New Zimbabwe.com

Gold producers bemoan foreign currency disbursement delays, high production costs

By Alois Vinga


DELAYS in the disbursement of the foreign currency component due to gold producers by Fidelity Printer and Refineries, has negatively affected operations in the sector, the Chamber of Mines of Zimbabwe Gold Producers Association (CMZGPA) has said.

CMZGPA chairman, Thomas Gono said this in a speech at the Zimbabwe Annual Mining conference, underway in the resort town of Victoria Falls.

“Gold producers are also facing delays in the disbursement of foreign exchange for gold delivered to Fidelity Printers. These delays, which average three weeks, have further worsened input shortages in the gold industry,” Gono said.

Gono added that local gold producers face a high cost structure, characterised by high input costs, high cost of funding, high labor costs, and suboptimal royalties.

“The country’s average all-in cost of producing an ounce of gold at US$1 080 in 2018 and remains the highest in the region.

“A number of mines incur costs well above this average, with narrow seam mines averaging around $1 400 and heap leachable deposits averaging around $1 300 as of 2018,” Gono said.

The gold producers chairman said as a result of such factors, mines are struggling to break even, and some have already been placed under care and maintenance, while others are contemplating on suspending operations completely.

“The local gold industry continues to face serious capital shortages to finance their operations and expansion plans. The gold industry currently requires in excess of US$1 billion in the next five years to sustain growth and development of the sector and achieve the output targets.

“Local financial market has limited capacity to finance such huge capital requirements on the back of liquidity challenges and when facilities are locally available, they will be expensive while offshore facilities are also expensive due to country risk premium,” he said.

“As a result, mining companies have struggled to fund exploration activities besides facing difficulties in retooling.”

Under a new contentious policy, miners are allowed to retain only 55% of their total earnings in foreign currency while the rest is paid in local currency in line with the interbank market rates.

South African owned gold mining giant, Metallon Corporation has already taken the RBZ and Fidelity Refineries to court over outstanding foreign currency earnings totaling US$132 million.

The company says the omission has affected the smooth flow of business at its plants and the loss of 2 000 jobs.