For several months we've been following Tan Range (TNX.to) in preparation for making a suggestion. We feel the company has recovered adequately from its recent low price postings at 88 cents a share, and now trading at C$1.00 it seems likely to be a good value. This week, we were spurred to move forward with the announcement that the company would soon trade on the American Stock Exchange, per a recent news release.
One of the things that was deeply impressive about the news release was the description of the company's self-described "broad shareholder base" of "3,377 Canadian stockholders and 3,917 US stockholders." Certainly, these figures make it far clearer how thinly traded junior mining stocks really are.
Jim Sinclair serves as chairman and chief executive officer of Tan Range. The company's web site gives details on their business plan and projects. Mr. Sinclair also provides commentary on gold as an investment through JSMineset.com and on a DVD available from Monex. We like Mr. Sinclair's approach to the issues involved in investing in gold, and his no-nonsense attitude toward business. He also has a reputation for not only having called the top in January 1980, but having sold much of his position quite close to the top.
Others in management seem well suited to their roles. None stand out like Mr. Sinclair.
The company is acquiring royalty interests in gold production in the Lake Victoria greenstone belt of Tanzania. The company not only has excellent properties in Tanzania and a capable technical capability, but also options its properties to qualified mining industry partners for pre-production and direct royalties in future gold production. The company describes its strategy as a variation on the successful Franco Nevada Mining strategy, which led ultimately to Franco Nevada merging with Newmont not long ago.
The 73 prospecting licenses in the Lake Victoria goldfields held by Tan Range include eleven which involve option agreements involving Barrick Gold. One of these, Itetemia, is considered very advanced and Barrick has expended over $4 million on its development. We were at first a bit put off by the close ties to Barrick, but the main property with measured and indicated resources does not seem to involve Barrick.
This main property, the Geita project at Luhala, has measured and indicated 13.3 million ounces and a total resource estimated at 16.3 million ounces gold. The total resource there is worth very nearly $7 billion at $427.40/ounce. With all options exercised, there appear to be 83.5 million shares fully diluted. Thus, at current gold prices, the asset at Geita is worth approximately $83/share. Using a contemporary production cost of $175/ounce for a nearby working mine (producing over 400,000 ounces per year) the net value works out to about $49/share. Certainly a worthwhile speculation for $1/share current market price.
Over the years, we've heard a number of good ideas out of Tanzania. We seem to recall this country is responsible for the innovative "your village owns this elephant herd" policy, which has resulted in larger and healthier herds, much more tourism, and better relationships among farmers, ranchers, and elephant herds. The country is widely regarded as having a sound mining policy.
This report first appeared in the 9 May 2005 issue of The Indomitus Report. It is copyright © 2005 Free West Trust. All rights reserved.
The price of Tan Range was recently (5 July 2005) C$1.28.
Update! The price of Tan Range was recently (19 September 2005) C$3.45. A triple for our readers who bought at C$1.00.