Bulls to charge into Zimbabwe gold stocks

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BY SHAME MAKOSHORI
BULLS will aggressively charge into Zimbabwe’s gold stocks this year, as investors pile up trades, attracted by strong international commodity prices, according to new projections by Inter Horizon Securities (IH).

It said the charge would be relentless and bulls would be unblinking, but warned investors to guard against over excitement.

The country’s two bourses, Victoria Falls Stock Exchange (VFEX) and the Zimbabwe Stock Exchange (ZSE) have recently hit a bad patch after driving market capitalisations up during most of the first half.

But the influential IH says gold stocks would rebound as mines ramp output, giving them impetus to lift profits and scale up dividend pay outs.

The paper, which estimates that about US$320 million has been injected to revive old gold mines, wants investors to pick the best run gold counters.

Caledonia Mining Corporation, which listed on VFEX last year has completed Blanket Mine’s flagship Central Shaft after spending US$67 million to ramp up output.

Following a US$180 million injection, Shamva Mine is returning to production, while How Mine has laid out a fresh expansion plan after a US$5 million fresh capital injection.

There has a US$17 million injection into a key plant at ZSE listed gold producer RioZim, while Padenga Holdings has brought back Eureka Gold Mine to full production after a US$51 million spend.

“From a stock market perspective, we are in favour of companies with strong financial positions that give room for investment in output growth during seasons of high commodity prices and also provide a cushion to ride out rockier periods for the underlying commodities,” IH said

Its new report titled ‘Zimbabwe Equity Research – Mining Sector.

“We are attracted to companies with a culture of management execution, transparency and creation of value for the shareholder. Gold mining stocks are particularly appealing in the present environment given that the underlying mineral thrives in periods of global uncertainty. The possibility of a global recession and a weak United States dollar is expected to support gold prices in 2022,” IH said.

Caledonia on Tuesday added excitement to IH’s optimism, saying in a shareholder update it was on track to hit the 80 000 ounces as planned.

“Gold production so far this year has been strong, and we are on track to hit the top end of our guidance range of 73 000 to 80 000 ounces,” chief executive officer Mark Learmonth said.

“Although the dividend continues to be a central part of our strategy, I am very excited with the opportunity that we have to evolve our business in Zimbabwe and de-risk it from being a single asset producer. I look forward to updating the market of our progress in due course.”

Last month, Zimbabwe’s gold mines will rise to 60 tonnes in the next five years, generating US$3,5 billion at current prices, the Gold Producers Association of Zimbabwe said Thursday, before outlining a range of factors that could hold back the positive trajectory.

The 60-tonne target would be 74% higher than 35 tonnes of gold projected to be extracted by end of this year, and double 31,5 tonne of gold mined in 2021, association president Qhubeka Nkomo said as the industry kicked off this year’s annual mining conference.

Until pandemic curbs rattled the industry in 2020, the industry had been on an upward trajectory, scaling up output to 35 tonnes in 2018, from 3,6 tonnes at the height of Zimbabwe’s hyperinflation indued economic upheavals in 2008, according to Qubeka Nkomo, whose presentation was a highlight of a special symposium on gold mining that ran during the conference.

Extensive pandemic induced dislocations in global supply chains from 2020, along with pandemic inspired hard lockdowns forced international freightliners to dock ships under efforts to prevent deadly contagion as millions contracted the disease.

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