NEW DIGS FOR METALLON
Julie Bain reports that Mzi Khumalo has operations in ex-Soviet states

http://www.sundaytimes.co.za/articles/arti cle.aspx?ID=ST6A175704
02 April 2006

METALLON Gold, which has had its fair share of troubles in recent
months, is expanding into a number of former Soviet states.

Andile Reve, chief executive of Metallon Corporation, which controls
the Metallon group of companies, said mining had started at one of
the company's two prospects in Armenia just a few days ago.

"Profit for 12 months' production of about 60000 ounces is put at
$12-million to $15-million," he said.

The open-pit mine is about 300km from Yerevan, the Armenian capital.

Exploration at a second prospect is under way and Reve said Metallon
could prove up a resource of about one million payable ounces in
eight to 10 months.

"We are very excited. After the reserves are proved we will make a
decision on whether to take [these projects] to market," he said.

Metallon Gold also has a prospect in Georgia, where further exploration
work is being carried out, and it is looking at a prospect in
Kazakhstan.

Last month Metallon Gold was knocked by the resignation of CEO Greg
Hunter. He seems to have been frustrated at the hurdles that have
stymied the company's strategy, and decided to quit.

Metallon Gold had planned to list in SA in May last year but a dispute
with the Reserve Bank has put paid to this.

Reve said Metallon Corporation chairman Mzi Khumalo was negotiating
with the Bank about the conditions under which Metallon's Zimbabwean
gold assets, which are held in a British company, could be repatriated.

He said the gold companies were now running as separate units.

"We will admit the failure to list was a serious setback," he
added. "It is a big opportunity to list a gold company in this
environment, at these prices.

"The capital coming out of that would have been great; it would have
made our lives much easier. And because of that we have had to regear
ourselves and change strategies."

Metallon Corporation was also hit by a Zimbabwean court ruling this
month ordering it to pay $7.4-million to a former business partner
for breach of contract.

But Reve said the company would appeal the decision.

In the past month Khumalo has also come under fire over the sale of
some of Metallon Ventures' shares in construction company Basil Read.

Last year Metallon Ventures and Amabubesi, headed by former Scorpions
boss Bulelani Ngcuka, bought a 51.2% stake in Basil Read from French
company Bouygues.

The sale has attracted attention because of Khumalo's sale of
empowerment shares in Harmony Gold a few years ago. It also raised
eyebrows because it reduced empowerment in Basil Read and there has
been talk of a disregarded lock-in agreement.

Basil Read CEO Marius Heyns said a 6.3% stake was sold, leaving
empowerment in the company well above the 26% threshold. Amabubesi
now has 25.6% and Metallon Ventures 19.3%.

Asked if the sale could have any negative implications for the company,
Heyns replied by e-mail: "It could possibly, but it is difficult
to ascertain."

The company was not informed of the sale, but Heyns pointed out that
Bouygues and the empowerment consortium had a private contract.

Reve said the sale of the 6.3% to Mawenzi Asset Managers -- in which
Khumalo has a controlling stake -- at the original deal price was
agreed when the original deal was reached last year. There is no
further agreement with Mawenzi for any sale on similar conditions.

There were no plans to sell more of Metallon Ventures' stake in Basil
Read, but Reve did not rule this out entirely.

"There really should not be such a fuss about a share sale that was
part of the funding agreement," he said.

"We are a company like any other, we just that we happen to be black."

The purchase of the stake in Basil Read was conducted with Bouygues
and it was not billed as an empowerment deal, Reve added.

If there was any future sale there is a so-called "tag-along clause"
with Bouygues, meaning it would have to be informed, he said.