Resource Clips May 24, 2012 – 5:47 AM ET | Last Updated: May 24, 2012 5:01 PM ET Tanzanian Royalty Exploration Corp Buckreef: Tanzanians working for Tanzania. By Kevin Michael Grace and Ted Niles Editor's Note: Since our interview with David Duval, he has left Tanzanian Royalty. As the tide of "resource nationalism" swells throughout the world, foreign mining companies are increasingly fighting rearguard battles with their host countries.Tanzanian Royalty (TSX:TNX) decided to employ a different strategy with its Buckreef Gold Project in Tanzania. David Duval, special advisor to President Jim Sinclair, explains, "We did a deal on it [in 2010] and allowed the government to keep 45%. I think in a sense we almost sort of nationalized ourselves by giving the government a large piece of the action." Buckreef and the company's other projects are located in the Lake Victoria Goldfields, a historic producer in East Africa. Other companies currently active in the region areBarrick (TSX:ABX), AngloGold Ashanti and Golden Eagle. Buckreef "had been explored by a number of different operators over the past decade or more," Duval says. "The last one was IAMGOLD (TSX:IMG). They actually did a fair amount of drilling on the thing. During the global financial crisis in 2008, they ended up in some financial difficulties and abandoned a number of projects in Africa." For decades after independence in 1963, Tanzania was a one-party state virtually off-limits to Western investment. That has changed, Duval says. "Tanzania is mining friendly. They have a democratically elected government, and it's a very stable African country… [Now] there's a lot of money going into the country, and their investment policies compared to South America and the other African countries are really quite good." Duval points out that Sinclair has built goodwill in the country with his considerable charitable work. "I was in the capital with Joseph Kahama, our Chairman [and CEO], and Joseph knows the President of Tanzania well. So we're well known politically, and we've developed a lot of very good political capital there over the years. People know who we are and the way we operate. Tanzanian Royalty strives for a true partnership. "All of our staff in Tanzania, the project staff, geologists, they're all Tanzanian," Duval reports. "We don't have one expatriate geologist on the project. They're just top-notch guys; they really are. I've been very impressed with them, and they've done a wonderful job for us." The company released a preliminary economic assessment for Buckreef April 25. Based on measured and indicated resources of 44.2 million tonnes at 1.23 grams per tonne (at a 0.5 g/t cutoff), it is estimated to contain 1.74 million ounces gold. Over a 12-year open-pit mine life, it is expected to produce 1.35 million ounces (at $750 per ounce before royalty and taxes) from 1.8 million tonnes per year initially, rising to 3.6 million tonnes per year in year six. Initial capital cost of mining equipment is $61.5 million, and the initial capital cost of the plant is $133.9 million. The total initial capital cost is $238.3 million. Pretax net present value (NPV), based on a gold price of $1,600 per ounce, is $392 million at a 5% discount rate. Post-tax internal rate of return (IRR) is 48%. May 22 Buckreef assays include 3.89 g/t gold over 30 metres (including 7.23 g/t over 7 metres) 9.2 g/t over 4.1 metres (including 15.71 g/t over 2.1 metres) 2.98 g/t over 11 metres (including 5.9 g/t over 2.9 metres) 5.98 g/t over 5 metres (including 10.69 g/t over 2 metres) 3.23 g/t over 7 metres (including 5.56 g/t over 2 metres) 7.36 g/t over 2 metres 1.39 g/t over 12 metres (including 6.17 g/t over 1.2 metres) On April 27, Tanzanian approved a $4.1-million, 16,600-metre Buckreef drilling program. It is intended to expand the project to 650 metres and upgrade inferred resources to measured and indicated. "I think the expectation that we could see the overall grade climb is realistic," Duval says. "We are looking at commercial production, later in 2014, and the more resources we have in this core area obviously the better from a mining standpoint." Tanzanian has not been immune to the bear market in precious metals. From a 52-week high of $7.55, it fell below $3.50 this month but has since recovered to over $4. "This stock has always been a bit of a counter-trend type situation," Duval says. "I've seen this happen in the past, and I think a lot of it relates to the potential that we see in this sort of discovery. Jim, of course, has been on the road a lot; we both have, as a matter of fact, getting our story out."As for infrastructure, "We're a few hours out of Mwanza, which is a mining hub on the south shore of Lake Victoria," Duval says. "We have good road access into the property, and it's a gravel road. There is an airstrip on the property. We would have to tie into the power grid, and I'm not sure about the exact distance from the property. It's not an onerous distance. I think we're okay in that regard. We would have to have diesel and backup and stuff like that, just in case." Simit Patel wrote in Seeking Alpha May 14, "[Tanzanian's] short interest has been steadily growing thus far in 2012. High short interest in quality gold stocks is something I really like to see, as invariably these shorts are going to need to cover - and when they do, [the] price could really take off, if the company is as solid as bulls believe it to be." Patel is bullish on the company largely because of Jim Sinclair: "I believe investing is all about finding top management in the right sector." Duval concludes, "We are gearing towards commercial production, and on top of that we have all this exploration upside. There is a lot of blue sky on it; we are producing results on a very consistent basis, and the results are excellent. It's as simple as that." At press time, Tanzanian Royalty had 100.3 million shares trading at $4.10 for a market cap of $411.2 million.