world gold analyst - zimbabwe special report september 2010

W G O L DO R L DA S TN A L Y

Zimbabwe – 2010 www.gfmsworldgold.com

The Zimbabwean Gold Mining Industry

World Gold Analyst Special Report

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Gold pour at Turk mine (courtesy New Dawn Mining)

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The Zimbabwean Gold Mining Industry


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‘000 ounces koz

‘000,000 ounces Moz

tonnes t

‘000 tonnes kt

‘000,000 tonnes Mt

tonnes per day t/d

tonnes per year t/y

grams per tonne g/t

gold equivalent AuEq

metres m

kilometres km

gold price / cash costs always in US$/oz

ppb parts per billion

measured & indicated resources M&I resources

Abbreviations used in this report

List of Figures and Tables Figure Title page

2.2 Zimbabwe gold production 11

4.1 SimplifiedgeologicalmapofZimbabweshowingmaingreenstonebelts 32

5.1 Mining Contributions to Zimbabwe Economy 33

6.1 This chart shows how weak the Zimbabwean banks are in relation to other Southern African countries’ banks 36

7.1 Annual gold production for Zimbabwe 49

7.2 Split of production on a percentage basis 50

7.3 Metallon’s forecast production 63

Table Title

2.1 Short and medium term production targets for the main producers 10

3.1 GDP growth 24

3.2 Projected growth rates for selected indicators 25

6.1 Power generating facilities in Zimbabwe 42

7.1 Top ten gold producers in 2009 50

7.2 5-year production split 50

7.3 Blanket production history 51

7.4 Zimbabwe Chamber of Mines: Gold Producers’ Committee 74

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Contents

Editor: Paul Burton ACSM, MSc, MBA

Contributors: Paul Wheeler, Professor Rudo Gaidzanwa

Design & Sub-Editor: Gavin Khanna, [email protected]

Published by: GFMS World Gold Ltd Hedges House 153-155 Regent Street London W1B 4JE. UK

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[email protected] www.gfmsworldgold.com

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Printing: Latimer Trend & Company Ltd., Plymouth

© GFMS World Gold Ltd 2010

World Gold Analyst is an independent publication committed to providing subscribers with factual information on selected publicly traded companies, business and economics.

World Gold Analyst, its publisher, editor and writers do not own or trade in shares of any of the companies mentioned.

All statements and expressions are the sole opinions of the editor and are subject to change without notice. A profile,description,orothermentionofacompanyinthenewsletter is neither an offer nor solicitation to buy or sell any securities mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy or completeness thereof, nor the statements made herein. World Gold Analyst shall have no liability for any representations (express or implied) contained in, or for any omissions from, this presentation or any other written or oral communication transmitted to the recipient whether or not World Gold Analyst knew or should have known of any such errors or omissions or was responsible for or participated in its inclusion in or omission from the publication.

The staff of World Gold Analyst are not registered investment advisors and do not purport to offer personalised investment related advice.

World Gold Analyst has full editorial control of this publication and all other information and analysis it prepares in connection with the companies mentioned herein.

Theprofiles,critiques,andothereditorialcontentoftheWorld Gold Analyst may contain forward-looking statements relating to the expected capabilities of the companies mentioned herein. The reader should verify all claims and do their own due diligence before investing in any securities mentioned. Investing in securities is speculative and carries a high degree of risk.

Theinformationfoundinthisprofileisprotectedbycopyright laws and may not be copied, or reproduced in any way without the expressed, written consent of the editors of World Gold Analyst.

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Chapter 1 – Introduction 5

Chapter 2 – Overview 7

Chapter 3 – Zimbabwe: Political&EconomicProfile 17

Chapter 4 – Geological Overview of Zimbabwe 29

Chapter 5 – Mineral Production in Zimbabwe 33

Chapter 6 – The Gold Industry: A SWOT Analysis 35

Chapter 7 – Gold Production Review 49

Company profile – GAT Investments 81

Company profile – New Dawn Mining 87

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FOLLOW THE TREND...FIND OuT WHO’S HITTING THE SEAM WITH WORLD GOLD ANALyST

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The Gold Mining Industry’s Leading Independent Information Source and Investment Aid


Chapter 1 – Introduction

This report presents a comprehensive review of current gold mining and project

development initiatives in Zimbabwe.

The main sponsor of the report is the Chamber of Mines of Zimbabwe (COMZ).

Figures from GFMS, showed that in 1999, the Zimbabwean gold mining industry produced 29.7 t of gold, a record for the country. However, since that time the economic woes of the country have decimated gold production and forced many mines to close in late 2008 and early 2009.

Since dollarisation of the economy in March 2009, which meant that the gold miners could be paid in US$, producers have started to ramp up operations again, but they face many challenges to restore the industry to its former glory.

The aim of this study is to present the investment community with a comprehensive review of all the production and development activity being undertaken on a company-by-company basis and an analysis of the strengths and weaknesses of the industry.

Approach

This report is based on information collected during a week-long visit to Zimbabwe that I made in July 2010. During that period I travelled between Bulawayo and Harare and visited the main operations of Duration Gold, GAT Investments and New Dawn Mining, including the recently-acquired Central African Gold assets. I undertook underground and surface tours and met at length with management and geologists.

The site visits were augmented by published data from press releases, financial reports, presentations and technical reports, the latter, in the form of NI 43-101 documents, were used extensively as the main source of independent information.

The report was edited by Paul Burton ACSM, MSc, MBA.

The sponsored reports were written independently and reviewed by the sponsoring companies for factual accuracy only. All ‘Investment Comments’ were made by Paul Burton.

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Q1 Review: Cash costs through US$400/oz;

Newmont bucks trend by posting a 2% decrease

in cash costs; Agnico-Eagle Mines remains the

industry’s lowest cost producer; Barrick Gold

remains the world’s largest gold producer, both

on a quarterly and 12-month basis.

Vol 11 No 2 June 2008

GO R L D

F M S WG O L D O MC

Metals & Markets

Gold volatile but up 13% in six months,

whereas gold stocks fail to capitalise.

March 2008 Quarter Review

28 pages of comment and analysis on

results for the March 2008 quarter

for seventy of the world’s top gold

producers. Production, costs, earnings,

market capitalisation, resources, project

update.

Silver Producers

Review of results

World Gold Explorer

Gold Coast fears as Ghanaian

Government intimates that the current

royalty and taxation regime may be

tightened up, but Keegan and PMI

press ahead. Newcrest joins Harmony

in PNG; Orko adds 30 Moz silver

equivalent; Sino Gold boosts Chinese

reserves; Terrane to build Mt Milligan

Mine.

London Eye

Silver giant comes to London: London

has succeeded in attracting the world’s

largest primary silver producer to

its market as Mexican company

Fresnillo lists; Billionaires’ playground in

Russia: Power struggles at Polyus and

Polymetal; Centamin upgrades Sukari.

Focus: Argentina and Chile:

More Than Copper

Argentina and Chile, the two elongate

South American neighbours, are

perhaps better known for their copper

production than their gold output, but

each produces around 40 t (1.4 Moz)

of gold each year. Moreover there are

millions of exploration dollars being

spent in the region in pursuit of gold

and silver deposits.

In this Special Focus Des Clifford looks

at some of the exploration activity

being undertaken by foreign companies

on a province-by-province basis.

ANDINA

new section

Extract from Ontario/Quebec – 2009

www.gfmsworldgold.comMaudore – Ontario/Quebec 2009Extract from World Gold Analyst Special Report

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West Africa – 2010

www.gfmsworldgold.com

West Africa 2010


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Scope

Chapter 2 presents an overview of the situation within the country and the issues facing gold producers. It concludes with some observations about current production.

A number of summary tables are presented at the end of the section. Projects are categorised by World Gold Analyst’s 6-D notation, which identifies at which stage in the mining life cycle a particular project. The model, in order of decreasing risk, is shown below.

6-D Model Description

Detection Reconnaissance mapping, geochemical and geophysical work underway

Discovery Mineralisedtargetsidentifiedand drilling underway

Definition Depositisbeingdefinedthrough a resource estimate and /or a pre-feasibility study

Design Feasibility study underway

Development Construction decision made

Depleting Mine is producing

Chapter 3 contains a brief introduction to the country of Zimbabwe through statistics and then a commentary on political developments leading up and beyond the formation of the government of national unity in 2009, with analysis of where we stand today. This is followed by an assessment of the state of the economy and concludes with a discussion of the current situation with regard to mining law.

Chapter 4 describes the geology of the country with special reference to the greenstone belts.

Chapter 5 presents some details of the minerals industry in the country.

Chapter 6 discusses the main characteristics of the gold mining industry before investigating the potential to develop the industry to a world scale and highlighting some of the main challenges the industry faces to grow. The chapter concludes with an industry SWOT analysis.

Chapter 7 is a review of the principal gold mining companies and their development projects within the country. The review also reports the latest Chamber of Mines production figures.

Finally, there are detailed individual reports on the two companies who were involved in sponsoring this major report.

The Editor

Based in London, Paul Burton is Editor of World Gold Analyst, a position he has held for over fourteen years.

Before joining the Mining Journal in 1996, Paul spent over twenty years in various positions within the mining industry. After initially working as a mining engineer he spent much of his career in mineral economics and minerals marketing in South Africa.

Paul graduated from the Camborne School of Mines in 1975 as a mining engineer and subsequently obtained an MSc in Mining Engineering and an MBA, from the University of the Witwatersrand, South Africa.

World Gold Analyst

World Gold Analyst has its roots back in the 1950s when its predecessor, the Mining Journal Gold Service, first started analysing and providing commentary on South African gold shares.

In 2002, after a management buyout, World Gold became an independent publication, and in 2006, the name was changed to World Gold Analyst to reflect a more analytical and selective approach to reporting.

In 2008, World Gold Analyst formed a joint venture with GFMS, the world’s foremost precious metals consultancy, to continue to publish the quarterly publication as well as the series of regional investment reports. The new joint venture company is called GFMS World Gold

World Gold Analyst’s long history of sound reporting and independent analysis has given it a reputation as a trusted and expert commentator of all aspects of the gold industry.

The publications are read throughout the mining investment world and its subscriber base includes mining analysts, fund managers, private investors and mining company executives.


Chapter 2 – Overview

Zimbabwe has a long history of gold production stretching back centuries. In

1975, despite being in the middle of a civil war, the country was ranked the sixth largest gold producer in the (western) world, with production of 18.6 t.

In 1990, the country’s mines were still producing at a similar rate and, after surviving the mid-decade drought, which led to disruptive power shortages, gold production rose to reach 29.7 t in 1999, a record which made the country the 16th largest gold producing nation in the world.

However, the growth was not sustained in the new millennium and by 2008 output had slumped to just 3.5 t, which represented the lowest level for 90 years. It picked up marginally in 2009 to 4.9 t.

What precipitated the collapse in gold production was a catastrophic economic situation within the country with hyperinflation and currency devaluation, which meant that the Reserve Bank was unable to pay for the mines’ gold output. Virtually all the gold mines were forced to close because of the economic situation in October 2008.

US dollars, but no power

In March 2009, the new government of national unity implemented reforms, which saw the deregulation of gold sales, meaning that gold producers were removed from the obligation to sell their gold production to the Reserve Bank and were free to sell on the international market and get paid in US$. Mines reopened immediately and stared to ramp back up to full capacity.

However, full production has proved elusive because of serious problems with the supply of power from the state grid. The industry is probably working at only 40% of installed capacity. In addition to scheduled load shedding, this year the industry has been hit by random outages that

producers have struggled to cope with. Although the government has acknowledged the problem it does not have the funds to rectify the capacity constraints and maintenance problems at the two main power stations.

In the meantime, the gold producers have, or are, implementing contingency plans by installing their own power generating facilities to counteract the power disruptions that have blighted operations. It is more expensive but at least they can guarantee the mine and plant can operate and thus have a chance to increase operations up to installed capacity.

Outside of the power problems, in the short term, to reach its current potential, the industry needs modest investment in plant. In the longer term, it needs a radical rethink on its mining strategy and a substantial injection of capital to expand. The need for international funding is critical, therefore, in whatever timeframe and the availability of such funding will depend on investors’ perception of the financial and political risk in the country. Thus the recovery of the economy and progress towards a new constitution are key factors that are being watched closely.

Difficult economic situation despite reforms

The country’s economy has just been through a period of unprecedented turmoil, which saw hyperinflation and a rapidly depreciating currency that led to the removal of the Z$ and installation of the US dollar (and the South African Rand) as the country’s currency, at least until 2012. After severe economic woes in 2008 the economy recovered in 2009 but there are signs that recovery is slower this year.

In a rather sombre mid-year review in July, the Minister of Finance acknowledged that gains in the economy in 2009 were being eroded by a threat to macro-economic stabilisation through


the resurgence of inflation, the lack of capital, modest recovery in capacity utilisation and a general drop in confidence in the economy.

Inflationary pressures picked up during the first half of 2010 with average annual inflation for the year expected to rise to 4.5%. Meanwhile, the Minister has revised growth rates for the economy down to 5.4%

Zimbabwe’s biggest problem is its debt position, which is hampering efforts to seek refinancing and aid. The IMF, in an April 2010 report, was unequivocal in its assessment that “Zimbabwe is in debt distress, which is compounded by unresolved economic policy challenges”. The IMF report comments that achieving debt sustainability would require a significant strengthening of economic policies and an improvement of relations with the international community whose support is essential for securing debt relief.

To achieve that Zimbabwe needs to lose its position as one of the pariah states in world investment terms and start to be a place where investors feel comfortable putting their money.

New constitution and elections key

In February 2009, on the formation of the new unity government, the coalition partners agreed to write a new constitution within eighteen months. Progress on a new constitution, however, has been slow with the two parties disagreeing on many implementation issues.

The processes for constitution-making, holding the referendum and proceeding with elections by 2011 are already behind schedule by at least 12 months. The GNU was expected to last for two years after which elections would be held after February 2011.

Professor Rudo Gaidzanwa, of the University of Zimbabwe, in writing specifically for this report, is pessimistic on progress. “...it is unlikely that elections will be held in 2011, judging from the interests and statements of the political parties involved. Thus, it is realistic to surmise that the GNU might last at least four years instead of the two years stipulated in the agreement and the elections would be held in 2013 at the earliest...”, he writes.

Such delays will do nothing to ease the fears of international investors.

Concerns over new mining legislation and indigenisation.

Turning to the mining industry more specifically, there is also much uncertainty over amendments to the Mining Act. The policy of ‘use it or lose it’ looks likely to be be included. The revised Act is likely to be finalised in Q3 or Q4 this year. This will go a long way to removing uncertainty over what is expected of the industry.

However, the greatest uncertainty surrounds the subject of indigenisation, one of the most divisive issues that government and the mining industry will have to resolve.

The Indigenization and Economic Empowerment Act 14, 2007 was signed into law in April 2008 and provided for all companies operating in Zimbabwe to arrange for 51% of their shares or interests therein to be owned by indigenous Zimbabweans.

The mining industry has accepted the broad principles of indigenisation in the Act, but is concerned about exactly how empowerment should be achieved. The Chamber of Mines has put forward a proposal that of the 51% to be put into local hands, 15% is as equity with the remainder being made up of credits in equity equivalents, which could include local procurement, CSI, support to the small scale mining sector, skills development, starting new businesses and any other socially and economically desirable activities. The COMZ is also keen to have a listing on the ZSE as a way of acheiving indigenisation.

The discussion between the Chamber and the government continues.

If uncertainty regarding politics and the economy can be reduced, the gold mining industry could develop into a major player again.

Zimbabwe’s gold mining industry has potential to expand

Zimbabwe’s gold mining industry is characterised by rich greenstone belts that support many small gold mines, many of which are underground, narrow vein mining operations, which are often privatively owned.

The Zimbabwe Craton hosts some of the world’s great greenstone belts. Greenstones are one of the most extensive and productive


sources of gold on the planet and as such the Zimbabwean rocks represent a huge potential treasure chest for miners. Examples of this type of mineralisation include the Yilgarn (Australia) and Abitibi (Canada) belts that have supported, and continue to support, large, world-class gold mining operations.

The geology should not be a constraint to large scale mining but the miners in Zimbabwe have a mindset that favours small, underground mines as the default option. Hence they need to rethink their strategy and there are a number of companies who are already actively pursuing such plans.

Producers need funds to finance...

The industry could creak along in its current state for some years, maybe reaching a third of the output of its 1999 peak if the power

problems are resolved (if not nationally at least at individual mine level through provision of their own generated power) by processing surface material, such as old heap leach dumps and oxide stockpiles. With some investment, perhaps from cashflow, it might possibly produce at its reported capacity of 20 t/y of gold from existing resources.

The gold producers and explorers have some exposed oxide ore on surface, which, when taken with old heap leach dumps, can be processed through rather old mills and plants to get some cashflow. But that is not their long-term goal. They generally have an idea of the sulphide potential that lies not far below the surface but need intensive drilling programmes to define this potential. Thereafter they will need capital to develop projects and operations.

One of the keys to obtaining funding, which invariably will come from overseas investors,

Despite the air of neglect, this plant at a former Central African Gold mine (now acquired by New Dawn Mining) is typically of the plant that can be refurbished relatively easily to treat surface material (Photo: Paul Burton)


is to adopt business structures that facilitate investment. As mentioned earlier, many of the companies are privately owned. Although in itself this is not necessarily a bad thing, it is often a sub-optimal way to run a capital intensive enterprise. Private companies do not have the same degree of access to the capital and equity markets as a public quoted company will have and that can limit the amount of finance the company can raise to build mines, construct new plant and fund exploration programmes.

...aggressive growth plans

Metallon Gold Zimbabwe, for example, is the country’s largest gold producer, yet it is a private company, owned ultimately by Metgold Ltd, a London-based company. As readers will discover later in Chapter 7, the company wants to pursue an aggressive growth strategy that will see it produce 1 Moz/y of gold within five years. To achieve its targets, the company needs to raise, by its own estimates, some US$600 million to invest in capital projects. It can’t do that as a private company. Therefore, Metallon is looking to go public and list on one of the world’s international resource stock exchanges (probably London).

It’s not alone. Duration Gold and Bilboes Holdings, two other private gold producers, are intent on obtaining listings to be able to tap into the international capital markets to fund expansion.

Bilboes Holdings, owned by GAT Investments, is looking to raise some US$15 million to undertake systematic drilling programmes on two of its projects to take them through to bankable feasibility study and thereafter to list the company to raise the finance to develop

the resources. They already have an idea of the potential on these former Anglo American projects. A 2009 independent technical report assessed the potential sulphide resources at one of the projects as between 3 and 5 Moz.

Some of the companies are already public. RioZim, for instance, is listed on the Zimbabwe Stock Exchange. But the ZSE has limited funding potential. Other companies are listed in London. Caledonia Mining, African Consolidated Resources and Mwana Africa are all London companies, although Caledonia is listed in Canada as well. What marks these particular companies out is how diverse they are, both by commodity and geographically. In the longer term it may make sense for them to spin off their Zimbabwean gold assets into a separate vehicle.

Perhaps ahead of the game with an international listing, and thus access to the capital and equity markets in North America already, is New Dawn Mining.

Large, open pits may revitalise the industry

So although most of the mines are currently small producers, with the right type of exploration and by adopting the most sensible mining method, they could develop into mines comparable in scale with those on other greenstone belts around the world.

Producers will have to do away with any preconceived ideas that underground mining is the way to go, of course. Looking at the Dalny mine, for instance, now part of New Dawn Mining’s portfolio, the company will investigate the potential to not only mine, using bulk mining methods perhaps, multiple reef systems underground but also the ‘halos’ of lower grade

Company Short term production goal (1-3 years) Long term production goal (3-5 years)

Koz/y Mine Koz/y mine

Caledonia Mining 40 koz/y Blanket na na

Duration 60 koz/y 4 mines 300 koz/y 4 mines

GAT Investments 15 koz/y oxides 340 koz/y oxides and sulphides

Metallon 56 koz/y 5 mines 1 Moz/y 7 mines

Mwana Africa 30 koz/y Freda Rebecca 50 koz/y Freda Rebecca

New Dawn Mining 35-50 koz/y Turk 100 koz/y 3 mines

RioZim 24 koz/y Renco 112 koz/y Renco

Table 2.1: Short and medium term production targets for the main producers


gold mineralisation that the old timers missed when following the quartz vein systems. Surface work at Colne/Stella on the property has showed that high grade reefs have lower grade in between, over a total width of 12-15 m. This sequence is replicated underground (at 60 m depth) but the old miners only mined the two high grade reefs, so management is working on the theory that there may be economic grade in between, which opens up the possibility of bulk, perhaps open pit, mining.

Many of the underground mines are quite low grade. Freda Rebecca for instance had a head grade of just 1.76 g/t in the six months to end March. Reserve grades are only 2.61 g/t.

Canada’s Detour Gold shows what can be done

It is instructive to see some of the developments on the Abitibi greenstone belt, in Canada. At Detour Lake, for example, the former owner mined the deposit for the bulk of its life from underground. Between 1987 and 1999 the mine produced 1.5 Moz of gold at a grade of 4.98 g/t before it closed because of low gold prices.

In the last few years, with gold prices much higher, a new company, Detour Gold, has evaluated the deposit as an open pit prospect with phenomenal results.

A feasibility study released in mid-2010, has confirmed reserves of 11.4 Moz of gold contained, capable of supporting production of almost 650 koz/y for a capital investment of almost US$1 billion.

Current Production

Gold production has shrunk alarmingly over the past few years principally because of the poor economic situation, and although the mines are now operating once again, power disruptions have limited production ramp ups. Production in the first half of 2010 was 105 koz and is likely to recover to 2007 levels.

Composition of the industry

The industry comprises large producers, small producers, custom millers and by-product from the platinum refineries.

The larger producers have been hardest hit over the past few years by the tough economic circumstances and collectively their proportion has fallen from 80% to 67%. “Large”, though, is something of a misnomer in Zimbabwean gold mining terms as many of those classified as such are small in global terms as classified by World Gold Analyst. The largest producer in 2009, RioZim, produced only 24 koz. The COMZ categorises producers as ‘large’ although their production may amount to no more than 1 koz/y.

Figure 2.2: Zimbabwe gold production Source: COMZ

0 50 100 150 200 250 300 350 400

2006

2007

2008

2009

2010 H1

Production (Koz)

The custom millers represent an important segment (17%) in the Zimbabwean production picture. Their output has fallen since 2006, but based on the first half of 2010 results, it could rise again this year. On a percentage basis, their influence has increased over the years. Small miners now represent a tiny fraction of the industry’s output.

By-product gold from the platinum producers is a significant segment of output and presumably will grow as the mines expand.

The industry by 6D status

Zimbabwe is unique out of the all the countries and regions we have examined over the past few


years in having hardly any early stage, Detection projects. We came across just seven (7%) standalone, greenfields projects. There is some exploration work going on, it’s just that it is all centred on existing brownfields sites or defunct mining properties. This is in total contrast to the likes of Ontario, Quebec, Ghana, Burkina Faso and Mali, all countries we have featured in recent reports and where there is a greater emphasis on greenfields exploration.

In total, we catalogued one hundred projects, ranging from the smallest defunct pit, to fully operating mines at 1,200 m depth. In fact, we had to introduce a new category to our 6D model of the industry – “Defunct”! We identified twenty four properties (a fraction of the total around the country that we did not have any data on) where mining has ceased but the mineralisation is being re-evaluated.

We have defined thirty eight projects as being in operation (i.e. Depleting).

The following pie chart shows the breakdown by percentages.

Depleting 38%

Defunct 24% Detection 7%

Definition 13% Discovery 17%

In conclusion, we believe that the Zimbabwean gold industry has a great future if it can attract the capital necessary to get existing operations up and running and then to conduct systematic exploration programmes to develop the sulphide resources. Attracting capital will depend on how investors view the economic and political situation within the country.

Imara, a pan-African investment group, notes in a recent research report that investment in Zimbabwe’s mining sector is starting to pick up despite investor concerns about an impending indigenisation law.

Indeed, there are tentative moves to invest in the country and its mining industry in some quarters. For example, a new Zimbabwean-focused fund, Masawara, has just been launched on London’s AIM.

In addition, to finish on a positive note, this year the gold industry has seen new entrants into the country who are prepared to spend money investigating the exploration potential. Although there are only two at present, and their spending is modest, South African producer, DRDGold, and Australia’s Cape Range are both exploring in joint ventures with local companies.

