The Sunday Mail
Gold
THE country’s biggest gold producer, Metallon Gold, with four operational mines — Shamva, How Mine, Mazowe, Arcturus — intends to inject more that US$294 million to expand its operations over the five-year period through 2019, signalling the growing appetite foreign firms have for local assets.
Of this investment, US$78,3 million generated from internal cash resources and bank facilities will come this year alone.
It is envisaged that the expansion projects will increase production from the 90 000 ounces (about 2,5 tonnes) produced last year to 150 000 ounces — or 4,2 tonnes — this year, which is 30 percent of Zimbabwe’s current gold output.
About 28,3 grammes of gold make up an ounce.
Under the current dispensation, all gold bullion produced is sold to Fidelity Printers and Refiners, a Reserve Bank of Zimbabwe subsidiary.
Gold producers are paid on delivery, with Government retaining 5 percent as royalty. Increased gold production will help Government stock its reserves.
As at the beginning of 2014, Government did not have any gold reserves in its vault apart from gold coins valued at US$501 390.
However, Metallon’s continued push to increase production will breathe life into a sector choking from falling commodity prices.
Metallon recently revealed that while four mines are operating, there are plans to re-open Redwing Mine and US$4,8 million will be earmarked for its restoration, a process that includes dewatering, and plant and equipment rehabilitation.
This year, US$18,7 million will be poured in Shamva, which is the mining group’s workhorse.
A South Africa company, Fraser Alexander, has been contracted to build new tailings dams at both Shamva and Mazowe mines.
Civil engineering work at Mazowe started last month, while plant erection on site is scheduled to start in June. The plant will be commissioned in September.
Another South African firm, Baldmin Engineering, has been engaged to build a plant for the sands retreatment project at Mazowe.
Fabrication of the plant is believed to be under way at the factory in South Africa and is now 50 percent complete.
Over the five-year period to 2019, Metallon will invest US$69 million into Bulawayo-based How Mine for shaft deepening, exploration and plant expansion.
After the investment, the mine is expected to produce 100 000 ounces, which translates to 2,8 tonnes.
Expansion works at Shamva Gold Mine that will include a shaft upgrade, sands retreatment projects, surface exploration of the Shamva hill and plant expansion are projected to take up more than US$54 million.
A similar amount will be used at Mazowe Mine.
In addition, US$46 million and US$73 million will be set aside for Arcturus Mine and Redwing respectively, with the two ventures expected to add a cumulative 664 000 ounces to production.
On the overall, by 2019 gold production is forecast to top 556 000 ounces (15 tonnes) per year. Revenues from the four mines is also expected to rise.
While this year topline is projected to come in at US$178 million, an estimated US$283 million is expected in 2016.
Ultimately, the gold miner says revenues will likely soar to more than US$561 million in 2018 before climbing to US$659 million after the projects.
Metallon CEO and deputy chairperson of the mining group, which also has assets in Tanzania and the Democratic Republic of Congo, Mr Mzi Khumalo, said last week gold production at its mines — especially in the first three months of this year — was affected by equipment breakdowns.
“. . . these issues have been addressed through the (phased) equipment replacement programme,” said the South African businessman.
In the quarter to March 31, 2015 production rose to 24 385 ounces from the same period a year ago.
It, however, did not meet the targeted output of 28 654 ounces.
Corrective measures have since been adopted and new locomotives and crushers have been ordered for Arcturus Mine in Goromonzi, Zimbabwe.
Another crusher will be ordered for Mazowe Mine.
Prices of the yellow metal slumped 0,1 percent in the first quarter of the year as the US dollar continue to gain against a basket of world currencies.
Gold futures for June delivery fell US$2,10 to settle at US$1 183,20 trading last month.
Prices are expected to recover.
Government is in the process of pushing foreign companies in the extractive sector to indigenise.
Metallon has already submitted its proposals, but its undertaking to cede 10 percent stakes to three entities — the local community, employee share schemes and the National Indigenisation and Empowerment Board (NIEEB) is at variance with Government’s resolve to get more than 51 percent equity.
One of the key pillars of Government’s economic blueprint Zim-Asset is value-addition and beneficiation.
Amendments to the Mines and Mineral Act are also expected to set the pace for growth in the mining sector.
“The amendments to the Mines and Minerals Act, which should also result in a progressive and investor-friendly mining title management system, will enable the implementation of the beneficiation and value addition strategy, while at the same time attracting investment into mining.
“The new Act will also meet international best practices, while also allowing for the use-it-or-lose-it principle in a win-win manner.
“The above developments, together with the recovery in the global economy, as well as fruition of anticipated investments from Russia and China, among others, will support the growth of mining,” said Finance Minister Patrick Chinamasa in the 2015 National Budget.
