HomeBusiness DigestMine closures stir more woes

Mine closures stir more woes

Eric Chiriga/Roadwin Chirara

ZIMBABWE’S economy is set to deteriorate further as more mining firms shut down due to an unfavourable operating environment.

Arial, Helvetica, sans-serif”>This comes after Falcon Gold (Falcon), one of the country’s largest gold producers after Metallon, last week announced that it was stopping gold production as mining was no longer its core activity.

“The situation in Zimbabwe has changed significantly over the years and our operations there have been affected by a number of factors beyond our control — wages, power costs, inflation and the cost of borrowing,” David Marshall, the chairman of Falcon, said in a statement last week.

Marshall said they were looking for suitable investment opportunities in the United Kingdom, but away from mining activities.

According to data released by the Chamber of Mines, since the year 2000 more than 10 mines have shut down due to viability problems.

These include Camperdown, Motapa and Gaika who had an annual production of about 76 260 and 125 kg respectively.

The mining sector accounts for 4,3% of the country’s gross domestic product (GDP).

According to a Platinum and Palladium 2005 survey report by GFMS, Zimbabwe has become the most expensive mining area in the region because of high operational costs.

Production costs of platinum shot up by 55% last year making the Zimbabwe production one of the most expensive in the world.

David Murangari, the chief executive officer of the Chamber of Mines, confirmed that Zimbabwe was now an expensive area to mine.

“The high inflation and the poor exchange rate have made the country less competitive,” Murangari said.

He said in gold mining one was paid on the basis of the international gold price and mining costs in Zimbabwe were rising at a faster rate than the gold price. This has resulted in the decline of revenues for miners.

Murangari said a number of investors keen to join Zimbabwe’s mining sector were waiting for an improvement in the economic and political environment.

Aaron Mudhuwiwa, group manager of human resources and external affairs of RioZim, said the multiple effects of the current harsh economic environment characterised by hyperinflation and turbulent industrial relations, presented a huge challenge to miners.

“The perceived high country risk presents the biggest foreign challenge in dealing with external suppliers of goods and services,” Mudhuwiwa said.

Rio holds 22% in Murowa diamond mine outside Zvishavane.

Murowa diamond mine is the single largest mining investment in the country after Hartley Platinum Project, which was taken over by Zimplats after it was abandoned by its promoters, Broken Hill Proprietary of Australia in 1999.

US$60 million has been sunk into the mine since its inception, the company’s managing director, Phil Plaisted, confirmed.

Murowa has produced 66 767 carats of diamond in the first quarter of this year, from 43 901 produced in the fourth quarter of 2004.

“The mine has a life expectancy of around 20 years.

Zimbabwe’s gold output dropped 17,6% in the first quarter of this year.

Earlier this year industry officials had anticipated gold output to rise by almost two thirds to a record 35 000 kg.

However, data released by the Chamber of Mines revealed that output fell to 4 200 kg between January and March, from 5 100kg in the same period last year.

Last year the country’s total gold production totalled 21 300 kg, which saw foreign currency earnings of US$273,8 million from $152,3 million in 2003.

Chamber of Mines president Ian Saunders was quoted as saying “rising production costs, lower Zimbabwe dollar prices and foreign currency shortages had dragged output down from last year”.

In January the Reserve Bank of Zimbabwe increased the Zimbabwe dollar gold support price from $92 000 per gramme to $130 000 to spur production.

Producers are required to sell some of the metal to the central bank and increased the amount of earnings they could retain in foreign currency.

The government has forecast 3-5% economic growth this year on the back of an expected recovery in the mining sector, which earns a third of Zimbabwe’s exports.

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