Development 1%


COMPANY SUMMARY

Company Project 6D Status

African Consolidated Resources Pickstone-Peerless Definition

Blue Rock Definition

Giant Definition

Chakari Detection

One-Step Discovery

Caledonia Mining Corp Blanket Depleting

GG Definition

Mascot/Penzance Definition

Cape Range Ltd Blue Duck Discovery

Eiffel Blue Discovery

Orcus Discovery

Inex Depleting

Carslone Globe & Phoenix Defunct

Golden Kopje Defunct

Chizim Investments Leny Discovery

Conquest Resources Beehive Defunct

Babs Defunct

Piper Moss Defunct

DRDGold Leny Discovery

Duration Gold Athens Depleting

Gaika Depleting

Queens Depleting

Royal Family Defunct

Vubachikwe Depleting

Auric Detection

Carry Detection

Tuff Nut Detection

Kernel Detection

Tiberius Detection

FA Stewart and Son Jessie Depleting

GAT Investments Bubi Depleting

Isabella Depleting

McCays Depleting

When Depleting

Gold Quarry Definition

John Mack Golden Valley Depleting

Metallon Gold How Depleting

Midwinter Definition

Shamva Depleting

Redwing Depleting

Arcturus Depleting

Mazowe Depleting

Motapa Definition

Mwana Africa Freda Rebecca Depleting

West Midlands Discovery


COMPANY SUMMARY

Company Project 6D Status

Lonely Discovery

Makaha Discovery

Prince Phoenix Discovery

New Dawn Mining Golden Quarry Definition

Old Nic Depleting

Camperdown Definition

Turk Depleting

Venice Definition

Angelus Development

Dalny Definition

Ladville Discovery

Basil Payne Discovery

Ox Mining Inex Depleting

RioZim Renco Depleting

Cam and Motor Definition

One Step Discovery

Spot Discovery

Kenilworth Detection

Sab Rock Miners Blue Duck Discovery

Eiffel Blue Discovery

Orcus Discovery

Zimbabwe Mining Development Corporation Jena Defunct

Elvington Defunct

Sabi Defunct

Asumura Ghana

Ity (46%) Cote d'Ivoire

Others Ashanti,BayhamMining,BronfieldMines,Calcite,Canterbury Mining, DTZ – OZGEO, Eureka, Exmine Syndicate, F A Stewart, Forbes & Thompson, Hunderson And Sons, John Mack & Company, LE Starling, Olympus gold mines, Pan African Mining, Sabi Consolidated

Depleting

Others Ardcor Ltd + Bilbos Holding, Ascot, Boreal Investments, Boulder Mining, Delta Gold Zimbabwe, Epsom, Harris J E, Homestake Mining, Horn Mine, Knobthorn Mining, Maligreen, P E Steyn, Pegolin Mining Ltd, Sebwe Investments, Tiger Reef

Defunct


OPERATING PROJECT SUMMARY

Project Company 6D Status

Angelus New Dawn Mining Development

Arcturus Metallon Gold Depleting

Ashanti Others Depleting

Athens Duration Gold Depleting

Auric Duration Gold Detection

Basil Payne New Dawn Mining Discovery

Bayham Mining Others Depleting

Blanket Caledonia Mining Corp Depleting

Blue Duck Cape Range Ltd Discovery

Blue Duck Sab Rock Miners Discovery

Blue Rock African Consolidated Resources Definition

BronfieldMines Others Depleting

Bubi GAT Investments Depleting

Calcite Others Depleting

Cam and Motor RioZim Definition

Camperdown New Dawn Mining Definition

Canterbury Mining Others Depleting

Carry Duration Gold Detection

Chakari African Consolidated Resources Detection

Dalny New Dawn Mining Definition

DTZ - OZGEO Others Depleting

Eiffel Blue Cape Range Ltd Discovery

Eiffel Blue Sab Rock Miners Discovery

Eureka Gold Mine Others Depleting

Exmine Syndicate Others Depleting

F A Stewart Others Depleting

Forbes & Thompson Others Depleting

Freda Rebecca Mwana Africa Depleting

Gaika Duration Gold Depleting

GG Caledonia Mining Corp Definition

Giant African Consolidated Resources Definition

Gold Quarry GAT Investments Definition

Golden Quarry New Dawn Mining Definition

Golden Valley John Mack Depleting

How Metallon Gold Depleting

Hunderson And Sons Others Depleting

Inex Cape Range Ltd Depleting

Inex Ox Mining Depleting

Isabella GAT Investments Depleting

Jessie FA Stewart and Son Depleting

John Mack & Company Others Depleting

Kenilworth RioZim Detection

Kernel Duration Gold Detection

Ladville New Dawn Mining Discovery

LE Starling Others Depleting


OPERATING PROJECT SUMMARY

Project Company 6D Status

Leny Chizim Investments Discovery

Leny DRDGold Discovery

Lonely Mwana Africa Discovery

Makaha Mwana Africa Discovery

Mascot/Penzance Caledonia Mining Corp Definition

Mazowe Metallon Gold Depleting

McCays GAT Investments Depleting

Midwinter Metallon Gold Definition

Motapa Metallon Gold Definition

Old Nic New Dawn Mining Depleting

Olympus Gold Mines Others Depleting

One Step RioZim Discovery

One-Step African Consolidated Resources Discovery

Orcus Cape Range Ltd Discovery

Orcus Sab Rock Miners Discovery

Pan African Mining Others Depleting

Pickstone-Peerless African Consolidated Resources Definition

Prince Phoenix Mwana Africa Discovery

Queens Duration Gold Depleting

Redwing Metallon Gold Depleting

Renco RioZim Depleting

Sabi Consolidated Others Depleting

Shamva Metallon Gold Depleting

Spot RioZim Discovery

Tiberius Duration Gold Detection

Tuff Nut Duration Gold Detection

Turk New Dawn Mining Depleting

Venice New Dawn Mining Definition

Vubachikwe Duration Gold Depleting

West Midlands Mwana Africa Discovery

When GAT Investments Depleting


Chapter 3 – Zimbabwe: Political&EconomicProfile

3.1 Zimbabwe at a glance

Land Area: 391,000 Km2 Population: 11.9 million (2009) Capital City: Harare, pop. 1.5 millionGDP: uS$4.4 billion (2009 IMF estimate)GDP per capita: uS$303 (2009 IMF estimate)Real GDP growth rate: 4.0% (2009 IMF estimate)Mining contribution to GDP: 4% Annual export Receipts: uS$1.376 billion (2008 - RBZ) Mining exports: 51% Avg. inflation rate: 6.5% (2009 IMF estimate)Ethnic groups: Shona 71%, Ndebele 16%, other African 11%, white 1%, mixed and Asian 1%.Religions: Christianity 75%, offshoot Christian sects, animist, and Muslim.Languages: English(official),Shona,NdebeleNatural resources: Deposits of more than 40 minerals including ferrochrome, gold, silver,

platinum, copper, asbestos; 19 million ha of forest (2000).Agriculture (19% of GDP): Types of crops and livestock: corn, cotton, tobacco, wheat, coffee, tea,

sugarcane, peanuts, cattle, sheep, goats, pigs.Industry (24% of GDP): Manufacturing, public administration, commerce, mining, transport and

communication. Trade (2009): Main trading partners (2008)--South Africa 32%, Democratic Republic of the

Congo 10%, Botswana 9%, China 6%, Zambia 5%, uS 4%. Total imports (2009): uS$2.0 billion: most of these imports were food, machinery, fertilizers, and

general manufactured products. Major suppliers: South Africa 60%, China 4%, Botswana 4%.

The UK annexed Southern Rhodesia from the British South Africa Company in 1923. A 1961 constitution was formulated that favoured whites in power.

In 1965, Ian Smith’s minority government unilaterally declared its independence, but the UK did not recognize the act and demanded more complete voting rights for the black African majority in the country (then called Rhodesia). UN sanctions and an uprising finally led to free elections in 1979 and independence (as Zimbabwe) in 1980. Robert Mugabe, the nation’s

first Prime Minister, was installed as the country’s President in 1987.

In 2008, after elections, ZANU-PF and MDC formed a government of national unity with Robert Mugabe as President and Morgan Tsvangirai, from coalition partner MDC, as Prime Minister.Source uS Dept of State/IMF

3.2 Political developments

The following article was largely written by Professor Rudo Gaidzanwa, from the University


of Zimbabwe, on behalf of the Chamber of Mines of Zimbabwe.

Background

Zimbabwe has been undergoing a slow, sometimes difficult transition to democracy for many years. During the 1990s economic, social and political dissatisfaction was expressed publicly by students, women, trade unionists and workers, the landless, civil rights activists and business interests who were all trying to push for economic, social and political reform in Zimbabwe. The economic decline throughout the 1990s, combined with strikes in the 1997-99 period, led to the rise of a strong civil rights movement which culminated in the rejection of the government-led draft constitution in 2000, signalling the growth in the strength of the forces of democratisation led by the Movement for Democratic Change (MDC) under the leadership of Morgan Tsvangirai.

Land and factory invasions followed the rejection of the draft constitution in 2000, which worsened the economy’s performance, which depended significantly on agriculture. While the ZANU-PF government took the stance that the democratisation forces were a part of an alliance led by the MDC, funded by western governments and donors for the purposes of regime change, the consistent gains by the opposition in elections after 2000, showed that democratisation was supported by a growing range of forces in the population.

By 2005, economic assessments showed that GDP had declined by 40% in the previous eight years and halved on a per capita basis. Two thirds of the population were living below the poverty line on less than US$1 a day and unemployment was estimated to be close to 70%.

Inflation stood at 1,200% and the fiscal deficit-to-GDP ratio doubled from 7.1% in 2004 to 14.2%. Domestic debt rose from Z$3 trillion in January 2005 to Z$12 trillion in June 2005. Approximately two million people, including many with high levels skills, had left the country while Zimbabwe’s share of SADC’s GDP declined from 3.6% in 1996 to 1.4% in 2006 and the country moved from being the second largest economy in SADC to a ranking of 10th place in 2006. (Games, 2006; Hawkins, 2006.)

Negotiations between the MDC and ZANU PF.

Negotiations between ZANU-PF and the MDC started as a result of the economic problems experienced in Zimbabwe prior to 2007 but were accelerated by the political violence in March 2007. The Mbeki regime, in South Africa, spurred by the international community, pushed ZANU-PF into negotiations with the MDC parties. South Africa hosted the negotiations and an agreement was reached to, 1) amend the constitution to enable elections to take place, 2) elect a more legitimate government, and 3) restore stability in Zimbabwe. Constitutional amendments facilitated the development of statutory changes, which evened out the political playing field, diluted ZANU-PF’s massive advantages of incumbency and state control over resources, the media and the electoral processes.

The MDC won the first round of elections, in March 2008, albeit without a 50% plus 1 majority required for outright control over the presidency. The official presidential election results showed that Tsvangirai [MDC-T] won 47.9% of the votes cast while Mugabe of ZANU-PF won 43.2% of the votes cast. Senatorial election results showed that the MDC-T had won 30 seats, ZANU PF 24 seats and MDC-M, 6 seats.

The victory of the MDC was historic because it broke the hold of ZANU-PF on Zimbabwe and signalled the end of the hegemony of a liberation party in Southern Africa. This election also signalled the consolidation of the forces of democracy as it became evident that a significant section of ZANU-PF supporters within and outside the government, also supported the process of democratisation.

Given that Morgan Tsvangirai had not won a 50% plus one majority according to the protracted official count, a run-off within 21 days was mandated by the negotiated Amendment and Electoral Act.

The presidential run-off

The Presidential run-off was characterised by unprecedented violence on the population in the Midlands, Masvingo, Manicaland and Mashonaland provinces.

On the 22nd of June 2008, the MDC-T publicly announced its withdrawal from the run-off because of the violence unleashed on its supporters by the ZANU-PF youth militia and armed forces. Mugabe remained in the one man


race, arguing that Tsvangirai’s withdrawal was unlawful and had no legal effect. The international and regional bodies tried to stop the run-off, arguing that the conditions were not conducive to free and fair elections. However, their arguments were disregarded by ZANU-PF and the run-off went ahead.

Mugabe was duly declared the winner and sworn in hastily, thereafter departing to an African Union summit, in Egypt, where his reception was lukewarm. The African Union called for a Kenya-style negotiated agreement amongst the major political parties, demonstrating that there was declining tolerance for governments which encouraged violence in their political systems, threatened property rights and the rule of law and violated the rights of their citizens.

The SADC bloc in turn, pushed for a negotiated political settlement in Zimbabwe as a result of the findings by the Mbeki government’s delegation of generals from South Africa, who had been sent to investigate the state of affairs in Zimbabwe. According to the Democratic Alliance and civil society organisations in Zimbabwe and South Africa, the generals confirmed the gross violence against certain sections of the population. This increased the impetus of the SADC in seeking mechanisms for ensuring stability in Zimbabwe.

In July 2008, Mbeki brought ZANU-PF and the MDC parties to the negotiating table.

The political agreement between ZANU-PF and the MDC formations was crafted amidst conditions of economic collapse in Zimbabwe. The Zimbabwe dollar was no longer accepted as currency by the majority; schools and hospitals had closed and 95% of the population were unemployed.

The negotiations continued into December when on the 13th, the draft constitutional amendment, which marked a major step towards the formation of an inclusive government in Zimbabwe, was gazetted. On the 5th of February, 2009 both houses of parliament passed the Unity Government bill unanimously, with an eye on the impending African Union Summit which endorsed the agreement between the political parties.

The post-crisis period: politics and policies.

President Mugabe and ZANU-PF have been forced to undertake political modernisation

and generate new initiatives to restore their legitimacy in Zimbabwe. While many governments in the SADC may express solidarity with ZANU-PF, a significant number of them have borne the brunt of the economic meltdown in Zimbabwe through hosting refugees and asylum seekers and providing services to them. The long decade of conflict with the internal democratisation forces and the international community has taken its toll on ZANU-PF, building sufficient pressure to force ZANU-PF into a political compromise.

The crisis period was followed by uneven recovery in the various sectors of the Zimbabwean economy. Food and beverage sectors recovered faster reaching just over 60% capacity utilisation while other sectors recovered more slowly at 30-40% capacity utilisation. While the adoption of multiple currencies stabilised the economy, limited liquidity in the economy remained, which has also reduced the resources available for patronage politics and forced the state to focus on delivering services to the people.

Specific measures have been developed to curb the powers of various functionaries such as the Reserve Bank governor, ministers and others in the state sector. Strict cash budgeting has curbed excesses and diversion of budgets to unbudgeted expenditures. Results-based management also makes politicians and civil servants accountable for their performance whereas in the past, political imperatives dominated the civil service. This stabilisation also halted the worst excesses experienced during the hyperinflation period.

Policy framework

While the state press give the impression that the policies and dominance of ZANU-PF continue uninterrupted, there have been major shifts in policies and behaviour by the state. For example, notwithstanding the continued rhetoric against donors, western countries and NGOs that are active in the governance and human rights sector, Mugabe has not signed the NGO Bill into law. There are indications that the Look East policy of the government has also nudged some western governments towards re-engagement with Zimbabwe’s political class in order to re-engineer a more workable relationship with them.

In the context of the economic and social problems in Zimbabwe, there is some recognition


of the possibility of winning back support from the public through re-building infrastructure and services.

Erratic supplies of energy, water and aged telecommunications, rail, road and air services and infrastructure all lead to dissatisfaction on the part of voters.

As the economy becomes more privatised, as the state is unable to sponsor any economic activity, business in general, and the small and medium business sectors in particular, gain significance. Large corporations in the mining, manufacturing and service sectors are the sole providers of significant social services. Key institutions such as the Grain Marketing Board (GMB) and the National Oil Company of Zimbabwe (NOCZIM) that used to deliver patronage have receded in strength and have been replaced by private business entities.

Indigenisation and empowerment

While indigenisation and empowerment are accepted in principle by the private sector, there are concerns over its method of implementation. There has been very spirited debate over this issue, resulting in the agreement to negotiate the regulations by sector, taking into account the specificities of capital, skills and other requirements in each sector.

It is significant that within ZANU-PF and the MDC parties, segments of these parties were wary of policies that could ruin the economy by seeing a repeat of the poorly-planned land reform that had wrecked the agricultural sector after 2000. Thus, the triumph of negotiation signalled that a shift in policy and practice had occurred notwithstanding the militant rhetoric that emanated from the radical fringe of ZANU-PF.

In the context of the constitution-making process currently in progress, both parties recognize

But which way is political reform? (Photo: Paul Burton)


that there is a price to be paid at the polls by any party that does not take the demands of the populace seriously. While the parties in the agreement may stall the constitution-making exercise for various reasons, it is quite clear that it is no longer prudent to ignore or circumvent the wishes of significant players in the economy and society.

The increased privatisation of the economy

There has been a significant shift in focus towards the economy as the form and content of the economy has changed. While rent-seeking activities could provide windfall incomes, there is recognition that in a stabilised economy, significant economic activities requiring investment in capital, time and skills have gained importance.

Thus, the struggle over the diamond fields in Marange shows the attempt by ZANU-PF functionaries to participate in the diamond sector on a more formal basis. In this respect, many of the political players who accumulated wealth during the hyperinflationary era desire to institutionalise and internationalise their businesses, creating linkages with existing and established players within and outside Zimbabwe. For these politicians, there is a significant incentive to stabilise the economy and society, re-engage the international community and re-join all the international bodies that can help further their economic interests. Thus, it is critical to recognise that while there remains a radical fringe which can destabilise the recovery, there is also a moderate segment that is not willing to remain marginal to the recovery, the economy and the accumulation of significant wealth. This is the element that can support business interests. Since the mining sector, particularly gold and diamonds, remain the focus of many politicians’ interest, there is merit in engaging these politicians in dialogue over progress in the mining sector.

Thus, the post-GPA period has lowered the political temperature even though there are episodes of strident and radical rhetoric of previous years. The segments of ZANU-PF that are inclined towards reform share some common ground with their MDC counterparts, raising the possibility of a moderate middle faction comprising elements from both parties. The decade of bitter struggle against the international

community has taken its toll on ZANU-PF while the long struggle against ZANU-PF over two decades has also exhausted the MDC and the civil rights and democracy movement. Thus, the fatigue on both sides creates the possibility for accommodation, notwithstanding the struggles for supremacy within and between these political formations.

The gradual engagement of the International Financing Institutions, western countries and donors since 2007 indicates that the politics of expediency have taken hold while the rhetoric against capital, the west, imperialism and colonialism may give the impression that the situation remains the same. While the ZANU-PF segment of the government continues to extract resources such as diamonds, the stringency of the IFIs’ funding conditions prevents significant access to state coffers. There is an inexorable shift towards regularisation of trade, commerce and other activities as shown by the compromise and negotiations with the Kimberley Process players.

Slow reform within ZANU-PF as the economy becomes more regularised

ZANU-PF continues to face problems with succession but this may be an issue only as long as the securocrats’ stake in the economy is not assured. Many of the securocrats may become significant players in business and institutionalisation of their interests post-Mugabe may be the price of peace. They are anxious about their fate and in these situations they are usually bought off as the price for stability. If this were to happen, it would enable the moderate segment of ZANU-PF to open dialogue with all sectors of the population and the international community.

This is the option that the successive Mbeki and Zuma governments in South Africa appear to favour on the basis that ZANU-PF, with the support of the securocrats, can help avert political strife and state disintegration in Zimbabwe. The South African government appears to have shared the securocrats’ fears about the MDC-T, assuming that the MDC is at best an unknown quantity and at worst, a western puppet, with little support amongst the ‘liberation’ leaders in the region, making close ties to ZANU-PF necessary if only to ensure that the ANC is not isolated in the region and the continent on the Zimbabwe question.


This option has been overtaken by events as the MDC has remained quite popular in comparison with ZANU-PF. The problem of succession and the structures in the party that have supported Mugabe against other leaders in ZANU-PF have split ZANU-PF into factions and frustrated attempts to reform the party, in the process weakening the party quite substantially.

Thus, political compromise with one or both factions of the MDC has occurred. The agreement that was reached after the violent run-off under an unreconstructed ZANU-PF is supported by slow economic growth. Thus, the business community can play a critical role in hastening economic growth, effecting an economic transition, which will not be controllable by politicians. With or without a new constitution, economic growth can help to support social and political liberalisation.

In many countries such as those of South East Asia, which have experienced significant economic growth, political and social transitions have not necessarily been violent and traumatic. This scenario would be ideal if it were allowed to unfold through significant economic investment and growth. This scenario appears to have started unfolding slowly as food availability in the shops has increased, schools and hospitals have re-opened, albeit with very little staff and resources to deliver basic services. There is a role for business in general, and the mining sector in particular, to accelerate the unfolding of this scenario through investment, job creation and economic growth.

2011– A new constitution and elections?

Progress on a new constitution, to replace the one drawn up in 1979, has been slow with the two parties within the GNU disagreeing on issues such as funding and who should be collecting views on the constitution, despite the fact that they agreed on formation of the new government to write a new constitution within eighteen months. The ‘outreach’ programme, whereby analysts are sent out to garner feedback on the constitution through a series of public meetings with local communities, only started in June this year, so there is little likelihood of anything being drafted this year. According to observers the process is almost a year behind schedule.

This long journey to a new constitution, one that lessens the powers of the President and guarantees greater civil freedom, is not going to be easy one as there are already claims by MDC-T and human rights group Zimbabwe Peace Project and Zimbabwe Election Support Network of intimidation of villagers by ZANU-PF members during the outreach process. There are concerns that the lead up to charter reform could be marred by the kind of violence that the country experienced in 2008 in the presidential run-off.

ZANU-PF has even stated that elections may go ahead regardless of whether or not the new constitution is in place. Clearly it plays into their hands to frustrate the process for as long as possible.

The SADC and its mediator, South African President Jacob Zuma, will have a key role to play here.

Meanwhile President Mugabe was back to his most radical rhetoric recently, telling the West to go to hell with their interfering and sanctions. “We should not allow colonial thieves to take our resources” he said.

That should encourage foreign investment!

3.3 The Economy

Hyperinflation

The country’s economy has just been through a period of unprecedented turmoil, which saw hyperinflation and a rapidly depreciating currency that led to the removal of the Z$ and installation of the US dollar (and the South African Rand) as the country’s currency, at least until 2012.

The backdrop to this was that in May 2008, the official Z$ to US$ exchange rate was revised to a floating rate of about Z$165,000,000=US$1, from a fixed rate of Z$30,000=US$1.

After the official inflation rate reached 231,000,000% in July 2008, the government ceased to release consumer price index data, mainly because there were few goods available for purchase on the shelves of stores!

In August, the newly-issued Z$10,000,000,000 dollar bill was revalued to Z$1. Hyperinflation, which was estimated to have reached about 500,000,000,000% in September and 89,700,000,000,000,000,000,000% in November,


was finally dampened in late 2008 by the de facto migration from the Zimbabwe dollar to foreign currencies1.

STERP

One of the first acts of the unity government, which came into office in mid-February 2009, was to introduce measures to tackle the unprecedented economic crisis. Its “Short Term Economic Recovery Plan (STERP)” came in at a time of “unprecedented levels of hyper-inflation, sustained period of negative GDP growth rates, massive devaluation of the currency, low productive capacity, loss of jobs, food shortages, poverty, massive de-industrialisation and general despondency”2

One of the main aims of STERP was to ensure that there was increased capacity utilisation in every sector of the economy, especially agriculture and mining, where the government undertook to abolish the retention of commodity earnings by any authority in Zimbabwe with the promise, however, to “review upwardly the taxation and royalty structures in line with international standards”.

But the key response to hyperinflation was the dispensation that “all enterprises are free to trade in South African rands, United States dollars or any other convertible currency”. This effective

dollarisation of the economy came in tandem with the agreement that gold producers could be paid international prices in US$, a move that galvanised the industry back into production.

The improvement in economic fortunes was immediate and dramatic in 2009 through to 2010 as the inflation rate was brought under control and stability returned to the markets. Shops were full again.

STERP was an emergency package to see the country through to the end of the year. It was to be followed by a five-year plan to guide the economy through to 2015 but although this was drafted it was never inacted and remains a ‘work in progress’.

The Ministry of Finance did, however, follow up in December 2009 with its 2010 Budget and a subsequent The Three Year Macro-Economic Policy and Budget Framework: 2010-2012 (STERP II) the same month.

The aim of STERP II was to build on the foundation laid by STERP and continue the restoration of economic stability and growth in the country. The Ministry of Finance recognised that although inflation had been controlled, there was still much to do with the economy (still fragile with a number of challenges which required urgent attention, including: capacity

A trillion isn’t worth what it used to be!


utilisation still low at below 50%); unsustainable debt of over US$5 billion and arrears of over US$3 billion, and capacity constraints in both public and private sectors.

State of the economy in 2010

In July this year, the government released its 2010 Mid-Year Fiscal Policy Review (FPR), so we have up-to-date data on how the economy is performing3.

The tone of the FPR was rather subdued with an acknowledgement that the gains in the economy in 2009 were being eroded by a threat to macro-economic stabilisation through the resurgence of inflation, the lack of capital, modest recovery in capacity utilisation and a general drop in confidence in the economy.

Some of the key measures of performance are discussed below.

Inflation

Inflationary pressures picked up during the first half of 2010 with year-on-year inflation recording 0.7% in January, 1% in February, 3.5% in March, 4.8% in April 2010 and 6.1% in May 2010. The Finance Ministry has revised average annual inflation for the year to 4.5%.

GDP growth

The Minister has revised growth rates for the economy after a better than expected performance by agriculture but a poorer performance from mining, because of the shortage of power. The following table shows projected growth rates for selected key sectors of the economy.

Table 3.1: GDP growth

Sector 2008 % (A)

2009 % (E)

2010 % (P)

Original Revised

Agriculture -39 15 10 19

Manufacturing -33 10 10 5

Mining -17 9 40 31

Overall GDP -15 6 7 5A - Actual, E – estimate, P – projected Source: Ministry of Finance (3)

Bank lending

There has been some increase in bank lending throughout the first half of 2010 but most loans remain short term (90 days or less) with longer-term loans accounting for less than 3% of the overall deposits. Credit can cost up to 30%.

The centre of Bulawayo where trade has grown again (Photo: Paul Burton)


Equity market

Trading volumes on the Zimbabwe Stock Exchange have been low this year. The industrial index which started the year at a high of 157, had dropped to 127 by June 2010, whilst the mining index, fell from an opening of 210 to 143.

Current account

The current account remains in deficit. Total exports for the first four months of 2010 were US$870 million against imports of US$1,545 million, resulting in a trade deficit of US$675 million, which was largely financed by SDR allocations and reduction in banks’ foreign assets. The Minister of Finance expects the gap to widen further in 2010, to US$1.3 billion.

Challenges facing the government and the economy

The Mid-Year Fiscal Policy Review identified several challenges to sustained, rapid economic growth, the most important of which we discuss here.

Lack of inflows of capital

The estimated lack of inflows of investment capital resources is US$10 billion annually or US$30 billion over the period 2010 – 2012. The bulk of these resources can only come from external sources. However, the country has not been able to attract meaningful external support in the form of lines of credit, foreign direct investment and donor support, according to the Finance Ministry.

Lack of fiscal space

The Minister is having problems balancing the budget. With a fragile economy, revenue collections estimated at US$1.75 billion are consumed largely by current expenditures

dominated by a high wage bill constituting over 60% of the budget. This situation leaves little money left over to pay for the accelerated reconstruction agenda.

Debt overhang

The debt overhang, which the Minister estimated at US$6.7 billion, is probably the single most critical factor that will inhibit any economic growth. While it remains, the country will not be able to access development assistance.

The IMF, in an April 2010 report back4, was unequivocal in its assessment. “Zimbabwe is in debt distress, which is compounded by unresolved economic policy challenges”, it concluded.

