Padenga sets new gold target after investing US$86m in mining assets

Dallaglio's Eureka Mine, Guruve

After investing US$86 million into its mines over the past four years, Padenga Holdings is setting itself a target of 100,000 ounces of gold per year.

The company’s mining arm, Dallaglio, has spent US$46 million on Guruve’s Eureka Mine, which it revived in 2021 after it had been dormant for over two decades. The company has also spent US$26 million on developing an underground mine at Chegutu’s Pickstone and US$14 million on plant upgrades there. In 2023, Dallaglio increased gold production by 16% to 79,895 ounces from 63,039 oz in 2022.

“We are fairly firm on the 2024 (capital expenditure) packet, where we will spend, for the group, around US$28 million compared to US$36 million that we spent in the prior year. Out of that, US$16 million is expansion capex that will go towards developing the mines,” Padenga CFO Oliver Kamundimu says.

Most of the capital expenditure is being spent at Pickstone, which is transitioning from an open pit mine to an underground operation. Commercial production from Pickstone’s underground mine started in September 2023 and a second phase has begun. Padenga bought the mine from Vast Resources in 2019. According to Padenga CEO Mike Fowler, not everyone was convinced this would be a good investment at the time.

“Many people looked at it and said it was not viable, it wasn’t good enough. So, the opportunities that were not so glaringly out there to take, are the ones that we took on,” says Fowler.

The investment has come at a big cost. Pedenga has debts of US$70 million, but officials insist that capex has now peaked and that it will start easing off after this year.

It’s not all rosy for gold miners. As costs rise, the government’s policy of paying miners 25% of their earnings in the fast-depreciating Zimbabwe dollar erodes value for miners.  “If you don’t take mitigatory measures, you’re going to lose anything from 12% of your turnover, because of the disparity between the official rate and the market rate,” Kamundimu says.

To deal with the power crisis, Padenga is building a 7MW solar plant at Eureka mine and another 5MW plant at Pickstone.

At current production levels of 79,895oz, Dallaglio is competing with Caledonia’s Blanket Mine, which produced 75,416 ounces in 2023. In 2024, Caledonia, which is developing two other mine assets, expects Blanket to produce 74,000oz to 78,000oz. Padenga forecasts 80,000-85,000oz this year. Freda Rebecca, one of the other larger mines, produced 73,000oz in 2022.