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  • New Digs For Metallon

    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.
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