Published by the government of Zimbabwe
Walter Muchinguri
6 November 2009
Harare — THE Industrial Development Corporation of South Africa has approved the provision of up to US$10 million debt funding for the Freda Rebecca gold mine in Zimbabwe.
Freda's parent company Mwana Africa Plc announced yesterday that the provision of the loan facility is expected to accelerate the implementation of the mine's refurbishment programme.
The refurbishment is expected to result in an increase in production in excess of 50 000 ounces of gold per year on the completion of Phase II.
Mwana said funding will be made available in two tranches with the first one of up to US$4 million, funding the remaining working capital requirements of Phase I.
The balance will be applied to the capital expenditure and working capital requirements of Phase II.
Phase II involves the rehabilitation of the second milling circuit and an increase in the capacity of underground mining equipment.
Mwana's chief executive Mr Kalaa Mpinga said: "We are delighted that the IDC is supporting our project, and we are hopeful that this will be a catalyst for further investment into the country.
"The IDC's involvement in the project will allow us to accelerate the implementation of the second phase of our refurbishment programme, which is planned to increase production from the mine to approximately 50 000 ounces of gold per year."
The loan is repayable in 10 equal installments over a five-year period and attracts interest at US$LIBOR plus 5 percent.
LIBOR is the interest rate that banks charge each other for one-month, three-month, six-month and one-year loans.
The funding is subject to loan documentation and fulfillment of certain customary conditions precedent including, but not limited to: the provision by the Export Credit Insurance Corporation of South Africa of political risk insurance and the provision of a detailed environmental management plan for the mining operations.
Mwana Africa PLC will provide a parent company guarantee covering the first tranche of funding until such time as the above conditions precedent are fulfilled.
Freda Rebecca has produced 1 081 ounces of gold since October 13 when it resumed operations.
During the first pour on that day it produced 180 ounces of gold ore.
Production rates from Phase 1 are forecast to increase to 30 000 ounces of gold annually by the end of this year.
Freda suspended mining operations in 2007 and was subsequently placed under care and maintenance due to viability challenges.
Mwana acquired a 100 percent stake in Freda in April 2005 from AngloGold Ashanti for US$2,5 million with an obligation to sell 15 percent to a local investor.
Since then Mwana has invested in excess of US$7 million in refurbishing the transportation and processing facilities.
As of December 2006, Freda hosted a proven plus probable reserve of 348 000 ounces of gold and one million ounces of measured and indicated resources.
In 2007, Mwana estimated that the mine could operate at a rate of 60 000 tonnes per annum, producing approximately 48 000 ounces of gold yearly.
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