Cost of power could burn the glitter off Padenga
LISTED diversified crocodile breeder, Padenga Holdings Limited, is expected to cash in on its gold operations, but the high cost of energy is seen as a huge stumbling block, according to analysts’ projections.
Padenga says its unit, Dallaglio, through which it owns and operates the gold mining business, seeks to grow gold production organically whilst lowering the all-in sustaining cost per ounce from the mining properties already held by the group.
Dallaglio acquired its first mine, Pickstone Peerless near Chegutu, in 2014.
It also operates Cordillera, a custom operation that provides milling services to artisanal miners in the Chegutu area within the vicinity of Pickstone Peerless Mine.
Dallaglio acquired Eureka Mine in Guruve in 2018.
According to research firm Morgan & Co, the price of gold during the financial year 2024 is expected to improve as the slowdown in US inflation signals an end to further interest rate hikes.
“However, the increase in electricity tariffs in Zimbabwe is expected to push mining companies’ opex higher by 10 percent despite Padenga’s installation of solar energy infrastructure in its crocodile operations,” said the research firm in their Zimbabwe 2024 Economic Outlook report.
“The stronger gold price will contend with higher energy costs for most of 2024, and result in marginal changes to the group’s prospects,” said Morgan & Co.
During the nine months to September 30, 2023, the Victoria Falls Stock Exchange (VFEX) listed firm’s gold operations continued to shine as gold sales grew by 12 percent above the same period in the prior year.
According to the group, total gold sales reached 1 664,8 kg compared to 1 480 kg in the same period the previous year on the back of a 5 percent rise in tonnes milled, totaling 1 332 973 tonnes. This is in addition to a 6 percent increase in mill feed grade, reaching 1,42 grams per ton.
The positive trajectory was primarily driven by the optimisation of the Eureka Mine plant and the addition of a new mill at Pickstone Peerless Mine.
Meanwhile, the Pickstone underground project marked a significant milestone with the completion of its initial phase at the end of August 2023.
Commercial ore hoisting commenced in September, contributing to the overall positive performance of Padenga’s mining operations according to Padenga.
Also recording gains, the Nile crocodile operations reported a substantial 30 percent increase in skin harvest volumes during the nine months under review, showcasing the success of strategies implemented to enhance skin quality over the past two years.
Skin sales also soared, reaching 30 586 skins, a 77 percent increase compared to the same period last year.
The crocodile operations are anticipated to rebound in the financial year 2025 as US interest rates plateau in 2024.
According to Padenga, the crocodile operation continues its post-Covid-19 recovery and is producing high-quality skins that are consistent with dynamic premium market expectations.
The business is already on course to fulfill its contract volumes to its primary customer within the current contract period. In terms of share performance, Morgan & Co has set a 12-month target price for Padenga at US13,55 cents maintaining a hold recommendation.