According to IMF statistics, at the end of 2009, total public and publicly-guaranteed debt amounted to US$6.9 billion or 157% of GDP, of which 102% of GDP was in arrears. Zimbabwe’s overdue financial obligations to IFIs include the World Bank (US$731 million), African Development Bank (US$483 million), and the IMF (US$140 million).

The IMF report comments that achieving debt sustainability would require a significant strengthening of economic policies and an improvement in relations with the international community whose support is essential for securing debt relief.

Reserve Bank problems

The IMF is blunt in its assessment that “The Reserve Bank of Zimbabwe is in financial distress and suffers from weak governance”.4

The government has taken actions and with the amendment of the Reserve Bank Act and the subsequent appointment of the Reserve

Table 3.2: Projected growth rates for selected indicators

Estimated Projected

2008 2009 2010 2011 2012 2013 2014 2015

Real GDP growth (%) -14.5 4.0 2.2 0.0 1.0 1.8 2.0 2.0

Nominal GDP (uS$B) 3.9 4.4 5.1 5.5 5.8 6.2 6.5 6.9

Inflation(%) ots 6.5 5.0 5.0 5.0 5.0 5.0 5.0

Money supply , M3 (uS$M) 314 1,276 1,511 na na na na na

Current account balance (uS$M) -945 -1,323 -1,183 -724 -795 -839 -885 -915

Officialreserves(US$M) 6 312 114 114 114 115 115 115

External debt (uS$B) 5.8 7.1 7.7 8.1 8.7 9.3 9.8 10.4

External debt (% of GDP) 148 163 149 148 149 151 151 151Source: IMF4 Ots = off the scale!


Bank Board, the focus is now on implementing the requisite governance reforms through restructuring, and downsizing of the Bank to align it to core functions under the multi-currency regime. Central to these reforms, is also the issue of addressing the indebtedness of the Reserve Bank estimated at about US$1.5 billion.

Power supply

The supply of adequate power is a huge issue that the government admits it has thus far not dealt with. The Minister stated in the Mid-Year Review that it was important that government deals urgently with the key issues of power generation, including the refurbishment and upgrading of power transmission lines and of power stations. However, he has allocated only US$15 million to the problem when, by his own estimate, the upgrade of Hwange and Kariba, the country’s main generating stations, will require a total of US$139 million.

Mining legislation

The Minister is concerned that the mining industry does not contribute enough to the

fiscus. Therefore he has urged amendments to the Mining Act to include greater transparency in exploration licence registration, the entrenchment of the principle of ‘use it or lose it’ with regard to claims, greater mineral beneficiation and greater taxation of mining companies with the warnng that “the current legal structure codified in our Mining law that the State can only look to corporate tax and royalties from the mining sector is unsustainable”. He has announced the increase in royalties on gold revenue to 4%.

Economic prospects

Table 3.2 (previous page) shows projected economic growth indicators according to the latest IMF report4.

3.4 Mining Law & Mineral Policies

The Mines and Minerals Act is the principal law governing mining in Zimbabwe. This law provides security of tenure and has clear provisions for acquisition, maintenance and relinquishing of mining title.

Companies need a Mining Lease to mine on a scale such as at Duration Gold’s ML 16 property (Photo: Paul Burton)


The Act (as amended) has been in force since 1965. Currently it is being amended again to improve the administration and management of the ‘use it or lose it’ policy and government and the Chamber of Mines have consulted with each other throughout the process. The revised Act is likely to be finalised in Q3 or Q4 this year. This will go a long way to removing uncertainty over what is expected of the industry.

The Act is enforced by the Ministry of Mines & Mineral Development (MMMD).

Although not solely applicable to the mining industry, the Indigenization and Economic Empowerment Act 14, 2007 was signed into law in April 2008 and provided for all companies operating in Zimbabwe to arrange for 51% of their shares or interests therein to be owned by indigenous Zimbabweans. The COMZ has put forward the views of the mining industry that the equity component should be restricted to 15%, with credits in equity equivalents, including local procurement and support to the small scale mining sector, making up the remainder (see section 6.3 for more details).

Mineral rights and licences

All mineral rights are vested in the President and an application to take out a licence must be made to the MMMD through a process defined in the Act. The Mining Commissioner issues exploration licences, of which, for gold, there are two main applicable types.

A Prospecting licence may be taken out by any person who is permanent resident of Zimbabwe for a period of two years. This licence entitles the holder to undertake reconnaissance work but they are not allowed to drill or remove any materials.

Any person or company (local or international) may take out an Exclusive Prospecting Order (EPO) for a period of three years with an option to extend the period by an additional three years. The area under licence was limited to 65,000 ha in the case of gold, but in the 2010 Budget (presented on December 5, 2009) the Minister of Finance proposed a reduction to a maximum 20,000 ha for each EPO. The Minister further proposed that application and renewal fees for EPOs be set at US$100,000.

Incidentally, the President has not signed any EPOs since 2002 but the Ministry of Mines and Mineral Development has announced that the

process of signing off EPOs already approved will resume later in 2010.

A Mining Claim is a permit to prospect and mine over a small area and usually several claims are grouped to form a block of claims. Ordinary claims are up to 25 ha and a block of claims may be transformed into a Mining Lease for simplicity of administration.

Meanwhile, there are two types of mining licences available for gold companies.

A Mining Lease confers the exclusive right of mining any ore or deposit which occurs within the vertical limits of the area covered by the lease. A Special Mining Lease (SML), on the other hand, applies where the holder of one or more contiguous registered mining locations intends to establish or develop a mine where the investment will be wholly or mainly in foreign currency and will exceed US$100 million and the mine’s output is intended principally for export. SMLs are valid for 25 years.

2010 budget and mining

There were a number of provisions brought in in this year’s Budget that will affect the mining industry. Among these were conditions to enforce the “use it or lose it” philosophy as it applies to mining claims. In order to discourage holders of mining claims from retaining un-worked ground for speculative purposes, the Minister introduced a fee of US$100 per ha per annum on unworked claims and removed the option to spread taxable income earned from the sale of mining claims over a period of four years.

Also in the Budget, the royalty rate for gold was increased from 3% of gross market value to 3.5%, from the start of 2010. However, the Minister of Finance recently further increased the royalty rate to 4%, effective October 1, 2010. Designated financial institutions now collect the royalties instead of Fidelity Refineries.

The Budget also had bad news for gold miners in the shape of an increase in the corporate tax rate to 25% in line with other industry sectors. Previously the gold producers received a special dispensation that had them paying just 15%, while the basic corporate tax rate was 30%.

The COMZ is also working with the MMMD on a new mineral development policy for the country.

Presently, government participation in mining


is through Zimbabwe Mining Development Corporation (ZMDC).The ZMDC was formed in 1982 for government to participate in the mining sector and to save companies that were being threatened to close. It is active in exploration, mining and giving assistance to cooperatives and small-scale miners.

The Minerals Marketing Corporation of Zimbabwe (MMCZ) was formed in 1992 and is responsible for marketing all the country’s non-gold minerals and metal products.

References:(1) uSGS, The Mineral Industry of Zimbabwe, uSGS Minerals yearbook 2008, April

26, 2010

(2) Short Term Emergency Recovery Programme (STERP) launch report, Ministry of Finance, February 2009

(3) Mid-year Fiscal Policy Review, Ministry of Finance, July 2010

(4) IMF Staff Report for the 2010 Article IV Consultation, April 29, 2010

BibliographyBiti, Tendai. “The Death of Constitutionalism: Constitutional Amendment No. 17 and the State of the State.” unpublished paper, 2005.

Bracking Sarah, ‘Development Denied: Autocratic Militarism in Post-election Zimbabwe.’ Review of African Political Economy, Nos: 104/105, 2005, pp 341-357.

Brett E.A. “Political Victories and Economic Defeats: Managing the Post-Election crisis in Zimbabwe.” unpublished paper. 2005.

Games, Dianna. A Nation in Turmoil: The Experience of South African Firms doing Business in Zimbabwe. Business in Africa Report NO. 8, South African Institute for International Affairs, 2006.

Hawkins, Tony. ‘Still Standing: The economic, political and security situation in Zimbabwe 2006 and implications for the SADC region.’ Paper presented to the Institute for Security Studies, university of Pretoria, 4th May 2006.

HilsumLindsey,‘Briefing:Re-entertheDragon:China’sNewMissioninAfrica,’Review of African Political Economy, 2005, pp 419-425.

InternationalCrisisGroup,“Zimbabwe’sContinuingSelf-Destruction”.AfricaBriefingNo 38, Pretoria/ Brussels 6th June 2006.

Lodge Tom, ‘Quiet Diplomacy in Zimbabwe: A case study of South Africa in Africa.’ unpublished mimeograph. 2004.

Maroleng Chris, ‘Situation Report: Zimbabwe: Increased securitisation of the state?” Institute for Security Studies, September 2005.

Movement for Democratic Change (Tsvangirai), “MDC Proposals for the Resolution of the Zimbabwean Crisis: Sign posts to Peace, Democracy, Legitimacy, Reconstruction and National Healing.” Harare May 2006.

Muleya Dumisani, ‘Government Spooks run Economy’, Zimbabwe Independent 7th April 2006.

Raftopoulos,Brian.‘ReflectionsontheOppositioninZimbabwe:ThePoliticsofthe Movement for Democratic Change (MDC).’ Raftopoulos, Brian and Alexander, Karin.(eds)ReflectionsonDemocraticPoliticsinZimbabwe.InstituteforJusticeandReconciliation, Cape Town, 2006.

Rupiya, Martin. ‘Explaining the Transformation of Relations between the Armed Forces and Society in Zimbabwe since 2000,’ in Karen Alexander (ed) The Future of Democratic Politics in Zimbabwe Institute for Justice and Reconciliation, Cape Town 2005.


Chapter 4 – Geological Overview of Zimbabwe

Zimbabwe’s geology can be divided into two main regions: a large portion of the central,

east and south of the country is underlain by basement complex rocks (deformed metamorphic and granitoid rocks) of the Zimbabwe Craton; while the smaller western and northwestern portion of the country is composed of younger, folded and deformed sedimentary rocks of the Magondi Basin and Karoo Supergroup, large tracts of which are covered by Tertiary sands. A third significant feature of the country’s geology is the Great Dyke, a SSW-NNE trending ultramafic-mafic dyke complex that cuts across almost the whole country.

The Zimbabwe Craton is bordered on three sides by younger mobile belts made up of meta-sedimentary and meta-volcanic rocks: the Zambezi Belt to the north, the Mozambique Belt to the east and the Limpopo Belt to the south.

The craton is made up of highly deformed and regionally metamorphosed grantitic gnesses and granitoids of Archean age (older than 2,500 million years) that formed in the root zones (basement) of mountain building regions of the crust. The great age of the terrane means that these basement rocks have been uplifted and deeply eroded to produce the current level of exposure.

The granitoid rocks of the basement complex consist of coarsely crystalline rocks with compositions from tonalite through to adamellite; true granites are rare. The gneissic rocks are foliated or banded grey gneisses and darker coloured migmatites, the majority of which are tonalitic in composition. Both granitoids and gneisses contain cross-cutting and conformable sheets and veins of quartz and aplite and xenoliths of ultramafic and banded iron formations are common, particularly in the gneiss. A younger generation of granitoid rocks intruded the basement complex some 2,650 million years ago. These rocks are predominantly medium-coarse grained adamellites and they form

extensive sheets and batholiths in the central and eastern parts of the country.

Greenstone belts are widely superimposed upon the underlying crustal basement throughout the craton and are the principal source of gold mineralisation. In the northeastern part of the craton innumerable dolerite sills, dykes and sheets occur, the volumetric quantities of which represent a significant magmatic activity.

The Zimbabwe Craton is separated from the Kaapvaal Craton to the south by an extensive zone of ENE trending high grade metamorphic rocks, some 600 km long and 300 km wide, known as the Limpopo Mobile Zone. Within Zimbabwe the mobile belt is largely represented by amphibolites, gneisses and granulites of an amphibolite -granulite facies, which show a penetrative ENE foliation.

In the north of the country the Zambezi metamorphic belt extends for some 900 km from Wankie in the west through Kariba to the northeast, although much of the western part is covered by much younger cover rocks. Deformation in the high-grade metamorphic belt is complex and the lithologies are dominated by garnet-mica-schists and granitic-gneisses and granulites.

West of the Zimbabwe Craton, the Magondi Basin was formed during a period of crustal extension after the emplacement of the Great Dyke, and represents the northwestern margin of the Zambezi Basin. The basin is filled with a thick sequence of sediments of Pre-Cambrian age, subdivided into the Deweras Group in the east, comprising arkoses, greywackes, argillites and basaltic lavas, overlain by the Lomagundi Group consisting of quartzites, slates and greywackes and to the west by the Piriwiri Group of extensive phyllites and greywackes. Felsic and mafic volcanics are intercalated with sediments near the base of the sequence and all rocks are deformed and metamorphosed.

by Paul Wheeler BSc, ARSM


The southern part of the Magondi Basin is covered by sediments of the Karoo Supergroup and Tertiary sandstones and aeolian sands of the Kalahari Group. The Karoo sediments were laid down in three major basins during the Permian to Jurassic, with similar lithologies in all the basins. Terrestrial clastic sediments predominate, with feldspathic sandstones, mudstones and shales, and including the coal beds of the Wankie Coalfield. These sediments are overlain by a thick succession of basaltic lavas.

The Karoo basalts are most spectacularly revealed in the Victoria Falls on the far western border with Zambia, but they reach their most extensive outcrop in the south and south-eastern part of Zimbabwe, where they are intruded by several large granophyre bodies.

The Kalahari sediments occur extensively between Bulawayo and Victoria Falls in the western part of Zimbabwe and consist of poorly consolidated sandstones and sands.

Greenstone belts

Zimbabwe’s greenstone belts are principally composed of bimodal assemblages of mafic, ultramafic and felsic volcanics and associated intrusives, clastic meta-sediments and banded iron formations (BIF). These assemblages of rocks were emplaced as a pronounced series of elongate, linear volcanic belts; tens of kms wide and several hundred kms long; the term greenstone reflecting the colour of chloritic and epidote alteration seen in the typical assemblage of basic volcanic and volcanoclastic units.

Thirteen major greenstone belts have been identified, and are believed to have developed in three successive stratigraphic phases: the Sebakwian Group, the Bulawayan Group and the Shamvaian Group. Each of the greenstone belts has its own distinctive structural and lithological setting, but are commonly intensely folded and faulted with major strike-slip ductile shears and are separated from each other by granitoids and gneissic rocks of the basement complex. The metamorphic grade and intensity of deformation various between the greenstone belts but is mainly in the lower to medium greenschist facies.

Dominant lithologies in the Sebakwian Group are komatitic and tholeitic basalts, intercalated clastic meat-sediments, BIFs and ultramfic intrusions.

The Bulawayan Group is the most important host for gold mineralisation and has been divided into an older Lower Greenstone sequence and a younger Upper Greenstone sequence, which volumetrically is the dominant greenstone assemblage. The Shamvaian Group is the youngest division within the greenstone stratigraphy and is dominated by rhyolite-dacitic tuffs and agglomerates, porphyry intrusives and clastic meta-sediments, in particular greywackes.

Within the Lower Greenstone sequence of the Bulawayan, bi-modal basaltic and andesitic volcanics and volcaniclastics predominate, with interflow BIFs and meta-sediments. The Upper Greenstone sequence includes a lower meta-sedimentary unit (greywackes, conglomerates and limestones), which is an important stratigraphic marker horizon; overlain by a thick assemblage of komatiitic lavas, tholeiitic basalt to andesitic lavas and pyroclastic rocks, capped by volcaniclastic and clastic and chemical sedimentary rocks.

Historically the Midlands (Kadoma-Hartley) gold belt, around KweKwe and Gatooma in central Zimbabwe, was the most significant greenstone belt, hosting the country’s two largest (both in excess of 4 Moz) production mines at Cam and Motor and Globe & Phoenix as well as numerous smaller operations. Brownfields exploration around former mines in the Midlands belt is the focus of a number of junior companies, notably New Dawn Mining at Dalny and African Consolidated Resources at Giant-Gadzema.

To the south of the Midlands Belt, the Shurugwi-Gweru belt is centred on the city of Gwelo, and the Selukwe mining district hosted significant deposits at Wanderer and Tebekwe. The former lies at the centre of a package of concessions, including Camperdown and Golden Quarry, which are being re-explored by New Dawn Mining.

In more recent years the production and exploration focus switched to the Shamva-Harare, Bulawayo-Buli and Gwanda belts, centred on their namesake cities in the northeast and south west and south of the country respectively. As well as the historic Shamva mine (1.5+ Moz), the Shamva-Harare belt currently hosts one of the country’s main producers, Mwana Africa’s Freda-Rebecca mine.

One of the country’s other key producer in


recent years has been Caledonia Mining’s Blanket mine, in the Gwanda belt. On account of the close proximity of the Gwanda belt to the Limpopo Mobile Belt, the grade of metamorphism at Gwanda is distinctly higher than in the typical Zimbabwean greenstone belts, reaching upper greenschist to amphibolite facies.

Great Dyke

The Great Dyke forms a band of hills and ridges that trends nearly 540 km, north-south through the centre of Zimbabwe. In geological terms the Great Dyke is not a dyke, but a long, linear series of lopolithic (lenticular) shaped ultramafic intrusions, from 3 to 12 km wide, that been emplaced stratiformly along a NNE-SSW trending graben structure.

Four complexes have been identified from north to south, the Musengezi, Hartley, Selukwe and Wedza complexes. Each of these complexes has an elongate, gently dipping synclinal structure and can be sub-divided stratigraphically into a lower ultramafic sequence of peridotites (dunites and harzburgites) and pyroxenites together with narrow bands of chromitite; and an upper mafic sequence consisting of a variety of plagioclase-rich rocks, such as norites and olivine gabbros.

The dyke lies within the Zimbabwe craton and is flanked by granitic rocks for most of its length. The Great Dyke has been dated at 2,575 million years old and is essentially undeformed, which indicates that the last phase of major deformation in the craton occurred before its emplacement.

Economically the Great Dyke is of significant importance, with major chromite and platinum resources. Chromite occurs in a varying number of bands towards the ultramfic base of each complex and is mined throughout the Dyke. Base-metal sulphides (Ni-Cu-Co +/- Au) and platinum group metals (PGMs) occur in the uppermost pyroxenite unit just below the ultramafic-mafic contact.

Gold mineralisation

At least 95% of Zimbabwe’s total gold production has been derived from orogenic lode-gold style mineralisation which occurs within many of the greenstone belts. Lode gold mineralisation is predominantly structurally controlled with

a broad spectrum of styles from extensively mineralised ductile shear systems through stockworks and multiple anastomosing and bifurcating quartz veins to massive quartz veins and breccias. In around half the known deposits, the host rocks are mafic volcanics but ultramafics, banded iron formations and granitoids are also important.

Shear zones are typically steeply dipping to vertical on average; individual fractures within the main shear zones exhibit a broad range of orientations with patterns reflecting riedel and compressive fracturing which has developed by consistent progressive deformation. Lode systems may have strike lengths in excess of 1,000 m but individual ore shoots and veins are usually only of the order of 10-100 m in strike length.

In lode-gold deposits, gold and gold-bearing sulphide mineralisation is present in quartz-filled shear zones and in altered wallrocks adjacent to the shear zones. Gold occurs as free gold intimately intergrown with quartz, as microscopic grains with sulphide minerals and as late gold in fractures within vein quartz or coating sulphides. Gold is most commonly fine grained, although occurrences of coarse visible gold have been found in numerous orebodies.

Although quartz vein related mineralisation is most commonly seen, in some deposits (or even as a second type of mineralisation within the same deposit) disseminated, sulphide replacement mineralisation hosts the bulk of the gold. Typically these zones have little quartz, silica is present as chert or chalcedony, and sulphide minerals in various combinations are major components.

Sulphide mineralisation is principally disseminated assemblages of pyrite, pyrrhotite, arsenopyrite and galena, with lesser amounts of chalcopyrite, tetrahedrite, stibnite and minor tellurides and scheelite. Sulphide-rich ores are generally not refractory and respond well to conventional treatment in gravity-CIL/CIP circuits; although increasing proportions of sulphides may require preparation of a flotation concentrate prior to leaching.

Numerous small deposits and several larger ones are associated with banded iron formations or granitioids. In the latter, gold bearing quartz-sulphide veins and shear-hosted disseminated mineralisation is of a similar style to orogenic


Figure 4.1: Simplified geological map of Zimbabwe showing main greenstone belts (courtesy, Duration Gold)

type, but there is a much clearer relationship with the emplacement of granitoid intrusions and the subsequent remobilisation of gold.

These BIF units typically form topographic features of considerable strike extent and are hard, cherty ferruginous rocks with repeated magnetite-quartz +/- grunerite bands which in many deposits are tightly folded and heavily fractured. Auriferous sulphide minerals occur as a replacement of the iron-rich minerals along fractures and in the hinges of the folds.

In all deposit types, wallrock alteration is dominated by carbonatisation, with siderite and ankerite the commonest phases. Sericite is very common in mafic and granitoid hosts, with magnesite , fuchsite and talc common in ultramafic hosts and pyrite and pyrrhotite in banded iron formations. Pyroxene rich wall rocks are commonly altered to hornblende, chlorite and carbonate.

Gold deposits are found in the Limpopo Mobile Belt, outside of greenstone belts, but the type of mineralisation is also that of orogenic lode gold, with similar styles and ore mineralogy. Minor gold production is reported as a by-product of base-metal and PGM production from mines on the Great Dyke.

Placer (alluvial) deposits in streams draining areas of primary gold mineralisation are not significant sources of gold in Zimbabwe. Gold in the weathered, eluvial (“float”) profiles of primary deposits is more widespread; but its exploitation is largely by small-scale, artisanal mining using traditional panning and sluice methods.

Key ReferencesFoster R.P. and Piper D.P. 1993, Archean lode gold deposits in Africa. Ore Geology Reviews 8.

Schulter.T. and Trauth, M.H. 2008; Geological Atlas of Africa 2nd Edition, Springer

Stagman.J.G., 1978 An Outline of the Geology of Rhodesia, Zimbabwe Geological Survey Bulletin No.80 (Reprinted 1981).


Chapter 5 – Mineral Production in Zimbabwe

According to the US Geological Survey1, Zimbabwe’s diverse mineral output in 2008

included about 3% of the world’s chromite and platinum production, and about 2% of the world’s asbestos, lithium, palladium, and vermiculite production. Significantly, gold production is not mentioned in world terms.

There are approximately thirty minerals or mineral-based commodities produced in Zimbabwe, which account for about 4% of the gross domestic product (GDP), with the platinum-group metals the most economically significant. Although not significant in GDP terms,

in terms of export revenues minerals play an important role accounting for some 35-40% of foreign exchange earnings historically.

In the strictest sense Zimbabwe is not a resource-based economy – agriculture still is the major contributor to GDP – but mining is a significant contributor to the economy and, in fact, should be a bigger component of the nation’s wealth generating enterprises.

But while the platinum industry has been able to capitalise on the commodity price boom of the last few years, the gold mining industry, and, through taxes and royalties, the country’s coffers, have missed the chance to capitalise on record high prices. Historically gold has been the main contributor to value of mineral production in the country, accounting for 44% but this fell to 27% in 20072 and has no doubt fallen even further as gold production slumped in 2008 and 2009, despite record high gold prices.

I will go into more detail on the reasons why gold output has suffered so dramatically in the following chapter, but first a brief look at the platinum industry and some of the other mineral commodity sectors within the country.

Platinum

Zimbabwe hosts the second-largest known platinum reserves in the world. It is the third largest platinum producer in the world with production of 229 koz in 2009 (up 27% from 2008) and the fifth largest palladium producer with output also rising 27% in 2009, to 177 koz4.

Production for both metals was at an all-time high as both producing mines in the country completed expansions during the year.

Impala Platinum (Implats), the world’s second-biggest platinum producer, controls the country’s largest platinum mine, Ngezi, through Zimplats (87% owned). The Ngezi mine completed Phase 1 of what may turn out to be multiphased expansions

0 5 10 15 20

Construction

Mining

Water, Elec

Tourism

Real Est

Trade

Trans & Comm

Finance

Manf.

Other Services

Govt.

Agriculture

Source: Mining Sector: Engine for Economic Growth. Douglas Munatsi3

Figure 5.1: Mining Contributions to Zimbabwe Economy3


in September 2009, as the concentrator reached design throughput of platinum-in-matte of 180 koz, almost double the production in 2008. Production in 2009 was 131 koz of platinum and 100 koz of palladium.

According to Reuters, Zimplats recently said it planned to go ahead with its US$500 million expansion project to lift annual output by 50% to 270 koz of platinum. It’s Hartley mine remains on care-and-maintenance.

At Mimosa (Zimplats 50%, Aquarius Platinum 50%), the Wedza Phase 5 expansion project was completed in mid-2009 and production of platinum-in-concentrate has risen to a fraction below design capacity of 100 koz of platinum.

Anglo American Platinum (Amplats) the world’s top platinum producer, is due to start production at its Unki mine in Q4. It will eventually produce 65 koz/y.

Kazakh miner ENRC owns 60 % of the Bokai platinum project, which is undergoing a feasibility study. The first stage is expected to produce 163 koz/y of PGMs in concentrate.

Platinum reserves and mines are centred on the Great Dyke, a highly elongated, layered igneous intrusion that runs about 550 km through centre of the country with geology similar to the Bushveld Igneous Complex, in neighbouring South Africa.

The most important economic sequence of ultramafic rocks is the Main Sulphide Zone (MSZ), a lithologically continuous layer that is typically between 2 m and 3 m thick that forms an elongated basin. It generally contains iron–nickel–copper sulphides, while elevated PGM concentrations occur towards its base.

Last year, Zimbabwe Chamber of Mines president, Victor Gapare, told a conference in Johannesburg that Zimbabwe was expected to be producing 1 Moz/y of platinum within the next ten to fifteen years.

Base metals

Bindura Nickel Corp, which is majority owned by gold producer, Mwana Africa, is the only integrated nickel miner, smelter and refinery in Africa. It was shut down in November 2008 and Mwana is seeking to raise finance to reopen the firm’s Trojan mine before the rest of the complex.

