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Stronger prices lift Mupane Gold as COVID-19 clips output

MBONGENI MGUNI
Rich earth: Mupane’s leases cover historically rich goldfields near Francistown
The country’s sole gold producer, Mupane Gold, expects to produce about 30,000 ounces of the precious metal this year, down from an initial forecast of 35,000 ounces, due to disruptions caused by the coronavirus (COVID-19).

BusinessWeek has learnt that the mine’s operations near Francistown, however, still expect a strong financial performance as gold prices have soared this year, at one point even topping $2,000 an ounce, their highest level in history.

Gold, seen as a safe haven investment in turbulent times, has risen by more than 30% this year, as investors seek it out to secure value and also buffer themselves for the expected rise in inflation later, when the trillions of dollars being pumped in COVID-19 responses by countries push prices up.

Galane Gold, the Canadian group that has wholly owned Mupane since August 2011, noted that its operations in northern Botswana had been suspended for about a month as part of the initial government COVID-19 response. Even after the lockdown ended, safety and health protocols around social distancing required limits to the numbers of workers, particularly in the underground work areas.

“Our usual production at Mupane would have been 35,000oz this year and we are seeing a reduction of 15% or perhaps, hopefully, 10%,” Galane Gold chair, Ravi Sood told Crux Investor, an investor platform this week.

“If these were 2018 gold prices, that would have been very painful.

“Hopefully, we can get back with an accelerated production schedule in 2021.” Sood said Galane Gold had ramped up its inventory in anticipation of supply constraints caused by COVID-19, a move that pushed up working capital costs. Other costs, however, declined as a result of the labour restrictions required in response

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to the pandemic.

“Botswana is landlocked and with gold mining, you need cyanide, oxygen and others to come in on a regular basis,” he said.

“We took advantage of high gold prices and more cash coming into the coffers to increase our stores.

“We had an outright shutdown, which lasted about a month, but we were later deemed a critical industry and were able to continue working.

“The shutdown, however, did hit our second quarter production.” Last year, Mupane produced 30,294 ounces of gold, earning $41.4 million (P455.4m) in revenue from the sale of 30,052 ounces of gold plus incidental silver at an average combined price of $1,378 per ounce.

“As at September, Botswana was not very affected by COVID-19, but we are operating with strict protocols which as an underground miner, affects our production and throughput underground,” Sood said.

“The ore is not going anywhere. The gold is still in the ground, but of course, we would like to get it out faster.

“We are following all the protocols required and we are positive that by 2021, we will be back to normal staffing levels in operations.” He said despite the knock on production, the robust gold prices meant Galane Gold was still self-funding and generating free cash flow.

“The numbers will look amazing at the end of the year, but they would have been even better if we did not have COVID-19.

“However, perhaps the gold price would not have moved up this fast also without COVID-19.”



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