Mupane bounces back after brief closure
Chakalisa Dube | Friday May 8, 2020 18:15
Mupane is the sole gold mine in the country and is situated near Matsiloje. The company is a subsidiary of Galane Gold, a Canadian firm.
Last Thursday Ministry of Mineral Resources, Energy Security and Green Technology permanent secretary, Mmetla Masire, told BusinessWeek that Mupane had not complied with the coronavirus (COVID-19) measures and as a result, was not operating even though mining has been classified an essential service. Employees at the mine had expressed concern that the failure to remain operational during the lockdown would negatively affect Mupane and ultimately lead to job losses in the near future.
It was widely speculated that officials from Mupane and the Department of Mines were at loggerheads in relation to matters concerning compliance to coronavirus regulations meant to allow the mine to commence operations.
However, Galane Gold management confirmed operations started this week. In documents accompanying Galane Gold’s financials for the year (2019) ended December 31, directors said approval to commence operations was granted on Friday. “The company has been working closely with the Department of Mines to agree on protocols to manage the potential for the spread of the coronavirus between its employees and in particular in its underground operations.
The company is recommencing full production this week (Monday) and hopes to make up the shortfall in production during the year,” reads a statement from the company in the financial report. Meanwhile, the company has said that it has entered into negotiations with government to reschedule the repayment of its deferred royalties. Mupane highlighted that the current commodity prices and exchange rate environment can be volatile, which may have an impact on its cash flow. Galane Gold directors also warned investors that the impact of the pandemic could impact Mupane’s ability to pay government its royalty obligations. Deferred royalties currently stand at $6.9 million.
“With the current focus on the COVID-19 shutdown of non-essential services in the country, these discussions (on deferment of royalties) have now been put on hold, directors said. Last year Galane Gold paid its five percent royalty on gold sales to government on “a timely basis. The royalty expense for the year ended December 31, 2019, was $2.1 million, which was funded from cash flows from operations, in addition to $1.6 million repaid from deferred royalties in accordance with the agreement with the government.
The mine has in the past been forced to reschedule payment of its royalties to government owing to the volatile gold trading environment.