Meanwhile, RioZim, another company with gold operations, aims to refurbish its Empress nickel refinery, which refines nickel and copper matte from Botswana. It also hopes to start chrome mining in a joint venture project and produce 30 kt/y of chrome concentrate a year from 2012.

Zimasco, owned by Chinese mining and trading group Sinosteel Corp, has a capacity of around 200 kt/y of ferrochrome, making it the country’s biggest ferrochrome producer.

Diamonds

Rio Tinto owns 78% of the Murowa diamond mine, and RioZim owns the rest. Rio Tinto has begun preparatory work for a US$300 million expansion programme to raise capacity sixfold. A review of expansion feasibility studies is due to be completed by the end of 2010. Capacity is 300 kct/y, but output was only 124 kct last year.

Coal

According to Chamber of Mines’ figures, Zimbabwe’s coal output has sharply declined from nearly 6 Mt in the 1990s to just over 1.7 Mt in 2009. The decline in coal output is largely due to lack of funds to recapitalise the Hwange Colliery Company, in which the cash-strapped Zimbabwe government is the largest single shareholder, with 43%.

RioZim owns the Sengwa coal mine in north-western Zimbabwe in a 50-50 joint venture with Rio Tinto. Small-scale mining at Sengwa, which produced 25 kt/mth for the local tobacco industry, was stopped in May 2008 at the peak of Zimbabwe’s economic crisis. Sengwa has ore reserves of 519 Mt and a total resource of 1.3 Bt. The company is currently holding discussions with undisclosed potential investors interested in setting up a coal-fired power plant at the mine.

References:

(1) “The Mineral Industry of Zimbabwe” by Philip Mobbs, uS Geological Survey 2008 Minerals yearbook, April 2010

(2) Working Paper 1, “The Mining Sector in Zimbabwe and its Potential Contribution to Recovery”, by Professor Tony Hawkins, 2009 united Nations Development Programme, Comprehensive Economic Recovery in Zimbabwe

(3) “Mining Sector: Engine for Economic Growth”, Douglas Munatsi, Group ChiefExecutiveOfficer,BancABC,6thAnnualInternationalMininginAfricaConference, June 2009

(4) Platinum & Palladium Survey 2010, published by GFMS, 2010.


Chapter 6 – The Gold Industry: A SWOT Analysis6.1 Characteristics of the gold mining industry

Zimbabwe’s gold mining industry is characterised by:

• Rich greenstone belts, that support

• Many small gold mines (>5,000), which are

• In many cases, underground, and are

• Often privatively owned, and

• Undercapitalised and seriously lacking in modern plant.

Let’s look in more detail at each of those points.

Greenstone belts

As readers will have learned in Chapter 4, the Zimbabwe Craton hosts some of the world’s great greenstone belts. Greenstones are one of the most extensive and productive sources of gold on the planet and as such the Zimbabwean rocks represent a huge potential treasure chest for miners.

A number of the Zimbabwean gold producers have noted the comparable size and make-up between the Zimbabwe Craton and the Yilgarn Craton, of Western Australia. Although the Zimbabwean version has a slightly different structural history, the rock types and mineralisation styles are very similar. Also there are often comparisons made between the Zimbabwean greenstones and the metavolcanic rocks found in the Barberton area, of South Africa, and the Abitibi Belt, in Canada.

The Yilgarn and Abitibi belts in particular, are well-endowed gold regions that have supported, and continue to support, large, world-class gold mining operations. The same cannot be said of Zimbabwe.

Small mines syndrome

That brings us to the second characteristic of the Zimbabwean gold mining industry – many small mines. There are probably no accurate records,

but having been on the ground there, a figure of 5,000 mines does not sound unreasonable. There are certainly that many deposits.

The density of shafts dotted around the countryside on the greenstone belts is reminiscent of the huge number gold mining tenements and individual shafts in Bendigo, when the Victorian gold rush was on, or the hundreds of tin and tin/copper mines that surrounded Carn Brea at the height of Cornwall’s tin mining boom in the 1800s.

As an illustration of the number and scale of operations, a recent technical report, prepared for New Dawn Mining, catalogues one hundred and sixty nine mines in the Chakari area alone, with historic production ranging from just one ounce (the aptly named Tiny mine), through 6 koz at Melton, to 36 koz at Brilliant, to the largest Dalny, which produced over half a million ounces.

Elsewhere, in the Gwanda greenstone belt, Caledonia Mining claims that its Blanket mine is the largest of the three remaining large gold producers in a gold resource area that has given rise to no fewer than two hundred and sixty eight gold mines.

The potential, and need, for consolidation is great.

Underground works!

And most of those are underground mines. The Zimbabwean miners do love to burrow underground out of the hot, African sun! I saw numerous old workings underground where the old time miners simply followed the quartz veins along narrow drives, mining the veins as they went along. And this was often their only form of exploration – sink a prospecting shaft and develop along the strike of any veins.

There are, of course, some open pits, but these are very small, oxide diggings that are reminiscent of the surface scratchings in the Western Australian goldfields 30 years ago or more before Alan Bond orchestrated consolidation which led to the formation of Kalgoorlie’s famous ‘Superpit’.


Private land – keep out!

The fourth characteristic of the industry is the high incidence of private ownership of the gold mines. Although in itself this is not necessarily a bad thing, it is often a sub-optimal way to run a capital intensive enterprise. Private companies do not have the same degree of access to the capital and equity markets as a public quoted company will have and that can limit the amount of finance the company can raise to build mines, construct new plant and fund exploration programmes.

Metallon Gold, for example, is the country’s largest gold producer, yet it is a private company, owned ultimately by Metgold Ltd, a London-based company. As readers will discover later in Chapter 7, the company wants to pursue an aggressive growth strategy that will see it produce 1 Moz/y of gold within five years. To achieve its targets, the company needs to raise, by its own estimates, some US$600 million to invest in capital projects. It can’t do that as a private company. Therefore, Metallon is looking to go public and list on one of the world’s international resource stock exchanges (probably London).

It’s not alone. Duration Gold and Bilboes Holdings, two other private gold producers, are intent on obtaining listings to be able to tap into the international capital markets to fund expansion.

International funds needed...

I would stress the international markets as being a key to unlocking a supply of funds for much needed capital injections. Unfortunately, the local Zimbabwean Stock Exchange does not have the appetite or the resources to support large financing programmes. RioZim, which owns the Renco mine and is looking to re-develop the famous Cam and Motor mines, is only listed locally. Last year it abandoned an attempt to raise US$40 million through a placement of its shares. This year it is looking to try again.

A raising via equity is the only real option open to most companies as there is a lack of enthusiasm from local banking institutions in supplying such risk capital. To be honest they probably don’t have the funds. A recent paper1 suggested that the country’s bank deposits total just US$400 million against the country’s needs of US$8.5 billion.

Looking at the funding situation on a regional comparative basis, figure 6.1 (above) shows how Zimbabwe’s banking sector measures up against some of its neighbours in terms of number of banks’ size of deposits.

...to buy plant and explore

Finally, in this look at the characteristics of the Zimbabwe gold industry, I have noted that it is undercapitalised and lacking modern plant.

Figure 6.1: This chart shows how weak the Zimbabwean banks are in relation to other Southern African countries’ banks Source: Mining Sector: Engine for Economic Growth”, Douglas Munatsil


I intimated this in the discussion of funding above. Invariably, with all the gold producers and explorers that I saw or spoke to, they have some exposed oxide ore on surface, which, taken with old heap leach dumps, can be processed through rather old mills and plants to get some cashflow. But that is not their long-term goal. They generally have an idea of the sulphide potential that lies not far below the surface but need intensive drilling programmes to define this potential. For this they will require an injection of capital, firstly to bring existing plants up to scratch to process the surface material and secondly, to expand the operations. This is what Metallon, Duration et al are striving to do.

6.2 Is there potential to develop the industry?

We have learnt in the preceding section that Zimbabwe has the right rocks for gold production, but there are questions as to whether the geometry and scale of the mineralisation and deposits is such that they can support larger scale operations or are miners restricted in what they can achieve by physical dimensions of deposits? The answer seems to be that, for historic reasons, most of the restrictions are of the miners own making. The norm of small mines doesn’t have to be the template going forward.

A very interesting article by the Zimbabwe Geological Society (ZGS) in 20052 argued passionately that conventional wisdom on lack of reserves, and a geology that was only amenable to hosting small scale mines, was wrong.

So let’s evaluate the industry characteristics in a more objective fashion.

Common ground in greenstones

Firstly, the issue of geology of the greenstones. As the ZGS article explains, terranes like the Yilgarn and the Abitibi have greenstone belts associated with crustal scale shear zones, whereas in Zimbabwe the gold deposits are found in association with more localised shear zones. The authors also note the difference between the classical greenstone belts and Zimbabwe with regard to the width of alteration zones – the Australian/Canadian belts have much wider alteration zones.

They commented, “These features would tend

to suggest that the geological environment in the Zimbabwe Craton was not favourable for the development of large gold deposits. However, current exploration is indicating that world-class deposits are not necessarily associated with large alteration zones and crustal scale shear zones”.

They go on to conclude that, “Recent work has shown that the Zimbabwe Craton, like other similar geological environments elsewhere, is highly heterogeneous, being cut by crustal scale shear zones that impart a conspicuous control on gold localisation. It is therefore becoming increasingly apparent that structural and lithological controls affecting localisation of gold deposits in Australian and Canadian Cratons are in many ways analogous to the Zimbabwe Craton situation. There is no reason why mines of the same significance as those in other Archaean granite-greenstone terrains should not be found in the Zimbabwe Craton”.

Many, small mines – blame the British!

The next point in our checklist of characteristics is the fact that there are a great many gold mines and they are invariably small scale. From the discussion above, the geological potential seems to be there, so what has stopped the development of gold operations to rival those in Australia and Canada? For an understanding of that conundrum we have to look back in history to see how the mining industry developed within the country.

Zimbabwe’s countryside is littered with a vast number of ancient gold workings as the first miners discovered and worked the easy-to-find, easy-to-extract auriferous quartz veins where they outcropped on the hillsides. The Portuguese, and more latterly the British, came to the country and took over where the ancients left off.

As a slight, but interesting digression, the country was first formally occupied by the British South Africa Company, under Cecil Rhodes, in September 1890, under a Royal Charter granted by the British Government. As one modern day explorer notes, “Whilst this Charter conferred both administrative powers as well as commercial rights, it was probably the only British proclaimed territory ever settled primarily for its mineral wealth”6.

Anyway, by concentrating on the old, recognised deposits the Europeans sought to short cut the


more formal exploration process in order to extract the gold as quickly as possible. In many ways they worked in a similar fashion to the band of small and informal miners that continue such practices to this day.

“The usual methods of exploration by the early Europeans were to get information from local villagers about the existence of old workings, on which prospecting shafts were sunk”, the ZGS notes.

Such methods are notoriously inefficient as they fail to take into consideration the geological setting and the potential of the whole mineral deposit. With a more systematic and objective approach they could determine not only the scope of the whole deposit, but also which techniques would serve them best for optimal exploitation of the mineral wealth.

One reason they were constrained in what development they could do was the fact that

they often did not have rights over more than a small patch of land and so couldn’t investigate and expand along strike. For that we must blame the piecemeal division of the land to the prospectors by the early chiefs. Breaking up a discrete mineralised zone into small parcels to appease demand from a hoard of prospectors with gold fever in their eyes, may have seemed like a good idea at the time but it is self-defeating in terms of sustainability. Nature, in her wisdom, doesn’t work with such artificial boundaries. But such criticism with the benefit of hindsight is probably harsh.

Again, the ZGS article sums it up well. “... strike extensions of many mines have not been investigated because of an entrenched tradition of going underground before fully understanding lateral extensions of the ore bodies – a result of the lack of usage of geologists by many mining companies. Probing of lateral extensions of ore bodies is also prohibited by adjoining

The Vubachikwe mine, owned by Duration Gold, is typical of the many underground mines in private ownership, although the depth of workings at 1,200 m is far from typical (Photo: Paul Burton)


mining claims belonging to different individuals”, they conclude.

Failure to recognise the ‘big picture’ has been an enduring fault with the industry but, hopefully, perspectives will change. This is not to say that all mines should be big. Many deposits may not be suitable and in any case there are unique circumstances in Zimbabwe, such as empowerment and social welfare issues, that suggest there is a continuing role for a small mining sector.

Open pits are also mines!

So the mine developers went ‘down’ and not ‘along’ on their leases, leading to the still-current fascination with working underground. As the ZGS states, “It is astonishing to note that this form of exploration became so entrenched in the exploration culture of Zimbabwean prospectors that it has remained basically unchanged up to today”.

So to recap, the geology should not be a

constraint to large scale mining but the miners have a mindset that favours small, underground mines as the default option.

As I’ve tried to explain in the proceeding paragraphs, there is now no reason why they can’t start to think in terms of the large open pit model that has been applied so successfully in Western Australia. Perhaps even more compelling than the Australian experience are some of the developments on the Abitibi greenstone belt, in Canada. At Detour Lake, for example,the former owner mined the deposit for the bulk of its life as an underground operation. Between 1987 and 1999 the underground mine produced 1.5 Moz of gold at a grade of 4.98 g/t before it closed because of low gold prices.

In the last few years, with gold prices much higher, a new company, Detour Gold, has evaluated the deposit as an open pit prospect with phenomenal results.

The many mapped vein systems near surface at the Dalny mine, which new owner New Dawn Mining will investigate and evaluate for open pit potential (Photo: Paul Burton)


A feasibility study released in mid-2010, has confirmed reserves of 11.4 Moz of gold contained, capable of supporting production of almost 650 koz/y for a capital investment of almost US$1 billion. Could any of the Zimbabwean underground mines be re-invented in such a spectacular fashion, I wonder?

A lesson from West Africa

But for that type of mining they need access to funding, which takes us to another characteristic of the industry, the fact that it is undercapitalised and seriously lacking in modern plant.

Here’s where the government has a major role to play. The country needs a stable, democratically elected government with sensible mining laws and tax regime that is not punitive to the industry in order to encourage inward investment from abroad. The government only has to look to the western limb of the continent to see how successful Ghana, for instance, has been in attracting capital and building a major gold mining industry for the benefit of the economy and ultimately, its people.

Or what about the dramatic rise in gold production in Burkina Faso and Mali, two other countries situated on the greenstone belt of the West African craton? Burkina Faso’s production grew from 2.7 t in 1999 to a forecast 13.5 t last year and Mali saw its gold output increase from 25.4 t in 1999 to 56.9 t in 2006, before declining slightly to 48.9 t3 as a result solely of exploration and development by foreign mining companies.

We’ll pick up again on the critical, but thorny, issue of government support in a later section, but I think the industry needs to change its approach and look to consolidate leases/claims which cover identified mineralised zones, especially when they are a continuation of one strike, so they can then properly investigate prospective claims through the use of modern geophysical and geochemical techniques (instead of just following a quartz vein) and design operations to suit the size of the deposits.

To be fair, all the companies I spoke to realise this and if they haven’t already started to employ modern exploration methods to define the sulphide potential, then they have them in their plans, they just can’t afford them yet!

And as far as M&A activity is concerned, New Dawn Mining has just moved to acquire another producer

paralysed by debt and taken a big step in the path to sensible consolidation within this industry.

6.3 Major risk factors that will challenge growth

In this section we will look at some of the most critical challenges that the gold producers and the politicians face in order to ensure a thriving gold mining industry. Some can be overcome by structural political overhaul; others by capital investment which can only come after the first condition is satisfied.

Politicians need to get it right

Looking from the outside, the level of political risk in Zimbabwe is the most fundamental hindrance to the development of a robust gold (and other minerals) industry. The government has a key role to play in making sure Zimbabwe loses its image of being one of the pariah states in world investment terms and starts to be a favoured destination for mining companies and a place where investors feel comfortable putting their money.

One of the most authoritative reports on mining investment moods each year is conducted by Canada’s Fraser Institute4. The Fraser Institute surveys companies worldwide and compiles a “Policy Potential Index”, which, as the Institute explains, serves as a report card to governments on how attractive their policies are from the point of view of an exploration manager.

The Policy Potential Index (PPI) is a composite index that measures the effects on exploration of government policies, including uncertainty concerning the administration; interpretation, and enforcement of existing regulations; environmental regulations; regulatory duplication and inconsistencies; taxation; uncertainty concerning native land claims and protected areas; infrastructure; socioeconomic agreements; political stability; labour issues; geological database; and security.

As the Institute notes in its introduction, “In today’s globally competitive economy where mining companies may be examining properties located on different continents, a region’s policy climate has taken on increased importance in attracting and winning investment”.

In the 2009/10 survey, published a few months ago, Zimbabwe scores poorly (as it has done for


many years). On the composite index scoring it came 69th out of 72 countries, with only the Philippines, Ecuador and Venezuela below it (Quebec was number one).

As the Institute commented, “Unfortunately, (out of the bottom 10 scorers) except for California, these are all developing nations which most need the new jobs and increased prosperity mining can produce”.

Breaking down the PPI into its component factors reveals some interesting observations with regards to the political risk perception of Zimbabwe. For instance, 96% of the respondents said that the lack of political stability within Zimbabwe was either a strong deterrent or dissuaded them completely from investing there. 76% felt as strongly about physical security within the country.

On the issue of “Mineral potential, assuming current regulation/land use”, the country was placed 67th out of 72, with only 9% of those surveyed indicating that the current situation encourages investment. However, this figure rises to 41% when “Policy/mineral potential, assuming no land use restrictions in place, and assuming industry ‘best practices’” is the question asked, which is an indication of how geologically prospective the land is deemed.

Financial and funding risks tied to credible government

There are certainly signs that the government is responding to the country’s problems and it may not be just coincidence that this happen since the formation of the GNU in early 2009. The dollarisation move and the introduction of “Short Term Economic Recovery Plan (STERP)” was a very effective measure, but they needed to do something as having hyperinflation and a currency that devalues by the minute is no good for the economy or would-be investors. Obviously, investors want to see stability and a clear path forward for economic and political reform. Thus the installation of a new constitution and free elections will be critical landmarks.

The longer term, fundamental reason for the slump in gold output within the country over the past few years, was the deteriorating economic situation, which meant that there was a lack of investment by companies in mine infrastructure not only because of rampant inflation but also

because producers were unable to benefit from the rising gold price and increase cashflow. They were either paid in Z$ of eroding value or, as happened eventually last year, were not paid at all by the Reserve Bank of Zimbabwe.

Under the legislation that existed up until early 2009, the gold miners were forced to sell their gold production to the Reserve Bank of Zimbabwe’s subsidiary, Fidelity Printers and Refiners, but when that organisation found itself in dire straits in 2008 it reneged on agreements and refused, or was unable, to pay the mining companies. The companies were left with little alternative but to place their mines on care-and-maintenance.

The unity government, to its credit, recognised that something had to be done as up until recent years gold mining had become an important source of income, accounting for more than 50% of export earnings. And so, the government introduced STERP in an effort to stimulate the economy by liberalising the mining sector.

Probably the most significant initiative in the reform package was the deregulation of gold sales, which meant that gold producers were removed from the obligation to sell their gold production to the Reserve Bank and were free to sell on the international market and get paid in US$.

These days, gold bullion is delivered, as still required by Zimbabwean gold-mining law, to the government-operated Fidelity Printers and Refiners, but for sampling only and onward delivery, often to the Rand Refinery in South Africa. The Rand Refinery undertakes final refining and sell the resultant gold with 100% of the proceeds being credited to companies’ Zimbabwean bank accounts in US dollars within 5 days of sale.

When the Reserve Bank stopped paying for gold it issued bonds in lieu of payment, which were due to be redeemed in August this year but thus far many companies have been left holding their certificates when they are in desperate need of cash!

Power to the industry

The limited availability of power in Zimbabwe has severely hampered miners over the past year or more at a time when they are trying to ramp up production to installed capacity levels after the 2008 hiatus. Capacity utilisation of mining operations and treatment plants is only about


40% at present because of the inability of the state power provider, ZESA, to maintain output to match demand.

Last year, at least, the schedule of load shedding was agreed between ZESA and the individual miners so that they could plan their operations accordingly. This year the industry has been hit by random outages that they have struggled to cope with.

New Dawn Mining reported at some length earlier this year in its March quarterly results, highlighting how critical this issue is. New Dawn said, “Management has previously identified the reliability and availability of power as one of the main strategic threats to its operations and growth plans. The reason for this is that, generally in the southern African region, there has been a shortage of power for a number of years and in particular Zimbabwe has, for a considerable period, experienced rotating scheduled outages (load shedding), as well as unexpected power cuts at irregular intervals”.

Demand for power countrywide is of the order of 2,000 MW. Zimbabwe has power generating capacity of around 1,900 MW (920 MW at Hwange coal-fired power station and 750 MW at the Kariba hydro plant)5 and, in theory, can import some 300-500 MW from neighbours Zambia and Mozambique. So there is already a capacity shortage, which has been exacerbated

by poor reliability of the power stations and faults in the grid system, which has meant that supply has often been closer to half the country’s needs. Essential maintenance work at Kariba and Hwange requires US$139 million, according to the Minister of Finance. He has allocated US$15 million from this year’s budget for the maintenance work. To add generating capacity, Zimbabwe would need to spend some US$4 billion for expansions at Hwange and Kariba (US$0.8 billion), and new power stations at Gokwe North (US$1.6 billion) and Bakota (US$1.8 billion).

The current situation according to the Minister of Finance, is shown in the following table.

Table 6.1: Power generating facilities in Zimbabwe

Power Station Installed Capacity

Current Output

Kariba South 750 KW 735 KW

Hwange thermal 920 KW 574 KW

Harare thermal 80 MW 0

Munyati thermal 80 MW 0

Bulawayo thermal 90 MW 0Source: Ministry of Finance5

New Dawn Mining’s management is fairly gloomy on the matter. “Due to this general shortage of power in the southern Africa region, Zimbabwe cannot

China’s Gold Industry – A case study in attracting foreign capital (and then driving it away!)

China’s gold production has risen significantlyinrecentyearstoaposition, where with an output of 324 t in 2009, it was the world’s largest gold producer, a position it has held for three years.

This success comes as a result of substantial government investment during the 1990s, and despite the still fragmented and archaic nature of most mining operations.

Gold mining in China stretches back into antiquity but the country has not, until recent years,

beenaproducerofsignificanceinglobal terms.

Most of the China’s production comes from small, underground mines working vein deposits with little mechanisation or infrastructure. There are thought to be over 1,000 small to medium-sized mines in operation throughout the country with the average mine producing in the region of 16 koz/y.

This could almost be a description of Zimbabwe’s gold mining industry!

Since 1998, the Chinese gold industry has undergone two phases of major restructuring aimed at creating a much more liberalised industry, with the central thrust a

move away from State control and towards private ownership.

In the 1980s and 1990s the State poured money into the gold industry in an effort to consolidated production units and encourage the growth of large mines. But by 2000, although the country’s output had grown annually at a rate of 10%, few mines of any size had been built, and most still contributed only 10 koz/y.

The government then decided to change its approach and moved funding away from direct investment in gold mining, deeming it ‘unproductive’, to concentrate more on infrastructure construction


throughout the country. It also opened up the industry and invited foreigners to participate with the anticipation that foreign investment would immediately replace state funding.

However, it was only later, with economic reform (China became a member of the World Trade Organisation in 2001) and a greater openness to foreign investment, with foreigners permitted to own gold deposits in 2002, that Australian and North American companies felt comfortable enough to seriously begin investigating the recognised gold potential of this vast country.

Local organisations, meanwhile, now starved of central government funding, were amenable to courtship by the foreigners and hence there was a willingness on each side to do business.

So there was something of a floodintothecountrybasedon its geological prospectivity. In GFMS World Gold’s 2005 Special Report on China, we catalogued the activities of almost sixty foreign gold companies engaged in over one hundred projects.

However, since that time, the floodhasdwindledtoatrickleand, in fact, has reversed as

companies have exited after having been frustrated by bureaucratic impediments and uncertainty of licence tenure. So China provides an object lesson in what to do right but with warnings on how to sustain this inward investment. The Chinese, however, are now self-reliant and have become the world’s largest minerals investor, so they are hardly concerned with the lack of foreign investment. They generate enough funding through their domestic economy.

Zimbabwe will never be in that positionsowillalwaysneedaflowof foreign capital into its mining and industrial sectors.

import its power deficit”, it observes. The prognosis does not seem to be any better according to the company. “Given the lack of available government funding for investment in major infrastructure projects together with the uncertain political environment, it is probable that, for the foreseeable future, the power supply will continue to be unreliable and unpredictable”, it concludes.

The government is acutely aware of the problem. Addressing the Chamber of Mines AGM in May this year, President Mugabe stated that it hopes to attract investment into new power generating facilities6. “I wish to inform this meeting that several power projects requiring new investors are pending, including the Hwange Power Stations 7 and 8, Kariba and Batoka”, he affirmed, going on to say that “...Government will institute the necessary energy sector reforms required for attracting new investment in that sector”.

In the meantime, the gold producers have, or are, implementing contingency plans by installing their own power generating facilities to counteract the load shedding and outages that have blighted operations. It is more expensive but at least they can guarantee the mine and plant can operate to increase operations up to installed capacity.

Power to the people – Indigenisation

The subject of indigenisation is one of the most divisive issues that government and the mining

industry have to resolve for the greater good of the country’s economy. Clarity on what the government’s intentions are is needed urgently to remove the uncertainty that hangs over the mining industry and deters foreign investment.

Incidentally, indigenisation was another high negative scorer in the Fraser Institute report mentioned earlier, with 60% voting against investment because of the uncertainty surrounding the issue.

The Indigenization and Economic Empowerment Act 14, 2007 was signed into law in April 2008 and provided for all companies operating in Zimbabwe, with a value greater than US$0.5 million, to arrange for 51% of their shares or interests therein, to be owned by indigenous Zimbabweans.

Over two years later the industry is still waiting to see exactly what the 51% requirement means, although it is understood that the government is not pressing for a simple transfer of ownership to Zimbabweans. Rather the process is likely to involve a series of credits against the 51% as an acknowledgement of giving certain concessions in social and welfare areas.

