tanzania’s tembo gold: part i -...

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THE CALANDRA REPORT* Subscribe TCR: Subscribe (Price rise to $80 from $65 yearly for new subscribers starts February 28, 2013.) Tanzania’s Tembo Gold: Part I MWANZA, Tanzania – These are troubling times. Not in Tembo Gold’s Tanzania, which has one of Africa’s best economy growth charts. These are trying times for those of us who would consider purchasing any metals equity in February 2013. The death rattle for junior miners is louder than those of the 5-foot and longer cobras that occupy east Africa. Even our resource market champions are dismayed with the nearly 2-year-old malaise that encrusts metals equities ‘round the world. “Thom, I’d short the GDXJ and the NUGT and go long the bullion trusts,” Rick Rule of Sprott Global Resource Investments tells me, minutes after I went long this week on NUGT, which multiples by three the gains or losses in mid-tier gold companies trading in North America. Mortality bells ring in our ears for what the experts say is an aging audience for gold and other metals prospectors. Still, I think I know what Mr. Rule is saying. He is pragmatic, Mr. Rule. Rick Rule is the thematic and pioneering bar bouncer who clubbed his way through thin resource markets and thick starting in

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Page 1: Tanzania’s Tembo Gold: Part I - Stockhousestockgroup.stockhouse.com/.../THE_CALANDRA_REPORT_Tembo_Gold_I.pdfTanzania’s Tembo Gold: ... African Barrick gold mining camp of some

THE CALANDRA REPORT* Subscribe

TCR: Subscribe (Price rise to $80 from $65 yearly for new subscribers starts February 28, 2013.)

Tanzania’s Tembo Gold: Part I MWANZA, Tanzania – These are troubling times. Not in Tembo Gold’s Tanzania, which has one of Africa’s best economy growth charts. These are trying times for those of us who would consider purchasing any metals equity in February 2013. The death rattle for junior miners is louder than those of the 5-foot and longer cobras that occupy east Africa. Even our resource market champions are dismayed with the nearly 2-year-old malaise that encrusts metals equities ‘round the world. “Thom, I’d short the GDXJ and the NUGT and go long the bullion trusts,” Rick Rule of Sprott Global Resource Investments tells me, minutes after I went long this week on NUGT, which multiples by three the gains or losses in mid-tier gold companies trading in North America.

Mortality bells ring in our ears for what the experts say is an aging audience for gold and other metals prospectors. Still, I think I know what Mr. Rule is saying. He is pragmatic, Mr. Rule. Rick Rule is the thematic and pioneering bar bouncer who

clubbed his way through thin resource markets and thick starting in

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the 1990s and continuing today. Rick Rule is one of three or four honored faces for the North America investment business of metals equities. In Europe and Asia, there are others. Arthur “Rick” Rule’s talks are usually among the best attended at North America conferences. “These junior issuers,” Rick Rule tells me, “are broke, delusional and often incompetent. The junior market will go into capitulation now, and the non-nimble ones will get the dot, just like 1992.” No dispute from this researcher and investor. Get the dot. As our TCR audience knows, the last time I nailed a theme publicly was when gold surpassed $400 and I got to dye my hair bullion blonde. I was in London at the time building MarketWatch.com’s European service for investors. The following years were a blast. Yes, Rick Rule is correct: this precious metals business is broken. There are fools and scoundrels among us. We cannot even trust that futures prices for gold, silver and platinum equal accurate and fiscal supply and demand. On the capitulation part, I am not so sure. I seek the nimble, and I always have. I remind our TCR audience that Mr. Rule and the merged Sprott Global of Canada/California pride themselves on locating investments that are “currently out of favor with the general investment community.” Their words. Let us hope that the subject of this site review – Tembo Gold (TEM Canada) in Tanzania – and those few other metals equities possessing

