TORONTO (miningweekly.com) - Mantra Resources, the TSX- and ASX-listed uranium junior, should not be too badly affected by the new royalty regime in Tanzania, where it plans to build a uranium mine, an analyst said on Wednesday.

Further, the anticipated 10% to 15% government's free carry share for Mantra's $300-million Nyota project is in line with similar African countries said Dundee Securities analyst David Talbot, who believes Mantra is an "attractive takeover target".

The Tanzanian government last week introduced a new law that raises the royalties mining companies pay, and requires them to list on the Dar es Salaam Stock Exchange. The local Chamber of Mines decried the new law as "distorted", saying it would scare potential investors away.

As part of the country's mineral legislation, the government negotiates a mining permit with companies, which sees the State getting a free share of the mining project once permitted. Talbot anticipated this would likely be 10% to 15% in Mantra's case.

The revised legislation is in line with the government's ambition to increase mining's contribution to Tanzania's gross domestic product to 10% by 2025, from the current 2,3%.

The Australia-based firm planned to complete a feasibility study on its Nyota project, which has first production pencilled in for 2012, by the end of this year. Mantra, in January, appointed former Norilsk Nickel International CE and LionOre COO Peter Breese as CEO.

Mantra would be the first uranium producer in Tanzania, followed by Australian peer Uranex. Talbot said that was why he believed the government would be "realistic" in negotiating a mine permit. "All eyes are going to be on this project in terms of what the government is going to do."

Another bargaining chip Mantra would hold going into negotiations with the Tanzanian government, was its infrastructure plans. The company has to spend in the order of $28,3-million to upgrade site access roads for Nyota. Nyota is part of Mantra's Mkuju river project, located in southern Tanzania.

It also planned on installing a 14-MW heavy-fuel oil power plant at a cost of $11,3-million. Mantra hoped to ultimately connect to the Tanzanian national power grid, which offers cheaper electricity, but the nearest potential connection point was 380 km away.

According to a prefeasibility study released in March, Mkuju river could produce 3,7-million pounds a year of uranium oxide for a minimum of 12 years.

Does Mantra have a good chance at financial success? "Absolutely. It's a fairly robust project they're working on, I see them as being a possible takeover target," said Dundee's Talbot. He pointed out that Uranium One saying it was looking at buying uranium assets in Africa made it a potential suitor.

Last week, it surfaced that Uranium One had built up a 1% shareholding in ASX-listed Paladin, which mines the nuclear fuel in Malawi, across the border from Mantra's flagship project, which it said was for "investment purposes".

Talbot stated in an April 29 research note: "Mkuju river is a world-class project and likely to be envied by other producers."

In a subsequent interview, he said Mantra had so far achieved what it had set out to. "There's a big credibility factor in the company."

Mantra was trading at C$4,94 a share on Wednesday, well off its C$6,09 high reached on March 23. Its market capitalisation was C$623-million.

The uranium spot price has slid to $41,75/lb, from $54/lb in June last year.

Mantra held C$74-million in cash at the end of March, and had no debt.

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