The founder of Zimbabwe’s largest gold mining group said he will decide by March whether to expand Metallon Corp. into a pan-African bullion company that will trade in London.
“It’s going to depend on how many assets we can assemble so that when we list, we go onto the main board in London,” Mzi Khumalo, who is also the company’s chief executive officer, said in an Oct. 9 interview in the capital, Harare. “We have assets in the Democratic Republic Republic that we intend to develop. We are in the final throes of securing assets in Tanzania. In March next year, we will have a definitive answer.”
This isn’t the first time Khumalo, a South African who served time as a political prisoner during apartheid with Nelson Mandela on Robben Island off the coast of Cape Town, has proposed an initial public offering of the company he created in 2002. In 2007, Metallon delayed an IPO planned for the following year because of a lack of equipment and foreign exchange and power cuts in the southern African nation that reduced output.
Khumalo, who bought the Zimbabwean gold-mining assets of Lonmin Plc in 2002 for $15.5 million to build up Metallon, had also considered listing stock on the country’s bourse and in London in 2010, as well as on South Africa’s stock exchange in 2005. Differences with Zimbabwe’s central bank halted plans for Johannesburg trading, he said.
The company had to close its five mines for two years from 2007 because it hadn’t been paid for gold sold to the central bank.
By 2019, Metallon forecasts 500,000 ounces of gold production a year, said Khumalo, the former chairman of JCI Ltd., which was South Africa’s first black-owned mining group before its assets were sold. “We have a plan that has been worked out and engineered,” he said.
Metallon produced 82,000 ounces in 2013 and estimates this will rise to 100,000 ounces this year. At its peak in 2006, output was 156,000 ounces.
“In the next three years, we should have invested $500 million,” he said. “By that time, we should be quite significant in terms of production.”
Average production costs across Metallon’s four operating mines are $900 an ounce and as little as $600 an ounce at its flagship How mine, Christopher Kamkazingeni, acting general manager for the operation that’s in Umzingwane, 470 kilometers (292 miles) southwest of Harare, said in an Oct. 16 interview there.
Gold for immediate delivery rose 0.1 percent to $1,240.03 an ounce at 8:35 a.m. in London.
The average all-in sustaining costs at the world’s nine biggest gold producers including Johannesburg-based AngloGold Ashanti Ltd. were $967 an ounce in the second quarter, according to an Oct. 15 Bloomberg Intelligence report.
How produces 5 grams (0.2 ounce) of gold per ton, and deepest part of the mine is 940 meters (0.6 mile), compared with operations in neighboring South Africa that are as deep as 4 kilometers. The mine has a 12-year life span and has 6 million tons of ore reserves, he said.
A fifth mine, Redwing, is flooded, and a return to production is planned for next year, Khumalo said.
Zimbabwe fell into recession and inflation accelerated as much as 500 billion percent according to theInternational Monetary Fund after Mugabe in 2000 backed an often violent program of seizing white-owned commercial farms and redistributing them to black-subsistence farmers.
“I came into Zimbabwe when nobody would touch this country with a barge pole,” Khumalo said. “I took the risk. There were times when felt I had made a terrible decision but I decided to wait. As they say in the classics, if you wait long enough, even Nostradamus’s predictions will come through. So we waited and waited and things have started to come through.”
Under a policy known as indigenization, the government is now compelling foreign-owned miners such as Anglo American Platinum Ltd., the world’s biggest producer of the metal, and banks to cede control of their businesses.
Metallon has submitted indigenization proposals to the government and is awaiting final approval, Klara Kaczmarek, the group’s head of communications, said by e-mail on Oct. 13. The plan will include share ownership for employees, local black communities and vocational training, she said.
“We have quality assets, we produce great results,” said Khumalo. “People say we live in a rough neighborhood. On matters of beauty, there can be no disagreement amongst gentlemen. It depends on your definition and assessment of risk.”
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