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Padenga divesture raises eyebrows

By Mining Reporter – Wednesday 28 August 2019

HARARE (Mining Index) – SHAREHOLDERS of listed crocodilian skin producer, Padenga Holdings today gave the nod to a proposed divesture by the firm into gold mining which the company says will minimise its concentration risk.

The divestiture will come into effect through the acquisition of 9,036 Dallaglio investment shares, representing a 50.1% equity shareholding for a value equivalent to $US20 million. The capital injection will come in the form of mining equipment to be delivered to Eureka mine, one of Dallaglio’s development prospects.

Although the motions were a breeze, with a lone Old Mutual hand opposing the proposal, analysts that attended the Extraordinary General Meeting (EGM) expressed their concern over the multiple interested parties with significant stakes both in Padenga and Dallaglio, thereby raising reasonable grounds for a conflict of interest argument.

Chief among these interested parties is HM Barbor which controls 20% of Padenga and 11% of Dallaglio. Furthermore, Michael Fowler of HM Barbor is on the boards of both companies. In addition to this, HMD Investments has a 22% shareholding in Padenga and an effective 14% interest in Dallaglio. The Zimbabwe Stock Exchange (ZSE) duly noted these inconsistencies and barred the interested parties from participating in the vote.

Other related parties which were not allowed to participate in the EGM include City and General Pvt Ltd, Norton Textiles Pvt Ltd and Federated Incorporated Pvt Ltd.

However Padenga Chief Financial Officer, Oliver Kamundimu said the biggest benefit will come to Padenga.

“If you look at the valuations done, we are making the purchase at a discount. Eureka mine will account for 200kgs of gold a month which will translate into a $100 million turnover. Our production cost is $700 an ounce which gives us a profit margin of 50%. So out of the $100 million, profit will be $50 million. Out of the $50million, 25 million will go to Padenga. So there will come a time when the whole $20 million will be recovered in one month,” he said.

Kamundimu said Padenga will now go ahead with the delivery of mining equipment to Dallaglio following shareholder approval of the deal.

“Following the shareholder nod, we will now put the transaction into operation by making sure that we deliver the equipment that we have promised Dallaglio. All the equipment will go to Eureka mine in Guruve which we expect to be operational by the end of 2020. It is a big asset for Dallaglio and when it’s fully functional it’s going to produce 200kgs of gold per month for Fidelity Printers. This means we will contribute 2400 kgs of gold a year for the country. Dallaglio has a budget of $30 million to revive the mine. We will put in $20 million and they will raise the other $10 million from their current mining operation,” he said.

Dallaglio also runs Pickstone Peerless gold mine in Chegutu which currently produces 65kgs per month. The mining firm also boasts of the giant gold mining claims which have a total measured indicated resource of 340 000 ounces. ENDS//



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