bAobAb resourcesBaobab Resources Obtaining first mover advantage in a district in southern Africa ripe for mining that remains, in some parts, unmapped, is a dream scenario for many

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2 MINING � Baobab Resources

Making it in Mozambique: Baobab ResourcesObtaining first mover advantage in a district in southern Africa ripe for mining that remains, in some parts, unmapped, is a dream scenario for many. There are, of course, few who have what it takes to make the leap.

Western AustrAliA-bAsed leAding miner, Baobab Resources, entered Mozambique’s fledgling materials

market and has grown considerably since beginning operations in the country back in 2005.

3JULY 2011 � The International Resource Journal

Making it in Mozambique: Baobab Resources

Mining

Obtaining first mover advantage in a district in southern Africa ripe for mining that remains, in some parts, unmapped, is a dream scenario for many. There are, of course, few who have what it takes to make the leap.

Western AustrAliA-bAsed leAding miner, Baobab Resources, entered Mozambique’s fledgling materials

market and has grown considerably since beginning operations in the country back in 2005. 02


With a core focus on iron ore, as well as inter-

ests in base and precious metals, the company

has a large land-holding covering five discrete

project areas within the country, including its

flagship project in the inland province and bur-

geoning mining hub of Tete.

With valuable iron ore deposits along the

Zambezi River, which runs through the province,

the government of Mozambique has taken a pro-

active approach to business in its country where

more than half the population still live below the

poverty line.

Baobab was established in order to acquire the

Mozambican company Capitol Resources, which its

directors considered to have a balanced portfolio

of projects in Mozambique ranging from advanced

resource definition drill targets to brownfield explo-

ration, and greenfield commodities prospects.

Baobab managing director Ben James says:

“We’ve grown rather quickly from a £10 million to

15 million company to a plus-£50 million market

company since the beginning of this year, which

has been a rather rapid increase in our value.”

A geological gold mineAs a geologist with 15 years global experience in

the mineral exploration industry, James says that

it was originally the geology of Mozambique that

encouraged the company to set up shop in the

southern African republic.

“We recognized that there is the same pro-

spective geological terrain that has been exploit-

ed in neighbouring countries, but it had hardly

received any modern exploration companies,”

remarks James. “There are opportunities not just

for deposits, but entire mineral fields that have

yet to be walked over.”

With such an abundance of untouched re-

sources it is no surprise that the big hitters from

the global mining industry are eyeing up and

setting up shop in the region. As a result of the

interest being shown from abroad, Mozambique

has begun undergoing something of an econom-

ic renaissance.

Just 10 years ago it was one of Africa’s poor-

est countries, but today thanks to investment from

foreign vehicles the world over and, perhaps more

importantly its stable democratic government, it is

one of Africa’s fasting growing economies.

The stability of the republic’s political system

has helped mining companies like Baobab settle

in and flourish quickly, and has acted to ensure

businesses have all the support necessary to take

advantage of the country’s untouched resources.

“The Ministry for Mineral Resources has

taken a very proactive approach,” says James.

“They see mining as the cornerstone of the new

Mozambican economy. They are pragmatic and


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are taking a very solid long-term view on the fu-

ture of Mozambique, and it’s proving to be a very

enjoyable place in which to work.”

Teaming up with the IFCIn Tete, Baobab has teamed up with International

Finance Corporation (IFC), a member of the World

Bank. Baobab owns 85 per cent of its project in the

province and IFC owns the remaining 15 per cent.

“Having an IFC investment gives both the

company and the project a lot of credibility,”

James says. “Financially of course it is very use-

ful as for every dollar we spend the World Bank

stumps up 15 cents.

“But the real benefit we see to working with

IFC is down the track when it comes to negotiat-

ing access to port, rail and power; having them

on our side of the negotiating side of the table

will be very valuable as they carry a significant

amount of clout in southern Africa.”

The experience IFC has in social and com-

munity-based programs is something James says

will help when it comes to implementing a large-

scale CSR strategy.

“As all of our projects mature, having the IFC

supporting us with our CSR initiatives will be very

useful as that’s really what they specialize in,

especially in community development programs,”

he remarks.

Size and scaleWithin its exploration licence, spanning 600 square

kilometres, metallurgical studies and financial mod-

elling for the Tete iron/vanadium/titanium project

have outlined a robust project economics in the

production of discrete, high-value titanomagnetite

and ilmenite concentrates, with potential additional

value upgrading onsite, which could include mine-

mouth pelletising or smelting.

The site is strategically located to access

low-tariff hydro-electric power, rail and port infra-

structure, as well as having access to possible

coking coal deposits.

