South African tycoon Mzi Khumalo turned $15.5 million into Zimbabwe's largest gold miner

Mzi Khumalo paid $15.5 million in 2002 for the Zimbabwean gold mines Lonmin no longer wanted.

Within a decade those mines were producing around 100,000 ounces of gold a year across five operations, making Metallon Corporation the largest gold miner in Zimbabwe. By 2019 the group owed roughly $200 million, three of its four remaining mines had stopped, and two were in the hands of court-appointed rescue practitioners.

Khumalo bought assets cheaply in a country nobody else would touch, which is how fortunes are made in mining, and then found out why nobody else would touch it.

He is one of six names that recur through the history of South African black economic empowerment, alongside Cyril Ramaphosa, Tokyo Sexwale, Patrice Motsepe, Saki Macozoma and Moss Ngoasheng. He is the only one of them who left South Africa to build something abroad, and the only one whose empire came apart in public.

KwaMashu, and twelve years

Khumalo was born on Nov. 4, 1955 in KwaMashu, a township outside Durban, the youngest of eleven children. His father was a policeman and his mother a cleaner, and his father died when he was nine.

He started earning straight away, tin-plating recycled oil cans and selling them, then working as a petrol pump attendant and teaching himself car mechanics. He became known in the township as somebody who could get things done.

That reputation is what recruited him. Friends in the African National Congress used him as a lookout, a driver and a means of moving weapons, and the organisation noticed. The ANC spotted him and recruited him, he said years later, rather than the other way round.

He trained abroad and joined Umkhonto we Sizwe, the movement's military wing, specialising in training and clandestine work.

Police caught him in 1978 during an operation to clear a compromised safe house. He was charged with treason and sentenced to twenty years on Robben Island, where he served twelve alongside Nelson Mandela before his release in 1990.

McCarthy, Capital Alliance and JCI

Khumalo joined McCarthy Holdings, the motor retail group, in 1991, at 35, with no formal business training.

Three years later he founded Capital Alliance, a financial services and insurance company, in the window when South African institutions were hunting for black partners and had almost nobody to choose from. He sold his interest in 1997, and the business was eventually sold carrying about $8 billion of assets under management.

He then bought a piece of mining history. Johannesburg Consolidated Investments had been a force in South African mining for more than a century when Anglo American broke it up, and Khumalo became a shareholder and then chairman of JCI Limited in 1997, at 41, making it the first black-controlled mining house in the country.

The unbundling split the group three ways. Khumalo took the mining assets, the property and investment side became Johnnic Communications, and the platinum interests went to Anglo American Platinum.

It did not hold, and what followed was worse. JCI later passed to Brett Kebble, who was accused with the director John Stratton of defrauding the company of 7.6 billion rand before being shot dead in Johannesburg in 2005, in a killing that consumed South African business for years. Khumalo was long gone.

He collected directorships across corporate South Africa in the same period, sitting on the boards of Anglo American Corporation, Telkom, McCarthy Retail, Momentum Life and Southern Mining Corporation. He became chairman of Mintek, the state minerals research organisation, in 2004, and a trustee of the World Wide Fund for Nature.

His personal investments went into a vehicle called Mawenzi.

The Harmony trade

The money that built everything else came from a single share price.

Khumalo and his partners acquired a stake in Harmony Gold through a vehicle called Simane Security Investments in a 2002 empowerment deal, a holding valued at about 2 billion rand. He then bought his partners out, and the share price climbed from 37.30 rand to 186.80 rand.

He sold into that, and the profits left the country.

Working with Deutsche Bank through a complex asset swap in 2002, Khumalo gained access to more than 700 million rand in foreign currency, effectively moving his gains offshore. His company Mawenzi Resources and Finance Company took a 760 million rand loan from Deutsche Bank in London, pledging the Harmony shares as security.

South Africa's exchange control rules did not allow that without approval, and he did not have it. The Reserve Bank valued the assets involved at $200 million, about 1.3 billion rand, and by 2005 was seeking a penalty of roughly 130 million rand. Khumalo complained publicly about red tape and threatened to list his companies in London instead, which amounted to his first public acknowledgement that he had broken the rules.

The dispute ran for twelve years, and the Reserve Bank won it.

Five mines for $15.5 million

Lonmin wanted out of Zimbabwe in 2002. Khumalo wanted in.

He paid $15.5 million for the company's Zimbabwean gold assets and folded them into Metallon Corporation, registered in London and owning the mines outright. He got five operations: Shamva and Mazowe in Mashonaland, Redwing at Penhalonga near Mutare, Arcturus outside Harare and How Mine in Bulawayo.

The assets were worth far more than the price. Independent assessors put Metallon's resource base at 5.2 million ounces of gold in 2018, and at its peak the group produced around 100,000 ounces a year, making it the largest gold producer in the country.

Khumalo wanted five times that. He set a target of 500,000 ounces a year, later raising it to 550,000 in a proposal he took personally to Zimbabwe's mines minister Winston Chitando in September 2019, and he estimated he needed about $400 million to get there.

