Tango Mining takes control at Oena, and is now planning further expansion in Africa

A C$250,000 fundraising, to close later in August, will set Tango Mining Limited (CVE:TGV) up nicely for the next stage of its development, as it seeks to secure control over the Oena diamond mine in the Northern Cape Province of South Africa.

Tango also mines and processes coal on behalf of Exxaro (JSE:EXX) in Mpumulanga in the northwest of South Africa. Tango’s new chief executive Samer Khalaf describes that operation as largely “self-sufficient.”

He’d like to be able to say the same about Oena too, which is why the company has recently been making some changes at the operational level, and why the recent funding has been put in place.

Out goes the old contractor at Oena, and in comes Consulmet, one of the top names in diamond mine design and operations. Tango and its partners will own the processing equipment, for which it has secured financing through a newly established equipment company and will be operator.

But while those changes are taking place there will be a short production hiatus.

“There is enough equity in the last raise to get us through the period when Oena is not producing,” says Khalaf. “It’s going to take us eight weeks to get up and running.”

Tie that into the 10 days or so that still remain for the current contractor to clear out and that means production in Oena is likely to re-start in about ten weeks.

But when it does the improvements ought to be palpable.

“We’ll be looking to target a double in production,” says Khalaf. “Certainly to increase it by between 50% and 100%.” And margins are likely to increase fourfold since the equipment on site is wholly owned by Tango and its partners.

This increase will be affected quite simply. There will be more shifts, more tonnage will be mined, and the company will also be processing old tailings as well as fresh gravel.

Even with those production increases in place, Khalaf says that internal company estimates still put the mine life at Oena at over ten years, which isn’t bad considering it’s already been in production for more than a decade.

But there’s more to it than that. Creating what Khalaf calls a new “mine equipment company” to do the work at Oena allows Tango to have a vehicle in place that will also be able to take on other work in South Africa as and when it arises.

“We have formed our own equipment company in order to lease  to other assets that we might acquire,” says Khalaf. “We’re looking to acquire diamond assets in South Africa and beyond and we’ve been very active in our search  over the past few months.”

Longer-term followers of Tango might remember the company’s efforts to acquire the BK11 kimblerlite pipe in Botswana, and how that deal eventually stalled.

But Khalaf is quite candid about this.

“BK11 was a really challenging project,” he says. “It would have required US$25mln to US$30 mln in new money in what would have been a new country for us. We dropped the opportunity earlier this year. We’re now looking more at alluvial diamond mines and trying to replicate the Oena model.”

So, smaller mines of a more manageable disposition, for a company that’s now stabilised financially and supported by a South African mining team with long-standing in-country experience.

“We can leverage from the experience of our coal team,” says Khalaf. “We’re really assisted by them in a lot of the decisions we take at Oena. The team is very involved in our analysis of the operation at Oena and at new opportunities we are reviewing”

As it stands, the three coal operations should process around 6.2 mln tonnes this year, while Oena continues to throw up a significant percentage of high quality stones worth more than US$1,100 per carat.

But don’t expect Tango to stand still for too long. Once Oena is up and running under the new mining plan, expect further interesting developments. 

Story by ProactiveInvestors