In January this year, the Zimbabwe Government published regulations with respect to the Act that included the requirement for companies operating in Zimbabwe to provide


specified information to the Minister of Youth Development, Indigenization and Empowerment, including an indigenisation implementation plan, by April 15. The government planned to use this information as a basis for determining what amount less than 51% would apply to any sector or subsector and the maximum period for achieving indigenisation. The regulations require the Minister to complete the determinations by the end of February 2011.

The Chamber of Mines of Zimbabwe is actively consulting with the relevant government authorities to convey its members’ views on this matter and to work towards finalising the indigenisation and empowerment metrics for the mining industry.

At the Chamber of Mines AGM in May this year, Chamber President, Victor Gapare, expressed the industry’s broad support for the sentiments expressed in the Act and outlined the industry’s recommendations on how empowerment could be achieved.

Broadly, as presented by Mr Gapare, these include the following:

• Equity of at least 15% as a minimum, which means it is possible to have even up to 100% equity being locally owned. Ministers have confirmed that companies could use listing on the ZSE as a way of achieving indigenisation.

• Credits in equity equivalents which include local procurement, CSI, support to the small scale mining sector, skills development, starting new businesses and any other socially and economically desirable activities.

At the same COM AGM in May, President Mugabe confirmed that a system of credits would form the basis of compliance with the Act. He stated in his speech to the assembled members of the mining industry that, “Government has also accepted the principle of empowerment credits as an integral component of the 51% and this is detailed in Section 5(4)(c) of the (Indigenization and Economic Empowerment) regulations.”, although clearly whether “integral component” means the 36% that the Chamber is seeking remains open for debate.

But the principle is acceptable to all concerned and there now needs to be some horse trading to set the level of equity participation.

Listing on the Zimbabwe Stock Exchange has

generally been accepted as a form of compliance and some companies’ proposals have already been accepted on the basis of a public listing in 3 to 5 years. The COM also believes that mineral rights in Zimbabwe (of which over 50% are already held in local hands and state controlled organisations, according to the COM) should form the basis of an empowerment programme. “Owners of mineral rights should use these rights as their contribution in joint ventures with foreign investors who should bring capital to develop the mineral rights. I would urge those holding such mineral rights to be creative and start engaging international capital to achieve development of the mineral rights”, Mr Gapare told this May’s AGM.

Security of tenure – nationalisation/expropriation

If indigenisation possibility represents a form of creeping nationalisation, overt nationalisation still hovers as a perceived threat to many looking at the country and the administration from London, New York, Toronto, Johannesburg or Sydney. The fear is generated by the government sponsored actions of the early part of the decade that saw expropriation of land owned by white farmers, and particularly the acts of violence that accompanied the re-distribution moves.

Such fears may be unfounded, however, as President Mugabe has publically denied that nationalisation is on the agenda. At the COM AGM, he addressed the subject head on. “Government has no intention of expropriating the mining industry”, he stated. He went on to stress the government’s record on this issue. “No mine has been nationalized since independence”, he stated and continued with an explanation of the government’s goal for the nation to own natural resources in circumstances in which they could share with other friendly countries as equitable partners. “This sense of direction, of seeking to correct historical wrongs, has persuaded Government to explore the path of profitable partnerships and joint venture initiatives with foreign investors in the mining sector”, he confirmed.

The ongoing dispute over the ownership of diamonds found and mined in the Marange area, with government-owned mining companies seemingly disregarding the Supreme Court’s instructions to stop mining and selling the diamonds until ownership has been determined,


has made international headlines. There is apparently a hoard of diamonds worth US$1.7-1.8 billion at play here so the stakes are high for a cash-strapped government.

The saga of the Marange diamonds, the Kimberley Process and explorer African Consolidated Resources is described in the box (overleaf).

Infrastructure

The question of appropriate level of infrastructure to support mining is an important one that would-be explorers and miners place high on their list of desirables when considering investing in a particular country.

We have discussed the power situation earlier in this chapter and it remains a very real concern for mining companies.

Elsewhere, the country is well served with over 90,000 km of roads. Main roads seem to be well maintained (there is a toll on many roads now to pay for upkeep) although some of the more rural roads need substantial upgrading. When I travelled to minesites, some of the metalled and dirt roads were in poor condition, but at least there are road connections.

The rail network needs an upgrade with ageing equipment hampering operations. Some 415 km of track is operating under cautions/speed restrictions.

As with most African countries, water is always a concern and droughts have often disrupted power supplies.

Skills

Lack of appropriate skills at all levels of the industry is of great concern to mining management and a very real limiting factor on growth. Many Zimbabwean professional geologists and mining engineers have long since left the country to undertake careers in other mining friendly countries such as South Africa, Australia and Canada.

Also, it is reported that something like 3 million people have left the country in recent years, with many across the border in South Africa.

The COM sums it up thus, “The industry has lost a lot of skills in the last decade. The skills base which had been developed in this country since 1980 were second to none and today, if you go anywhere in the world, Zimbabweans are running major undertakings. This is good in a way as

these migrants are gaining valuable experience. However, we need to make plans to get these Zimbabweans back as our economy takes off”.

The COM is a major sponsor of the School of Mines and as part of the indigenisation and empowerment programme; mining companies have undertaken to make skills development a major priority.

6.4 SWOT analysis

Strengths

• World class greenstone belts

Zimbabwe has a proven gold producing record and there may be deposits of greater size than those already exploited.

• Evidence of extensive, generally unexploited sulphide resources

Sulphide potential needs to be quantified as little structured exploration work has been undertaken thus far throughout the long history of the industry. If delineated, sulphides offer not only large deposit potential but also open pit mining potential which could increase production dramatically.

• Long mining heritage and culture

An understanding of mining, it’s importance plus the skills needed to develop the industry (although they might not all be in Zimbabwe currently)

Weaknesses

• Perceived security risks

Perception probably doesn’t represent the situation on the ground within the country now but perceptions count. Investors need reassurance from a government tough on law and order

• Lack of consolidation, too many small mines

Sub-optimal working of deposits. Opportunity, though, for aggressive companies to lead the consolidation process.

• Extensive private ownership

Aggravates the small-mine syndrome. Little capital to expand and little chance to obtain capital as no market to tap into

• Undercapitalised

Again, lacking money to build more logically-sized mines


• Power supply problems

Limiting normal operating and constraining expansion. Mines are installing their own generators but this is costly.

Opportunities

• Evidence of near-surface sulphides

Possibility of developing large open pits to exploit sulphides. Lower cost, more productive than underground mining.

• Use of modern exploration techniques

Huge amount of ground in Zimbabwe’s greenstone belts has not been explored using modern methods. Opportunity to discover more goldfields.

• Consolidate claim areas

Opportunities to consider more regional scale exploration and exploitation, which could lead to more optimally-sized mines.

• Political pressure from SADC and South Africa, in particular.

South Africa’s President Zuma, in particular, must play a major role in conciliating between the two parties in the GNU and also in keeping pressure on the government to move forward on elections.

Threats

• Failure to install new constitution and hold democratic and free elections.

It is critical that the GNU continues to move the process of rewriting the constitution forward and keeps momentum towards elections. Already the timetable has slipped and elections look like being delayed, perhaps until 2012 or even, as this Professor Gaidzanwa suggests in this report, to 2014. The country is desperate for foreign capital and the mining industry needs to attract investors and this will not happen at the scale required until there is a stable, democratic government.

Diamond’s are a... government’s best friend

The Kimberley Process & ACR

In August, the Zimbabwean government sold 900 kct of certifieddiamonds,outofastockpile believed to be as large as 4.5 Mct, raising uS$72 million in the process, according to Mines Minister, Obert Mpofu. That’s one part of the story, the other being that a London-listed minerals exploration company is in dispute with the government over ownership of those diamonds.

Thefirstpartofthestoryisinteresting in that it shows that the Zimbabwean authorities can work with a world monitoring body, but the second part is perhaps more absorbing for would be mineral investors as there may be clues as to how the government will act on mineral rights in the future.

The diamonds that were sold

were from the Marange-Chiadzwa kimberlitefield.Saleshadbeensuspended last November by theinfluentialKimberleyProcessCertificationScheme(KP),whichisa body set up in 2003 by the united Nations to certify the source of rough diamonds with powers to sanction trade of any diamonds they believe are so-called ‘blood diamonds’. After a monitoring mission,theKPofficialsallegedthat they had found instances of non-compliance and human rights violations when government cleared illegal miners (Reuters report up to 30,000) from the site of the mines.

This dispute was resolved in July at the World Diamond Council’s 7th annual meeting in St. Petersburg, when the KP reached consensus on an agreement to enable the renewal of rough diamond exports from the Marangefields.Wastingnotimethegovernmenttookthefirstdiamondsto auction in August. Although the process went off smoothly, theinfluentialUS-basedRapaport

Diamond Trading Network said it will not allow its members to trade in them.

Meanwhile, the wrangle over ownership of these diamonds continues. The two protagonists are the government and explorer African Consolidated Resources (AGR).

ThediamondsfieldsatMarangewere discovered by ACR in 2006, after it picked up claims originally held by De Beers as its EPO expired that year. The government has revoked any claims the London company has and gone ahead with mining operations and the recent auction sales of mined diamonds seemingly in direct opposition to High and Supreme Court rulings.

When ACR listed in London in 2006, its admission document listed three groups of claims in the Mutare region of eastern Zimbabwe held by three 100% subsidiaries of ACR. The company simply stated that it had acquired ground in the eastern part of Zimbabwe where


• Political unrest and turmoil

Clearly this will deter investors.

• Low economic growth

Dollarisation’ has lowered inflation and stabilised the economy to a degree. Forecast GDP growth for this year is 5%, which is better than many developed countries, but the finance minister is still having problems funding the current account. In addition, the country has a serious debt problem. Without foreign financing packages the minister will not be able to fund any capital infrastructure projects which the country badly needs.

• Worldwide recession and economic crisis.

If major western economies fail to grow or if they fail to lower their high debt levels then they may not be able to assist Zimbabwe whatever the political state of the country.

• Gold price weakness

Costs are relatively high in the low grade, underground mines especially when they are not working at full capacity owing to the power problems. Significant and sustained gold price weakness to U$850/oz would threaten any recovery of the gold mining industry.

• New mining legislation

The government is in the process of amending the Mining Act and is making noises that the mining industry does not contribute enough to the fiscus. The Minister of Finance has already removed the mining companies’ favourable tax regime (corporate tax has been increased from 15% to 25%) and imposed a royalty of 4% of revenue. A more punitive tax regime will further deter investors. Allied to this is the indigenisation legislation issue, which is still surrounded by uncertainty. The industry fully accepts the principle of empowerment and favours the model whereby equity is put into indigenous hands to the level of 15% with credits on socially desirable

previousexplorationidentifiedkimberlite indicator minerals and was re-sampling the area.

Within three months, in September 2006, it made the simple announcement of “a diamondfindinZimbabwe”,without giving any details.

But by November 2006, not only had the company had to deal withtheinfluxofillegalminersbut it also announced that there was disagreement between the company and the Mining Commissioner’sofficeoverthevalidation of ACR’s claims.

In a press release in December that year, the company advised that the Ministry of Mines had invoked a clause in the Zimbabwe Mines and Minerals Act and intended to cancel registration of the company’s title to the Marange diamond deposit on the grounds that title should not havebeengrantedinthefirstinstance because of a pre-existing

exploration licence over the same area.

The situation remained unresolved until September 2009 when the High Court upheld ACR’s title. The government appealed to the Supreme Court, which issued a Judgment on 16 February 2010, which ordered that all diamonds acquired from the Marange Claims Area be surrendered to the Reserve Bank of Zimbabwe, and that all mining activities on the Marange Claims Area cease until determination of the appeal against the 25 September Judgement in the Supreme Court.

ACR has stated that only the diamonds mentioned in the 25 September Judgement were lodged with RBZ, whereas ACR understands that diamonds are still being mined, which are continually stockpiled by the companies mining upon the Marange Claims Area (Mbada and Canadile) are retained by those companies.

ACR has suggested a holding agreement until the Supreme Court ruling has been made on ownership, which it claims the government has ignored. The company thus sought an urgent injunction through the High Court to stop sales of any diamonds held by Mbada and Canadile and that the stockpile be deposited with the RBZ as per the Supreme Court ruling. The High Court dismissed the application on the basis that the matter was not urgent, and ACR is now obliged to re-lodge the application as a normal (i.e. non-urgent) application in the High Court, which ACR has now done.

The issue here is one of security of tenure that international gold companies will no doubt, be following with avid interest as it may be a better measure of the government’s true intentions with valuable minerals than their rhetorical statements in speeches at mining conferences.


activities making up the remainder to 51%. Investors will be loath to put money into the industry if they are then going to lose control of any mining companies.

References(1) “Mining Sector: Engine for Economic Growth”, Douglas Munatsi, Group ChiefExecutiveOfficer,BancABC,6thAnnualInternationalMininginAfricaConference, June 2009

(2) “Zimbabwe’s Gold Potential” by Forbes Mugumbate, Fadzanayi Bornwell Mupaya and George Tendai Kwenda of the Zimbabwe Geological Survey, article in Mining Review Africa, Issue 5, 2005

(3) GFMS Gold Survey 2010

(4) “Survey of Mining Companies 2009/2010” by Fred McMahon and Miguel Angel Cervantes, published by The Fraser Institute, April 2010.

(5) The 2010 Mid-year Fiscal Policy Review, Ministry of Finance, July 2010

(6) ACR AIM listing document, 2006.


Chapter 7 – Gold Production Review7.1 Historic gold production in Zimbabwe

Our parent company, GFMS Ltd, has been collating and publishing annual data on global gold supply patterns in its Gold Surveys since the mid-1970s, when it was an internal department within Consolidated Gold Fields, so its proprietary records have given us a great source of statistics to chart the rise and fall of Zimbabwe’s gold mining industry.

In 1975, despite being in the middle of a civil war, the country (then known as Rhodesia)

was ranked the fifth largest gold producer in the world, with production of 18.6 t, behind the USA but, significantly, ahead of Australia.

By 1980, the year that Zimbabwe gained its independence and the gold price peaked at a record US$850/oz, production had slumped to just 11.4 t, but the new Renco mine was on the horizon. GFMS’s predecessor stated in its Gold Survey at the time that the country’s industry was facing “rising cost, restrictions on foreign currency allocations, and increased taxation of the mining industry”.

Despite these threats, by 1990, Zimbabwean gold production had increased by almost 50%, to 17.0 t, with an increase in exploration also noted in GFMS’s Gold 1991. The advent of good rains in 1995, breaking the drought which had led to power shortages, which hampered mining, saw gold production increase to 26.1 t, the highest level for 50 years. The improved trend continued for the rest of the decade until in 1999, GFMS’s analysis showed that the Zimbabwean gold mining industry produced 29.7 t (955 koz) of gold, a record which made the country the 16th largest gold producing nation in the world.

However, the growth was not sustained in the new millennium and by 2008, output had slumped to just 3.5 t, which represented the lowest level for 90 years. It picked up marginally in 2009 to 4.9 t as mines restarted their operations.

Ironically, in the year that gold production peaked, 1999, GFMS already notice that there were signs of an imminent crisis. The Gold Survey of 2000 commented, “...this growth (to 29.7 t) was achieved partly as a result of the crisis which gripped the

economy and which saw the currency weaken sharply, resulting in a higher domestic price and lower costs. This provided some breathing space for an industry where many of the numerous small operations were on the brink of closure under pressure from spiralling costs of essentials such as power and water. However, the crisis in the country continues to deepen and, the outlook for the gold mining industry – as for the rest of the economy – is bleak, with a crippling fuel shortage exacerbating the effects of 55% inflation, an overvalued currency and increasing political instability”.

0 200 400 600 800 1000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010 (f)

Gold production koz

Figure 7.1: Annual gold production for Zimbabwe

Source: GFMS & COMZ


As mentioned earlier, Zimbabwe’s gold output slumped in 2008, as the catastrophic economic situation and the Reserve Bank’s inability to pay for gold production gave owners little option but to close operations for most of the fourth quarter. Output recovered slightly in 2009 to 4.9 t.

This year, with mines sure of US$ receipts for their gold, production at most mines has ramped up but is still constrained now by the lamentably poor power supply situation and insufficient working and investment capital that means that with first half production reported at just over 4.0 t, the industry is probably working at only 40% of capacity.

The Chamber of Mines predicted that gold output for 2010 would be 7 t but it looks as though that estimate may be exceeded, which is an encouraging turnaround from the debacle of the last two years, but still some way short of potential represented by an installed capacity of 20 t.

7.2 Review of the main gold companies

This section reviews the status of the operations and projects of the gold producers belonging to the Chamber of Mines, who are listed in alphabetical order in the following table.

The top ten gold producers in the country in 2009 are shown in the table below:

Table 7.1 : Top ten gold producers in 2009

Company Gold (koz)

RioZim 24

Metallon Gold Zimbabwe 18

Caledonia Holdings Zimbabwe 10

Forbes & Thompson 10

Casmyn 10

DTZ – OZGEO 7

Pan African Mining 6

Sabi Consolidated 5

Calcite 4

Ashanti 3Source: COMZ

Table 7.2 5-year production split

2006 2007 2008 2009 2010 (H1)

Total Large Producers

80% 81% 72% 68% 67%

Total Small Producers + 1kg

5% 3% 0% 1% 1%

Custom millers + 1kg

9% 6% 11% 14% 17%

Other producers 1% 2% 3% 1% 2%

Ngezi + Mimosa 5% 9% 13% 16% 13%

Total Gold Production

100% 100% 100% 100% 100%

Koz 365 226 112 160 105 Source: complied from COMZ data

0

20

40

60

80

100

2006 2007 2008 2009 2010

From Table 7.2 and Figure 7.2 we can make the following observations:

• The deteriorating trend in output is clear. The shutdown of the main producers’ mines in late 2008 had a devastating effect on the country’s production profile.

• The larger producers have been hardest hit over the past few years by the financial and power problems. Collectively their proportion has has fallen from 80% to 67%.

• The custom millers represent an important segment in the Zimbabwean production picture. Their output has fallen since 2006, but based on the first half of 2010 results, it could rise again this year. On a percentage basis, their influence has increased over the years.

• Small miners now represent a small fraction of the industry’s output.

• By-product gold from the platinum producers is a significant segment of output and presumably will grow as the mines expand.

Figure 7.2: Split of production on a percentage basis

%

large small custom others by-product


Caledonia Mining Corp (TSX:CAL, AIM: CMCL)

Caledonia Mining is an African-focused mining and exploration company, which owns the Blanket gold mine, in Zimbabwe; two platinum-nickel exploration projects, in South Africa, and a cobalt-copper exploration project, in Zambia.

The Blanket mine is located along strike from Duration Gold’s Lease 16 property, 150 km from Bulawayo and 16 km from town of Gwanda, in Matabeleland South.

Caledonia Mining acquired the mine from Kinross Gold In 2006. Under the former ownership the mine had produced up to 24 koz/y.

Blanket expansion

The company stopped production in late 2008 and then restarted the mine in April 2009 with a production target of 40 koz/y by the end of the year. However, although gold output reached over 1,800 oz in October 2009 the mine was unable to reach target because of exhaustion of reserves above 14 Level and handling constraints on the extraction of deeper ores, which were compounded by electricity outages. Production has therefore only ranged between 1,200 and 1,500 oz/mth since recommencement.

The key to achieving the production target is the completion of the US$3 million, 4-shaft expansion project, which is now expected to be commissioned in September 2010, some two years later than originally planned.

The 4-shaft project entails the installation of a new crushing and loading facility below 22 Level (750 m) to replace the current mid-shaft loading boxes on 14 Level (510 m) and thus open the reserves that lie below 14 Level. The project will also see an increase in the secondary crushing and milling facilities on surface, from 600 t/d to 1,000 t/d.

Table 7.3: Blanket production history

H1 2010 2009 2008 2007

Tonnes milled (kt) 58 103 82 100

Grade (g/t) 3.85 3.66 3.33 3.58

Gold (koz) 6.5 11.0 8.4 14.0

According to Caledonia management, the mine is currently producing at a rate of 1,300 oz/mth and ramp up will commence in September to achieve 3,300 oz/mth (40 koz/y) by the end of the year. The mill circuit comprises gravity concentration plus CIL, with a capacity of 3.8 kt/d.

The installation of a 2.5 MVA diesel generator in June enabled the company to press on with the 4-shaft work without delays because of the power outages. The existing genset will also greatly aid steady state production going forward by avoiding interruptions to mining operations due to lack of power from the state grid. The company estimates that it will need another two standby generators in order to maintain the 40 koz/y rate. Power security does not come cheap, however. Overall power operating costs are five times higher than for ZESA grid power.


No 4 shaft at Caledonia’s Blanket mine is nearing completion of an expansion project

The delay with the 4-shaft project was caused by lack of funds due to the failure of the RBZ to pay for gold production in 2008 and 2009, compounded by the subsequent failure of the RBZ to redeem Gold Bonds, which matured in February 2010 with a redemption value of US$3.16 million. The company secured US$2.5 million loan in May this year to pay for this and the genset (see later).

Geology and reserves

Blanket is situated in a typical greenstone terrain; the 70 km long by 15 km wide Gwanda Greenstone belt. The Blanket property is the largest of the three remaining large gold producers, from a gold resource area that has given rise to no less than 268 gold mines.

Blanket is part of the group that makes up the North Western Mining camp extending from Sabiwa and Jethro in the south, through Blanket itself to the Feudal, AR South, AR Main, Sheet, Eroica and Lima ore bodies.

The geological sequence strikes north-south, dips vertically and consists, from east to west, of a basal felsic unit (which is not known to carry mineralisation), a higher ultramafic unit that includes a banded iron formation (which hosts the eastern dormant cluster of mines and the ore bodies of the adjacent Vubachikwe mine complex belonging to Duration Gold), and finally the mafics that host the active Blanket ore bodies and an andesitic unit, which lies to the west, caps this whole stratigraphy.

Ore bodies at Blanket are epigenetic and are associated with a later, regionally developed deformation zone characterised by areas of high strain, wrapping around relatively undeformed remnants of the original basaltic lava flows. It is within the higher strain regime (highly sheared rocks) that the wider of the orebodies are located.


The company has not updated its ore reserve statement since that published and certified in terms of NI 43-101 at December 31, 2008. Reserves amounted to 3.8 Mt at grade of 3.81 g/t for contained gold of 465 koz. Additional Indicated resources were just 67 koz of gold contained, although Inferred resources were estimated at 418 koz of gold contained at the higher grade of 5.19 g/t.

Exploration

Elsewhere on the property, the company is investigating expansion and extension opportunities within the existing orebody through its Lima project. It is extending the 22 Level haulage from 4-shaft through to the Eroica and Lima and orebodies to allow for underground resource drilling down to 1,100 m. In a second phase, it intends to extend either the Lima shaft or sink a new shaft at AR Main to 1,300 m in depth to increase production capacity.

Outside of the mining lease, the company holds forty seven precious metal claims covering 415 ha in the Gwanda greenstone belt. Blanket’s main exploration efforts are focused on the potential for finding satellite orebodies in the Blanket vicinity. After completion of the 4-shaft project, there will be 500 t/d of surplus milling capacity and 2,800 t/d of surplus CIL capacity that needs to be filled.

The main targets are at GG and Mascot/Penzance. GG lies approximately 7 km from Blanket and the company has started sinking a 140 m exploration shaft. The company plans to undertake development at the 120 m level by the end of the year to gather data for an in-house scoping study.

At Mascot/Penzance, located approximately 40 km from Blanket, the company plans to refurbish the existing shaft and headgear before following up on drilling results from over a decade ago.

Carslone Enterprises

Carslone is a subsidiary of the Reserve Bank of Zimbabwe which owns the Globe & Phoenix, now obsolete, but it was once the second largest historical gold producer in Zimbabwe with an output of almost 4.0 Moz at an average grade of 27.6 g/t. Carslone also owns the Golden Kopje mine.

Casmyn Mining

Casmyn Mining is the wholly-owned, Zimbabwean subsidiary of Canadian-domiciled, New Dawn Mining Corp. See New Dawn Mining for more details of gold production activities.

Duration Gold

Duration Gold Ltd, a private company based in Jersey, Channel Islands was formed in 2006, and holds an extensive portfolio of gold mines and advanced stage projects in Zimbabwe. Duration Gold is wholly-owned by the Jersey-based Clarity Capital Group.

Group gold mines

The company owns 112 gold deposits and prospects, which have now been consolidated to enable the construction of four medium- large


scale modern mines at (ML16, Athens, Gaika and Royal Family ), which historically produced a combined total of 5.2 Moz.

The current producing mines are located at ML16 (Vubachikwe), Athens, Queens, and Gaika , which are located in Matabeleland and the Midlands.

The company’s mines currently produce almost 20 koz/y, but the company is targeting an increase in total production to 60 koz/y by the end of 2012, followed by an expansion to in excess of 120 koz/y over the next two years, contingent upon securing the required financing.

Duration’s objective is to develop its existing global historical resource base of 4.2 Moz of gold into a 300 koz/y producer based on four bankable feasibility studies on its core projects targeted for completion by 2015.

Location of Duration Gold’s projects

Expansion at Vubachikwe

Duration’s principal mine is Vubachikwe, located near the town of Gwanda, some 180 km south east of Bulawayo, which currently accounts for almost 60% of the group gold output.

The mine was originally operated by Lonrho before being acquired by a family firm (the Thompsons) in 1955, who ran it until 2006 when


scale modern mines at (ML16, Athens, Gaika and Royal Family ), which historically produced a combined total of 5.2 Moz.

The current producing mines are located at ML16 (Vubachikwe), Athens, Queens, and Gaika , which are located in Matabeleland and the Midlands.

The company’s mines currently produce almost 20 koz/y, but the company is targeting an increase in total production to 60 koz/y by the end of 2012, followed by an expansion to in excess of 120 koz/y over the next two years, contingent upon securing the required financing.

Duration’s objective is to develop its existing global historical resource base of 4.2 Moz of gold into a 300 koz/y producer based on four bankable feasibility studies on its core projects targeted for completion by 2015.

