THE Chamber of Mines has appealed to the Reserve Bank of Zimbabwe (RBZ) for an urgent review of the gold price in a bid to save the sector currently facin
g viability problems.
The Chamber, which represents the mining industry in Zimbabwe, last week wrote to the central bank requesting the gold price to be increased to $6,8 million from the current $2,5 million per gramme.
The Chamber said an urgent price review was required to cushion the mines from the increased production costs.
The appeal comes barely a fortnight after businessdigest reported that gold mining firm, Falcon Gold, had threatened to shut down if problems related to the gold price were not addressed.
David Murangari, the Chamber’s managing director, wrote to Gono after several representations from other gold mining firms.
The letter, a copy of which was seen by businessdigest, is dated June 26, 2006. Murangari, in his plea on behalf of the gold mining companies, urged the central bank to review the gold price quarterly to enable mining companies to meet increasing production costs.
Murangari suggested that the central bank should consider the sector’s cost structure when reviewing the gold price.
Businessdigest is informed that labour accounts for 35% of a gold mining company’s costs, while spares account for 38%, electricity 7% and other expenses, 20%.
Input costs, which include salaries and wages (238%), electricity (280%) spares and machinery (350%) and services (148%) have been rising significantly over the past few months due to increased inflationary pressures in the economy, Murangari highlighted in his letter to Gono.
The letter said production costs had gone up by 265,8% during the first half of the year.
In January, the Reserve Bank increased gold prices from $1,2 million per gramme to $2,5 million in a bid to boost production after official deliveries to Fidelity Printer, a gold-buying subsidiary of the central bank, plunged by 40% last year.
Gold is a key foreign currency earner and accounts for about 52% of total mineral production and a third of export earnings.
The sector has however been hit by mine closures in the last eight years as operating costs soared on the back of foreign currency and fuel shortages.
Gold deliveries fell to 13 000 kg last year from 21 300 kg the previous year.
The central bank has accused gold miners of smuggling the precious mineral to neighbouring countries.