AUSTRALIA-BASED ElDore Mining Corporation looks to join the ranks of Zimbabwe’s gold producers with the acquisition of Lonely Gold Mine for US$4.4 million in a cash and equity deal.
ElDore Mining’s announcement comes at a time of renewed interest in the mining sector despite concerns over the country’s controversial economic empowerment policies and the recent huge increases in royalty fees and other levies.
Lonely Gold Mine, located about 80 kilometres north of Bulawayo in the gold-producing Bubi greenstone belt, was the country’s largest single gold producer until its closure in the mid-1990s. It has historical underground production of up to 1.1 million ounces of gold.
In a statement this week, ElDore said it plans to determine the potential to restart operations at the mine along with discovering the size and scale of operations and exploration prospects.
Due diligence will be carried out over the next 60 days and the company will seek shareholder and regulatory approval for the acquisition.
ElDore will pay the seller US$2.4 million in cash and US$2 million in shares.
Half of the shares will be payable upon settlement and the other half on first production pour of 20kg, or 643 ounces, of gold.
Officials said the same milestones will determine the cash payment with US$500,000 paid on settlement and US$1.9 million on gold pour.
ElDore also has operations in the West African country of Burkina Faso as well as Papua New Guinea and Romania.
The mining sector has been the key driver of economic recovery over the last few years, buoyed by better commodity prices on the world market and a more liberalised local operating environment.
Government officials say the sector grew by 25.8 percent in 2011 and is projected to expand by another 15.9 percent in 2012 with increased output forecast for all minerals.