Historical exploration limited to government

sponsored work was undertaken in the 1960s and

1980s; however, no previous drilling ever took place.

Upon commencing exploration of the area in

mid-2008 Baobab immediately recognized the

area’s significant resource potential, with the

mineralised strike in the Massamba Group alone

in excess of 8 kilometres.

An independent estimate on the Massamba

Group claims that the area has could accommo-

date an exploration target between 400 million

to 700 million tonnes at a maximum depth of

250 metres below the surface, supported by

7,500 metre scout diamond drilling.

An aggressive 2011 exploration campaign

focused on achieving a targeted global resource


inventory of 300 million tonnes and RC drilling

programs, totalling 25,000 metres, has been

designed to define resources at South Zone, Chi-

tongue Grande extensions and Chimbala within

the Massamba Group.

As a result, three RC rigs and two diamond rigs

are under contract to accelerate the work programs

and ensure that the resource milestones are met.

Improving infrastructure The company’s activities in Mozambique’s inte-

rior have benefited from the infrastructure sur-

rounding the Zambezi River, which flows into the

Indian Ocean.

Africa’s fourth largest river provides Mozam-

bique with a significant energy source through

the use of hydropower.

“In Mozambique we are confident that we’ll be

able to negotiate electricity tariff rates at a half, if

not a quarter, of what you would expect to pay in

Australia or West Africa, which will have a massive

impact on our operational costs,” says James.

“If you take a look at a typical Western

Australia magnetite operation, the power bill—

as a component of the mineral processing

costs—often makes up around 30 per cent of

the overall overheads. There will be a significant

impact on our financial modelling, as a result of


Mozambique’s plentiful power supply.”

With roads and rail improvement and refur-

bishment plans in place, Baobab is a company

that is confident that it can take full advantage of

the iron ore and other mineral resources on offer.

“This infrastructure is multi-party,” says James.

“It’s not going to be monopolized and we won’t see

a situation where smaller companies cannot get ac-

cess to railway infrastructure, for example.

“We have also had the green light from

environmental agencies in regards to barging

on the Zambezi River,” he adds. “This has now

been put forward for public consideration, and

if it turns out to be a viable option it will act to

open up additional opportunities for getting bulk

commodities very cheaply to the coast.”

Baobab has spent much of its time exploring

the Massamba region north of where it has been

granted an exploratory license in the Tete prov-

ince and later this year will begin to take a closer

look at the Singora region south of Massamba.

“By the end of the third quarter this year we

will have a global resource of at least 300 million

tonnes, with plenty of scope for additional re-

sources,” notes James. “It is my personal opinion

that we’re sitting on between 300 million to 1

billion tonnes in the Tete area.”


Community spiritWith so much potential material underneath the

feet of its workers, Baobab understands that

while it stands to make a generous profit from its

adventures in Tete, it also has a lot of responsi-

bility in regards to the local population.

“We are privileged to be working in Mozam-

bique, but with privilege there comes a tremen-

dous amount of responsibility; especially in re-

spect to local communities and the environment

in which we work,” explains James. “For example,

we try to employ ‘local-local’ as much as pos-

sible. ‘Local-local’ is an IFC buzzword that means

‘as close to the drill rig as possible’.

“We have a large team of employees in Mo-

zambique, of which more than 90 per cent are

Mozambican, and some of these people have

been with us for more than four years now.

“They have really thrived thanks to the men-

toring and training programs in place, and it has

been a real pleasure to see a lot of these guys

developing their skills.”

The real benefit of the company’s work in

Mozambique, James says, is the amount that

is being returned and invested in the country’s

economy.

“CSR is incredibly important to Baobab, its

shareholders and the local population,” he notes.

“But the real benefit of mining is the royalties


and how the government redistribute those royal-

ties across the country.”

Venturing into Tete has proven a huge suc-

cess for Baobab and its project in the province

has developed from a concept to a company flag-

ship project within two years. It is a tale of suc-

cess being written and reflected across a growing

Mozambique.

“Baobab is in a really exciting phase of its devel-

opment,” insists James. “We have got a robust flow

of meaningful news coming through to the end of

this year, including a series of resource estimates in

Tete, a scooping study at our Monte Muande project,

and even a possible emerging coal story.

“But in bigger terms we are uniquely placed in

Mozambique in respect to its infrastructure and com-

plementary resources. This has provided us with the

opportunity to look at sub-3 billion tonne deposits, as

well as opportunities to add additional value onsite,”

he concludes.

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As seen in tHe JulY 2011 issue oF tHe internAtionAl resource JournAl

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bAobAb resourcesBaobab Resources Obtaining first mover advantage in a district in southern Africa ripe for mining that remains, in some parts, unmapped, is a dream scenario for many