A crocodile skin and meat company investing in a gold mine drew a lot of side-eyes last year. But Padenga Holdings’ investment in Dallaglio is now looking like a case of good timing.

Dallaglio, the new owners of Eureka Mine, have spent US$23 million on rehabilitating the operation. They plan to spend an additional US$26 million before reopening the mine next year. The Guruve mine, formerly owned by Delta Gold, has been closed for close to 20 years.

Resumption of mining there would be a major win for Padenga, which surprised the market when it bought 50.1% of Dallaglio last year.

The investment was part of a strategy to diversify away from its core business, crocodile skins. With 79% of Padenga’s 2018 sales having been accounted for by just one European luxury goods brand, the company was keen to move into a new business.

[CLICK: Gold and crocs: Padenga buys into gold mines to diversify business]

The move into gold drew some cynicism on the market, but the company’s latest trading update suggests that Padenga may have timed its play well.

Due to COVID-19, crocodile skin sales from Zimbabwe have fallen 42%, while crocodile meat sales in Europe have also dropped. Meanwhile, Dallaglio, which owns Pickstone Mine in Chegutu, saw gold sales in the nine months to September up by 20% to 544.2kg from 452.8kb last year.

Dallaglio: investment

Dallaglio plans to spend an additional US$26 million to bring the mine back to production.

“In the nine months to September 2020, a total of US$15,189,745 was spent on this project. This is in addition to the US$7,886,026 spent in 2019, bringing the total project cost to date to US$23,075,771. A further US$26,300,658 is budgeted to be spent on this project before commissioning,” Padenga says in a trading update.

“The rehabilitation of Eureka Mine is on schedule for completion mid-2021 and will significantly increase gold production volumes and profits for the group. The firming gold prices on the world market will enhance both turnover earnings and profits from Dallaglio mining operation.”

Before selling the mine, Eureka’s previous owners Vast Resources had reported that the open-pit mine had been completely flooded. It would need to be dewatered, after which grade control drilling was to be undertaken

At Pickstone, gold production this year will be higher than last year, the company says.

While the latest profit figures for Pickstone are not yet available, Pickstone reported US$26.7 million turnover and US$2.7 million net profit in 2018.