Tuesday, November 8, 2016

Banro Corp and Twangiza Mine

Today Banro released its 3Q 2016 report. Below you will find the chart showing the performance of the oldest mine, called Twangiza:

As the chart shows, Twangiza is deteriorating. Despite higher gold prices received, the margins demonstrated by the mine are going down.

Why? Here is the answer:

Simply put, grades and recovery ratios are going down. As a result, margins are going down as well.

Somebody could say that over time every mine is deteriorating. Yes, but Twangiza is a relatively new operation. It is too early to deteriorate so much.... 



  1. SD, your charts are so elegant...3 pictures worth 3000 words!

    tx again from an admiring reader.

  2. joey,
    Thanks. That is what a simple digression is about...

  3. Over simplified digression. Readers would easily get confused by this quick conclusion.

    The chart shows grades still hovering well around 2.75g/t. A decent grade at open pit.

    Recovery ratio is a function of chemical extraction in a CIL circuit. It depends on ore soil composition and crushing grade.

    This iterative process of improving recoveries will see further improvement with October already at 75%.

    Labelling a change in soil on a high grade resource as a 'deteriorating' is factually inaccurate.

    1. Of course the grade of 2.62 (3Q 2016) is decent for an open-pit operation. But you look at it from a geological perspective , which is wrong. Remember that Banro is in trouble therefore it should deliver as highest cash flow as possible to survive. If there are better parts of the deposit they should change the mine plan immediately and mine from that part.

    2. Analysis is rather shallow. Twangiza is a 1.8 moz reserve with avg 2g/t. This 'oldest' mine can produce for another 14 years at current AISC of 869.

      Each quarter has seen improvement. The trouble is not Twangiza. Mine plan is debatable but production is also expanding with finer crusher and increased mtpa throughput.

      Fear in the market on todays debt. Now they refinancing for new longer term. Let 2016 deliver $240mil and will see 20% of that be free cash.

      Changes everything.

    3. In 3Q 2016 Twangiza was delivering its gold at AISC of 1,000 (not $869), which was quite high, compared to other West African mines (but, of course, it was still quite a decent cost, compared to other world mines)

      3Q 2016 was worse than 2Q 2016 so the thesis there was an improvement each quarter is flawed.

      You are right on debt but remember that Banro has to be delivering part of its production to financing entities at prices much below the market. It has a negative impact on the company's economics.

      That is why I generally avoid the miners financed by streaming companies.

      As for Banro - I am not a hater. I keep my fingers crossed that they'll be O.K. but, for the time being, I see nothing interesting about this company (apart from the stock price)