Zimbabwe gold production giant wants royalty shake-up

Padenga Holdings Limited has called on government to review its gold royalty framework, urging authorities to reduce the 10% levy applied when prices exceed US$5 000 per ounce, warning that it could hinder growth and investment.

The group, which has transitioned from a crocodile farming business into a predominantly gold-focused miner, said the current royalty regime risks eroding profitability at a time when it plans to invest about US$40 million in exploration this year.

Under the framework introduced on January 1, royalties are set at 3% for gold prices below US$1 200 per ounce, 5% for prices between US$1 200 and US$5 000, and 10% for prices above that threshold.

The policy comes amid a strong rally in global gold prices, which rose sharply last year and are forecast to climb further, potentially reaching between US$5 500 and US$6 000 per ounce.

The surge has significantly boosted Padenga's valuation, making it the second most valuable company on the Zimbabwe Stock Exchange after Delta Corporation Limited, with a market capitalisation exceeding US$1 billion.

Gold now accounts for about 94% of Padenga's revenue, underscoring its strategic shift into mining.

However, chief finance officer Oliver Kamundimu said the royalty structure—being levied on turnover rather than profit—poses a major concern.

"When it comes to taxes that are not based on profit, such as royalties that go up to 10% on turnover for gold prices above US$5 000, we urge the authorities to consider maintaining them at 5%," he said.

Kamundimu proposed a staggered approach, where only the portion of gold prices above US$5 000 would attract the higher 10% rate, rather than applying it to total revenue.

He also appealed for a review of the Intermediated Money Transfer Tax (IMTT), arguing that it increases operational costs as it is charged on transactions rather than profits.

Despite these concerns, Padenga posted strong financial results. Revenue rose 26% to nearly US$266 million for the year ended December 31, 2025, driven largely by higher gold prices, while profit after tax almost doubled to US$70.7 million.

Cash flow increased by 84% to over US$110 million, strengthening the company's ability to fund expansion.

Looking ahead, Padenga expects to produce approximately 84 600 ounces of gold this year, broadly in line with its earlier projections, with performance continuing to benefit from firm global prices.

The company's position highlights growing tension between government revenue measures and the need to sustain investment in Zimbabwe's mining sector, particularly as gold remains a key driver of economic growth.