Location of Duration Gold’s projects

Expansion at Vubachikwe

Duration’s principal mine is Vubachikwe, located near the town of Gwanda, some 180 km south east of Bulawayo, which currently accounts for almost 60% of the group gold output.

The mine was originally operated by Lonrho before being acquired by a family firm (the Thompsons) in 1955, who ran it until 2006 when

Duration came in as partner. The mine, one of the many on Duration’s Lease 16, is situated on a 60 km-long mineralised strike that also includes the Blanket mine, now owned by Caledonia Mining.

The Vubachikwe mine is currently working parallel Hangingwall and Footwall reefs between 30 and 35 Levels (down to 1,200 m) with grades of 5-6 g/t. Despite the depth, underground conditions are good – the mine is warm, dry, and the rock is very competent and needs little support. Development is in progress down to 40 Level from where the company will undertake resource drilling down to 44 Level.

The deposit at Vubachikwe is part of the Thuli syncline, the north limb of a massive regional shear zone. The geological setting is classic greenstone with mineralisation associated with ultramafics and banded iron formation (BIF). Gold is generally fine grained and may be associated with arsenopyrite. The neighbouring Blanket orebodies are hosted in a mafic unit that sits on top of the ultramafics.

The Vubachikwe processing plant, which includes a flotation circuit, currently has a capacity of 12 kt/mth but a new 30 kt/mth CIL plant is under construction and is expected to reach full capacity within twelve months.

After the industry-wide 2008 production hiatus, mining recommenced in February 2009 and the mine is currently producing at about

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30 kg/mth (15 koz/mth), which is around 60% of capacity as a result of the limited availability of power from ZESA. Cash costs are running at US$700/oz but the target is US$500/oz. The company is about to install a new generator to remedy the power problem.

Exploration within Lease 16

Along the 8 km strike length within Lease 16, there are a number of other past-producing mines, which the company is investigating with a view to recommencing and expanding operations.

At the Black Cat prospect, the company is currently developing through from Vubachikwe along 6 Level and drilling with two rigs to determine the extent of the orebody and assist with modelling the oxide, open pit potential.

At Magano, there is currently limited production from shallow underground workings beneath an open pit with underground development down to 6 Level and underground drilling in process. The company plans to conduct a surface drilling programme to further test strike and depth extensions.

Further south, in the Central area a number of mines have been consolidated and are accessed via a vertical shaft which is being brought back into production. Further south again, the Bar 20 has been developed down to 6 Level and prospects between Central and Bar 20 include Champion and Turquoise. Bar 20 ore was originally treated as being refractory and concentrates were sent to be roasted in

Main shaft at Vubachikwe (Photo: Paul Burton)


Kwekwe by previous owners, but the company now believes that not all ore accessed from Bar 20 Shaft is refractory.

The company is also looking at options to process the 1.2 Mt refractory concentrate dump, with ultra fine grinding or BIOX technologies being considered. A feasibility and optimisation study is currently underway on this.

Other operations

Outside of Lease 16, Duration has resumed operations at the Athens mine and commenced a resource drilling programme in 2009.

In addition, the company has resumed operations at the Umviga properties with development ore currently being trucked to Queens mill for gold extraction. Pending completion of a final study, the company will look to refurbish the Umviga plant for the treatment of tailings and sand dumps.

At the Gaika mine (KweKwe) where a small vat leach programme is currently being run, the company is planning to start an open pit operation (20 kt to 30 kt/mth) in 2013 with the view to producing around 24 koz/y.

On the exploration front, Duration is undertaking resource drilling at Athens, Gaika, Vubachikwe, and Royal Family, while commencing scout drilling at the Auric, Carry, Tuff Nut, Kernel and Tiberius mines, all in the Bulawayo area.

Part of the old plant at Vubachikwe with the new CIL plant in the foreground (Photo: Paul Burton)


Earlier this year, Clarity Capital agreed a strategic alliance with South African engineering group, E+PC Engineering & Projects Co Ltd, with the aim of developing the Vubachikwe high grade, refractory tails re-processing project; the initiation of bankable feasibility studies for the expansion of the Vubachikwe mine and the development of the Athens and Gaika mines.

Clarity Capital companies’ also work closely with the Cotton Tree Foundation. The Foundation is committed to progressing education, training and entrepreneurship in rural communities. The communities surrounding Duration’s mines are currently the key focus. Such initiatives should stand the company in good stead with regard to indigenisation legislation that is being interpreted at present.

In September last year, the Duration raised US$8.0 million through a private placement to fund the resource drilling programme across the group and the Vubachikwe mine processing plant expansion.

The company is looking to raise additional financing in Q3/Q4 through another private placing.

FA Stewart and Son

Jessie mine near Blanket and Vubachikwe

Falcon Gold

Falcon Gold is listed on the Zimbabwe Stock Exchange. After its mid-year takeover of Central African Gold, New Dawn Mining now owns 85% of Falcon Gold and its three mines at Dalny, Venice & Golden Quarry. See New Dawn Mining for details of these operations.

Freda Rebecca Mine

The Freda Rebecca mine is owned by Mwana Africa plc. See Mwana Africa entry for details of the mine.

GAT Investments

GAT Investments, a private Zimbabwean company, owns a number of gold mining operations and projects in Zimbabwe through local private entity, Bilboes Holdings (Private) Ltd.

Its main claim blocks are located in Matabeleland province, 80 km due north of Bulawayo. These properties were formerly owned by Anglo American Zimbabwe and the company acquired them through a management buyout in 2003.

The company’s short term business plan revolves around dump and oxide material treatment but the longer term future is dependent on the successful delineation and exploitation of sulphide mineralisation at these former Anglo American properties.

Oxide production at Isabella group mines

The Isabella EPO hosts three operating mines at Isabella, McCays and When grouped together, with Bubi (on the Gwizaan EPO) some 32 km away. These shallow (less than 30 m deep) open pit/ heap leach mines have produced some 230 koz of gold since start up by Anglo American in 1989 but only 40 koz of gold since the 2003 acquisition.

Each mine has heap leach facilities although Isabella is the site of the


single elution and smelting plant. Isabella has an installed crushing plant with a capacity to treat 100 kt/mth of ore. Future production will be based on an installed crushing plant capacity of 80 kt/mth at McCays, When 15 kt/mth and Bubi 80 kt/mth. The mines are connected to the national electricity grid via 300 kVA transformers with a 150 kVA backup generator at Isabella.

Production for seven months in 2009 amounted to approx 4 koz, well below rated capacity, at a cash cost of US$689/oz.

The short term production target at the Isabella plant is 6 koz/y from old heap leach dumps and some open pit oxide ore, with a longer term forecast of approx 15 koz/y from oxides.

Current oxide reserves amount to 104 koz of gold contained at an average grade of 0.67 g/t. Measured and Indicated resources are 79 koz at a grade of 0.50 g/t.

In order to reach planned output the company is looking to spend US$5 million on the oxide facilities.

Although the continuing processing of oxide material should enable Bilboes to generate cashflow over the next few years, the longer term future of the operations in Matabeleland lies with the deeper sulphide resources.

The sulphide project

The Isabella EPO is underlain by felsic and mafic schists and greywackes of the Upper and Lower Bulawayan volcanic units that form part of the Archaean Bubi greenstone belt. Mineralisation is truncated by fault splays.

Flooded pit at McCays (Photo: Paul Burton)


The Isabella mine mineralisation is hosted in a banded iron formation unit and is located within a broad shear zone cutting through felsic schists close to the contact between the Bulawayan and Shamvaian units. Sulphides throughout are predominantly pyrite and arsenopyrite and are refractory.

A December 2009, independent technical report by SRK Consulting confirmed significant sulphide resources drilled out on the Isabella, McCays and Bubi claims and also suggested considerable potential to upgrade these resources and delineate additional resources.

End-2009 Inferred resources, based on a 2 g/t cut-off, were 4.7 Mt at a grade of 3.49 g/t for 533 koz of gold contained down to a depth of 100 m. Beneath this, SRK identified an additional 3.5 Mt of ‘unclassified’ material at a grade of 2.11 g/t for 240 koz of gold contained.

Following its study of the data, SRK concluded that there is “...potential to increase this (533 koz of Inferred) by 4 Moz through strike and depth extensions of the known open ended mineralisation.”

Accordingly, the company is planning to invest US$7.2 million over the next two years to explore systematically the sulphide potential and complete a bankable feasibility study.

The sulphides are known to be refractory so metallurgical test work will follow up on previous flotation, BIOX and ultra-fine grind tests.

At this stage, GAT is projecting production from the sulphide project of 39 koz in four years time, building to 257 koz/y eight years’ out.

The existing plant at Isabella, which Bilboes will utilise for oxide and dump material processing initially (Photo: Paul Burton)


Gold Quarry project

Meanwhile, within the Mutare EPO application, in Manicaland, lies the Gold Quarry project, where there is potential for both open pit oxide and underground sulphide mining, with silver as a by-product. The claims are located within the Mutare Greenstone Belt.

The 2009 SRK report determined a Measured resource, in oxide and transition material, containing just 40 koz at 0.81 g/t gold, but with 745 koz of silver.

However, the consultant has stated that it believes the potential for Gold Quarry and neighbouring claims is “between 0.5 and 1.5 Moz with a grade of between 3 and 4 g/t”, based on an assumption that mineralisation is continuous and to a depth of 400 m and with a strike length of 400 m.

Based on these conclusions, Bilboes intends to initiate an exploration programme consisting of 6,000 m of drilling at a cost of US$0.5 million as part of a US$1.6 million investment to take the Gold Quarry project through to completion of a bankable feasibility study within 2 years.

The company is projecting first production from Gold Quarry after five years at a rate of approx 12 koz/y rising to 68 koz/y from year eight.

The company has applied for Exclusive Prospecting Orders (EPOs) which consist of two contiguous areas in Matabeleland (Gwizaan and Isabella), another two in the Midlands Province (Gweru and Lower Gweru) and one in Manicaland (Mutare).

GAT is undertaking a private placement to raise US$15 million, mainly to complete the work for bankable feasibility studies for the Sulphide and Gold Quarry projects as well as recapitalising its gold mines.

GAT subsidiary, Bilboes Holdings, hopes to undertake a stock exchange listing and an IPO in 2 years after successful completion of bankable feasibility studies to fund mine construction.

John Mack

The Golden Valley mine is located 16 km outside Kadoma, on the road to Chakari. Gold production is about 6-8 koz/y.

Metallon Gold Zimbabwe (Private) Ltd

Metallon Gold Zimbabwe (Pvt) Limited, Zimbabwe’s largest gold producer, is a private company that owns and operates five gold mines, with forecast 2010 production (to end September 2010) of 56 koz. The company is a wholly-owned subsidiary of UK company, Metgold Ltd (formerly Metallon Corporation Ltd).

The company is planning to list on AIM later this year, ahead of securing a local listing to comply with Zimbabwean indigenisation legislation.

Historical background

Like most gold producing mines in Zimbabwe, the company closed operations in 2008 due to the economic melt-down and re-opened late in 2009. The current production (2010) is therefore predicated on this background. Before the melt down, average production was 156 koz, with peak production of 177 koz.


The company is embarking on an aggressive growth strategy that will see it produce over 1 Moz by 2015, through expansion at the five existing mines and two new projects. Total group M&I resources (at 30 September 2008, the latest audit) were 4.0 Moz of gold contained. Recent in-house work indicates a group global resource base in excess of 15 Moz.

The reports below outline the company’s current thinking but details may change as it has yet to finalise its business plan.

How mine

How mine is the company’s largest underground mine, whose production estimate for 2010 is 31 koz of gold at a cash cost of US$484 /oz. In 2006, the mine produced 60 koz.

As at the end of September 2008, How had 2P reserves of 4.6 Mt at a grade of 5.3 g/t for 792 koz of gold contained. Additional LOM resources totalled 5.0 Mt at a grade of 4.9 g/t for 788 koz of gold.

To reach the production target of 255 koz in 2015, Metallon plans to spend some US$114 million at How on rehabilitation of the North shaft; the opening of the How South open pit, an expansion of the plant to a treatment capacity of 75 kt/mth in 2011-2012, enlargement of the plant to 150 kt/mth capacity in 2014, a new 100 kt/mth shaft .

Shamva mine

Metallon’s second largest underground mine, Shamva, is expected to produce 15 koz of gold in the current year at a cash cost of

Location of Metallon’s mines and projects in Zimbabwe


US$882 /oz. In 2006, the mine produced 32 koz. By 2013, the company hopes to push production up to 164 koz, while pushing costs down below US$350/oz. The key projects are shaft and mill upgrades over the next two years with the construction of a new 120 kt/mth sand treatment plant and the introduction of open pit mining on brownfields targets which are in the vicinity.

Shamva had 2P underground reserves of 5.5 Mt at grade of 2.82 g/t for contained gold of 503 koz at the end of September 2008. LOM resources at the same date were 14.0 Mt at grade of 2.49 g/t for 1.12 Moz of gold contained.

Redwing mine

The largest injection of capital will be at the company’s Redwing mine, where planned expansion is expected to cost over US$220 million. This will see production rise from a 2010 estimate of over 2 koz to 200 koz/y by 2015. Cash costs, meanwhile, are forecast to fall from US$1,183 /oz to US$285/oz by 2015. Production for the mine in 2006 was 18 koz.

The company intends to refurbish the existing flooded underground operation, including major works on the shaft systems, to take production from underground up to 360 kt/y, but the bulk of the capital is destined for the development of a new open pit (2 Mt/y) and a new plant to process this open pit and underground ore. The company will also construct a new slimes dam to accommodate the increased production at a cost of US$12.5 million. The open pit is projected to contribute 166 koz to total mine production of 200 koz in 2015.

Figure 7.3: Metallon’s forecast production

0

200

400

600

800

1000

1200Mid-Winter

Motapa

Mazowe

Redwing

Shamva

Arcturus

How

koz

2010 2011 2012 2013 2014 2015

Redwing had an ore reserve (20 koz of gold contained) as at 30 September 2008 due to down grading of reserves resulting from the flooding in 2007, but a LOM resource containing 1.1 Moz (9.6 Mt at a grade of 3.66 g/t), the majority of which is located underground.

Arcturus mine

Metallon recently significantly expanded its plans for Arcturus mine and now sees over 202 koz of production from this mine in 2015. Currently (FY2010) the mine’s production is estimated at less than 4 koz. Current infrastructure will be refurbished to cater for 45 kt/mth yielding 55 koz by 2015. The company will expand the operation through the sinking of a new shaft at Gladstone and building a new


plant, costing US$70 million, to give an expanded processing capacity of 100 kt/mth, which will deliver an additional 147 koz/y. The total capital investment envisaged is US$170 million.

Arcturus had an underground reserve of 1.2 Mt at a grade of 4.47 g/t for 174 koz of gold contained at the end of September 2008. Additional LOM resources, again virtually all underground, amounted to 3.9 Mt at a grade of 4.69 g/t for 594 koz of gold contained.

Mazowe mine

At Mazowe, the company plans to invest almost US$20 million in major underground expansion and plant upgrades and the development of a sands re-treatment plant, which will contribute some 13 koz/y of total gold output of 33 koz by 2015.

Projects

As well as expanding operations at the five operating mines, Metallon plans to develop two new projects at Motapa and Midwinter.

Motapa, in Bubi near Bulawayo, is due to come into production in 2012 and will require a total capital investment of US$127 million, although feasibility studies have yet to be undertaken. The project involves the exploitation of 61 koz of low grade gold in sands; 67 koz of gold in heap leach dumps and remnant oxides in-situ and, most importantly, development of an underground mine to exploit the estimated 2.3 Moz of gold at grades of 3.0-5.6 g/t in Indicated and Inferred resources at Jupiter, Pluvius and Fossicker.

Production of approx 5 koz in 2012 is projected to rise to 114 koz by 2015 at a cash cost of US$388/oz.

At the Midwinter project, Metallon intends to spend US$120 million to construct a CIL plant to process 220 kt/mth yielding 100 koz/y by open pit for ten years by 2014 with cash costs running at US$380/oz.

Exploration

To reach its production profile goal, Metallon will have to undertake a substantial amount of exploration. Accordingly, it has budgeted a sum of US$12 million to be spent on on-mine exploration, with an additional US$22 million for project exploration. The business plan calls for the upgrading of 2.3 Moz of resources at Motapa and 2.2 Moz at Midwinter.

Mwana Africa plc (AIM: MWA)

Mwana Africa is a pan-African, multi-commodity resources company. It’s principal operations and exploration activities cover gold, nickel and other base metals, and diamonds in Zimbabwe, the DRC, South Africa and Ghana.

Mwana Africa has a 100% interest (with the intention of selling a 15% stake to a local partner) in the Freda Rebecca underground mine, located near the town of Bindura, some 90 km north-east of Harare, which commenced operations in 1988. The mine, acquired from AngloGold Ashanti in 2005 for US$2.5 million, was placed on effective care and maintenance in 2007 after producing at a rate as high as 98 koz/y (2002) when owned by the South African major.


Freda Rebecca expansion

The mine operates as a low-grade underground operation comprising crushing, conventional milling and a combined gravity/CIL process.

Mwana Africa has embarked on a refurbishment programme with the intention of taking production back to an initial 30 koz/y, with a subsequent expansion to 50 koz/y.

The company completed the Phase 1 expansion to 30 koz/y in September last year through a programme of dewatering the mine, overhauling the mine fleet and refurbishing the processing plant to a 50 kt/mth capacity. Total capital expenditure was US$13.5 million.

The re-opened mine poured its first gold in October 2009 and marketed it through the Chamber of Mines export licence.

In the six months to end March, the mine processed 205 kt of ore at an average grade of 1.76 g/t and, with recoveries of 74%, produced almost 9 koz of gold.

However, the mine ramp up has been slower than expected owing to poor availability and reliability of the underground mining fleet and the company offset mined ore shortfalls with lower grade surface stockpile material with the result that in the nine months to the end of June 2010 the mine produced just 12 koz of gold.

The company has resolved the problems with the mine vehicles and is confident of reaching target production rate in the current quarter.

Phase II of the expansion programme will entail additional mine development, additions to the mine fleet and further refurbishment and expansion of the plant to 80 kt/mth at a cost of US$6 million.

This phase was expected to be completed this month but has been delayed because the funding, in the form of an Industrial Development Corporation (IFC) loan, is not yet in place.

Midlands Greenstone

Belt

MutokoGreenstone

BeltBindura

Greenstone Belt

Makaha

Freda-Rebecca District

West Midlands

P jBubi

Greenstone Belt

NubobsGreenstone

Belt

Project

Lonely/Turk Mine Areas

Mwana Project Areas

Exploration potential around Freda Rebecca


Funding

The IFC approved a US$10 million debt facility for Freda Rebecca in November 2009 and the agreement was signed in March this year. Although the board of IDC has since approved the final terms of the facility, and the company has completed the environmental management plan for the mining operations at Freda Rebecca to the IDC’s satisfaction, drawdown of the facility remains subject to certain conditions.

The most notable of the conditions is the provision by the Export Credit Insurance Corporation of South Africa (ECIC) of political risk insurance for the facility, which is itself subject to ratification of the Bilateral Investment Promotion and Protection Agreement (BIPPA) between Zimbabwe and South Africa. Whilst this agreement has been signed by both countries, formal ratification by the South African parliament remains outstanding.

In addition, the External Loans Coordinating Committee (ELCC) of the Reserve Bank of Zimbabwe (RBZ) has approved the terms of the facility. However, ELCC has not approved the provision of certain of the ancillary arrangements, including the mortgage charge over the land on which the Freda Rebecca plant is built and the operation of offshore accounts.

Mwana Africa is working with the ELCC and IDC to agree amendments to the security package, compliant with the current exchange control regulations in Zimbabwe.

Provision of the second tranche of the facility, totalling US$6 million, is also subject to independent verification of JORC/SAMREC compliant Measured gold resources, sufficient to support a ten year mine life. An independent technical report on resources after a programme of re-sampling of existing drill cores is expected imminently.

Geology and reserves

As described in a 2007 technical report by SRK Consulting, Freda Rebecca lies on the central axis of the synclinal Mazowe-Bindura Greenstone belt. The geology of the area around the mine is characterised by the Shamvaian sediments, diorite and granodiorite.

The orebodies are largely hosted by the Prince of Wales diorite and the Bindura granodiorite. The mineralisation is hosted within two major shear envelopes. Individual shears are variable in width and these two systems merge to the south west at depth flattening at around 850 m elevation and extending into the metasediments. The shear system is characterised by a set of anastomosing shears separated by relatively undeformed rock units.

There are two styles of sulphide mineralisation: older disseminated, pervasive sulphides occurring throughout the sediments, diorite and granodiorite, which vary in intensity and grade; and younger mineralisation restricted to shear zones and associated with higher gold grades. In both types of mineralisation, higher grades are associated with fine-grained sulphides , such as arsenopyrite, pyrite, pyrrhotite and chalcopyrite.

As at March 31, 2010, Freda Rebecca had reserves of 4.01 Mt at a grade


of 2.61 g/t for 340 koz of gold contained (91% underground). M&I resources (including reserves) were 13.2 Mt at a grade of 2.46 g/t for 1.0 Moz of gold contained (97% underground, at a cut-off of 1.5 g/t).

Exploration

On EPOs outside the mining lease, Mwana Africa has identified a number of exploration targets, perhaps the most significant of which is the former mine Phoenix Prince, located two kilometres to the south east. Originally the mine exploited thin, high-grade, near vertical bodies but exploration has outlined broad, 5 m to 10 m, low-grade oxide lenses.

Outside of the Freda Rebecca area, the company is active on a number of exploration properties throughout the main greenstone belts within the country. In the Midlands greenstone belt it is conducting exploration at the West Midlands project, which lies adjacent to the dormant Maligreen mine, in which Mwana Africa has a 50% interest. The interest was acquired through the purchase of Cluff Mining in December 2005. Pan African (Private) Limited, a Zimbabwe registered company, holds the other 50% and manages the property.

Located in the Nkayi-Silobela greenstone belt, the mine produced roughly 23 koz of gold by heap-leaching methods between August 2000 and September 2002.

Irrigation of the dumps continued to August 2004 with some minor gold recovery. Cluff conducted an extensive drilling campaign to evaluate the deposit and the sulphide resource, which is open to depth and to the north, leading to an Indicated resource of 371 koz contained.

In the Mutoko greenstone belt, Mwana Africa has 100% ownership of the Makaha deposit, situated 140 km north-east of Harare.The prospect has a historic (non-JORC compliant) resource of 350 koz at a grade of 1.2 g/t.

Elsewhere, Mwana is active in the Bubi greenstone belt, at Turk and Lonely mine areas, and in the Nubobs greenstone belt.

Mwana Africa owns a 53% stake in Bindura Nickel Corp, which comprises two nickel mines, Trojan and Shangani, a smelter and a refinery. The Zimbabwe government holds 22%, with the remainder as free float traded on the Zimbabwe stock exchange. The company completed construction of an upgraded concentrator at Trojan in February 2008, but then was forced to place the complex on care-and-maintenance at the end of that year. In August, Mwana Africa received a positive report from SRK Consulting on re-starting the Trojan mine.

New Dawn Mining Corp (TSX:ND)

Canadian-listed New Dawn Mining operates the 100%-owned Turk mine and in mid-2010 completed the acquisition of several more historic mining projects with its acquisition of an 89% controlling interest in AIM-listed Central African Gold Plc (CAG).

Its Turk mine, owned through local subsidiary Casmyn Mining Zimbabwe, which it restarted in 2009, is expanding operations to a capacity of 23 koz/y and is working towards 35-50 koz/y.

With the acquisition of CAG, giving it an 84.7% interest in Falcon Gold


Zimbabwe Ltd (85% of Golden Quarry, Venice & Dalny mines), and a 100% interest in Olympus Gold Mines Ltd (Camperdown & Old Nic mines), the goal is to reach annualised gold production of 50-60 koz of gold within two years and 100 koz within 4 to 5 years.

Turk/Angelus mine Phase 1 expansion

The company is looking to raise a minimum of US$10 million (up to US$25 million) through a share placement, which it hopes to close before the end of Q3.

The company was forced to put the Turk mine on a care-and-maintenance basis in October 2008, but in May 2009, it was able to restart the operation and commenced a ramp up in production to a rate of 14-15 koz/y gold output, which it has struggled to maintain because of power shortages. In H1 2010, the mine produced under 7 koz of gold.

The company recently undertook a Phase 1 expansion of the mine and plant to push the current processing capacity of 15 kt/mth that with full power availability can produce around 17.5 koz/y of gold, which it hopes to attain by Q4 this year, to 23 koz/y of gold, which it hopes to achieve by mid to end next year.

This expansion had the further aim of allowing the operations some flexibility in an effort to maintain existing production rates when impacted by power outages and cuts that have burdened the industry. The company has decided to implement the expensive remedial option

0 250km

MAJOR TOWNS

MAJOR GOLD MINES(<10000KG AU)

CAG MINES

NEW DAWN MINE

GREENSTONE BELTS

BULAWAYO GOLD CAMP

GWERU GOLD CAMP

KADOMA GOLD CAMP

LEGEND

1

2

3

HWANGEHWANGE

BULAWAYOBULAWAYO

BEITBRIDGEBEITBRIDGE

GWERUGWERU

HARAREHARARE

Dalny MineDalny Mine

Venice MineVenice Mine

Golden Quarry MineGolden Quarry Mine

Camperdown MineCamperdown Mine

Old Nic MineOld Nic Mine

Turk and Angelus Mine


KARIBAKARIBA

MUTAREMUTARE

12

3

Location of New Dawn’s mines and projects post the Central African Gold acquisition


(US$1.2 million) of installing 3 MVA of diesel generating capacity as standby power.

Geologically the properties are located within the Bulawayo-Bubi greenstone belt that typically comprises volcanic and sedimentary successions. The mines are hosted by a large northeasterly striking shear zone, which dips steeply to the south within a typical Archaean greenstone succession of meta-sedimentary and meta-volcanic rocks.

Gold mineralisation occurs in a multiple shear system within this zone with six major mineralised shears and a number of splays, which strike over at least 800 m, persist to beyond a depth of 800 m and dip steeply to the south-southeast.

