BUSINESS REPORTER
Padenga Holdings is looking up to gold to provide a buffer in a rainy day after the yellow metal glittered in the third quarter to September 30 contributing 70% of the group’s revenue.
In August, Padenga completed the acquisition of 50.1% stake in gold producer Dallaglio Investments as it diversifies its revenue stream and reduce reliance on crocodilian skin sales.
In a trading update for third quarter ended September 30, Padenga said revenue was up 221% with the mining business contributing 70%. Dallaglio’s sales volumes for the nine months to September 30,2020, increased by 20% to 544.2kg from 452.8kg.
The spot price of gold firmed by 27% to an average of US$1,735 per ounce year to date from an average ofUS$1,364 per ounce, Padenga said.
“Gold production volumes at Pickstone Peerless will exceed prior year.
This coupled with the increased gold spot prices means that gold will help the group ride the difficult trading conditions in the crocodilian business,” the company said in a trading update.
It said Covid-19 related disruptions impacted sales of crocodile and alligator skins with “no meaningful turnover being realised since April”.
The alligator skin market, Padenga said, was particularly weak as a “consequence of cyclical over production compounded by the market depression resulting from the Covid-19 pandemic”.
The depressed demand for alligator skins will adversely impact volumes and prices for the next two to three years adding that production was being adjusted to produce the exact sizes and the numbers that customers still in the market require, the Zimbabwe Stock Exchange-listed firm said.
However, the alligator business is unlikely to meet its financial targets for the year.
Padenga ventured into gold after acquiring a controlling shareholding in Dallaglio to diversify its revenue streams.
In a circular to shareholders to approve the acquisition, Padenga said it had a highly concentrated export business with virtually all its revenue streams coming from skin sales.
Padenga used to rely on Nile crocodile production until 2012 when it ventured into alligators following the acquisition of Lone Star Alligator Farm in the United States. It was renamed Tallow Creek Ranch.
In 2018, the business contributed 9% to Padenga’s revenue. Padenga ventured into gold to reduce client concentration risk as 79% of sales in 2018 were to one luxury goods brand in Europe.
It sees the gold mining sector as attractive from a long term perspective, particularly, in respect of the historic world-wide demand for gold and the capacity for gold to produce hard currency which is not readily available in the Zimbabwean market.
Dallaglio capital expenditure for the period under review focused on rehabilitation project at Delta Gold’s Eureka Mine in Guruve where US$15,189,745 was spent on the project in the nine months to September.
This was in addition to the US$7,886,026 spent last year.
Padenga said a further US$26,300,658 would be spent on the project before commissioning.
“The rehabilitation of Eureka Mine is on schedule for completion mid-2021 and will significantly increase gold production volumes and profits for the group,” Padenga said.
