Padenga says it has invested US$40 million in Eureka Mine and projects commissioning in July, reviving a mine that last operated two decades ago.
Resumption of mining at the Guruve mine would be a major win for crocodile producer Padenga, which surprised the market when it bought 50.1% of gold company Dallaglio in 2019. The move into gold was the right call, Padenga says in its latest financials, which show that the mining assets now account for 57% of group revenues as crocodile sales slump.
“The strategic acquisition of Dallaglio has been validated as the crocodilian skins industry experiences its first major cyclical downturns since the global financial crisis. The significance of having a broad product base with both focused 100% on export earnings will enable Padenga to deliver on its strategy to increase profits,” says Padenga.
Padenga bought into mining to diversify from the crocodile business. Close to 80% of Padenga’s crocodile skin sales go to just one European luxury goods brand, Hermès, which makes the top-end Birkin handbag.
This left Padenga exposed to great risk, the company said as it announced its decision to go into gold in 2019. The decision came right in time, as the crocodile skins and meat market collapsed last year due to COVID-19. Hermès reported recently that sales had rebounded in the first quarter.
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However, it is in gold that Padenga is seeing the most growth.
Revenue from mining was US$40.4 million, making up 57% of the company’s revenue. Dallaglio made a profit of US$7.1 million. With gold prices forecast to remain firm in 2021, “this investment will continue to yield positive returns for the foreseeable future”.
“The Eureka Gold Mine project is currently 87% complete, with commissioning scheduled for July 2021. The subsequent ramp up to the full processing capacity of 100,000 tons per month is targeted by the end of December 2021,” Padenga said.
So far, the company has put in US$39.3 million into the project to get Eureka running again. A further US$11 million is to be spent, to reach the US$51 million that the company has budgeted to revive the mine.
Previously run by Delta Gold, Eureka stopped operations in 2000.
Dallaglio’s other mine, Pickstone near Chegutu, milled 362,000 tonnes last year, generating 772 kgs of gold, an increase of 14%. Pickstone is now producing more gold than previously bigger gold peers, such as RioZim’s Renco, which produced 580kg last year.
A review of the mine plan at Pickstone, which included two claims, extended the mine’s life to over 10 years.