Allan Mulligan, Managing Director, Walkabout Resources

Walkabout Resources talks about operations in Botswana and Tanzania.

AllanMulligan-BLOGWalkabout Resources has several projects spread across Africa: a thermal coal project located in Botswana and several concessions under exploration in Tanzania. Could you please provide us with an introduction to these projects?

AM: Takatokwane, our coal project located in Botswana, is the largest coal resource in Botswana; we have a JORC-compliant Inferred Resource of 7 billion mt and an Indicated Resource of 750 million mt under the JORC code. Takatokwane is currently undergoing a pre-feasibility study and the purpose of the pre-feasibility is to assess the best way of commercializing these resources. Coal in Botswana is stranded; rail infrastructure is not developed to access our resource body. One focus of our pre-feasibility study is to determine the viability of shipping around 1 million tonnes of coal per annum to South Africa, either for local consumption or to access international markets through Richards Bay. South Africa has indicated they will have a shortfall of coal within several years, reaching a so-called “coal cliff.” By 2016, the country will have a shortage of some 20 million mt of coal. By 2019, this number is estimated to grow to 40 million mt. Takatokwane is a starter mine project: the ore body is so large that it has the potential to host several strip mines one day. These mines will supply coal to Asian markets.

In Tanzania, our most active project is Kigoma copper, located in the Northwest of the country, along the coast of Lake Tanganyika and 80 km south of the town of Kigoma. The region has an active base of artisanal miners, who mine for copper oxides. We have been able to partner with a number of local companies and acquire a majority stake in the landholdings we wish to explore. We have split the project into two zones: an oxide copper project and a sulphides project. The oxide project seeks to assess the scale and tenor of the copper currently being mined by several micro-operations on an informal basis. We have determined the oxide copper enriches on the interface between basalt and dolomites and that the copper fluids have come up through magmatic intervention. The presence of a significant magmatic event would bode well for our sulphide project. In working with our sulphide project, we have identified several linear structures within the area: one of which leads directly into a magnetic high, about two hundred to five hundred meters below the surface. In 2014, we plan to generate drill targets to expand our work on this project.

Walkabout Resources is a Junior exploration company. Exploration is what we do best and it is in African exploration that our expertise is most notable. Walkabout Resources plans to develop a pipeline of projects that are in different stages of development and build shareholder value through this model. So our focus is first and foremost on mineral exploration.

Botswana has many merits as an investment destination: the country is politically stable and has been deemed by many the premier destination for investment capital in all of Africa. How supportive has the government been of the industry’s development?

AM: The Government of Botswana has always been supportive of resource industry development. It is a great place to work; there is no corruption and security of tenure is good. The country is in relative early stages of development as a diversified resource industry, although the country has had diamond and copper production for many years. Commercial markets are now moving to invest in Botswana’s mining industry. The further development of regional infrastructure, as proposed by the development of either the Trans-Kalahari rail line, which would run to the West to Namibia, or the Trans-Swana rail line, which would run to Mozambique in the East, will only further increase the region’s appeal. Estimated to take between five and six years to construct, any one of these rail lines will unlock the coal industry in Botswana. There is very little risk of a slow-startup for either of these rail lines. Financing remains one barrier to the project’s development. We urge the Government of Botswana to consider underwriting one of these developments as they are in the public interest. Infrastructure such as the Trans-Kalahari or Trans-Swana will structurally change the economic future of countries, incentivizing other investment and creating their own economic zones.

Walkabout Resource’s share price, like that of many other resource exploration companies, has displayed volatility within the past year. Do investors fully understand the value of Walkabout Resources’ assets?

AM: Project risk is directly linked to the stage of development. Investor perception of Walkabout Resources’ assets is certainly not exceptional in this regard: investors are cognizant of the value of our project, but until a route to market is demonstrated, they will remain cautious. This has been especially true over the course of the past year. We believe the market is changing though and money is beginning to flow back into advanced stage, robust projects; from this we are now beginning to see funds cascade down into earlier stage projects. Our approach is to consider Takatokwane Phase 1 as a starter project which will de-risk the larger and longer term outlook for the ore body. Looking at the development of the region, the most appropriate strategy for the development of projects such as Takatokwane will be to partner with those companies with which we can secure off-take agreements. This strategy will have the added benefit of decreasing the perceived risk of our projects.

Australia’s resource industry undoubtedly has very strong connections to Africa. How has this relationship evolved? What dynamics has Walkabout Resources noticed through its development?

AM: When I began working in this industry, we observed there was not a large amount of retail uptake for projects located in Africa. While the Canadian Junior industry first entered into resource exploration in Africa, they then moved on to South America. Australian investors of the time did not properly understand the opportunities in Africa. This has rapidly changed. Investors have come to understand that if the Australian development model is followed, whereby companies employ a set of best practices and minimize the exposure of their investors to undue risk, Africa can be a very lucrative place to invest in resources.

Australian resource exploration companies in fact have an advantage in exploring Africa. There are parallels that exist between African geology and Australian geology. If we are to look at Tanzanian gold, for example, it is comparable in structure and size to Australia’s greenstone belts.

One industry dynamic we have observed in the development of the African resource sector is that when operating in more advanced African mining jurisdictions you should partner with local businesses and individuals, whereas when operating in less advanced mining jurisdictions one should form partnerships closer to government.

Poor infrastructure and undeveloped logistic networks are two of the chief complaints that resource exploration companies have regarding working in Africa. Why have we seen these two areas go undeveloped for so long?

AM: Several reasons exist for the state of Africa’s infrastructure and logistic networks. First, there has not been enough money put into these areas in general. Second, the belief has emerged that infrastructure should be privately developed, in spite of the historical and successful involvement of governments in large-scale infrastructure projects. The privatization of the development burden of enabling infrastructure has occurred at a tremendous loss to Africa; many projects cannot be developed because governments are unwilling or unable to invest in their own country.

If we were to meet with you five years from now, where would we see Walkabout Resources be?

AM: Walkabout Resource aspires to become a mid-cap mining company, with possibly one or two projects in production and several others in development. We will have a strong cash flow with an even stronger focus on generating returns for our investors.

This interview was conducted as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Official Mining in Africa Country Investment Guide, will be launched next February 2014, as the only official publication providing country-specific information at Africa’s top mining event, the 2014 Investing in Africa Mining Indaba™ held in Cape Town, South Africa.

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