New Dawn has accessed upper levels at the neighbouring Angelus mine from Turk and drilling in the section shows that a similar pattern of multiple reefs and cross-linking structures is also present and that Angelus simply represents a faulted extension of the Turk structure.

Turk has reserves containing 167 koz of gold and M&I resources of 769 koz according to an SRK Consulting audit at the end of 2009.

Phase 2 expansion

The company plans to expand operations at Turk/Angelus in Phase 2 essentially through working three areas on the property based around the existing Incline shaft (on the Turk property); the Angelus shaft to the east and the newly-renovated, shallower Armenian shaft to the west.

To expand from the current production rate level to a milling of 28-30 kt/mth, the company will spend some US$7-8 million on increasing the hoist capacity, installing a new fine grinding mill (Deswik) and other equipment, such as compressors and underground equipment. This will be funded from cashflow and take gold production up to 35-50 koz/y.

Golden Quarry/Camperdown complexes

The Golden Quarry mine complex, near Gweru, consists of an open pit/heap leach and a higher grade underground mine feeding a CIL plant, although neither are operational at present.

The Golden Quarry main ore deposit is located in a large shear in a structurally complex area, with considerable alteration of the host lithologies. However, the orebody is not well understood at present.

Management will re-commission the plant at 7-8 kt/mth to produce 6 koz/y. The mine has a very small global resource delineated underground (70 koz), which will supply some 40% of the mill feed with the rest originating from other, as yet undelineated, resources. Once the plant is fully utilised it is expected to produce approx 14 koz/y.

The nearby Camperdown mine previously produced ore material from both a dual open pit and an underground mining operation, with the higher grade ore sent for treatment at the Golden Quarry plant and lower grade oxides treated on site.

Camperdown has a total M&I resource of 270 koz, of which 183 koz is open pit oxides and surface dump material.

The mine lies in part of the Shurugwi Schist Belt that is a sedimentary


succession of conglomerates, grits, phyllites, sandstones, and banded ironstones (BIF), which is exposed in the open pit. The most important ore source in the underground mine was the Collingwood Leader.

Like Golden Quarry, the deposit is not well understood so the company is planning a 4,000 m Phase 1 drilling programme to fully investigate the potential. The plan may involve the building of a modular CIL plant to treat tailings ore sources within the region at a rate of 70-90 kt/mth for 5-6 years, at an estimated capital cost of US$4-5 million. Once a larger ore resource is defined at the Camperdown and nearby deposits like Golden Quarry then the crushing and milling circuit would be added to the tailings CIL plant.

In the short term, the company’s plan is to generate cashflow by processing dump material from the old Wanderers mine (4.5 Mt at a grade of 0.64 g/t for around 90 koz gold contained), which lies on the property. This, along with a smaller dump, has the potential to produce 20-25 koz/y of gold.

Kadoma properties – Dalny/Venice

At the Dalny mine complex, near Kadoma, historical production (to 2006) was 2.4 Moz of gold from 10.2 Mt of ore treated at a grade of 7.42 g/t.

The mine operated as an underground mine with numerous vertical shafts feeding a flotation/roaster plant. At its peak the operation produced 50-60 koz/y.

The old Camperdown pit is in poor repair but the future may lie underground (Photo: Paul Burton)


The Dalny complex is located on the north-western limb of the plunging Kadoma anticline and is hosted by andesitic to basaltic lavas of the Upper Bulawayan System that is Archaean in age.

A strong structural control has given rise to mineralised zones oriented along a northeast to southwest strike with a steep dip towards the west. The most common sulphides are pyrite and arsenopyrite, which extend into the schistose country rock surrounding the narrow, gold-rich part.

According to a recent independent NI 43-101 report, M&I resources contain 337 koz of gold, 164 koz of which are located underground (at grades between 5.73 g/t and 7.87 g/t), with the remaining 173 koz in surface dumps (at a grade of 0.67 g/t).

The site has potential for short term dump retreatment but the longer term attraction is for recommencement of underground mining and possible open pit opportunities along the strike of the shear zone. To this end, the company plans to dewater the W14 shaft bring the existing plant back into operation at around 9 kt/mth.

The company also plans to conduct an audit of geological information for the Dalny complex and explore some of the shallower mines that have been redundant for years. It will investigate the potential to not only mine multiple reef systems underground but also the ‘halos’ of lower grade gold mineralisation that the old timers missed when following the quartz vein systems.

Venice, finally, is also in the Kadoma camp. Historical production (to 2002) was 318 koz of gold from 2.5 Mt of ore treated at a grade of 3.77 g/t.

The property is considered geologically very prospective, although the reef geometry is complex and the shaft is flooded. Near term potential lies with the retreatment of a 1.8 Mt dump.

The company has options at Ladville (Ashtonkop and Ultimus claims) and Basil Payne, all former mining areas.

RioZim Ltd (ZI:RTNR)

RioZim Ltd is incorporated in Zimbabwe and is listed on the Zimbabwe Stock Exchange. The company became independent from Rio Tinto plc in 2004 when the major swapped its 56% interest in Rio Tinto Zimbabwe for a proportionate share of Murowa Diamonds.

The group currently operates the Renco gold mine, in the south east of Zimbabwe, as well as gold exploration projects at the site of the historic Cam and Motor mines. The company also owns the Empress Nickel Refinery, near the city of Kadoma, in central Zimbabwe; a 60% joint venture that has extensive chrome claims in the Darwendale area of the Great Dyke, a 50% interest in Sengwa Colliery, in Gokwe North, and holds a 22% interest in Murowa Diamonds (Private) Limited (Rio Tinto plc owns the balance). It is also actively exploring potential nickel, coal and gold prospects.

Renco expansion

Renco opened in 1982 and has produced over 1.1 Moz of gold since that time. The mine has a production capacity of over 50 koz/y but


reported gold output of only 15 koz in 2008 (when it was the only gold mine that stayed open) and 23 koz in 2009. Production in 2009 came from treating 709 kt/d of ore at a grade of 3.32 g/t with a recovery of 84%. The mine operated at only 75% of rated capacity because of frequent power outages, as a result of load shedding, and numerous plant breakdowns.

The mine is located in the Limpopo Mobile Belt and not in one of the greenstone belts.

As a result of the reclassification of some ore reserves, proved reserves at the end of 2009 fell 19% to 346 kt, containing 62 koz of gold. Over the next five years, the company intends to employ a combination of diamond drilling and accelerated underground development of haulages to increase reserves once again to support significantly increased production levels from 2015 onwards.

According to Reuters, the mine is forecast to produce 24 koz of gold this year with an increase to 70 koz by 2013 and a further increase to 112 koz in 2015.

In 2009, the company reported a loss of US$16.2 million. At the end of the year, it had cash of US$2.9 million and borrowings, through an overdraft facility, of US$29.4 million. Such production expansion as outlined above will require a substantial capital investment and therefore RioZim is reportedly looking to raise US$40 million through a rights issue, having apparently abandoned a similar placement plan last year.

Location of RioZim’s mines and projects in Zimbabwe


Cam & Motor exploration

Outside of Renco, the company is exploring at the historic Cam and Motor mines and has completed a programme of digitising old mine plans, geophysical exploration and diamond drilling. This defined a number of resources including dump material, “low grade” material used as backfill in the old stopes, haloes around the old workings and new resources not previously defined. At the end of 2009, RioZim was able to declare Inferred resources of 1.3 Mt at a grade of 4.26 g/t for 177 koz of gold contained at Motor and 0.8 Mt at a grade of 4.74 g/t for 138 koz of gold at Cam down to a depth of 100 m. The company has high expectancy that this figure can be increased to 1 Moz down to 200 m when results of a recent drill programme are incorporated. Drilling is continuing on the adjacent Petrol Lode and the extensions of both the Cam and the Motor Lodes.

At One Step, the company completed work in Q1 last year on evaluating the potential of the prospect and concluded that “the resource did not have sufficient critical mass to justify the investment into a new plant and mine at this time”. There were plans back in 2008 to build a 12 koz/y mine at One Step.

At the Spot gold mine, which is on the Renco mine claims, the company undertook geophysical exploration in conjunction with further diamond drilling to improve its knowledge of the mineralisation. The work confirmed that the reefs are relatively discontinuous, with a high nugget effect, and as a result the company has downgraded reserves at the mine. Meanwhile the geophysics work identified significant continuous anomalies further west, in the direction of the main Renco ore body, which the company intends to follow up through surface diamond drilling.

Finally, the company was planning to explore at the Kenilworth gold prospect this year.

Zimbabwe Mining Development Corporation (ZMDC)

ZMDC owns Elvington, Sabi, Jena, all important past producing mines. Sabi produced just 5 koz in 2009.

ZMDC has a broad mandate as detailed in the ZMDC Act but perhaps its three main responsibilities as the state mining body are a) to invest in the mining industry in Zimbabwe on behalf of the State; (b) to plan, co-ordinate and implement mining development projects on behalf of the State; and (c) to engage in prospecting, exploration, mining and mineral beneficiation programmes.

7.3 Other large producers

‘Large’ is something of a misnomer in Zimbabwean gold mining terms as many of those classified as such are small in global terms as classified by World Gold Analyst.

Aside from the companies covered in some detail in the proceeding section, the COMZ categorises many other other producers as large although their production may amount to no more than 1 koz/y!

Some of those companies, belonging to the COMZ, are listed in the table overleaf.


Table 7.4: Zimbabwe Chamber of Mines: Gold Producers’ Committee

Company 2009 Gold prod. (koz)

Bayham Mining 0

Caledonia Holding 10

Carslone Enterprises 2

Casmyn Mining 10

Delta Gold Eureka Gold Mine 0

DTZ-OZDEO (Pvt) Ltd 7

Duration Gold 2

F A Stewart (Pvt) Ltd 2

Falcon Gold 0

Gat Investments 0

John Mack &/Golden Valley 3

Metallon Gold 18

Pan African Mining 6

RioZim Limited 24Source: COMZ

Makorakozas working in one of Duration Gold’s old pits (Photo: Paul Burton)

7.4 Small producers and illegal miners (Makorakoza)

There are a number of very small producers in Zimbabwe but collectively their direct output totalled only about 3 koz in 2009.

Below this category, as mining activity becomes more and more informal, there exists another level of producers – illegal miners. Like all countries where gold is found in easily identifiable and traceable rocks, such as the quartz veins in Zimbabwe’s greenstone belts, there exists an informal and illegal mining sector. In Brazil and other countries we refer to them as “garampeiros”. In Zimbabwe they are called “Makorakoza”.

Although the Chamber of Mines records estimates of Makorakoza


Makorakoza activity at the Old Camperdown pit (Photo: Paul Burton)

production each year the actual level is not known for obvious reasons. It is very difficult to measure an activity that by definition is informal and thus not exactly intent on publishing public records.

The COMZ believes Makorkoza production cannot amount to more than a few kilograms a year for the following reasons:

1) Over the last ten years or so the oxidised gold resource that small scale and illegal workers had been working on have largely been exhausted. This leaves hard rock gold resources at depths that require drilling and blasting with grades far less that the surface enriched resource of yesteryears. There is no evidence of mining that leads to such high levels of production.

2) The number of people involved has also drastically reduced compared to the numbers involved in the 1990 to 2000.

3) The pull for this illegal activity has also disappeared with the use of multiple currency in the conduct of business. The skewed exchange rate that existed before the dollarisation in 2009, coupled with the unrealistic Z$ price offered by the RBZ, were major incentives for illegal operations. Miners would produce gold, export it illegally and bring back hard currency that was exchanged on the parallel market for huge rewards. This does not pay anymore.

Notwithstanding the Chamber of Mines’ comments, in the short time I was in the country I witnessed considerable Makorakozi activity in some


of the disused open pits. ‘Mining’ usually involves some sluicing of ‘run of mine’ dirt and then hand shovelling into wheelbarrows. Gold extraction often involves the hazardous use of mercury.

Sometimes the illegal miners are more adventurous and actually engage in actual mining, burrowing into the walls of old open pits. The Camperdown pit, shown on the previous page, has evidence of this adit mining.

The Makorakoza activity at this subsistence level is obviously fraught with danger for the individuals themselves. Despite it being illegal, neither the police nor the mining companies show much interest in putting an end to it. The police do occasional ‘raid’ a site and arrest the miscreants but after receiving a small fine they are back at work the next day. The mining companies turn a blind eye to it, although most mine sites employ security guards and fencing, and will probably look to employ the illegals when they recommence organised mining in the affected pits.

The final category of producer outside of the formal sector is the custom millers. These small operations use old style stamps to crush and mill gold bearing rock that they buy from small, informal miners and, presumably, from illegals as well. Their setups can be seen all over the place. One such operation was pointed out to me just metres off the main road as we drove south from Bulawayo along the road to Beit Bridge.

7.5 By-product gold production

The PGM smelters at Ngezi and Mimosa produce quantities of by-product gold. The COMZ records almost 15 koz in 2008, and 26 koz in 2009.

7.6 Explorers

African Consolidated Res. plc (AIM:AFCR)

African Consolidated Resources is an AIM-listed mineral exploration company with projects in Zimbabwe and Zambia. Within Zimbabwe, it is active with gold, copper, nickel, diamonds, platinum and phosphate projects.

It’s gold projects are at Pickstone-Peerless, Gadzema (Blue Rock, Giant), Chakari and One-Step.

Pickstone-Peerless

Pickstone-Peerless is the site of historic mining operations with past production from Rio Tinto and others of 427 koz. At Pickstone, gold was mined from Banded Iron Formations over a 1,200 m strike length and down to about 700 m depth. At Peerless, there has been little mining although the mine was developed on four levels.

On the two properties, ACR has drilled out some 450 koz in Inferred resources at a grade of 1.4-1.5 g/t on the Peerless and Concession areas. The properties also host 63 koz of Measured resources in surface dumps.

In July, AGR entered into a memorandum of understanding, subject to due diligence, with a group of individuals known as the SSSB Group,


for the development of the Pickstone Peerless property. Prior to this, TWP Investments (PTY) Ltd withdrew from an agreement (after a corporate takeover) to pay for and build a plant to treat the sulphide dump material on a tolling basis.

Under the terms of the SSSB Group agreement, the mine, apart from the sulphide dump, will be transferred to a structure owned 40% by ACR and 60% by the SSSB Group. SSSB will prepare a pre-feasibility study and if this indicates an IRR in excess of 30% then will proceed with a definitive feasibility study.

Blue Rock

At its Blue Rock project, some 30 km to the north of Pickstone-Peerless, the company recently published a JORC-compliant, near surface Inferred resource of 8.5 Mt at a grade of 1 g/t for 272 koz of gold contained. The Blue Rock resource covers 500 m of strike of ultramafic schists interbedded with BIF and minor mafic volcanics, all intruded by felsic volcanics. Gold mineralisation occurs within BIF (where it was historically mined), in narrow quartz veins and in broad zones in the felsic intrusives.

AGR has identified another trend (Berks) through drilling to the north-east of Blue Rock and plans over 5,000 m of RC drilling on this trend and the Shlegani prospect (3 km north).

The Blue Rock resource adds to its resources in the Gadzema greenstone belt, 100 km southwest of Harare, where it already has an Inferred resource of 4.4 Mt at a grade of 2.2 g/t for 300 koz of gold contained at the Giant mine, just 5 km away long strike. Giant mine has produced 563 koz of gold historically from underground BIF-related mineralisation. AGR is just completing a 2,000 m diamond drilling programme, aimed at extending the orebody at depth, along with a further 3,000 m of infill RC drilling.

Other Projects

The Chakari project is located in a previously unexplored stretch of the Chakari-North greenstone belt, 30 km long, which partly lies on the well mineralised Lily Shear zone, north-east of New Dawn Mining’s Dalny gold mine. Exploration has yielded several exciting geochemical anomalies, and artisinal panning activity in the area indicates widespread mineralisation. Further mapping, sampling and RAB drilling will be conducted to identify economic gold mineralisation hosted in Archean metasediments and volcanics.

Finally, the company has intersected encouraging grades at One-Step, which lies approximately 70 km south-west of the Pickstone Peerless project, and after consolidation of claims, it has secured over 4 km of mineralised trend.

Cape Range Ltd (ASX:CAG)

Australian company Cape Range, until recently a technology company, has made a swift entrance into Zimbabwe through the purchase of options to acquire up to 90% of two Zimbabwean gold companies.

The first option is with Sab Rock Miners (Private) Ltd, which holds the Orcus, Blue Duck and Eiffel Blue prospects in the Kadoma area. Historical


channel samples taken in underground adits has produced exceptional results including 10.8 g/t over 160 m and 18.9 g/t over 130 m at Orcus; 21.06 g/t over 44 m at Blue Duck and 42.11 g/t over 81 m at Eiffel Blue.

The company is following up these showings with a drill programme.

In a separate transaction, the Australian can earn up to 90% in a small gold producer, Ox Mining (PV) Ltd, which owns the Inez mine, also near Kadoma. Inex currently produces around 2 koz/y from open pit oxides and dump material. The mine has a 350 t/d CIL treatment plant.

Cape Range plans to target deeper, higher grade ore underground for exploration. The company’s commitment for an initial 10% stake is US$1.5 million in cash. It can then increase its interest to 51% by paying US$8 million in cash and shares and then acquire a further 39% by paying US$15/oz for each JORC resource ounce proved up.

Conquest Resources Ltd (TSXV:CQR)

Canadian-listed Conquest Resources owns the historic Beehive, Babs and Piper Moss mines, in the Midland goldfield, but is not active on any of these projects as its main focus is on its Alexander project in Ontario’s Red Lake camp.

The Babs & Beehive mines are former gold production properties situated respectively about 10 km north and 30 km northwest of KweKwe. The mines were developed by African Gold PLC between 1997 and 1998 at a cost of approximately US$4.5 million and operated for nine months before being placed on care and maintenance in early 1999.

The mines have a combined historic resource of 360 kt at a grade of 5.7 g/t.

The Piper Moss mine is a former gold production property situated just 3 km north of and in a similar geological setting to the Globe & Phoenix mine. The Moss vein from which most of the past production of 163 koz at a grade of 10.8 g/t gold was derived can be traced for over 1,200 m and is up to 2 m wide in places.

DRDGold (JSE:DRD)

South African gold producer, DRDGold, is in collaboration with Zimbabwe-based Chizim Investments to explore 32 contiguous claims over 550 ha at the Leny claims, near the town of Norton, which lies close to Harare. Historic mines Ascot and Epsom are in the locality.

Initial exploration work by Chizim on two veins in 2009 showed grades varying from 5 to 25 g/t.

Earlier this year, the partners contracted Camden Geoserve to conduct an initial, 28-week programme that will include updating the sampling base of the known veins; geophysical exploration using induced polarisation; and selective trenching and drilling.

DRDGold has invested US$1 million, most of which is seed capital for the fledging Chizim Gold but US$0.27 million is dedicated to a diamond drilling programme to determine SAMREC/JORC-compliant resource by September 2010.

Company Reports

GAT Investments New Dawn Mining


GAT InvestmentsProject: Isabella oxides (100%) 6D Status: Depleting

Its main claim blocks are located in Matabeleland province, 80 km due north of Bulawayo. These properties were formerly owned by Anglo American Zimbabwe and the company acquired them through a management buyout in 2003. The Matabeleland properties consist of a total of 696 claims covering an area of 3,480 ha.

The Isabella EPO hosts three operating mines at Isabella, McCays and When grouped together, with Bubi (on the Gwizaan EPO) some 32 km away. These shallow (less than 30 m deep) open pit/ heap leach mines have produced some 230 koz of gold since start up by Anglo American in 1989.

McCays’ ore reserves were depleted by December 2002 and the company suspended mining at Bubi and When by May 2005, although it did continue with intermittent re-leaching of pads thereafter at the three mines.

Isabella, meanwhile, operated (mining and leaching) on a start-stop basis until October 2008, when all the processes at all the mines were stopped until April 2009. The company has produced 40 koz of gold from the four mines since the 2003 acquisition.

Each mine has heap leach facilities although Isabella is the site of the single elution and smelting plant. Isabella has an installed crushing plant with a capacity to treat 100 kt/mth of ore. Future production will be based on an installed crushing plant capacity of 80 kt/mth at McCays, When 15 kt/mth and Bubi 80 kt/mth. The mines are connected to the national electricity grid via 300 kVA transformers with a 150 kVA backup generator at Isabella.

When I visited in late July 2010, Isabella was the only plant operating, retreating heap leach dumps, although it was running well below rated capacity. Production for seven months in 2009 amounted to 120 kg (3.9 koz) at a cash cost of US$689/oz.

The short term production target at the Isabella plant is 175 kg/y (6 koz/y – it has operated at around 70 koz/y) from old heap leach dumps and some open pit oxide ore. Longer term, the company forecasts steady state production from oxides of 450 kg/y (approx 15 koz/y).

Current oxide reserves amount to 104 koz of

Corporate Details

Name GAT Investments (Private) Ltd

Registered Zimbabwe

Address 3 Cecil Rhodes Drive, Newlands, Harare, Zimbabwe

Telephone +263 4 788151

Fax +263 4 788156

Email [email protected]

Website na

Company Description

GAT Investments, a private Zimbabwean company, owns a number of gold mining operations and projects in Zimbabwe through local private entity, Bilboes Holdings (Private) Ltd.

The company’s short term business plan revolves around dump and oxide material treatment but the longer term future is dependent on the successful delineation and exploitation of sulphide mineralisation at these former Anglo American properties.

The company has a long term production target from its sulphide projects of 300 koz/y from a potential resource base of up to 6.5 Moz.

In total, the company holds 1,217 claims covering 6,086 ha in Matabeleland, Midlands and Manicaland provinces as well as 198,229 ha of exploration licenses under application within the same provinces, namely: Isabella, Gwizaan, Lower Gweru, Gweru and Mutare EPO applications..

Key Officers & Management (Bilboes)

Chairman: EdgarNyamupingidza,ChiefOperatingOfficerofKingdomFinancialHoldings,aZimbabweanfinancialservicesgroup. Group Chief Executive: Victor Gapare, led the management buyout of Bilboes in 2003 from Anglo American Corporation Zimbabwe Limited, current president of the Chamber of Mines of Zimbabwe. Technical Executive: Simba Chimedza. Projects Executive: Willie Cherewo. Non-executive directors: Washington Gapare, Jean Maguranyanga, Vulindlela Ndlovu, Duncan Smith, Michael Tapera.

Funding & Financial Position

In 2009, Bilboes reported revenue from gold sales of uS$3.8 millionwithagrossprofitofUS$1.7million.Thenetlossforthe year was uS$0.8 million. The company ended 2009 with a negative working capital position of uS$1.0 million.

The company is undertaking a private placement to raise uS$15 million, mainly to complete the work for bankable feasibility studies for the Sulphide and Gold Quarry projects as well as recapitalising its gold mines. The mines have a capacity to produce 15koz/yfromdumpsandoxidematerialforthenextfiveto10years.

The company, through Bilboes Holdings, hopes to undertake a stock exchange listing and an IPO in 2 years after successful completion of bankable feasibility studies to fund mine construction.


The flooded pit at McCays (photo: Paul Burton)

gold contained at an average grade of 0.67 g/t. Measured and Indicated resources are 79 koz at a grade of 0.50 g/t.

In order to reach planned output the company is looking to spend US$5 million on the oxide facilities, comprising new crushing plants at McCays and When (US$1.2 million); additional earthmoving equipment and refurbishment of process plants at all the mines (US$3.5 million) and heap leach pad extensions at Isabella and McCays (US$0.3 million).

The production schedule for the oxides is shown in the following table.

2009a 2010f 2011f 2012f 2013f 2014f

Tonnes treated (kt)

294 877 1,860 1,670 1,740 1,740

Gold (koz) 3.9 5.5 14.2 15.4 14.5 14.5

Cash costs (uS$/oz)

689 748 514 486 505 525

a= actual; f= forecast

Project: Sulphide (100%) Status: Definition

Although the continuing processing of oxide material should enable Bilboes to generate cashflow over the next few years, the longer term future of the operations in Matabeleland lies with the deeper sulphide resources.

The Isabella EPO is underlain by felsic and mafic schists and greywackes of the Upper and Lower Bulawayan volcanic units that form part of the Archaean Bubi greenstone belt. The area is transacted by three major structural faults with a number of associated splays which have controlled the mineral deposition. Mineralisation trends north east- south west and is truncated by fault splays and is hosted in a banded iron formation unit.

The Isabella mine mineralisation is located within a broad shear zone cutting through felsic schists close to the contact between the Bulawayan and Shamvaian units. Orebody widths range from 5 to


20 m and have strike lengths from 75 m up to 500 m. The oxide cap is deepest (between 12 and 40 m, with an average depth of 24 m) at Isabella. Sulphides throughout are predominantly pyrite and arsenopyrite and are refractory.

Isabella’s geological strike covers over 6 km of which 70% has been fully explored for oxides.

A December 2009, independent technical report by SRK Consulting confirmed significant sulphide resources drilled out on the Isabella, McCays and Bubi claims and also suggested considerable potential to upgrade these resources and delineate additional resources.

End-2009 Inferred resources, based on a 2 g/t cut-off, were 4.7 Mt at a grade of 3.49 g/t for 534 koz of gold contained down to a depth of 100 m. Beneath this, SRK identified an additional 3.5 Mt of ‘unclassified’ material at a grade of 2.11 g/t for 240 koz of gold contained.

The resource estimate is based on drilling

undertaken by previous owner Anglo American Zimbabwe between 1994-98, which consisted of 123 diamond drill holes (for 17,700 m) over a strike of 3.4 km and down to an average depth of 150 m.

Following its study of the data, SRK concluded that there is ‘potential to increase this (534 koz of Inferred) by 4 Moz through strike and depth extensions of the known open ended mineralisation.’ This potential comes out of a strike of 8.4 km to a depth of 300 m. Furthermore, the consultant inferred that out of this potential resource, about 1-2 Moz could be amenable to mining by open pit methods down to 100 m.

Accordingly, the company is planning to invest US$7.2 million over the next two years to explore systematically the sulphide potential and complete a bankable feasibility study.

