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Zimbabwe’s Gold Production Plunges

ZIMBABWE’S gold output plunged 44% in the first seven months of 2008 as miners grappled with power cuts, an overvalued local currency and Reserve Bank payment delays, the country’s mining chamber said on Wednesday.

 

The Chamber of Mines said gold output slumped to 2 624 kg between January and July this year compared to 4 686 kg during the same period in 2007, Reuters reported.

Miners sell their gold to the sole purchaser and refiner, Fidelity, a Reserve Bank subsidiary.

They receive 40% of their earnings in local currency.

“Issues of concern include delays in paying gold producers their US dollar revenue.

“Data at hand indicate that there are some producers that have not been paid for deliveries made in 2007,” the chamber said in a statement.

Zimbabwe’s mining sector was rattled last year after the government introduced a law compelling all foreign-owned companies, including mines, to sell 50% of their shares to locals as part of an empowerment drive.

Foreign investors have withheld funding for expanding existing operations, worsening the plight of a sector hit by mine closures in the last seven years and the soaring costs.

The chamber blamed administrative glitches at the Reserve Bank of Zimbabwe (RBZ) which delayed payments to producers for gold deliveries as well as an uncompetitive exchange rate.

“Data at hand indicate that there are some producers that have not been paid for deliveries made in 2007,” the miners’ body said in a statement.

The Reserve Bank is the sole buyer of gold and other precious minerals but has lately been accused of insensitivity to miners’ concerns, often reacting too slowly to grievances forwarded to it by industry representatives.

The Chamber of Mines has repeatedly said the official exchange rate of 95 Zimbabwe dollars for every US dollar as of yesterday, which miners are paid for a third of their earnings was unviable as this could not meet their Zimbabwe dollar costs.

The parallel market rate is nearly five times the official rate while Real Time Gross Settlement (RTGS) is about 24 times more.

The mining sector is the biggest foreign currency earner in a country battling its worst ever economic crisis and its collapse could bring more misery to the majority of Zimbabweans who are squeezed by a high inflation rate of more than 11,2 million percent, unemployment is estimated to be around 80% and there is a shortage of hard cash and food.

The country’s gold production has declined over the years due to operational constraints and poor incentives that have made investment into the industry a tough choice.

From a peak of 27 metric tonnes in 1999, gold production plummeted to seven tonnes last year.

This year gold production is projected to fall to 4,5 tonnes.

By Paul Nyakazeya

 

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