HomeBusiness DigestChamber wants gold price reviewed

Chamber wants gold price reviewed

Godfrey Marawanyika/Eric Chiriga

THE country’s gold production has surged to a new three-year high with total output of the yellow metal reaching 19 675,09 kilogrammes at the end o

f last year.

Provisional figures from the Zimbabwe Chamber of Mines indicate that 19 675 kg of gold were produced last year valued at $1,3 trillion.

The 2004 output figure represents a 57% increase compared to 12 564 kg produced in 2003. In 2001, Zimbabwe produced 18 049 kg of gold.

The RBZ is buying gold at $92 000/gramme. Those that opt to sell in foreign currency get 50% of the payment in Zimbabwean dollars at the auction rate and are allowed to retain 40% in US dollars while the remaining 10% is paid at a rate of US$1:$824.

Gold miners are now accessing the productive sector facility at a concessional interest rate of 50% per annum, which has enabled them to reduce working capital costs.

The Chamber of Mines has since appealed to the Reserve Bank of Zimbabwe and government for a review of the gold price, to improve the fortunes of the mining sector.

The mining body is looking for a review of the price to at least $115 000/gramme from the current $92 000.

“The chamber has engaged the RBZ saying that the current $92 000 is unsustainable. They are looking at a figure ranging from $115 000 to $120 000,” a mining executive said.

Gold producers say a review of the gold price would offset the rising costs of wages and electricity.

Zesa introduced a 126% one-off tariff hike for industry and the mining sector this month which the miners’ representative organisation is greatly worried about.

Yellow metal producers have also raised concerns about the new minimum wage for the industry of $735 000 per month.

The new figure came from an Administrative Court intervention after employers and employees were deadlocked over a new wage.

Increases of 33% were awarded in April and July. A further increase of 53% was awarded as of October 1.

Last year the RBZ was buying gold for $60 000 per gramme.

In his quarterly monetary policy review in October RBZ governor Gideon Gono increased the figure to $92 000, an amount gold players say was not at par with high monthly inflation prevailing at the time.

Economic analysts say the RBZ should review the exchange rate before increasing the gold price because it is fundamental in making gold production in the country viable.

“The monetary authorities should review the exchange rate system first rather than increasing the gold price because it is the most fundamental issue,” economic analyst John Robertson said.

Robertson said increasing the price would not compensate the rise in costs as most mining equipment and implements were imported. It was therefore imperative to review the exchange rate, he said.

“As long as the exchange rate system is not reviewed, production costs of mining firms will be very high because they import a lot,” he said.

Robertson said the Zimbabwean dollar was grossly overvalued and that

there was too much interference at foreign currency auctions.

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