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Entry a test for game Mantra
Michael Quinn,
4 May 2009

Aerial survey work at Mkuju River.

MANTRA Resources is another uranium stock absolutely flying at the moment with shares in the Tanzanian explorer up more than five-fold since last November. Good grades and growth potential have impressed analysts and investors alike, and while part of the company flagship project is located in Tanzania’s Selous Game Park, management claim there is no cause for concern.

Earlier this year the company reported it had calculated 39.9 million tonnes grading 409ppm U308 for a contained 35.9 million pounds of U308 at its Mkuju River project.

Infill and extensional drilling is underway, and a scoping study is expected to be completed next month, with Canadian brokerage Griffiths McBurney (GMP) modelling a 2.5Mlbpa operation – costing $US175 million and having cash costs of $US25/lb of U3O8 – in a client note published in March. GMP entitled the note “Opening up the next uranium camp in Africa”, while a month earlier Australian investment firm Argonaut headed its coverage of Mantra, “Sleeping Giant”. In essence the common thesis is that the maiden resource covers just 9% of the known mineralisation with a 100sq.km area, with an additional suite of 33 satellite targets.

Hence Mantra/Mkuju River is seen as having big potential, both in its own right and also as a potential takeover target. On the latter, sector darling and regular corporate player Paladin Resources has its Kayelekera uranium project in neighbouring Malawai – with Mkuju River described as “not dissimilar” by Argonaut – while the team at Mantra already has corporate form given they were at OmegaCorp – out of which Mantra was spun – when that company was taken out by Denison.

Mantra’s credibility is also suggested by the fact that last year it attracted a strategic investment equating to 19.2% of the company from Highland Park – comprising the founders and executives of LionOre.


Mantra's ground in Tanzania.

Perhaps the one obvious question mark at this early stage is the project’s locale, and in particular the part of the project that strays into the Selous Game Park. Indeed that’s the important part of the project to date given it contains about 80% of the current resource.

Tanzania’s Ministry of Natural Resources and Tourism approved Mantra exploring inside the park, and Mantra managing director Mat Yates does not have concerns that there will be an issue should, as would be expected, Mkuju River become a mining development.

“Not at this point of time [do I have concerns], no,” Yates told HighGrade. “Obviously we’ve got protocols that we’re going to have to go through … things like environmental impact assessment. Permitting for any mine is not something you take lightly no matter where you are. We’ll just take that in our stride and push on.”

While Yates confirmed the shallow mineralisation at Mkuju River makes any project development an opencut scenario, he was a little ambiguous when asked if there was a preference for underground mining from the Tanzanian authorities.

“I can’t remember, you’d have to go and have a look,” he said.

Mantra’s prospectus back in 2006 suggests there is.

“The Company (Mantra) has complied with the protocol outlined in the Mining Act 1988 and has been granted permission from the Ministry of Natural Resources and Tourism to undertake uranium exploration on the portion of the Tenements that fall within the game reserve during certain periods of every year,” the prospectus stated. “The Company may require additional approvals to progress from the exploration to the development and mining phases of operations. If mining occurs the Ministry of Natural Resources and Tourism would prefer underground mining.”

Still, the analysts, like Yates, do not seem at all fazed by the general issue of being allowed to mine in Selous, with GMP coming up with a comprehensive list of reasons why the development should take place.

“To note, operating a mine in a game reserve is not uncommon in Africa as Bannerman and Extract are developing projects and Paladin is operating its Langer Heinrich project within the Namib Naukluft National Park game reserve,” GMP said. “As such we believe that Mantra should have little issue in operating within the Selous game reserve and that once it has completed its BFS and Environmental Assessment study it will receive its mining exploitation licence from the Tanzanian government. From an economic perspective, the Mkuju River project should create approximately 1000 jobs during the construction phase and 300-400 jobs once in operation. As well, we believe that the government should begin to diversify its mining tax base from strictly gold to uranium. More importantly the project falls within the Mtwara Development Corridor that has been explicitly outlined by the Tanzanian government as a primary corridor for economic development. With this said, we do not seed the Selous game reserve as an issue that will inhibit the construction of the Mkuju River project.”

While conceding mine permitting in Selous is a risk to the project’s development and first production in 2012, Argonaut too is optimistic about the situation.

“Argonaut notes that there is no prohibition to mining in the Selous, and in any case Nyota occupies less than 0.2% of the total 52,000sq.km game reserve,” the firm said. “By moving the southern boundary just 10km, government authorities can boost the under-developed Southern Tanzanian economy.”

Meanwhile, Yates doesn’t expect to carry out a fund raising in tandem with planned TSX listing later this year.

“We’ve got $A23 million in the tin and there’s a load of 20c options both listed and unlisted due to expire on June 30,” Yates said. “They’re well in the money so we expect $A5-6 million from them (and so) at the moment there is no immediate plans for a raising.

“Ultimately we’ll need money. Having the TSX listing done before we start the bankable allows us to tap into those markets when and if we need to. I agree you do need to move stock over there in terms of liquidity, but whether you do that (do a raising) on the day you list or later, it doesn’t really matter. We’ve enjoyed a strong run (on the market) and if that continues we’d obviously like to be doing a placement at higher levels than we are now.”

Mantra’s sponsor for the listing, Haywood Securities, was expected to visit Mkuju River next week.

Disclosure: The reporter holds Bannerman shares