Online Reporter
Nelson Gahadza
ZIMBABWE gold miners are in good financial health due to the yellow metal rally, hence providing them with opportunities to invest in capacity in the medium to long term.
Gold made a record-breaking rally in April, with those gains linked to strong central bank purchases, demand from Asian markets and haven buying, amid conflicts in Ukraine and the Middle East.
According to a research note by the African Export-Import Bank (Afreximbank) on the macroeconomic implications of the ongoing gold price rally for African producers, countries on the continent that rely on the metal can take advantage of the trend by investing in the sector and improving the value chain through long-term infrastructure development.
It said in the near term, the recent rally in gold prices is expected to benefit countries whose economies are heavily dependent on the precious metal.
In an interview, the Gold Miners Association chief executive officer, Mr Irvine Chinyenze, said the benefits are not immediate but there is an encouragement for the sector to capitalise on operations.
“The benefits will accrue in the medium to long term, particularly on issues to do with mechanisation because that is paramount.
“We are moving away from the archaic and old way of doing things in a small-scale matrix through innovations and technology,” he said.
Mr Chinyenze said the approach to mining should be the same as with every other business where sound and absolute practices are encouraged.
“So, yes, the firming of the price is a good thing, and we look forward to the medium term,” he said.
Listed gold counters, which have continually invested in capacity, have committed further investments in 2024, taking advantage of the gold rally that has bolstered their revenues. Dallaglio Investments, a subsidiary of Padenga Holdings, has invested US$86 million in expansion over the last four years and is planning to spend a further US$28 million in 2024.
According to the group’s 2023 financials, Phase One refurbishment of the underground mine at the gold unit, Pickstone Peerless Mine, was commissioned in September 2023.
“The group is now engaged in further capital expansion for Phase Two of the project, with completion expected at the end of 2024 and open production from 7-level,” the company said.
At Eureka Mine, the group said, a pre-leach thickener and solar project will be undertaken in 2024.
The project involves introducing a thickener, which is a standard gold processing plant installation placed after the milling circuit. This results in an improvement in plant recovery.
Reviewing Padenga’s earnings, IH Securities said ore grades and volumes are expected to improve with increasing underground operations.
Bloomberg estimates average prices will reach US$2 645/oz by 2027, representing a revenue upside for gold producers. The anticipated increase in gold output, compounded by the favourable prices, is expected to bolster Dallaglio’s revenue.
Another Victoria Falls Stock Exchange-listed counter, Caledonia Corporation, has made significant investments in Blanket over the past seven years and the completion of the central shaft has nearly doubled production, extended the mine life and allowed the restart of underground exploration in 2023.
“We continue to progress with the underground exploration programme, and we expect to publish further exploration results in the first quarter of 2024 and a revised resource statement in the following quarter.
“Our wider capital expenditure programme continues to focus on unlocking value and delivering our multi-asset growth pipeline in Zimbabwe with Motapa and Bilboes, whilst maintaining a disciplined focus on cost and capital allocation,” the company said.
It was noted that the budgeted capital expenditure for the group in 2024 is US$34,4 million, which includes planned exploration at Motapa and further work on the Bilboes feasibility studies.
According to Afreximbank, high gold prices offer African countries an opportunity to strengthen their reserve portfolios with a safer asset like the yellow metal.
In the medium term, the gold rally is an opportunity for long-term infrastructure and social investments, as well as diversifying the production base.
Afreximbank said governments will also need to implement soft and hard measures to tame the activities of illegal miners.
The African continent produces about one-quarter of the world’s gold output.
According to data from the World Gold Council, African countries produced a total of 979,2 tonnes of the precious metal in 2022.
Zimbabwe, Ghana, South Africa, Sudan, Mali, Burkina Faso, the DRC, Tanzania, Togo, and Côte d’Ivoire are the top 10 producers, which collectively account for 90 percent of the continent’s production.
Tinaye Agere