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what Mr. Rule and his Sprott Global call “underlying value” -- one day soon shall return to favor among what I am told is our decrepit and always aging audience. (I am 56 years old. Mr. Rule is part of my ballpark generation. So are: Frank Holmes, David Scott, Robert M. Friedland, Ross Beaty, you get the idea …) TEMBO GOLD (TEM): Our Next O.T. Mwanza is Tanzania's second largest city after Dar es Salaam. It is mambo gorgeous. This lakeside city, some one-hour’s puddle jump from Tembo’s Lake Victoria greenstone gold project, will experience – is already experiencing – the kind of gold rush growth that marked Mongolia’s Ulan Bator when Ivanhoe Mines staked Turquoise Hill (now TRO ticker in Canada) in 2002 or so. Housing prices rising smartly. Hotels thriving. Restaurant curries among Africa’s best. New airlines starting. I seek, always have been seeking, the next Ulan Bator, the next Turquoise Hill, the next gold (or copper or platinum) divot on an emerging market map that can be seen from outer orbit. Ivanhoe Mines, along with six or eight other resource investments, including the original prospect generators, at least for my generation (Virginia Mines, Altius, Almaden and others), greatly benefited the original TCR audience in 2002 and 2003. I am here viewing Tembo Gold's Lake Victoria greenstone operation some 45 minutes’ easy drive through the bush, after landing at an African Barrick gold mining camp of some 2,000 workers. Dar to Mwanza to here: total less than three hours. Tembo’s CEO, longtime Tanzania geologist David Scott, has in place, future financing permitting, a 2013 $5 million drill program. It’s a follow-on from 2012's 35,000-meter drilling program that uncovered shallow high-grade gold, some of it triple-digit in grams per metric ton, across the expansive property. As in: hundreds of grams per tonne. That is said to be almost generic in some of these

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already discovered east Africa greenstone belts. (See: Eritrea, possibly the Sudans and Ethiopia)

Shares of Tembo, a pure gold prospector (49 million out and 67 million all in), are under pressure in February 2013 because of a misfired financing that is being reformulated. For galactic readers of this review in the year 2121 or so, well, it has been a heck of a dumpster market for metals equities since March 2011.

David Scott and his board chairman, former African Barrick chief operating officer and now Colossus Minerals president and chief operating officer Dave Anthony, say they are on track to raise $5 million for the next round of drilling. Fingers crossed. That forthcoming 12,000 meters of drilling (approx. 22 holes) will allow 58-year-old Mr. Scott to road-test his years-long theory about 200-meter-deep-plus gold at lengthy and one hopes contiguous stretches. [TCR family: I own 9,000 at about 44 cents Canadian.] Large shareholders include a Hong Kong firm, Saskatchewan investor Tom Macneill, Mr. Macneill's 49 North Resources merchant bank (FNR in Canada), CEO Scott, 42-year-old Vancouver financier Rob Anderson and his Access Capital, clients of Canaccord in Vancouver and Peter Beck's Performance Fonds GbR in Germany. CFO John Seaman, a Canadian from Toronto, says large holders account for 60 percent or so of the 66 million fully diluted shares. Mr. Seaman, a large yet improbably fit 45-year-old who plays tennis regularly, was the CFO who helped engineer the sales of Wolfden and Pediment several years back. In 2012, Tembo spent $13.5 million on developing the project on its

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94-square-kilometer concessions. All told, that was 35,300 meters of drilling, some 192 holes both diamond tipped and reverse circulation. [Photos: Up top, Tembo team of Peter Horwath, Jann Beresford and David Scott; next, wildcat miners in blue-tarped camps are blanketing the Lake Victoria region these past four months. "Two years ago, there was nothing here, absolutely nothing," says Mr. Scott. I have documented this with east Africa geologists and pilots.] TNP = Temperature & Pressure David Scott and his team hope to gain from their experience in Tanzania. Mr. Scott, a Dar resident and with his wife, an advocate of early and continuing education for Tanzania kids, is credited with 30-plus years of exploration and technical activity in Africa, 15 of that in Tanzania and six years at the neighbouring African Barrick gold mine: Bulyanhulu. [Please see: Mr. Scott’s geo-strategy in his own words at http://www.tembogold.com/news/2013/january08/.] [TCR bullets on geology, structure, exploration model and catalysts coming in Part II in two days. All material will be re-published at

http://www.babybulls.com.] If we take away just one thing from Tembo’s work in the Tanzania greenstone belt, it is the notion, Scott and Horwath’s central premise, that pressure and temperature are at the crux of one of Africa’s largest undiscovered gold fields.

The two geologists, with an assist from Aussie consultant Nick Oliver, believe vast amounts of mineralized gold eased their flows upward. This was from hundreds and thousands of meters deep as molten rock rose toward the surface.

