The quality of Mwana Africa’s Freda Rebecca gold mine in Zimbabwe is such that on one site visit a few years ago one analyst wondered why on earth the company was bothering with its other major asset – a nickel business at all. That same analyst also took his clients out of Northland Resources well in advance of one of the more spectacular mining busts to have hit the market since the crash swept away most of the obvious dross and froth back in 2009.
But the simple answer to the question is: ambition. Yes, with its annualised gold production at just under 60,000 ounces (according to the latest figures) Freda Rebecca makes a comfortable profit, even with gold wavering at around US$1,200. This was a mine that got restarted in the middle part of the last decade, when the boom was not yet long-in the tooth, and it’s designed to withstand tougher gold markets than this.
But all told, it’s not really rocking anyone’s world. Sometimes it even disappoints on the downside, as in the case of the most recent quarterlies, which showed a production dip from 16,555 ounces in the preceding quarter to 14,298. That puts unit costs up, and makes it less of an obvious winner.
The nickel project is what will make Mwana into the regional player that chief executive Kalaa Mpinga hopes that it will one day become. Mining was restarted at Trojan a couple of years ago, but that’s just the beginning. The current operation doesn’t make a great deal of money given that the nickel price has now dropped back again from the highs of last year, and given the complicated structure of the off-take deal currently in place with Glencore.
But even as we speak Mwana is in the final stages of putting a bond in place that will go towards financing the next stage of development at the Trojan site – the reactivation of the Bindura smelter. That will allow the company to ditch the Glencore deal with its onerous terms and keep more of the value add for itself. That’s not insignificant in a nickel market that’s no longer quite so buoyant as it was, but there’s more to it than that.
Once upon a time Bindura was one of the major smelting and refining destinations in Southern Africa. The steel frameworks housing the old furnaces are still there to prove it, as are the electro-winning vats. If Mwana could eventually reactivate the refining side too, then as a company it could become a real regional force. That’s ambition. And that’s why, although Freda Rebecca is a good little mine with healthy enough cashflow, the company is pressing on with its nickel plans.
Kalaa Mpinga is playing the long game. And it’s by no means over yet.