PADENGA Holdings’ mining operation, Dallaglio will be the most immediate beneficiary of a planned listing on the underachieving Victoria Falls Stock Exchange (VFEX), Inter Horizon Securities (IHS) said at the weekend, giving the deal the thumps up.
In a commentary released hours after, Padenga said it would seek a shareholder nod to de-list from the Zimbabwe Stock Exchange and move to VFEX, IHS said the strategy would open pathways for Dallaglio to pounce on new gold assets and position itself to benefit from attractive forex retention thresholds announced last month.
The thresholds present growth opportunities for gold miners and VFEX-listed firms.
Padenga swooped on Dallaglio about two years ago, as it diversified from its traditional crocodile skin processing business into gold mining in a surprise move.
Through Dallaglio, Padenga gained a foothold on Eureka Gold Mine, which returns to production next month following a US$40 million injection to restart production.
The transaction also gave Padenga access to Chegutu-based Pickstone Mine, a 60kg per month gold asset.
“We see potential for growth pathway particularly in Dallaglio via acquisitions within the gold space motivated by the new incentives articulated by the Finance and Economic Development ministry and in the short-term an uplift in earnings caused by a higher effective real gold price achieved based on greater foreign currency retention.
“The listing on the VFEX enables shareholders to unlock a real United States dollar valuation of the business, with capital gains and dividends realisable in hard currency. Downside risk is liquidity on the VFEX itself which may potentially create an initial discount on valuation, we, however, believe this will resolve itself in the medium term as other assets migrate to the VFEX deepening the available asset base and attraction levels,” noted IH.
Following its much hyped opening in October last year, VFEX has struggled to attract listings.
Seed Co International, which listed on the first day, remains the only counter eight months on.
But Caledonia Mining Corporation, the major shareholder of Gwanda-based Blanket Mine, has indicated that it is looking at the possibility of listing on the new bourse, while CBZ, the country’s biggest banking group, could also be headed to the waterfall.
Exporters, including miners, are currently allowed to keep 60% of their forex in hard currency, while 40% is sold to Reserve Bank of Zimbabwe at the official exchange rate.
In May, Finance minister Mthuli Ncube said miners, who produced above their monthly average, could retain 80% of their incremental portion.
Firms listed on the VFEX can retain 100% of the incremental portion.
An extraordinary general meeting will be held on July 2, 2021, seeking shareholder nod.
On Friday Padenga said the move had been precipitated by the need to benefit from the incentives articulated by the Finance and Economic Development minister, noting that the move had not been initiated by its shareholders.
“The VFEX will allow Padenga to raise capital in foreign currency from a wider and deeper potential market, to expand existing business, acquire or establish new business and fund acquisitions for both the company and its gold mining subsidiary, Dallaglio Investments,” Padenga added.
Padenga’s financial statement for the year ended December 31, 2020 showed that its mining portfolio accounted for most of its earnings.
Its plan to list on the VFEX is further signal that the company sees Dallaglio as a key driver of its future, one analyst said on Friday.
Revenue from mining was US$40,4 million, making up 57% of the company’s revenue.
Dallaglio posted a profit of US$7,1 million during the review period.