Mzi Khumalo closing shop in SA, his activities now centred in Zimbabwe

Mining magnate Mzi Khumalo is closing shop in South Africa as it emerged this week that his main corporate entity, Metallon, was going into final liquidation.

The winding up of his companies was revealed in court papers filed at the South Gauteng High Court involving a claim of R1.3million against him by a Lanseria based charter aircraft company, Execujet Flight Operations.

Once described as the most powerful black businessman in South Africa, Khumalo's gold mining activities are now centred in Zimbabwe.

There's no knowing how the listing of a South African company with Zimbabwean gold mines could go in Toronto, assuming that the necessary SA Reserve Bank approvals were obtained. However, in Metallon's favour is the fact that billions of US dollars in fresh capital have been raised in the past two years in North America. This capital is for emerging junior mining companies seeking new mineral ounces.

Metallon Resources, wants to raise capital for its operations and plans to list its Zimbabwean gold assets in either Johannesburg or Toronto.

Metallon Resources owns assets producing just over 190 000oz/year of gold, of which 90% are in Zimbabwe.

The Zimbabwean mines can lift output to 220 000oz/year after three years. However, both developments would require more capital, as would plans to acquire new mines.

Metallon says, the Zimbabwean government has made a number of concessions to encourage investment. For example, its treasury has dropped the 3% royalty on gold mining. In addition, there's speculation that its corporate tax rate could be reduced to 15% from its current 25%.

Metallon has also been able to negotiate a special package for two of its mines considered marginal – Mazowe and Arcturus – such that revenue is predicated on a fixed contract of Z$71 000/g. That's equal to $402/oz, higher than the current spot price. As for the other mines, 50% of the revenue is paid in hard currency, 25% at a rate of US$1/Z$824 and the balance at whichever is the better of Z$72 000/g or US$1/Z$5 200. The net effect is that 75% of total gold production from Zimbabwe is received at internationally traded spot US prices.

Mzi Khumalo's Zimbabwean company, Metallon, has nearly earned back the $15,5m acquisition cost of the Zimbabwean gold assets bought in October 2002. The mines are also making real money (after capital expenditure) of $9m this year.

One can't get more real than Zimbabwe, where Metallon Resources has a number of mines.

Mzi Khumalo is a former political prisoner who spent 12 years on Robben ­Island for his activities as an ­Umkhonto weSizwe operative.