Zimbabwe gold mining still a big risk

A healthy scepticism might well be the most appropriate approach when one is asked to believe that Zimbabwe is again becoming an attractive gold mining investment target.

You only have to look at the diamond mining at Marange/Chiadzwa in the eastern part of the country to understand that Zimbabwe remains prey to violent and powerful kleptocrats. The diamond deposits were "stolen" from their foreign owners and eventually brought under the exploitative control of local warlords. But let's move on.

A recent report by London metals consultancy GFMS World Gold on the current state and potential of Zimbabwe's gold mining industry suggests that what is happening in diamonds might not hold true for the country's gold resources. The report was largely sponsored by the Chamber of Mines of Zimbabwe, which, of course, has an interest in seeing the country's mining industry revivified. But that sponsorship should not be seen as detracting from the report's fresh insights.

Fundamentally, Zimbabwe's gold-bearing greenstone belts hosted by the Zimbabwe craton that stretch across the country are highly prospective for gold - witness the hundreds of small mines, mostly now closed, that are peppered across the country.

The report draws parallels with the mineralisation of the Yilgarn greenstones in Australia and the Abitibi ones in Canada. Both of these are host to major gold mines. But this followed years of small-scale operations before mines were merged to create the economies of scale that allow lower-grade ores to be exploited profitably.

The report suggests Zimbabwe's need for a different approach, to learn from Australia and Canada, and cites the Dalny mine owned by New Dawn Mining, which is investigating the viability of bulk mining across multiple gold reefs and of the "haloes" of lower-grade mineralisation ignored by old-time miners following rich reefs.

All of which is fine in theory. Zimbabwe's gold producers closed down in droves since the turn of the century as widespread electricity disruptions blanketed the country, as the central bank insisted on taking bullion, sometimes paying in Zimbabwean dollars or in bonds that have yet to be redeemed even though they are long past their maturity date.

Since then a couple of things have happened to bring about something of a renaissance. Zimbabwe now operates with US dollars and rands (and the gold miners are supposedly allowed to keep their dollars).

Yes, you might ask, but what happens when party-loyalist kleptocrats decide to grab the mines just as they have done with the commercial farms? The glib proposal in the GFMS report is that this cohort will ensure that sensible economic policies are implemented.

DRDGold is one that is dipping its toes into Zimbabwe's gold waters, funding an exploration programme with local partners. It is a comparatively inexpensive entrée into a jurisdiction that might turn up trumps.

For what it is worth, Mugabe regime honchos regularly point out that no Zimbabwean mine has ever been nationalised without compensation. That is a comforting thought.