HomeBusiness DigestZim gold sector suffers huge losses

Zim gold sector suffers huge losses

ZIMBAWE suffered real losses of US$448,5 million in the gold sector last year due to a slump in production which was worsened by low support prices and electricity shortages.


The central bank’s failure to pay for gold deliveries on time also contributed to the massive losses.

Zimbabwe only managed to produce seven tonnes last year, which earned US$155,5 million.

The 2007 production figure is in stark contrast to 1999’s all time high of 27 114 kg which at today’s prices would have earned Zimbabwe a total of US$604 million, according to Chamber of Mines Zimbabwe chief executive officer Joseph Malaba.

“Production for 2007 in volume terms was only 7 017 kg. This represents a decline of 20 097 kg over a nine year period,” Malaba said.

“If the country had been producing at 1999 levels the country could have earned US$604 million compared to the current US$155,5 million for 2007.”

Gold output declined by 38% last year from 10,9 tonnes in 2006 to 6,8 tonnes in 2007.

Malaba said the international weighted average gold price for 2007 was US$692,89 an ounce while Zimbabwe’s weighted annual price, based on production figures, was US$684,87 an ounce.

The central bank has also kept the lip on the support prices by reviewing it quarterly at a time when international bullion prices are firming.

The Chamber of Mines Zimbabwe could not immediately quantify losses arising from erratic electricity supplies but said the problem had affected virtually all mining companies.

“The power crisis has affected all mineral producers significantly. There are mines that have experienced flooding principally because of electricity supply constraints. Such operations deserve special mention whenever the electricity issue is discussed. Information on lost production in man hours for the gold industry is not currently at hand,” Malaba said.

One of the worst affected has been Metallon Gold which 51% of Zimbabwe’s total gold.

Two out of Metallon’s five gold mines have experienced flooding, due to electricity shortages.

“The number of pumps we bought is far less than the number we require. The mine is still flooded,” a source at the mine said.

Zimbabwe has tumbled down the rankings of Africa’s top gold producing countries since the economic and political crisis set in almost ten years ago.

Currently, Zimbabwe is tenth in the ranking of Africa’s top gold producers. However, in 1999 when production was at its peak, Zimbabwe was in third position after South Africa and Ghana.

The firming international prices of gold have not benefited the mining sector because of the fixed exchange controls. .

The price of gold reached new highs last week as it rose to US$953,60 an ounce before falling to US$926,40 an ounce on the back of a decision by the International Monetary Fund (IMF) which plans to sell more than 3000 tonnes of gold.

The increase has been attributed to gold trekking the rising price of oil which hit the US$100 a barrel mark two weeks ago.

Meanwhile businessdigest understands that the central bank is yet to pay for gold deliveries since October last year.

Most exporting companies are also yet to receive their foreign currency from the central bank.

An official at the central bank said it was highly unlikely that the companies will get their money anytime soon.The delay in the release of funds is now threatening the viability of the few exporting companies that are still operating.–Kuda Chikwanda

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