Is gold future for Padenga?

Padenga’s FY2020 numbers certainly appear to point to the group’s positive yields from its decision to diversify into gold production.

With the global crocodile skins market having been in a state of flux for a while now — a situation that has been exacerbated by the Covid-19 pandemic — the move to gold seems to be paying dividends.

According to Padenga’s FY2020 results, Dallaglio (the group’s gold subsidiary) accounted for over half of total revenues since its full consolidation into the group just last year.

Over the year just ended, Dallaglio’s revenue amounted to $40,3 million, constituting 57 percent of total revenue at $71,3 million.

But Padenga’s crocodile skins business is far from crumbling.

Management reported that revenue earnings from the Zimbabwean crocodile operation grew 6 percent from $25,5 million in 2019 to $27 million, accounting for 38 percent of total revenue.

And contribution to turnover from the Texas alligator operation was $3,9 million, which was 5 percent of turnover, up from $3,5 million in the prior comparable period.

In terms of output across the different subsidiaries, Dallaglio sold 722 kgs of gold in the period under review while the farming operations sold 72 244 skins, compared to 58 626 skins in 2019.

Despite the improved output, the crocodile business was below expectations, which weighed down on Padenga’s profit before tax.

But going forward the group expects a 45 percent upside in terms of the gold business, especially as ongoing mine rehabilitation projects come into play.

“Initiatives to improve the efficiency and effectiveness of mining operations including improved stockpile management, are being implemented at Pickstone Peerless Mine.

“The Eureka Mine rehabilitation project is 87 percent complete, with commissioning scheduled for July 2021. Full processing capacity of 100 000 tonnes per month is targeted by the end of December 2021,” said group chairman Thembinkosi Sibanda in its Q1, 2021 trading update.

“As it ramps up production this operation particularly will qualify for a retention level of 80 percent on the incremental portion of gold delivered to Fidelity Printers and Refineries (FPR) in accordance with the recent announcement in this regard.”

Management expects total gold production for Dallaglio to increase by 45 percent from the prior comparable period.

“This investment will continue to yield positive returns for the foreseeable future,” added Padenga’s chairman.

Although leveraging on gold for the future, Padenga remains positive on the outlook demand for its crocodile skin products.

“The demand for top quality defect-free skins remains steady and prices for these will hold.

“Luxury brands have bounced back after the early 2020 depression in retail sales and have increased their on-line sales to maintain market access,” said Sibanda.

“The crocodile business is confident of moving the stock of skins that it has on hand as the mid/upper tier market returns.

“The good husbandry and sustainability standards achieved by the Farms will be meaningful in ensuring that skins produced continue to be sold into the premium markets and will confer a significant competitive advantage.

“The Nile Crocodile business will therefore continue to deliver good operating profits.”

With regards to the Zimbabwe Crocodile Operation, management reported that skin sales volumes were down 29 percent in Q1 compared to prior period (5 904 skins vs 8 286 skins).

“A single sales grading was conducted in March with the first-grade ratio being consistent with

budget,” said the chairman.

A total of 13 006 skins were harvested during Q1, and management is happy with the quality achieved.

“The size and quality of the harvestable crop remaining in the pens at the end of the quarter was consistent with expectations to achieve the budgeted skin numbers by year-end,” added Sibanda.

Demand for crocodile meat in Europe remained subdued under the continued impact of the Covid-19 pandemic.

Consequently, no export sales were achieved and 42 tonnes of export meat was in freezers at the end of the period.

Local market sales implemented resulted in a volume 142 tons being sold during Q1 (16 tons FY20) leaving only the export cuts in stock at the 31 March 2021.

With regards to the United States Operation – Tallow Creek Ranch – skin volumes were down 72 percent compared to the prior period (3 614 vs.12 725).

“A majority of the skins sold during the period were carryover skins from FY20. These have all been sold now. The 2021 harvest in the quarter was 5 938 skins with a full year offtake of 12 752 skins anticipated,” reported the group.

Dallaglio’s gold sales volumes for the first quarter ended 31 March 2021 decreased by 24 percent to 138 kgs from 183 kgs achieved same period last year, which was largely expected due to the just ended rainfall season.

From a financial perspective, the group’s revenue was down 31 percent compared to the prior period.

“The first half of the financial year for the farming operations is largely a cost accumulation period with the greater portion of harvesting and turnover following during H2,” reported the chairman.

Ore volumes were down 24 percent at Pickstone Peerless mine “as unusually heavy rains negatively impacted the mining activities.”-ebusinessweekly.co.zw