted during a drilling program conducted in its license area.

Recent stockpiled tailings have not been sampled by CTL; however, the gold assay from different piles of tailings taken in November 2007 indicated a significant amount of gold was unrecovered in the ore mined from Magambazi deposit. 

The gold tailings totalled an estimated 32 000 t at undetermined grade and metallurgical recoveries. The processing flow-sheet will see the tailings re-milled to further expose remaining free gold, followed by treatment through a gravity circuit and finally through a carbon-in-pulp (CIP) plant. PMM is currently on site working towards the final stages to commission the CIP plant.

Transaction terms

During the lifetime of the mine, PMM will sell 30% of the gold produced to East Africa Metals at the price of production cost plus 15% of production cost, pursuant to a gold purchase agreement. Gold production costs means actual mining and milling costs as well as those associated with third party smelting, refining, transportation and royalties minus by-product credits.

PMM undertakes to produce at least 10 000 oz in the first year of commissioning of operations, 20 000 oz in the second year, 30 000 oz in the third year and at least 40 000 oz per year thereafter.

In the event PMM does not meet the minimum production in a year, it will compensate East Africa Metals as follows:

  • In the first year minimum production is not met PMM will pay $200 000; $400 000 in the second year; $600 000 in the third year; and $700 000 per year for any other years’ where the minimum production is not achieved.

“With the conclusion of the sale purchase process and the beginning of development, East Africa Metals looks forward to the initial gold production from the tailing re-processing operation during the last half of 2021,’ says East Africa Metals President & CEO Andrew Lee Smith.

Magambazi mine at a glance

The Magambazi mine, located in the emerging Handeni gold district in eastern Tanzania, 180 km northwest of Dar es Salaam and 140 km southwest of the port city of Tanga, consists of two mining licenses (which cover 9.9 km2) and two prospecting licenses, for an aggregate total of approximately 93 km2

Magambazi is estimated to contain an indicated mineral resource of 15.2 Mt grading 1.48 g/t of gold and containing 721 300 oz, as well as an inferred mineral resource estimate of 6.7 Mt grading 1.36 g/t of gold and containing 292 400 oz.

The pit shells and cut-off grade of 0.50 g/t gold used to calculate the maiden resource at Magambazi applied a 2012 gold price forecast of $1 250/oz.