Top Zimbabwe Miner May Pay Suppliers in Gold

Precious Metals
Gold Investing

Due to a cash shortage in Zimbabwe, gold miner Metallon has floated the idea of paying its equipment suppliers in gold in order to avoid disrupting its expansion plans.

Metallon has evaluated Zimbabwe’s current economic climate and has begun looking at paying its mining equipment suppliers in gold. 

Zimbabwe abandoned its currency in 2009 because of hyperinflation, and now faces a cash shortage.

Metallon, the country’s largest gold miner, requires US$400 million to buy new machinery and upgrade existing equipment as it moves to increase its production.

CEO Mzi Khumalo said on Tuesday (September 18) that the move would allow the company to sidestep the country’s cash quandary and continue with plans to expand.

The miner has begun talks with equipment suppliers in South Africa and Canada, among other countries, to discuss using gold as payment.

“We can then enter agreements with banks, various financiers on the basis of gold-backed transactions,” Khumalo stated. He added, “[suppliers] will get their payment in gold.”

The company is proposing this idea because Zimbabwean law enables Metallon to convert leases on claims around its four mines into special mining leases that can then be used to secure financing for equipment purchases.

Despite this law, gold is not considered legal tender in Zimbabwe — if this transaction were to come to fruition, it would be the first of its kind for the African country.

Khumalo stated that last week that he met with Mines Minister Winston Chitando who told him that he would support Metallon’s efforts to boost output.

Similarly, President Emmerson Mnangagwahas pledged to revive mining and agriculture as part of a plan to achieve middle-income status within the next five years.

“In the past we operated under a government that has been very hostile to business,” he said. Mnangagwa added, “[t]he amount of money that is going to be made in Zimbabwe in the next five to ten years, measured against other emerging markets, Zimbabwe will be number one.”

Metallon currently has four mines in Zimbabwe, one of which has suspended underground mining to allow for redevelopment. The company produced 77,568 ounces of gold last year and plans to increase that to 550,000 ounces by 2023, after new equipment has been acquired.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.

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