Banro Corporation (BAA) – The Newest Mid-Tier Gold Producer in Gold’s Final Frontier Friday, Aug 12 2011 

While most investors chase mid to large cap names in the Americas, Africa remains the final frontier for gold mining stocks based on a number of factors. Political risk in North Africa, rumblings about nationalization in South Africa, and the stability or lack thereof in Zimbabwe and Somalia can be enough to give many investors pause.

But for those who take a look closer they will find compelling stories and valuations in Central Africa and with one of those companies being Banro Corporation (BAA).

Banro has 13 Exploitation Permits along the Twangiza-Namoya gold belt in the Democratic Republic of the Congo which is similar in size and geology to the famous Ashanti Gold Belt in Ghana.

Within the 13 permits four deposits have been discovered. The first deposit, Twangiza, is on schedule for completion in the fourth quarter of 2011. The mill, located on top of a mountain, will process 1.7 million tonnes per year with an annual production of 120,000 ounces of gold for the first 5 years at cash cost of $356 per ounce. According to Michael Cooper at CFMonitor.com cash costs could rise to $450 per ounce with the effects of oil price increases, still at the low end of the cost spectrum.

The latest 43-101 for Twangiza shows Measured and Indicated Resources of 5.6 million ounces of gold of which will be upgraded to Proven and Probable in the third quarter to this year.

Cash flow from Twangiza will go towards the build-out of the Namoya project in the southwestern part of the gold belt. Namoya is expected to cost $118 million to build and produce an estimated 124,000 ounces of gold per year when completed at a total cash cost of $400 per ounce. Project capex would be paid back in one year’s time at current gold prices.

Upon completion of Namoya cash flows will be directed towards the creation of a hydroelectric plant 25 km from Twangiza which could be built without a dam and provide enough power to reduce production cash costs at Twangiza Phase 1 and 2 by $100 per ounce.

Twangiza Phase 2 will access the ore at the bottom of the mountain using a new processing facility with an estimated capex of less than $400 million.

The final two deposits, Lugushwa and Kamituga, are still in the exploration phase and show strong upside potential.

Once the first three projects are complete Banro will have an estimated annual gold production of almost 500,000 ounces by 2016.

Banro has been active in the local communities as well building schools through the Banro Foundation building two high schools, two primary schools, a health care center, and the rehabilitation of local infrastructure.

Investors have spent the final few years racing towards the low hanging fruit in the mining sector grabbing companies with properties in the Americas. While many have done well Africa has been largely ignored but that may be changing soon.

Despite swimming in cash from high gold prices mining companies are finding that excess cash gets eaten away by inflation for large scale projects.

Inflation is beginning to rear its ugly head in Brazil and Argentina where they are fighting inflationary forces for different reasons. Already we have seen capex numbers increase by more than 25% for projects like Cerro Casale or be scaled back as is the case with Galore Creek in Canada.

The threat of nationalization in Bolivia and higher taxes in Peru has been giving companies consternation as project costs rise and margins fall.

In the Congo, inflation risk is stabilizing as the inflation rate trends lower and economic growth moves forward.

In a sign of increasing faith in the long-term future of the Congo, Newmont Mining (NEM) recently took a 16.8% stake in Loncor Resources (LON) which holds rights to more than 21,000 square kilometers in the Congo.

While Newmont’s production profile has been flat for the last few years Africa is the only area showing growth. The investment in Loncor is not just an investment in an exploration company with strong potential but a stamp of approval for the Congo.

While investors are rushing into gold and silver stocks located in the Americas Africa remains overlooked. Instead of chasing returns investors should look for value in African mining stocks like Banro who will enter into production later this year and rising to almost 500,000 ounces per year by 2015.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.

Trichet and the ECB, Finalizing a Legacy Tuesday, Jan 18 2011 

On October 31, 2011 the tenure of ECB President Trichet will come do an end. In the coming months we will likely hear an increasing drumbeat of noise concerning who will replace Trichet and what policies the new leader of the ECB will embrace. In the meantime, it is likely that Trichet will use the remaining months to tie up loose ends regarding the PIIGS and set a potential course for his successor.

