Padenga aligns capex to bullish gold price outlook

Source: The Herald – Breaking news.

 FILE PIC – Padenga Holdings’ chief executive officer Michael Fowler (left) and finance director Oliver Kamundimu

Business Reporter

As gold prices rally toward unprecedented levels, Padenga Holdings Limited is leveraging targeted capital expenditure (capex) initiatives to fortify its mining operations, aiming to capitalise on bullish gold price projections.

The company’s aggressive investments in underground expansion, renewable energy, and resource exploration position it to harness rising gold prices while mitigating risks associated with market volatility. 

As part of its key capex initiatives, Padenga has invested US$44 million since 2022 in developing the Pickstone underground mine, with US$13 million allocated for 2025 alone.

This project, set to boost production volumes and operational efficiencies from 2026, aligns with JP Morgan’s timeline for gold to peak at $4 000/oz.

The mine’s deeper shafts are expected to unlock higher-grade ore, enabling Padenga to scale output just as prices potentially surge. 

“This will increase our production volumes and efficiencies from FY2026 as we progress into deeper levels, giving more opportunities to mine in virgin ground,” said finance director Oliver Kamundimu at the company’s analyst briefing held at the end of March 2025.

A 7 megawatt (MW) solar plant at Eureka Mine and a 5MW installation at Pickstone are designed to reduce energy costs, which account for 25 percent of mining expenses.

Lower operational costs will enhance margins, critical as global All-In Sustaining Costs (AISC) hit a four-year high of $1 456/oz in 2024. 

In terms of exploration and resource confidence, Padenga plans $3,8 million in exploration drilling across Eureka and Pickstone in 2025, targeting 34 440 metres to expand mineral resources and extend mine life.

This, according to experts, ensures sustained production to meet demand spikes during gold’s rally. 

“The Eureka 2025 exploration work seeks to increase confidence in the areas around the current pit and to include these into the new design, which will further improve the life of mine and profitability of the pit,” said Mr Kamundimu. 

The total Eureka budget for 2025 exploration is US$2,2 million.

The underground diamond drilling at Pickstone Mine seeks to confirm additional ore to cover the short-term mine plan ahead of the commissioning of the 10 Level loading station, Mr Kamundimu said.

Padenga plans to fund future capex internally and has since reduced debt by 20 percent in 2024 to $56 million.

This strengthens its balance sheet as gearing goes down to 37 percent from 71 percent and insulates it from rising borrowing costs amid global interest rate hikes. 

The capex investments, according to Trigrams Investment Analyst Walter Mandeya, align perfectly with the gold price rally and projections.

JPMorgan’s forecast for gold price to reach US$4 000/0z hinges on sustained central bank demand and recessionary fears — a backdrop Padenga is primed to exploit.

The company’s gold revenue surged 53 percent in 2024 to US$192 million (86 percent of group revenue), driven by a 23 percent rise in average realised prices (US$2 402/oz) and a 17 percent production increase.

With gold output targeted at 85 000–90 000 ounces annually by 2026, Padenga could see revenue triple if prices reach US$4 000/oz. 

“While Padenga’s strategy aligns with bullish forecasts, it hedges against downside scenarios,” Mandeya said.

He said solar investments and processing upgrades such as Eureka’s pre-leach thickener protect margins if gold prices stagnate. 

Mandeya believes the agribusiness division, though smaller, provides cash flow stability for the group.

Mandeya notes Padenga’s timing as strategic.

“Their capex cycle coincides with gold’s macro tailwinds.

“If Pickstone’s expansion delivers as planned, Padenga could emerge as a top beneficiary of the US$4 000/oz era.” 

However, delays in production scaling or a faster-than-expected Fed rate hike cycle could temper gains. Yet, with 3,1 million ounces in total resources and a focus on high-margin underground mining, Padenga’s roadmap reflects a calculated bet on gold’s enduring appeal. 

As JPMorgan warns of “extreme tail scenarios” pushing gold to US$4 500/oz, Padenga’s blend of growth-focused capex and fiscal discipline positions it not just to survive, but thrive, in the unfolding golden age.