CAG chief executive Roy Pitchford told online publication Miningmx on Tuesday last week that they were planning to raise the money to increase gold production to 50 000 ounces a year.
There was also a possibility of combining its subsidiaries, the ZSE-listed Falcon Gold where it has an 85% stake and Olympus Gold Mines which is wholly owned by CAG, and have them listed on the local bourse.
“We need a capital injection to stimulate the mines,” said Pitchford. “The management team is talking to potential financiers in South Africa and Europe. We are looking at a number of options. We are looking at project or debt finance within the Falcon Group. We are looking at raising some money via other investments. We should be in a position to decide on a way forward within a month.”
CAG’s desire to raise capital confirms the continued growing interest in the mining sector. This interest comes on the back of improved commodity prices especially gold which has been on the rise for the greater part of last year, and has been trading at above US$1 100 per ounce.
Policy changes have also buoyed production as gold miners now can sell their produce and only remit part of the proceeds to the authorities.
Pitchford said the deregulation of the Zimbabwean gold sector has benefited a number of gold producers. “You can sell your gold where you like and you are getting full value for it. I cannot remember a time when the gold miners in Zimbabwe have been in such a good position. It is a phenomenal opportunity.”
Mining also provides a lot of potential given the mineral deposits in the country which has seen increased exploration activities last year. Mining rose 35% to 4,2 tonnes last year but this level is still way behind the 24 tonnes produced at the turn of the century.
It was suggested in CAG’s 2008 annual report released towards the end of last year that the company was likely to raise capital through new equity investment or share exchange.
CAG’s is focusing on Zimbabwe after losing Bibiani gold mine in Ghana and having gone into agreement with Australia’s Colonial Resources to sell its Mali exploration assets for US$5 million.
“The ability to continue as a going concern is dependent upon the group effecting suitable financial and other arrangements to enable the development of the Zimbabwean assets and also to the successful completion of the sale of the Mali assets,” auditors KPMG said in CAG’s 2008 annual report.
CAG posted a £26,4 million loss in the year to end-December 2008 and had net current liabilities of £20m up from £3,7 million a year earlier.