Mzi Khumalo’s Metallon has completed the sale of Shamva Mine to Kuda Tagwirei’s Landela Mining Ventures, while the sale of Mazowe Mine is expected shortly.
The transaction represents a change of guard in the industry.
Metallon was once the country’s largest gold producer. It is now down to just a single working operation, How Mine in Bulawayo. Its other remaining mine, Redwing near Penhalonga, has been idled for over a year and is also up for sale.
As the sun sets on Khumalo’s gold empire, it is rising on well-connected Landela, which has used its influence to take over key mining operations over the past year.
Production at Shamva, which has stalled since last year, has now resumed after the change of ownership, Landela CEO David Brown said.
“We are now focusing on growing production,” Brown said.
The purchase price has not been disclosed.
For 2017, the last publicly available production results, Shamva produced 20 359 ounces of gold, while Mazowe’s output was 8 888. Shamva has an estimated resource of 2,5 million ounces of gold as of 2018, while Mazowe’s estimate is at 1,8 million ounces.
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A 2016 estimate showed the Metallon group had a significant mineral resource of 8,3 million ounces of gold. This resource drew the interest of some potential buyers, including Canada’s B2Gold Corp. The company’s interest cooled after government officials rejected its demands to be exempted from selling gold to central bank.
South Africa’s Randgold also made enquiries in 2018, but did not pursue its interest further.
Prior to suspending operations, Mazowe employed over 600 employees, while Shamva had 800 workers. In total, Metallon last year owed over $40 million in salaries, benefits and other related debts such as unremitted pensions, including over $1 million owed to the National Social Security Authority.
Shopping spree
This latest acquisition adds to a string of mining assets taken over by Landela over the past year. In October last year, Landela became a 50% partner in the Darwendale platinum project. That same month, Landela bought Asa Holdings’ 74,13% stake in Bindura Nickel and took over Freda Rebecca gold mine.
More recently, Landela has taken control of some of the gold assets of the Zimbabwe Mining Development Corporation (ZMDC), including Sabi gold in the Midlands. In 2018, government put six ZMDC mines on sale, as part of a broader privatisation drive. Despite receiving 151 offers, the sale was cancelled in 2019, paving the way for Landela to run the mines.
Tagwirei is already a shareholder in African Chrome Fields and has been linked with bids for ferrochrome producer Zimbabwe Alloys.
Now in control of Freda Rebecca, ZMDC mines and the two Metallon operations, Landela will become a major gold player. Freda was recently licensed to buy gold, and targets 500kg of gold per month from tribute agreements with small miners working on its 60 000ha claims.
Metallon’s decline
While Landela rises due to its reported connections and deep pockets, Metallon’s fortunes have waned. This has been down to poor government relations, forex policies, debts and management.
In February, Shamva and Mazowe Mines were put into corporate rescue after an application by unions for a reconstruction order on the two mines.
The Associated Mine Workers Union of Zimbabwe (AMWUZ) applied for a reconstruction order on Mazowe and Shamva in 2019, in a bid to secure unpaid wages as creditors besieged the mines.
At its peak, Metallon, controlled by Mzi Khumalo, produced around 100 000 ounces from five mines; Shamva, Mazowe, Redwing, Arcturus and How. Arcturus was sold to TN Capital, owned by businessman Tawanda Nyambirai, in December 2017.
The company halted operations at Redwing, Mazowe and Shamva in 2019, weighed down by debts of US$200 million.
Apart from losing various mining equipment to creditors, Metallon also lost a new plant at Mazowe Mine, built at a cost of US$18 million and only completed in 2017.
Metallon, according to a debt schedule compiled in 2019, owed US$5,6 million to Afmine, a company with which Metallon entered into a contract mining agreement in 2016.
Metallon also owed US$3 million to engineering firm Frazer Alexander. A total of 41 of the company’s properties in Mutare were last year seized over a $700 000 debt to a car service company.
Khumalo was keen to complete the sale of Mazowe and Shamva, facing the need to pay offshore creditors and fund a new start-up in Angola.
In April 2019, a court in London ordered the liquidation of a firm owned by Khumalo. Gold & General, a company he founded in 2015 to lead his ambitions to expand in Africa, was wound up after a ruling of the Business and Property courts of the British High Court. The decision came after an application by the HM Revenue and Customs, the British tax agency.
American Express Services Europe on January 18, 2019, also filed its own petition for the liquidation of Metallon Corporation, according public company records.
Legal trouble
Khumalo’s relations with the Zimbabwe government have soured since 2018, when he was accused of bleeding the country’s biggest gold assets, instead of investing in them.
In September 2019, Khumalo traveled to Harare from his London base to meet Mines minister Winston Chitando, hoping to smooth things over.
At that meeting, Khumalo pledged more investment to increase annual production by five times to 550 000 ounces.
As part of that recovery, Khumalo’s proposal said, Metallon would need to halt underground mining at Mazowe for three years to focus on redevelopment.
The two held a joint Press conference, publicly pledging to work together to keep the mines running, but relations had been damaged beyond repair.
Government, however, had rejected Khumalo’s proposal to pay for mine equipment using earnings from gold sales, suspicious of his intentions given allegations Metallon was facing in court.
In court, Khumalo is facing allegations of spiriting US$31 million from the country.
An investigation by the National Economic Conduct Inspectorate (NECI) and the Criminal Investigations Department alleged that Metallon would transfer money outside Zimbabwe without approval from the Reserve Bank of Zimbabwe, under the pretext of repaying loans, paying suppliers or paying for management fees. The allegations, denied by Khumalo, are that:
Metallon externalised US$9,9 million to the UK between 2009 and 2013, claiming the payments were management fees to Redwing UK.
The company paid US$5,8 million to Stonhage Trust as loan payment, when no such loan existed.
Khumalo declared a dividend of $25 million in 2012 despite operating profit being less than the dividend payout.
From June 2011 to January 2012, Metallon paid US$87 871 to First Atlantic, an offshore company, disguised as loan repayment. There was no evidence of the loan.
In 2012, the company allegedly wrote off an advance loan of US$7,7 million as uncollectable, effectively “externalising” the value to its sister company in South Africa.
In turn, Khumalo has sued the government for US$132 million, saying he lost money to RBZ’s forex retention schemes for exporters.
Entry and exit
With the Mazowe and Shamva sale, Khumalo’s exit from Zimbabwe appears inevitable.
In 2002, Khumalo paid US$15,5 million for Lonmin’s Zimbabwe gold assets. Khumalo was sued by a local partner, Lloyd Hove, who accused him of reneging on a deal to take on Hove’s firm, Stanmarker, as its local empowerment partner. The company that Khumalo chose to partner, Manyame Consortium, also later sued Khumalo for breach of contract after he froze them out of the transaction.
It now appears Khumalo’s exit from Zimbabwe will be just as controversial as his entry was.
In his seat will be Landela, whose own aggressive acquisitions are just as reminiscent of Metallon’s earlier years. — newZWire