On January 13th, the ECB released its latest statement sending a hawkish tone to the markets and warning that if commodity prices continue to rise the ECB may have to step in a begin raising interest rates in an attempt to stay ahead of the inflationary curve.

During the press conference Trichet reminded the markets that in July of 2008 the ECB was faced with a difficult decision in the face of rising oil prices and not afraid to raise interest rates to maintain price stability..

As Trichet’s tenure as head of the ECB draws to a close we are likely to see him begin to tie up some loose ends so as not to burden the new President and allow him to start with a fresh plate.

This explains the recent push by Europe to get Portugal and Spain to accept bailouts. As noted in a fall speech Trichet warned the PIIGS that they cannot wait to get their respective houses in order and that it must be done quickly or else they risk being left behind.

By getting Spain and Portugal out of the way early in 2011, Trichet can turn his full attention to a very pressing matter, rising inflationary pressures.

Italy will become a wildcard if Burlusconi cannot hold onto power. If the Italian government falls then there will likely be pressure by the ECB and the market to accept reforms or a bailout.

December 2010 ECB inflation came in at 2.2%, slightly higher than the 2% upper band. Recent pressures in the agricultural and commodities sectors indicate that inflation may be stubborn and stay above the 2% level for most of 2011. In that case, Trichet may choose to end his term with a rate hike in order to get ahead of the inflation curve and set the course for hi successor.

During the press conference Trichet noted a clear difference between the building inflationary pressures and problems at the sovereign level by remarking that both areas are separate and distinct risks.

Rising commodity prices fuel inflation risk as consumers purchasing power is eroded through higher prices which in turn translates into rising wages.

The problems at the sovereign level fuel sovereign risk as governments are forced to pay higher rates in order to finance new debt and refinance existing debt.

The question yet to be asked is who will replace Trichet as head of the ECB?

The French are concerned as Trichet is the only French member of the council and his departure represents a loss of decision making power over interest rates.

Right now the ECB council is composed of representatives from France (Trichet), Italy, Spain, Germany, Austria, and Portugal. We may see an olive branch extended to France for support of a hawkish candidate by offering them the position currently held by Gertrude Tumpel-Gugerell, the representative from Austria, when she retires in May of 2011.

Late last year the French began to court the head of the Italian Central Bank as a possible successor in contrast to the head of the German Bundesbank who is a leading candidate.

One needs to ask themselves what favors the Germans asked for in return for their bailing out of Ireland and if the recent large purchases of debt by Japan and China were a negotiating ploy.

Whomever takes the reigns of the ECB following Trichet will be watched closely by the market as a hawk would indicate a continuation of the policies and the potential for interest rate increases. A dove would indicate a break with the policies of Trichet and an indication that interest rates are likely to remain low for some time into the future.

Disclaimer
Communications are intended solely for informational purposes. Statements made should not be construed as an endorsement, either expressed or implied. This article and the author is not responsible for typographic errors or other inaccuracies in the content. This article may not be reproduced without credit or permission from the author. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Past results are not indicative of future results.
PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS THE OPPORTUNITY FOR GAIN WHEN INVESTING IN THE STOCK, BOND, AND DERIVATIVE MARKETS. WHEN CONSIDERING ANY TYPE OF INVESTMENT, INCLUDING HEDGE FUNDS, YOU SHOULD CONSIDER VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS: OFTEN ENGAGE IN LEVERAGING AND OTHER SPECULATIVE INVESTMENT PRACTICES THAT MAY INCREASE THE RISK OF INVESTMENT LOSS, CAN BE ILLIQUID, ARE NOT REQUIRED TO PROVIDE PERIODIC PRICING OR VALUATION INFORMATION TO INVESTORS, MAY INVOLVE COMPLEX TAX STRUCTURES AND DELAYS IN DISTRIBUTING IMPORTANT TAX INFORMATION, ARE NOT SUBJECT TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES, AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN ONLY TO THE INVESTMENT MANAGER.
Before making any type of investment, one should consult with an investment professional to consider whether the investment is appropriate for the individuals risk profile. This is not intended to be investment advice or a solicitation to purchase any of the securities listed here. I will not be held liable or responsible for any losses or damages, monetary or otherwise that result from the content of this article.