The bulk of the money (US$5.4 million) will fund an exploration programme to include, as

Elution plant at Isabella (photo: Paul Burton)


recommended by the consultants’ study, infill drilling to upgrade the existing Inferred resource and to provide samples for metallurgical testing, as well drilling along strike down to a target depth of 300 m to expand the resource. The company plans to drill some 48,000 m in total.

The sulphides are known to be refractory so metallurgical test work will follow up on flotation, BIOX and ultra fine grind tests, some of which were conducted during the Anglo American era, and an amount of US$0.3 million has been budgeted for this.

At this stage, Bilboes is projecting production from the Sulphide project of 1,200 kg (39 koz) in four years time, building to 8,000 kg/y (257 koz/y) eight years’ out.

Project: Gold Quarry (100%) Status: Definition

Gold Quarry lies within the Mutare EPO application, which is located approximately 50 km east of the city of Mutare. The Manicaland properties consist of four claim blocks for a total of 59 claims covering an area of 296 ha. The company acquired the claims from Anglo American Zimbabwe in early 2006. Anglo American explored the area back in the 1960-70s after small mines worked the property sporadically in the first half of the twentieth century.

At Gold Quarry there is potential for both open pit oxide and underground sulphide mining, with silver as a by-product.

The claims are located within the Mutare Greenstone Belt, which strikes west to southwest as a narrow synclinal structure comprising ultramafic and mafic rocks of the Bulawayan group with banded iron formation intercalations overlain by sediments. Mineralisation within the Mutare greenstones is associated with shear zones which tend to be located along the contacts of the different lithological units and within the BIF.

Gold deposits are scattered throughout the belt within and surrounding quartz diorite stocks. Most have high silver content with associated lead, zinc and nickel. The sulphides present include galena, chalcopyrite, pyrite, pyrrhotite and arsenopyrite.

The 2009 SRK report determined a Measured

resource, in oxide and transition material, using historic drill data, over the Main, South and Woodstock areas containing just 40 koz at 0.81 g/t gold, but with 745 koz of silver in the Main zone.

However, the consultant has stated that it believes the potential for Gold Quarry and neighbouring claims is ‘between 0.5 and 1.5 Moz with a grade of between 3 and 4 g/t’, based on an assumption that mineralisation is continuous and to a depth of 400 m and with a strike length of 400 m.

SRK bases its estimation on two holes, which intersected sulphide mineralisation at a depth of 300 m but were not assayed, as well as the presence of four parallel zones of mineralisation at Gold Quarry which have only been partly explored and similar likely extensions at the adjacent Woodstock claims.

Based on these conclusions, Bilboes intends to initiate an exploration programme consisting of 6,000 m of drilling at a cost of US$0.5 million as part of a US$1.6 million investment to take the Gold Quarry project through to completion of a bankable feasibility study within 2 years.

Metallurgical work so far has shown that the ore is not refractory but that there may be recovery problems associated with the silver. Thus the company plans to take bulk samples to test gravity concentration for free gold recovery before cyanidation, with an option to agglomerate the fine ore.

The company is projecting first production from Gold Quarry after five years at a rate of 360 kg/y (approx 12 koz/y) rising to 2,100 kg/y (68 koz/y) from year eight.

Project: Exploration (100%) Status: Detection

The company has applied for Exclusive Prospecting Orders (EPOs) which consist of two contiguous areas in Matabeleland (Gwizaan and Isabella), another two in the Midlands Province (Gweru and Lower Gweru) and one in Manicaland (Mutare).

The EPOs have yet to be approved although the company applied for three of them back in 2003 and the remaining two a year later. The official government standpoint is that the company must demonstrate its technical ability to complete a


proposed exploration programme and raise the necessary finance for the exploration. So work cannot commence until the funds are raised. Statutory annual fees are up to date.

The company also owns 472 claims covering a total area of 2,310 ha in Matabeleland, Manicaland and Midlands.

Investment Comment by World Gold Analyst

On the Matabeleland claims, the company has • a reasonably-sized oxide reserve/resource that can be exploited relatively easily. Although the material is low grade there are no real mining costs involved and processing is straightforward. The company has a clear business plan to achieve a production rate of 15 koz/y from the oxides, but it will need to raise and spend US$5 million to bring the facilities fully on line.

Re-establishing the oxide processing would • generate cashflow and see the company moving into a profit situation in 2011 and for five years thereafter.

Longer term, the company’s growth into • a mid-tier gold producer, in world terms, depends on the successful development of the sulphide resources on the Matabeleland claims. Already, based on the work that Anglo American did, an independent consultant’s report has estimated over 0.5 Moz of Inferred resources. The company plans to upgrade these resources and expand exploration to cover the full 8.4 km of strike length of the mineralisation.

There are several points that make this • project interesting from an investment point of view. The first is that it was owned by Anglo American, which gives it credibility. A company the size of Anglo American does not invest in a short term, small oxide pit project. The company must have realised the longer term potential and clearly that’s why it drilled almost 18,000 m over 3.4 km to outline the sulphides. This exploration programme represents one of the few systematic drilling programmes to investigate and evaluate a deposit on a large scale that I came across in the country; and that’s the second point.

Thirdly, although, the extent of the work • has not allowed the independent consultant to define fully the scale of the deposit, it has given it enough confidence to suggest that the resource potential is probably some 3-5 Moz. That represents a sizable orebody by anybody’s standards. Finally, the depth of the sulphides is relatively shallow (the average depth of the oxide cap is only 24 m) and therefore the potential to develop a large open pit is very good. The consultant’s report suggests that there may be 1-2 Moz of gold that could be mined this way. The sulphide mineralisation is refractory and although these days that does not represent a technical challenge, it will add to the operating cost profile.

The company’s other project, Gold Quarry, • is at a much earlier stage than the Sulphide project in Matabeleland, and probably represents less of a compelling investment given that it appears to be smaller scale and lower grade. Nevertheless, the consultant’s report has indicated potential of 0.5-1.5 Moz in resources so it clearly warrants investigation.

The key with GAT (and Bilboes) is to • secure the necessary financing to enable it to proceed with its plans.

The management and technical team are • former Anglo American employees so are familiar with the projects. Both GAT and Bilboes are 100% owned Zimbabwean companies so there is no concern about compliance with indigenisation legislation.


New Dawn Mining The Central African Gold acquisition

In June this year, New Dawn acquired from the three largest shareholders of Central African Gold (CAG) – Emerging Capital Partners (50.0%), HBD Zim Investments Limited (28.2%) and Investec Asset Management (10.5%) – an 84.7% interest in Falcon Gold Zimbabwe Ltd (Golden Quarry, Venice & Dalny mines), which is listed on the Zimbabwe Stock Exchange, and a 100% interest in Olympus Gold Mines Ltd (Camperdown & Old Nic mines), a private Zimbabwean company.

Camp: Bulawayo Project: Turk/Angelus (100%) 6D Status: Depleting

In October 2008, after 12 years of production, the company was forced to put Turk on a care-and-maintenance basis following the Reserve Bank of Zimbabwe’s refusal to pay for the company’s gold production. In May 2009, the company restarted the operation and commenced a ramp up in production to a rate of 14-15 koz/y gold output, which it has struggled to maintain because of power shortages.

In the March 2010 quarter, Turk produced 3,395 oz of gold at a cash cost of US$653/oz. In the June quarter production fell to 3,243 oz, and costs rose to US$747/oz, as the mine suffered from unscheduled power shortages and had minor mill and pump repairs to undertake.

The company recently undertook a Phase 1 expansion of the mine and plant, including the installation of a third ball mill, the deepening and commissioning the Armenian shaft and the current installation of a new, larger crushing plant, to push the current processing capacity of 580 t/d (15 kt/mth) that at full power availability can produce around 17.5 koz/y of gold, which it hopes to attain by Q4 this year, to 23 koz/y of gold, which it hopes to achieve by mid to end next year.

This expansion had the further aim of allowing the operations some flexibility in an effort to maintain existing production rates when impacted by power outages and cuts that have burdened the industry. This strategy has achieved only limited success because, since late last year,

Corporate Details

Name New Dawn Mining Corp

Registered Canada

Address Suite 301 – 116 Simcoe St. Toronto, ON M5H 4E2, Canada

Telephone +1 (416) 585 7890

Fax +1 (416) 585 9801

Email [email protected]

Website www.newdawnmining.com

Share Information (close 27/8/10)

Listed TSX

Ticker ND

Shares in issue 38.0 million

Share price C$1.39

52-wk high: C$1.72 low: C$0.71

Market Cap C$53 million

Company Description

• Canadian-listedNewDawnMiningoperatesthe100%-ownedTurk mine and in mid-2010 completed the acquisition of several more historic mining projects with its acquisition of an 89% controlling interest in AIM-listed Central African Gold Plc (CAG).

• ItsTurkmine,whichitrestartedin2009,isexpandingoperations to a capacity of 23 koz/y and is working towards approximately 35-50 koz/y.

• WiththeacquisitionofCAG,thecompanygoalistoreachannualised gold production of 50-60 koz of gold within two years and 100 koz within 4 to 5 years.

• TheTurkmineisheldthroughalocal,wholly-ownedsubsidiary, Casmyn Mining Zimbabwe (Private) Ltd.

Key Officers & Management

President, chief executive officer, director:Ian Sanders, non-executive Chairman:Robert Weingarten, other directors: Divo Milan, Jon North, Phillip MacDonnell and Bryce Fort, chief financial officer: Graham Clow, investor relations: Richard Buzbuzian.

Funding & Financial Position

As at June 30, 2010, the company had cash of uS$4.9 million and short term debt of uS$0.5 million. For the nine months to end June, the company reported revenue of uS$11.3 million and net income of uS$0.3 million uS$0.01/share).

The company has only 38.0 million shares outstanding, which closed on the TSX at C$1.39/share on August 27, giving the company a market capitalisation of C$53 million.

The company is looking to raise a minimum of uS$10 million through a share placement.


0 250km

MAJOR TOWNS

MAJOR GOLD MINES(<10000KG AU)

CAG MINES

NEW DAWN MINE

GREENSTONE BELTS

BULAWAYO GOLD CAMP

GWERU GOLD CAMP

KADOMA GOLD CAMP

LEGEND

1

2

3

HWANGEHWANGE

BULAWAYOBULAWAYO

BEITBRIDGEBEITBRIDGE

GWERUGWERU

HARAREHARARE

Dalny MineDalny Mine

Venice MineVenice Mine

Golden Quarry MineGolden Quarry Mine

Camperdown MineCamperdown Mine

Old Nic MineOld Nic Mine



KARIBAKARIBA

MUTAREMUTARE

12

3

ZESA moved away from its agreed load shedding schedule and imposed random power cuts on the mine. Consequently, the company has decided to implement the expensive remedial option (US$1.2 million) of installing 3 MVA of diesel generating capacity as standby power.

Geologically the properties are located within the Bulawayo-Bubi greenstone belt that typically comprises volcanic and sedimentary successions. The mines are hosted by a large northeasterly striking shear zone, which dips steeply to the south within a typical Archaean greenstone succession of meta-sedimentary and meta-volcanic rocks.

Gold mineralisation occurs in a multiple shear system within this zone with six major mineralised shears and a number of splays, which strike over at least 800 m, persist to beyond a depth of 800 m and dip steeply to the south-southeast. Widths are variable and average around 2.5 m but splays or connecting structures converge to produce 15 m wide reefs in places.

New Dawn has accessed upper levels at the neighbouring Angelus mine from Turk and drilling in the section shows that a similar pattern of

multiple reefs and cross-linking structures is also present and that Angelus simply represents a faulted extension of the Turk structure.

Turk has reserves containing 167 koz of gold and M&I resources of 769 koz according to an SRK Consulting audit at the end of 2009 and as shown in the following table.

Category Tonnes (Mt)

Grade (g/t)

Gold (koz)

2P Reserves 1.32 3.92 167

M&I resources 4.81 4.98 769

Inferred resources 2.08 5.14 343Based on a cut-off of 2.45 g/t and a gold price of uS$875/oz.

The neighbouring Angelus mine has Indicated and Inferred resources totalling 59 koz of gold.

The company plans to expand operations at Turk/Angelus in Phase 2 essentially through working three areas on the property based around the existing Incline shaft (on the Turk property); the Angelus shaft to the east and the newly-renovated, shallower Armenian shaft to the west.

To expand from the current production rate to a milling capacity of 28-30 kt/mth, the company

Location of New Dawn’s camps and projects post the Central African Gold acquisition


will spend some US$7-8 million on increasing the hoist capacity, installing a new fine grinding mill (Deswik) and other equipment, such as compressors and underground equipment. This will be funded from cashflow and take gold production up to 35-50 koz/y.

Although it’s primary focus at this stage is on getting the operations bedded in at the current capacity rate and working on the expansion, New Dawn is starting to apply more time and resources on its exploration on the properties. The company is probing the lateral and down dip extensions of the gold lodes mined previously on shallower and deeper levels through cross-cutting and diamond drilling at Batyali and MVS-Armenian zones at Turk, and at Angelus.

Project: Old Nic (100%) Status: Depleting

The Old Nic Mine is situated on the eastern side of the city of Bulawayo, and is one of the oldest gold mines in Matabeleland. The mine has produced some 290 koz from high grade (9.4 g/t) ore but it is not regarded as a key asset because expansion potential is limited given its proximity to the city.

Camp: Gweru Project: Golden Quarry (75%) Status: Definition

The Golden Quarry mine complex consists of an open pit/heap leach and a higher grade underground mine feeding a CIL plant (which also processed higher grade ore from Camperdown), although neither are operational at present.

The Golden Quarry main ore deposit is located in a large shear in a structurally complex area, with considerable alteration of the host lithologies. The original rock types are from a greenstone assemblage, with evidence of ultramafic and mafic rocks and some intercalated sediments and local occurrences of banded iron formation and chert. However, owing to a lack of detailed geological mapping and drilling, the orebody is not well understood.

The hoisting capacity is 10 kt/mth, although the plant can treat up to 20 kt/mth. Management will re-commission the plant and has blocked out eighteen months of ore to feed the mill at 7-8 kt/mth to produce 1,200 oz/mth or 14 koz/y.

The mine has a very small global resource delineated underground (70 koz), which will

Shaft and ore silo at Turk mine (photo: Paul Burton)


supply some 40% of the mill feed with the rest originating from other, as yet undelineated, resources. Once the plant is fully utilized it is expected to produce approximately 14 koz/y.

To this end the company is proposing a trenching programme on the main shear zone strike where illegal miners (makorakoza) are working and will also explore at the Santoy/Santoy West claims to the north.

Project: Camperdown (100%) Status: Definition

The Camperdown mine is situated approximately 30 km southeast of Gweru, 5 km from Golden Quarry. The orebody previously produced ore material from both a dual open pit and an underground mining operation, with the higher grade ore sent for treatment at the Golden Quarry plant and lower grade oxides treated on site.

Camperdown has a total M&I resource of 270 koz, of which 183 koz is open pit oxides and surface dump material.

The mine lies in part of the Shurugwi Schist Belt that is a sedimentary succession of conglomerates, grits, phyllites, sandstones, and banded ironstones (BIF) that gives rise to a small range of hills north of Shurugwi. The most important ore source in the underground mine was the Collingwood Leader. The BIF, which is exposed in the open pit, dips gently to the northwest and east, forming a flat arch with folding towards the south-east portion of the pit. The ‘Brown’ dyke and another felsic dyke are main control features on gold deposition.

The deposit is not well understood as under Falgold’s ownership the only exploration was underground development, although re-interpretation of old data has led to a new model of the BIF ‘arch structure’.

Accordingly, the company is planning a 4,000 m Phase 1 drilling programme (25 diamond holes and 75 RC holes) to fully investigate the potential. The plan may involve the building of a modular CIL plant to treat tailings ore sources within the region at a rate of 70-90 kt/mth for 5-6 years, at an estimated capital cost of US$4-5 million.

Once a larger ore resource is defined at the Camperdown and nearby deposits like Golden Quarry, then a crushing and milling circuit would be added to the tailings CIL plant.

A recent independent technical report

recommended an open pit survey to map out the extent of the quartz veins and re-assess the extent of the important Collingwood Leader.

In the short term, the company’s plan is to generate cashflow by processing dump material from the old Wanderers mine (4.5 Mt at a grade of 0.64 g/t for around 90 koz gold contained), which lies on the property. This, along with a smaller dump, has the potential to produce 20-25 koz/y of gold.

Camp: Kadoma Project: Dalny (75%) Status: Definition

The Dalny mine complex is situated 36 km north of Kadoma in the Chakari district, approximately 175 km southwest of the capital, Harare. The property consists of greater than 3,500 claims covering a strike length of some 25 km.

Historical production (to 2006) was 2.4 Moz of gold from 10.2 Mt of ore treated at a grade of 7.42 g/t. Power is supplied by ZESA.

The mine operated as an underground mine with numerous vertical shafts feeding a flotation/roaster plant. At its peak the operation produced 50-60 koz/y, with the Dalny mine the largest, although most recently Arlandzer, Turkoise and the Dawn-Brilliant mines were being worked. In recent years, Dalny has treated dump material at a separate leach plant onsite.

The Dalny complex is located on the north-western limb of the plunging Kadoma anticline and is hosted by andesitic to basaltic lavas of the Upper Bulawayan System that is Archaean in age. Several intrusive quartz porphyries and dolerite dykes of different ages crop out in the area.

A strong structural control has given rise to mineralised zones oriented along a northeast to southwest strike with a steep dip towards the west. Most of the mineralised deposits situated west of the Chevy Chase fault (Arlandzer, Turkoise and Dalny) are predominately of the replacement type, whilst those to the east tend to be narrow quartz veins with erratic gold distributions, eg Chadshunt, Double H, Cheshire Cat and Dawn-Brilliant.

The most common sulphides are pyrite and arsenopyrite, which extend into the schistose country rock surrounding the narrow, gold-rich part. Although most of the gold is very fine grained and associated with the sulphides, coarse gold has been observed.


According to a recent independent NI 43-101 report, M&I resources contain 337 koz of gold, 164 koz of which are located underground (at grades between 5.73 g/t and 7.87 g/t), with the remaining 173 koz in surface dumps (at a grade of 0.67 g/t).

The site has potential for short term dump retreatment but the longer term attraction is for recommencement of underground mining and possible open pit opportunities along the strike of the shear zone.

The W14 shaft had a capacity 18 kt/mth and the company plans to dewater the shaft and use it again as a production shaft. In addition, by spending around US$250,000, the existing plant can be brought back into operation at around 9 kt/mth.

The company will investigate the potential to not only mine multiple reef systems underground (Dalny mineralisation extends down to 38 level at 1,500 m) but also the ‘halos’ of lower grade gold mineralisation that the old timers missed when following the quartz vein systems. Surface work at Colne/Stella has showed that high grade reefs have lower grade in between, over a total width of 12-15 m. This sequence is replicated underground (at 60 m depth) but the old miners only mined the two high grade reefs, so management is working on the theory that there may be economic grade in between, which opens up the possibility of bulk mining over a potential 1 km strike.

Recent structural remote sensing work (using QuickBird high-resolution earth observation satellite in conjunction with Aster image interpretation) led to a new geological map, which has picked up structure and identified changes in shears (E-W) which have potential for duplex reef structures. It also clearly picked out potential drill targets in areas where illegal miners are working.

There are also thought to be open pit opportunities at Colne, Maldon and Arlandzer where near-surface mineralisation remains intact.

The company plans to conduct an audit of geological information for the Dalny complex and explore some of the shallower mines that have been redundant for years, such as Dalny, Pixy and Stella.

Project: Venice (75%) 6D Status: Definition

Venice is situated approximately 28 km south of Kadoma and consists of over 2,500 claims that have numerous exploration targets. Historical

production (to 2002) was 318 koz of gold from 2.5 Mt of ore treated at a grade of 3.77 g/t. The mine complex has a metallurgical facility that has capacity to process 18 kt/mth.

The property is considered geologically very prospective, although the reef geometry is complex and the shaft is flooded. Near term potential lies with the retreatment of a 1.8 Mt dump using hydraulic sluices utilising water from underground at a treatment rate of 30 kt/mth over a 4 year period.

Project: Other properties Status: Definition/Discovery

In the Gweru camp, the company has options at Ladville (Ashtonkop and Altimus claims) and Basil Payne, all former mining areas.

At Altimus, the company has completed 3,000 m of trenching on a broad geochemical anomaly.

Other potential within the camp exists to the north where New Dawn has options on the RKB property and will conduct trenching on 7.2 km of BIF strike

New Dawn is in discussions with a company for a regional dump processing project.

Investment Comment by World Gold Analyst

The company completed the acquisition of • CAG through the issuance of 3.5 million shares with an equivalent value of roughly C$4 million. In addition, New Dawn effectively settled the debt owed to the three shareholding groups by CAG through issuing a further 5.3 million shares and 2.2 million, 4-year warrants with an exercise price of C$2.00/share. As a consequence, US firm, Emerging Capital Partners, is now the third largest shareholder in New Dawn with a 12.8% interest.

Although the new assets will need some • not-inconsequential refurbishment work, this move will give the company the opportunity to grow at a much faster rate than organically from its own projects. The potential offered by these new assets, particularly in the Kadoma camp, will show this acquisition to be great value in the longer term. It also establishes New Dawn as the prime consolidator in the burgeoning Zimbabwe gold landscape.


There was an immediate outcry from the • government over New Dawn’s acquisition of CAG with the claim that it “did not comply with empowerment regulations and threatened Zimbabwe’s security and economic interests”. There should be no concern for investors on this. Management has had discussions with government officials and explained New Dawn’s long presence in Zimbabwe through Casmyn Mining and the fact that the chief executive is a Zimbabwean national and lives in Bulawyo. Furthermore, the acquisition is unlikely to fall foul of the Competition Act of Zimbabwe.

At its original operating property, Turk/• Angelus, there is potential to expand the mining focus to additional lodes as past mining at Angelus only exploited one lode (the miners worked two at Turk). Also, historic mining operations worked to a depth of 800 m and with current mining no deeper than 200 m this suggests that there is scope to develop deeper parts of the mine property.

Exploration work could open up significantly • more resources according to SRK Consulting. In a December 2008 independent report, the consultant states “SRK are of the opinion that it is not unreasonable to expect that between 1.5 and 2 million ounces at a grade of between 4.0 and 4.5 g/t will eventually be mined at Turk and Angelus Mines, excluding the current Resource and Reserve inventory...”.

With the installation of power generators at • Turk, the company should be able to reach its current capacity and then to expand operations up to the intended 35-50 koz/y level. Importantly, New Dawn does not have to really on outside funding for this expansion – it will be funded from cashflow.

At the Kadoma camp, the potential is good • to look at bulk mining opportunities once the company has completed a full geological investigation. There is underground potential to mine two parallel reefs and the halo in between. In some case the same reef orientation is relatively close to surface so may be amenable to open pit mining.

The company is looking to raise a • minimum of US$10 million (possibly up to US$25 million) – US$3 million for accrual payable for Falgold; US$2 million for working cap to rejuvenate existing ops; US$5 million to new compressors and equipment to take production up to 50-60 koz/y over next 18 months for all ops.

In October last year, New Dawn managed to • sell the bond secured from the Reserve Bank of Zimbabwe in lieu of payment for gold sales in 2008 for the sum of US$2.4 million. Other companies are still waiting for the RBZ to honour it’s bonds.

The company is listed in Canada and has • access to capital markets. After the CAG acquisition it still only has 38 million shares outstanding.


Headgear at Dalny (photo: Paul Burton)


Company Index

African Consolidated Resources 76-77

Caledonia Mining Corp 51-53

Cape Range Ltd 77-78

Carslone 53

Chizim Investments 78

Conquest Resources 78

DRDGold 78

Duration Gold 53-58

FA Stewart and Son 58

GAT Investments 58-61, 81-85

John Mack 61

Metallon Gold 61-64

Mwana Africa 64-67

New Dawn Mining 67-71, 87-92

Ox Mining 78

RioZim 72-73

Zimbabwe Mining Development Corporation 73


Appendix: 5-year production history by mine

Gold production (koz)

Mine 2006 2007 2008 2009 2010 (H1)

Ardcor Ltd + Bilbos Holding 0 0 na 0 0

Ashanti 9 1 na 3 9

Bayham Mining 0 0 na 0 0

Boreal Investments 0 0 na 0 0

Boulder Mining 0 0 na 0 0

BronfieldMines 2 2 na 0 0

Calcite 3 3 na 4 1

Caledonia Holdings Zimbabwe 24 12 na 10 7

Canterbury Mining 1 0 na 0 0

Carslone enterprises na 4 na 2 1

Casmyn 13 12 na 10 7

Delta Gold Zimbabwe na 1 na 0 0

DTZ - OZGEO na na na 7 4

Duration Gold na 2 na 2 8

Exmine Syndicate 0 0 na 0 0

F A Stewart 4 3 na 2 2

Falcon Gold 16 10 na 0 0

Forbes & Thompson 15 12 na 10 na

Harris J E 0 0 na 0 0

Horn Mine 0 0 na 0 0

Hunderson And Sons 1 2 na 1 0

John Mack & Company 11 8 na 3 2

Knobthorn Mining 0 0 na 0 0

LE Starling 1 1 na 0 0

Maligreen 0 0 na 0 0

Metallon Gold Zimbabwe 131 68 na 18 22

Olympus Gold Mine 4 4 na 1 1

P E Steyn 0 0 na 0 0

Pan African Mining 10 4 na 6 6

Pegolin Mining Ltd 0 0 na 0 0

RIOZIM 22 20 na 24 9

Sabi Consolidated 17 12 na 5 4

Sebwe Investments 0 0 na na na

Tiger Reef 0 0 na 0 0

Total Large Producers 291 182 81 108 70

Total Small Producers 18 7 0 1 1

Custom Millers 31 14 13 23 18

Other producers 5 3 4 2 2

By-product from platinum 19 19 15 26 14

Total Gold Production 365 226 112 160 105


Makorakoza at one of Duration Gold’s pits Examining vein contact underground at Turk (courtesy New Dawn Mining)

Mine geologists and miners underground at Turk (courtesy New Dawn Mining)

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