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Enacy Mapakame
Shareholders of Padenga Holdings yesterday approved the proposal to acquire a 50,1 percent stake in gold mining firm Dallaglio Investments.

At an EGM held in Harare yesterday, Padenga shareholders agreed to the transaction which will see the company acquire 9 036 shares in Dallaglio which will be settled by way of a cash injection of $90,36 a share and an equivalent of US$19 million to be paid in kind by delivery of mining equipment at Dallaglio.

The deal now awaits regulatory approval and is expected to boost the crocodile breeder’s export earnings as gold remains a competitive commodity.

Dallanglio, was incorporated in Zimbabwe in 2005 and owns Pickstone Peerless Mine near Chegutu which produces approximately 61 kg to 65 kg of gold a month.

The group also owns Eureka Mine near Guruve, an open pit gold mine currently under development set for a 2020 commissioning and anticipated to produce 140 kg a month. These assets have a total measured and indicated resource of 1,6 million ounces, and a total resource of 2,2 million ounces in its 2018 financial year.

In 2018, Pickstone recorded a US$26,7 million turnover and profit after tax of US$2,7 million.

According to Padenga, diversifying into gold mine will help reduce concentration risk as the company looks for alternative export oriented businesses.

In a circular prior the EGM, Padenga said the company: “… seeks to reduce this concentration risk through diversification into alternative, export oriented business, and has identified 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 mining to produce hard currency which is not readily available in the local Zimbabwe market.”

Padenga is highly concentrated export business with virtually all revenue coming from crocodile skin sales, with, to some extent, a small portion from crocodile meat sales into the European Union.

The company was originally concentrated in Nile crocodile production but diversified in 2012 to include the alligator production in United States of America. According to Padenga, although the business is growing, it represented only 9 percent to the group’s revenue in 2018.

According to Padenga, the firm has a significant client concentration risk, with 79 percent of sales in 2018 being ultimately to one luxury goods brand in Europe and its product and customer concentration risk has been worsened by the nature of its core product.