Tembo Gold (TSXV: TEM; FRA: T23A) and Barrick Gold (TSX: ABX) today released details of a spectacular transaction: for USD $6 million, Barrick will acquire from Tembo a total of six licenses directly adjacent to Barrick's world-class Bulyanhulu mine in Tanzania. On top of that, Barrick also becomes a shareholder of Tembo, as upon signing the purchase agreement, Barrick's subsidiary Bulyanhulu Gold Mine Limited agreed to subscribe for common shares of Tembo in a private placement at a price of CAD0.27 per common share. Barrick will acquire 5,518,764 shares of Tembo, becoming a 5.5 percent shareholder.
Barrick also commits to invest at least USD $9 million in the newly acquired license area over the course of four years following the closing of the transaction. In the event of success, Tembo would benefit massively again and receive up to USD $45 million in profit sharing. These are "contingent payments" to be calculated on the basis of inferred, indicated and measured gold mineral resources if found in the land areas covered by the licenses.
Figure 1: Goldspot's data analysts suggest that the Tembo licenses may be "on strike" with Barrick's Bulyanhulu mine. If nothing else, this evaluation is likely to have convinced Barrick.
Even after the deal with Barrick, Tembo retains the vast majority of its eponymous exploration properties in Tanzania. The six licenses sold are in areas where Tembo has not previously concentrated its exploration activities. Accordingly, Tembo retains its core licenses on which the last two drilling campaigns were carried out. On these core licenses, as Goldspot's analysis has shown, there are still a significant number of untested new high priority targets. In addition, the core licenses include the three main targets where the majority of the drill holes have been completed.
David Scott, President & CEO, stated, "This agreement is an important milestone for Tembo. We have long considered our license area to be one of the most prospective areas in the Lake Victoria goldfield. Barrick's commitment is a significant endorsement of the potential for gold discovery in the area. The proceeds from the sale will allow us to move forward in earnest with our exploration strategy. We expect and hope that a significant new discovery will be made that will benefit the companies as well as the surrounding communities and the country of Tanzania."
The formal closing of the transaction and private placement are subject to TSX Venture Exchange approval and other required regulatory approvals in Tanzania, as well as other customary closing conditions for transactions of this nature. However, both parties anticipate that the closing of the Transaction and the Private Placement will occur in the first quarter of 2022.
Conclusion: German stock market speculator André Kostolany once referred to stock market gains as pain money. This wisdom proves exemplary in the case of Tembo Gold. For more than a decade, the team around CEO David Scott held together the concessions in Tanzania, although the matter often enough seemed hopeless due to the political conditions in Tanzania. Insiders in particular have kept the company alive over the past few years and massively increased its position. Now it is paying off that Tembo has held on to its "asset." The neighbor Barrick has publicly stated several times its intention to make Tanzania a focus of future investments. To implement this growth strategy, Barrick apparently needed the Tembo licenses, which are directly adjacent to the world-class Bulyanhulu mine. For Tembo shareholders, it's a well-deserved "ten year over night success" as well as the go-ahead for some serious exploration of their own early next year. The bull elephant in the company's logo has proven to be a true alpha dog. Tembo's journey has just begun anew. Goldinvest first highlighted Tembo in May of this year. At that time, the stock stood at CAD 0.16.
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