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Mining Sector Faces Collapse

TROUBLED gold mines are now disposing of equipment to meet operational costs and monthly wage bills due to non-payment of over US$30 million owed to the mines by the Reserve Bank, businessdigest has learnt.


Metallon Gold, which produces 50% of the country’s gold has closed five mines — Redwing Mine, Shamva Gold Mine, How Mine, Acturus Mine and Mazowe Mine — due to failure by the bank to pay for gold deliveries from the entire sector.
The Chamber of Mines has also warned that more gold producers could face the same fate if the Reserve Bank delays payment for deliveries made two years ago or fails to import critical raw materials from South Africa by the end of next week.
Mining accounts form about 40% of the country’s exports earnings.
“This has been happening because RBZ has failed to pay for gold delivered, resulting in all the mines being unable to sustain production,” said the Chamber of Mines, which is regarded as the voice of the mining industry in the country.
Some gold firms had not been paid a single cent for deliveries for a whole year, according to the mines body. Most mines have gone for three months without paying employees.
The Chamber said the sector, which was one of the biggest gold producers in Africa less than 10 years ago, was on the brink of collapse with several mines unable to sustain operations, pay wages and salaries.
The Reserve Bank through its subsidiary, Fidelity Printers and Refiners, buys the precious metal from 354 registered gold workings under a government support price that has been widely criticised for being a mere fraction of the global market price of over US$700 per ounce.
The Reserve Bank pays 75% of the total value of gold delivered in US dollars directly to the producers’ foreign currency accounts with the balance of 25% being paid in local currency as determined by the Reserve Bank.
But for the past two years the Reserve Bank has been falling behind on payments to gold miners as it struggles for hard cash to import food and other basic commodities in short supply in the country.
Zimbabwe has the second largest platinum reserves in the world after South Africa and large gold, nickel and coal deposits, but mines have found it difficult to expand in the face of a worsening economic crisis.
“It is not understandable that at a time when the country requires as much foreign currency as possible, the gold sector, which can generate foreign currency, has deliberately been brought to its knees,” said the Chamber in a statement.
The Chamber labelled the Reserve Bank’s non-payment for gold a “travesty of justice” and said exploration work had completely ceased while most underground mines had flooded, because they cannot pump out water seeping from shafts.
“There is need for urgent release of the outstanding US dollar payments before the onset of the annual shutdown by South African suppliers,” read the statement from the the Chamber.  
“Most South African suppliers will not take new orders after mid November. Unless the gold industry is paid all its outstanding balances within a two-week period, the funds will be received too late to try to initiate and complete the purchasing cycle before the year-end shutdown in South Africa. Little gold production will be realised during the first quarter of 2009.”
Gold production, the Chamber warned, was now expected to hit an all-time low of three tonnes, representing  nine times less than the peak production in 1999.
According to the miners, efforts to engage the Reserve Bank governor Gideon Gono, Ministry of Mines officials and recently the chief secretary to the president and cabinet Misheck Sibanda over the matter had not yielded any results.
Sources however said there were fears that the Reserve Bank could have diverted the money to meet government requirements. The bank has of late bought vehicles for judges, doctors and government ministers. It has also imported tractors and other agricultural equipment.
Associated Mine Workers Union of Zimbabwe president, Tinago Ruzive confirmed to businessdigest that some mine workers had gone up to three months without being paid.
“ The situation is desperate. Workers have gone for two to three months without being paid. Those that are being paid are receiving their wages sporadically,” Ruzive said.  
“We have also received reports of demonstrations being held at gold mines by mine workers and their families. We have also received a report of a mineworker who died of hunger at a mine.  Such reports are a serious cause of concern to us,” he said.
Industry sources also warned that the sector could suffer more from an anticipated sharp decline in gold prices on the world market that was triggered by the near collapse of leading financial markets.
The Reserve Bank is however insisting that the miners would be paid soon.
The latest closures bring to seven out of the 21 registered primary producers that have shut down.
Turk Mine and Golden Valley mine recently stopped mining the precious metal citing viability problems triggered by the Reserve Bank’s delays in paying the miners.

 

By Bernard Mpofu/Kudzai Kuwaza 

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