Lake Victoria Gold’s Tembo Project LOI: A Strategic Move to Unlock Tanzania’s Gold Potential?

Lake Victoria Gold Ltd. (TSXV:LVG) has taken a significant step toward unlocking value at its Tembo Project in northern Tanzania with the signing of a non-binding Letter of Intent (LOI) on May 1, 2025. The agreement, between the company’s subsidiary Mineral Industry Promotion and Consulting Company Limited (MIP) and Nyati Resources (T) Limited, aims to evaluate a potential joint venture (JV) to develop small-scale gold production. While the move aligns with Lake Victoria’s strategy to generate near-term value from its extensive exploration portfolio, the project’s success hinges on overcoming technical, financial, and regulatory hurdles.

The Tembo Opportunity: Infrastructure and Partnerships
The Tembo Project, which has seen over USD $28 million in historical exploration and boasts more than 50,000 meters of drilling, sits adjacent to Barrick Gold’s Bulyanhulu Mine, a mature operation with a long history of gold production. The LOI’s focus on leveraging Nyati’s existing infrastructure—including a 120-tonnes-per-day (tpd) processing plant and a 500tpd plant under construction—could significantly reduce Lake Victoria’s capital expenditure burden. By combining Nyati’s facilities with mineralized material from Tembo’s Mining Licences and nearby Primary Mining Licences (PMLs), the JV could fast-track production without requiring costly new builds.

The proposed structure also includes a special purpose vehicle (SPV) to comply with Tanzania’s mining regulations, which require a 16% free carried interest for the government. MIP retains operational control, managing day-to-day activities, technical staffing, and plant optimization. Meanwhile, Nyati’s commitment to raising up to USD $5 million in working capital signals confidence in the project’s potential.

Profit Sharing and Risks: A Delicate Balance
The preliminary profit-sharing framework—85% to MIP and 15% to Nyati after the government’s 16% cut—appears favorable for Lake Victoria. However, this arrangement remains contingent on due diligence and definitive agreements. Critical uncertainties include metallurgical recoveries, grade continuity, and permitting timelines. Lake Victoria’s Tembo Project lacks a formal mineral resource estimate or feasibility study, meaning the project’s economic viability remains unproven.

Investors should also note Tanzania’s evolving mining policies, including the 2017 Mining (Amendment) Act, which has deterred some foreign investors. While Lake Victoria’s partnership with Taifa Group—a local contractor with deep industry ties—may mitigate geopolitical risks, regulatory challenges persist.

Broader Strategic Context: Imwelo and Beyond
The Tembo LOI is part of a broader strategy to capitalize on Lake Victoria’s asset portfolio. The company also holds the Imwelo Project, a fully permitted gold project west of AngloGold Ashanti’s Geita Mine, supported by a 2021 pre-feasibility study. Taifa Group’s involvement in Imwelo’s contract mining and civil works underscores the company’s focus on leveraging local expertise and existing infrastructure to reduce costs.

Yet, Tembo’s lack of a feasibility study contrasts sharply with Imwelo’s advanced stage. This disparity highlights Lake Victoria’s dual approach: balancing high-potential but unproven projects with more established opportunities.

Conclusion: A High-Reward, High-Risk Proposition
Lake Victoria Gold’s Tembo Project LOI represents a bold attempt to unlock value from a historically underdeveloped asset. With USD $28 million already invested in exploration and a strategic location near major mines, the project has tangible advantages. Nyati’s infrastructure and capital commitment could accelerate timelines, while MIP’s operational control maintains Lake Victoria’s stake in the venture.

However, the absence of a mineral resource estimate or feasibility study introduces significant technical and financial risks. The government’s 16% carried interest reduces net profits, and Tanzania’s regulatory environment remains unpredictable. Competing priorities—such as the Imwelo Project’s advanced stage—may strain resources.

For investors, Tembo’s success will depend on whether due diligence confirms the project’s metallurgical and geological viability, secures permits, and attracts financing. If these hurdles are cleared, the 85% profit share for Lake Victoria could deliver outsized returns. But until then, the project remains a speculative play.

In a sector where junior miners often struggle to advance projects past the exploration phase, Lake Victoria’s proactive approach—combining partnerships, local expertise, and a focus on near-term opportunities—merits attention. Yet, the road to profitability at Tembo is long and uncertain. Investors should proceed with caution, closely monitoring progress on due diligence and the eventual execution of definitive agreements.

Nick Timiraos is a pseudonym for a financial journalist specializing in mining and commodities. The views expressed here are based on public information and do not constitute investment advice.