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“Lower TNP,” says Mr. Horwath. Easing temperatures and pressure more or less turned off the motor pushing these minerals toward surface. “After the 15 meters of 22.8 gram gold,” says Mr. Scott of one hallelujah hole, TD00041, “we are convinced there is a very robust system deeper. We can look at many of our holes and show the gold fluctuation.” One hole, TD0006, reinforced the idea of easing temps and pressure. “Gold was the least important thing in that one – we only went 70 meters to 125 meters,” says Scott as we view core ridden with biotite, pyrite, various mica group minerals and other markers. I know. Oh, I know. I am asking you to “board the bus,” a North American promotional phrase I despise. (See: Bulyanhulu mine shuttle bus photo above) This story, Mr. Scott’s narrative, is not brand new. Tembo in 2012, when it had cash, did a good job of contacting brokers, individual investors, newsletter writers. I suppose even miracle workers need press agents. Spreading the word among individual investors pummeled Canaco Resources when Magambazi, several hours southeast of here, arrived short of their 2 million-ounce-plus hopes. They sold their shares mercilessly, but only after the four or five large banks and investment firms first had abandoned the Tanzania prospector. If it is true that 60 percent of all publicly traded natural resource companies are listed in Canada, then Canaco’s failure punished all of them. I still own the shares at a steep loss. (Of interest is that I failed, too – seeing Magambazi for myself several years ago gave me the courage to put aside what turned out to be sage advice at the time from Rick Rule and one other writer, Brent Cook of California.) Besides, the challenge of 2013, this dumpster market for metals equities, coincides with what I call an assay payoff sometime in spring 2013 for Tembo’s Ngula prime targets. If, that is, another $5 million comes into the corporate treasury there in Vancouver, Canada.

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Tanzania’s Lake Victoria area is a sucker punch ringer for Lion King stage sets. I do hereby swear, one of our drivers from the Barrick camp is named Simba. Truth. There are buzzard vultures here in the trees and on the telephone and power lines. But Mr. Simba was the only lion in sight. For those and other splendid creatures, one must buzz over to Tanzania’s Serengeti, which whilst I was here was named one of Africa’s 7 great natural

wonders. We are at this moment walking through open pits; illegal (and some legal) miner equipment and at least 10 makeshift mills (mercury) surround us. None of this is on Tembo licensed concessions, but it easily could be if Tembo’s team, including longtime Africa geologist Peter Haworth, were not

monitoring the gold rush to this region. If you look at a 60-square-kilometer and greater grid of this part of northern Tanzania, with Tembo's entire property portfolio, the African Barrick gold mine Bulyanhulu and this village we are walking through, you will see thousands of blue-tented camps that have sprouted since late December. (See photos) These so-called artisanal miners, all of them Tanzanian, have dug at least 120 mine shafts, some 60 meters to 80 meters deep. The grades, affirmed by Tembo in sampling, are as high as 58 grams per tonne gold, with little byproduct. Appropriate that they are smiling as they toil. I would be. Nearly all of these very recent illegal miners, like in the past four months or so, are tracking, on the Internet, the drill holes completed on Tembo property and subsequently published for investors. Coming from Mwanza on mostly paved road to Tembo camp, I had

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the chance to pass through the African Barrick gold mine facility at Bulyanhulu. We used the airstrip there. (Mr. Simba’s turf.) Workers either knew Mr. Scott or knew of him. The mine there is said to employ as many as 2,000 people. African Barrick recently published its annual update. African Barrick's Bulyanhulu gold mine is that miner's most prolific and I believe its highest-grade Tanzania gold operation. Tembo has a chance, after it locks in another $3 million to $5 million financing, to deliver assays that fulfill the promise of its recent 35,000 meters of exploration drilling in north Tanzania. I am in the business of believing in prospectors. So is the TCR audience. That belief benefited us and it now punishes us, diminishing our net worth like some much porous lucre. If you are not prepared for the risks that Simba the Hollywood star faced in his own travels, please do not board this bus just yet. At least, not until: 1. We publish Part II of this TCR report; and 2. We get a better sense of how Tembo will raise its next slug of drilling funds. Coming Part II: More Geology, Event Drivers Here is our TCR photo file from a February 2013 tour of Tembo Gold and its Lake Victoria area greenstone belt project. Please see: https://plus.google.com/photos/101338642857105186354/a

lbums/5845996102004916529 All Photos: Thom Calandra Notes: Tembo's team has practiced what I believe are friendly and practical methods in its successful efforts to monitor activity and work with legitimate and illegal small mining

operators. Junior company exploration efforts in Tanzania and other African nations, particularly from my personal experience Mali and

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Ghana, often benefit from the 'trail' that artisan miners leave across mineral trends. These trails sometimes include shafts that can sink 50 meters or more and collapse in flooding. I am, after viewing gold projects for the past 10 years or more on at least four continents, willing to place our own TCR brand of approval on Tembo's current relationships with its surrounding communities. Illegal mining is a centuries-long challenge for mineral prospectors around the world. In many cases, including in Ghana and in our beloved Colombia, companies and communities, with government sanctions, structure toll-mining programs and other alluvial and underground operations that slowly are saving lives and reaping income benefits for both the companies and native miners.

n Thom Calandra February 22, 2013 California, USA