This document provides an overview and analysis of the Zimbabwean gold mining industry. It discusses the country's gold production globally, characteristics of the industry including the prevalence of small, privately owned underground mines, and challenges facing growth. Key challenges are political and economic instability, uncertainty around indigenization legislation, lack of infrastructure and skills. However, the geology has good potential and some companies are pursuing aggressive expansion plans involving exploration and capital raises if the investment climate can improve.

1. The Zimbabwean Gold Mining Industry - An independent Evaluation Paul Burton Managing Director, GFMS World Gold Zimbabwe Rising London, 3 December 2010

2. GFMS World Gold is an independent, mining equities research company formed in 2008 as a joint venture between GFMS and World Gold Analyst.

4. Zimbabwe & world gold production

5. Characteristics of the Zimbabwe gold mining industry

6. Growth potential – challenges & risks

8. Completed in September 2010 after a week-long field trip in July.

9. Contents:

10. Political & Economic review

11. Geology

12. Review of production, mines & projects

13. SWOT analysis

14. In-depth reports on sponsor companies.

16. Zimbabwe gold producers by category % Source: COMZ

18. Metallon 18 koz

19. Caledonia 10 koz

20. Forbes & Thompson 10 koz

21. Casmyn 10 kozSource: COMZ

23. Many small mines

24. Underground culture

25. Private ownership common

26. Undercapitalised

28. Greenstones are one of the most extensive and productive sources of gold on the planet and as such the Zimbabwean rocks represent a huge potential treasure chest for miners.

29. “There is no reason why mines of the same significance as those in other Archaean granite-greenstone terrains should not be found in the Zimbabwe Craton” (ZGS 2005)

32. Small mining methods are notoriously inefficient as they fail to take into consideration the geological setting and the potential of the whole mineral deposit.

34. Historically underground was their only form of exploration – sink a prospecting shaft and develop along the strike of any veins.

36. Although in itself this is not necessarily a bad thing, it is often a sub-optimal way to run a capital intensive enterprise.

38. The mining companies generally have an idea of the sulphide potential that lies not far below the surface but need intensive drilling programmes to define this potential. For this they will require an injection of capital, firstly to bring existing plants up to scratch to process the surface material and secondly, to expand the operations.

40. The limited availability of power in Zimbabwe has severely hampered miners over the past year or more at a time when they are trying to ramp up production to installed capacity levels after the 2008 hiatus.

43. In the 2009/10 Fraser Institute study, Zimbabwe scores poorly coming 69th out of 72 countries, with only the Philippines, Ecuador and Venezuela below it.

45. The subject of indigenisation is one of the most divisive issues that government and the mining industry have to settle for the greater good of the country’s economy. Clarity is needed urgently to remove the uncertainty that hangs over the mining industry and deters foreign investment.

46. The 2007 Act requires 51% of companies to be owned by indigenous Zimbabweans. Uncertainty still surrounds how this will be made up, with the COMZ suggesting 15% equity plus credits, a principle which seems to have been accepted by the government and President Mugabe.

48. Nationalisation

49. Infrastructure

51. I would suggest that a strategy rethink is needed and most of the more progressive mining companies have realised this.

52. To implement strategies they need large capital injections, mostly from overseas.

54. Companies such as Metallon, Duration Gold & Bilboes (GAT Investments) all have strategic plans to raise foreign capital through listing on major international exchanges. Metallon is looking to spend some US$600 million on projects over the next 5 years.

55. New Dawn Mining is also raising capital. It is listed already, in Canada, and has started the consolidation process that the industry needs through the acquisition of Central African Gold.