B2Gold of Canada is considering buying an idle Zimbabwean gold mine, if it can be exempted from a law that requires producers to sell all the metal to the country’s central bank, people familiar with the situation said.
Securing an exemption may open the way for further investment by gold producers in the country, where a number of companies have closed mines because of the sales requirements and Zimbabwe’s economic crisis.
If a transaction with owner Metallon is concluded, B2Gold will invest $150m to $200m developing the Shamva gold mine, one of the people said. The Vancouver-based company will pay about a third of the book value for the mine, which was last assessed at about $167m seven years ago.
John Mangudya, the central bank governor, was unavailable to comment. A B2Gold spokesperson had no immediate comment, while a spokesperson for Metallon declined to comment.
The purchase would be an unusual investment in Zimbabwe’s struggling gold sector, with the two biggest producers, Metallon and RioZim, suing the central bank over its payment arrangements.
By law, gold miners in the country must sell their gold to a unit of the central bank, which then pays them back partly in dollars and partly in a local quasi-currency that cannot be traded outside Zimbabwe. Both companies have sued the central bank over the currency they are remunerated in and over late payments.
Earlier in 2019, RioZim suspended its gold mines temporarily because it was not getting paid and Metallon shuttered three operations in 2018 for the same reason, leaving it with a single mine.
A large portion of Zimbabwe gold is produced by artisanal miners and much of it is smuggled out the country. Zimbabwe is in the midst of an economic crisis with shortages of fuel, medicine and foreign currency being commonplace.
B2Gold officials have visited Zimbabwe several times in a bid to conclude the sale, one of the people said. The shares fell as much as 1.2% in Toronto Thursday after initially rising 3.3%.
Shamva gold mine, about 90km northeast of the capital Harare, is an underground operation that produced 21,061oz of gold in 2016, according to Metallon’s website.-Bloomberg