Musings on Investing

Tanzania Shoots itself in the Foot

Renaissance Gold (REN.V), and Tower Resources (TWR.V)

Tanzanian government has passed a legislation that gives them a 16% free-carried interest in mining projects in Tanzania. Royalty rate has been increased to 7%, from 4% earlier. The legislation also allows the government to acquire 50% of the shares of a mining company–the mechanism how this would be done has been left undefined. If a company is at all left with any cash after making all these payments to the government it must be held at a bank in Tanzania.

Earlier, Tanzania had barred gold majors from exporting concentrate. Moreover, I have been told that they are now interfering in mining operations as well, and are making it difficult to export rock samples.

In short, Tanzanian government has said that if an investor makes a profit, they will take it away from him; and if he loses, he loses anyway.

Financial corruption is only a minor problem. What Tanzanian government is doing is sheer stupidity. It will benefit no one. It is a wretched poor country and I only see this getting much worse.

Sub-Saharan Africa grew by 1.4% last year. Given that their population growth is twice as much, on a per capita basis, they had a negative growth rate last year.

Sometime in this century, 40% of the world’s population will be in Africa.

Botswana is way past its peak, and South Africa is readying itself for a civil war. There was a time when these two countries were mentioned as examples of good governance in Africa.

The biggest problem of Africa is deeply-rooted irrationality and tribalism. Lack of rationality means that they cannot foresee the effects of their actions. They operate through emotions and feelings, and they hold disdain for those who want to think, plan, and play out scenarios.

If possible, I like to invest in countries where the rule of law is a part of institutions, and private property is respected by the society. That brings me to two companies in North America.

  • Renaissance Gold (REN.V; C$0.26): This has been one of my favorite junior mining companies. Ronald Parratt and Richard Bedell were behind one of the larger gold discoveries of the last decade, where their shareholders made as much as 9,800% of their investment. They have in the last few months entered into multi-million dollar agreements with each of Anglo-Gold Ashanti, Kinross, and Coeur Mining. They have nineteen more projects. Their current Market Capitalization is only C$13 million. REN has about C$2.3 million in the treasury for their generative programs. All the projects are in Nevada and Utah. In my view, they offer a very low risk for a possibility of a very nice reward.
  • Tower Resources (TWR.V; C$0.22): It is hard to find a copper story among junior mining companies. If you are looking for one, you might want to keep an eye on TWR. They have recently had a good, long hit at their Rabbit North project–247m of 0.75% CuEq. This is one of the better hits I have seen in a porphyry target in BC, but it starts 200m under surface. Several other holes they hit earlier were at surface, albeit of lower-grade. I hope their continual drilling leads them to higher grade holes closer to surface. They have two more very interesting projects. They have recently done some cheap financing and 28 million warrants are in-the-money, so I am in no hurry to buy more, but it is worth keeping an eye on TWR for their forthcoming news releases.

On other matters…

This week, I will be speaking on the mess that India is in at FreedomFest in Las Vegas. Linked is a recent overview I wrote on India.

Also, linked is my latest update on India.

At Capitalism & Morality seminar on 29th July 2017, I will be speaking about why without Europeans running the third-world countries, these countries will keep taking suicidal decisions, as exemplified by Tanzania and India. (Use coupon code MUSINGS for a 10% discount on tickets to Capitalism & Morality).

Warm regards,

Jayant Bhandari

Associate: Rajni Bala

 

Disclaimer: All information found here, including any ideas, opinions, views, predictions, forecasts, commentaries, suggestions, or stock picks, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as personal investment advice. While the information provided is believed to be accurate, it may include errors or inaccuracies. The sole purpose of these musings is to show my thinking process when analyzing a stock, not to provide any recommendation. I will not and cannot be held liable for any actions you take as a result of anything you read here. Conduct your own due diligence, or consult a licensed financial advisor or broker before making any and all investment decisions. Any investments, trades, speculations, or decisions made on the basis of any information found on this site, expressed or implied herein, are committed at your own risk, financial or otherwise.

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