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Plans to expand mining in Zimbabwe stifled by fear from investors who are unwilling to take a bet on the country's economy
Metallon Corporation is planning to spend as much as $70 million (R1 billion) this year to grow annual gold output fivefold to 500 000 ounces by 2019.
The company, which has South African businessman Mzi Khumalo as its chair with a controlling stake, is also looking to introduce contract mining at one of its four mines in Zimbabwe to boost gold production.
But Metallon officials said this week that perceptions that Zimbabwe was a high-risk investment destination were making it difficult for the company to secure funding.
“The perception that people have of Zimbabwe externally is that it is a difficult place to invest money. There is little foreign direct investment,” said Metallon spokesperson Klara Kaczmarek during a briefing at the company’s office in Harare.
Zimbabwe’s economy is struggling, growing by just 1.5% last year, and investors are concerned about the country’s regulatory and operating framework.
Metallon CEO Ken Mekani said there was support from local banks for some of the company’s expansion projects, and money to be raised was expected to come from internally generated cash and investors.
In a bid to broaden output, the $70 million will be spent on tailing and sands retreatment projects, as well as replacing plant machinery and equipment.
Mekani said the company was looking to move into contract mining as a way to sustain volume.
Metallon, which employs 3 500 people, has suffered plant and equipment breakdowns at its mines, resulting in reduced productivity.
“At Shamva mine, we want to introduce contract mining and, if it works at Shamva, we’ll roll out to the other mines. It’s a way of getting performance guarantees. You pay a contract miner based on the tonnage,” Mekani said.
Metallon owns five mines in Zimbabwe – How, Shamva, Arcturus, Redwing and Mazowe – although it has had to put its fifth and problematic Arcturus gold mine on care and maintenance.
Mekani confirmed this week that the Arcturus mine is now up for sale.
Zimbabwe’s mining industry is struggling, but gold miners are better off due to improvements in the gold price. Earlier this month, gold climbed to a two-year high of $1 370 an ounce, and this week was quoted close to $1 320.
Metallon generated a $10 million net profit in 2014.
Zimbabwe has set an ambitious 24-ton target for gold production this year, up from 17 tons last year.
Metallon was consolidating its operations and would be undertaking further exploration, said Mekani.
President Robert Mugabe’s government has begun taking over unused mineral claims, but Mekani said his company has not been affected by the new policy position to take over “unutilised mineral claims”.
Zimplats, in which Impala Platinum has an 87% stake, and Zimbabwe Alloys, which is country’s second
largest ferrochromium producer, are set to be affected
by the policy.
Metallon is aiming for the production of 120 000 ounces of gold this year, up from 99 000 ounces
last year.
