Zim­babwe’s gold cheap to mine – Me­tal­lon

CityPress - - Business - MEM­ORY MATARANYIKA busi­ness@city­press.co.za

Me­tal­lon Cor­po­ra­tion is bank­ing on the low­cost na­ture of its gold oper­a­tions in Zim­babwe and new CEO Ken Mekani says the group has set its eyes on up­ping pro­duc­tion in the min­eral-rich south­ern African coun­try.

Zim­babwe has vast min­eral riches that span gold, plat­inum, nickel, chrome, coal and di­a­monds. These have at­tracted high-pro­file re­source in­vestors such as An­glo Plat­inum, Im­pala Plat­inum, Mwana Africa and Rio Tinto.

In fact, owner Mzi Khu­malo has pre­vi­ously said his com­pany could ex­pand into plat­inum min­ing in Zim­babwe.

Me­tal­lon owns five gold prop­er­ties in Zim­babwe in ad­di­tion to ex­plo­ration projects in the Demo­cratic Re­pub­lic of Congo (DRC) and is plan­ning to list on Lon­don’s Al­ter­na­tive In­vest­ment Mar­ket, a de­vel­op­ment that sources and in­sid­ers say is set to re­duce Khu­malo’s in­ter­est in the com­pany sig­nif­i­cantly.

Its flag­ship mine in Zim­babwe pro­duced 55 000 ounces of the pre­cious yel­low me­tal in 2014 and Mekani says it will pro­duce nearly 61 000 ounces this year, laud­ing it as a qual­ity prop­erty.

Of the five mines in Zim­babwe, four are op­er­a­tional, although re­ports say the other one, Arc­turus, has not per­formed well amid spec­u­la­tion Me­tal­lon may be forced to halt oper­a­tions or spin it off.

Mekani said in an in­ter­view: “The How mine is a qual­ity un­der­ground gold min­ing op­er­a­tion with high gold grades of about five grams per ton … [it] is fairly shal­low with plenty of up­side po­ten­tial, with ad­di­tional min­ing tar­gets, tail­ings re­treat­ment and highly prospec­tive ex­plo­ration tar­gets.

“How mine is also one of the low­est-cost mines in Africa – with C1 cash costs of $541 (R6 633) per ounce and allin-sus­tain­ing costs of $562 per ounce in 2014 and is cash gen­er­a­tive at the cur­rent gold price of about $1 200.”

The com­pany has so far in­vested $6 mil­lion “to­wards the Ma­zowe Sands Re­treat­ment Pro­ject, the Ma­zowe and Shamva slimes dams, Arc­turus cap­i­tal de­vel­op­ment and Red­wing re­sump­tion”.

The Red­wing mine was closed over the past few years ow­ing to flood­ing, but the com­pany said the prop­erty would re­sume oper­a­tions be­fore the end of this year.

And like all the other min­ing com­pa­nies, Me­tal­lon has to pay a pre­mium for guar­an­teed power sup­plies. Zim­babwe is bat­tling power woes that have halved pro­duc­tiv­ity in the coun­try’s econ­omy, although min­ers pay a pre­mium tar­iff of 12 cents per kilo­watt hour.

The com­pany said: “There is a gen­eral energy-sup­ply deficit through­out the south­ern African re­gion and Me­tal­lon hopes a longterm sus­tain­able plan will be found in or­der for these power is­sues to be re­solved.”

Hav­ing pro­duced 90 000 ounces from Zim­babwe in 2014, Me­tal­lon has set a tar­get of 150 000 ounces this year and it said it was well on course to achieve this.

Mekani said the com­pany would this year fo­cus more on re­duc­ing costs at its mines in Zim­babwe and un­der­take fur­ther ex­plo­ration.

The Cham­ber of Mines of Zim­babwe said ex­plo­ration had been on the back burner in Zim­babwe, with gov­ern­ment fail­ing to process ex­clu­sive prospect­ing or­der ap­pli­ca­tions dur­ing the first quar­ter of this year.

Ex­plo­ration ac­tiv­i­ties by Me­tal­lon would be tar­geted at “ex­pand­ing our re­serves and re­sources and pro­duc­tion pro­file”, ex­plained Mekani. “Ex­plo­ration ac­tiv­i­ties at our min­ing as­sets are fo­cused on ex­tend­ing ex­ist­ing ore bod­ies and iden­ti­fy­ing new ore bod­ies, both at ex­ist­ing and un­de­vel­oped sites,” he added.

Be­yond Zim­babwe, the com­pany planned to pur­sue ex­plo­ration in Tan­za­nia and the DRC.

Mekani said Me­tal­lon had se­cured four ex­plo­ration prop­er­ties in the Maniema province, near Bukavu in the DRC. Ad­di­tion­ally, it was in the process of “se­cur­ing min­eral rights lo­cated within the Lake Vic­to­ria gold fields” in Tan­za­nia.

De­spite the bullish out­look and fo­cus on grow­ing out­put adopted by Me­tal­lon, other gold in­vestors are wor­ried about putting money into Zim­babwe. They com­plain that the op­er­at­ing and reg­u­la­tory en­vi­ron­ment is not cer­tain and high­light that the gov­ern­ment should fix its high-risk per­cep­tion as an in­vest­ment des­ti­na­tion.

“Me­tal­lon is keen to work with other min­ing com­pa­nies and gov­ern­ment to im­prove the global rep­u­ta­tion of Zim­babwe and en­cour­age for­eign di­rect in­vest­ment and cap­i­tal in­flows into the coun­try,” said Mekani.

Mzi Khu­malo

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