Harare — AIM-listed mining group, Mwana Africa Plc has announced plans to sell a portion of its stake in Freda Rebecca gold mine to a local investor under a move that could in part fulfil the country's economic empowerment law.

Freda Rebecca is one of Mwana Africa's mining assets in Zimbabwe which consist largely of nickel interests. In its annual report to shareholders released last week, the mining group said: "Mwana Africa announced in March 2009 its intention to restart production at the Freda Rebecca gold mine in Zimbabwe, and has committed to sell a 15 percent stake to a local investor."

It did not say, however, if it had already identified a suitable local investor or if it was going to rely on a database of potential suitors from the government.

Freda Rebecca mine is situated in the town of Bindura and was acquired by Mwana Africa in April 2005. The mine was returned to production in October last year following a long period of care and maintenance. The gold mining company's parent shareholder said terms for a US$10 million finance facility from South Africa's Industrial Develo-pment Corporation (IDC) had been finally agreed, with formal documentation of the conditional loan facility signed in March this year.

"The board of the IDC has since approved the final terms of the facility, and the environmental management plan for the mining operations at Freda Rebecca has been completed to the IDC's satisfaction."

"Drawdown of the facility remains subject to certain conditions, most notably the provision by the Expert Credit Insurance Corporation of political risk insurance for the facility, which is itself subject to ratification of the Bilateral Investment Protection and Promotion Agreement (BIPPA) between Zimbabwe and South Africa. The agreement is aimed at providing security of tenure to South African investments in Zimbabwe, and Zimbabwean investments in South Africa," said Mwana Africa.

The BIPPA was signed by the respective governments of Zimbabwe and South Africa in November last year, and was ratified by the government of Zimbabwe on May 11, 2010. In South Africa, the agreement was adopted by the Portfolio Committee on Trade and Industry in the National Assembly and by the Select Committee on Trade and International Relations in the National Council of Provinces.

"Mwana Africa expects that, in the coming weeks, the instrument will be put forward for adoption by the South African parliament, after which notice of the agreement's ratification will complete the process. "Additionally, the External Loans Coordinating Comm-ittee (ELCC) of the Reserve Bank of Zimbabwe had 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 ELCC and IDC to agree on amendments to the security package, compliant with the current exchange co-ntrol regulations in Zimbabwe," said Mwana Africa.

Mwana Africa said a programme of dewatering of the underground mining areas, together with the rehabilitation of underground trackless equipment, was successfully completed during the year.

"In addition, the first phase of a two-phase refurbishment programme at the processing plant was concluded. The first commercial pour of gold following completion of phase one of the re-commissioning program-me took place on 13 October 2009. During the year, 8,550 ounces of gold were produced, realising average sales proceeds of US$1,116 per ounce," the company an-nounced.

The milling, leaching and gold winning circuits had demonstrated their ability to meet the projected throughput requirements for the first phase of the refurbishment, the company said.

"However, poor reliability, and hence availability of the underground vehicle fleet, resulted in under production of ore from the mine. In order to make use of spare plant capacity, material from lower grade surface stockpiles has been processed.

"This has resulted in a lowering of the overall average feed grade achieved. Steps have been taken subsequently to increase the fleet capacity, including the purchase of two additional B30D articulated dump trucks," said the company statement.

Gold sales of 8,550 ounces, at an average of US$1,116 per ounce, generated revenue of £6,0 million, including by-product sales and net of royalties and marketing costs. There had been no sale last year. Operating costs during the period increased in line with the ramp up of operations, and totalled £9,7 million for the year, against £0,5 million the previous year.

Further capital expenditure of £2,2 million was incurred on the first phase of the refurbishment programme at Freda Rebecca. Working capital movements, including loans advanced to Freda Rebecca by Mwana Africa, resulted in a cash inflow of £6,8 million.

Non-current assets increa-sed to £13,2 million as a result of the continued investment in the refurbishment of the mine and plant, and the addition of environmental assets.

Current assets increased as a result of the increase in debtors following the return to production, and in line with the increase in spares inventory. Creditors increased in line with the greater expenditure at the mine and in accordance with creditor payment terms, and as a result of loans advanced by Mwana Africa.