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Miners warn of hard times

Shame Makoshori

ZIMBABWE’S Chamber of Mines has warned of a “dire situation” in the gold mining sector, saying in a confidential letter to the Reserve Bank of Zimb

abwe (RBZ) that a raft of measures put in place last July had failed to inject life into struggling mines because of non-payment of overdue receipts.

The industry’s woes had been worsened by an unannounced 10% deduction of the gold miners’ delayed payments towards an Energy Stabilisation Fund.

The fund is meant to mobilise foreign currency for fuel and electricity imports. Some mining operations are at the same time paying for their electricity in foreign currency.

The Chamber of Mines, in a letter signed by chief executive officer David Murangari dated November 15, said the RBZ subsidiary, Fidelity Printers and Refineries (Fidelity), the sole buyer of gold in the country, was failing to pay gold producers in time, creating severe cashflow problems for the gold miners.

Gold producers had by November 14 outstanding payments due from Fidelity amounting to US$9 million for the component of gold paid for in foreign currency and $610 million for gold deliveries paid for in local currency.

Some of the gold had been lodged with Fidelity as early as September 7 but no payments had been made by the time the Chamber of Mines wrote the letter to the RBZ governor Gideon Gono.

“The new payment scheme introduced in July where 50% (of which 25% is in Zimbabwe dollars and 75% in US dollars) of the value of gold lodged with FPR (Fidelity) is being paid within four days and the balance to be paid within 21 days has not worked from inception,” the Chamber of Mines wrote in the letter, a copy of which was seen by businessdigest.

The Chamber of Mines’ letter followed several others written individually by gold producers to Gono highlighting the problems besetting the sector due to delayed payments from Fidelity.

Gono remained silent on the gold miners’ pleas, prompting the Chamber of Mines to write on behalf of the sector last week.

The Chamber of Mines said the delayed payments had caused serious cash flow problems, something that could force “some mines to temporarily shut down” unless prompt payments were made.

The Chamber of Mines said there had been serious disruptions to operations since the RBZ introduced its new payment scheme in July.

The letter said foreign creditors had threatened to withhold supplies while local suppliers were piling pressure on gold producers to pay up before placing new orders.

The Chamber of Mines also sought to find out why Gono had ignored the gold mining companies’ pleas on the overdue accounts.

“A number of gold producers have written to the RBZ advising of the difficulties being experienced in receiving payment as per the announced policy. The silence that prevails in such difficult times does nothing to build confidence in policy announcements and we strongly suggest that the authorities provide the industry with some explanation of the challenges being faced by the RBZ,” the Chamber of Mines said.

“External suppliers mainly in South Africa are due to close for the festive season. As a result any new orders for supplies will not be entertained where payments for orders already delivered are still outstanding. This will affect production seriously and could cause some mines to temporarily shut down,” the Chamber of Mines warned.

The letter was copied to Mines minister Amos Midzi, Finance minister Herbert Murerwa, Economic Development minister Rugare Gumbo and Chief Secretary to the President and Cabinet Misheck Sibanda.

The Chamber of Mines also argued that the static exchange rate, which had remained fixed at US$1:$250 since July, was not keeping pace with the rapid movement of costs.

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