HomeBusiness DigestMzi tightens grip on mines

Mzi tightens grip on mines

Ngoni Chanakira

SOUTH African business tycoon Mzi Khumalo’s Metallon Resources Ltd has mooted a R100 million investment in Zimbabwe’s struggling mining industry.

Arial, Helvetica, sans-serif”>Khumalo this week told businessdigest in an interview that he was still in discussions with Reserve Bank of Zimbabwe officials on how to go about his investment proposals.

The tycoon attended RBZ governor Gideon Gono’s monetary policy review statement on Tuesday.

“Yes I can confirm that I will be investing in the country,” he said. “The amount could be anything ranging from R100 million as spelt out by Reserve Bank governor, Gideon Gono.”

Gono said the move was a boon for his Homelink programme where he is trying to lure local and foreign investors into Zimbabwe to shore up the ailing economy.

Khumalo is in partnership with businessmen John Mkushi and fugitive banker Mthuli Ncube in Independent Gold Mines.

Ncube has been accused of externalising foreign currency from Zimbabwe, an allegation he denies.

“Ncube’s departure from Zimbabwe has not in any way affected our operations here,” Khumalo said.

“We welcome Mzi’s move,” Gono said. “It will boost the economy.”

Meanwhile reports from South Africa recently said Khumalo was putting finishing touches to the paperwork it needs to list its portfolio of Zimbabwean and South African gold assets, a float that chief executive officer, Greg Hunter, expects to execute before the end of this year.

The reports said Metallon’s mining operations generate US$12 million, in profits each year.

“It makes perfect sense for us to get into this market, we just need to decide on the optimum way for us to do it,” Hunter said.

“We’re aiming to have it done before the end of the year.”

The company’s reserve and resource statements, audited accounts and legal compliance documents are being finalised.

Hunter has yet to decide which market Metallon will list on, but it looks as though the lead contender is Toronto, given its strong resources bent and the relatively high risk appetite of Canadian punters and institutions.

Hunter said the firm did consider floating on the Johannesburg market, given that its mines are in South Africa and neighbouring Zimbabwe, but the absence of a peer group put paid to those plans.

“We just don’t have a peer group here, so how would you value this thing?” said Hunter, who was previously a rated precious metals equity analyst at Deutsche Securities in Johannesburg.

Hunter said he wants to use the proceeds from a float to augment by acquisition Metallon’s existing southern African asset base, which he concedes remains too dependent on its Zimbabwean mines. His immediate target is to more than double production from acquisitions and expansion, to around 500 000 ounces a year, within three years.

“We can hit that target, depending on how aggressive we want to be. Our existing business is very cash generative, but not enough to grow as aggressively as we want to,” Hunter said.

Notwithstanding what Hunter says is a strong business, Metallon’s valuations at a listing will rest largely on the perceptions of risk, given the volatile political situation in Zimbabwe, where the rump of Metallon’s gold is produced.

He said the corporate tax rate for gold miners had dropped from 25% to 15% in the past year, while a 3% revenue royalty levied on all gold producers has been scrapped.

Wages remain low compared to South African mines and three quarters of all revenue is secured at hard currency, a lot better than the 50% of a year ago.

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