He never raised it.

The group looked beyond Zimbabwe as well, securing four exploration properties in the Democratic Republic of Congo, pursuing ground near Tanzania's Lake Victoria goldfields and talking about Zimbabwean platinum. Gold and General, the company he founded in 2015 to hold the majority of Metallon, was the vehicle for that ambition.

What went wrong

Zimbabwe pays its gold miners through the central bank.

Producers deliver bullion to Fidelity Printers and Refiners, a Reserve Bank subsidiary, and are paid for it. When Zimbabwe reintroduced its own currency in 2019 and its value collapsed on the parallel market, miners who had already delivered gold found themselves holding money worth a fraction of what they were owed.

Metallon put its shortfall at $132,748,521 and said in May 2019 that it would sue the Reserve Bank, threatening to bring the case outside Zimbabwe if it got no satisfactory answer within 60 days. The central bank denied it was in arrears.

The company was finished by then. Creditors had spent months obtaining court orders to auction Metallon assets, the state power utility sued in February 2019 over a $9.3 million electricity bill, and a debt schedule seen by South Africa's Sunday Times put total borrowings at about $200 million.

The underlying numbers were dreadful. Metallon told Zimbabwe's labour ministry that in the first half of 2018 it produced 2,952 ounces against a budget of 7,523, earned net revenue of $3.94 million against operating costs of $6.51 million, and lost $2.57 million.

The Associated Mine Workers Union of Zimbabwe went to the High Court in Harare in April 2019 seeking business rescue for Shamva and Mazowe, saying about 1,400 workers were owed $40 million in salaries, benefits and unremitted pension contributions. Corporate rescue began on April 1. Metallon separately faced a case alleging it had unlawfully sent more than $30 million to Britain as dividends and management fees.

Khumalo had already begun selling. Arcturus went to TN Capital, owned by the Zimbabwean businessman Tawanda Nyambirai, in December 2017. Shamva and Mazowe went to Landela, a rival with political connections and deeper pockets, in 2020.

Redwing

The mine that did most damage to his name is the one he still legally owns.

Zimbabwe's High Court placed Redwing under corporate rescue in 2020, after creditors and the workers' union sued over unpaid salaries and contractual obligations worth at least 114 million rand. Metallon lost operational control.

Disorder filled the vacuum. A local company called Prime Royal Mining brought in more than a thousand artisanal miners, and the site became one of unregulated extraction, environmental destruction and death. Fifteen men were pulled alive from a collapsed shaft in January 2024, and leaked internal reports from Metallon's own rescue team recorded deaths that were never reported to the authorities.

Zimbabwe's Supreme Court removed the mine from corporate rescue in 2022. Metallon has kept staff on site and says it is working to end unsafe small-scale mining and restore formal underground operations.

How Mine in Bulawayo is its only working operation.

The Reserve Bank takes a billion rand

The exchange control case came back for him while Zimbabwe was collapsing.

South Africa's Reserve Bank issued its first notice of forfeiture in August 2008. Khumalo took it to the North Gauteng High Court, argued the exchange control regulations were unconstitutional, and won in 2009, only for the Supreme Court of Appeal to overturn that in March 2010.

Deputy governor Lesetja Kganyago, later the bank's governor, signed the forfeiture order on Aug. 2, 2011. It was one of the largest the bank had ever issued, and it took interests in fifteen companies, investments held by Deutsche Bank, the Premier Soccer League club Lamontville Golden Arrows that Khumalo had bought in August 2004, a Sandton property, Metallon Hotels and Leisure Holdings, Joob Joob Investments, the Mzi Khumalo Family Trust, Simane Security Investments and a 50 million rand Raytheon 390 Premier 1 jet. The total came to about 1 billion rand, payable into the National Revenue Fund.

Khumalo applied to have it reviewed in November 2011, arguing the bank had attached assets belonging to third parties who had nothing to do with the case. Judge Hans Fabricius ruled against him on May 8, 2017, holding that he lacked the legal standing to bring the application at all.

Britain's tax authority finished the job. HM Revenue and Customs applied to wind up Gold and General, and the English High Court ordered its liquidation in April 2019, the same month Metallon's Zimbabwean subsidiaries filed for rescue.

What is left

Metallon still exists, registered in London and still chaired by Khumalo, describing itself as a gold producer, developer and explorer. Mawenzi still holds his personal investments. He is based in London, where he has lived for years.

He bought correctly and could not hold on. The five mines he acquired for $15.5 million contained millions of ounces of gold, and bullion that traded near $310 an ounce when he bought them now trades above $4,000, roughly thirteen times higher. Metallon needed $400 million to reach the scale that would have made it safe, and investors who looked at Zimbabwe's currency, its power supply and its central bank declined to provide it.

Khumalo spent twelve years on Robben Island, came out at 34 with nothing, and by 41 controlled the first black-owned mining house in South African history. The second half of that career is the part worth studying, because almost everything that later destroyed Metallon was visible before he paid for it.