Twangiza is the most advanced of four major wholly-owned gold projects TSX listed Banro Corporation is focused upon along the 210 kilometre-long Twangiza-Namoya gold belt in the Democratic Republic of Congo (DRC), but its second project, Namoya, could be brought on stream more rapidly and at a lower cost.
Earlier in 2008 Banro Corporation released the results of its pre-feasibility study on its Twangiza gold project located in the South Kivu province of the DRC. It will take an estimated US$420 million to build the project.
After the current round of exploration at Twangiza commenced in October 2005, a preliminary assessment study was completed in July 2007, and this study advanced to a prefeasibility study. Now the focus is on completing a bankable feasibility study by about the end of 2008, while improving the project economics. This is to be done by expanding the resource base, as well as optimising the processing route, the engineering designs and the planned hydroelectric power plant.
The Twangiza gold project pre-feasibility study indicates gold production of 2.3 million ounces at an average operating cost of US$345 an ounce over 12 years of operation. The scoping study indicated production of 345,125 ounces a year at a total operating cash cost of US$212/oz during first three years.
Martin Jones, Banro’s vice president of corporate development said in October 2008 that the project has the potential to increase its resource with the results of the current feasibility drilling program. As well, there is potential longer-term for adding resources through follow-up of a number of new prospects on the 1,164 km2 property. “We expect to announce the results of the feasibility results in January. We expect the costs to be lower and to have more resources on the table,” he says. The four consultants involved in the process are Senet Engineering, SRK, Knight Piesold which is looking at the power options, and SGS which is doing the metallurgical work.
The two deposits at Twangiza, Twangiza Main and Twangiza North, according to the prefeasibility study, are planned to be mined simultaneously to provide 5.0 million tonnes of oxide ore to the processing plant in the initial years. The transition and fresh ore types will be stockpiled during this period and processed once the oxide ore production decreases. The estimated total open pit mine operating cost of US$4.32 per tonne of ore is equivalent to US$1.59 per tonne of material moved. Based on the prefeasibility study, Twangiza has a favourable stripping ratio of about 2:1. The base case for the pre-feasibility study was a gold price of US$850/oz.
Power for the project is to be provided by the development of a hydroelectric facility. Studies to date envisage the development of a stand-alone, run-of-river hydroelectric scheme on the Ulindi River utilising a 600 metre natural drop in the river over a distance of some 18 kilometres. One of the advantages of Twangiza is that the resettlement of people is currently estimated to involve only about 700 families. The process is being done according to international best practice.
Banro’s second project, Namoya, would involve the resettlement of an estimated 350 families. This project’s pre-feasibility study is being undertaken by the same set of independent consultants that are doing the Twangiza feasibility work. “All the drilling for the Namoya pre- feasibility study has been completed and a new resource announcement will be made based on this,” Jones says.
The company decided to pursue a study of the heap leach option at Namoya since it could have a number of advantages over the CIL option. These include lower capital costs, a lower operating cost profile primarily as a function of lower power requirements, and earlier delivery of gold production and cash flow for the company as compared with the conventional CIL option owing largely to the much reduced lead time for construction and infrastructure requirements. The Namoya topographical terrain is also well suited for a heap leach facility. However, CIL may come back onto the table with the costs of construction and material, such as cement and steel, likely to be lower after the recent global financial meltdown.
The heap leach option would give Banro the flexibility to introduce a smaller mill and a conventional CIL mill circuit after the open pit resources have been exhausted to treat the higher grade sulphide underground resources.
“Namoya could be in production in 18 months and in a global environment where financing is an issue it gives us a less expensive option for which it will be easier to raise debt capital or to bring in a partner,” Jones says. “It would also demonstrate the viability of gold production in the DRC.”
Based on the current work done, Namoya could produce 194,000 ounces a year during the initial five years over an average eight year life of mine producing 165,000 ounces a year of gold, at an operating cash cost of US$217 per ounce. “There is also a lot of potential to add resources at this project.”
Banro is not ignoring its third of the four projects it has in the DRC, that being Lugushwa, where the orebody is geologically complex, which thus requires more time and investment. “We have had two drills operating on site at Lugushwa this year. Lugushwa has an inferred resource of 2.7 million ounces and we plan to do a scoping study on this project in 2009,” Jones says.
However, with the current fallout of the credit crunch sweeping around the world, junior mining groups may have to change their plans, and Banro, a long lived junior which has survived tough times before will cut back on its drilling campaign. “We have suspended our drilling programme, having had 11 rigs on the three projects, and whereas we were using three helicopters in the past we will now use one. The measures we are taking may turn out to be unnecessary,” Jones says.
“We do plan to keep together the team of 200 people we have in the DRC. It is a high quality team and one that is loyal to the company, and we to them.” This team includes 35 local geologists as well as nine expatriates. Ground exploration including trenching, soil sampling and stream sampling will continue. Jones estimates that the company could operate for the whole of 2009 without having to raise capital.
In addition, the robustness of the Banro’s DRC gold projects will ensure they are developed. “It is extremely unlikely we will do both Twangiza and Namoya under current circumstances, but we are confident that between 2009 and 2011 we can establish one of the projects.”
Jones emphasises Banro’s efforts made in building relationships in the country and region, which includes having invested US$880,000 in local community and social development projects in 2008, an impressive feat for a company with no cash flow.
Overall Banro completed 45,549 metres of drilling in 2008. This is made up of 27,284 metres at Twangiza, 5,521 metres at Lugushwa and 13,780 metres at Namoya. The drilling companies involved have been Geosearch and Major Drilling.
In addition to the 13 mining permits at four projects, Twangiza, Lugushwa, Namoya and Kamituga, which cover 2,600 km2, the company has 14 exploration permits covering some 3,130 km2 in the DRC along the Twangiza-Namoya gold belt contiguous to its existing projects.
Most of the supplies for Banro’s activities in the DRC are shipped from South Africa, and have come inland via Mombasa by truck through Kenya and Rwanda. Jones describes the route as reliable, and as part of Chinese investment in the country, a new road, the N2, is being built that will pass relatively near the Banro projects, construction now having reached Kamituga. At the moment it takes three days to reach Namoya by road. Other infrastructure work such as a bridge over the Elia River will reduce transport logistics challenges.
Banro has been focused on its four gold projects in the DRC since 1996 when it acquired ownership in the properties in what was then Zaire. In 1998 the company’s mineral rights were expropriated by the first Kabila’s government, and the company through a US subsidiary took the matter to an US federal court. It won a judgment in 2002, and based on this signed an agreement where it gave up rights to other minerals and assets including a casserite mine to get 100% ownership of the four gold projects.