TORONTO (miningweekly.com) – Blessed with a vast mineral wealth, the Democratic Republic of Congo (DRC) has also been cursed with a recent history of a corrupt government and deadly conflicts.
On a more stable footing since the mid-2000s and slowly putting the past behind it, the country is hoping direct foreign investment in the mining sector will produce much-needed tax revenue as well as deliver corporate social responsibility (CSR) programmes that will improve social services.
“Most people know the DRC has had a disruptive history, a violent history,” Banro Corp VP for investor relations Naomi Nemeth told guests at a joint luncheon for the Toronto branches of Women in Mining and the Canadian Institute of Mining on May 22.
“The mineral industry has grown significantly since then, with a lot of money coming from the International Monetary Fund [having been] invested in the DRC’s roads, bridges and other infrastructure,” she said.
But much more work needs to be done, with many of the basics still absent. “When someone says: ‘there’s a road from the mine to the closest town’ that will probably be kidney-jarring ride on what’s considered a good road for the region,” she added.
Much of the mining development in the DRC is currently focused on the country’s southern copperbelt, while an area to the north of Banro’s operations has seen the Kibali gold mine come on stream, which is held by AngloGold Ashanti (45%), Randgold (45%) and Société Miniére de Kilo-Moto (10%). “The more miners in the area, the better it is for all of us,” Nemeth noted.
UP AND RUNNING
Banro currently employs around 8 000 people. “We also have a government relations office in Kinshasa. You can’t operate in the DRC without professional government relations,” Nemeth stressed. “It means everything; it means getting things done.”
The company’s exploration and operations offices are located near Bukhavu, a city of about one-million people that lies about 70 km north of the company’s Twangiza gold mine. Twangiza was brought into commercial production in September 2013.
Travelling between Bukhavu and Twangiza involves a “journey that takes about three-and-a-half hours by vehicle or 15 minutes by helicopter,” Nemeth added.
The company’s concessions stretch about 210 km on a north-east–south-west axis, in territory that includes thick rainforest. “To the south of Twangiza, we have two exploration projects – Kamituga and Lugushwa – which both have full mining licences,” she pointed out.
“Namoya is beyond this; it is fully licensed and being brought into production. [It] will officially come on stream for commercial production probably at the start of July,” Nemeth said. “So it’s an incredible feat for Banro to have built two mines in the Congo since 2004.
“We do have debt, although I think that’s a product of the times. [However,] we were fortunate to be in the position to secure creative funding to build these mines,” she said.
“We have $226-million in debt in various instruments,” Nemeth stated. “[But we] also have decent margins and are managing our repayments now. That’s really going to be our focus for the next couple of years.”
Twangiza and Namoya have total proven and probable reserves of 37.39-million tonnes at 1.96 g/t gold for 2.36-million ounces gold contained. Total measured and indicated resources stand at 161.1-million tonnes at 1.61 g/t gold for 8.35-million ounces gold.
Oxide material is currently being exploited at Twangiza, “so we don’t have to drill or blast at this point … We’ve got about eight years of oxide material at [between] 2.7 g/t and 2.9 g/t gold”, Nemeth added.
The company recorded an output of 20 137 oz of gold in the first quarter of the year, down from 22 858 oz gold in the fourth quarter. However, sales rose in the first quarter, with 24 427 oz gold recorded compared with 21 379 oz gold in the preceding quarter. Revenue was just under $30.5-million for the March quarter, up over just more than $27-million in the fourth quarter.
“We’re ramping Twangiza up to steady-state production at about 9 000 oz/m to 10 000 oz/m of gold,” Nemeth noted. Banro will also seek between 9 000 oz/m and 10 000 oz/m gold at Namoya.
Another goal for Banro was to reduce the all-in sustaining cost of gold to $900/oz. For the fourth quarter last year, this stood at $1 035/oz. “Our strategy is to produce gold at a decent cash cost,” she added. “Really it’s like anyone else’s strategy; grow the business and take advantage of synergies by producing more gold from more lines.”
Nemeth also highlighted how many companies fell into the trap of accepting higher costs as the norm following major construction phases. Instead, this should be the period when companies curtailed all excess expenditure.
“When a construction phase is over, some mining companies retain the mind-set that the bills will keep coming in,” she said. “But you should start paring costs soon after [construction] has ended. Banro now has some efficiency experts helping [the company] cut to bare-bones costs and it will take about a year [to fully implement].”
Nemeth also stressed the importance of creating and investing in dynamic CSR programmes to create goodwill and bolster local support for the company and its mining projects.
“Banro spent $5.5-million before the company poured an ounce of gold and that [went] a long way in the DRC. We built schools, employed doctors and built women’s clinics,” she said.
“It makes doing business easier and it also integrates us within the community,” Nemeth added. “And this is part of the mining business; we can say those children wouldn’t have attended school were it not for our mines and our integration within the community.”