ZIMBABWE’s gold deliveries increased 17% to 2.402 tonnes in October from 2.048 tonnes during the same period last year due to increased fuel allocations to miners and the drawing down of the Gold Development Initiative Fund, Business Times can report.
This is the first month in 2019 that gold deliveries have outweighed last year’s production on month on month comparison. Gold is now the highest single foreign currency earner, ahead of tobacco, but its subdued performance continues to shatter the country’s hope of turning around the economy. Gold contributes 38% of the country’s total earnings and more than 60% to the mining sector, the economy’s highest forex earning sector.
Fradreck Kunaka , the general manager of Fidelity Printers and Refiners, told Business Times that gold deliveries would have been high, had the authorities been provided fuel for the mining sector.
“In October gold deliveries went up 17% to 2.402 tonnes, from 2.048 tonnes delivered during the same period last year due to the massive fuel provisions by the monetary authorities, increase of gold centres across the country, and the drawing down of $150m the Gold Initiative Development Fund (GIDF),” Kunaka said. “Small scale miners contributed 1.54 tonnes while primary producers extracted 0.858 tonnes. Meanwhile, during the same period last year small scale produced 1.19 tonnes against 0.84 tonnes.”
Cumulatively, gold deliveries decreased 23% to 23.03 tonnes during the first nine months of 2019 from 30.13 tonnes during the comparative period last year due to inappropriate ore hoisting machinery from the deep mine shafts. Until the October haul, gold deliveries have been on a decline due to foreign currency shortages, crippling power outages and poor mining policies.
Since 2017, Zimbabwe’s economy has been grappling with foreign currency shortages, inefficient mining and processing technologies. Experts say the reduction of the forex retention levels by the Reserve Bank of Zimbabwe to 55 percent from 70 percent seemed to have worsened the situation, creating arbitrage opportunities for miners who are smuggling gold to South Africa.
Last week, Finance Minister Mthuli Ncube said close to 34 tonnes of gold were smuggled to the Rand Refinery in Cape Town, with South African authorities beneficiating gold into posh jewellery. Experts say the leakages will have a negative impact to the already fragile economy as gold is the most liquid commodity in the world.
Kunaka said the sharp decline in gold deliveries during the second quarter acted as a stumbling block in attaining the set target.
“The decline was mainly because of power outages which intensified during the month of June, inefficient mining and processing technologies in use, inappropriate mining methodologies especially at a time when most mines have deepened beyond 30 metres and inappropriate ore hoisting machinery from the deep mine shafts,” he said. “However, even if we fail to meet the set target, we project an increase in deliveries in this fourth quarter as artisanal and small scale miners are capacitated under the Gold Development Initiative Fund.”
Kunaka said the Fund aims at assisting miners in acquiring the appropriate mining equipment to enhance their gold production, thus increasing deliveries to Fidelity Printers and Refiners.
Irvine Chinyenze, the CEO of Gold Miners Association of Zimbabwe, said the monetary authorities should have increased forex retention rather than reducing it as it has fuelled smuggling and arbitrage opportunities.
“The facts that the monetary authorities have reduced forex retention to 55%, gold miners don’t have the appetite to sell their gold to Fidelity Printers and Refiners as there are better offers somewhere. The trick is that they should have raised forex retention to above 80% to woo miners,” Chinyenze said.
The government is planning to increase forex retention to 60% next year but the miners want retention to be above 70%. The monetary authorities argued that the remaining percentage will be used to import fuel, grain, medicines and fertilisers among other essentials. Some miners, especially large scale, are believed to be selling their gold to suspected smugglers to get more forex for their operations.
Industry experts say established mining companies with huge capital cannot be dominated by less organised small scale producers who do not have basic machinery for mining.
Zimbabwe is targeting 100 tonnes of gold per year by 2023, a figure which is expected to help the sector to earn US$12bn yearly but only if the forex retention threshold, other fundamentals and funding issues are addressed, according to industry executives. Gold is expected to contribute US$4bn by 2023.